A person often reads that low oil prices–for example, $30 per barrel oil prices–will stimulate the economy, and the economy will soon bounce back. What is wrong with this story? A lot of things, as I see it:
1. Oil producers can’t really produce oil for $30 per barrel.
A few countries can get oil out of the ground for $30 per barrel. Figure 1 gives an approximation to technical extraction costs for various countries. Even on this basis, there aren’t many countries extracting oil for under $30 per barrel–only Saudi Arabia, Iran, and Iraq. We wouldn’t have much crude oil if only these countries produced oil.
Figure 1. Global breakeven prices (considering only technical extraction costs) versus production. Source: Alliance Bernstein, October 2014
2. Oil producers really need prices that are higher than the technical extraction costs shown in Figure 1, making the situation even worse.
Oil can only be extracted within a broader system. Companies need to pay taxes. These can be very high. Including these costs has historically brought total costs for many OPEC countries to over $100 per barrel.
Independent oil companies in non-OPEC countries also have costs other than technical extraction costs, including taxes and dividends to stockholders. Also, if companies are to avoid borrowing a huge amount of money, they need to have higher prices than simply the technical extraction costs. If they need to borrow, interest costs need to be considered as well.
3. When oil prices drop very low, producers generally don’t stop producing.
There are built-in delays in the oil production system. It takes several years to put a new oil extraction project in place. If companies have been working on a project, they generally won’t stop just because prices happen to be low. One reason for continuing on a project is the existence of debt that must be repaid with interest, whether or not the project continues.
Also, once an oil well is drilled, it can continue to produce for several years. Ongoing costs after the initial drilling are generally very low. These previously drilled wells will generally be kept operating, regardless of the current selling price for oil. In theory, these wells can be stopped and restarted, but the costs involved tend to deter this action.
Oil exporters will continue to drill new wells because their governments badly need tax revenue from oil sales to fund government programs. These countries tend to have low extraction costs; nearly the entire difference between the market price of oil and the price required to operate the oil company ends up being paid in taxes. Thus, there is an incentive to raise production to help generate additional tax revenue, if prices drop. This is the issue for Saudi Arabia and many other OPEC nations.
Very often, oil companies will purchase derivative contracts that protect themselves from the impact of a drop in market prices for a specified time period (typically a year or two). These companies will tend to ignore price drops for as long as these contracts are in place.
There is also the issue of employee retention. In a sense, a company’s greatest assets are its employees. Once these employees are lost, it will be hard to hire and retrain new employees. So employees are kept on as long as possible.
The US keeps raising its biofuel mandate, regardless of the price of oil. No one stops to realize that in the current over-supplied situation, the mandate adds to low price pressures.
One brake on the system should be the financial pain induced by low oil prices, but this braking effect doesn’t necessarily happen quickly. Oil exporters often have sovereign wealth funds that they can tap to offset low tax revenue. Because of the availability of these funds, some exporters can continue to finance governmental services for two or more years, even with very low oil prices.
Defaults on loans to oil companies should also act as a brake on the system. We know that during the Great Recession, regulators allowed commercial real estate loans to be extended, even when property valuations fell, thus keeping the problem hidden. There is a temptation for regulators to allow similar leniency regarding oil company loans. If this happens, the “braking effect” on the system is reduced, allowing the default problem to grow until it becomes very large and can no longer be hidden.
4. Oil demand doesn’t increase very rapidly after prices drop from a high level.
People often think that going from a low price to a high price is the opposite of going from a high price to a low price, in terms of the effect on the economy. This is not really the case.
4a. When oil prices rise from a low price to a high price, this generally means that production has been inadequate, with only the production that could be obtained at the prior lower price. The price must rise to a higher level in order to encourage additional production.
The reason that the cost of oil production tends to rise is because the cheapest-to-extract oil is removed first. Oil producers must thus keep adding production that is ever-more expensive for one reason or another: harder to reach location, more advanced technology, or needing additional steps that require additional human labor and more physical resources. Growing efficiencies can somewhat offset this trend, but the overall trend in the cost of oil production has been sharply upward since about 1999.
The rising price of oil has an adverse impact on affordability. The usual pattern is that after a rise in the price of oil, economies of oil importing nations go into recession. This happens because workers’ wages do not rise at the same time as oil prices. As a result, workers find that they cannot buy as many discretionary items and must cut back. These cutbacks in purchases create problems for businesses, because businesses generally have high fixed costs including mortgages and other debt payments. If these businesses are to continue to operate, they are forced to cut costs in one way or another. Cost reduction occurs in many ways, including reducing wages for workers, layoffs, automation, and outsourcing of manufacturing to cheaper locations.
For both employers and employees, the impact of these rapid changes often feels like a rug has been pulled out from under foot. It is very unpleasant and disconcerting.
4b. When prices fall, the situation that occurs is not the opposite of 4a. Employers find that thanks to lower oil prices, their costs are a little lower. Very often, they will try to keep some of these savings as higher profits. Governments may choose to raise tax rates on oil products when oil prices fall, because consumers will be less sensitive to such a change than otherwise would be the case. Businesses have no motivation to give up cost-saving techniques they have adopted, such as automation or outsourcing to a cheaper location.
Few businesses will construct new factories with the expectation that low oil prices will be available for a long time, because they realize that low prices are only temporary. They know that if oil prices don’t go back up in a fairly short period of time (months or a few years), the quantity of oil available is likely to drop precipitously. If sufficient oil is to be available in the future, oil prices will need to be high enough to cover the true cost of production. Thus, current low prices are at most a temporary benefit–something like the eye of a hurricane.
Since the impact of low prices is only temporary, businesses will want to adopt only changes that can take place quickly and can be easily reversed. A restaurant or bar might add more waiters and waitresses. A car sales business might add a few more salesmen because car sales might be better. A factory making cars might schedule more shifts of workers, so as to keep the number of cars produced very high. Airlines might add more flights, if they can do so without purchasing additional planes.
Because of these issues, the jobs that are added to the economy are likely to be mostly in the service sector. The shift toward outsourcing to lower-cost countries and automation can be expected to continue. Citizens will get some benefit from the lower oil prices, but not as much as if governments and businesses weren’t first in line to get their share of the savings. The benefit to citizens will be much less than if all of the people who were laid off in the last recession got their jobs back.
5. The sharp drop in oil prices in the last 18 months has little to do with the cost of production.
Instead, recent oil prices represent an attempt by the market to find a balance between supply and demand. Since supply doesn’t come down quickly in response to lower prices, and demand doesn’t rise quickly in response to lower prices, prices can drop very low–far below the cost of production.
As noted in Section 4, high oil prices tend to be recessionary. The primary way of offsetting recessionary forces is by directly or indirectly adding debt at low interest rates. With this increased debt, more homes and factories can be built, and more cars can be purchased. The economy can be forced to act in a more “normal” manner because the low interest rates and the additional debt in some sense counteract the adverse impact of high oil prices.
Figure 2. World oil supply and prices based on EIA data.
Oil prices dropped very low in 2008, as a result of the recessionary influences that take place when oil prices are high. It was only with the benefit of considerable debt-based stimulation that oil prices were gradually pumped back up to the $100+ per barrel level. This stimulation included US deficit spending, Quantitative Easing (QE) starting in December 2008, and a considerable increase in debt by the Chinese.
Commodity prices tend to be very volatile because we use such large quantities of them and because storage is quite limited. Supply and demand have to balance almost exactly, or prices spike higher or lower. We are now back to an “out of balance” situation, similar to where we were in late 2008. Our options for fixing the situation are more limited this time. Interest rates are already very low, and governments generally feel that they have as much debt as they can safely handle.
6. One contributing factor to today’s low oil prices is a drop-off in the stimulus efforts of 2008.
As noted in Section 4, high oil prices tend to be recessionary. As noted in Section 5, this recessionary impact can, at least to some extent, be offset by stimulus in the form of increased debt and lower interest rates. Unfortunately, this stimulus has tended to have adverse consequences. It encouraged overbuilding of both homes and factories in China. It encouraged a speculative rise in asset prices. It encouraged investments in enterprises of questionable profitability, including many investments in oil from US shale formations.
In response to these problems, the amount of stimulus is being reduced. The US discontinued its QE program and cut back its deficit spending. It even began raising interest rates in December 2015. China is also cutting back on the quantity of new debt it is adding.
Unfortunately, without the high level of past stimulus, it is difficult for the world economy to grow rapidly enough to keep the prices of all commodities, including oil, high. This is a major contributing factor to current low prices.
7. The danger with very low oil prices is that we will lose the energy products upon which our economy depends.
There are a number of different ways that oil production can be lost if low oil prices continue for an extended period.
In oil exporting countries, there can be revolutions and political unrest leading to a loss of oil production.
In almost any country, there can be a sharp reduction in production because oil companies cannot obtain debt financing to pay for more services. In some cases, companies may go bankrupt, and the new owners may choose not to extract oil at low prices.
There can also be systemwide financial problems that indirectly lead to much lower oil production. For example, if banks cannot be depended upon for payroll services, or to guarantee payment for international shipments, such problems would affect all oil companies, not just ones in financial difficulty.
Oil is not unique in its problems. Coal and natural gas are also experiencing low prices. They could experience disruptions indirectly because of continued low prices.
8. The economy cannot get along without an adequate supply of oil and other fossil fuel products.
We often read articles in the press that seem to suggest that the economy could get along without fossil fuels. For example, the impression is given that renewables are “just around the corner,” and their existence will eliminate the need for fossil fuels. Unfortunately, at this point in time, we are nowhere near being able to get along without fossil fuels.
Food is grown and transported using oil products. Roads are made and maintained using oil and other energy products. Oil is our single largest energy product.
Experience over a very long period shows a close tie between energy use and GDP growth (Figure 3). Nearly all technology is made using fossil fuel products, so even energy growth ascribed to technology improvements could be considered to be available to a significant extent because of fossil fuels.
Figure 3. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends from 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by the 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.
While renewables are being added, they still represent only a tiny share of the world’s energy consumption.
Figure 4. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.
Thus, we are nowhere near a point where the world economy could continue to function without an adequate supply of oil, coal and natural gas.
9. Many people believe that oil prices will bounce back up again, and everything will be fine. This seems unlikely.
The growing cost of oil extraction that we have been encountering in the last 15 years represents one form of diminishing returns. Once the cost of making energy products becomes high, an economy is permanently handicapped. Prices higher than those maintained in the 2011-2014 period are really needed if extraction is to continue and grow. Unfortunately, such high prices tend to be recessionary. As a result, high prices tend to push demand down. When demand falls too low, prices tend to fall very low.
There are several ways to improve demand for commodities, and thus raise prices again. These include (a) increasing wages of non-elite workers (b) increasing the proportion of the population with jobs, and (c) increasing the amount of debt. None of these are moving in the “right” direction.
Joseph Tainter in The Collapse of Complex Societies points out that once diminishing returns set in, the response is more “complexity” to solve these problems. Government programs become more important, and taxes are often higher. Education of elite workers becomes more important. Businesses become larger. This increased complexity leads to more of the output of the economy being funneled to sectors of the economy other than the wages of non-elite workers. Because there are so many of these non-elite workers, their lack of buying power adversely affects demand for goods that use commodities, such as homes, cars, and motorcycles.1
Another force tending to hold down demand is a smaller proportion of the population in the labor force. There are many factors contributing to this: Young people are in school longer. The bulge of workers born after World War II is now reaching retirement age. Lagging wages make it increasingly difficult for young parents to afford childcare so that both can work.
As noted in Section 5, debt growth is no longer rising as rapidly as in the past. In fact, we are seeing the beginning of interest rate increases.
When we add to these problems the slowdown in growth in the Chinese economy and the new oil that Iran will be adding to the world oil supply, it is hard to see how the oil imbalance will be fixed in any reasonable time period. Instead, the imbalance seems likely to remain at a high level, or even get worse. With limited storage available, prices will tend to continue to fall.
10. The rapid run up in US oil production after 2008 has been a significant contributor to the mismatch between oil supply and demand that has taken place since mid-2014.
Without US production, world oil production (broadly defined, including biofuels and natural gas liquids) is close to flat.
Figure 5. Total liquids oil production for the world as a whole and for the world excluding the US, based on EIA International Petroleum Monthly data.
Viewed separately, US oil production has risen very rapidly. Total production rose by about six million barrels per day between 2008 and 2015.
Figure 6. US Liquids production, based on EIA data (International Petroleum Monthly, through June 2015; supplemented by December Monthly Energy Review for most recent data).
US oil supply was able to rise very rapidly partly because QE led to the availability of debt at very low interest rates. In addition, investors found yields on debt so low that they purchased almost any equity investment that appeared to have a chance of long-term value. The combination of these factors, plus the belief that oil prices would always increase because extraction costs tend to rise over time, funneled large amounts of investment funds into the liquid fuels sector.
As a result, US oil production (broadly defined), increased rapidly, increasing nearly 1.0 million barrels per day in 2012, 1.2 million barrels per day in 2013, 1.7 million barrels per day in 2014. The final numbers are not in, but it looks like US oil production will still increase by another 700,000 barrels a day in 2015. The 700,000 extra barrels of oil added by the US in 2015 is likely greater than the amount added by either Saudi Arabia or Iraq.
World oil consumption does not increase rapidly when oil prices are high. World oil consumption increased by 871,000 barrels a day in 2012, 1,397,000 barrels a day in 2013, and 843,000 barrels a day in 2014, according to BP. Thus, in 2014, the US by itself added approximately twice as much oil production as the increase in world oil demand. This mismatch likely contributed to collapsing oil prices in 2014.
Given the apparent role of the US in creating the mismatch between oil supply and demand, it shouldn’t be too surprising that Saudi Arabia is unwilling to try to fix the problem.
Conclusion
Things aren’t working out the way we had hoped. We can’t seem to get oil supply and demand in balance. If prices are high, oil companies can extract a lot of oil, but consumers can’t afford the products that use it, such as homes and cars; if oil prices are low, oil companies try to continue to extract oil, but soon develop financial problems.
Complicating the problem is the economy’s continued need for stimulus in order to keep the prices of oil and other commodities high enough to encourage production. Stimulus seems to takes the form of ever-rising debt at ever-lower interest rates. Such a program isn’t sustainable, partly because it leads to mal-investment and partly because it leads to a debt bubble that is subject to collapse.
Stimulus seems to be needed because of today’s high extraction cost for oil. If the cost of extraction were still very low, this stimulus wouldn’t be needed because products made using oil would be more affordable.
Decision makers thought that peak oil could be fixed simply by producing more oil and more oil substitutes. It is becoming increasingly clear that the problem is more complicated than this. We need to find a way to make the whole system operate correctly. We need to produce exactly the correct amount of oil that buyers can afford. Prices need to be high enough for oil producers, but not too high for purchasers of goods using oil. The amount of debt should not spiral out of control. There doesn’t seem to be a way to produce the desired outcome, now that oil extraction costs are high.
Rigidities built into the oil price-supply system (as described in Sections 3 and 4) tend to hide problems, letting them grow bigger and bigger. This is why we could suddenly find ourselves with a major financial problem that few have anticipated.
Unfortunately, what we are facing now is a predicament, rather than a problem. There is quite likely no good solution. This is a worry.
Note:
[1] For example, more dividend and interest payments are paid, tending to benefit the financial industry and the elite classes. More of the output of the economy goes to workers in supervisory positions or having advanced education. Other workers–those with more “ordinary” responsibilities–find their wages falling behind the general rise in the cost of living. As a result, they find it increasingly difficult to buy cars, homes, motorcycles, and other goods that use commodities.
Russia’s Gazprom ‘Extremely Surprised’ at Ukraine Fine
https://www.google.pl/search?q=Russia%E2%80%99s+Gazprom+%E2%80%98Surprised%E2%80%99+at+%243.4+Billion+Ukraine+Fine&ie=utf-8&oe=utf-8&gws_rd=cr&ei=PG2iVr6oL8PjywPXmazwAw
Are we starting next level of trade war? Is it a Black Swan?
Gail,
The NYT seems to have caught on to what you have been saying as of this am Fri 22 Jan on page A1 though listening to JP Morgan being bullish gets them into a falso optimism too quickly
Mott Greene
>
Sure thing, and those speculators are responsible for stock market turmoil in China
http://www.bloomberg.com/news/articles/2016-01-22/china-s-intervention-vow-seen-making-stocks-even-less-attractive
Trying to control the market by targeting speculators is an “impossible” task, according to Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank, which has $453 billion under management. Individuals drive more than 80 percent of trading on mainland bourses, versus about 15 percent in the U.S.
Telegraphing support allows investors to front-run the government and makes yuan-denominated A shares even less appealing to foreign institutions, said Aberdeen’s Yeo. Chinese stocks already trade at some of the world’s highest valuations, with the median company on mainland exchanges valued at 55 times reported earnings.
“It’s not a good approach as it allows speculators to speculate on what’s going to happen the next,” Yeo said. “No international investors will want to look at A shares for a long time.”
“The more they do, the less credibility there is,” said Nicholas Yeo, Hong Kong-based head of Chinese equities at Aberdeen Asset Management, which oversees about $430 billion. “You have to allow the market to find a bottom and recover from there, whether it’s a currency or stocks. They might even increase speculation interest if they don’t allow the market to be a market
That’s what the central banks want …
I see it working as follows:
Fund manager says to his team that handles the China fund — corporate profits are dropping — the China growth story is over — commodities are blowing out … a credit crisis is brewing — we need to go short the market — let’s work out which companies to target
The Fund assembles its short positions.
Market drops 7% by lunch – Fund Manager says yippee — we will win!
PBOC says — not so fast — plunge protection swoops in last minute buying everything in site — market makes up the 7 and goes up 4 ….
Fund Manager swoons… thinks about what has happened…. ‘PBOC has unlimited funds to buy with —I cannot compete — even if all Funds try to gang up on the PBOC — the PBOC has a printing press’
Fund Manager gets his team together and says we must go long — shorting this is a fool’s game…
Stock market moves up — until some other Fund Manager gets the bright idea to go short…. rinse repeat
And just in case these Fund Managers don’t get the message — the PBOC threatens them with prison sentences should they try to short the market…
And everyone lived happily ever after and the stock market went up forever….
Ayako Sera clearly hasn’t clued into this arrangement yet….
FE, the China stock market has dropped 40% from its highs of last June?
China Stock Rout Seen Getting Uglier as Derivative Trigger Looms
http://www.bloomberg.com/news/articles/2016-01-20/bofa-sees-tipping-point-in-hong-kong-stocks-as-futures-unwind
If Bank of America Corp. is right, Chinese stocks in Hong Kong are poised for a fresh wave of selling.
That’s because the benchmark Hang Seng China Enterprises Index is trading at a level that forces investment banks to pare back their bullish futures positions, according to William Chan, the head of Asia Pacific equity derivatives research at BofA’s Merrill Lynch unit in Hong Kong. The trades, tied to banks’ issuance of structured products, are likely to start unwinding when the index falls through 8,000, a level it breached on a closing basis Thursday for the first time since 2009.
Banks have purchased futures on the gauge of so-called H shares to hedge exposure to structured products that they’ve sold to clients, according to Chan. Many of those products have a “knock-in” feature at the 8,000 level that will spur banks to cut futures positions to maintain the effectiveness of their hedges, he said. Additional pressure points may also come at lower levels, Chan said.
“As the market goes lower from here, the downward move may accelerate,” he said. “There will be a large amount of hedging in futures which dealers need to unwind.”
Also the P/E ratio of China stocks are at 55 times earning!
So perhaps it won’t end happily ever after ….
This is not totally different from “The Big Short” Everybody who reads or posts here needs to see it!
Price earnings ratios are terribly high in the stock market in China. I am afraid the market reaching its own level would bring process down a lot.
Oil was overpriced by speculators since 2002. Finally prices are returning to where they should be. Of course speculators hope and will no doubt push for a huge increase in oil prices if that happens watch as the economy crumbles and civil strife arises. An article like this is designed to convince fools that being milked of their money is in their own interest. Just like the huge bank bailout was sold as good for the sucker tax payers.
Bot?
“Oil was overpriced by speculators since 2002.”
My understanding from those working in the field of oil, some of which post on peak oil dot com while others are on peak oil barrel, is oil has never been overpriced due to speculators. The reason why is the quantity of oil x the price of oil is too big a price tag to be manipulated via speculation. What happened was oil extraction peaked in May 05, then produced at a plateau worldwide for several years while demand increased. When the price got up over $100 a barrel, every effort was made to produce as much conventional and non-conventional as possible and now we have a glut, resulting in a low price. The problem going into the future is the current low price does not provide sufficient incentive to secure future enough supply. Once oversupply dwindles price will rise and renewed efforts to develop new sources will take place.
The meme of speculation was never proven. It was an emotional reaction to high prices without knowledge of why oil was going higher in price, i.e. limited supply. If you have a link that specifies proof of speculataion, that would be great to look at.
Did you read the article?
The price of oil cannot go up — that will only hasten the deflationary collapse.
People are not consuming enough even with oil below $30 – what do you think would happen if it went to $100+ (which is where it needs to be for the oil industry to not collapse)
Did you even read my post? I never stated oil would go up over $100 again, I wrote,
“Once oversupply dwindles price will rise and renewed efforts to develop new sources will take place.” Where does it day $100 a barrel? There’s plenty of room for oil price to rise to 60-80 a barrel. Your memory is poor FE. We’ve had this discussion before and we both have different opinions of where price will go. All we can do now is let time pass to find out who was correct.
I don’t think my response was directed towards your comment ….
I agree with Stilgar on this one. There will be a shortage of oil sooner or later, the price will rise precipitously, then the demand will crash and the price will go down again. This will occur endless as we bump our way down the undulating plateau of Peak Oil until the final crash which is some ways off yet.
I write the story as I see it. I don’t make any money by telling a false story.
The fact the prices are falling back to an affordable level doesn’t mean that oil can now be extracted for that price. We really do need low priced oil, so we can repair our infrastructure for the price for which it was originally built, for example. But the current situation is a phony one. It is not sustainable. It will collapse.
The costs of infrastructure are becoming unaffordable: the construction companies will stop investing into construction of new flats and houses when the infrastructure stops to be subsidized by the state or municipalities.
I wonder how many new flats and houses Greece and Spain are now subsidizing. I would guess that as countries get poorer, this kind of subsidy will drop.
Of course, one big subsidy is low interest rates for buying these homes. If these start going up, it seems like demand will drop precipitously.
So perhaps a smart move would be to use the temporary low prices to repair key infrastructure and cease any activity or plans toward supporting growth that cannot be sustained, e.g., ports and grid maintenance over widening the interstate highways, building additional bridges, roads, etc. I wonder how far down the infrastructure budget countries such as the USA should be reaching?
I know that near where I live, infrastructure spending seems to be on non-sustainable things, like adding new toll lanes to the interstate system.
I don’t even think we have a plan for upgrading the many other things that need upgrading:
1. Water and sewer pipelines
2. Pipelines for crude oil and products; also natural gas. We have had many leaks in old pipelines.
3. Bridges
4. Electricity transmission lines
A lot of these things are repaired (or not repaired) within the private system, not government funded, so it would be hard to get funds allocated to them.
It does sound like a worthwhile activity though, if somehow enough tax money could be found to pay the workers. More debt?
This is so cool — drone footage of Syria after we bombed the country back to the stone age.
Really incredible stuff!!! I am so happy 🙂
Eddy, I am actually pretty sure it was Assad`s Army and the barrel bombs they have been using, as this is from Homs, where Syrian army and Rebels have been fighting, not Raqqa, where ISIS resides.
‘pretty sure’… you need to be more sure before you post…
Try starting with this: http://www.theatlantic.com/international/archive/2015/11/report-israel-strikes-target-in-syria/415446/
Remind me of why Assad has to go? Why the US has created and armed ISIS? Which has provoked Russia who have also bombed Syria to support Assad.
Don’t get me wrong — I really am happy about all of this — the US is acting in my interests — it is helping me to continue living large….
I only post to draw attention to how it is important that humans are exterminated from the face of the planet…. such an outcome would put a smile upon my face
I subscribe to Our Finite World as it informs me & I like the comments that follow. I’ve never commented here before but after subscribing for a long time I must say I really love what you have to say Fast Eddy. You and a few others (Bandits 101 & Van Kent spring to mind but there are many other worthwhile commentators here) are a breath of fresh air in the rotting world of an alienated & dysfunctional humanity.
There is so little of value to save from this culture I look forward to its demise so the non-human world can get on with their own cultures.
I live in Australia where the industrial inhabitants have never seen real hardship or war. The indigenous people however are another story as the invading industrial tentacles of death screwed them over like they did wherever else they went.
In 2008 Australia was spared the worst of the financial crisis as it relied on raping the continent & shipping it to China. This time however……………………………………….
Yet the zombies still walk about in a coma as if “something or someone” will save them all because of inherited indoctrination.
Please keep up the great comments FE & the others here.
https://industrialcivilizationacultofdeath.wordpress.com
The vote of confidence is appreciated.
I really love what you have to say Fast Eddy…
Me too. The difficulty comes in deciding whether one likes the fast collapse comments because they reflect reality or because one would like them to reflect reality.
@Lee
Yes, in some ways I do want collapse. Of course I don’t want to starve to death or to be eaten by zombies but psychologically the slow decline of living standards, increasing lies and powers of the state and ongoing destruction of the environment are hard to take.
There is certainly a lot of confirmation bias present on this blog. For instance, every time share prices or the price of oil go down comments are posted to this effect, but did anyone notice that the price of oil just went up nine to ten percent over the course of a single day?
However, agreed the bad news greatly outweighs the good news and there is a possibility Gail and Eddy are correct and financial collapse is coming soon. Gail admits she does not know what happens afterwards. Eddy believes financial collapse equals the end of the world. Clearly the world is not in population overshoot with the current level of resource extraction so in theory at least a command economy could keep everyone alive a while longer.
Thanks for the movie tip. I’ll check it out tonight.
Is there anyone who wants a fast collapse?
My hand is not up.
I would love for this to drag on for 3 more decades … for BAU to slowly grind itself into the dirt — 78 is my magic death number.
The facts absolutely do not support this I’m afraid.
There are lots of people who at least profess to wanting a fast collapse. Those are the people who detest what people are doing to the world and see the rapid end of industrial civilization as the best hope for the living planet. You must see that the longer BAU continues the greater the calamity when it all comes crashing down. Extending BAU extends the destruction of the environment and means there are more people to cut down trees and starve to death when BAU ends.
You are probably right, though. Once IC ends the chance of maintaining all the spent fuel ponds is zero so it’s already too late for most life on earth and we may as well extend as long as possible.
You were smart to not have children. We are the same age and if I’d known what was coming as early as you I’d be sitting back and enjoying the show well stocked up for the final party.
Glad to have you as a reader and commenter, Brendon. I see you have a blog yourself.
@Yorchichan
I agree, these people are pretty great. I think we cannot assume that anything will go on forever and also that a quick collapse is at very least possible.
They have strong reasoning behind why an immediate collapse could happen soon. I do still struggle to accept the notion that tptb would accept collapse but to Gail’s point, they can’t outrun it forever. Or perhaps they want it to occur.
Have you seen “The Big Short”? I just saw it tonight. Great movie and it set the stage for a bigger collapse taking place soon. The movie featured a quote about every person having a deep seated/buried desire for civilization to collapse, so yes, I too worry about confirmation bias.
I think we are faced with collapse. It won’t be pretty.
Sorry Lee, messed up the order of that last comment. Is it possible to move it please Gail?
As Putin said “don’t you see what have you done?” and this must stop, enough is enough after Libya/Syria/Ukraine/Egypt/Iraq/Afghan/.. Few days ago the Qatari delegation was bowing in front of Putin, and Saudis were courting China, Kerry and Biden also backed off and had to force federalization on their unwilling nazis in Ukraine gov. Meanwhile the evidently first peaking region (of them) NOK is falling way slooooower than Canadian or Russian currency, crazy world.
In summary, the ball is going sooner or later on the opposite section of the playground and stays there for a while, my guesstimate is the next chair to fall in the west must be some of their periphery like Spain/Greece/perhaps Italy or France. UK has been tasked with forcing EU reforms prior 2017 membership plebiscite, so there are monumental forces colluding about right now ~ before 2020 and it must crack somewhere soon..
Where did all the people go? Hopefully, they can return and rebuild. (Sarc)
I guess all the people fled to Europe …. because we blew up their cities … so they can no longer work and make money to feed themselves….
And Europeans are really pissed off about this outcome….
🙂
“I guess all the people fled to Europe …. because we blew up their cities …”
They blew up their own cities to a large extent, at least in Syria. I guess everyone thinks a revolution will be fast and easy, somehow they don’t expect it to turn into decades of destroying your own homes.
Um…. actually no …. Syria was a rather peaceful place until it got caught in the crossfires of geopolitics….
No doubt Assad’s forces are responsible for a fair bit of the damage…. but what did you expect them to do when America’s terrorists started to lob missiles into Damascus (including btw the chemical weapons that killed women and children and was blamed on Assad — funny how we hear nothing more on that — just like we never get to hear what was on the flight recorded of the airliner that the CIA had their boys shoot down in Ukraine and blame on Putin)
The US started the war in Syria — they created ISIS – therefore the US is responsible for the holocaust that you see in those images.
Therefore America is responsible for the refugees pouring into Europe.
America Created Al-Qaeda and the ISIS Terror Group
http://www.globalresearch.ca/america-created-al-qaeda-and-the-isis-terror-group/5402881
Now the truth emerges: how the US fuelled the rise of Isis in Syria and Iraq
http://www.theguardian.com/commentisfree/2015/jun/03/us-isis-syria-iraq
Secret Pentagon Report Reveals US “Created” ISIS As A “Tool” To Overthrow Syria’s President Assad
http://www.zerohedge.com/news/2015-05-23/secret-pentagon-report-reveals-us-created-isis-tool-overthrow-syrias-president-assad
No going back
Hopeless proxy fragmented clusterf now
Just as they want it
Looks like Stalingrad in 1942.
The end is nigh, at least that’s what was echoed from Davos as the Swedish PM was trying blackmail CEE area EU members to capitulate and sing to mandatory quotas of resettling invading migrants inside the respective countries, otherwise the EU brakes up in just two months! The western “cunning plan” is based on the ongoing practice and polls in which majority of CEE people/govs refuse migrants, while are still somewhat preferring continuation of their EU membership, free movement inside the EU, the so-called Schengen treaty . This western tactics was recently used by the Germans, but the Swedes were asked to elevate the threads a bit higher. The quota system is obviously a joke since the migrants themselves evidently cross several safe countries but are zooming in only on the highest payment destination such as Sweden and Germany for a reason. The CEE countries don’t have the post WWII/post colonial migrant problem as the founding EU members to begin with, most notably France, Belgium, Holland and Germany. They simply don’t want to suffer/pay for someone’s else stupid mistakes, another historical factor comes to mind, as it was mostly through the swords of Poles and Hungarians (and their wider Eastern Europe+Balkan sphere of influence) that Turks were kicked out of European landmass for good in the baroque era .. obviously this “little detail” is of no importance to multikulti cloud surfing elites of the west..
Line of unused rail cars languishes in Lakeville backyards
LAKEVILLE — A long line of railroad cars has been parked for seven years in the Twin Cities suburb of Lakeville, blotting the view from homeowners’ backyards.
Some of the cars fill with stagnant water in warm weather, attracting mosquitoes. The cars can also block the neighborhood’s only exit when moved from one stretch of track to another, and teenagers often climb up to sunbathe or run down the line of cars, the Star Tribune reported.
“Basically, this is a rail yard,” said resident Theresa Johnson. “It’s just a matter of time before someone gets hurt or killed
The track in Lakeville was at one point targeted for a potential county greenway. It’s operated by Lakeville-based Progressive Rail, and the company’s president, Dave Fellon, declined to comment. But he told the newspaper in 2012 that a sluggish economy was keeping the cars parked
Sluggish economy?…soon those cars will be filled with excess oil.
The engine is still turning. The rpms get slower. The boarded up buildings get greater.
Their is a feel to abandonment of what was.
A feel to living in the skeleton of what was.
A grub in a stripped deer carcass knows that feeling
Detroit knows that feeling
Some of the excess cars have to do with lack of coal being shipped. Some of them have to do with lack of finished goods being shipped. And some of them have to do with lack of oil being shipped.
I have a hard time seeing oil stored in train cars, although I suppose stranger things have happened. I don’t see a quick rebound use of the cars–or even a slow rebound.
What goes up must come down:
http://www.zerohedge.com/news/2016-01-21/fragile-forty-how-world-lost-17-trillion-6-months
‘The Fragile Forty & How The World Lost $17 Trillion In 6 Months’
It’s official. More than 50% of the “wealth” effect created from the 2011 lows to the 2015 highs has been destroyed (despite the world’s central banks going into money-printing overdrive over that period). Almost $17 trillion of equity market capitalization has evaporated in just over 6 months with over 40 global stock indices in bear markets…
The U.K. was the latest market to fall 20 percent from its peak, while India is less than 1 percent away from crossing the threshold that traders describe as the onset of bear market.
The U.K. was the latest market to fall 20 percent from its peak, while India is less than 1 percent away from crossing the threshold that traders describe as the onset of bear market. Nineteen countries with $30 trillion have declined between 10 percent and 20 percent, thereby entering a so-called correction, according to data compiled by Bloomberg from the 63 biggest markets on Wednesday.
Emerging nations bore the brunt of the meltdown, accounting for two out of every three bear markets. Slowing Chinese growth, the 24 percent slump in oil this year and currency volatility have driven developing-nation stocks to the worst start to a year on record.
Among equity indexes that are on the cusp of entering bear territory are Australia, India and the Czech Republic, each having fallen about 19 percent from their rally highs.
Thanks! The chart showing the 7.5 year MSCI cycle is interesting too.
HI Gail:
I have been reading your articles. Could the Fed be taking advantage of low oil prices, or (if this is possible) even manipulating them down to facilitate their desire to raise interest rates (as their number one priority objective even above sustaining the health of the economy)?
See this article:
http://beforeitsnews.com/financial-markets/2016/01/fed-is-swapping-zero-interest-rates-for-cheap-oil-turmoil-in-markets-result-2857864.html
I think what is happening is that with the Basel 3 rules that were put in place, in order to try to prevent banks from collapsing from too many defaults, the G20 (or whoever is behind this effort) is accidentally producing a situation where banks cannot possibly make enough profit. Pension plans and insurance companies are not doing well either.
The plan to prop up interest rates is needed to save banks. But this cannot happen, because it drops oil prices too low. The problem is that the world economic system as a whole is producing too little output. It is not possible to promise a lot of the world’s economic output to banks, insurance companies, pension plans, oil companies, coal companies and the like, and still have enough for wages for the non-elite workers. The whole system tends to collapse.
The beast is hit by a hard right cross…. it is dazed…. it staggers to its feet…. ding ding ding…. the round ends….
Schlumberger Loses $1 Billion, Raises Layoffs to 30,000, Doubles Share Buybacks to $20 Billion
The warning came on December 1, 2015 in an SEC filing in which Schlumberger, the world’s largest oil-field services company, disclosed a charge of $350 million for the fourth quarter. It would cover the costs of an unspecified number of new job cuts in 2016 – as the filing said, “in light of expected reduced activity for 2016 and to streamline its support structure.”
At the time, Patrick Schorn, president of operations, explained in a speech that “it has become clear that any recovery in activity has been pushed out in time,” and that therefore, those job cuts would “further right-size the organization based on the activity outlook for 2016,”
Today, Schlumberger, when it reported fourth-quarter earnings, put a big number on those job cuts.
It’s tough out there, in the oil and gas sector. The company reported that revenues in the fourth quarter plunged 39% year-over-year, income from continuing operations plunged 58%, earnings per share plunged 57%. This includes North America, where revenue plunged 55% and operating plunged income 84%. If I use “plunge” a lot, it’s because it was that kind of earnings report.
After it was all said and done, the company had a net loss for the quarter of $1.01 billion.
More http://wolfstreet.com/2016/01/21/schlumberger-loses-1-billion-raises-layoffs-to-30000-doubles-share-buybacks-to-20-billion/
Death by 30,000 cuts… 10,000 cuts…. etc etc etc…
Slap as many $100 bills on the beast’s cuts as you like … eventually the beast gets enough cuts it will bleed out… it will die….
Long live the beast…. I what’s the beast’s blood type? Happy to donate a pint….
Interesting article on Reuters this morning. Wall Street is up as oil prices move higher which is right in line with this article. When prices are too low it hurts the eCONomy, when the prices are too high it hurts the consumers.
http://www.reuters.com/article/us-usa-stocks-idUSKCN0V01H6
And so it begins: Norway’s Biggest Bank Demands Cash Ban: http://www.zerohedge.com/news/2016-01-23/norways-biggest-bank-demands-cash-ban
“The war on cash is escalating faster than many had imagined. Having documented the growing calls from the elites and propagandist explanations of the “benefits” to their serfs over the last few years, with China, and The IMF entering the “cashless society” call most recently, International Business Times reports that Norway – suffering from its own economic collapse as oil revenues crash – has joined its Scandi peers Denmark and Sweden in a call to “ban cash.”
As I said before, the banks won’t slit their own throats. They’ll keep extending credit even to the shakiest frackers: http://www.cnbc.com/2016/01/22/why-banks-wont-cut-off-energys-drunken-sailors.html
I can see the Pentagon war-game somewhere in the late 80s, Peak Oil; oil prices sky rocket, ok, what´s the plan, invade ME, keep an ace in the sleeve, take out shale when oil prices sky rocket to 120 bucks a barrell, use banks to finance this masterfull check-mate move on the global geopolitics game.
And now when Gail has shown what Peak Oil actually means, the guys in charge are simply waiting, the-price-has-gotta-rise, all war-games showed price sky rocketing. F-ck, well, let the banks keep on lending, any day now the oil price will sky rocket to 200 bucks like the war-games showed, and then America will W-I-N.
Hope they would learn from past mistakes and take Gail in to their next war-game session. The banks will be in serious trouble come April. That means bye-bye to U.S. hegemony wet dreams, and that means desperate measures from the neocons by June-July. It would be nice to know what “drills” NATO is currently prepairing for June-July..
No drills really needed for whats coming
Cyber attack
Space based weapon attack
Launch codes
Who takes the first punch is anybodys guess. as who is the last man standing.
Thanks! Interesting article!
Pingback: Why oil under $30 per barrel is a major problem | Theupliftingcrane's Blog
Can Oil drop to $10 a barrel?
At the World Economic Forum in Davos yesterday the boss of BP, Bob Dudley told the BBC’s Kamal Ahmed it was “not impossible” the price of oil could fall to $10 a barrel – a forecast made earlier this month by emerging-markets lender Standard Chartered.
However, Dudley reckons this will be a short-term fall to a price that is not sustainable. “We could see some real volatility in the first quarter [and] second quarter,” he said. “And then, around April or May, as the stock drawdowns [in preparation] for the summer driving season in the northern hemisphere, then I think that given the rise of demand in China and North America… prices would start on an upward trajectory”.
[from: http://www.theweek.co.uk/oil-price/60838/oil-price-rally-proves-to-be-another-false-dawn%5D
———————————————————————————————————————————
Hmmm…at that price people just might buy a barrel of oil just to get the barrel for cheap!
😉
🙂
Come to think of it … I bought 15 empty Castrol Oil barrels a few months ago — for $120…. including delivery…
“Hmmm…at that price people just might buy a barrel of oil just to get the barrel for cheap! ”
Good point! There are also oil heaters I wonder how crude would burn in them?
Everyone should take a very serious listen to lol Jim Cramer of mad money fame
‘we live and die with oil’ he discovered an interesting connection!!!!!!!!!!!!!!!!
http://video.cnbc.com/gallery/?video=3000485774
I would recommend not listening to someone who acts like a circus clown ….
Unless of course you’d like to lose a lot of money… then yes listen to him…
Let’s revisit one of his most famous calls :
Rural areas look pretty, but difficult to make a a $. Another marker that reeks economic crisis
http://www.winonadailynews.com/news/state-and-regional/mn/midwest-plains-bankers-had-dire-view-of-rural-economy/article_52972415-1519-5b60-9413-900a9ba1a6cb.html
OMAHA, Neb. (AP) — A survey shows some bankers had a dire view of the rural economy in their 10 Western and Plains states.
A report released Thursday says January’s Rural Mainstreet Index plunged to 34.8 from 41.5 in December. It’s the lowest overall index figure since August 2009. Survey officials say any score below 50 on any of the survey’s indexes suggests that factor will decline.
Creighton University economist Ernie Goss oversees the monthly survey of rural bankers and says it’s the fifth straight month for a decline. He again blames lower prices for agriculture and energy commodities and downturns in manufacturing.
The farmland and ranchland price index dropped to 23.9 in January from December’s 28.8
Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming were surveyed.
Huge problems for China who already refuse to devalue the RMB with Li Keqiang stating they do not plan to. Falling commodities too.
Could this lead to the near death of oil?
I think that a part of all this is the fact that we are on the cusp of entering a new societal and technological phase. We may truly see the beginnings of a post-labor world.
arthurrussell, can you describe what a post-labor world is?
“arthurrussell, can you describe what a post-labor world is?”
10 fishes to your one you dont get a reply.
I owe yah ten fishes Van Kent. Smelt ok?
Thanks kjuf, but I prefer Baltic herring or Arctic char, Atlantic salmon if nothing else is available. Don´t worry, I´ll make those in my smoker when you come visiting, instead of you sending a smelt package by mail, ok?
A. salmon is also great for canning, but you are apparently closer to the source even in Eastern Baltica at better prices or is the import from Norway? for you more costly than for say continentals.. ?
Hanuman, the salmon price range is about 3,99 €/kg to 6,99 €/kg in groceries. If you don´t know how to fillet a fish, 2€ approx. is added to the price. Wholesale is cheaper of course.
Sure. Human beings that have jobs are generally supervising robotic production or providing some kind of service to other humans. Humans themselves are generally no longer required for most manual labor.
arthurrussell, do limits on a finite world have any effect on this post-labor world?
At that point, probably not, except as an impetus to move off planet more heavily. I mean, if we REALLY want to keep burning hydrocarbons, we could either synthesize them or harvest them from places like Titan.
arthurrussell, and energy, now, a few years from now, or when going to Titan, where does that energy come from?
Are you familiar with a concept of EROEI, Energy Returned on Energy Invested?
What kind of energy are we talking about?
Harvest hydrocarbons from Titan? Surely you jest! Silly me and I thought shale gas was difficult I was way off.
If humanity focuses on getting into space large scale, it may actually be cheaper to get it from there than mining it here, given the gravity difference and such.
“What kind of energy are we talking about?”
Energy is energy. E=mc2
Pick one.. anyone..
Well, you asked where the energy was coming from. There’s human energy, which could be called ambition or knowledge or work. That energy generally comes from ingesting nutrients. Electricity is different, but we choose to make it in the cheapest way possible without regard to future energy spent fixing the mess. Nuclear energy has similar problems, but the used nuclear waste is pretty dense, it probably has some use outside of weapons, especially if we go off planet. Solar has issues, but could work in the near term. I feel like I’m not answering what you’re asking.
“cheaper to get it from there than mining it here, given the gravity difference and such.”
Would you care to explain how energy becomes cheaper in space?
The cost to transport a product from the surface of a planet into orbit is directly related to the amount of gravity exerted on the transported object. A trampoline system could move heavy cargo from the surface of the moon into orbit. I don’t remember how much gravity Titan has, but it should be far easier to simply harvest hydrocarbons there and move it around for use throughout the solar system than it is to pump it out of the ground on earth, then move it to orbit. Even if you had a space elevator on Earth, you would still face greater cost than if you were able to just toss it into orbit.
I am not clear what gravity has to do with sucking energy out of the centre of the earth
As per my Jules Verne project…. we pound titanium stakes into the ground until they hit the molten core — the titanium heats up and boils water producing steam — and there you have it — massive amounts of clean energy…
Let’s forget about space solar — we have the answer right below our feet.
How hard can this be? (sarc on)
Space solar is a good idea, I think. Space would probably be the best place for fusion reactors, too.
arthurrussell, how old are you?
38. Why?
Robots consuming fuel to build junk. Just when I thought the ideas couldn’t get any dumber you say something like this….and totally redeem yourself.
“Robots consuming fuel to build junk. Just when I thought the ideas couldn’t get any dumber you say something like this”
You are aware that places like FoxConn are replacing hundreds of thousands of humans with hundreds of thousands of robots? This process has been ongoing for sometime now. Car makers have been replacing humans with robots for decades. One tech maintains 200 robots that replace three shifts of humans. The Jetsons may have been Sci-Fi in the 70s, but it is pretty much our reality.
Robots take skill to design and build. There is labor involved in learning those skills. There is labor involved in teaching those skills. There is labor involved in mining the resources it takes to build the robots. There is labor involved in maintaining the robots. I could go on and on and on and on. This techno fantasy future is so freaking absurd. Have people just lost their ability to think. Have people grown so accustomed to this artificial fossil fuel haven we have built that they think it is real and natural? I know why Fast Eddy gets bent outta shape reading this rubbish.
“Robots take skill to design and build. ”
Once one person designs a robot to do a task, no one ever needs to redesign it. Robot factories can build the robots.
“There is labor involved in learning those skills. There is labor involved in teaching those skills.”
One person trains a robot. Those skills are copied to a million other robots. So if it takes 1000 hours to train a robot to do a job, it takes the same 1000 hours to train a billion robots to do the job. The skill level and time to train a robot is being continuously reduced:
https://www.youtube.com/watch?v=2piPTm_PWz8
“There is labor involved in mining the resources it takes to build the robots. ”
Until the robots do the mining.
“There is labor involved in maintaining the robots.”
Until there are maintenance robots.
“I could go on and on and on and on.”
Anything a human can do, a robot can be made to do the same job, better, for less.
The only problems are a lack of continuously increasing supplies of energy, and a solution to how exactly unemployed people will buy the stuff the robots make.
Matt, don’t you think if robots can be made to do everything people do, then why would the superwealthy want a world with non-superwealthy people using resources their offspring can use far into the future? No one seems to think much about this, but it’s never been an issue before in human history. But now there could be robots running ore mines, manuf. plants, cultivating food and wine. If it ends up being cheaper to have robots do things then the most powerful people will only want robots, not troublesome people, right? We may be on the cusp of a world about to change very quickly from 7.2 billion people and some robotics to a world with a few thousand or million super wealthy and however many robots they need to serve their needs. Once they don’t need people won’t they just find ways to extricate us. Maybe insect drones injecting people with something that makes them lethargic so they quietly waste away – no fuss, no disgruntled masses.
“We may be on the cusp of a world about to change very quickly from 7.2 billion people and some robotics to a world with a few thousand or million super wealthy and however many robots they need to serve their needs. ”
I think they would need BAU for another decade, consensus, and to keep such a plan secret for that to work. Not impossible, but improbable at this point.
Can’t the robots buy the stuff?
“Can’t the robots buy the stuff?”
The robots don’t get wages, that is why they are cheaper than employing humans. If you had to pay a robot a fair wage, on top of buying it and powering it and maintaining it, it would cost more than human labour in Nigeria or China.
Stilgar,
Netflix?
It isn’t too hard imagining you’re future with super rich and hunter-gatherers, all other gone.
Matthew,
“The robots don’t get wages, that is why they are cheaper than employing humans.”
I believe the reason robots and outsourcing is cheaper is you avoid workers taxes. Making tax burden heavier on the remaining, increasing robots advantage.
“I think they would need BAU for another decade, consensus, and to keep such a plan secret for that to work.”
I think much more than a decade, THAT much hasn’t technology evolved last decade. Add a recession right about now…
“I believe the reason robots and outsourcing is cheaper is you avoid workers taxes.”
Triple production, cut defects by 80%, removed 90% of human workers:
http://www.techrepublic.com/article/chinese-factory-replaces-90-of-humans-with-robots-production-soars/
Plus you don’t have the labour pressures. Chinese workers already up to $500 USD per month, while in Cambodia, $75. Robots help avoid having to move your factory every 5 years.
“I think much more than a decade, THAT much hasn’t technology evolved last decade. Add a recession right about now…”
Which technology? Self-driving cars are being tested on public roads this year. Once you no longer need humans to drive the trucks in and out of the mines, that is a huge step forward. A few thousand workers can manufacture everything millions of people need. If you are referring to the idea of nanobot mosquitoes selectively injecting an engineered virus, I think there are much lower tech means of achieving rapid depopulation without massive uprisings.
Stilgar, I agree that is a real risk.
With selfdriving cabs a reality, owning a car is much less interesting. So cab-driver-robots eliminate need for car-building-robots.
“With selfdriving cabs a reality, owning a car is much less interesting. So cab-driver-robots eliminate need for car-building-robots.”
Reduce, not eliminate. If the same work can be done with 1 self-driving cab as 10 people owning their own cars, you still need one-tenth as many cars made.
…and less people in work, so less cabs needed.
“entering a new societal and technological phase”
rocks and sharp sticks? Whens the IPO?
Lol… more like world government and artificial intelligence, human (as we know it) obsolescence.
AI may indeed be a game changer. How do you envision its form effects and interaction with humans?
I’m not sure I understand what you’re asking. Its form?
Well in terms of your earlier comment ” human (as we know it) obsolescence” This implies that humans wil still be around but have soime sort of interaction with AI. AI big limitation and big advantageas I see it is it is non biological. Since you seem to have a vision I was curious about it.
Terninators, network , crays or somthing else. IMHO semiconductors are probably the least sustainable thing on the planet. The chemicals, metals, technology required for SC is one of the most coimplicated things that exists. Its going away. But its nice to imagine so I am curious as to your vision for “rtificial intelligence, human (as we know it) obsolescence. “
Basically it would be a being which we would turn to for answers. A homemade god, if you will. Probably software, and thus no true physical form. Kind of like the one from the Ender’s Game series.
Hitchikers guide to the Galaxy?
Maybe as an extension. I mean, think about it. If you were a conscious being, unbound by a physical form, you might extend your consciousness to a robot like in Hitchhiker’s Guide, but you may prefer to be like the Unbound from the Homeworld games. Huge conscious spaceships and such, if you’re going to take a form at all.
Lol…. hmmmm….
Ha! That’s a good one kjuf. Technology will save us.
LOL
“We may truly see the beginnings of a post-labor world.”
No one has solved how people without jobs can buy things they don’t need. I think it is more likely we are rapidly approaching a full-employment situation, where everyone will be working overtime to try to get enough food to live.
It would require a rethink of economics, for sure, and probably world governance.
Is that a Unicorn leaping over a rainbow in your icon?
No, I believe it’s laughing as it flies overhead, pooping the rainbow. Sort of like turbopower.
Thank you for the clarfication.
Note unicorn flying not leaping
🙂
Lol
But ancient humans have lived without money in the past (as some still do today). Somehow, they managed to find food, water, community, and a way to maintain body temperature…
It would have sucked to live like them though….
And they still had all the “low hanging fruit” available. The next time there will be none of that and it will become nigh on impossible to survive.
Or maybe we will be fighting over boiled rat meat shortly…. I sure hope you are right
Tastes like… chicken?
http://www.snopes.com/photos/food/graphics/rats01.jpg
Sure glad there’s ketchup.
We could always work towards my hope for the future while preparing for the possibility of yours. Heck, we might decide rat is tasty. Lobster used to be served to prisoners and reviled among most others.
Lobster used to be feed to chickens in New England. There is a story in which the poor school teacher who is not feed, room and board being basically the salary, enough goes and takes lobsters from the chicken to eat.
LOL, i’m going to make the suggestion that we have Maine lobster day in the campus center cafeteria in honor of all those hard-working, low-paid teachers in old New England! Of course, I’ll have to get this story verified by the history department, first.
Well there’s no deflation with our PG&E bill. They are raising rates for all customers in 2015 4.5% and another 5% in 2016 AND eliminating our E8 rate plan on 3/1/2015 which will increase our winter rate 20-25%! I told him that if PG&E keeps pushing rates up like this more people will go to solar which will reduce the number of customers they have and force even greater rate hikes on those people. He had no response that – but it’s true. Unless there is short term collapse and this slow collapse continues, look out 20 years from now and the people still on the grid will be paying $500-1000 a month.
Which is why it must be legislated that all houses must be connected to the grid. Solar anarchy is not OK. Have all the solar you want but grid connection is mandatory just like health insurance for the good of all. What percentage of your increase was “service charge”?
“What percentage of your increase was “service charge”?”
Zero. It is all rate increases based on tier 1-5.
“Zero. It is all rate increases based on tier 1-5.”
Well thats a pretty rare opportunity and pretty good for where you live. In means you can bring your bill to zero by bringing your use of electricity to zero. Where I live its rural and there is always a substantial service charge. With no service charge you could run PV in the summer when the sun shines a lot in AK- back to the grid in the winter when the sun doesnt shine in AK. If I run PV I still have to pay the service charge (which has increased 500%) even if I pull nothing off the grid.
“Unless there is short term collapse and this slow collapse continues, look out 20 years from now and the people still on the grid will be paying $500-1000 a month.”
Just continue the thought experiment. As it becomes more costly to stay on the grid, more people get off it, which causes the cost to the remainder to increase, and so on. I don;t think the process would take 20 years before the grid collapses.
Of course, this would mostly apply to rural and suburban areas; in a dense city, people would not be able to switch to another system. The grid would shrink down in size, to remain affordable to the smaller group of more densely situated users.
Exactly! Folks forget we are living at the peak and that is where economies of scale really shine. Once things begin to contract we can no longer leverage these large scale systems…they will fall apart at an accelerating pace. It will be non-linear.
Exactly greg. They will fall apart at an accelerating pace along with the people that previously were on the grid. Then we really are on our own, which of course benefits those that can afford a solar system and its periodic upkeep, repair/replacement. Then the divide between the have’s and the have not’s really gets accentuated, with people knocking on the door – “We noticed you have solar. Can you heat up this soup in your microwave for us. Got any plastic spoons? Can we use the bathroom? Our water was shut off last week. Have an extra towel – can we take a shower?”
Or…
“Nice solar system — I think me and the boys would like to have this….’
http://thenewsdoctors.com/wp-content/uploads/2014/11/smoking-gun.jpg
People knocking on the door, this is great point, people should think way ahead of these things, in terms of what kind of neighborhood they are settled or moving in etc.. The individual squirrels will be spotted pretty much instantly just by the way of their behavior (trash/smells, clean clothing, not starving kids, gear etc.). The only meaningful reaction is to build a community, and that usually means top down structure, order and command to various degree depending on cultural, historic and on site energy potential. We can guarantee one thing, the globalist uniformity would go the opposite way for more regional flavor again. So the human farm will continue on a different footprint and with different props.
Yes I think that too and the non linear part but eventually there won’t be islands of plenty in a sea of want, they too will be overrun. The extremities and the end of the supply lines go first to try to preserve the core. It will be another example of can kicking but taking place in the end game. Checkmate is inevitable. BHP, Glencore, Anglo American, Rio Tinto all huge examples of economies of scale going steadily to the wall. Soon to follow big box stores, franchises, airlines, tourism and Wall Street amongst others.
“but eventually there won’t be islands of plenty in a sea of want, they too will be overrun”
I think it depends on what the people on the islands of plenty are willing to do to preserve what they have.
This is why it puzzles me that there is so much talk about what everybody in the world will do. Won’t they just have to figure that out for themselves?
“In January 2008 when he was running for President, then-Senator Obama, said, “[E]lectricity rates would necessarily skyrocket…. [W]hatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money onto consumers.””
https://www.uschamber.com/above-the-fold/president-obama-keeps-his-promise-electricity-rates-will-skyrocket-because-carbon
Here in New York State we hate coal, we hate nuclear, we hate oil, we love natural gas for electric generation. We do not have enough gas pipelines and nobody wants one in their town and it is not clear to me that there is a source for all the natural gas that the entire country plans to use.
Denver Post (I get these w/o paragraph breaks, unfortunately.)
Page 19A – Editorial
THE DEATH KNELL FOR “PEAK OIL”
Collapsing energy prices and bearish economic news have rattled equity markets, and the shock may not be over. With the world awash in oil and prices falling toward $26 a barrel, Iran is set to add to the oversupply now that international sanctions have been eased. It’s as if the whole world were conspiring to bury the tattered remains of the “peak oil” thesis, so popular a few years ago. As recently as 2009, a headline in The Denver Post announced a gathering of “peak-oil theorists” who insisted the planet was “running out of oil faster than society suspects,” and predicted the resulting spot shortages would “blow up prices, shock economies and destabilize governments.” Little did they realize that the shale oil revolution in the U.S., already under way, was about to push domestic production to unforeseen heights. As it turn out, the real threat to stability around the globe was an oil price too low to support the budgetary commitments of petro-states such as Russia and Venezuela, among others. Needless to say, peak oil — the high point of production after which it steadily declines and oil is never cheap again — is no longer on the horizon. Indeed, some experts are saying that huge upward price spikes aren’t likely in the future, absent war, because of immense supplies and the ability of producers to react faster than ever to market signals. They may be proved wrong, of course, just as peak-oil pessimists were, but their logic at least bears considering. Peak oil handwringing was popular for most of a decade, with even a somber editorial on these pages 10 years ago highlighting some of the arguments. Suffice it to say that human ingenuity and the profit motive are usually enough to covercome worries over resource scarcity. Or at least that has been true in the case of oil for all of its history: one prediction after another of impending permanent shortage followed by an unforeseen gusher of supply and diving prices. Prices will eventually recover, of course. They always do. For the sake of Colorado jobs and market stability, we hope a bounce off the floor occurs sooner rather than later, even if peak oil worries have been laid to rest.
‘Prices will eventually recover, of course. They always do’
Amusing….
If this is sarcasm then, it is hilarious if it is serious, I would call it arrogance. Nature always wins….always!
I agree. One day it will bounce back. True challenge is timing.
” Prices will eventually recover, of course. They always do.” Of course they will, when the storage tanks begin to run dry and gurgle. The price will “recover” all right, to the point where gas tankers will need armed guards and people will come to see the Mad Max movies as documentaries.
Given the amount of oil in storage, and the fact that we now know how to ramp up production in a hurry, a lot would have to happen for storage tanks to run dry in a short-time frame (say a decade). The sort of events that completely wipe oil issues from your mind. Not saying it couldn’t happen, but just don’t see it as likely in the short-term. But long-term, say 100 years out, and a Mad Max world doesn’t seem all that fanciful.
I’ve been reading a lot about water lately. Very interesting stuff. There is plenty of water…for now. Unfortunately, it’s not all where we need it, we use it wastefully, and our population keeps growing. So we have to throw some pretty amazing feats of engineering at the problem. In some regions, the situation is already dire and has been for quite some time. Even in the first world, it is getting to the point where regular people are having to change their habits. Luckily, we’re so wasteful that there is a good deal of room to change. On the other hand, nearly everyone fights change tooth-and-nail, which only hastens the coming squeeze.
Sound familiar?
‘a lot would have to happen for storage tanks to run dry in a short-time frame (say a decade)’
I think I saw a post that indicated we don’t even have a month of oil in storage — we use nearly 100M barrels per day….
I can’t find global numbers…. but – ‘U.S. stocks levels, already at a 80-year high of 459 million barrels, may soon test the limits of the country’s tank capacity.
I reckon that’s about 20 days of oil based on the current consumption of oil in the US….
Yes, but one has to be capable of some pretty amazing mental gymnastics to think that oil production will significantly decline relative to demand in a time-frame that matters. By significant, I mean to the degree that stored oil begins to dwindle.
Look, I fully expect to see supply falling in the near future, due to the drop-off in non-OPEC drilling, but its not going to fall off a cliff. Also, Iran can’t be ignored any longer. We would need to see a significant fall in production (unlikely because of Iran), as the world economy picks up in a big way (unlikely because of…every country besides the US and Germany) to see a storage draw-down worth worrying about.
A major conflict in the middle-East is the only way I see events leading to a large storage draw-down. Unfortunately, such an event is distinctly possible.
My bet is on worsening economic malaise and continued low oil prices. Honestly, it is starting to feel like Limits to Growth are finally manifesting and economic growth is banging its head against the ceiling.
Keep in mind … we either grow or die…
The problem is not too much oil — rather it’s that the demand that was expected is not happening … creating a mismatch…
Or in other words — we are shrinking…. (grow or die….)
If we reduce demand even further — and reduce supply …. storage won’t be an issue…
Because the financial system will collapse — and supply will completely stop
Actually, if we continue to grow, we die. So I think of it as shrink or die.
I guess I reject that the Ffinancial system will collapse. And I say that as someone who really wants it to collapse. My expectation is that we will see a massive decrease in debt as a tool for…pretty much anything, and the Finance sector will shrink as a direct result, but I just can’t fathom why the sector would disappear.
(Note that WordPress’s text editor is doing weird things with the lowercase letter ‘F’, which is why Fast Eddy seems to have mis-spelled Finance, and why I am capitalizing the word.)
I think the US is at 19 million barrels per day. The 100M is the world rate per day. 459/19=24 days.
“THE DEATH KNELL FOR “PEAK OIL””
And oil production grew exponentially forever, and nothing bad happened, ever again. The End.
Touché. love it!
LOL, it seems so…
A Thermodynamic Tale of Collapse
There was once a settlement on the Maine coast. It was called Bar Harbor. The people were fishermen. They rowed and sailed out to sea and caught fish. The land was rocky and nothing but weeds would grow, so they just ate fish. An economy developed, wherein some people built boats and nets and processed the fish and preached sermons to the sinners and became skilled carpenters and such. They invented a money system as a medium of exchange, but they had very little contact with the outside world.
Now the amount of fish you catch is related to how long you fish, and the people in Bar Harbor were spending 2 hours getting to the fishing grounds and 2 hours getting back to Bar Harbor. As luck would have it, there was a rocky island near the fishing grounds: Washington island. By moving to the island, the fishermen could catch more fish, which allowed them to trade more fish for the stuff that they needed the people in the town to do for them. The people in the town chose to use the additional fish in two ways: they had more children to help them make more stuff to trade with the Washington Islanders, and they began to feed some of the fish to domestic animals such as chickens. Certain clever bankers discovered that they could loan out money at interest to fund the increased amount of infrastructure, such as bigger fishing boats and fancier carpentry shops. Since more fish were coming ashore, the increased amount of money greased the skids for the exchange of the fish and the products produced in the town.
However, the fish were living a rather precarious position. It was true that the ‘sea was swimming with fish’, but the fish lived a rather complicated ecological life, depending on a whole food chain with started with green algae. The fish which the fishermen caught was just the tip of an iceberg…but nobody knew it.
As the boats got bigger, the catch increased, but then the laws of ecology began to reduce the catch. The fishermen went to the bankers and took out loans so they could buy bigger boats. But the bigger boats simply increased the catch, which kicked the laws of ecology into overdrive. The people in town were eating all the fish they wanted, so the fisher people had to lower the price of their fish so that the townspeople would buy more to feed their chickens. But going out to catch fish and then feed those fish to chickens turned out to be an energetically very expensive proposition. So the townspeople and the fishermen out on the island were soon locked in a downward spiral.
The bankers thought they knew what to do. Loaning out some more money had always paid rich dividends, so they loaned out more money. By now, there were 50 people in town for every fisherman out on the island, so the preachers stopped telling people that waste was sinful, and began to preach sermons that consumption was holy and what God had intended all along. The Day of Atonement which Honest Abe had made a national holiday became the Day Before Black Friday…an orgy of shopping. It sort of worked for a little while, but those actually doing the work began to feel distress. The bank foreclosed on many of their enterprises. A very rich man who knew a thing or two about crafting a message appealed to the workers, and started a mass movement.
Meanwhile, the fish were clearly cratering. The fishermen who had originally moved to the island to be 20 miles closer to the fishing ground found that the fishing grounds were retreating farther offshore every year. But the fishermen had to pay the loan on their big boat, and they had to buy supplies from the people in town, so each of them individually doubled down on catching more fish.
I am not going to tell you how the story ends. You can make up your own story at this point.
Don Stewart
The banks started printing fish?
Greg
The banks do essentially print fish. If the system is working on physical exchanges, and everyone has perfect knowledge (the bases of economic theories of capitalism), then a bank would stop loaning money to expand the catch when they perceive that the catch cannot be expanded and that they will never get the loan back. Money, however, obscures everything. So long as the banks can increase the credit, and volumes of fish continue to increase and payment schedules are met, everything looks OK. It takes an analysis of the thermodynamics to reveal that the system has been destabilized and that credit should not be extended. But since the banks don’t do that, they finance bigger boats which reduces the fish even faster. The price of fish falls in Bar Harbor, even as the basis for the industry erodes.
Don Stewart
Yes…that’s why the economy is floundering.
LOL
Good one stan!
“I am not going to tell you how the story ends. You can make up your own story at this point.”
And then one of the fishermen snapped and became a violent psychopath. He forced all the fisherman to join a cartel, which regulated capture quotas and fixed the price of selling fish. Anyone who violated the cartel rules was sent to Davy Jones’ locker.
The cartel used the money they made by catching fewer fish and selling them at a higher price to create fish hatcheries, to increase the fish stocks, so they could increase production as long as the market could bear the higher prices. If the market would not bear the higher price, they could lower the price or reduce quotas as needed. And they all lived happily and fearfully ever after.
The Ukraine trebles price for transiting Russian gas to Europe:
http://www.novinite.com/articles/172709/Ukraine+Trebles+Price+for+Transiting+Russian+Gas+to+Europe
It was posted the Ukraine is in ecomic crisis and faces complete social collapse
http://www.telegraph.co.uk/finance/economics/12072614/Inflation-hits-44pc-in-Ukraine-amid-economic-collapse.html
http://www.foxnews.com/health/2015/12/23/ukraine-health-system-in-danger-collapse-as-reforms-stalcollapse
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I still don’t understand why it appears as problem. Oil is bad for our life and earth and we really need to plan to eliminate all the oil extraction. This is the opportunity to invest in better energy production source.
Ya, I did and bought a cloths line to dry by wet laundry and some great trail sneakers as a means to travel.
“…eliminate all the oil extraction. ”
That means horse drawn fire engines? I guess I should move closer to a fire station.
Yes, eliminating all the oil extraction means no solar panels for Glan!
There is a limit to better and we are there now.
BWAHAHAHAHAHAHAHAHAHA
Your post is masterful.
It shows deep ignorance on so many intertwined levels that I am unwilling to dissect it.
Omost every word supports the ignorance of the others.
Perhaps FE will oblige or let it stand as a everlasting monument to the power of ignorance.
masterful.
A simple sword stroke
I stand in awe.
You might want to think that through …. there are quite a few implications to ending oil when there is nothing available to replace it….
“I still don’t understand why it appears as problem. Oil is bad for our life and earth and we really need to plan to eliminate all the oil extraction. This is the opportunity to invest in better energy production source.”
Our entire world is based on oil. What is this better energy source? How long will it take to come to fruition?
From CNBC-Abigail Stevenson/Mad Money with Jim Cramer
“When Iran came back online over the weekend, it wasted no time trying to take market share from the other producers out there, such as Nigeria, Venezuela and Saudi Arabia. It took share by cutting deals that some say are like buying one tanker filled with 2 million barrels of oil and getting a second one free.”
Cramer added that the cost of Iranian oil is now well below $13 a barrel.
First of all Jim Cramer is a complete idiot
https://www.youtube.com/watch?v=V9EbPxTm5_s
Secondly CNBC is not a serious financial news source… the MSM is a joke — then you have CNBC which is so bad it is not even funny….
Iran cannot produce at $13 —- nobody can — the cost of product of a barrel of oil involves more than the cost of the pump and the electricity that powers the pump…
Just as Apple cannot sell an iphone for a dollar more than the cost to manufacture it — the oil companies cannot sell oil for a dollar more than it cost to pump it out of the ground.
So, when will the governments announce the fact that we have a problem ?
Never. The gov’t still is in denial about the depression we have been in since 08.
The announcement would of course cause panic, perhaps even anarchy and civil unrest.
The actions of the government and the Fed seems to suggest that they are aware of the problem, but don’t know how to solve it. The government deficits have managed to pay for the imported oil, while the Feds QE’s have financed the deficits and the shale revolution.
On one hand they need to find a solution to the problem and on the other hand they cannot admit that there is a problem, since they must maintain crowd control ?
I don’t believe the Govt was ever in denial, they just never admitted it. It’s why the term “The Great Recession” has been bandied about. It has a much softer tone than a Depression. Back in 2008 I went to visit one of my customers and we got to talking about the financial mess that had shortly come about. I used the word “DEPRESSION” and she shush me. She looked aghast and said don’t say that.
Now multiply that response by 200 million. That’s why the word is rarely used because it’s too depressing.
Depression means inevitable reset of the system – wars and revolutions. This is how it ended throughout the history. French (let them eat the cake) and Bolshevik’s revolution were triggered by hunger and poverty. WWI and WWII were also iginited by socioeconomic changes and shifts in geopolitical power structure. Depression is incurable. We are hitting this wall again.
The recession term just gives more hopium to the ruling paradigm.
“Depressions” and “collapse of civilizations” are really not too different, in my view. If we were to look back today on what are viewed by researchers as collapses, we would see what looks like depressions.
The basic problem in both cases is the inability of non-elite workers to afford the output of the system. Demand falls. Debt bubbles also can be involved. Once those debt bubbles collapse, they tend to lead to recession, because they too reduce the buying power of the economy.
I therefore agree with you. Both collapse and depression are incurable. They arise from the fact that population tends to rise, while the extraction of resources (or production of food) tends to hit diminishing returns. Resources per person tend to drop. (For example, if everyone is a farmer, the size of farms gets smaller.) This is equivalent to inflection-adjusted wages per person dropping, and the whole system implodes.
Peak oilers put out a different story, because they didn’t understand that we would be hitting the same old problem, yet again. They assumed that we had a new problem that would have a new outcome.
““Depressions” and “collapse of civilizations” are really not too different, in my view. If we were to look back today on what are viewed by researchers as collapses, we would see what looks like depressions.”
I think the big difference is, in a real collapse, you have loss of central government. In the 1930s, you still had the FBI running around, arresting and killing the moonshine runners, the gangsters and bank robbers. In a collapse, it would be like the 1930s without the FBI. Perhaps instead of the Feds taking out Al Capone, he becomes Warlord over the independent City-State of Chicago.
You are right. And when the FSU collapsed, there were significant parts of the government that held together. Public transportation still ran. Not very much later, oil prices rose again, and it was possible to increase exports again, leading to a significant fix to the problems. Investment and technology from abroad helped.
Speaking of a Problem will crash the economy immediately. Not speking of it will crash it some time later, that is the far better option!
True.
Dear Artleads
A little more about new experiences and changed behavior. Bear with me while I copy some stuff from What Plants Know by Chamovitz. There will be a point to this.
I earlier referred to the fact that plants can be killed with repeated human touches. This was an astonishing finding. Which prompted scientists to look into the matter more closely.
‘What are these touch-activated genes? The first of the TCH genes Braam identified encode proteins involved in calcium signaling in the cell. As we’ve seen earlier, calcium is one of the important salt ions that regulates both the cell’s electrical charge and communication between cells. In plant cells, calcium helps maintain cell turgor and is also part of the plant cell wall. Calcium is essential for humans and other animals to propagate electric signals from neuron to neuron, and it is also necessary for muscle contraction. Although we do not yet know all of the ways in which calcium regulates such diverse phenomena at the same time, it is a field of intense study.
Scientists do know that following a mechanical stimulation like the shaking of a branch or a root hitting a rock, the concentration of calcium ions in a plant cell peaks rapidly and then drops. This spike affects the charge across the cell membrane, but it also directly affects multiple cellular functions as a ‘second messenger’, a mediator molecule that relays information from specific receptors to specific outputs. This free soluble calcium is not very efficient on its own in causing some response, because most proteins can’t bind calcium directly; hence calcium, in both plants and animals, usually works in conjunction with a small number of calcium-binding proteins.
Among these, the most studied is calmodulin. Calmodulin is a relatively small but very important protein, and when it binds with calcium, it interacts with and modulates the activity of, a number of proteins involved in processes in human beings—such as memory, inflammation, muscle function, and nerve growth. Getting back to plants, Braam showed that the first TCH gene encoded calmodulin. Most likely, a plant makes more calmodulin to work with calcium that it releases during the action potentials. We now know that over 2 percent of arabidopsis genes are activated after an insect lands on its leaf, an animal brushes up against it, or the wind moves its branches. This is a surprisingly large number of genes, which indicates just how far-reaching a plant’s response is when it comes to mechanical stimulation and survival.’
Now moving into some speculation about humans, and their behavior which would likely be adaptive in a period of change. What we see with the plants is that it takes some threshold level of stimulation to start the chain of events which results in the plant actually doing something in response to the change in the environment. If the change is too large (e.g., the gardener cuts it off at ground level), then nothing can be done. If the change is too slight, and below the minimum threshold, nothing happens. But if the stimulation is just right, then the plant activates its genes. But I will also add that the activated genes are encoding some already learned behavior. They already know how to make defensive chemicals or strengthen fibers. They just aren’t wasting energy doing so unless they need to do it.
So I speculate that resilience in humans involves three steps:
*Experiencing a ‘just right’ shock to the system so that we can see that our present stock of responses and skills is inadequate
*Learning how to do something which might be useful in the future
*Keeping an eye on the environment, and letting what we see trigger the already learned response
So, I think I did give my grandchildren a ‘just right’ shock to the system. They saw a very different way of living. In the one day that we had, they DID NOT learn all the skills that Deb Tolman has taught herself. Consequently, they are not really prepared for the third step.
I would prefer it if they DID practice some of Deb’s skills, but I am not their parents and I live far away. But the three steps also indicate some of my reasons for being hostile to those such as Fast Eddy who think that those who take any advantage of current civilization are phonies. IF you have the skills to do without current civilization, then there is no reason to try to do it until you get the environmental signal. Parallel systems will work better than all the eggs in one basket.
Don Stewart
“Parallel systems will work better than all the eggs in one basket.”
Well I’ve learned from Fast Eddy a healthier respect for our dependence on industrial civilization. It seems to me that any parallel systems to this are so small relative to it as to be statistically zero (quantitatively). But it also seems that these parallels (homesteader, survivalist, etc.) have created a sub theme within industrial society itself. I’m thinking of how the Occupy movement (which seemed in ways quite creative and forward looking, while perhaps grossly misguided as well) sprang up in the middle of mainstream society, seemingly out of nowhere.
That could mean there is hidden potential in mainstream society to “flip,” or change. But I’d argue that the means for this change, what this change would look like, can’t be too far away from BAU, else it would have no resonance. So what I’m talking about–and Van Kent has focused on this as well–is creative and practical use of BAU’s infrastructure before, during and after collapse.
Is it that what you are saying about plants learning can’t be a parallel strategy exactly, but must somehow find a way to harmonize with the mainstream? The vast majority of people do and will need a sense of “new-normalcy.” That sense must be rooted in the large web of cultural expectation, familiar things like streets and buildings. I can’t imagine who, statistically speaking, is prepared to launch out into the wilderness and make a go of it. Consistent with what you seem to be saying about our brain “wiring,” we are civilization itself. Take away civilization, and what do you get?
Artleads
I am all in favor of reusing anything that has value. I advocate teaching children how to recycle stuff to make interesting and useful things.
However, consider the ghost town in Inner Mongolia with its fairy tale architecture. If we have a rapid decline in energy available, I don’t see how it can be maintained. People might FEEL happier if they could wander around in its fantastical buildings…but I suspect they will be too busy growing food. Which doesn’t mean that everyone in China will survive to grow food.
So I am all in favor of art and science NOW which embodies and teaches skills and memes and emotional responses which are likely to be adaptive in the future. The raw materials can well be industrial products which have been scavenged. For example, Deb Tolman has made a pretty good deer fence out of scavenged and natural materials. She could also consider a living fence. Someone recently wrote about their experience in Illinois planting osage orange. In my childhood, osage orange was everywhere, and served as both a living fence and a windbreak on the prairies. Then it was all destroyed with power machines. The neighbors in Illinois weren’t very happy about the planting of osage orange, seeing it as a throwback to the bad old days. It takes some art and science to appreciate it. For example, the biodiversity it supports.
Don Stewart
Hi Don,
I’m only giving a different emphasis to using the past. “Scavenging” gives it the wrong emphasis. Scavenging seems like what happens when a house is demolished and you come by and take a door or a clawfoot bathtub. I’m suggesting that you don’t tear down the house in the first place. You view the village or town or city as a meaningful pattern and preserve the entire pattern.
J.B. Jackson (founder of Landscape Magazine)–I paraphrase: “You can’t change something unless you love it. Otherwise, all you can do is destroy it, and replace it with something totally different.” Like those agricultural landscapes close to major cities where developers come in and raze the ENTIRE LANDSCAPE to build spec houses. That is how history and culture are destroyed.
Artleads
My concern reflects my view of the probable future. I concur with those people who think that food production needs to get a whole lot closer to the consumer. We can accomplish some of that with gardening in the post WWII suburbs, as David Holmgren advocates. But current housing developments are really hostile to gardening. And many old city neighborhoods have to deal with things like heavy metals in the soils. Which tells me that a lot of people are going to have to move out into the countryside. Instead of one person per square mile, as in much of farmland Iowa, we will need more like a hundred people per square mile. More like an Indian village. Such a move would require, among other things, the depopulation of cities and the building of a lot of new housing in the countryside. The new housing likely wouldn’t look much like the previous houses the city people lived in.
The cities may all look a little like Detroit…lots of vacant land and derelict buildings.
The reason food has a one to ten ratio of output to inputs is NOT because production itself is so energetically expensive. It is mostly because we spend so much energy after the raw materials exit the farm gate. Cutting down on all that energy use is likely to require a vastly shortened food chain…and I’m not talking about ‘food miles’. I’m talking about ‘from the garden to stew-pot’. We may not have refrigerators, unlikely to be able to drive to supermarkets, and won’t get lettuce from California and grapes from Chile.
If the production system changes, then everything else changes. And we won’t be able to turn all the surplus infrastructure into yoga studios and coffee shops.
I DO see a role for art, using that term broadly. For example, when I studied geography in the 7th grade (shortly after the glaciers melted), the teacher showed us some pictures of our native Oklahoma pattern of development and the pattern of development in French Canada. In Oklahoma, the farmhouses were the maximum distance from each other. In Canada, the houses were close together in a sort of linear village, with the fields stretching out behind the houses. One design encourages solitude, while the other encourages more communal behavior such as loaning tools and working together on farm chores. Bringing about a more vibrant little farm community is an exercise in the arts…for architecture to sociology to entertainment.
Don Stewart
“In Oklahoma, the farmhouses were the maximum distance from each other. In Canada, the houses were close together in a sort of linear village, with the fields stretching out behind the houses.”
As far as I understand, the French Canadians followed a system of dividing up the land amongst sons. So, if a man had two sons, when he died, the property would be split in two. Since access to the river was the most important thing, the properties were split lengthwise. If you start off with 300-foot wide properties, it all seems fine in the beginning. Give it five or ten generations, and you end up with 30-foot wide long strips of land.
India, maybe China, and many other places, have had similar systems which inevitably lead to inefficient, tiny farms. Of course, many societies have tried different solutions; send the second son off to be a priest or soldier. Allow people to sell properties so they can be merged back together. Enforce a one-child policy.
” Instead of one person per square mile, as in much of farmland Iowa, we will need more like a hundred people per square mile. More like an Indian village. Such a move would require, among other things, the depopulation of cities and the building of a lot of new housing in the countryside. The new housing likely wouldn’t look much like the previous houses the city people lived in.”
Well, we certainly are starting out on opposite ends of the discussion, even though I think it’s best when all can find some sort of consensus.
I also think we’re both short on the facts. I once read about a study comparing urban and rural land. It was done in the UK, maybe London; I forget. It found that the urban soil was healthier than the surrounding tested ex-agricultural land outside the city. I would attribute some of that to the poisoning of the ag land with petrochemicals. But it’s hard to be definitive about the issue barring very intense and investigation of urban and rural landscape all over the world. Short of doing that, how can one speak definitively about city land?
Detroit’s abandoned properties have very notable urban agriculture going on them.
You speak of art as some sort of discretionary extra that might be fun and helpful here and there. It is nothing of the sort. It is the essential discipline of our time, which requires radical creativity and rethinking of urban and rural space.. Art is a break from the norm. And, short of understanding its creative role, there is a tendency to overly rely on old assumptions of all sorts.
Furthermore, it is precisely the lack of historical and cultural understanding that sidelines permaculture. It is reductionist.
So, no problem. I respectfully disagree with almost all you had to say (unlike most of the time) in your latest response.
Artleads
Permaculture came out of a very specific cultural milieu. Bill Mollison had studied native peoples very carefully, as well as a variety of ecological systems. So his message, which followed closely on Limits to Growth, was that the industrial model was leading us into disaster, but there were older models which could be adapted. Since the original work by Mollison and Holmgren, many other biological methods of growing food have sort of been joined together with Mollison’s original work. Some of the other methods are happy to be called permaculture, some detest the word. I like the term ‘biological farming or gardening’. I like it partly because biology is a science, and so we can always discover new principles and practices…we are not wedded to some traditional system or a set of rules laid down by somebody long ago who didn’t have all the understanding we have today.
In terms of the physical layout of the world of 2100, I think it will be whatever it has to be to deal with a lot less energy, and hence much more reliance on photosynthesis. Since photosynthesis is by its nature low density, I expect humans populations to be low density in 2100. I wouldn’t call that reductionist…just realism.
As for the role of art and science. Consider the recent little post I made here that some people bear the scars of stressful situations for the rest of their lives, while other people thrive on stress. I believe that those who are able to thrive on stress are able to interpret events within a context which allows them not to take things personally, but to get on with life. I would call that ability a science based art. The science tells us its possible, the art is whatever a person does in their individual life in order to make something good out of stress. I don’t think art is useful as denial of whatever it is that we need to do because of the physical circumstances in the world. I don’t care much for escapist movies.
If you want to talk about culture, you can select among many aspects of culture. There are elements of the culture I was born into that I find truly repulsive. Others that I value highly. Being cosmopolitan now, I can pick and choose. One danger as we move toward a more rural society is going back to an insistence by the village on a restrictive culture. I’ve been there, and don’t want to go back to it.
Don Stewart
“…we are not wedded to some traditional system or a set of rules laid down by somebody long ago who didn’t have all the understanding we have today.”
Quite amusing, given where we stand today. As to considering 2100… No, let me not even go there. 🙂
One of the most important but so far overlooked measures that we should be undertaking while infrastructure and energy allows is the reverse development, primarily depaving, of all the over-reach development. The soil under parking lots is generally in pretty good shape compared to other more deeply disturbed soils in city centers and under larger structures. Reexposing these buried soils will very quickly suck CO2 out of the atmosphere – a side benefit of restored productivity.
With the implosion of the Commie economy in China, the exhaustion of the various dubious “tools” of the Fed and other central banks, not to mention ecological and overpopulation problems, it looks like the processes mentioned long ago by the Club of Rome and Joseph Tainter — i.e., the absolute limits to growth — are now taking effect globally. From here on out, it looks to be stalemate. We are now at Peak Everything.
Yes like a post earlier stating that growth is over. If that is true then for every winner there must now be a looser.
It used to be sites like Zero Hedge delivered the bad news… but now the MSM is virtually overwhelmed with bad news now….
Is this what it feels like when the doctor tells you that you have only a few weeks — or at best a few months — to live…
We certainly are getting down to the nitty gritty….
Oh did I mention…. we have a neighbourly thing where we pick each other up at the airport to save parking fees…
My very good neighbour was mentioning how diesel prices are way down — and how he was filling up drums of diesel on the cheap ‘in case of an emergency’
When we moved here one of the first things his wife said to me when we met was – good to know who your neighbours are just in case of an emergency situation….
They may not know the full story — and I ain’t telling them — but they know something big is coming.
Thank you very much for your blog, Fast Eddy. You manage to keep us all informed with the latest news. I see you have managed to persuade Gail the Actuary to do a few guest posts. They are very insightful. I hope you can persuade her to do a few more.
The lines of arguments of both, Gail and FE, are stringent and supplementary from my point of view.
We are trapped. Watch the news.
One of the main players will panic soon and will become ugly aggressive. . My favorites are the US or/and Saudi Arabia. That could be the first dominos to fall.
They are less tough than the Russians are. They are the most “civilised”.
As I said, fuses are burning at every corner.
Gail (in the first line) but also FE are perfectly reporting about the facts.
Thanks for all the efforts!
The beast is thrashing about in agony …. it is dying….
1996 from our analysis, as we consider it anomalous given that it overlapped with harsh winter conditions and was limited to January and early February of that year. Of the remaining instances, all either overlapped with a recession, or preceded a recession by a few quarters.
The current period starting in October and continuing through the present has been accompanied by weak ISM results, with the purchasing managers index recently falling to 48.2 in December from 48.6 in November (a reading below 50 suggests contraction), and our proprietary BofAML Truck Shipper Indicator recently falling to its lowest level since 2012.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/01/ex%201%20rails_0.jpg
http://www.zerohedge.com/news/2016-01-21/what-rail-industry-sees-canadian-pacific-warns-tremendous-pressure-strong-headwinds-
No Turkey for you Jeremy!!!
I’d give Jeremy a turkey for that comment or, better yet, buy him a pint.
You might keep in mind that I don’t write the articles — I am not capable of writing the articles…
Gail is the Professor.
We are all students.
And as in any class… some students get A’s … some get F’s….
Some are along for the ride …. some make contributions that make the class more interesting.
But the professor is the one with the PHD…..
Really? Gail has a PhD?
A PhD in- Doom Science. Do ypou really think that if Gail had her head programmed with all the years of brainwashing and A** kissing thaty a PhD entails that she would be able to speak to the points that she does?
“The author of Our Finite World is Gail Tverberg. She has an M. S. from the University of Illinois, Chicago in Mathematics, and is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.”
-from http://ourfiniteworld.com/about/
Actuaries–at least the casualty actuaries in the US–live in a parallel universe, compared to the PhD system. The FCAS degree we get is more like an apprenticeship program plus self study. There is a series of exams that typically take those who are taking them about 10 years; many people drop out. The exams are put together by other actuaries. The exams are graded by actuaries. (I have participated in the grading–it is a lot of work!)
Companies generally give some study time toward the exams, and may provide a library with study materials. The quantity of material to study for each exam is very large and the pass ratio is very low–typically 35% or so. Students (many of whom start with Masters degrees or Ph.D.s degrees in something else first) keep retaking exams until they pass them. Actuaries often study every night after work for many years, before finishing the exams. But none of them ends up with debt at the end, because the process “costs” virtually nothing, except lots and lots of time.
Since the process takes place outside of the university system, there is not the emphasis on the academic papers, or models put together by others. The emphasis is on figuring out things for yourself, and figuring out the right references for the current problem. I have learned what I would call practical economics, but I have missed most of the standard indoctrination.
None of the academic journals seem to have a problem with my credentials. They keep writing to me as Dr. Gail Tverberg, asking if I would contribute articles, peer review a paper, or some such thing.
Wages are very good for actuaries. “Jobs Rated” lists actuary as the number one job in the country. Salary surveys give an idea how good salaries are. https://www.dwsimpson.com/downloads/2015-Actuarial-Salary-Survey-COMPLETE.pdf
I am working towards my doom phd…. then I can be Dr Fast Eddy…
Oh Canada! (is screwed)
http://wolfstreet.com/2016/01/19/canada-rebels-against-destruction-of-canadian-dollar/
So which industry is hit hardest? The crap made from plastic, which is petroleum based, or the fuel and lubricant one. This is what no one addresses in these rants about low oil prices. Stop making everything out of plastic, go back to metal for Tonka trucks for example. I swear the only people who don’t like low prices are the stock holders and they can just suck eggs, plastic ones.
The guardian has the numers. 1% of oil is transformed into plastic, not much…
http://www.theguardian.com/business/2016/jan/19/more-plastic-than-fish-in-the-sea-by-2050-warns-ellen-macarthur
Things made from oil http://www.ranken-energy.com/products%20from%20petroleum.htm
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Shell Fires 10,000 Workers
http://247wallst.com/energy-business/2016/01/20/shell-fires-10000-workers/
10,000 mortgage defaults
10,000 pickup truck defaults
10,000 families no longer buying much stuff…
Deflationary death spiral ahead.
Central banks can print all the money they want – they can run with – 5% interest rates …. if people do not have jobs then the only outcome is a deflationary death spiral
Of course the central banks might try something totally absurd when faced with the total collapse of the global economy —but it will be futile — it will just accelerate the the collapse.
This needs an image
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/death%20spiral.jpg
Sweet Jesus, can you please think just a little bit outside the artificial bounds of your argument? You state that the Fed can drop interest rates to -5%, but that it won’t have any effect. How about demonstrating a little bit to the board that you understand Keynes 101 by mentioning that NIRP would be accompanied by large-scale public expenditures? Not to mention directed economic activity such as mandated debt-financed purchases of say … healthcare insurance?
In some ways you sorta sound like Stockman; still stuck in the fundamental valuation loop. That is, the Fed has so corrupted market pricing mechanisms (to the tune of $15T) that they are now fully corrupted. But those sentiments are expressed in the context of what was viewed as “normal” economic activity over the last 300 years, and the desire (or expectation) of a return to those innocent days.
However, where humanity is going has no connection to the recent past whatsoever; rather, we’re going to dial back 1,500 years to the days of feudal order. Go on, get excited – me, I’m just smiling here knowing the shock which is going to occur when people are told that for national security reasons, dictats 1, 2 & 3 are being proclaimed. We are never going to get back to Kansas.
‘How about demonstrating a little bit to the board that you understand Keynes 101 by mentioning that NIRP would be accompanied by large-scale public expenditures?’
Been there done that
http://blogs-images.forbes.com/niallmccarthy/files/2014/12/20141205_Concrete_FO.jpg
The point of my post was to demonstrate this is going to be a deflationary death spiral…. the lay offs will come fast and furious — as will the bankruptcies
The thing is….
We won’t stagnate at 40% or 60% or 80% unemployment — there is a tipping point where suddenly there is basically 100% unemployment —- the whole ball of yarn will just unravel
It will start with some key large companies – such as Glencore and other large commodity producers —- and quickly you get dominoes falling not one by one … but by the thousand….
How do you get hyperinflation when hundreds of millions of people — no — billions of people — are not earning money? When currencies have collapsed. When the economy has collapsed?
Do you seriously believe the central banks can just churn out money by the trillions and give it to them — say each person gets $5,000 per month clear and free?
What will they buy with it when there is no economy – when there are no businesses?
The government will no longer be there to help — there will be no government — there will be no ‘public works’ — to ‘New Deal’ — no welfare — there won’t even be Oxfam to feed you ….
This is not the 1930’s — this is not Somalia or Haiti or Ethiopia….
This time is different — this is well and truly the end of the world.
There is no way to ‘play’ it
You seem unable or unwilling to understand that
“Do you seriously believe the central banks can just churn out money by the trillions and give it to them — say each person gets $5,000 per month clear and free?
What will they buy with it when there is no economy – when there are no businesses?”
How about, instead of giving the people $5000 for nothing, you give every business $10,000 per month for each person it employs full time, as long as the company pays the employee $30 per hour? Then, you have businesses, employers, and employees. The people will have money to spend to consume.
Matthew, if all businesses that in any way can turn a profit, gets as much of government backed debt as it wants.. What exactly is the difference in your model and what they already implemented in Europe and U.S Q4 2015?
“What exactly is the difference in your model and what they already implemented in Europe and U.S Q4 2015?”
My model limits the amount of money a business would get as a function of how many people it employs. Lending a billion dollars to a company that employs 100 people and uses robots to manufacture goods for ten million people is pretty useless as far as a stimulus plan. Without income, how can anyone consume the products of the factory?
Matthew, they lend only to profitable businesses. Profits must be proven, calculated, estimated and.. proven.
Most businesses that can prove that their business plan is profitable are service type franchises to global brands, just above minimum wage etc.
“Matthew, they lend only to profitable businesses. Profits must be proven, calculated, estimated and.. proven.”
That is why their solution will not work. The most profitably thing to do is replace all the human workers with robots.
My solution is to maximize employment. People must have jobs, to keep them occupied and to ensure they can consume non-essential goods and services produced by other people in order to keep the circle flowing.
We can use Carbon taxes, tariffs, credits, whatever as a means of slowly reducing the energy density of the goods and services, while still keeping all those hands from being idle.
“My solution is to maximize employment. People must have jobs, to keep them occupied and to ensure they can consume non-essential goods and services produced by other people in order to keep the circle flowing.”
This sounds wise to me, even given my alienation from money (of which I have so little). What I don’t know is how the money system can be maintained long term. For one thing, capitalism-as-we-know-it requires destroying all natural life support systems.
” What I don’t know is how the money system can be maintained long term.”
I’m pretty confident the financial system as it currently exists, cannot last for long. Even if there was no environmental problems, no commodity issues, vast lakes of easily accessible oil, the current system would come to an end.
All I’m suggesting is means of postponing the day of reckoning.
I think you are both right Matthew and VK to a point anyway. I still think the central banks are in fact swallowing large amounts of debt on a regular basis and simply hiding it through proxy buyers like Belgium and such. What do institutions like the Fed and others who can simply create digital fiat cash care about how much debt in dollars (or yuan or whatever) they make vanish? They don’t care. What they care about is how much actual resources they accumulate and I doubt that real physical amount has changed much no matter how much toxic debt, public or private, they swallow. We are busy watching their fiat illusions why the central banks are playing an entirely different game. It only falls apart when the illusion costs too much in real wealth and that can take generations yet I imagine.
And that consumption hastens planetary meltdown?
“And that consumption hastens planetary meltdown?”
What do you mean, “planetary meltdown”? It delays collapse, which delays people clearcutting and burning green wood to avoid freezing to death, while reactors and spent fuel ponds spew radiation into the sky and roving gangs hunt long pork through burned out cities.
Matthew, the environment is so destroyed by ff civilization that keeping it going is fatal anyway. Gail has suggested that the only way you address climate change is through economic collapse. I guess it’s very hard to connect all the dots.
“Of course, eventually it would snap, but it might buy some time.”
Buy some time to do what?
Why….to continue to live large of course… and then die of a stroke or some other natural cause at 78…
That would be a perpetual economic motion machine.
“That would be a perpetual economic motion machine.”
While it might appear like one, it would actually have friction and gradually slow. The idea would be paper inflation, energy deflation, and maintain social order as long as possible. Of course, eventually it would snap, but it might buy some time.
I have though of this solution before. It makes sense when you consider the high failure rate of small businesses. What this approach would remedy is the bloated rent structures that haunt late stage capitalist economic cycles. Yes it is equivalent to QE. But it is more effective at currency circulation by bypassing the elite investing class mode of hoarding (and therefore tends to counter rent inflation)
Sorry, to fast on the “submit” button. Rent structures are not the whole of the problem but the business welfare payments delivered to the bottom tier will keep the masses fed and happy a while longer until the elders are able to stabilize global trade during the transition to global policy that can address distribution and payments through collectivized global monetary operations.
I do support your position, but the feudal times were not that far into the history, even western countries land reformed (nationalized, expropriation-theft) land of feudals after WWI..
Onto the main point though, the COG will emerge sooner or later, for most of the people it doesn’t matter if this going to be under these guys, or some populist-revolutionary cabinet or colonel/general carving out entire region/state for himself.. The goal under this rule will be to mandate at least some remnant features of the old times, e.g. grid for a few hours, basic schooling for kids upto 8-12yrs, and obviously Food and Safety-Security, and that all my friends is a lot of work, so the question of unemployment is a bit hollow argument thrown around here..
Yes there will be also “the unfortunates” who ended up in region cut off from grid and resources, food, and law and order, mortality spike.
The government could take over the whole economy when the collapse is imminent and declare the beginning of communism ?
These 10.000 workers can install the Internet of things to every item in the world, about 100 Billion items need an internet connection. There are plenty of new job opportunities!
But what value does the Internet of things have? I do not want my dishwasher talking with the central authorities.
“What is driving this is that the central banks are not coming to the rescue,” he said, speaking at a Fox Business event hosted by Maria Bartiromo. Rates are already zero or below in Europe and Japan, and quantitative easing is largely exhausted, leaving it unclear what they could do next if the situation deteriorates.
http://www.telegraph.co.uk/finance/economics/12110415/Fears-of-global-liquidity-crunch-haunt-Davos-elites.html
Paul Singer, head of Elliott Management, said central banks have corrupted global assets markets with $15 trillion of bond and equity purchases over the last seven years, creating a total dependency on monetary largesse that must inevitably be all the more painful when it ends.
The bond markets – supposedly safe – have become the epicentre of risk.
“Things could be very disorderly. There is the potential for a tectonic shift if investors lose confidence in central banks,” he said.
The Fed has a magic tool in the toolbox that know no bounds: denial. The Fed and Govt will continue to do that which works best: cook the statistics and deny the obvious. How many times have we heard the MSM talking head experts say things like: “Unemployment figures are going down so the economy is improving.” “The stock market is going up so the broader economy is improving.” “Next quarter results will be better.” “Once we get through this first quarter things will improve.” or ” is causing global economic uncertainty. Destroying this will bring stability to the global economy.”
Central Banks Are Out Of Tricks
Once the power to manage expectations has been lost, the central bank bag of tricks is empty.
No one knows precisely how and when the global unraveling will impact their corner of the planet, but we do know one thing with absolute certainty: central banks are out of tricks.
Like all good conjurers, the major central banks will claim that their magical powers to inflate asset valuations and inspire the animal spirits of risk, borrowing and spending are unimpaired, but this time the audience knows the truth: their magic is threadbare and their trick-bag is empty.
Obfuscation and doublespeak are primary components of central bank magic. The magic is largely semantic: if the Federal Reserve claims it can restore the economy and the stock market with reverse repos and other financial legerdemain, the corporate media is always ready to repeat this dubious claim until it is accepted as self-evident.
The central bank magic is fundamentally a mind-trick of managing expectations. If the Fed (or other central bank) announces a quantitative easing or market-goosing program, punters buy assets anticipating the success of the bank’s program, effectively creating the very push higher the bank intended.
This rise draws in other traders, and the program is declared a success as the market generates a self-reinforcing logic: the market’s response is evidence the central bank’s program is a success, which then inspires more risk-on buying and further market gains.
Once a central bank program fails to generate a self-reinforcing rally, the mind-trick’s power is broken. Once expectations of a sustained rally are crushed by the failure of the rally to achieve virtuous-cycle lift-off, the magic no longer works: once traders take a wait and see stance rather than rush to place panic-buy orders, the initial rally soon fizzles, and the expectations of effortless gain are replaced by gnawing fear of more losses.
Once expectations revert to caution, the central banks lose their power to move markets with pronouncements. Unfortunately for believers in the omnipotence of central banks, monetary legerdemain has little power over the real economy. Once the power to manage expectations has been lost, the central bank bag of tricks is empty.
http://charleshughsmith.blogspot.com/2016/01/central-banks-are-out-of-tricks.html
You are unprepared because you play by the rules. The central banks make the rules. When they say all debt in the bond market is zero, it will simply go away and no one wins and no one looses. Or they can say : multiply all credit by -1. They can nullify all private debt. They can forbid selling of stocks more than 1000 USD per day and person. There are thousands of tricks left, be more creative!
Yep. I hope that this is more or less correct interpretation, as Gail said on page#1 that debt jubilees albeit solving nothing long term, are likely to kick the can further (relatively speaking) than outright/overnight market default-crash. So, what approach is more likely to be taken..?Now, what can we expect from the relative? Months, years, decades? This current system will most likely dissolve into lesser complexity, parts and expertise which could not be resupplied as new item would be simply cannibalized from the system at another location, also entire regions forced cut out of the deal, all this resulting in patchwork of deeper and shallower collapse zones, and also increasingly larger abandoned infrastructure, dwellings, etc. For some it’s already hellish reality, compare contrast city street pictures Syria 2011 vs. 2015 it’s like Berlin/Dresden 1945.. the energy throughput on the ground must be like 1/25th of the former prewar “glorious” times. That’s how it always worked throughout history.
The problem with forgiving debt is that every debt is someone else’s asset. The savers. including the wealthy, would also be wiped out. This is why it will never purposely happen.
If debt will be erased, let me know when it happens, so that I can buy me.. hmm.. what do I need, oh yeah, a holiday spa resort with jacuzzis, saunas, waterglides, masseuses, cooks and stuff. I´ll probably pay the salaries and all bills simultaneously for the next decade. Hmm.. some cash would be good, probably a ton or so of gold in the safe would suffice. Just let me now when the jubilee will start so that I can start taking more debt.
🙂 :} 🙂
Yes agree with that. Not saying a jubilee won’t tried but I think if is, it will be just signalling that it’s game over, the horse has bolted, the fat lady is singing, all over bar the shouting, turn off the scoreboard, batten down the hatches, get outa Dodge, looking for a miracle, time for a Hail Mary…….
“Yes agree with that. Not saying a jubilee won’t tried but I think if is, it will be just signalling that it’s game over, ”
What about quietly rolling over all the debts as zero-percent interest, interest only minimum payments?
Matthew,
“What about quietly rolling over all the debts as zero-percent interest, interest only minimum payments?”
That has already happened, has it not?
“That has already happened, has it not?”
Most people and businesses are still above zero on their interest rates, and are forced to pay part of the principal with each installment. We are not there yet. Making principal repayment essentially voluntary effectively creates the same result as a jubilee. The central banks can be the holders of the debt, having bought the debts from the pensions, businesses, rich people, etc.
People and businesses can be encouraged to actually make payments by increasing their credit limit as reward for making the payments.
Reduce credit card interest payments to 0… increase limits to $100,000 … make the minimum payment $200 per month on a 100k balance.
I am sure if the Elders think that doing something as insane as this would kick the can — it will be done.
The problem with any of these policies that put significant amounts of money into the hands of the consumer is they could spook the sheeple —- and when the people start to believe green shoots are not around the corner…. they stop spending….
Can you imagine a world where Goldman Sachs is ok with debt forgiveness…. hahahahahahahahaha …. hahaahahhaahah…..
http://cdn.akamai.steamstatic.com/steamcommunity/public/images/avatars/d5/d5e585297945102c78c7fa41ab69b8552014c8ee_full.jpg
that’s a perpetual economic motion machine…. aka a unicorn
When the Fed starts to buy T-bills then the jubilee has started. That is exactly what the Fed is doing today. I guess the private debt is a different story.
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http://money.cnn.com/data/premarket/
Premarket was projected earlier tonight to go positive tomorrow. However, just a few hours later and it’s now projected to go negative. That seems to be what is happening – any positive sentiment is being overwhelmed by negative results. The height of the Dow was in May 2015 at 18320. It’s now down -2672 points to 15648, a 14.5% loss. When the loss hits 20% it’s accepted as a bear market. Historically 9 out of 10 bear markets have coincided with recessions. What will Yellen do? QE4 or fold?
I think the Fed is intervening and the market is still dropping. I have this awful feeling that the intervention is not being publicized to give folks the security that investing in the market is OK because the Fed will drop rates and the markets will soar. When in reality the Fed is doing everything they can to prop it up and its out of bullets do stop the coming crash.
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The trigger? http://www.zerohedge.com/news/2016-01-20/emerging-markets-it-now-worse-asian-financial-crisis
I was in Jakarta during the 1998 crisis…. barely any cars on the road …. beggars on every corner…. grim….
Ah, now I get it – your earlier, formative years were shaped by experiences outside the Empire. So, you have first-hand knowledge of what happens when debts are found to be unpayable and previously over-valued assets crash to the floor ie deflation.
However, it’s a bit of a pity you’re conflating what occurred at a regional colonial outpost with the very center of Empire. Bad mistake on your part. I know this market action all seems very exciting, but apparently, no one is considering just who benefits from the status quo. That is, who would suffer the most if markets were allowed to clear, that true supply & demand would dictate prices, if funds were not available for requisitioning the most exotic & sophisticated weaponry.
We’re talking the Deep State here fellows. What would it profit them to lose their grasp on world affairs? Why not use every resource at their disposal to seize additional control and prepare the global order for a more directed economy?
But I guess dreamers are gonna dream. There’s been a few revealing tells the last few days just how juvenile & naive some of the posters really are. Sorta sad I guess, but eventually, everyone finds out the hard way.
Oh but Jakarta was nothing compared to what is coming …
The Asian Financial Crisis was but a tiny spark compared to the inferno that is coming…
This time it’s not an outpost that burns…. this time the entire empire burns … and the fire will burn hottest at the epicentre of the empire — America.
You exposed yourself some months ago when you stated to the effect ‘we are America — we are special — we are great — we will deal with this’
I almost fell off my chair laughing when you posted that load of drivel.
Clearly you actually believe that — ooh let’s invoke mention of the ‘Deep State’ oooooh ….. the all powerful Deep State …. they are omnipotent ….
We’ll see how far your Deep State gets you in the very near future….. they’ll be eating boiled rat just like everyone else…. and wondering how it all went so wrong…
America is not special — it just happened to be a place with enormous amounts of cheap energy and other resources…. and now those are all running out.
And when the resources are no longer available — it will be amazing how Americans will no longer feel ‘special’
You need to get your head around that.
No, you’ve got it wrong, FE. I believe that B9 isn’t stating that there will be no collapse at all, rather that the periphery is what is going now and we (in the center of the Empire) still have lots of game left to play. The “Powers” can still make this dead cat bounce for a ways yet down the line. Somebody (who?)got Mario Draghi to spit out some more QE and it wont be long before the Fed loosens. The Western elites are all working in concert together now. They’ll re-jigger the system again for awhile. I’m a’tellin’ you, the fat lady ain’t singing yet!
If she ain’t singing yet… she’s at least had her pre-concert meal and is warming up …. la la la la…..
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Definitely a major problem for the Markets.
https://www.youtube.com/watch?v=Iyfacz5x67U
New Collapse Cafe coming next week.☼
RE
haha classic spreading this
Thanks SL! I’m working on getting the YouTube channel better developed. It’s my main project for 2016.
Yay! Can’t wait!
Migration and Urban Planning:
http://citiscope.org/habitatIII/commentary/2016/01/habitat-iii-can-help-migration-drive-city-development
Oil Woes: Houston Housing Prices Falling Quickly
http://www.planetizen.com/node/83333/oil-woes-houston-housing-prices-falling-quickly
there are a lot of near falsehoods, assumptions, truth stretchers and some outright lies. and also, I’ve watched oil companies raise gas prices immediately when oil prices rise usually without resupplying the gas stations but gas prices don’t fall until the lower priced oil is actually purchased and converted to gas, however that seldom happens because the oil prices rise again and the consumer doesn’t see the cost reduction at the pump. Please do not tell me that the economy doesn’t get a boost when oil prices drop. It would if the oil companies reacted to oil price drop the same way as they react to price increases, because when the consumer has to pay lees for one item, especially one so widely used and costly, then the consumer has more money to spend
Motor oil in the stores still sells for the historically highest price that was established at the oil Price at it’s highest and the consumer sees no relief. Please stop (all media) but especially you making excuses for the oil companies when they are the wealthiest companies on the planet
“Please stop (all media) but especially you making excuses for the oil companies when they are the wealthiest companies on the planet”
Please stop? No belief in the right to free expression and exploration of ideas? It seems clear that what should happen is only ideas that dont upset you should be allowed.
“Please do not tell me that the economy doesn’t get a boost when oil prices drop. ”
OMG Why is this so upsetting to you?
The economy (whatever that is) is deader than a possum hit by a semi. Oil prices are lower than low. Where is the boost of which you speak?
The chance that you (or I) would exist without the oil companies is less than 100 to 1. You are not special. I am not special. I see no need for excuses for the oil companies at all. Without them I would not exist. To hate the oil companies is to hate your own existence. Now hating both your own existence and the oil companies may be appropriate, if thats your point I acknowledge the logic of your argument even if I disagree.
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@ Douglas,
Yes, I fully agree with your highly optimistic post. Given human ingenuity, we’ll eventually find a way to rewrite the very laws of arithmetic themselves so that continued exponential growth will never lead us towards any limits and we can continue on our current trajectory forever, amen.
Yeah, right.
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The resilience of mankind is unmistakable. Sure, there are many here that fear the future as a coward fears death, but for the most part, creativity, innovation and the shear will of humans seem to create sufficient curve balls that futurists can’t/won’t anticipate and work into their models.
Sometimes sea change events such as oil price v demand/supply coming to a head is a good thing. Looking beyond the next few years should be a habit and a welcome consideration, not a chore. We have to be prepared to replace our reserves here in the US and abroad for little dollars, not huge profits, at least any time soon. There will always be a segment of our population that can make the turn in the road and some who can’t take another minute on the ride. However if the past is representative of the future, there will always be innovation to assist true leadership. We should look for it, anticipate it and embrace it.
In a tsunami of energy rhetoric, we have in fact moved into a New Era of Discovery, reducing finding costs to pennies in some cases. However, in the flurry of other innovation we are blinded, and not yet open because the institutions of yesterday dominate the thinking of today.
Consider that in our day, remote sensing technologies are now 8 times more efficient than 3D technologies, yet 3D is the energy buzz word that never grows old. This technology is here due to 40 years of Russian, Chinese and American gathering of mineral and surface vegetation data over oil fields, which demonstrate changes and different alterations of different surface mineral and vegetation environments. And, for what ever reason, oil micro seepage seems to travel directly vertical. There is only one company that has gathered up this data and synthesized it. They are not even American, where most innovation is born and fostered. Today in 2016 we can now spot large oil reserves with up to 90% success. We have in fact entered into A New Era of Discovery based on years of data integration and building of algorithms across multiple language barriers. We use US Satellite technologies and very proprietary algorithm technologies. The future of oil is here and it will be in a short time period that the Saudi’s mismanagement of their assets (and blaming it on allah setting the price) that will be played out as their revenues decrease, their fortunes turn back into sand huts and the world moves on from Irrational influences of easy oil money and religious influences in the Middle East to solid low cost finding and implementation operations in areas not yet considered. To the past we wave Good riddance.
So here is my prediction. We will cycle through this period of low oil prices impacting sectors of our economy not yet fully considered to emerge on the other side victorious over adversity and swing oil politics. Hope that helps. I know I feel better.
Douglas, Please read a few more of Gail’s post and spend an hour or so going through the comments – either that or pass me your pipe!
This is surely sarcasm. Lost me at the first sentence. Mankind, resilient? That’s a good one. Nature is resilient. Mankind may have been resilient centuries ago. But, today most humans have devolved into ignorant, arrogant, dumb, cheap, greedy, energy hungry and lazy hogs. Must be affluenza!
LOL! Idiocracy, here we come.
“The resilience of mankind is unmistakable.”
Yeast is very resilient while its got lots of sugar
“Sure, there are many here that fear the future as a coward fears death, ”
A yes we are all cowards for looking at the facts. Too infinity and beyond
“New Era of Discovery, ”
BS Too infinity and beyond
“data integration and building of algorithms across multiple language barriers. ”
+ points for large grouping of meaningless buzzwords
“emerge on the other side victorious over adversity”
Smiting our enemy Victorious!!!!!!!!!!!!!
Was your post intended as Sarcastic humor? Where do these garbage speak, Huffington post, Kumbaya smoking, Star trek reality trolls come from? Do they clone them?
It amazes me how some folks can have such a high level understanding of many subjects and others lack even the most fundamental amounts of common sense. it must be one of the seven wonders of the world. It is sad that collectively, we as human beings, are not really any wiser than yeast in a jar.
This is a superb indictment!!!
And I haven’t even gotten to the comment that provoked this rebuttal…
I got a few sentences into this and thought it would be nice to have some music to go along with the fairytale….
It would be really nice if you are correct. It would help all of our life expectancies a lot. It is hard to see how all of these miracles will happen in 2016, when we really need them.