The Economy Is Like a Circus

The economy is like a circus. It comes to town, and eventually it leaves town. We get paid in tickets to this circus. As long as the circus stays in town, we can use our tickets. Once the circus leaves town, we are pretty much out of luck.1

The reason the circus stays in town is because the economy stays in sufficient balance that the economy can go on. This is much like the way many other self-organized systems function. For example, our bodies continue to function as long as there are suitable balances in many different areas (oxygen, food, water, air pressure). Ecosystems continue to function as long as there is sufficient rain, adequate temperatures, and enough sunlight.

There are many different views as to what limits we reach in a finite world. Some people think we will “run out” of oil, or of energy products. Some think that the energy return will fall too low, as measured in some manner. I see the adequacy of the energy return as being very much tied to the financial system. Thus, the forecast by US Atlanta Fed GDPNow indicating that first quarter 2017 US GDP growth will only be 0.5% is likely to be a problem, assuming it is correct.

Our economy operates on economies of scale. Once we get too close to shrinking, or actually start shrinking, we reach a point where the economic circus starts to leave town. At some point, we will discover the circus is gone. The economy we thought we had, will have left us. If some people are survivors, they will need to pick up the pieces and start over with an entirely new system.

What the Economy Needs to Do to Keep Functioning

For our economy to continue functioning, a number of variables are important:

  • Prices of commodities – Prices cannot be too high for the consumer to afford goods made with them. They also cannot be too low for producers. If prices of oil and other commodities are too low for producers (as they are now), producers need to keep raising debt levels to stay in business. There is a risk that production will stop from lack of adequate new investment, or from the bankruptcy of producers.
  • Wages of non-elite workers – These wages need to be high enough so that workers can afford goods made with commodities, such as cars, homes and computers. These big purchases tend to use commodities even after they are made, adding to “demand” for commodities. If commodity prices such as oil are too low (as they are now), it is likely related to the inadequate wages of non-elite workers.
  • Mandatory payments required of non-elite workers, such as taxes, health care, and education – It is not just wages of non-elite workers that are important. So are required payments, such as payments for taxes, healthcare and education. Clearly, the lower these payments are for non-elite workers, the better the economy functions.
  • Interest rates – Low interest rates are helpful for some parts of the economy, while high interest rates are good for other parts. Low interest rates help create affordable monthly payments for goods such as homes and cars. If interest rates decline, the market prices of assets such as real estate, shares of stock, and bonds tend to rise. These rising values are of great benefit to owners of these assets, since they can sell these assets and use the proceeds to add to current consumption. Conversely, high interest rates are important to pension plans and to others depending on investment income. Banks have a problem if there is not a big enough “spread” between short and long interest rates.
  • Increase in debt – An increase in debt indirectly makes the economy “look” much better. Increasing debt acts to raise wages, since some of this growing debt adds to funds available for wages. The higher wages tend to increase demand for goods, and thus indirectly raise commodity prices. A virtuous circle starts, pushing up economic growth, provided an adequate quantity of very cheap energy products is available (under $20 barrel oil, for example) that can be used to make goods and services. Increased debt works less and less well, as the price of energy products increases.
  • Inflation rates – The higher the inflation rate, the easier it is to repay debt with interest, since most debt is not adjusted for inflation. Also, high inflation rates help keep prices of homes and other buildings from falling as they age, making the use of mortgages more feasible. If the price of a commodity, such as oil or coal, is high and then falls, debt based on the prior high value of the commodity is likely to become a problem.
  • Quantity of energy products affordable by economy – It takes energy products to produce goods and services. If the price of commodities is low, it is possible for buyers to purchase a large quantity of these products, even on a low budget. Current relatively low prices tend to help the economy, even if producers cannot afford to make adequate investment in new production with such low prices. Thus, today’s low energy prices make the economy look good for at a short time. Afterwards, the outlook is less rosy.

Ultimately, the issue at hand in determining whether the “circus will leave town” is whether non-elite workers are able to adequately make a living. We know from biology that the return on the labor of animals must be adequate (animals must be able to get enough food by walking, swimming, or flying) or their populations will collapse. The same thing is true for humans. We also know that prior civilizations that collapsed often had wage disparity problems. When this happened, non-elite workers were no longer able to pay adequate taxes. Their nutrition became poorer. They tended to become more susceptible to epidemics. These were things that pushed the economy toward collapse.

The goods and services that non-elite workers can buy with their wages represent the benefits of our fossil fuel powered energy system, as distributed to the most vulnerable workers in the system. Once these benefits start falling too low, the system can no longer function.

There are some indications that benefits are already too low for the economy to keep functioning in a “normal” manner. A major such indication is the fact that energy prices have remained far too low since mid-2014. It is becoming increasingly clear that there really is no oil price which is both high enough for producers and low enough for consumers. We may be living on “borrowed time,” using an increasing amount of debt to support energy producers.

Thus, world economic growth rates may already be too low to keep the world economy operating. Regulators who consider only the US do not seem to understand the world situation. Because of this, they can easily make moves that make the situation worse, rather than better. For example, they have already started raising interest rates and are planning to sell securities currently held by the Federal Reserve.

A Few Graphs Giving Hints of Our Problem

Economists have not understood what our problems really are, so they have tended to omit some important issues from their analyses. I put together a few graphs that might give a little insight as to what is happening.

Interest Paid by Households 

Interest paid by households is important because this money is transferred to banks, insurance companies, and pension plans. It leaves the households who paid this interest poorer. Buying goods using debt is convenient, but it has a cost involved.

BEA Table 7.11 shows a category called, “Interest Paid by Households.” If we compare this to BEA “Wages and Salaries,” we find the relationship shown in Figure 1. Admittedly this is not an exact comparison; there are some people who are not wage earners who are making interest payments, for example. I have not tried to offset “interest paid by households” against “interest received by households,” because the households benefiting from interest payments are likely very different households from those making interest payments. They are likely richer, and at a later stage in their lives.

Figure 1. US Household Interest Paid (from BEA Table 7.11 Interest Paid and Received by Sector and Legal Form of Organization) divided by Wages and Salaries from BEA Table 2.11, “Personal Income and its Disposition.”

The pattern might be described as follows:

  • A rapid run-up in interest payments that took place until about 1986
  • A general flattening, with new peak in 2007
  • A rapid fall starting in 2008

It seems to me that the pattern up to 1986 reflects the general run-up in consumer debt levels during this period. The amount of interest paid is also affected by interest rates, such as ten-year treasury rates.

Figure 2. US Federal Bonds 10 year interest rates. Graph produced by FRED (Federal Reserve Economic Data).

Interest rates started falling in 1981. These higher rates only gradually worked their way into the system because many people had bought houses earlier and were able to keep their existing mortgages at low interest rates. The amount of debt outstanding continued to rise, allowing the total amount of interest paid to continue to rise until 1986.

After 1986, rising debt amounts and falling interest rates came closer to offsetting each other (Figure 1). By 2008, the economy was in a severe recession. In order to help get out of the recession, interest rates were lowered through Quantitative Easing. These lower interest rates, besides helping the economy in general, helped oil prices gradually increase back to the $100+ per barrel price level that they needed to be profitable. Oil prices had temporarily dropped below $40 per barrel in December 2008.

Figure 1 shows that interest payments for several years amounted to about 12% of wages for households. Interest payments are now down to 8% of wages. Even at this level they are significant. They are likely higher than this for those with low wages and high debt. If interest rates rise significantly, the most vulnerable are likely to find their discretionary income reduced.

Rising Healthcare Costs 

Figure 3 shows a comparison of US healthcare costs to GDP and to wages. A huge increase in costs is evident in the 2001-2005 periods, and also in the 2008-2010 period, especially compared to wages.

Figure 3. US Healthcare costs as a percentage of GDP and as a percentage of wages. Healthcare costs from cms.gov. Wages and salaries and GDP from BEA.

The increase in healthcare costs since 2008 is one of the costs putting pressure on the economy, and leading to a need for lower interest rates.

The Affordable Care Act should be affecting amounts for the latest years, since the ACA started increasing the number of people with insurance starting about 2014.

Figure 4. Kaiser Family Foundation chart of percentages of non-elderly people without healthcare insurance, from this Source.

A person might wonder why 2014 and 2015 costs didn’t rise more, with so many more people added to the system. Perhaps care that was being given “free” by hospitals is now being charged back to patients. Or perhaps many of the people choosing to purchase coverage through the program were already insured elsewhere in the system, so were not really added to the healthcare system through the Affordable Care Act.

One very recent US healthcare change is the addition of an automatic penalty for not having healthcare insurance. This penalty began for tax year 2016, filed in the beginning of 2017. This provision particularly hurts young people, because rates are structured in such a way that the rates for young people subsidize the rates for older people. Thus, young people often find that buying health insurance is far more expensive than their out of pocket costs for health care would have been, without insurance.

Young people who are affected by this new requirement will find that they need to cut back on other expenditures (such as restaurant visits), if they are meet the requirements of the law–either buy healthcare insurance or pay the mandated penalty. This change will begin to adversely affect the economy in 2016. Bigger impacts are likely in early 2017, when taxes are filed.

Falling Wages Relative to GDP, and Rising Wage Disparity

The path to lower wages as a percentage of GDP has been a bumpy one. The general pattern is that when the economy is booming, wages tend to grow as a percentage of GDP. Recession tends to send wages down as a percentage of GDP. US wages seem to have increased somewhat since 2013, perhaps because the price of oil is down, and the US dollar has risen to a relatively high level. This is part of what allows some people to talk about the “tightening labor market,” and gives them confidence in the economy.

Figure 5. US wages and salaries divided by US GDP, based on BEA data.

There has been significant growth in wage disparity since about 1980, both in the US and in many other developed countries. Figure 6 shows some data for the US.

Figure 6. United States Income Distribution_1947-2007 in 2007$. The data source is “Table F-1. Income Limits for Each Fifth and Top 5 Percent of Families (All Races): 1947 to 2007”, U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements. Graph is from Wikimedia Commons http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1947-2007.svg

As the economy becomes more “complex,” in other words, “specialized,” wage disparity tends to be more of a problem. Work that could previously be done by manual laborers is done by machinery, or is transferred to low wage countries. Many people lose their jobs, and have difficulty finding good-paying replacement jobs. All of this contributes to inadequate wages for non-elite workers.

Role of Inflation and Rising Commodity Prices in the Economy

We rarely stop to think how important inflation is to the economy. For example, if inflation is sufficiently high, it will slightly offset normal depreciation in values of homes and business properties. Thus, home and business property values will tend to slightly rise over time. If banks can count on values of structures rising, rather than falling, over time, lenders can assume that mortgage loans are fairly risk-free, because the lender can count on getting its money back through the sale of the property, if the mortgage-holder defaults.

This same principle holds when energy properties, such as coal mines and oil fields, are financed. As long as energy prices keep rising, there is a good chance loans can be repaid. Once energy prices fall, debt defaults become a problem. Oil exporting countries also find that the taxes they can collect fall significantly. As a result, energy-exporting countries are in a far worse economic position once energy prices fall. Exporters of other commodities, such as metals, have a similar problem if prices fall.

In the last two paragraphs, I mentioned the impact on lenders and governments of rising or falling prices. Owners of properties are also affected by rising or falling prices. If prices rise, these owners can sell their assets, and make a profit. In fact, these owners have often purchased their properties with debt. If the price of the property rises, but the amount of debt is unaffected by inflation, the owner of the property can often get a disproportionate benefit of the price rise. Of course, if the value of a property falls, the property-owner is disproportionately affected by the fall of the price.

We are so used to a rising-price scenario that we have little understanding of how a flat or falling price scenario might work.

To get a little idea of how much inflation has in the past been working through to asset prices in the United States, I looked at some information provided by the US Bureau of Economic Analysis. I compared these amounts to GDP, rather than asset prices, to get an idea of how much impact they have, relative to each current year’s activities (Figure 7). There is about $3 of assets of the types BEA analyzes for every dollar of GDP, so the impact, relative to GDP, is about three times as high it would be, relative to the asset prices themselves.

If this same relationship holds elsewhere, a person can see why a commodity-producing country might have a big problem, if the price of that commodity suddenly falls. There is huge “balance sheet” impact that doesn’t directly affect current GDP as reported (since GDP has to do with current goods and services produced). But it can have a major impact on the country, as it goes forward, because affected loans are much less likely to be repaid. Countries often try to be lenient with lenders, hoping that commodity prices will rise again. But if the drop in prices is permanent, countries must use more and more extreme measures to hide the problem of loans that have a low probability of repayment in a low-priced commodity environment. Eventually, these loans seem likely to default, if prices do not rise sufficiently. China and many commodity-exporting countries seem to be affected by this problem.

 

Figure 7. Changes to US Fixed Assets, based on BEA Table 5.10, Changes in Net Stocks of Produced Assets.

BEA shows three amounts of interest with respect to US assets (Figure 7):

  1. Inflation – Changes in asset values based on changes in the general price level
  2. Re-evaluation total – Changes to asset prices in particular; includes changes because assets are taken out of service because of disaster or because a business is no longer profitable. Note the spikes related to the housing bubble of the 2003-2006 period and the corresponding dip during the Great Recession of 2007-2009.
  3. Depreciation – Expected amount of new investment needed to offset “consumption of fixed capital.” This rate is quite high, (about 15.7% of GDP recently) because the asset base includes fairly rapidly depreciating assets, such as cars and computers, besides buildings of all types, and intellectual property such as computer programs.

The last year shown is 2015. Inflation (relative to GDP) was only 1.2%, and the re-evaluation total was only 0.3% of GDP. (Calculated as percentages of the assets involved, these inflation rates would be only a third of these amounts.) These low inflation rates make it very difficult to operate a debt-based economy. A shift from inflation to deflation would be a major problem. Unfortunately, it is very difficult to get much inflation, if the wages of non-elite workers remain very low.

Conclusion

We have kept our economy expanding through growing debt use and growing energy use. I described this process in my post, What has gone wrong with oil prices, debt, and GDP growth?

Now we seem to be reaching the end of the line. The economy is getting very close to shrinking. When this happens, we are getting close to economic collapse–the economic circus is starting to “leave town.”

People who think our only problem is “running out” and “high oil prices” don’t see the problems the economy is developing right now. These problems are much more subtle, but they can have a devastating effect. The Federal Reserve talks about inflation rates above 2% being too high, but inflation rates below 2% are at least equally problematic. Somehow, the debt system needs to keep operating for the whole system to work.

We are now at the point where the economy is decidedly unstable. Little things can affect it, like the Affordable Care Act requirement that uninsured people buy healthcare insurance, or pay a penalty. Low commodity prices make debt repayment more difficult in countries producing those commodities.

We should not be too surprised if the economic circus starts to leave town. There are simply too many pieces that are now unstable. The US Government is facing a shutdown in the near future, unless its debt ceiling can be raised and funding can be enacted. The world is depending on China for economic growth, but China’s debt is becoming unmanageably high. Japan’s debt is also unreasonably high. Oil exporters are becoming increasingly unstable, with continued low prices. We can find problems in almost every country of the world. It looks like it is only a matter of time, until one of these problems starts a downward spiral.

 

Note:

[1] Thanks to commenter “Lastcall” for this analogy.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,952 Responses to The Economy Is Like a Circus

  1. Fast Eddy says:

    Consumption in the rich OECD bloc fell by 0.4pc in February from a year earlier, and it has been lacklustre in emerging markets. “Oil demand growth is very poor,” said Dan Smith from Oxford Economics.

    The picture of soggy demand is even clearer for industrial metals. Iron ore has crashed by over 30pc as stockpiles reach record levels in Chinese ports and steel mills suspend production. China accounts for half the world demand for iron ore, copper, and zinc, among other metals.

    http://www.telegraph.co.uk/business/2017/05/04/commodities-slump-china-tremors-opec-failure/

  2. xabier says:

    So, on a more cheerful note: what are everyone’s vacation plans this summer? 🙂

    • DJ says:

      Hyperloop to of Saturns moons, have not yet decided which.

    • Fast Eddy says:

      Paris – Malta – Hong Kong … end of June…. provided I have not starved to death by then

      • Eddy you are a one man global warming machine

        • ITEOTWAWKI says:

          FE is putting his money where his mouth is….doing his part to keep BAU chugging along as long as possible 🙂

          • xabier says:

            I’m spending as much as I dare in support of BAU, not by travel but in local shops, staffed by nice people who are pleasant to talk to – few such still exist, and they make my urban experience bearable. And, guess what? These places give helpful discounts to regulars (as I do to my regulars).

            No chains. No one in a chain shop ever really makes personal contact, it’s depressing.

            I’ve just discovered a little cafe in a side street where the owner is clearly on his own and so pleasant and human it’s goodbye to all the rest: pleasant view of a 800 year-old church from one’s seat as well. I hope he survives, he deserves to.

        • Fast Eddy says:

          I think I might come back to Bali again in August… someone needs to counter these fools who are buying and flying less in the false belief that they are doing the world a favour…

          I do appreciate the compliment but Leo Dicaprio and Elon Musk are far more deserving… one really needs a private jet to make a significant difference….

          • ITEOTWAWKI says:

            Leo Dicaprio, enjoy his movies, but his environmentalist gig hahahahaha, what a joke…classic case of “Do as I say, not as I do”…Dude enjoy your jet-setting lifestyle by all means, but then don’t come preaching to the rest of us how we have to save the planet…another clueless human being who does not understand that BAU is keeping him and the rest of us alive…

    • Yorchichan says:

      Ibiza. Been already at Easter. Thank demand destruction and budget airlines for the £27 return air fare from Manchester. 🙂

      • ITEOTWAWKI says:

        Nice! World’s headquarters of Electronic Music, a nice gift (IMHO) of our Industrial Civilization 🙂

        • Yorchichan says:

          Agreed. Do you think you could acquire a taste for folk music?

          • ITEOTWAWKI says:

            Hahahaha…never..that’s why for me it’s Industrial Civilization or nothing 😉

        • Fast Eddy says:

          I was partial to Jakarta back in the day …. many, many fond memories of times spent in Stadium… it used to open Friday evening and go 24 hours until Monday morning….

          • ITEOTWAWKI says:

            Those must have been epic week-ends!!!

            • Fast Eddy says:

              I still suffer the effects of slight brain damage….

            • ITEOTWAWKI says:

              Hahaha FE…well look at it this way, maybe that brain damage from partying to EDM (and potentially enhancing it with other stuff wink-wink) enabled you to open your mind to discover and understand this giant clusterfxxck of a predicament we find ourselves in 😉

            • Fast Eddy says:

              That is a possibility….

      • xabier says:

        Generations of Northerners would have killed to have such a cheap escape route to sunnier climes (distant ancestors from Bolton, by the way)!

        Such are the miracles of the end days of industrial consumerism.

        When this all ends, if we are still about at all, the old saying will apply:

        ‘They say a starvin’ dog’ll eat a bit o’ dirty puddin”……….

    • Kurt says:

      Road trip in a tesla. Maybe put some solar panels on the house. Also looking to pick up my very own storage container – cheap of course.

      • Fast Eddy says:

        Solar panels are good — the manufacture of them involves the burning of tremendous amounts of lignite coal — every little bit counts!

    • grayfox says:

      I have no summer travel plans but plan to spend time gardening, hiking, bird-watching and visiting a local cafe. Also, I’ll be training for a couple of local mile footraces.

      • DJ says:

        Competing over only a mile? If you are an adult that is impressive.

        • grayfox says:

          I typically do the mile, 5k, 10k, 8 Mile, and 10 mile races each year. The mile is very tough race. I’m not an “elite status” runner, by any stretch of the imagination, but I like a challenge.

          • DJ says:

            Yes, middle distance is serious running.

            But doesn’t impress much on the sheeple who disregards speed.

            Like: a mile in 6:00 would impress no one even though being equal to about 90 min half marathon. But a 2:27 half marathon is kind of impressive on those folks …

    • merrifield says:

      San Francisco (wedding), Seattle (food) and watching the solar eclipse in Oregon in August.

      • Duncan Idaho says:

        Just moved from Mexico (San Pancho) to Bend OR.
        The eclipse is going to bring the hoards, as being on the Eastern side of the Cascades, good viewing is almost assured.

        I’m done with Asia, and not going back.

        • Jarvis says:

          Off to the doomstead in the electric car. It’s on a beautiful lake and there’s no better way to start the day than a long swim and coffee on the dock. We spend the day cycling around to the 10 wineries that are located close by and always a couple of hours in the garden. In other words one foot in the doomsday world and one in delusistan! Does wonders for your sanity.

        • merrifield says:

          I live in Eugene, which won’t quite have a totality, so will drive up to Salem unless it’s supposed to be cloudy. If so, will join you in Bend!

    • Karl says:

      Well, we got back from Belize about 6 weeks ago. It was a nice trip sans children. Lots of jet fuel consumption. August is going to be a driving trip with kids to one of the East coast beaches. Not nearly as much FF consumption 😦 . I am planning on adding a whole house generator with propane tank this summer though, that should help the cause some……

      • Fast Eddy says:

        ‘Lots of jet fuel consumption’

        ++++++++++++++++++++++++++++++++++

        • I am headed on a trip to Japan on Monday for two weeks, on a commercial tour. Don’t want to announce this too widely, though. Will try to keep commenting, assuming I have internet access. Will also keep the use of jet fuel up.

          • Fast Eddy says:

            Excellent! Long haul flights are where it is at. I’ve got a 5 hour flight next Sunday then a 12 hour one on Monday topped with a 1.5 hour flight from Auckland to Nelson.

            Then …. I have two 12 hour flights to Europe in late June — and two more on the way back + 4 more short flights involved…

            I gave so many flights just the thought of all this jet fuel involved makes me giddy

  3. Duncan Idaho says:

    Canada Housing Bubble Pops and Looks Similar to US Housing Bubble: Canada’s Largest Alternative Mortgage Lender Crashes in Dramatic Fashion.

    http://www.mybudget360.com/canada-housing-bubble-home-capital-group-canada-real-estate-bubble/

  4. Duncan Idaho says:

    The World Is Buying American Diesel as Fast as Refiners Can Make It

    https://www.bloomberg.com/news/articles/2017-05-04/world-buying-american-diesel-as-fast-as-refiners-can-make-it

    (The diesel engine is the most important thing keeping BAU together)

  5. JT Roberts says:

    This system resembles Mr. Todd’s Wild Ride. It starts off in a library. This is fitting because information is the foundation of the universe. Then it passes through Todd hall into a barn yard. The biological endowment here on earth. After going down the One Way Street which is the point of no return. It then witnesses the order and disorder of human civilization. Starting with a judge ending with a shoot out. The final scenes are running on a railroad track and being hit by and oncoming train which is the thermodynamic collapse of the system. Ending in a Hell scene representing death. Just a ride like the Carousel of Progress.

  6. Cliffhanger says:

    So, you would surmise from reading the papers (or their web editions) that the health care problem was simply a matter of apportioning insurance coverage. That is what the stage magicians call misdirection. Any way you cut the dynamics of health insurance, as practiced in the USA these days, it is nothing but racketeering, literally a conspiracy between informed players to swindle uninformed “patients.” The debate in congress (and the news media) is just about who gets to be swindled.

    -jhk

    • I haven’t read the whole James Howard Kunstler article, but I expect that my take on the situation is not too different from his.

      We have put together a healthcare system in the US that is horribly expensive and doesn’t work very well. It is based on providers making money, not on curing patients. Doctors have a range of “medical treatments.” These often do not include any knowledge of what has happened in the last 10 years in terms of research on what the underlying cause is of the condition–what deficiency in food or exercise might be changed to correct the condition, for example. Instead, they have pills and surgery to hand out to fix any condition imaginable. The system is set up so that those over 65 can cure their loneliness by going to visit doctor after doctor, in the quest for more tests, pills, and surgeries that will somehow make them feel better. People who seem to be near death are kept alive as long as possible, often in intensive care, even when it is clear there is no hope of recovery. Surgery is done on very elderly patients, if they or a spouse asks for it. I know my father in law had brain surgery when he was 90, because my mother in law wanted it. The assisted living facility where they lived would call us and demand that we get treatment for them of some rash or other minor problem.

      My father was a medical doctor, first a general practitioner (delivered babies, did surgery, counseled patients, etc.) and then became a psychiatrist, after he developed a latex allergy. The government facilitated the transition with funding for living expenses and schooling starting about 1965. Pills for curing/mitigating psychiatric diseases had come out, and the government wanted to empty out the many large facilities warehousing patients. Unfortunately, this did not really work as planned. Quite a few of the people who had been in mental facilities ended up as homeless, because the drugs did not work as well as planned, and because people did not take them consistently.

      As a general practitioner, my father spent every spare minute reading medical journals. (He did this, even after he retired.) He would complain that the other doctors never looked at a medical journal. Their primary concern seemed to be earning money.

      Anyhow, the whole system needs to be changed to greatly reduce its cost. I think healthcare needs to be a government sponsored program, available to all, but covering a relatively limited number of conditions. It needs to be based primarily on what patients can do to keep themselves well, rather than “cures” for everything imaginable. Health care providers cannot be terribly high paid. The whole “specialty” situation has become hugely overdone.

  7. Cliffhanger says:

    You’ll Die in a Nuclear War, but These Elites Will Be Saved
    https://www.vice.com/en_us/article/youll-die-in-a-nuclear-war-but-these-elites-will-be-saved

    • It is sort of hard for elite to be saved, without continued access to food, water, electricity, and oil to operate vehicles. In a nuclear war, all of these would be at risk. The government would somehow need to keep the entire supply chain of all of these alive. I don’t think it would happen.

  8. Fast Eddy says:

    Oil has been overproduced since late in 2013. That glut decimated oil prices in 2014, finally bottoming at a low price below $30 and now recovered towards $50, but still well below a price that enables anyone to make a decent profit except for the conventional Middle East producers – and even THEY need a far better margin to support their national budgets.

    But how have oil companies reacted? Did they stop drilling oil at a loss? No, not really – instead they cut their budgets for investments in new projects, trimmed costs to the bone and called on technology to make getting a barrel of oil out of the ground as cheap as possible.

    http://wolfstreet.com/2017/05/06/self-sabotage-what-are-us-oil-producers-thinking/

    What are they thinking? It sounds as if they are not thinking … rather they are acting on a directive to slash costs and keep the oil flowing as we approach collapse.

    What is happening is completely rationale.

    Surely it should be obvious to the author that this is what peak oil looks like … clearly he does not understand this

    • Fast Eddy says:

      R Davis
      May 6, 2017 at 1:10 am
      “selling ever increasing amounts of oil on the market at a loss”

      Is it possible that the customers cannot afford to by / cannot afford to pay market prices ?
      What happens to you, when your customers can only afford to stand outside the window of your store, gazing at your products with desire & empty pockets.
      What do you do ?
      Pull down the blinds to minimize your pain & anguish.
      Oil keeps .. right
      It does not have a used by date .. right
      Phew !
      In the meantime the consumer will have to go without .. causing discontent, panic, civil unrest bla, bla, bla.

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