Our economy is a mystery to almost everyone, including economists. Let me explain the way I see the situation:
(1) The big thing that pulls the economy forward is the time-shifting nature of debt and debt-like instruments.
If we want any kind of specialization, we need some sort of long-term obligation that will make that specialization worthwhile. If one hunter-gatherer specializes in finding flints that will start fires, that hunter-gatherer needs some sort of guarantee that others, who are finding food, will share some of their food with him, so that the group, as a whole, can prosper. Others, who specialize in gathering firewood, or in childcare, also need some kind of guarantee that their efforts will be rewarded.
At first, these obligations were enforced by social norms such as, “If you don’t follow the rules of the group, we will throw you out.” Gradually, reciprocal obligations became more formalized, and included more time shifting, “If you will work for me, I will pay you at the end of the month.” Or, “If you will pay my transportation costs to a land of more opportunity, I will repay you with 10% of my wages for the first five years.” Or, “I will sell you this piece of land, if you will pay me x amount per month for y years.”
In some cases, the loan (or loan-like agreements) takes the form of stock ownership of an enterprise. In this case, the promise is for future dividends, and the possibility of growth in the value of the stock, in return for the use of funds. Even though we generally refer to one type of loan-like agreement as “equity ownership” and the other as “debt,” they have a great deal of similarity. Funds are being provided to the enterprise, with the expectation of greater return in the future.
As another example, governments make promises for future benefits, such as Social Security, healthcare, and payments to the unemployed. These payments are not guaranteed, so are not considered debt. Even without a guarantee, they act in many ways like debt. Citizens plan their lives around these payments, even though they may be reduced or eliminated.
Surprisingly, even “cash” is debt. It is similar to a bond that pays zero interest and has no redemption date; this type of bond can also be easily transferred from person to person. Since cash can be hidden under mattresses, it too can be used as a device for time-shifting.
(2) The big thing that goes wrong in this time-shifting approach to operating the economy is the loss of what I would call an “opportunity gradient.”
As long as the future looks better than the past, it makes sense to make these debt-like obligations. But as soon as the future looks worse than in the present, the whole model falls apart. Even if the future looks exactly the same as the present, there is a problem, because taking on these long-term obligations has some overhead costs, such as administrative costs and a margin to cover the possibility of defaults on loans. These overhead costs need to be paid in some way. Because of this, there needs to be enough of an upward gradient to cover the necessary costs of the loans or the loan-like agreements. (This is part of what makes a Steady State Economy, advocated by many, an absurd idea.)
Once the opportunity gradient becomes negative, it becomes very difficult to get anyone to borrow money and to use the resulting debt to lead the economy forward. When the opportunity gradient becomes negative, young people are less inclined to get married, and tend to have fewer children. International organizations of countries (such as the European Union) have a harder time staying connected. The whole model of cooperation working better than “every country for itself” starts falling apart.
Just as human bodies often go downhill before dying, an economy that finds itself on a downward slope may very well be near collapse.
(3) The loss of an opportunity gradient comes from diminishing returns in many areas, including:
- Rising energy extraction costs
- Rising costs of mitigating pollution, as increasing resources are extracted and used; these pollution mitigation costs are really part of total extraction costs
- Reduced quantity of arable land per person
- Reduced fresh water per person, without high-cost treatment such as desalination
- Fewer investment opportunities that allow for true growth, such as providing tractors to farmers who previously used draft animals, or adding a new road that permits fast transit across a country for the first time
- Many more required “investments” that are simply for the purpose of offsetting deterioration in previously built infrastructure
Figure 1 illustrates the extent to which current business and government investment in the United States offsets either depreciation on old investments, or previous investment that was no longer needed for one reason or other–perhaps because manufacturing moved to China.
Between 2008 and 2015, only 17% of “Gross Capital Investment” actually became “Net Capital Investment.” With this small amount of true addition to capital investment, it shouldn’t be surprising that what seems to be “productive investment” doesn’t really raise productivity by much. It mostly raises the debt level, without necessarily providing a corresponding benefit to the economy.
(4) Increasing complexity is what acts to offset the many diminishing returns we face. Thus, the situation we face is an increasing battle between growing complexity and diminishing returns.
Many people would consider increasing complexity to be similar to improved technology, but increasing complexity really is broader than improved technology. Besides involving the development of new devices, it involves greater use of specialization, and more use of education. Businesses become larger and more international in scope, and governments offer more services. Organizations become more hierarchical as the economy becomes increasingly complex. With these types of approaches, it is sometimes possible to overcome problems associated with diminishing returns.
If an economy is already reaching limits because of the long-term battle between diminishing returns and rising complexity, the use of an increasingly hierarchical structure tends to lead to a society of “haves” and “have nots.” The people at the top of the hierarchy have more than enough. Those at the bottom of the hierarchy find it increasingly difficult to meet their basic needs for food, housing, and transportation. They find it difficult to afford the output of the economy. This is a problem we are increasingly facing today, because of the way our self-organized economy operates.
(5) Debt plays a greater role, as the economy becomes increasingly complex and uses more technology.
Debt, because of its time-shifting ability, acts almost like magic in allowing an economy with adequate resources to grow. In part, this is because improved technology allows more capital goods used by businesses and governments to be produced. Capital goods made in the year 2016 are designed to provide a long-term benefit into the future, over a future period of, say, 2016 to 2066. Paying workers making these goods becomes a problem unless the future benefit of these capital goods can somehow be brought forward to 2016, so that the workers making the capital goods can be paid. In fact, there is a whole supply chain of workers that needs to be paid. There is also a need to pay many other kinds of costs, including taxes for government services and dividends to shareholders. All of these costs can be paid, using the magic of debt to bring forward the hoped-for future income from the new technology.
Debt is also frequently used for convenience for large purchases, such as buying a house or car. Here, debt effectively promises that the buyer will have enough future income to make the planned payments. It thus brings forward the future income of the debtor, and, through the magic of debt securities, adds this future income to the balance sheet of some organization–a bank, an insurance company, a pension fund, or the purchaser of a bond related to this debt, as if the debtor had already earned the funds needed to pay for the large purchase.
Of course, the problem with using debt and other debt-like approaches to bring forward future revenue flows is the fact that we don’t really know what the benefit of a new capital device will be, and we don’t really know whether a particular individual will be able to continue paying his mortgage or other loan. Perhaps he will become ill; perhaps he will lose his job in a recession, and not be able to find another job that pays as well. With a mortgage, there is a backup possibility that the house can be sold, and its value be used to provide the necessary repayment, but we saw in the Great Recession that property values can drop, so this doesn’t necessarily work either.
The way today’s economy is structured assumes that these future payment streams can be counted on. The value of stocks and bonds are the “assets” of insurance companies and pension plans. Banks can only exist if the loans they make can really be repaid. Our whole financial system is dependent on the current system continuing as usual, with at most a small number of loan defaults, such as are priced into the system.
(6) Growing debt tends to raise commodity prices and encourage commodity production, while falling debt levels tend to lower commodity prices.
If an individual obtains a loan, he or she can buy a home, a car, or other high-priced object, such as a boat. If a business takes out a new loan, it can build a new factory or buy new equipment. Making these objects requires the use of a wide range of commodities, typically including many kinds of metals and energy products. Once these items are placed in service, they are likely to need to continue to consume energy products.
Adding more debt allows the economy to make more goods using commodities. The way the economy encourages more production of a commodity is by bidding up its price. With this higher price, ores of lower grade can be converted to metals, and higher cost energy products can be used to make the desired end products. Alternatively, the higher cost can be used to open new mines or new oil fields, to try to pull the cost of production back down again.
Of course, if debt levels start to shrink or even rise less quickly, the opposite effect tends to happen. Commodity prices tend to fall, because not as many mines and oil wells seem to be needed.
(7) Nurturing economic growth; the key to growth seems to be growing “Disposable Personal Income”
With the magic of borrowing and promising to pay back the borrowed amount with interest (or through share appreciation and dividends), it is possible to start with very little, and gradually create a large economy. The situation is almost like planting an “economic seed,” and nurturing it with (a) additional debt as needed, (b) a growing supply of cheap energy, and (c) a growing population of workers. As long as the debt grows rapidly, the supply of cheap energy grows rapidly, the population of available workers grows rapidly (without becoming too hierarchical), and the other types of diminishing returns listed in Section (3) don’t become too great a problem, the economy can grow and prosper.
One of the keys to producing economic growth seems to be getting sufficient funds back to workers as “disposable personal income.” Disposable personal income (DPI) is after-tax income that gets back to individuals one way or another: as wages, dividends, interest, or rents, or as transfer payments, such as pensions for the elderly and payments to the unemployed, or as government employment of some kind, such as payment for being in an army.
There is a popular belief that GDP is the Goods and Services that an economy can make. As far as I can see, GDP is the Goods and Services that the people living in the economy can afford to buy. There is clearly a commonsense reason why this might be the case: an economy cannot grow, if the people living in the economy cannot afford to buy the goods and services that the economy produces. In the US economy, there is a .98 correlation between the growth in DPI (for all people in the economy combined) and the growth in the US GDP, as shown in Figure 2.
The GDP used to compute growth rates is not inflation adjusted, nor is the DPI inflation adjusted. These amounts are thus different from the more commonly shown inflation-adjusted amounts.
The way I see things, the amount of inflation in commodity prices is to a significant extent determined by the match between how much disposable personal income is rising, and the quantity of goods and services being produced. As I have discussed previously, energy is essential for producing goods and services. A suitable quantity of energy products must be purchased, no matter how inexpensive or expensive the price of energy may be. If the energy purchased is very cheap, it is likely that the goods and services can be produced very inexpensively. The benefit of this cheap production of goods and services can encourage growth in many parts of the economy at the same time:
- Profits to the owner(s); stock dividends
- Interest on debt
- The financial sector can flourish, with all kinds of new products
- Commodity price inflation
- Economic growth
The reason why this pattern happens is because the DPI of citizens (plus whatever amounts that governments and businesses can add to DPI) doesn’t necessarily match up with the cost of making those goods and services.
When energy prices are low, and when there are many opportunities for productive investments, the excess buying power can partly go into new productive capacity, leading to economic growth. Some of it can also go to provide higher wage growth. In fact, all of the items on the above list can be higher.
When energy costs are at a high level (see Figure 3), all other parts get squeezed. Instead of seeing inflation in commodity prices, we start seeing deflation in commodity prices. In fact, deflation can bring energy prices below the cost of production. This effect, together with the end of US Quantitative Easing, likely explains the sharp drop in oil prices starting in mid-2014.
Figure 2 shows that, in recent years, the overall annual growth in US DPI and in GDP has been only about 4%. Growth of 4% doesn’t go very far when it needs to cover growing population (about 0.7% per year in the US), plus inflation, plus “real” growth in wages. No wonder commodity prices get squeezed! Because of diminishing returns, the cost of their production rises far more than the modest growth in DPI can afford to cover. Something gets squeezed: energy prices remain far below the cost of extraction.
(8) The 1980 Economic Turning Point
If we look back at Figure 2, we see that the recent peak in the growth of GDP and DPI occurred about 1980, at approximately 11% per year. At 11% there is room for many economic “goodies,” including funds for new investment, raising wages, and inflation.
When growth in GDP and DPI started falling shortly after 1980, many changes occurred in the economy. For one thing, wage disparity in the US started increasing (Figure 4).
This was also about the time when US interest rates started to fall. Ten-year treasury rates hit a peak in 1981.
It also seems to be the time when increases in debt no longer automatically triggered a corresponding increase in the wages of non-government workers (Figure 6).
In Figure 6, “Wage Base” is wages of non-governmental workers, including wages of proprietors, such as farmers. I consider my wage base to be “regular” wages, before all the government manipulations that produce the much higher DPI, which includes transfer payments, and wages paid under government programs. Figure 7 shows a comparison of the relative amounts. On Figure 7, note that the upward “blip” in the Wage Base occurred in the 1998-2000 period, when the price of oil was unusually low (Figure 3), leaving more for wages.
(9) The Problem of Ever Rising Government Expenditures, and Government Receipts that Don’t Increase Enough
If we look at the historical pattern of governmental costs, we see that there has been a long-term upward trend in governmental costs. Figure 8 combines receipts and disbursements for all types of governments (federal, state, and local). The Wage Base, mentioned previously, is used as the denominator, because even taxes paid by businesses will indirectly affect prices paid by customers.
In Figure 8, Government expenditures peaked at over 90% of the wage base. Clearly these expenditures are only possible because they include a big increase in debt at the time of the bank bailouts and all of the stimulus activities.
The fact that government receipts have stalled at about 66% of the wage base since 1981 suggests that there is a problem in raising taxes above the current level. We may not even be able to maintain our current tax level, if required payments for health care coverage under the Affordable Care Act behave like another tax.
(10) The Recent Decline in US Debt Growth
If we compare the growth in total US debt (not just governmental debt) to the Wage Base (includes all non-government wages, including proprietors’ income), we see a rather surprising pattern (Figure 9):
The ratio of debt to wages remained pretty constant until about 1980, when it began to rise sharply. This was about the time when wages started to diverge, and interest rates began to decline. Once oil prices fell to lower levels in the late 1980s, the non-financial debt level settled back, compared to wages. When oil prices began to rise in the early 2000s, the total debt level skyrocketed. These patterns suggest that debt growth is strongly related to the price of oil. Less debt is needed to keep the economy going when oil prices are very low; much more debt is needed when the cost of oil production is high.
Since 2008, we see a different pattern. The debt level is falling, despite record low interest rates. We discussed in Section 2 the need for an “Opportunity Gradient” to encourage borrowing. At this point, there does not seem to be a sufficient Opportunity Gradient to keep borrowing at the very high 2008 level, and even grow from this point. The failure of US debt to grow relative to wages is thus part of the reason why oil prices cannot be raised to a high enough level to make oil production profitable.
The low growth in US debt is likely a problem for the rest of the world, too. Since oil is priced in dollars, I expect that the US really needs to be a leader in debt growth, if the world economy is to grow. The US no longer seems to be trying to be a leader in debt growth; it ended Quantitative Easing in 2014, has raised interest rates once, and is now planning to raise interest rates again. This creates a problem for other countries, because their currencies tend to fall relative to the dollar, when US interest rates rise. If these other countries do attempt to raise their debt levels, their currency levels tend to fall relative to the US dollar, mostly negating the benefit of the debt increase when it comes to buying oil and other energy products. This makes it very difficult to use debt to provide new programs, such as guaranteed income plans for citizens.
This analysis is based on US data, but it gives some insight into what is happening on a world basis. I would expect that Europe and Japan are in many ways not too different from the US. The world economy has done better, because it includes countries with more opportunities for investments that might truly be associated with economic growth.
The situation everywhere may very well be that growth is a temporary phenomenon. Rapid growth occurs for a while, but then it fades away. When it fades away, inflation tends to shift to deflation. This presents a huge problem, because our financial institutions are built using debt and debt-like instruments. When deflation hits, the “Opportunity Gradient” changes from favorable to unfavorable for future investment. This creates a much greater likelihood of future debt defaults, and discourages citizens from wanting to take out loans to finance new investments. All of these things are concerns for the future functioning of the economy.
The situation we seem to be encountering is that economies, both of the world and of individual countries, are dissipative systems. As such, they require energy. Similar to other dissipative systems (hurricanes, ecosystems, stars, plants and animals), they grow for a while, and eventually collapse.
Economies, as dissipative systems, seem to need several kinds of systems. Energy provides sustenance for an economy, in a way similar to the way food provides sustenance for humans. The debt system acts somewhat similarly to the way a human’s circulation system works; the time-transfer mechanism provides a pumping action similar to that of the heart. The pricing system acts very much like a human’s sensory system; it allows the system to discern whether the current opportunity gradient is sufficient to justify adding more debt. Thus, this analysis suggests that one way the system may fail is through commodity prices that fall too low. Most people have never considered the possibility that this could happen.
Intermittent renewables, such as wind and solar, might be considered as similar to a type of food that causes the sensory system of the economy to malfunction (similar to deafness or blindness). This happens because, as I discussed in a previous post, intermittent renewables disrupt the pricing system for electricity by dumping electricity on the grid without regard to whether the price signals indicate that the additional electricity is actually needed. As a result, prices for other types of electricity (such as nuclear and natural gas) become depressed, necessitating subsidies. This shows why overly simple models cannot be relied upon when evaluating possible solutions to our energy problems.
It would be nice if we could figure out a way to make our economy last forever, but it is doubtful that we can. Ultimately, the battle between diminishing returns and increased complexity seems likely to be settled in a way that causes the economy to collapse.
PS. Happy solstice!
Great post Gail, one of your very best, thank you for all the thought and effort that went into it.
Thinking our situation through is an evolutionary process as well as a bit like playing chess: the number of potential future moves at any given point is so great it’s not until some watershed move that clarity and a singular line of thought is able to be better pursued.
Your article today to me represents just such a point, where your concepts are really well developed and are a very good fit to the worlds situation and help me to organise my own thoughts around your clearly articulated understanding.
Keep it up please and thank you again 🙂
You are welcome. This is a topic I have been talking and thinking about for a long time, including back in Oil Drum days. It hasn’t come out in very many posts. I have hesitated to say much, partly because so many professors and graduate students whom I personally know tie their research to this subject. It is also sort of a difficult subject for people who are not involved in the subject to understand.
This is only slightly relevant but quite funny. A green energy scheme may threaten the future of the power-sharing institutions in NI.
Sinn Fein has warned a collapse of the powersharing institutions at Stormont is an option if First Minister Arlene Foster refuses to stand down to allow a probe into her handling of a botched green energy scheme…
It was supposed to offer a proportion of the cost businesses had to pay to run eco-friendly boilers, but it ended up paying significantly more than the price of fuel, enabling applicants to “burn to earn” – getting free heat and making a profit as they did it.
Claims of widespread abuse include a farmer allegedly set to pocket around £1 million in the next two decades for heating an empty shed. [LOL] Mrs Foster was the minister in charge of the scheme at its inception.
Now First Minister, she has the party strength in the Assembly to defeat any bid to censure her.
However, the structure of the DUP/Sinn Fein-led governing executive is predicated on the participation of both partners – so if Sinn Fein walks away the institutions would fall, with an election likely to follow six weeks later…
how will bau continue for the next decade first we are gonna have an increase in the feds interest rate which will shortly result in global financial crisis part 2 which will result in a world-wide bail-in of part of everybody’s money to save the banks. from their we will be convinced by our governments to take part in to a cashless world where all money would no longer be physical but electronic we will all then be subjected to a drastic cut in all central bank interest rates sending them all negative which would result in everybody’s money being taxed if it stays in their account for too long. this will then lead to money not sitting in a savings account but being spent asap .the growth we will get will be quite high leading to higher asset prices higher oil prices and higher inflation but with permanent negative interest rates, that means that no loans will ever have to be paid back as the negative interest rates will just pay off all debts without anyone paying out any of their money. it all sounds too good to be true but i believe that this may be one way bau continues for a whole lot longer.
It agree this may be the future. However, how do we reconcile existing debts? And what about the current pension/retirement plans? Insurance plans? These type of things depend on positive interest rates. This may work for a few months. But, in this scenario money is essentially worthless since you can no longer use money to make money anymore. What I fear would happen in just a few months (assuming all this money is spent on real goods and services) is that the resource base would collapse.
unfortunateley greg i dont have any answers on any of these questions because if the world does go on this path its simply experimental its never been done before ,desperate times call for desperate measures and the powers that be are obviously clutching for straws to keep bau alive
I think Japan has negative interest rates. I wonder how that is working out for them?
This is what I call in tv parlance “Jumping the Shark”:
I know what happened to Fast Eddy … finally. He had an epiphany of sorts and finally moved from anger to acceptance. He now realizes – as Carolyn Baker expresses it in a recent article – that it is time for him to:
“We stop shining of the false light. As our heart breaks, as our veneer cracks, we open to more integrity, more truth, more tenderness. We stop trying to be all things for all people. We become this one small thing, feigning nothing.”
Yup, FE has moved on to that world where he sees that his predictions for the future mean nothing since the future will come regardless of who believes him, regardless of whether anyone believes him. The attorney in him has died, and now the tenderness that we all know was there all along will find voice soon.
FE will be back! But it will be Fast (tender, loving, and inclusive) Eddy.
Yes, FE has gone dark, but that darkness will bring a new age of FEness. First though he needs time to (again from his favorite person):
“The mystics tell us that we need spiritual crisis. That we must enter the Cloud of Unknowing, the deepest despair, the most profound darkness within, without hope, in order to grow spiritually. They call such a time of deep crisis, of great uncertainty, the Dark Night of the Soul. There, in our radical desperation, in our absolute abandonment, it is said, the Divine Doctor awaits. Holy Darkness was Her medicine all along.”
When FE returns, you will see him in all his glory! He will be a force to create: “… a culture of love beyond measure.”
I’m afraid you’re actually provoking it. FE will reappear in OFW but I think not as you imagine.
love that in reference to FE
Sounds like a remake of Paul Newman’s character in “Cool Hand Luke”. Paul (Fast Eddy) plays himself, as Luke, the Cool Hand. Pintada in the role of the late George Kennedy’s character “Dragline”. Art imitates Life.
Another crack opening
I posted my thoughts on FE but my comment was deleted. And you know that I have not cluttered this space with comments.
I think FE is a misguided idealist. He has a version of collapse in his head that simply isn’t occurring. If you want to know what is occurring, you must become a student of human nature. History, sociology, psychology, these are all important areas to study. If you concentrate on present politics and economics alone, you miss out because these areas are too modern and rational. People are driven by instincts.
the philosophy of sudden and catastrophic collapse is a simple one
the human race is on course to reach 9-10—maybe 12 biillion or more this century
clearly this cannot happen, therefore something big is going to prevent it. I have my own ideas on what that might be.
people are not going to stop having sex, and the mothers of the next 2 bn are alive now.
they are going to breed if the means is there to do so. (basically food)
The only unknown factor is when and what will cause our species to crash in spectacular fashion. There are wild and wacky speculations about that, which is understandable, but we make the mistake of predicting the future using the lessons of our past.
it isn’t going to be like that.
WW1 and 2 deleted 100m or so—but in order to survive as a species we have to delete maybe 6bn. An altogether different scale of things. (yet we even call up the energy-effort of WW2 to “fix” our current situation!)
the question is—-can we stop at 6bn and leave a billion to carry on, or will we overshoot and kill everybody off? We can only hope, but I carry a degree of pessimism—bearing in mind that our entire civilisation has been created on the back of what is destroying us.
If we have a billion people left, scattered across continents—they will still carry the infection of greed and denial and god-certainties that got us into this mess in the first place, and will strive to “rebuild” what was, and try to kill each other to grab resources and to gain some kind of ascendancy and ”righteousness” to reassert their certainties—at least for 2 or 3 generations. That will manifest itself in the breakup of nations into smaller and smaller tribal areas as the energy sources that created them go into depletion.
The USA was built and held together on the out-thrust of hydrocarbon fuels. A regression is inevitable.
We will not—repeat not—regress into some kind of bucolic peasantry and suck on straws and wish each other a pleasant good morning.
This is the myth of “downsizing” and the “static economy” that one reads about. For what it’s worth I’ve tried to inject some reality into that notion here:
Starving people look to survive, genetic forces give us no choice
We cannot uninvent what we know and what we are, or divest ourselves of our current ”normality” and willingly return to an unpleasant dark age where our prime technology was the naked flame and the cartwheel.
the fact that we will return there will be perhaps our ultimate denial—that somehow ”they” will fix things and recreate our cornucopian utopia. Look around now—and recognise that the vast majority are certain that prosperity can be voted into office.
Those screaming masses are the future, for as long as they have sufficient energy to be like that
This isn’t theory—this is, as you point out—human instinct.
I would be happy to be proved wrong, feel free to point out any error.
I agree Norm. When the energy is gone we will be fighting again like cats in a sack. We get along when everyone has sufficient access to energy and resources. The opposite is true when energy and resources decline.
“point out any error”
The biggest unknown is the human response to the problems you correctly point out. Can the problems be fixed at all? Definitely they can within what we know of physics.
Will we fix the problems? Hard to say.
But it is worth remembering that western culture is no longer the only game in town.
“error”—and ”unknown” are different things
i forecast ”human response’—-i will expand that a little for clarity:
3 ultimate acceptance when there’s no further option/action possible—that might be 200 years from now, but it is certain to happen
the above will of course overlap and meld into one another according to prevailing conditions in different areas and times.
western ”culture” is the only game in town, unless you’re a Kalahari bushman or something—doesn’t matter which side of the Greenwich meridian you stand.
every Indian peasant aspires to a car and colour TV, refugees from third world countries risk death to reach nations with “western” culture—why?
Because that is their ultimate aspiration; telling them that in 50 years it will all be over would be a waste of breath—they want it now.
the knowledge to prevent it happening?
certainly—-just be prepared to persuade (or force) a billion women not to have any kids during this coming generation.
because if they do have kids, they will starve to death. Nature is very efficient in that respect.
but we can feed 10 billion, can’t we?
yes we can, but then you’re faced with the next set of problems:
1 shipping food from breadbasket nations to basketcase nations if theres no oil
2 persuading breadbasket nations to grow food and give it away. Russia and the USA are broke already.
3 feed a billion people, and they will reproduce several billion more people
all of the above in the face of climate change (reducing food output) and rising conflict of desperation by those affected.
And if we dont have a couple of billion kids?
Then our generation will be be left to fend for itself as ageing starts to bite.
And a happy christmas to all my readers—sanity claus or no sanity clause (to the unbelievers out ther)
You obviously agree with Jay Hanson’s assessment. For those who haven’t read it Jay’s views after over 20 years of studying the problem are summarized here:
Coincidentally just as FE has thrown in the towel Jay has just shut down his America2Point0 list “until further notice”. He also has gotten fed up with saying the same things over and over to people who won’t listen.
Enjoy the dieoff!
The Dreamers always have an answer. They dream in terms of a fanatical team supporter, claiming their team is “mathematically” capable of making the playoffs with a percentage of .0001. No amount of your “buts” can defeat their dreams of unlimited free energy, resources and stairways to the stars. To them overshoot, resource depletion, environmental and ecological destruction and financial collapse are issues best ignored because in their “dreams” they are solved in the course of implementing their ridiculous ideas.
Yes, the Dreamers are telling you now:
Hmm.. yup, it’s been well established by Norman and Gail that as the affordable energy resources start to collapse, so will our global civilization. Keith still can’t explain where he is going to get mineral resources that doesn’t exist. So Keiths plans can’t much work. The only thing we don’t know is, do we have 1 month or 60 months left of grid up, food in the groceries BAU. And the order of the magnitude of this collapse is not 3% culling of the global population (WW2). Or even 10%. Or even 30%-50% (Black Death) But in the magnitude of 90% for the first year or two, and then.. who knows.. maybe 90% again.. etc. The tsunami headed our way is two or three Black Deaths combined with two or three WW2, in the first year or so. And then again..
It’s almost impossible to survive this.. odds are certainly not in our favor.. if there is going to an bottleneck, nobody knows where the survivors will be.. maybe iceland.. maybe John Galt in Southern NZ.. maybe south africa.. maybe antarctica.. who knows..
If its almost impossible to survive this. Then its strange we don’t discuss other strategies of prepairing for the inevitable in this blog. When odds of survival are zero.. why not try something truly interesting?? Why not be free to try truly different strategies?
Kunstler talks about a world made by hand. That is the future we’re headed towards. That’s a lot of skills to be learned.. There will be some time in the first few months, while canned foods are still available.. to try something different, from the ordinary hide in a shelter and wait it out scenario. Or start an organic farm and homestead the h-ell out of the collapse scenario.. so.. why not try to do something different.. what have we got to loose.. we are free.. survival is not an option..
Take canned foods as tokens of payment, and teach the people who paid the fee:
Day 1. How to build a 4 brick rocket stove.. 12 brick stove.. 250 brick stove.. 2500 brick stove with oil drums and air ducts taken from office buildings. To cook food and boil water..
Day 2. Biochar production in an oil drum, for making of water filters
Day 3. Liquids from solids separating composting toilet, from ordinary wastebins with wheels.. combine biochar with urine, for odor control and to produce fertilizers
Day 4. Local wild herbs, wild vegetables, berries and mushrooms, that really do grow everywhere
Day 5. How to use ash as fertilizers for trees, bushes, mushrooms and berries
Day 6. Traps for rabbits and squirrels, not for eating, but for breeding and trade
Day 7. Rabbit, chicken, squirrel coops construction, to have live animals for trading..
Day 8. Rabbit, chicken and squirrel feed and how to build and maintain a 1 rabbit a week for slaughter -rabbit farm
Day 9. Fermenting, making of canned foods
Day 10. Drip irrigation, water tank construction, gravity fed water tanks and/or planters from 2L soda bottles
Day 11. Activated charcoal production from biochar by grinding and pressure steam. Different uses of Activated charcoal
Day 12. Different Rain water collection systems
Day 13. Different Water filter systems
Day 14. Root cellar design and construction
Day 15. Deer traps, man traps, pit traps and polycarbonate shields for protection
Day 16. Bicycle, tricycle, milkcarts, use of wheel, water wheel, well wheel and wind mill
Day 17. Ethanol production unit
Day 18. Biogas production unit
Day 19. Refurbishing petrol-ethanol engines
Day 20. Refurbishing diesel-biogas engines
Day 21. Greenhouse constructions and structures
Day 22. Water pumping, water moving, water transporting and gravity drip irrigation systems
Day 23. Fruit trees and berry bush seedlings, planting, weeding, fertilizing
Day 24. Fish traps, fish ponds, fish nets, crab traps, grocery store fridges as fish tanks/ aquaponics
Day 25. Soap, vinegar, apple cider vinegar, baking soda, potash and sodium
Day 26. Harvesting batteries from cars and buildings, and how to reload them efficiently
Day 27. Explosives, dynamite and gunpowder production
and restart when finished
” mineral resources that doesn’t exist.”
I don’t know where you get that. It certainly does take mineral resources, but the amount is modest. A ground based solar system has a mass of around 500 kg/kW, a space based system runs 6-7 kg/kW. The reason it is so much lighter is that you don’t need to support the collector surface against wind or gravity.
The energy requirements for lifting the parts to GEO are more of a problem, but the payback time is so short (3 months) that it’s an awful good investment.
This is all subject to further analysis, what we have done so far only somewhat beyond back-of-the-envelope.
I wish there was more discussion of these things too as I could not agree with you more when you say, what have we to lose? Sure we are most likely to die but in the meantime I think trying some of the things you mention helps lift the spirits. If by some miracle it takes some time before the radiation gets us and we make it past the stage of mass mayhem, these things will make what is left of life much better.
where did the following pop up from??? (though hard to tell if your response was meant in irony—if it was, sorry)
Day 17. Ethanol production unit
Day 18. Biogas production unit
Day 19. Refurbishing petrol-ethanol engines
Day 20. Refurbishing diesel-biogas engines
Day 22. Water pumping,
Day 26. Harvesting batteries from cars and buildings, and how to reload them efficiently
Day 27. Explosives, dynamite and gunpowder production
ethanol biogas requires mechanical equipment of some kind to produce it
Even with my primitive knowledge of vehicle engine mechanics, i know that “refurbing” of engines requires mechanical input from fairly complex machinery (assume you meant reboring etc etc? new sparkplugs?)
Explosives seems to suggest starting a war somewhere.
Without mechanical backup–the above will be difficult no matter how many tins of corned beef you hand over.
My 200 years figure was plucked out of the air, laced with a bit of logic., We’ve had 8 generations since the industrial revolution gained traction (about 4 per century) 1820s/1920s/2020s So I thought another 8 generations until all vestiges of it have disappeared beyond retrieval.
Could be more
Could be far less
But bear in mind that if “collapse” comes in the next 25 years or so (likely) it will take a very long time for our “industrialised thinking” to be expunged from our consciousness and we as a species, resign ourselves to the cruel fact that the party’s over, and no Messiah is going to return to clean up the mess we’ve made.
Our biological clocks are likely to take that long to reset, and those left have learned living/survival skills in any real sense.
Those having failed to learn will be long dead, and their genes will not have passed on.
There will not be many of us—maybe even none.
My thinking on reduced population fits the concept of disparate ministates instead of large nations.
Unfortunately it also raises the spectre of warlords….. a distinct possibility.
In 200 years, conflict will be determined by the material that can be carried and sustained for a day’s battle. So it will be brief, if bloody. Neither side will be able to afford the energy expenditure. Even the key battle of Waterloo in 1815, which turned Europe’s history, only lasted a day. 100 years later, battles in the same place lasted months because of industrial input.
In modern war, soldiers represent the business end of a production line—that will no longer be possible.
We may have finally figured out that conflict is pointless—though nature seems to force us into it.
That 200 years will also put bacteria back in their position of dominant species. Those of us immune to unpleasant diseases will pass on their immunity, those who are not, will die. Think how the First Nations people were decimated by European diseases.
Maybe our immune systems have become so weakened by over-cleanliness that none of us will survive—a distinct risk. Our personal bodily bacteria help us to live, constantly washing them off might not be a good idea.
I hope this reply covers several interesting responses in this thread—I don’t want to clog the netwaves on this subject by individually responding to all
“it will take a very long time for our “industrialised thinking” to be expunged from our consciousness and we as a species, resign ourselves to the cruel fact that the party’s over, and no Messiah is going to return to clean up the mess we’ve made.”
I think you overestimate the power of indoctrination. A month without power and international commerce would probably do it. I bet Venezuelans are already pretty close.
i could be way out in my timing obviously
but as long as there are people alive with the knowledge to make machines work, (and books of course) the faith will remain that they will work—if we vote/pray/fight hard enough.
we know no other way.
Eventually that will change as resignation sets in
Even el Trumpo has pronounced that there is enough oil to last 300 years—and it is in peoples interest to believe that.
The opposite admits the end of civilisation—so vote Trump!!
Take it easy!
“In some ways being aware that it’s pointless and absurd makes it more meaningful. The meaning is in the act itself, Life becomes Art.”
Quoting Froggman (bolt mine)
Besides denial and conflict, we could make adjustments. For example, it would not be that hard to develop a refrigerator that worked fine on intermittent energy, locally storing enough cold to get through the times where power is expensive.
“200 years from now,”
I don’t know if you are more optimistic or more pessimistic than I am. I can’t imagine biological humans existing in more than token numbers for longer than another 40-50 years if we continue technological advances. The prospect also makes me very uneasy. It’s possible we have already seen what happened to another species that went this way.
“persuade (or force) a billion women”
The Chinese did it. But even without coercion, Mexico and Iran are down to 2 children per woman.
” as ageing starts to bite.”
These guys are about half an hour away from me, up I 805 toward Los Angeles.
It’s hard enough to cope with unknowns. It’s really difficult to cope with a dozen interacting exponential developments. Biology is advancing very rapidly. AI of the Watson variety is likely to speed it up.
a refrigerator is a large double skinned metal box
you cannot make one out of reeds or bamboo—trust me
sheet metal requires a massive factory backup—blacksmiths in days of yore knocked out suits of armour for kings and knights and very beautiful they were too—but the poor bloody infantry had to suffer the slings and arrows of outrageous fortune. Unaffordable armour you see.
Blacksmiths will not make refrigerators.
The Chinese birth control thing has been a disaster—they now have 120 males for every 100 females
The problem is not the birthrate per nation—it’s the “bulge” of people passing through this century and wanting to breed because they see children as an asset rather than a liability.
“a refrigerator is a large double skinned metal box”
That’s not even accurate. Take a magnet to the inside of one. They have been plastic on the inside for decades.
“you cannot make one out of reeds or bamboo—trust me”
Actually you can, at least a box to keep food cold.
“Commonly iceboxes were made of wood, most probably for ease of construction, insulation, and aesthetics; many were handsome pieces of furniture.” https://en.wikipedia.org/wiki/Icebox
When I was a kid, one of the places we stayed for a few weeks on a trip had an ice box which dated to the early part of the 20th century. It was built out of wood. Before mechanical refrigeration, people cut ice on lakes and stored it in ice houses for the summer.
Sheet metal is not required to keep food cold. But that was not what I had in mind, I was responding to Gail’s concerns about intermittent energy. It would not be hard to make refrigerators that effectively used intermittent energy, via local storage of “cold” to keep food from spoiling. I would have to research it a bit, but a modest sized tank of water loaded with glycerol or some other low temperature phase change substance would keep food cold on a few hours of power a day.
It might be possible to build an entirely passive cold box for food, no energy needed at all. What it would take is a thermal diode and a shielded radiator on the roof. Thermal diodes are well understood.
I’lll keep trying—why I don’t know.
I KNOW a fridge is sheathed in plastic on the inside—plastic is an oil product which is why i ignored it here
it is double skinned for insulation purposes
I KNOW people cut ice from lakes in winter and stored it in ice houses—they are still quite common in UK
They were built in the 16/1700s, when UK climate was much colder. (the Thames used to freeze over) they we 10/15ft deep, brick lined with a beehive roof. Building one was an energy intensive “investment”
We don’t have that much ice now.
They were built to supply the aristocrats with ice, ie 1 family.—they couldn’t store enough to keep the riff raff cool.
Try building/using an ice house in the tropics at sea level
‘ice boxes” had a metal box to keep the ice block in the bottom
The ice block itself had to be manufactured elsewhere and transported to the customer.
At one period in the 19th c I believe they had ice ships to bring ice north to south to sell ice commercially
Whatever line you take, cooling requires energy input
“they couldn’t store enough to keep the riff raff cool.”
US experience was different. ” In 1907 survey of expenditures of New York City inhabitants, 81% of the families surveyed were found to possess “refrigerators” either in the form of ice stored in a tub or iceboxes. The widespread use of iceboxes was partially credited with reduction of US infant mortality in summer months.” (from Wikipedia).
” ice block in the bottom”
Top actually. Cold air circulates down. But as you say, the holder for the ice and the drip pan were usually metal.
“cooling requires energy input”
That’s mostly true. But properly designed, a mechanical refrigerator would work just fine on a few hour of intermittent electrical power per day. Like from a few solar panels.
There is also this,
“Nocturnal ice making
“In India before the invention of artificial refrigeration technology, ice making by nocturnal cooling was common. The apparatus consisted of a shallow ceramic tray with a thin layer of water, placed outdoors with a clear exposure to the night sky. The bottom and sides were insulated with a thick layer of hay. On a clear night the water would lose heat by radiation upwards. Provided the air was calm and not too far above freezing, heat gain from the surrounding air by convection would be low enough to allow the water to freeze by dawn.”
If I was a prepper, or wanted to sell to them, it might be worth building a no energy refrigerator based on this cooling method. But as FE would point out, “what’s the point of keeping food you don’t have cold?”
“a refrigerator is a large double skinned metal box”
You can put a clay jar wrapped in cloth inside another clay jar, fill the gap between with sand, add water. As the water evaporates off the top, the inner jar is cooled.
“The Chinese birth control thing has been a disaster—they now have 120 males for every 100 females”
That is a cultural problem with having a preference for one sex over the other and choosing to infanticide babies of the “wrong” sex, not a problem with the idea itself.
If you want to hold down population, you reduce the number of females. India until fairly recently killed some baby girls to keep population down. Men don’t have babies, women do. Brothers can share a wife, or extra men can join the army or serve in celebate church positions.
In refrigeration applications, thermoelectric junctions have about 1/4th the efficiency compared to conventional means (they offer around 10–15% efficiency of the ideal Carnot cycle refrigerator, compared with 40–60% achieved by conventional compression cycle systems (reverse Rankine systems using compression/expansion).) Due to this lower efficiency, thermoelectric cooling is generally only used in environments where the solid state nature (no moving parts, low maintenance, compact size, and orientation insensitivity) outweighs pure efficiency.
However, a thermal diode is a different beast from Peltier heat pump. They take no power at all to operate. They are similar to a heat pipe, but use gravity to get the liquid back to the bottom.
When the top end is colder than the condensing temperature of the working fluid (typically ammonia or propane/butane) the fluid condenses and runs down the tube to the bottom, where it boils into vapor and goes to the top taking heat where it condenses again.
Human could, in theory, use these things to refreeze the arctic ocean and stick the bottom of glaciers to bedrock. It would take an awful lot of them, but they are simple and cheap to build, if kind of expensive to install.
Easy for you to say;-)
“can’t imagine biological humans existing in more than token numbers for longer than another 40-50 years if we continue technological advances”
Where will the other 10B people go?
“Where will the other 10B people go?”
Uploaded into a much more attractive simulated world. Reversibly uploaded, but it’s so much nicer than the base reality that very few people want to live elsewhere. I developed this idea somewhat in “The Clinic Seed.” It’s why “the sea is boiling hot” in the future from the waste heat of the simulation computers. I suppose the simulation could have “pigs with wings.”
There is a chance that we have seen an alien species that uploaded the whole population into a simulation. If so, the blinks we see may be heat sinks a substantial fraction of the size of the star.
Of course this assumes we live in the base reality and are not already living in a simulation. Musk thinks we are, so does Nick Bostrom.
Seems expensive. Best start with the poorest who currently can’t afford vaccines or clean water. If the producers and owners are gone, who will pay for the poorest 7-8B?
But maybe the meek will inherit the world after all.
“Of course this assumes we live in the base reality and are not already living in a simulation. Musk thinks we are, so does Nick Bostrom.”
“Uploaded into a much more attractive simulated world.”
If this is a much more attractive world, I sure am glad I’m not living in the original anymore.
“But even without coercion, Mexico and Iran are down to 2 children per woman.”
Age they give birth also matters. Having 2 children at ~20 and living to 80 still leads to massive population growth.
I wonder how popular “apotheosis” would be amongst the masses, or if we end up with a Butlerian Jihad.
” Can the problems be fixed at all? Definitely they can within what we know of physics.” I do not think what we face is a problem. It is a predicament. And predicaments do not have solutions.
you’re so young
Instincts in the absence of sufficient energy to act upon them don’t matter.
Hm, the issue Dolph is repeatedly addressing, and correctly so, is that these larger cycle gyrations of such complex systems are way beyond the capacity of single human life. Apparently, not disputed, large segments of the “industrialized world” society are no longer growing up in terms of income/prosperity/even often in terms of happiness and health, that’s a process of past ~40yrs. Yes, the previous version of the financial and redistribution system derailed after in 2008/9, new even crazier version has been put to work.
So, taken the above and other pressing issues, should we just freak out and loudly claim instadoom is here around the corner, the very next day.. ? No it’s a process, it will be likely punctuated with acute spikes of instability and JIT malfunctions. But to assume it’s going all down in sync and on flash without correcting measures (attempted) is not very rational..
Look at the articles and comments of the people at Greer’s site, it’s increasing in quality as the extreme positions are well balanced by level headed conversations and analysis.
” History, sociology, psychology, these are all important areas to study.”
And evolutionary psychology ties all of these together. Our mental mechanisms that give rise to what we know as psychology evolved, no less than hands, eyes and ears.
“In the view of evolutionary psychology “the mind is a set of information-processing machines that were designed by natural selection to solve adaptive problems faced by our hunter-gatherer ancestors.””
Some of those behaviors such as capture-bonding are activated by a specific situation. I make a case here https://www.academia.edu/777381/Evolutionary_psychology_memes_and_the_origin_of_war
that perception of a bleak future turns on mechanisms that lead to population reducing wars (or rather, did in the stone age). How this will play out in our future is really hard to say since any number of wild cards, like smallpox, cheap fusion, a major nuclear war, AI, nanotechnology and/or power satellites could happen.
So what the hell happened to Fast Eddy?
the aliens changed their minds and decided they wanted him after all
The redheaded one?
He is very lucky, but must feel a little embarrassed there was a way out of extermination after all.
when the human race is finally removed, they will bring him back to start over, and hopefully not make the same mistakes next time
Get real, FE loves Monsanto. Have you been chowing down on GMO food?
He is clever, though – he seduced you by saying how lucky we are to have you.
It is extremely difficult to post with the fervour and frequency that FE has. Very few can do it.
only one person is allowed to say ”lucky to have me”—with eddy it’s purely platonic i assure you
I was not going for the inyourendo angle.
Class, you know.
Pay attention. He’s still lurking under the name “John Galt”.
i guess the belief in bau lite is just like chidren that believe in santa claus
with fast eddie gone zoolanders are posting more often on ofw what is to become of us realists who know that bau lite can never exist
i think Paul (aka Fast Eddy) is on vakay at his new beach shack somewhere on the coast of the North Island of New Zealand and is likely ‘on purpose’ without means to internet access. i expect him to resurface after he returns to “civilization”. he may also be lurking. a new post by Gail would likely help to flush him out.
excuse me, South Island, not North.
I recognize FE because I see some of myself in him. He’s a frustrated idealist. He has an ideal version of collapse, which isn’t happening.
I’m telling you, nobody cares about our discussion here. We are monks at the end of the roman empire. This is what people care about:
-arts and entertainment
That’s it. Those are the only things that motivate people to do anything at all. A trailer for a movie gets viewed a million times more than this site, the movie itself a billion more times. And then immediately forgotten when the next movie comes out a month later.
People are not scientists. Science, and the appreciation of it, was only ever going to be a niche activity. Proof: the myths of goat herders 2000 years ago still, to this day, carry more weight with people than the entire body of scientific literature.
We’ve entered a post-truth, post scientific age. Industrial collapse is an objective, science based reality, therefore is it “not happening”. It’s all politics, spectacle, image, and stories now.
The Age of ‘Frozen’!
FE please let us know you are OK.
Who is John Galt
John Galt is Fast Eddy
Yes, he posted under that name on Wolfstreet. The style was identical.
And Fast Eddy left Wolfstreet as well… for similar reasons.
I have no idea of how many John Galts there are, but I have known one of them for around 35 years. He was so taken with the character that he legally changed his name.
This interactive map of the world trade is really interesting. I want to share with you, friends of OFW.
(To move with the mouse)
thanks crates xery interesting
Fascinating thanks…that graph will be devoid of any dots in the very near future…
Why is it so hard to understand, even on a site like this one (judging from the many koombaya comments – FE WHERE THE HELL ARE YOU!!!), that the resources needed to run and grow Industrial Civilization are simply no longer sufficient…
FE, you come back to this site right this very minute or there will be no turkey dinner for you young man!
Exactly lolll 🙂
I did wonder if FE was hiding because of the flak he anticipates taking from you, Kurt, on Christmas Day. Maybe if you promise to go easy on him he’ll come back. 😉
What happened to FE?
From a FE comment on December 14th:
“It really does get frustrating having to deal with the same bullshit over and over and over…” (speaking of koombaya commenters on this site)
So maybe he’s just taking a break from all the stupid koombayaists on this site…I hope he comes back soon though, we need one of ours that has the patience to reply to these delusional comments…I vote for Norman to take his place in the meantime…How about it NP1? 😉
Probably has it gone to the DelusiSTAN’s capital to drop a bomb atomic and to end with the problem definitively.
Though I do not know that it means NP1, Norman seems to me to be perfect 🙂
i sign myself as NP1 on other sites—my cover has been blown
My 00 status has been revoked!!!
yup—will do canuck—thank you for your vote of confidence
just as i get through negotiations for the movie rights to my book with MGM—I’ll be on the doomtrail, holding the fort till Eddy gets back, or until the aliens have finished their experiments
Perfect Norman, thanks! I knew we could count on you!!! You literally wrote a book that is the perfect response to any Koombayaist….you can pretty much respond “Just read my book” to any Koombayaist’s comment lolll
I can offer you the concession as my official Canadian agent.
Don’t let your percentage of the royalties go to your head or change your lifestyle though
Galt’s Gulch, also known as Mulligan’s Valley or Atlantis (est. 2011), in Ayn Rand’s novel Atlas Shrugged, was the secluded community founded by Midas Mulligan and composed entirely of participants in the great strike of the men of the mind called by John Galt.
he’s been raptured
i’m going through the stuff he left behind right now
Sell all his survival equipment (gathered during the innocent phase of FE’s journey to realizing we are all done for no matter what you do) and make a quick buck. Maybe you can find takers on Chris Martenson’s website…tons of “We can get through this if we prepare” folks on that site….
Surprise – there are limits to growth. Everything we create to battle nature (wind turbines, solar panels, roads, houses) all takes massive amounts of resources. And these resources must be profitable to extract or they stay in the ground. We are at that point right now folks. The resources are no longer profitable. The evidence is clear. Exxon posting losses. Aramaco selling oil fields. Oil prices below cost of production. The glue holding all this together is the financial system. And the big irony is that resources are the glue that holds the financial system together. When either of these fail, resource or financial system (or what appears to be happening – both at the same time) then growth is over, interest doesn’t work and the system falls completely apart. No one is paid, no one goes to work, people get hungry, riots and fights ensue, order collapses. The resources and financial system is everything!!!!
This is a good reflection !!
Here’s a little more evidence of the decline in oil
More bad news and more evidence that resources are drying up. 2017 is shaping up to be a really bad year. Interest rates rising, energy costs rising, wages going down, civil unrest is now global and has arrived in the US, debts are going exponential, banks are on the verge, growth is going negative, China is maxed out, pension plans are in trouble, student loans are a towering inferno, workforce participation is in the toilet and GE is delivering wind turbines to the Saudi’s! Merry Christmas and a Happy New Year.
The turkey is in the oven!
OPEC oil ministers have said a price of $60 a barrel would be acceptable to everyone.
BP says it can cover spending and dividends without having to borrow at a price of $50 to $55 a barrel next year, down from an earlier estimate of $60.
Good for everyone except the global economy I assume. Since $30 did little to boost the real economy. Double that price will be interesting. Especially in light of the recent interest rate hike.
$60 per barrel is still pretty low. We cannot cannot keep up production at $60 per barrel.
This is incredibly worrying because the historical price (fitted to the inflation) is 20-30 $ approximately, if we exempt the crisis of the seventies and 21st century. Therefore, 60$ is a price very raised actually.
Thank you for the new article with very much delay. 🙂
If shortages hit that will be a hoot for sure. Shortages brought out bad behavior 40 years ago. Today, I fear it would be much worse. People have zero respect or consideration for each other.
If 40 years ago there was a shortage at gas stations, now there is a shortage of dollars in our pockets. The problem is of a radically different nature.
” People have zero respect or consideration for each other.”
I agree with you.
I am assuming that at some point there will be gas shortages.
I suspect that we are going to collapse without knowing that we had a problem with energy. That is the terrible irony.
Perhaps, but I do believe there will be fighting over resources, food, gas, shelter, clothing etc. It may well be that most do not connect the dots that the collapse was due to decreasing net energy. But I do think shortages and financial collapse are in our future. And I also believe it will get very ugly very quickly when the financial collapse or shortages occur. I am not sure which will come first (financial collapse or shortages) but it won’t really matter. They will happen within days of each other regardless. And this time it will be global with no bailouts or foreign aid. It will be a discontinuity. It will be chaotic and unpredictable. When it happens is anybody’s guess. But, the symptoms of the disease are all out there right now for anyone who cares to look. No one wants to hear the diagnosis. To my point of view it would be ignorance to believe that real growth can continue for another decade. Everyone will be pointing fingers at the politicians. Blaming others for the inevitable. Some think I am overly negative. I think I am being realistic. I am a scientist. I want the truth. I can accept my fate if I know the truth. To me It would be worse (given the facts of today) to be in denial and blindsided by what lies ahead.
Greg, except in nuances (for example the financial collapse must certainly come before the real energy shortage) I totally agree with you. It is better to look at the monster in front of you than to hide your head like the ostriches. We should not blame anyone for what is about to happen. It was in our nature to come to this situation someday. If we were only able to understand this, we would have a lot of cattle. But of course that will not happen.
And if interest rates go much higher? That seems like a nightmare scenario.
Just some clarification on The Hills Group work and how it fits into this discussion. What they are suggesting is that the oil industry, in absolute broadest sense, is losing the ability to grow because of net energy restraints. So when you combine the production with all the points of consumption which must include all the infrastructure that supports production and consumption. Then you calculate the rate of depreciation which requires replacement to maintain the system you end up with very little left over to grow the economy. Like new roads bridges etc. At some point the system will only be able to cover it own depreciation. Which means to build a new road one has to be abandoned or to fuel another car one must be abandoned etc. At that point the system will start contracting to increase efficiency. So they predicted in 10 years 75% of gas stations will close. What is interesting is the same mechanism is at work in the economy. Since the economy is debt based it can only grow to the level of debt service. This is bad news if debt itself is required to support the economy. In essence debt is funding operations rather then investment. The reality is we are see evidence of this all around us. Big box retailers, M&A of large industry these are all attempts at maintaining productivity when there is none. So productivity is increasing through unemployment. So the wage earners become wards of the state instead. Elon Musk will argue that this is just the evolution of civilization and soon everything will be automated allowing man the freedom to explore his greater self free of the burdens of labor. Really? I can take you to a tenement high rise in NYC and show you in principle how the free time is used to explore man’s potential really works out. But underlying the whole situation is the net energy decline. This is where people lose focus there is so much noise about the economy and so much focus on money they forget that money is only a steering wheel it’s not the whole car. For the economy to stay on the road it needs tires an engine and fuel. The Hills Group demonstrated that with their calculations. The most fascinating thing was their work on the entropy of oil plays. By studying the water cut and temperatures of initial production verses present production they could map the rates of decline. Entropy is times arrow it also the law behind depreciation, which in large part is their net energy calculation of where we are per barrel. So their thinking is based on very sound principles maybe just articulated poorly.
Much gratitude for your insights JT Roberts…apparently we have a shift in mindset perception
Wabi-sabi can change our perception of the world to the extent that a chip or crack in a vase makes it more interesting and gives the object greater meditative value. Similarly materials that age such as bare wood, paper and fabric become more interesting as they exhibit changes that can be observed over
Wabi-sabi (侘寂?) represents Japanese aesthetics and a Japanese world view centered on the acceptance of transience and imperfection. The aesthetic is sometimes described as one of beauty that is “imperfect, impermanent, and incomplete”. It is a concept derived from the Buddhist teaching of the three marks of existence (三法印 sanbōin?), specifically impermanence (無常 mujō?), suffering (苦 ku?) and emptiness or absence of self-nature (空 kū?).
We in the West will have plenty of opportunities go practice Wabi Sabi!
My artwork is built entirely on these principles. But I’m also trained to conserve and restore art–the terms, conserve, preserve get confusing even for me too. Maybe conserve is more what you do to keep the object from falling apart, and preserve is what you do to keep it in a given state. And then there’s “restore” to add to the bargain!
I believe the Japanese didn’t just allow things to fall apart, then left them to fall apart more, but that they conserved and preserved as well. They really seemed to take care of things–floors clean enough to eat off of, Zen gardens continually raked, nothing out of place…I would like to be corrected on this, since what you describe above seems more like letting go and not trying to save the object.
My current thought is that things fall apart because they aren’t preserved, but that this falling apart, if arrested somewhat, is the essence of beauty. The most beautiful metal for me is a car that’s been crumpled by impact. I know people were injured and lives were lost, but that doesn’t make the vehicle less beautiful. So is it that the embodiment of all the trials and insults of life, reflected in them, is what maximizes the beauty in things?
Yes,Yes…Artleads…very intriguing and fascinating to immerse ones being in the actual….not the “should be”….
Yrears past children would be honored to have their parents or grandparents to live with them in Japan….not like here in the West…warehouse them away!!!
You and others may find this article on Minimizing Entropy: Wabi Sabi helpful
Wabi then seeks the beautiful not in the perfect symmetry prized by western ideals of beauty, but in the asymmetry and irregular structure evidenced in the natural world that surrounds us: it is an ideal that elevates imperfection, as representative of impermanence, or mujou in the Zen Buddhist lexicon, to the highest levels of beauty and thus finds the beauty in those things whose form has long since deteriorated.
Thus, wabi, as an aesthetic, takes objects ravaged by time or imperfect in their creation, and finds within them a conspicuous beauty that surpasses the material. More than that, wabi takes objects which, under other aesthetics, would be discarded for their worn or irreparably damaged appearance and elevates them to a position of high art: it re-values decay and forces the connoisseur of art to re-evaluate their perspective on beauty itself…In the modern sense, wabi is often paired with sabi, which is a qualitative principle of feeling that refers to the specific quality of the emotions of the artist or the perceiver that arise in response to imagery.
…in the Shinto conception, those things which most accurately reflect the natural order, that is constant flux, are the most valued. In this sense, a cracked and faded porcelain vase, an iron kettle rusted from use or a sword whose chipped edge shows its age are considered the highest forms of art. It is through the contemplation of these objects, that the appreciator of sabi art begins to sense the ebb and flow of nature…
…under wabi, beauty can never fade: it only grow deeper with the passing of time and the accretion of subtle qualities of impermanence that serve to deepen the beauty of the object by reminding us, through the feeling of sabi, of the evanescence of all life, that we should savor each moment as it comes, rather than longing for it to last forever.
Like it or not…we that survive will be immersed in the concept…
Or maybe wrong calculations, combined with poor articulation.
Excellent subject for your next post.
The second law of thermodynamics is ‘Times Arrow’,not entropy. You probably know that,
but still no excuse for a sloppy ,incorrect statement.
Entropy is the second law of Thermodynamics.
‘Entropy is the second law of thermodynamics’.
Well,Well.Well. Let me break it to you gently . That statement would earn you a fail
in Physical Chemistry 101. It must be the most nonsensical statement I have ever read on the internet. You definitely deserve a prize of some sort.
“It must be the most nonsensical statement I have ever read on the internet.”
First time on internet?
First time you’ve heard of the second law of thermodynamics?
Maybe you have something to contribute to the discussion? Or maybe just a debate about words? Since Thermodynamics seems to be your specialty why not explain it in a way that the audience can understand it’s relative importance to the discussion? Or was that not your goal?
You are the one who made the statements about entropy. I pointed out that you were
incorrect. Or perhaps you think incorrect statements should be accepted without comment? I have made several comments contributing information here. There are plenty of sites explaining the SLT . I should add that I agree with most of what you state
about the critical importance of energy.It is indeed the master resource. Biophysical
economists such as Charles Hall understand this, His ‘Energy and the Wealth of Nations’
should be read by everyone here,but it seems to me that our civilisation is too deeply
enmeshed in myths and misunderstandings to have much hope of turning the ship around now,even if Anthropogenic Climate Disruption was not the behemouth looming
A couple of years ago I felt the need to brush up on thermodynamics since it had been close to 50 years since the last time I took the course. Thermodynamics, as currently taught to engineers, is largely concerned with machines, steam, gasoline and diesel engines plus refrigeration cycles. Carnot is ever present, entropy is discussed, but mainly in the context of open systems since closed systems are not very interesting for getting things done and we don’t live in a closed system (for practical purposes).
The wiki article https://en.wikipedia.org/wiki/Introduction_to_entropy is an OK introduction to the concept, but, again, for practical open systems, such as the Earth, it’s only one of the concepts of thermodynamics. I am not sure it’s practical to expect non technical people to understand isolated concepts from a deeply technical field.
I know someone with a fair amount of social influence who is convinced that low temperature waste heat can be converted to electricity. It can, of course, provided you have an even lower temperature available, but this rapidly becomes impractical. If you understand Carnot, it’s obvious. If you don’t, you don’t understand why the engineers can’t deliver what you want.
The four laws of thermodynamics are:
Zeroth law of thermodynamics: If two systems are in thermal equilibrium with a third system, they are in thermal equilibrium with each other. This law helps define the notion of temperature.
First law of thermodynamics: When energy passes, as work, as heat, or with matter, into or out from a system, the system’s internal energy changes in accord with the law of conservation of energy. Equivalently, perpetual motion machines of the first kind are impossible.
Second law of thermodynamics: In a natural thermodynamic process, the sum of the entropies of the interacting thermodynamic systems increases. Equivalently, perpetual motion machines of the second kind are impossible.
Third law of thermodynamics: The entropy of a system approaches a constant value as the temperature approaches absolute zero. With the exception of non-crystalline solids (glasses) the entropy of a system at absolute zero is typically close to zero, and is equal to the logarithm of the product of the quantum ground states.
Entropy (arrow of time)
JT’s statement is correct.
Please read that article carefully. Entropy is not the second law of thermodynamics.
The SLT states that a closed system tends towards maximum entropy (disorder) and
minimum energy. That is what the ‘Arrow of Time’ concept refers to. One way to think of it
is to think of placing a drop of ink into a bowl of water,and filming the result. As the entropy of the system increases,the ink disperses slowly throughout the bowl of water,until eventually the bowl of water is a uniform colour. When the resulting film is viewed in both forward and reverse motion,it is easy to tell which is the ‘forward’
motion,which is the one where entropy increases over time.
if the hills group is right then we will end up with negative interest rates permanently
If we are to have negative interest rates permanently then there will be no pension plans, no retirements, no investments, no growth. Negative interest rates is not an economy. It is like have a negative heart rate. How does that work? Negative interest rates is a symptom of a disease. The disease is resource limits in a finite world. So, when you hear the term negative interest rates you should substitute the phrase “running out of resources”.
About the only direction interest rates can go is negative. An economy cannot last very long on negative interest rates, however.
I agree given all the current trends that negative interest rates is the only direction they can logically go. However, for now it looks like the Fed will raise rates. Why do you suppose the Fed is raising rates now?
“Elon Musk will argue that this is just the evolution of civilization and soon everything will be automated allowing man the freedom to explore his greater self free of the burdens of labor. Really? I can take you to a tenement high rise in NYC and show you in principle how the free time is used to explore man’s potential really works out.”
Hilarious, but so true. The perspective of the wealthy elite energetic intellectual vs. the low self esteem, street-educated, defeated person trying via street drugs to reach cloud 9. What a stark contrast in how free time is spent when available.
You make an interesting point. Life must have purpose. Isn’t that the ultimate object? But where there is design there is purpose. Hence discovery might indeed be our purpose not simply existing or consuming. That’s the reason many are drawn to this site.
Knowing, controlling and manipulating the processes which govern nature and humans themselves is a powerful weapon when wielded against the lesser of organisms and your brethren.
Hence, discovery and curiosity are strong genetic traits in the human ape, which have passed down through the evolutionary processes of natural selection throughout the ages.
And indeed; the only lasting source of existential fulfillment is learning and attempting understanding the world around us.
Apparently, for many the purpose is to be entertained and amused, JT Roberts, the old bread and circus, hence what we see here..the so called “Fast Eddy Fan Club”….
Give Gail a break….we are already why past comment totals for another paper!
BTW…don’t know why the big deal concerning the definition of Entropy…
Hmmm..mine is ” you can’t cry about spilled milk”..
There are thousands of examples in our daily lives that show how entropy is affecting us. In fact, all we have to do is nothing, and everything deteriorates, collapses, breaks down, wears out, all by itself
you sound just like my doctor
This sounds to me like the return of slavery. Except in this scenario the wealthy interact with robots (which are maintained by slaves). Except it won’t work and the robots will go away and the slaves will remain. As it was in the beginning, as it is written in the Bible, slavery will be acceptable once again.
ultimately the majority will have no option but to sell their labour in return for food and other essentials—the source of which will be held by a minority
much like today in many respects, though far more defined and rigid in concept
Serfdom anybody? we’ll soon pick it up—we’ve only been ”free” for 1–200 years.
The ‘nice’ thing about fossil fuels is that they are fungible. Everybody basically pays the same price and they can be bought and sold all over the world. If some country keeps more for themselves as a producer and the price goes up for the rest of the world, that producer will end up selling at the higher price and it will equalize again.
So, the Chinese behemoth that Dolph refers to will end up paying the higher price that the USA will. The big question is how much of a higher price can each different country’s economy tolerate without stalling and nose diving. I think that depends on a lot of things, but the country’s debt load plus its deep infra-culture’s dependence on oil for survival will be the biggies. Is it all about just in time or can someone get food from a local grower using an ox for plowing? Those are probably the two extremes. The other main one is whether the country is a producer of products or of services.
I agree about Trump. I think there will be a short honeymoon with the markets and Congress and then the economy will rear its ugly head as the chronically sick breadwinner in the family. Bill Clinton got it right years ago; “It’s the economy, stupid!”
Uhm, no, even fossil fuels as end product brake out into many different categories, according to climate (temp) etc., so for example in sudden cold snap there could be great insufficient supply of the “arctic grade” variety or in another example the EU cripples the fuels (and people’s engines) with mandatory “biofuels” mixed in mandate, and so on around the globe different mandates and standardization..
And in terms of source of fossil liquid fuels it’s not true at all.
Every refinery is tweaked for particular source intake, there might be some installations with higher degree of freedom what they can work with, but it’s obviously capacity/run up time limited anyway etc.
“Every refinery is tweaked for particular source intake”
That’s true. I used to work here https://www.lyondellbasell.com/en/houston-refinery/ That place was tuned up to work with Venezuela sour crude.
But over time, a refinery can be modified to deal with different kinds of crude.
This is even true for electricity produced by coal. They are tuned for particular types of coal.
What you are saying is more true for oil than it is for other fossil fuels, because of the high cost of transport for most fuels. Even with oil, a country like Saudi Arabia can choose to give a much lower price to its own citizens than is charged in the world market.
which they do of course
then when reality bites and they have to charge at true cost, all hell breaks loose because their citizens have become accustomed to the cheap price.
This is why Egypt is a powder keg ready to blow—they’ve had everything subsidised for years on borrowed money—now that cash is no longer available
Egypt 74% dependent.
Trump is very much a standard issue, power and money hungry corporate republican. He won by appealing to the white working class, a class which has been ignored for a long time. Republican support came to rely too heavily on the white middle class, while the Democrats completely abandoned the white working class in favor of their multiracial coalition.
Nevertheless, we can expect Trump and his team to be similar in outlook to Bush II, but Bush II was lucky to benefit in the 2000-2008 period from renewed nationalism post 9/11, as well as an economy that was basically the last hurrah of the American suburban build out.
No such circumstances exist for Trump. America is now permanently split, and the Chinese behemoth refuses to curtail its own consumption. Something has got to give, and soon.
Trump in his pre election pitch book quotes some corporate and gov studies there is <300yrs of oil extraction available to be fracked by the contemporary newest technology around the US, so he will behave accordingly as of now the selection of people for the administration shows that as well. How long and if at all they can subsidize this "energy morning in America" scheme is open question..
“Traders said the higher in front month crude futures were due to expectations of a tighter market in 2017.”
That’s right folks, tighter meaning more expensive. Deals have been made, some of the glut guzzled down in previous months and now Trump gets to come on board just as oil get more expensive, putting downward pressure on the economy.
More money for oil means less money for other things.
More money for higher interest rates means less money for other things.
Put those two things together, and the world economy likely has a major problem.