The Next Financial Crisis Is Not Far Away

Recently, a Spanish group called “Ecologists in Action” asked me to give them a presentation on what kind of financial crisis we should expect. They wanted to know when it would be and how it would take place.

The answer I had for the group is that we should expect financial collapse quite soon–perhaps as soon as the next few months. Our problem is energy related, but not in the way that most Peak Oil groups describe the problem. It is much more related to the election of President Trump and to the Brexit vote.

I have talked about this subject in various forms before, but not since 2016 energy production and consumption data became available. Most of the slides in this presentation use new BP data, through 2016. A copy of the presentation can be found at this link: The Next Financial Crisis.1

Slide 1

Most people don’t understand how interconnected the world economy is. All they understand is the simple connections that economists make in their models.

Slide 2

Energy is essential to the economy, because energy is what makes objects move, and what provides heat for cooking food and for industrial processes. Energy comes in many forms, including sunlight, human energy, animal energy, and fossil fuels. In today’s world, energy in the form of electricity or petroleum makes possible the many things we think of as technology.

In Slide 2, I illustrate the economy as hollow because we keep adding new layers of the economy on top of the old layers. As new layers (including new products, laws, and consumers) are added, old ones are removed. This is why we can’t necessarily use a prior energy approach. For example, if cars can no longer be used, it would be difficult to transition back to horses. This happens partly because there are few horses today. Also, we do not have the facilities in cities to “park” the horses and to handle the manure, if everyone were to commute using horses. We would have a stinky mess!

Slide 3

In the past, many local civilizations have grown for a while, and then collapsed. In general, after a group finds a way to produce more food (for example, cuts down trees so that citizens have more area to farm) or finds another way to otherwise increase productivity (such as adding irrigation), growth at first continues for a number of generations–until the population reaches the new carrying capacity of the land. Often resources start to degrade as well–for example, soil erosion may become a problem.

At this point, growth flattens out, and wage disparity and growing debt become greater problems. Eventually, unless the group can find a way of increasing the amount of food and other needed goods produced each year (such as finding a way to get food and other materials from territories in other parts of the world, or conquering another local civilization and taking their land), the civilization is headed for collapse. We recently have tried globalization, with exports from China, India, and other Asian nations fueling world economic growth.

At some point, the efforts to keep growing the economy to match rising population become unsuccessful, and collapse sets in. One of the reasons for collapse is that the government cannot collect enough taxes. This happens because with growing wage disparity, many of the workers cannot afford to pay much in taxes. Another problem is greater susceptibility to epidemics, because after-tax income of many workers is not sufficient to afford an adequate diet.

Slide 4

A recent partial collapse of a local civilization was the collapse of the Soviet Union in 1991. When this happened, the government of the Soviet Union disappeared, but the governments of the individual states within the Soviet Union remained. The reason I call this a partial collapse is because the rest of the world was still functioning, so nearly all of the population remained, and the cutback in fuel consumption was just partial. Eventually, the individual member countries were able to function on their own.

Notice that after the Soviet Union collapsed, the consumption of coal, oil and gas collapsed at the same time, over a period of years. Oil and coal use have not come back to anywhere near their earlier level. While the Soviet Union had been a major manufacturer and a leader in space technology, it lost those roles and never regained them. Many types of relatively high-paying jobs have been lost, leading to lower energy consumption.

Slide 5

As nearly as I can tell, one of the major contributing factors to the collapse of the Soviet Union was low oil prices. The Soviet Union was an oil exporter. As oil prices fell, the government could not collect sufficient taxes. This was a major contributing factor to collapse. The collapse from low oil prices did not happen immediately–it took several years after the drop in oil prices. There was a 10-year gap between the highest oil price (1981) and collapse (1991), and a 5-year gap after oil prices dropped to the low 1986 price level.

Slide 6

Venezuela is often in the news because of its inability to afford to import enough food for its population. Slide 3 shows that on an inflation-adjusted basis, world oil prices hit a high point first in 2008, and again in 2011. Since 2011, oil prices slid slowly for a while, then began to slide more quickly in 2014. It is now nine years since the 2008 peak. It is six years since the 2011 peak, and about three years since the big drop in prices began.

One of the reasons for Venezuela’s problems is that with low oil prices, the country has been unable to collect sufficient tax revenue. Also, the value of the currency has dropped, making it difficult for Venezuela to afford food and other products on international markets.

Note that in both Slides 4 and 6, I am showing the amount of energy consumed in the countries shown. The amount consumed represents the amount of energy products that individual citizens, plus businesses, plus the government, can afford. This is why, in both Slides 4 and 6, the quantity of all types of energy products tends to decline at the same time. Affordability affects many types of energy products at once.

Slide 7

Oil importing countries can have troubles when oil prices rise, similar to the problems that oil exporting countries have when oil prices fall. Greece’s energy consumption peaked in 2007. One of Greece’s major products is tourism, and the cost of tourism depends on the price of oil. When the price of oil was high, it adversely affected tourism. Exported goods also became expensive in the world market. Once oil prices dropped (as they have done, especially since 2014), tourism tended to rebound and the financial situation became less dire. But total energy consumption has still tended to decline (top “stacked” chart on Slide 7), indicating that the country is not yet doing well.

Slide 8

Spain follows a pattern similar to Greece’s. By the mid-2000s, high oil prices made Spain less competitive in the world market, leading to falling job opportunities and less energy consumption. Since 2014, very low oil prices have allowed tourism to rebound. Oil consumption has also rebounded a bit. But Spain is still far below its peak in energy consumption in 2007 (top chart on Slide 8), indicating that job opportunities and spending by its citizens are still low.

Slide 9

We hear much about rising manufacturing in the Far East. This has been made possible by the availability of both inexpensive coal supplies and inexpensive labor. India is an example of a country where manufacturing has risen in recent years. Slide 9 shows how rapidly energy consumption–especially coal–has risen in India.

Slide 10

China’s energy consumption grew very rapidly after it joined the World Trade Organization in 2001. In 2013, however, China’s coal consumption hit a peak and began to decline. One major contributor was the fact that the cheap-to-consume coal that was available nearby had already been extracted. The severe problems that China has had with pollution from coal may also have played a role.

It might be noted that the charts I am showing (from Mazamascience) do not include renewable energy (including wind and solar, plus burned garbage and other “renewables”) used to produce electricity. (The charts do include ethanol and other biofuels within the “oil” category, however.) The omission of wind and solar does not appear to make a material difference, however. Figure 1 shows a chart I made for China, comparing three totals:

(1) Opt. total (Optimistic total) – Totals on the basis BP computes wind and solar. Intermittent wind and solar electricity is assumed to be equivalent to high quality electricity, available 24/7/365, produced by fossil fuel electricity-generating stations.

(2) Likely totals – Wind and solar are assumed to replace only the fuel that creates high quality electricity. The amount of backup generating capacity required is virtually unchanged. More long distance transmission is needed; other enhancements are also needed to bring the electricity up to grid-quality. The credits given for wind and solar are only 38% as much as those given in the BP methodology.

(3) From chart – Mazamascience totals, omitting renewable sources of electricity, other than hydroelectric.

Figure 1. China energy consumption based on BP Statistical Review of World Energy 2017.

It is clear from Figure 1 that adding electricity from renewables (primarily wind and solar) does not make much difference for China, no matter how wind and solar are counted. If they are counted in a realistic manner, they truly add little to China’s energy use. This is also true for the world in total.

Slide 11

If we look at the major parts of world energy consumption, we see that oil (including biofuels) is the largest. Recently, it seems to be growing slightly more quickly than other energy consumption, perhaps because of the low oil price. World coal consumption has been declining since 2014. If coal is historically the least expensive fuel, this is likely a problem. I have not shown a chart with total world energy consumption. It is still growing, but it is growing less rapidly than world population.

Slide 12 – Note: Energy growth includes all types of energy. This includes wind and solar, using wind and solar counted using the optimistic BP approach.

Economists have given the false idea that amount of energy consumption is unimportant. It is true that individual countries can experience lower consumption of energy products, if they begin outsourcing major manufacturing to other countries as they did after the Kyoto Protocol was signed in 1997. But it doesn’t change the world’s need for growing energy consumption, if the world economy is to grow. The growth in world energy consumption (blue line) tends to be a little lower than the growth in GDP (red line), because of efficiency gains over time.

If we look closely at Slide 12, we can see that drops in energy consumption tend to precede drops in world GDP; rises in energy consumption tend to precede rises in world GDP. This order of events strongly suggests that rising energy consumption is a major cause of world GDP growth.

We don’t have very good evaluations of  GDP amounts for 2015 and 2016. For example, recent world GDP estimates seem to accept without question the very high estimates of economic growth given by China, even though their growth in energy consumption is very much lower in 2014 through 2017. Thus, world economic growth may already be lower than reported amounts.

Slide 13

Most people are not aware of the extreme “power” given by energy products. For example, it is possible for a human to deliver a package, by walking and carrying the package in his hands. Another approach would be to deliver the package using a truck, operated by some form of petroleum. One estimate is that a single gallon of gasoline is equivalent to 500 hours of human labor.

“Energy consumption per capita” is calculated as world energy consumption divided by world population. If this amount is growing, an economy is in some sense becoming more capable of producing goods and services, and thus is becoming wealthier. Workers are likely becoming more productive, because the additional energy per capita allows the use of more and larger machines (including computers) to leverage human labor. The additional productivity allows wages to rise.

With higher incomes, workers can afford to buy an increasing amount of goods and services. Businesses can expand to serve the growing population, and the increasingly wealthy customers. Taxes can rise, so it is possible for governments to provide the services that citizens desire, such as healthcare and pensions. When energy consumption per capita turns negative–even slightly so–these abilities start to disappear. This is the problem we are starting to encounter.

Slide 14 – Note: Energy percentage increases include all energy sources shown by BP. Wind and solar are included using BP’s optimistic approach for counting intermittent renewables, so growth rates for recent years are slightly overstated.

We can look back over the years and see when energy consumption rose and fell. The earliest period shown, 1968 to 1972, had the highest annual growth in energy consumption–over 3% per year–back when oil prices were under $20 per barrel, and thus were quite affordable. (See Slide 5 for a history of inflation-adjusted price levels.) Once prices spiked in the 1973-1974 period, much of the world entered recession, and energy consumption per capita barely rose.

A second drop in consumption (and recession) occurred in the late 1970s and early 1980s, when easy-to-adopt changes were made to cut oil usage and increase efficiency. These included

(a) Closing many electricity-generating plants using oil, and replacing them with other generation.

(b) Replacing many home heating systems operating with oil with systems using other fuels, often more efficiently.

(c) Changing many industrial processes to be powered by electricity instead of burning oil.

(d) Making cars smaller and more fuel-efficient.

Another big drop in world per capita energy consumption occurred with the partial collapse of the Soviet Union in 1991. This was a somewhat local drop in energy consumption, allowing the rest of the world to continue to grow in its use of energy.

The Asian Financial Crisis in 1997 was, in some sense, another localized crisis that allowed energy consumption to continue to grow in the rest of the world.

Most people remember the Great Recession in the 2007-2009 period, when world per capita growth in energy consumption briefly became negative. Recent data suggests that we are almost in the same adverse situation now, in terms of growth in world per capita energy consumption, as we were then.

Slide 15

What happens when growth in world per capita energy consumption slows and starts to fall? I have listed some of the problems in Slide 15. We start seeing problems with low wages, particularly for people with low-skilled jobs, and the type of political problems we have been experiencing recently.

Part of the problem is that countries with a high-priced mix of energy products start to find their goods and services uncompetitive in the world marketplace. Thus, demand for goods and services from these countries starts to fall. Greece and Spain are examples of countries using a lot of oil in their energy mix. As a result, they became less competitive in the world market when oil prices rose. China and India were favored because they had a less-expensive energy mix, favoring coal.

Slide 16

Slide 16 shows the kinds of comments we have been hearing in recent years, as prices have recently bounced up and down. It is becoming increasingly clear that no price of oil is now satisfactory for all participants in the economy. Prices are either too high for consumers, or too low for the producers. In fact, prices can be unsatisfactory for both consumers and producers at the same time.

On Slide 16, oil prices show considerable volatility. This happens because it is difficult to keep supply and demand exactly balanced; there are many factors determining needed price level, including both the amount consumers can afford and the costs of producers. The bouncing of prices up and down on Slide 16 is to a significant extent in response to interest rate changes, and resulting changes in currency relativities and debt growth.

We are now reaching a point where no interest rate works for all members of the economy. If interest rates are low, pension plans cannot meet their obligations. If interest rates are high, monthly payments for homes and cars become unaffordable for customers. Also, high interest rates tend to raise needed tax levels for governments.

Slide 17

All of these problems are fairly evident already.

Slide 18

The low level of energy consumption growth is of considerable concern. It is this low growth in energy consumption that we would expect to lead to low wage growth worldwide, especially for the non-elite workers.  Our economy needs more rapid growth in energy consumption to provide enough tax revenue for all of our governments and intergovernmental organizations, and to keep the world economy growing quickly enough to prevent large debt defaults.

Slide 19

Economists have confused matters for a long time by their belief that energy prices can and will rise arbitrarily high in inflation-adjusted terms–for example $300 per barrel for oil. If such high prices were really possible, we could extract all of the oil that we have the technical capacity to extract. High-cost renewables would become economically feasible as well.

In fact, affordability is the key issue. When the world economy is stimulated by more debt, only a small part of this additional debt makes its way back to the wages of non-elite workers. With greater global competition in wages, the wages of these workers tend to stay low. The limited demand of these workers tends to keep commodity prices, especially oil prices, from rising very high, for very long.

It is affordability that limits our ability to grow endlessly. While it is possible to argue that more debt might help raise the wages of non-elite workers in a particular country, if one country adds more debt, other currencies around the world can be expected to rebalance. As a result, there would be no real benefit, unless all countries together could add more debt. Even this would be of questionable value, because the whole effort relates to getting oil and other commodity prices to rise to an adequate level for producers; we have already seen that there is no price level that is satisfactory for both producers and consumers.

Slide 20

These symptoms seem to be already beginning to happen.


[1] This presentation is a little different from the original. The presentation I am showing here is entirely in English. The original presentation included some charts in Spanish from Energy Export Data Browser by Mazama Science. With this database, a person can quickly prepare energy charts for any country in a choice of seven languages. I encourage readers to “look up” their own country, in their preferred language.

In this write-up, I include more discussion than in my original talk. I also added Slides 13 and 14, plus Figure 1.

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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3,812 Responses to The Next Financial Crisis Is Not Far Away

  1. Bergen Johnson says:

    Ok, Class, pay attention: These ‘missing charts’ may change the way you think about fossil fuel addiction.

    “To address the twin threats of climate change and ocean acidification, nearly every nation has promised to reduce fossil fuel burning. But so far, humanity keeps burning ever more. Last year we did it again, burning an all-time record amount.”

  2. dolph says:

    On the question of the super rich. Much of their wealth is nominal and not real. But! It doesn’t mean their real wealth is going away.
    If you have mansions, yachts, jets, businesses, etc., even if the financial paper wealth disappears, the real wealth is still there. It’s just a question of triaging off what isn’t worth it anymore, while keeping the core intact.
    It’s just that at their level, they don’t really suffer or die for any of this. They merely grow old. The rest of us, it’s actually a question of starvation. We can’t just keep getting rid of more and more, at some point we need basic work and food and shelter.

    • I am not sure about your assumptions. Real wealth goes away, if someone stronger than you takes it away, or if the government taxes it away, or if you find that necessary services (food and water particularly) are not available. Also, without oil, the yacht won’t go very far. Neither will the jet. And the business will not work, unless banks are open.

      Much of what we think is real disappears at the same time the paper wealth disappears.

      • :Land ownership does not. Those who lost their land to communists mostly got them back after communism collapsed.

        • I saw apartments in St. Petersburg, Russia that had been carved out of much larger apartments at the time of the communist takeover. There were also parks that had previously been private land. There clearly had to have been a lot of exceptions to “Those who lost their land to communists mostly got them back after communism collapsed.”

          How do you come to the belief that this statement is true?

          • Kulm is probably referring to peculiarities of “post communist” world, outside former USSR/Russia proper, where grand schemes of “restitution laws” were enacted.
            In case of Russia to my limited knowledge, only the state orthodox church was given back relatively large chunks of former wealth, because it’s a team player.

            Specifically, in many countries of the CEE/incl. parts of Baltic, large waves of wealth transfers occurred in past decades, not only predating the “iron curtain years” i.e. restoration line ~1949, but also breaching the post WWII treaties of the winning powers, so going way before 1940s start of the war, sometimes skilfully attacking even the 1914-18 legal situation. So, for example large swaths of land, stakes in industry, has been returned to quasi feudal entities and dubious international characters, churches/orders etc.

            That’s partly the reason for the unraveling of security situation in Europe, Russians correctly feel they were duped on the security guarantees of early 1990s, that WWII results and their commitment (~30M dead, country in smoldering ruins) are to be honored into the future.

            You will here exactly zero about this important sub-context in the western press.

            • Thanks! I hadn’t heard about that before.

            • There are even precedents way before that, e.g. nobility restitution (to a varied degree) post Napoleonic wars in Europe early 19th century. And before that during “30yrs War” in the mid of 17th century, basically Catholic vs Protestant blocks of power players confiscating each other, restitution, rinse and repeat, carving out chunks of countries (and tribute) left or right..

          • InAlaska says:

            Its not really “getting it back” if you have to wait 70 years. That’s mostly a loss.

            • That’s why the distinction, Russia was a very special case, civil war and attempted western occupation ~1917 and almost straight into planned tightly vertical integrated system ever since with very brief respites in early 1920s and the longer one mid 1990s.

              In the rest of Eastern bloc it was only ~40yrs, therefore restitution of property provided marked difference, anyways historically after WWII each state ran different mixed model, e.g. Yugoslavia and later also Hungary were quite liberal in lower tier economic matters, people could travel to west a little bit, owned little farms and companies, economies still tanked. While others were quite dogmatic on every aspect like typical protestant/heretic East Germans and Czechs.., however being more developed on the technical side. Yep, world is complicated.

            • That was my thought.

            • MG says:

              It was only thanks to adpoting nuclear energy, oil and natural gas, that the Central Europe (and other parts of the world) continue functioning.

              E.g. without the nuclear energy, there is no Slovakia anymore, as there would be not enough domestic energy that could keep the state and its economy functioning. During the WWII, Slovkai turned into the republic led by a catholic priest Jozef Tiso as its president. And bfore, during WWI, it was another priest, who was playing the leading role: Andrej Hlinka.

              In my opinion, in times of total despair, such union of government and church seems to be the logical solution: nothing remains, but the trust into a Higher Power.

          • DJ says:

            Didn’t j.wes and other who got property confiscated in Berlin get it back later? Probably some unfortunate people who bought the confiscated property got squeezed.

            • As mentioned above it differs very much in terms of particular time epoch and location/jurisdiction. Churches and faith societies are often cured among the first, they are prioritized simply on the line of powerful pressure groups, being allies of the new gov pushing restitution process in the first place..

              Not sure what specific case you have in mind. Sometimes throughout restitution process he who bought said property previously in good faith and under the law, could be re-compensated by the gov, usually in money, sometimes in ~kind, i.e. land somewhere else of ~similar value etc.

        • Fast Eddy says:

          Reference please

      • xabier says:

        Let’s think historically: did any of the great families of Ancient Rome survive? None: they were liquidated with the structure that supported them.

        Were any of the rulers of Europe in the late 8th century descended from powerful families among the tribes which conquered Rome and were powerful a generation before? None: they were all new men, and even the flattering court poets had to be silent about their dim provincial ancestry.

        And what happened to most of the great and powerful of Europe and Russia in the 20th century? Why did many of the English gentry and aristocracy end up living in the servants’ quarters of their mansions in the 1940’s, struggling to cook and clean for themselves? When the structures go, the status goes. Thousands of gentry mansions were demolished for salvage after WW2, they had no value.

        The top strata might be said to be particularly vulnerable to change. As a student I worked for a delightful summer at Christie’s in London, in the Old Masters department: I met not a few people from the titled aristocracy (in fact, nearly everyone had a title except me!) and they all lived at a very much lower level than their grandparents.

        • psile says:

          Indeed. If the elite weren’t so vulnerable to change, they wouldn’t fight so hard to preserve the status quo.

        • That’s agreeable with the proviso, we are about to enter a phase in which the “upper caste” dominating past century+ (at least) is either to be forced to share much more or to be put aside. Also there is to be expected lot of collateral damage as usual around these historical tectonic shifts of longer cycles concluding.

          • Artleads says:

            worldofhanumanotg says:
            July 15, 2017 at 5:27 am
            That’s agreeable with the proviso, we are about to enter a phase in which the “upper caste” dominating past century+ (at least) is either to be forced to share much more or to be put aside. Also there is to be expected lot of collateral damage as usual around these historical tectonic shifts of longer cycles concluding.
            Leave a Reply Cancel reply

            A blogger from Wales once posted that, technically speaking, the royal family own all the British land. But that aside, either they or the aristocracy as a whole own a very great amount of land. Being a wishywashy fellow who hates changing even “bad” things, I search endlessly for ways to have it all. So I do believe that with an aristocratically trained eye and a socialist conscience you can use all that land to benefit the unwashed masses. You have to put style and aesthetics first, and the old guard now occupying servants digs (with style!!!!!) need to know their new place. There has to be a useful, pragmatic, wise way to remain upper class. One possible way to ensure this is to educate the masses (though not en masse!) to a standard that is conducive to integration with the aristocracy. An aristocratic society. It might call for extremes of cultural diversity, each enabling a viable path to status. Everybody must have status, but they can’t have it in all the same white-dominant centralized way as before.

    • MG says:

      When the system implodes, it is about the declining energy, both human and external. And everybody is affected. There is no way an individual can preserve his or her remaining assets against the starved majority or other species that prevail over the weakend human species lacking the external energy.

    • Jan Steinman says:

      If you have mansions, yachts, jets, businesses, etc., even if the financial paper wealth disappears, the real wealth is still there. It’s just a question of triaging off what isn’t worth it anymore, while keeping the core intact.

      I’m not so sure.

      If the “paper wealth” of the rich deflates to the point that they have to liquidate hard assets, why won’t those hard assets also deflate? I all of today’s billionaires suddenly become mere millionaires, who is going to buy their excess “mansions, yachts, jets,” etc.?

      • xabier says:

        In the late 19th and early 20th centuries, the British titled aristocracy found that their real income was plummeting due to the fall in agricultural land values -the Great Agricultural Depression – and they (like the Italian and French nobility) often adopted the strategy of marrying super-rich American ladies, daughters of industrialists and businessmen.

        Even the Duke of Westminster had to do this. And hence, famously, Winston Churchill.

        But even since the 17th century they had condescended to marry the daughters of rich London merchants (themselves often coming from the minor gentry, apprenticed to trade),and daughters (holding their noses a bit) had married merchants – the Percy family of Alnwick Castle did this in the 17th century,

        So in the early 1900’s they were merely going global and acting as parasites on the booming American economy. Pretty smart.

        • Yep, not many people internalized the simple in the face observation, that the amalgam of global elite got together much sooner and tidier than even the first gen “collectivists/socialists/communists” ever dreamed about their own goals..

  3. Cliffhanger says:

    During the mid/late 20th century (1960-1999), a barrel of oil cost $19 on average; during the years immediately prior to the Great Recession (2000-2008), the average price of a barrel of oil had increased to $47; During the same three time periods, the average price of a metric ton of copper increased from $3,085, to $3,713, to $6,817; the average price of a metric ton of iron ore increased from $36, to $57, to $124; and the average price of a metric ton of potash increased from $114, to $185, to $343. (Prices are inflation adjusted.)

    The simple fact is that we CANNOT GROW our global economy and improve our global material living standards on $45 oil, $6,817 copper, $124 iron ore, and $343 potash like we did on $19 oil, $3,085 copper, $36 iron ore, and $114 potash. It should come as no surprise that our NNR-dependent global economy experienced the Great Recession during 2009. Nor should it come as a surprise that we have yet to recover from the Great Recession as we enter 2018. Nor will our industrialized and industrializing economies ever recover, so long as price levels associated with the vast majority of NNRs remain at their inordinately high levels.

    • bandits101 says:

      ……but why? Why are prices high. They’re not high just because they can be, they’re high for reasons.
      1) Declining EROI leading supply and demand issues, demand for cheap commodities overwhelmed by the ability of suppliers to deliver. Bankruptcies occurring because business paying for the commodities they require at a price point that is destructive and suppliers selling at a price point that is destructive. Debt masking the insolvency of businesses.
      2) Diminishing returns and relative historical high debt (related to above)
      3) Decline in quality and accessibility of commodities eg. FF, fisheries, ores, rare earths (related to 1 & 2)
      4) Overpopulation leading more claims on limited slices of the pie.
      5) Pollution, deforestation,corruption, conflicts, complexity…….

    • That’s a valid optics to a degree, but don’t forget infrastructure/tools gets overhauled regularly. For example, office or light engineering PC desktops now consume ~1/10x watts what they used to, but on the other hand the sever infrastructure and its consumption increased, while large chunk perhaps most is used for frivolous stupidities like HD videos of cats playing. Similarly, cars, buses, jets, .. are sipping %% less, although there is the counter trend in their higher overall aggregate volume in operation. It’s a very mixed story..

      Yet, I gather, the major fork building up among people over here is what follows the recent trend of exponential growth, which in itself is dubious claim, since the growth path was not lifting all boats within and across societies anyway. Hence there is a some validity to the point arguing we might expect (for some ~limited time) a wobbly plateau and fall to lower level complexity, again at different speeds in global comparison as well within each particular society, instead of the single point event of universal synchro collapse.

      • The reduction in electricity used by computers and their screens seems to be one of the things leading to falling electricity usage in quite a few developed countries. I am sure LEDs contributed as well. I haven’t seen studies breaking out the relative impact, though. There are clearly other thing working in this direction, such as more efficient televisions and refrigerators.

        • Correct, one of the issues is that not that long ago, you bought German or Swedish made home appliances and it lasted 20-30yrs operating 24/365, with reasonable energy consumption and token if not existent repair effort, just impossible feat today with subcontractor from Asia and Poland.. and even the high end stuff nowadays tend to be on the crappy side, at least for those with a bit of memory..

          The computer aided tools and mountains of money (credit) allowed for rapid product development, new niche segments. But do you for example really expect the same quality by BMW doing combinations of 50x car models and 20x engines and 5x transmissions vs. tiny fraction of it decades ago with “lower tech” yet proper lifecycle attention..

          • Also, I know with my fancy washing machine that I had to replace after 8(?) years, the person who looked at the machine said that the new highly efficient (and expensive) models don’t last nearly as long as the old less efficient models.

  4. David F. says:

    interesting fact: predictions of the collapse of Industrial Civilization have never been correct. Zero percent, nada, nil, zilch, zip, goose eggs!
    I will concede that such a prediction only has to be correct once, but so far not.
    I will also say I predicted 2017 for IC collapse.
    Why? Because I like the number 7!
    I now predict collapse in 2020.
    Why? Only because it’s a round number!
    Late in 2020, I’m sure I will change my prediction to 2027 or 2030!

    • Jan Steinman says:

      predictions of the collapse of Industrial Civilization have never been correct.

      And yet, predictions of the collapse of 100% of all civilization besides the one we got have been 100% correct!

      But, perhaps you’re right… just this once…

    • bandits101 says:

      Predictions of doom will ALWAYS be wrong……….until they are right. Many a smart ass will chime in AFTER the event, to denounce the the audacity of the persons prediction when they don’t eventuate.

      Predictions are usually made by evaluating available data, history, intuition and educated guess. Even if every single component is correct a “force majeure” comes along and alters one, several or all evaluation points. There is a trend though and it seems to be inexorably towards disaster. I’m not going to wish away my life or everyone’s life by declaring a time. I’ve been through that and the silly depression it causes. Now it’s one day or month at a time, there will be no accolades for the doomster who gets it exactly right.

      • Fast Eddy says:

        It’s like releasing a feather from an airplane — you know with total certainty that it will eventually fall to the ground… but you cannot know when… because it will be carried on the wind … blown up and down and sideways….

        But you do know — that it will end up on the ground — that is indisputable.

      • Interguru says:

        Reposted the umpteenth time

        Stein’s Law: ” Things that can’t go on forever eventually stop”
        Two lemmas ( mine — Interguru’s Lemmas )
        1) They go on a lot longer than you think they can.
        2) They stop suddenly without warning. Even those who see it coming have no idea when.

    • xabier says:

      This is for the simple reason that once people become aware of the mere possibility of collapse (whether for ecological and demographic reasons,in the 1970’s, or financial and ‘peak oil’ causes, as more recently) they tend to panic and jump the gun.

      Most predictions, even from the best-informed and well-intentioned of commentators, can be invalidated immediately on account of this basic psychological flaw.

      Another body of analysts have something to sell – books or ‘advice for survival’ – and so cry ‘Wolf!’ as loudly as they can, and IT is always imminent, so sign up for my newsletter today!

      In no way does this invalidate the considerable body of scholarly work on the growth and collapse trajectory of all civilisations, or make trends so many areas any less ominous.

      • Not repeating the obvious, most prior collapses where not clear cut cookies anyway.
        It was usually a tangled combination of resource/ecosystem depletion with sudden natural forces impact and intertwined social complexities etc.

        For instance, the original ClubMed based western Roman Empire evolved into “proto-JIT” system where shipping container of that era, millions of (amphorae) moved by sea and rivers to the center. At certain point this was not enough, and the empire attempted stepping up the complexity into also land based type of setting, which drained more resources for upkeep the roads, protection fortresses and so on. When this finally crashed in the west (for many reasons) the Eastern half of the Roman Empire soldiered on from different capital for ~thousand more years, but I’m stressing the following point here. That from that time it was based on different mixture of land and sea based “JIT” complexities. In other words, they re-balanced the mix according to the new world realities at that specific part and reach of the Empire per given historical realities.

        That’s perhaps the very point so hard to grasp for many here, who insist on single event collapse variety as the only highest probability outcome.

        • Lots of problems working together lead to collapse. One of the issues is that the climate is naturally changing. Natural variations certainly play a role. So do impacts of clearing forests and adding agriculture. Such changes have been affecting local weather (or perhaps you would call it climate) for a long time. Killing off major predators also had a big effect on ecosystems, even in the days of hunter gatherers. These ecosystem changes seem to have led to the permanent loss of forests in some places, such as Australia.

        • Artleads says:

          I don’t know the answers, but I think instant doom adherents would say some of the following: Nuclear contamination that spreads by air and water is a new problem. We also can’t expect to release trillions of tons of CO2 into the air and water and expect global climate to stay the same. And there are also no back up carbon sinks–like healthy rainforests (?)–any more. The entire planet is networked now,in ways that make it harder to isolate healthy parts away from the doomed parts.

          • Fast Eddy says:

            The earth releases the excess into space… at least that is what NASA is claiming:


            Burn all the coal you want — it makes no difference

            • doomphd says:

              consider your source, FE. that dude has an axe to grind, and forbes is far from neutral in that debate.

            • doomphd says:

              I’ll have to read it more carefully than I have time for at the moment. the reporter has an axe to grind, not the scientist. there’s something not right here, however, the planet is cleary warming, there are few glaciers not in retreat, polar bears and Inuit people are having a harder time feeding themselves (due to lack of sea ice environment), permafrost is melting globally, heat waves, droughts on the rise, sealevel rising, etc.

            • Fast Eddy says:

              Stop with the anecdotal bullshit — the clim.ate is ALWAYS changing — glaciers melt — then freeze — then melt — temperat.ures break records for hot and cold all the time…

              Canada was covered by glac.iers at one point. And now it is not — what caused the glaciers to retreat? Duh…..

              The REALITY is this — overall the cli..mate has barely changed at all …. that is FACT.

              If it was dramatically changing then why would the cli…mate sci.entists have to fake their data?

              You even have the Godfather of Green James Lovelock stating all the models were wrong … you’ve got many clim..ate scienti.sts coming out admitting the same.

              All that carbon — and what do we have – sweet f789 all in terms of change…. enough of this shit.

              Are you people mentally f789ing retarded? What will it take?

              We are NOT going to burn up because we are burning oil and coal.

              I was wrong — you are wrong — be a bloody man and admit it.

              The new NASA Terra satellite data are consistent with long-term NOAA and NASA data indicating atmospheric humidity and cirrus clouds are not increasing in the manner predicted by alarmist computer models.

  5. Tim Groves says:

    Nor will our industrialized and industrializing economies ever recover, so long as price levels associated with the vast majority of NNRs remain at their inordinately high levels.

    Are you sure you have the right word there?

    to an unusually or disproportionately large degree; excessively.
    Example: “the information was inordinately vetted and censored”

    It could be argued that the current price levels are unusually high, but they are not excessive given the cost of extracting and refining said NNRs, not unexpected or surprising given the nature of our finite world, and if they remain at their current levels, these prices will in any case become the new “normal”.

    So if I was writing that sentence, I would have replaced “inordinately” with “current historically”.

    • JeremyT says:

      Oh dear, I thought the premise here was that the ‘new normal’ wasn’t possible, because the entire ic was founded on the cheap… the new NNR prices are unsustainable or beyond the ‘ordinary’. It simply can’t be ‘ordered’, complex or negentropic with the fundamentals so distorted.

      • Tim Groves says:

        No, Jerry, that premise is not universally embraced even on FW. The bottom line is that normality is a moveable feast. It’s whatever we’ve gotten used to. After a few weeks even broiled rat on a stick and watching everybody’s hair fall out due to radiation poisoning can seem normal. Admittedly, having the Donald as President still feels surreal, but give it a bit more time.

        • Well, human kind (and ecosystems) while getting somewhat battered so far, survived the very poisonous rapid build up phase of plutonium for thousands of war heads. The cleverness or rather sheer corruption of Japanese to build NPP without much safety backup on known active earthquake fault line and tsunami area, and or the comedy of Ukrainian horrors upon non procedure-book errors at Chernobyl, also speak volumes about something.. else..

  6. Cliffhanger says:

    The likeliest reasons why we haven’t contacted aliens are deeply unsettling

    c) The great filter is still ahead of us and we’re all screwed.

    • Slow Paul says:

      Or all alien civilizations might follow the same path as us. Max Power Principle, self organizing systems, growth and collapse etc, long before they invent long distance space travel.

  7. Fast Eddy says:

    The note comes 24 hours after BofA’s chief strategist Michael Hartnett warned that “the most dangerous moment for markets” will likely come when “rising rates combine in three or four months’ time with an inflection point in corporate profits. In anticipation of this, we would use the next couple of months to buy volatility, and within fixed income slowly reduce exposure to IG, HY, and EM bonds.”

    And then there is this — the CBs are the market now….

    • We have been at it so many times already, why so simplistic..

      They print “on the transparent plane” at the minimum ~ $4T per year, in reality likely much more, so do you think ~ $20B of pocket change has any particular consideration to them on such important systemic pillar issue?

      Most likely not, if they decide to close the money spigot for the alt oil it would be for mostly very different set of reasons namely:

      – preemptively crashing markets to launch some other mid term version of the scheme
      – imminent war of larger impact, e.g. NK/China
      – imminent resource technological reshuffle real or imagined (another scam to the front)
      (e.g. now they try to push LNG exports)

  8. Fast Eddy says:

    Isn’t that special — I’m running myself ragged trying to kill DelusiSTANIS from one account — I surely don’t need extras

    There are others who agree with me on most issues – they are what I refer to as The Core.

    • Tim Groves says:

      We’re in a bit of a Rorke’s Drift situation at present. This latest post has stirred up a real hornet’s nest of ’em an ammo is limited. So fire at will, but don’t shoot until you see the whites of their eyes.

      (This has a catchy tune, by the way.)

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