World GDP in current US dollars is in some sense the simplest world GDP calculation that a person might make. It is calculated by taking the GDP for each year for each country in the local currency (for example, yen) and converting these GDP amounts to US dollars using the then-current relativity between the local currency and the US dollar.
To get a world total, all a person needs to do is add together the GDP amounts for all of the individual countries. There is no inflation adjustment, so comparing GDP growth amounts calculated on this basis gives an indication regarding how the world economy is growing, inclusive of inflation. Calculation of GDP on this basis is also inclusive of changes in relativities to the US dollar.
What has been concerning for the last couple of years is that World GDP on this basis is no longer growing robustly. In fact, it may even have started shrinking, with 2014 being the peak year. Figure 1 shows world GDP on a current US dollar basis, in a chart produced by the World Bank.
Figure 1. World GDP in “Current US Dollars,” in chart from World Bank website.
Since the concept of GDP in current US dollars is not a topic that most of us are very familiar with, this post, in part, is an exploration of how GDP and inflation calculations on this basis fit in with other concepts we are more familiar with.
As I look at the data, it becomes clear that the reason for the downturn in Current US$ GDP is very much related to topics that I have been writing about. In particular, it is related to the fall in oil prices since mid-2014 and to the problems that oil producers have been having since that time, earning too little profit on the oil they sell. A similar problem is affecting natural gas and coal, as well as some other commodities. These low prices, and the deflation that they are causing, seem to be flowing through to cause low world GDP in current US dollars.
Figure 2. Average per capita wages computed by dividing total “Wages and Salaries” as reported by US BEA by total US population, and adjusting to 2016 price level using CPI-Urban. Average inflation adjusted oil price is based primarily on Brent oil historical oil price as reported by BP, also adjusted by CPI-urban to 2016 price level.
While energy products seem to be relatively small compared to world GDP, in fact, they play an outsized role. This is the case partly because the use of energy products makes GDP growth possible (energy provides heat and movement needed for industrial processes), and partly because an increase in the price of energy products indirectly causes an increase in the price of other goods and services. This growth in prices makes it possible to use debt to finance goods and services of all types.
A decrease in the price of energy products has both positive and negative impacts. The major favorable effect is that the lower prices allow the GDPs of oil importers, such as the United States, European Union, Japan, and China, to grow more rapidly. This is the effect that has predominated so far.
The negative impacts appear more slowly, so we have seen less of them so far. One such negative impact is the fact that these lower prices tend to produce deflation rather than inflation, making debt harder to repay. Another negative impact is that lower prices (slowly) push companies producing energy products toward bankruptcy, disrupting debt in a different way. A third negative impact is layoffs in affected industries. A fourth negative impact is lower tax revenue, particularly for oil exporting countries. This lower revenue tends to lead to cutbacks in governmental programs and to disruptions similar to those seen in Venezuela.
In this post, I try to connect what I am seeing in the new data (GDP in current US$) with issues I have been writing about in previous posts. It seems to me that there is no way that oil and other energy prices can be brought to an adequate price level because we are reaching an affordability limit with respect to energy products. Thus, world GDP in current dollars can be expected to stay low, and eventually decline to a lower level. Thus, we seem to be encountering peak GDP in current dollars.
Furthermore, in the years ahead the negative impacts of lower oil and other energy prices can be expected to start predominating over the positive impacts. This change can be expected to lead to debt-related financial problems, instability of governments of oil exporters, and falling energy consumption of all kinds.
Peak Per Capita Energy Consumption Is Part of the Problem, Too
One problem that makes our current situation much worse than it might otherwise be is the fact that world per capita energy consumption seems to have hit a maximum in 2013 (Figure 3).
Figure 3. World Daily Per Capita Energy Consumption, based on primary energy consumption from BP Statistical Review of World Energy and 2017 United Nations population estimates.
Surprisingly, this peak in consumption occurred before oil and other energy prices collapsed, starting in mid-2014. At these lower prices, a person would think that consumers could afford to buy more energy goods per person, not fewer.
Per capita energy consumption should be rising with lower prices, unless the reason for the fall in prices is an affordability problem. If the drop in prices reflects an affordability problem (wages of most workers are not high enough to buy the goods and services made with energy products, such as homes and cars), then we would expect the pattern we are seeing today–low oil and other energy prices, together with falling per capita consumption. If the reason for falling per capita energy consumption is an affordability problem, then there is little hope that prices will rise sufficiently to fix our current problem.
One consideration supporting the hypothesis that we are really facing an affordability problem is the fact that in recent years, energy prices have been too low for companies producing oil and other energy products. Since 2015, hundreds of oil, natural gas, and coal companies have gone bankrupt. Saudi Arabia has had to borrow large amounts of money to fund its budget, because at current prices, tax revenues are too low to fund it. In the United States, investors are cutting back on their support for oil investment, because of the continued financial losses of the companies and evidence that approaches for mitigating these losses are not really working.
Which Countries Are Suffering Falling GDP in Current US Dollars?
With lower oil prices, Saudi Arabia is one of the countries with falling GDP in Current US$.
Figure 4. Increase in GDP since 1990 for Saudi Arabia in current US dollars, based on World Bank Data.
Saudi Arabia pegs its currency to the dollar, so its lower GDP is not because its currency has fallen relative to the US dollar; instead, it reflects a situation in which fewer goods and services of all kinds are being produced, as measured in US dollars. GDP calculations do not consider debt, so Figure 4 indicates that even with all of Saudi Arabia’s borrowing to offset falling oil revenue, the quantity of goods and services it was able to produce fell in both 2015 and 2016.
Other oil-producing countries are clearly having problems as well, but data is often missing from the World Bank database for these countries. For example, Venezuela is clearly having problems with low oil prices, but GDP amounts for the country are missing for 2014, 2015, and 2016. (Somehow, world totals seem to include estimates of the total omitted amounts, however.)
Figure 5 shows similar ratios to Figure 4 for a number of other commodity producing countries.
Figure 5. GDP patterns, in US current dollars, for selected resource exporting countries, based on World Bank data.
A comparison of Figures 4 and 5 shows that the GDP patterns for these countries are similar to that of Saudi Arabia. Because resources (including oil) do not account for as large a share of GDP for these countries as for Saudi Arabia, the peak as a percentage of 1990 GDP isn’t quite as high as for Saudi Arabia. But the trend is still downward, with 2014 typically the peak year.
We can also look at similar information for the historically big consumers of oil, coal and natural gas, namely the United States, the European Union, and Japan.
Figure 6. Increase in GDP since 1990 for the United States, the European Union, and Japan, in current US dollars, based on World Bank data.
Here, we find the growth trend is much more subdued than for the countries shown in the previous two charts. I have purposely put the upper limit of the scale of this chart at 6 times the 1990 GDP level. This limit is similar to the upper limit on earlier charts, to emphasize how much more slowly these countries have been growing, compared to the countries shown in Figures 4 and 5.
In fact, for the European Union and Japan, GDP in current US$ is now lower than it has been in recent years. Figure 6 is telling us that the goods and services produced in these countries are now lower in US dollar value than they were a few years ago. Since part of the cost of goods and services is used to pay wages, this lower relativity indirectly implies that the wages of workers in the EU and Japan are falling, relative to the cost of buying goods and services priced in US dollars. Thus, even apart from taxes added by these countries, consumers in the EU and Japan have been falling behind in their ability to buy energy products priced in US dollars.
Figure 6 indicates that the United States has been doing relatively better than the European Union and Japan, in terms of the value of goods and services produced each year continuing to grow. If we look back at Figure 2, however, we see that even in the US, wage growth has lagged far behind oil price increases. Thus, the US was also likely headed toward an affordability problem relating to goods and services made with oil.
The Asian exporting nations have been doing relatively better in keeping their economies growing, despite the downward pressure on energy prices.
Figure 7. Increase in GDP since 1990 for selected rapidly growing Asian exporting countries in current US dollars, based on World Bank data.
The two most rapidly growing countries are China and Vietnam. There seems to be a recent slowing of their growth rates, but no actual downturn.
India, Pakistan, and the Philippines are growing less rapidly. They do not seem to be experiencing any downturn at all.
Considering the indications of Figure 4 through 7, it appears that only a relatively small share of countries have experienced rising GDP in current US dollars. Although we have not looked at all possible groupings, the countries that seem to be doing best in terms of rising current US$ GDP are countries that are exporters of manufactured goods, including the Asian countries shown. Countries that derive significant GDP from producing energy products and other commodities seem to be experiencing falling GDP in current US dollars.
To fix the problems shown here, we would need to get prices of oil and other energy products back up again. This would indirectly raise prices of many other products as well, including food, new vehicles, and new homes. With lagging wages in many countries, this would seem to be virtually impossible to accomplish.
The Wide Range of GDP Indications We See
In this post, I am talking about GDP of various countries, converted to a US$ basis. This is not quite the same as the GDP that we normally read about. It is not until a person starts working with world data that a person appreciates how different the various GDP and inflation calculations are.
GDP in US dollars is very important because energy products, including oil, are generally priced in US$. This seems to be true, whether or not the currency used in the actual transaction is US$. See Appendix A for charts showing the close connection between these two items.
The type of GDP is generally reported is inflation-adjusted (also called “real”) GDP. The assumption is made that no one will care (very much) about inflation rates. In general, inflation-adjusted GDP figures are much more stable than those in Current US$. This can be seen by comparing world GDP in Figure 8 with that shown in Figure 1.
Figure 8. GDP in 2010 US dollars, for the world and for the United States, based on World Bank data.
Using inflation-adjusted world GDP data, there doesn’t seem to be any kind of crisis ahead. The last major problem was in the 2008-2009 period. Even the impact of this crisis appears to be fairly small. The 2008-2009 crisis shows up more distinctly in the Current US$ amounts plotted in Figure 1.
World GDP growth figures that are published by the World Bank and others combine country by country data using some type of weighting approach. Economists tend to use an approach called Purchasing Power Parity (PPP). This approach gives a great deal more weight to developing nations than the US dollar weighted approach used elsewhere in this post. For example, under the PPP approach, China seems to get a weighting of about 1.9 times its GDP in US$; India seems to get a weighting of about 3.8 times its GDP in US$. The United States gets a weight of 1.0 times its GDP in US$, and the weights for developed nations tend to be fairly close to 1.0 times their GDP in US$. The world GDP we see published regularly should be called “inflation-adjusted world GDP, calculated with PPP weights.”
The relationship among the three types of GDP can be seen in Figure 9. It is clear that GDP growth in Current US$ is far more variable than the inflation-adjusted growth rate (in 2010 US$). PPP inflation-adjusted GDP growth is consistently higher than GDP growth with US dollar weighting.
Figure 9. World GDP Growth in three alternative measures: Current dollars, Inflation-adjusted GDP is in 2010 US$ and adjusted to purchasing power parity (PPP).
It is also clear from Figure 9 that there is also a big “Whoops” in the most recent years. Economic growth is at a record low level, as calculated in Current US$.
World “Inflation” Indications
The typical way of calculating inflation is by looking at prices of a basket of goods in a particular currency, such as the yen, and seeing how the prices change over a period of time. To get an inflation rate for a group of countries (such as the G-20), inflation rates of various countries are weighted together using some set of weights. My guess is that these weights might be the PPP weights used in calculating world GDP.
In Figure 10, I calculate implied world inflation using a different approach. Since the World Bank publishes World GDP both in 2010 US$ and in Current US$, I calculate the implied world inflation rate by comparing these two sets of values. (Some people might call what I am calculating the implicit price deflator for GDP, rather than an inflation rate.) I use three-year averages to smooth out year-to-year variability in these amounts.
Figure 10. World inflation rate calculated by comparing reported World GDP in Current US$ to reported World GDP in 2010 US$. Both of these amounts are available at the World Bank website.
The implied world inflation rates using this approach are fairly different from published inflation rates. In part, this is because the calculations take into account changing relativities of currencies. There may be other factors as well, such as the inclusion of countries that would not normally be included in aggregations. Inflation rates tend to be high when demand for energy products is high, and low when demand for energy products is low.
Figure 10 shows that, on a world basis, there have been negative inflation rates three times since 1963–in approximately 1983-1984; in the late 1990s to early 2000s; and since about 2014. If we compare these dates to the oil price and energy consumption data on Figures 2 and 3, we see that these time periods are ones that are marked by falling per capita energy consumption and by low oil prices. In some sense, these are the time periods when the economy is/was trying to stall, for lack of adequate demand for oil.
The workaround used to “fix” the lack of demand in the late 1990s to early 2000s seems to have been an increased focus on globalization. China’s growth in particular was very important, because it added both a rapidly growing supply of cheap energy from coal and a great deal of demand for energy products. The addition of coal effectively lowered the average price of energy products so that they were again affordable by a large share of the world population. The availability of debt to pull the Chinese and other Asian economies forward was no doubt of importance as well.
The United States has been fairly protected from much of what has happened because its currency, the US Dollar, is the world’s reserve currency. If we look at the inflation rate of the United States using data of the US Bureau of Economic Analysis, the last time the United States had a substantial period of contracting prices was in the US Depression of the 1930s. It is quite possible that such a situation existed worldwide, but I do not have world data for that period.
Figure 11. US inflation rate (really “GDP Deflator”) obtained by comparing US GDP in 2009 US$ to GDP in Current US $, based on US Bureau of Economic Analysis data.
It was during the Depression of the 1930s that debt defaults became widespread. It was only through deficit spending, including the significant debt-based funding for World War II, that the problem of inadequate demand for goods and services was completely eliminated.
How Do We Solve Our World Deflation Crisis This Time
There seem to be three ways of creating demand for goods and services.
[1] A growing supply of cheap-to-produce energy products is really the basic way of increasing demand through economic growth.
If there are cheap-to-produce energy products available, a growing supply of these energy products can be used to increasingly leverage human labor, through the use of more and better “tools” for the workers. When workers become increasingly more productive, their wages naturally rise. It is this growing productivity of human labor that generally produces the rising demand needed to maintain the economic growth cycle.
As growth in energy consumption slows and then declines (Figure 3), this productivity growth tends to disappear. This seems to be part of today’s problem.
[2] Increasing the amount of debt outstanding can work to make the energy extraction system work more effectively, by raising the price that consumers can afford to pay for high-priced goods.
This increasing ability to pay for high-priced goods seems to come in two ways:
(a) The debt itself can be used to pay for goods, making these goods more affordable on a month-to-month or year-to-year basis.
(b) Increased debt can lead to increased wages for wage earners, because some of the increased debt ultimately goes to create new jobs and to pay workers. Figure 12 shows the positive association that increasing debt seems to have with inflation-adjusted wages in the United States.
Figure 12. Growth in US Wages vs. Growth in Non-Financial Debt. Wages from US Bureau of Economics “Wages and Salaries.” Non-Financial Debt is discontinued series from St. Louis Federal Reserve. (Note chart does not show a value for 2016.) Both sets of numbers have been adjusted for growth in US population and for growth in CPI Urban.
Debt is, in effect, the promise of future goods and services made with energy products. These promises are often helpful in allowing an economy to expand. For example, businesses can issue bonds to provide funds to expand their operations. Selling shares of stock acts in a manner similar to adding debt, with repayment coming from future operations. In both cases, the payback can occur, if energy consumption is in fact growing, allowing the output of the business to expand as planned.
Once world leaders decide that debt levels are too high, or need to be controlled better, we are likely headed for trouble, because debt can be very helpful in “pulling the economy forward.” This is especially the case if productivity growth is low because per capita energy consumption is falling.
[3] Rebalancing of currency relativities to the US dollar.
Rebalancing currencies to different levels relative to the dollar seems to play a major role in determining the “inflation rate” calculated in Figure 10. Currency rebalancing also plays a major role in determining the shape of the GDP graph in current US$, as shown in Figure 1. In general, the higher the average relativity of other currencies to the US$, the higher the demand for goods and services of all kinds, and thus the higher the demand for energy products.
One problem in recent years is that, in some sense, the average relativity of other currencies to the US dollar has fallen too low. The fall in relativities took place when the US discontinued its use of Quantitative Easing in late 2014.
Figure 13. Monthly Brent oil prices with dates of US beginning and ending QE.
The price of oil and of other energy products dropped steeply at that time. In fact, in inflation-adjusted terms, oil prices had been falling even prior to the end of QE. (See Figure 2, above.) The shift in the currency relativities made oil and other energy products more expensive for citizens of the European Union, Japan, and most of the commodity producing countries shown in Figures 4 and 5.
The ultimate problem underlying this fall in average relativities to the US dollar is that there is now a disparity between the prices that consumers around the world can afford to pay for energy products, and the prices that businesses producing energy products really need. I have written about this problem in the past, for example in Why Energy-Economy Models Produce Overly Optimistic Indications.
At this point, none of the three approaches for solving the world’s deflation problem seem to be working:
[1] Increasing the supply of oil and other energy products is not working well, because diminishing returns has led to a situation where if prices are high enough for producers, they are too high for consumers to afford the finished goods made with the energy products.
[2] World leaders have decided that we have too much debt and, indeed, debt levels are very high. In fact, if energy prices continue to be low, a significant amount of debt currently outstanding will probably be defaulted on.
[3] Countries generally don’t want to raise the exchange rates of their currencies to the dollar, because lower exchange rates tend to encourage exports. If the United States raises its interest rates, either directly or by selling its QE bonds, the level of the US dollar can be expected to rise relative to other currencies. Thus, other currencies are likely to fall even lower than they are today, relative to the US dollar. This will tend to make the problem with low oil prices (and other energy prices) even worse than today.
Thus, there seems to be no way out of our current predicament.
Conclusion
The world economy is in a very precarious situation. Many of the world’s economies have found that, measured in current US$, the goods and services they are producing are less valuable than they were in 2013 and 2014. In particular, all of the oil exporting nations have this problem. Many other countries that are producing commodities have the same problem.
Governments around the world do not seem to understand the situation we are facing. In large part, this is happening because economists have built models based on their view of how the world works. Their models tend to leave out the important role energy plays. GDP growth and inflation estimates based on PPP calculations give a misleading view of how the economy is actually operating.
We seem to be sleepwalking into an even worse version of the Depression of the 1930s. Even if economists were able to figure out what is happening, it is not clear that there would be a good way out. Higher energy prices would aid energy producers, but would push energy importing nations into recession. We seem to be facing a predicament with no solution.
Appendix
Growing Inflation-Adjusted GDP Comes From Growing Energy Consumption
We often hear that GDP no longer depends on energy consumption, but this simply is not true. Energy consumption is needed for practically every industrial process, because energy causes the physical transformations that are need (including heat, light, and movement). Even services that only require a lighted, air-conditioned office and the use of computers require energy consumption of some type.
An industrialized country can outsource manufacturing of many of its goods to other countries, but the need for energy products goes with this outsourcing. The transfer of manufacturing to lesser developed countries tends to stimulate building in these countries. As a result, on a world basis, the amount of energy consumed tends to remain close to unchanged.
Using data for 1965 through 2016, we find the following relationship between inflation-adjusted world GDP and world energy consumption:
Figure A1. World growth in energy consumption vs. world GDP growth. Energy consumption from BP Statistical Review of World Energy, 2017. World GDP is GDP in US 2010$, as compiled by World Bank.
Another way of displaying the same data is as an X, Y graph. A very high long-term correlation can be observed on this basis.
Figure A2. X-Y graph of world energy consumption (from BP Statistical Review of World Energy, 2017) versus world GDP in 2010 US$, from World Bank.
This high level of correlation can be seen for other groupings as well. For example, for the grouping Middle East and North Africa, there is a high level of correlation between energy consumption and GDP.
Figure A3. X-Y graph showing correlation between energy consumption and GDP in the Middle East and North Africa.
If a person calculates the implications of this fitted line, energy consumption for these oil-producing countries is actually growing faster than inflation-adjusted GDP for these countries. This type of trend is to be expected if oil-producing countries are in some sense becoming less efficient in producing oil. This could happen for a number of reasons. One is that the easiest to extract oil is extracted first, leaving the more expensive to extract oil to be extracted later. Another possible reason for this trend is rising human populations in oil producing countries. These people drive cars and live in air conditioned buildings, driving up energy consumption for these countries. Whatever the cause, this loss of efficiency in oil production can be expected to at least partially offset growing efficiencies elsewhere in the system.
FE’s favourite :
http://www.zerohedge.com/news/2017-08-15/text-message-between-ousted-uber-ceo-and-engineer-lets-start-faketeslaabout-stupid-s
If nothing else comes of Google suing their former autonomous driving engineer Anthony Levandowski (refresher: he’s the guy that split with 14,000 proprietary Google documents, used them to start a new self-driving tech company called Otto and then promptly sold it to Uber for $700 million), the following text messages exchanged between Levandowski and former Uber CEO Travis Kalanick, disclosed as part of the discovery process, will have been well worth the millions in legal fees.
In one text from September 2016, Levandowski texted Kalanick to suggest that they should setup a fake twitter handle called “@faketesla” specifically to “give physics lessons about stupid shit Elon says…” Per Recode:
“Yo! I’m back at 80%, super pumped… we’ve got to start calling Elon on his shit. I’m not on social media but let’s start “faketesla” and start give physics lessons about stupid shit Elon says like this: “we do not anticipate using lidar. Just to make it clear, lidar essentially is active photon generator in the visible spectrum – radar is active photon generation in essentially the radio spectrum. But lidar doesn’t penetrate intrusions so it does not penetrate rain, fog, dust and snow, whereas a radar does. Radar also bounces and lidar doesn’t bounce very well. You can’t do the “look in front of the car in front of you” thing. So I think the obvious thing is to use radar and not use lidar.”
“The photons stop acting like photons at 77Ghz we at least need the geeks on our side and start calling the BS out. Any objections?”
Not everyone is enamored with the story Musk is telling!
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This is just an extra ordinary campaign, no doubt the coup or path towards impeachment must be in full swing as of now.. I can’t imagine this stuff a decade or two ago on US TV..
Yes, extraordinary.
And yet people apparently cannot see how they are being manipulated by those who wish to subvert the election (and who made their intentions clear even before the result was in).
If they are given a new puppet of the right political complexion – according to their prejudices – they will no doubt cheer and congratulate themselves on their ‘bravery’.
Mob violence and, I am quite sure, agents provocateurs aplenty. Little people desperate for some theatre in their lives eager to be part of a ‘Resistance’ – something of an insult to those who faced the German occupation in the 1940’s.
This is true banana republic politics, and it will end in some form of dictatorship (that it will be officially ‘Left/Liberal’ is neither here nor there).
I think the key word here is “sleepwalking”.
Yes,yes, I’m going with sleepwalking. It seems like a recurrent nightmare
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Prepare for negative interest rates in the next recession, says top economist
http://www.telegraph.co.uk/business/2017/08/13/prepare-negative-interest-rates-next-recession-says-top-economist/
And goodbye to retirement plans, insurance and pension plans.
The Deflation
With Dick’s stock crashing after reporting dreadful results this morning, in which both comp sales and EPS missed as the company slashed its full year guidance below even the lowest sellside forecast (it now sees full year EPS of $2.80 to $3.00, below the previous guidance of $3.65 to $3.75 and the Wall Street estimate of $3.62 ), the management team had no reason to hold back on today’s earnings call, and luckily – unlike many other retailers who still hold out hope that the worst is behind them – it did not, for an unvarnished look into the retail space.
Stack said he observed heavier promotions and price cuts particularly on athletic apparel, electronics, and hunting, fishing and camping gear which started as early as Father’s Day. “We started to see this happening a little bit before Father’s Day, and it continued to be very promotional, not only from retailers but also from some of the brands on a direct-to-consumer basis.”
Having no other choice, Dicks has joined the battle of the “deep discounters”, and has also launched a “best price guarantee” in which it promises customers that if they find a lower price on a product, Dick’s will match it. Of course, by doing so, the retailer assures that both Dick’s and its peers margins and net income shrink even more in the coming quarters.
http://www.zerohedge.com/news/2017-08-15/dicks-ceo-retail-industry-panic-mode
In response to it, might mega spike again or not.., obviously there are more finer instruments to focus on REITs, nevertheless this could show the stresses and gov/CB’s control over it..
https://finance.yahoo.com/quote/SRS?ltr=1
Dick’s is still more profitable than Amazon.
Amazon doesn’t need to make money — the business model:
– lose money — undercut the competition — drive all retail out of business — then increase prices and become the most profitable company on the planet…
One flaw… there will be nobody to sell to when they reach their goal
Wall St overlooks that tiny detail
Wall St and the 0.1% are well advanced in doing that now.
Dick’s and Field and Stream just expanded near us. I haven’t been inside to see the change. http://scoopotp.com/field-stream-coming-kennesaw/
Dick’s used to be a two level store. Now, everything is on the much larger first level. The second floor will be for something else (storage?). At the same time, a Cabella’s opened down the road a ways, and there are a number of other competing stores.
http://www.zerohedge.com/news/2017-08-15/picture-mike-pence-triggered-bunch-california-private-college-kids
Same people who insist solar, Evs and G w…. are the real deal.
The thing is… most people will watch that… and think — what a great idea….
The MSM exists — to tell you what to think — NEVER forget that
The 1973 so-called “oil embargo” which reduced oil supply to the USA by somewhere around 3% or 4%. It slammed the US economy, caused the largest stock market crash since the great depression, doubled gasoline prices, severely damaged US industry and caused a 55 MPH national speed limit which remained in effect for ten years. The government also put restrictions on how much gasoline you could purchase. There were fist fights and even a couple murders between the public at gas stations. Just wait until we experience a 10% or 20% drop in oil supplies. In a few years or sooner we certainly will. When it hits the economic and social damage will be catastrophic. The end of Western Civilization, from China to Europe, to the US, will not occur when oil runs out. The economic and social chaos will occur when supplies are merely reduced sufficiently.
http://i.imgur.com/7aMKHdp.gif
If finance collapses it will be even worse.
Uhm, not necessarily going in sync everywhere, I think you should revisit that Gail’s graphs about energy intensity per capita, showing energy consumption across major hubs of global demand, the discrepancies there are very striking. Specifically, the scenario of selective impoverishment of US consumer (and mil-gov), i.e. falling at or even bellow consumption levels per capita of its global peers, essentially giving breathing space to others, can not be discounted. Similarly, W. Europe could end up as the proverbial sacrificial lamb instead.
If at all and how exactly we could possibly arrive there is the question..
zakly
my comment wasin reply to cliffhanger
Didn’t the country’s check engine light come on about 40 years ago? Guess were gonna blow a gasket. Metaphorically speaking.
Wait till the power goes off… and the pumps no longer function
I think what happened had as much to do with rapidly growing debt and changing currency relativities as it did with a shortage of oil supplies.
Look at Figure 10:
https://gailtheactuary.files.wordpress.com/2017/08/world-inflation-rate-in-us.png
The 1973-1974 period was the highest period in history for “inflation” on this basis. I expect that this was a big reason for the run-up in prices. With inflationary pressures now negative, it would be very hard to reproduce this result.
I expect that the fighting had as much to do with price controls as anything. http://logos.nationalinterest.in/2016/05/price-control-on-gasoline-in-the-u-s-1970s/ This article says, “The 1970s price controls had saved consumers between $5 billion and $12 billion a year in gas costs, but at the price of stifling domestic oil production and causing an artificial shortage of as much as 1.4 million barrels a day.”
Too many people think that we can apply the lessons from the 1970s directly to today. The situation is more complicated than they think.
With none of the three possible approaches working, we’re in the coffin corner aerodynamically speaking.
Right! http://www.boldmethod.com/learn-to-fly/aerodynamics/coffin-corner-where-vne-and-mmo-meet/
http://www.boldmethod.com/images/learn-to-fly/aerodynamics/coffin-corner/coffin-corner.jpg
http://imgur.com/a/zBL5g
Progress is now an illusion;
sh-it happens, but it is slow and
invariably disappointing.
In fig. 7 it looks like China and Vietnam have skyrocketing GDP.
In fig. 1 it looks like world GDP has been on a long incline with just a couple of minor jogs.
In Fig. 11 it looks like inflation is under control.
Fig. 2 shows US wages on a long gradual incline
Fig. A3 Shows a massive incline
I don’t see a problem with fig. 8
Other than a massive amount of CB borrowing, which could definitely lead to problems, I don’t see a lot of problems with those graphs. Looks like as long as phony money can be injected into the system and people don’t get jittery and cause hyper-inflation, things should just keep going as is. What collapse? As long as the US & China are doing well is there really that much to worry about?
For n-th time worth repeating what is going on, as the US continues to de-industrialize, others tend to (re-) industrialize and diversify from the US only export bound market. So, this trend ends in the inevitable situation where the US can’t export anything meaningful anymore, while the transaction and recycling USD regime still holds. The final step concludes in side stepping from the money plane as well. We are not there yet, Asians figure ~2025-35 horizon for it, but other developments might speed the date up or conclude it prematurely, i.e. risk the situation in which some US sourced imports won’t have domestic analogues for a while or not to be available in enough numbers for few years.
Given, that accumulated energy likes to be dispersed and the topic of this blog (looming affordability threshold crisis), I kind of doubt the above peaceful process, so one of my major working scenarios, lets say ~35% chance is that some faction in the US not willing to loose it will eventually loose it mentally and pushes the thermo nuke button anyway..
Irrationality can only grow in such circumstances, when ascendancy is being lost.
I’m reading an account of Alexander the Great (or The Demon as the Iranians say), in which his policies and psychological profile are compared to those of his father, Phillip of Macedon
King Phillip: great womaniser, rational, ambitious, hard but not at all cruel, no senseless massacres, superb soldier and astute organiser.
But Alexander, on the other hand: an unmanly, odd-looking, midget, homosexual, haunted by the thought that he wasn’t a patch on his father, descending into madness, drunkenness and one terrible and counter-productive massacre after another.
States can certainly enter such a spiral, as much as individuals.
What’s the title of the book?
Alas, we are saved by digital money. Something that is virtual and doesn’t really exist (digital money) will replace energy and resources. Great, we can keep consuming finite real resources with fake money. How nice.
Energy and money is de-coupling. That is the problem. No amount of funny money will conjure up more energy and resources. It takes energy to get energy and energy to get resources and resources to get energy. Some banker was just clever enough and got the authority to limit energy and resources to those that posses the bankers money.
Maybe it is time for me to pull out my images of disks of the size of the economy again.
https://gailtheactuary.files.wordpress.com/2013/02/growing-economy.png
https://gailtheactuary.files.wordpress.com/2013/02/declining-economy.png
https://gailtheactuary.files.wordpress.com/2011/10/repaying-loans-growing-shrinking.png
For one thing, China isn’t really doing so well. It has a huge amount of debt and can’t really keep its growth up. It doesn’t have trading partners who can absorb all of the things it is making. All it can do is build more condo/apartment buildings for its people, except that there aren’t people with jobs to fill the buildings. So China ends up with a huge number of unused apartments, plus some barely needed roads and shopping centers. It is (sort of) trying to rein this in, except that if it succeeds, there will be a big crash. Chinese refiners have been cutting back on the crude oil they are buying to process. That is the reason being given for the drop in oil prices in the last couple of days. This is one of the problems.
Another is that the US isn’t really doing that well. It really needs ultra-low interest rates to do as well as it is doing. The number of cars being sold is way down, even with interest rates as low as they are. Students are defaulting on their loans. We really don’t have as many young people getting married and starting families as should be the case–too many are weighed down by debt. Profits of companies have not been growing, at least not based on the figures they file with the IRS. Oil companies are doing badly. Oil production seems to be turning to gas early in the Permian, because of over-drilling. http://oilprice.com/Energy/Crude-Oil/Nothing-To-See-Here-Frackers-Ignore-Rising-Well-Decline-Rates.html And investors are getting unhappy with the continued bad results, will cut off the additional funding.
And then there are all of the customers around the world who have borrowed money from the US in US$, but their currencies have fallen relative to the US$, so that they will have trouble paying this money back.
Also the problem with trying to get a budget for the US, and to raise the debt ceiling. This could end very badly. Also, selling debt securities held by the Federal Reserve could raise interest rates substantially. Raising interest rates would make the stock market fall and housing prices fall. There would be lots of defaults on debt.
Thanks for the new post and all your work.
I’ve noticed you’ve alluded to similar things in the last paragraph before. Isn’t the debt ceiling invisible? You seem to be pointing out problems that can lead to a 2008 situation, could they nationalize the banks to buy time?
It seems to me that functioning global credit markets are as essential as water for BAU (and us) Sorry to be slow at getting this stuff.
snorp
In the United States, the governmental debt ceiling is a very real thing.
This is the treasury.gov website dealing with the debt ceiling. https://www.treasury.gov/initiatives/Pages/debtlimit.aspx
The text of the site is the following:
It is followed by a long list of links.
The current Congress has not shown that it is capable of passing much of any kind of legislation. There are big divisions, between the republicans and democrats, and within the republicans. I am quite frankly worried about the debt limit getting passed. We also need either a budget, or a “continuing resolution,” which would allow past programs to go on as in the past, but not add additional spending. This is part of the problem as well. As I understand it, there will only be 12 working days after Congress comes back from vacation to get these things passed, before the September 29 deadline. (The new fiscal year starts Oct. 1, among other things. We are also running out of ways to get around the current low debt limit.)
Thanks, ever since I’ve paid attention to it, they always raise it. I’ll watch it closely on your advise.
China is the world leader … in having the greatest fake economy on the planet
Yep, dozens of thousand km of high speed rail, fleet of new and expanding NPPs, it’s apparently all fake.. In reality, the whole civilization attempt is a game of illusions, it depends only on the relative eye of the beholder, your assumed and or pretended place inside-outside this circus..
Peak Oil And Peak Demand Have Entirely Different Outcomes
https://www.forbes.com/sites/rrapier/2017/08/15/peak-oil-and-peak-demand-have-entirely-different-outcomes/#6b94d6d074f0
When speaking of oil and energy the word “demand” bothers me. I can demand gas for my tank. However, if I have no money, I get no gas despite my demand for it. Demand seems to be the wrong word.
I have been demanding a private jet for some years now…. begging … pleading…
Yet still…
Robert Rapier needs to start reading my articles. (I know him from Oil Drum days.) The issue is not people turning their backs on oil; it is wages falling too low.
Yes, I remember reading some of his work on TOD. I am kind of disappointed with his analysis.
Things like this are shocking evidence of most peoples ignorance of science and engineering, shameful that so many of these crowd funded cons exist.
Yes it is just amazing the fools that fall for this kind of garbage.
Yes its sad. After joining the death cult of FW. I have lost two of my friends because I mocked solar power and renewable s, and tesla’s,driver less cars, etc. They said i have become a Trump supporter and i don’t like “cool new tech”. LOL
Haven’t you heard;
Politics is magic
Banking is magic
Technology is magic,
…..so all you need is the app; then everything will be ok!
Perhaps you should focus your conversation on more neutral topics, such as which sports your friend’s children are playing, and how they are doing in them.
It quickly becomes clear that there are a lot of people who cannot deal with subjects I have been talking about. Some of these people can be close relatives of ours, so we kind of have to choose conversational topics that they can deal with.
The power of the MSM…. if you encounter someone who does not understand the formula of repeating the lie endlessly …. then you will find it virtually impossible to convince them that what they believe is false… no matter what facts you present they will not change their mind…
In fact — even if you trotted out someone who formerly believed what they believe for years — but changed their mind because the facts dictated they change their mind — and that person explained why they changed their mind…
It would not matter.
Once indoctrinated facts don’t matter. They will continue to believe what they believe.
See James Lovelock.
https://www.flickr.com/photos/sevencontinents/7568589854
Migrant boy and his leverage apparatus vs rich delusions..
What’s the leverage of damage there ~1 000 000 000 : 1 ??
(stick, stone, sling, billions of refugees)
And no, tightly knitted chicken wire won’t protect it either, firstly too expensive for the length of the wall, secondly and more importantly you can lob into pattern which allows the stone fall almost vertically from above on the panels..
Good point!
I would assume that the panels would need to be mostly on the south side of the wall.
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there’s a lot to digest in these 2 articles about EVs and renewables—but worth taking the time over
https://damnthematrix.wordpress.com/2017/08/15/ev-transition-what-ev-transition/
https://damnthematrix.wordpress.com/2017/08/07/lithiums-limits-to-growth/
Thanks for the links. Ahh, the fallacy of “renewable energy” in all its complex glory is well presented in those articles. In a way the complexity plays into the hand of “renewable energy” proponents. There are so many places where numbers can be fudged to make it appear that “renewable energy technology” is viable. Snake oil at its finest.
But, it works for the rich people. They love it.
And that is what makes it the perfect snake oil. It plays into the hands of the rich who feed the salesman the money. The fool and his money are quickly parted – again!
A reader left this comment:
“Energy is becoming more fungible, not less so, in the face of electrification.”
The reader adds that users of petroleum have “switched to gas, coal or electricity.” First electricity is not a source of energy. It is a carrier of energy produced by sources mostly gas and coal. Second, switching from gas to coal is hardly evidence of interchangeability. In many cases the switch from coal to gas is done for economic and environmental reasons. This fallacy that energy is becoming more fungible has no basis in reality.
lol—i know
but reading such nonsense sometimes reassures me that i’m not the insane one.
One obvious advantage remains there after-all.
The foolish first adopters, stock jockeys, and govs/CBs have thus provided for ample spare-crash parts from these, that many people would be able to re-build it in their specific application. There are already several vendors of various mods and hacks for the most available brands like Nissan-Renault, Tesla, .. Given the ~15+yrs lifespan of high power electronics + new or reconditioned batt cells pack, you would be able to put together a nice local runabout meant for slow charging on tiny budget .. I don’t need 100-300mi range and or >30k price monstrosity in the first place..
i dont think you’d be able to run around sitting on 4 wheels and a battery
1…tech knowledge to build such a thing isn’t available to everyone
2…battery powered vehicles cannot function outside a hydrocarbon based environment
3…every moving body means shifting weight, the laws of physics are fixed about that, as is the necessary battery capacity to move that weight
4…in a de industrialised environment, you would have no purpose in going anywhere. (thats the biggie no one ever mentions)
But the next series of the Flintstones might be interested in hearing from you
You may like this Norman: when a gentleman was riding around England in the 1780’s he often had trouble getting accurate directions from the country people, even to one of the county towns a few miles away. They simply had no reason to go anywhere much. Down to the dung heap and back was about it……
lol yes
thats why our accents vary so much–regions were self contained, nobody went anywhere because there was no reason to
I have heard that there were over 100 regional dialects in Norway. There was a need to put together a common language so people could understand each other.
Of course, China’s language using pictures was an attempt to solve a similar problem. This still leaves people unable to talk to each other, but they can write to each other.
“in a de industrialised environment, you would have no purpose in going anywhere. (thats the biggie no one ever mentions)” – That applies to “capital” or money too. If money has no destination (resources and services to buy) then, it has no where to go thus, no purpose.
Well, ample historical accounts of formerly posh-trophy-lux objects suddenly atrophy in status and used later only to move hay around..
Norman, it was obviously meant in near term horizon context only, basically hobby level.. advantage over scraps from mass produced industry. That’s why I stipulated that ~15yrs time mark, it would be impossible to repair this stuff (high power module and their driving boards) inside JITs malfunction situation, at best cannibalize few more spares into keeping the one unit working few more years. The same or bit lower lifespan for the battery as well.
Last Days of the Third Reich mend and make-do scenario……
I thought the lithium’s limits to growth article was interesting. His conclusion is
“The conclusion should be that switching to long-range EVs with large batteries and advanced electronics bears significant environmental challenges. The high manufacturing emissions of these types of EVs make their ecological benefits questionable for private vehicles which are only used on average 4% of the time. However, they are a very good option for vehicles which are used a higher percentage of the time such as taxis, buses and heavy trucks, because they will be driven many miles to counterbalance their high manufacturing emissions.”
I know that China is going this direction on its buses.
Hi, I trnslated the post into spanish… here: https://plantidoto.wordpress.com/category/traducciones/
Thanks! That was a lot of work, I expect.
http://peakoilbarrel.com/wp-content/uploads/2017/08/611513-1.jpg
That JPEG shows how much US unconventional oil is adding to the US supply. Its several million barrels a day! For all the Debbie downer talk about fracking, the info. on that graph tells a different story. It’s a substantial amount and is growing.
Volunteering to reply, only because it’s a nice graph.
So, the rebuttal is based on the fact the alt oils as shale have different energy content-density compared to traditional sources, they are mostly unfinished-uncooked reservoirs or completely different geology, hence the refinery process is more expensive both in energy and money, plus the effect concerning need of infill water sources (and its non-disposal).
Frankly, the alt oils “gave (us)” probably ~10-15yrs extra years since ~2003.
We could be “grateful” in this respect. On the other hand, the extra time for us also means extra time granted for other maturing trends and cycles to focus to a pinpoint situation. Therefore the next big crisis will be releasing much more pent up “negativity” in shorter span .. aka more destructive release ahead..
Ahh but 60% of global crude oil production comes from conventional oil. And it takes tens of thousands of shale wells to equal a mere hundred conventional wells. And many more feet of pipe and drilling intensity to get shale out. That is costly:
https://g.foolcdn.com/editorial/images/172046/schlumberger-limited-saudi-arabia_large.jpg
Besides, we don’t know precisely the hard and soft limits towards resource depletion.
For example:
– albeit low probability, but might happen eventually, some countries going crazy and running cheap (“dangerous”) graphite NPPs to cook heavy oils of the world, not only Venezuela’s. Not solving the global question, but boost of decades for some selected authoritarian regimes nevertheless possible..
– cultural cults taking over suddenly, new maturing psycho generation allows 25-75M immigration into France, the wars with European (and within) neighbors result in carnage with the effect of ~4/5 energy demand of much of W. Europe wiped out
– many of such scenarios possible.. this is after all the planet of the funky monkey
Yep – it has been growing — nobody will argue that…
But shale wells peak quickly — then production crashes…
The faster you suck on the milkshake — the sooner it empties….
Watch that space
Not necessarily a fake business. If the federal government decided it wanted to get electric cars up and running and would absorb the initial losses then that would not be called fake. An individual does it with government help and it’s a fake. Government help getting a private initiative to work is similar in both cases. Taxpayers don’t pay either way
What other business in the period from 1900 to 2000 needed this much help to get started? Not to mention still looses money after years of trying! To me this Tesla business model is a whole new concept fraught with corruption.
If a government were doing it, there would be no need of a profit. As to your query, wars are uncontested costs, a gigantic “business” opportunity.
Can someone remind me why Tesla is subsidized?
Oh right- these are greener than ICE vehicles….
Well….
Electric vehicles in Hong Kong could be adding “20 per cent more” carbon to the atmosphere than regular petrol ones over the same distance after factoring in the city’s coal-dominated energy mix and battery manufacture, a new research report found.
Investment research firm Bernstein also claimed that by subsidising electric vehicle purchases, the government was effectively “harming rather than helping the environment” at the expense of the taxpayer.
“The policy is to encourage drivers to be green, but they are actually subsidising vehicles that create more emissions of CO2 and particulates from power plants,” said Bernstein senior analyst Neil Beveridge.
http://www.scmp.com/news/hong-kong/health-environment/article/1935817/electric-shock-tesla-cars-hong-kong-more-polluting
And then there are the 500kg toxic waste dumps otherwise known as the batteries….
TESLA exists as a flavour of hopium.
Never forget – when the MSM repeats something over and over — it is a LIE. Always.
“Taxpayers don’t pay either way”.
The fantasy world you occupy is up there with the best.
It’s fake in that the rationale is fake. They are not green
By green you mean?
Green seems to imply that environmentally friendly… sustainable…
Which rules out pretty much everything that is made by man….
A good way of understanding this process is to study how fake businesses are all the rage. No one seems to be willing to produce something cheaper or better than the competition – not when it is easier to get government money and regulatory support.
“How Tesla’s Elon Musk became the master of fake business”
http://business.financialpost.com/opinion/lawrence-solomon-how-teslas-elon-musk-became-the-master-of-fake-business/wcm/12e8fd62-b49d-40d1-90e4-03105e49a514
https://financialpostcom.files.wordpress.com/2017/07/nybz414-ap.jpg
The 21st century’s successes all seem to be fakes: Amazon, F-35, Facebook, Google, Zumwalt, fracking, oil-sands, pre-salt, the media and many others
It’s interesting that Lawrence Solomon has come out and called Elon a fake. I’ve been reading Solomon for a long time and I give him a high rating for journalistic integrity, and this only confirms my prejudice!
Thanks for link; been waiting for an informed article about this whole fraud!
Uber must be competitive with Tesla in this regard – that is manufacturing false hope
That’s a whole new world. Perfectly logical, but at the same time it makes no sense whatsoever.
It implies a mind boggling level of political corruption. I can say I’ve seen that kind of thing in action, years ago, where once you get the government contract you do whatever you want with it, but that was different, just friends in high places. This is fake from the ground up. It’s a Ponzi scheme.
What I found peculiar, after all those years, that Tesla still needs to scout for top talent at BMW, Daimler etc. in order to close the apparent quality gap, be it in interiors, fittings etc..
It’s absolutely crazy to fork the money at them now, it’s all prototype low volume production, it’s like Korean carz in early-mid 1990s..
Money to the drain? then better splash it on LR-Jag, were the notable quality issues are being addressed relatively more swiftly, it’s aluminum as well, ground clearance, and looks much better.
He promotes the make believe world of the serfs.
He should build an ethanol plant next to space-x.
It is amazing how many people primarily look at devices based on what the after-subsidy cost is. “Look what a great deal this is, and my neighbors will want to see what new I have!” We end up taxing the poor to help the sort-of-rich (or at least, well-educated). Musk has taken this to the extreme.
I think we need to realise that the ‘well educated’ are more accurately termed ‘useful idiots’. Now where have we heard that before!
Without electricity, knowing how to program will be of little use.
I wish I had a fake business supported by Wall St.
Soon I shan’t be able to afford the pills and red wine like Elon….. 🙁
If the ‘Oil God’ had read FW… and realized that oil cannot be priced significantly higher than it is without cratering the global economy … he might not have lost 30% of his clients’ cash…
And he’d not be closing down the fund….
https://www.bloomberg.com/news/articles/2017-08-14/andy-hall-says-goodbye-to-oil-market-citing-worsening-outlook
The Y-axis on figure 3 seems to be mislabeled.
Here is a better one that should be updated.
https://gailtheactuary.files.wordpress.com/2012/03/per-capita-energy-consumption-countries.png
That is sort of humorous. Our maybe I should pretend I invented a new measure of energy.
The chart is from a post that still is read by a lot of people. https://ourfiniteworld.com/2012/03/12/world-energy-consumption-since-1820-in-charts/
There have been 22,000 views so far in 2017. In total, there have been over 218,000 views. I should probably figure out how to fix the spelling. I had someone else look at the text for typos a few years ago, but it is easy to miss a label in a chart.
Another Pig is going to walk:
Trump says he may pardon Arizona ex-sheriff Arpaio: Fox News
https://www.reuters.com/article/us-arizona-arpaio-trump-idUSKCN1AU21E?feedType=RSS&feedName=domesticNews
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Thanks Gail! I’m on to plan C. Been having a lot of work done on the house lately. Everyone wants cash. They have no intention of declaring the income on their taxes. This is a factor that goes completely missing in GDP calculations. It is a little strange to walk into a bank and ask for 20,000 cash. Eyebrows do go up. Also, they kind of don’t want to give it to you. Right away they say, “I think I can do it but the denominations will be odd.” Me- money is money, I’ll take quarters.
It got both ways for “GDP”, a lot is under reported as you mentioned, however a lot is included artificially (even double counted) at the same time by the govs to push up the numbers..
..It goes.. grr..
btw. but as Gail showed the gdp/energy correlation graph, the metrics is somewhat working, despite some occasional deviations, mostly looking as biased towards boosting up the GDP vs Energy..
Or possibly we are now producing more GDP in recent years, per unit of energy. If a person fits lines to groups of years, the indications seem to go in this direction. This would happen if the mix is shifting more toward services like education and medicine.
Yes, that’s a good point, but then it should look a bit more pronounced on the graph and for a long term trend, which it isn’t, so far. I guess it could be negatively compensated by the counter trend as many people falling through, not able to reach for the next gen care or education GDP spike expenses.
Also, cash starves the beast. To scraped percentage for the middleman. And that’s why the middleman wants electrons instead of paper money.
Wake me up when everyone else wants gold, or bitcoin.
I would split up my request for money–either get money on different days, or go to different banks, if you have multiple bank accounts. (If you have enough money, it is not a bad idea to split your money between banks.)
You have probably heard about at least some governments pushing to get all transactions to go through banks. One way of doing this is by calling in all denominations above a certain limit. A major reason for doing this is so that the government can tax all transactions. Of course, this would shrink the economy, because it is the after-tax income of the participants that allows them to buy goods and services.
In the United States, there are tax forms that you are supposed to file if you pay a person (rather than a corporation) income of over $600 in a year. In theory, you could get into trouble for this reason.
That’s sensible *precautionary advice, yet futile, since all the western payment systems are running on the same tech platform and the RU-CHN- .. system doesn’t have cash machines deployed in the west, and even if they branch some token number of them there in the near future, the local govs can easily curtail it anyway via emergency banking laws etc.
We are all going to be corralled and deprived into poverty in full spectrum repression (pensions, wages, purchasing power, property legal/tax status, ..) there is simply no workaround around it. You can continue “to prosper” for a while only as gov/CB remnant affiliate or warlord, and these two professions are kind of not promoting much new people to their equal status, lolz.
* your advice might be good for temporary relative advantage in step-wise scenarios at specific places, i.e. limited applicability
Agreed. We had an elderly aunt of my husband’s living with us years ago, and I had to handle her finances. She had bank accounts in several different banks, because of lessons her parents had learned during the Depression.
The problem with currencies is that their relative values can be manipulated by central banks and governments. That can distort research using currency values.
I would watch the total amount of oil produced from all sources. Not long after that begins to stop increasing, trouble will start. Less oil used will mean less work in getting done. (Batteries won’t have much impact for at least another 10 years.) Less work being done will mean the economy is shrinking. That will be a big problem because it is the definition of a recession. With debt at record level, and with who knows how many financial bets inside the complex financial system, a recession could easily transform into another Great Depression, which takes down the banking system as trillions of dollars of loans can’t be serviced.
I used to think that we could all just sit back and slowly get poorer as the oil ran out over a century or so. Unfortunately, the banking system needs constant growth in order to keep functioning. We can’t yet grow without using more oil. That fact threatens the financial system.
The governments will try and stop the collapse with financial manipulation. Some of it will seem really strange. It will probably work for some unknowable period of time. But eventually, the system will melt down, like it almost did in 2008 from something far less fundamental than being forced to perform less work.
It is interesting to speculate that even if oil was free, yet something forced us to use less and less of it, if we would find ourselves in the same predicament.
++++++++++++++
Once the Petro and the Dollar go their separate ways finance will fall apart. Energy cannot be decoupled from the Dollar. It won’t work.
Yes the legacy finance will (likely) mostly fall apart.
What the aftermath, the next quasi global and regional finance will look like, what reach and depth can it operate, that’s the question.
“I used to think that we could all just sit back and slowly get poorer as the oil ran out over a century or so. Unfortunately, the banking system needs constant growth in order to keep functioning. We can’t yet grow without using more oil. That fact threatens the financial system.”
The “yet” in “…can’t yet grow…” is important. I’m still unclear about the difference between more jobs, work and money circulation (as opposed strictly to combustion-related activity) being the marker of growth. If combustion stays more or less the same, but jobs, work, money circulation increase, can that be defined as growth?
fraid nobody believes that.
it is impossible to have employment without fuelburning.
that used to mean walking behind an ox team with a plough.
now it means sitting behind some kind of engine
virtually no one can see the danger that poses
Couldn’t it also mean billions of people working with their hands to grow food?
when you work, you burn fuel
that fuel originally belonged to another biological species—ie you eat a steak, then go and tend to your farm, grow food, eat it and sell the surplus which becomes a food source for other people to consume in order to do their work.
planting/harvesting –say– rice by hand performs the same function.
Fuel is burned inside your body, instead of an IC engine
you eat the rice you produce, plus sell/trade the surplus, which is where money comes from.
having a surplus allows populations to expand, consuming as they do so.
we consume fossil fuels, but they too were once part of other biological species
we have reached the point where no more expansion is possible.
soon the moneyprinters will find that out
So there’s no difference between burning fuel (of whatever sorts) to build solar panels, say, and burning fuel to plant food by hand? I’m talking about degrees and variations of burning fuels. Could some varieties and amounts of fuel burning extend out system over others?
all fuels can be reduced to calorific values
on a can of corned beef, you will find its energy value expressed in calories. (about a third of your daily requirements)
the same applies to the fuel used to make a solar panel, or shift your car for 30 miles.
it isn’t possible to spend a day in a field planting potatoes by hand, unless you’ve had sufficient energy intake to support that effort, and of course that your efforts will harvest more potatoes in energy terms, than was used in planting them.
exactly the same principle applies to drilling an oilwell
I recall Doomy Permies on FW responding to my question about how they will water their veg patch when the taps run dry with ‘we will fill buckets with water from the nearby river and carry them to the veg patch’
And then we have the Roof Top Permies when asked about watering their veg patches and soil … ‘we’ll carry them to the roof’
Profound ment al re tar dat ion on display here….
True, sort of. Except the workings of the human brain are in some sense of much higher value than the amount of calories it consumes would indicate.
And intermittent electricity added to the electric grid is of much lower value to grid operators than other electricity than matches grid specifications.
Trying to combine different types of energy, using only energy consumption/output as weights, can lead to misleading results.
Artleads,
The people making wind turbines and solar panels would like to think that the fuel being spent on solar panels and wind turbines will pay back manyfold going forward. All of the analysis has to be done using models, and there is a lot of controversy about what should be in those models. That is what my previous article was about. https://ourfiniteworld.com/2017/07/22/researchers-have-been-underestimating-the-cost-of-wind-and-solar/
There are problems both on the input and the output side. On the input side:(1) What are the energy inputs required for adding wind and solar? Is it just the devices themselves, or does it include all of the workarounds to bring the electricity up to grid quality, including batteries and long distance transmission and subsidies for backup plants. Is it just the energy involved in making the devices themselves that should be considered, or should a wider range of energy inputs be considered. For example, in China where most of the solar panels are made, we can measure the coal used in making the devices. But should we also be thinking about where the worker’s wages are going–to buy new vehicles, and to buy new concrete homes. Clearly, this is a direct result of making the solar panels in China. Also, the many new roads that need to be added in China, and the very polluting mining operations that are not being cleaned up properly. How should they be counted? Also, a huge amount of debt is needed at several stages along the line. This has to be paid, indirectly, with goods and services made with energy. Shouldn’t this go into the calculation as well?
On the output side, we have a different group of problems: (2) How do we estimate the length that the devices will be operating? Can we expect them to last 5 years beyond the warranty period (Current recommendation on place)? Or should we (realistically) assume that we will not be able to use them for electrical generation, beyond the life of the grid? Should we be looking at how these devices operate in actual situations, or should we be looking a manufacturer specifications, as to how the devices might operate, if installed in an ideal location, and proper maintenance (including regular cleaning for solar panels)?
For wind, in very good locations, it is possible that there is a net benefit. But for solar panels it is not at all clear that there is any benefit at all. We are burning quite a bit of coal now, for hoped-for benefits in the future.
Norm,
The question is what sort of energy use drags out civilization longer. It’s not about whether all actions require energy. You’ve made that much crystal clear.
My favorite material is cardboard. The free cardboard I haul from the store, while statistically making zero difference, in principle, saves the store energy to bale it with wire and drive it to the dump, and saves the dump energy to dig up the ground and bury it, or saves some recycler much more energy to grind it up to make new cardboard or whatever.. Meanwhile, I can use the cardboard to make a new box or protect something or plant something in. It invariably ends up, after several uses, being undesirable for similar uses. At this point I could use energy to drive it to the dump, where they’ll do whatever they do with it, all using energy. But what I could do instead, saving me much trouble, is to rip up the cardboard (or not) and put it in a compost pile. Thereafter, worms and/or, micro-organisms do all the work required to transform into soil that I don’t have to drive to the store to buy. I take the easy route, making nature do much of the work. I fail to see how these varied approach to energy get to be exactly the same.
Of course, it takes a different level of energy to make the cardboard and maintain the industrial infrastructure to make that possible. But again, it’s hard to see that there can be only one way for that to be done, or that the end result has to be exactly the same, whatever is done.
What we need is wages for humans, to keep our system going. Giving the cardboard to the worms cuts humans out of the “value” chain, except to the extent that you and your family get value from the compost pile.
If someone has debt that needs to be repaid with interest, not getting money somewhere along the line could make a real difference.
surely that should be “surplus energy for humans?”
Right!
Agreed! Good points.
Gail,
That has to be the most thorough analysis of wind and solar that there is. I also appreciate Norm’s simplifications (for dummies). The wall that FW posters keep identifying makes it seem that a certain forward momentum is no longer possible, and neither is there an alternative to it. An artistic model to deal with this impasse might be to let the system run the way it wants to and not try to fix it. Just merely observe it. Thanks for doing that so excellently.
I think you are both correct. But you are talking past each other at cross purposes about different things.
Norman: when you work, you burn fuel
But the opposite doesn’t hold. When you burn fuel, you don’t necessarily work. A lot of fuel is burnt, either in IC engines or in human bodies, that doesn’t do any useful or productive work whatsoever.
Mordern industrialized society is profligate in its use and wastage of energy. Huge amounts of energy are consumed in order to fuel so-called “economic activities” that in turn support the functioning of “the financial system” as their main purpose, regardless of their other purposes.
For instance, driving down to the Golden Arches for a Big Mac and Fries in order to fill up an already obese body with even more calories counts as an economic activity but tilling the soil and planting, growing and harvesting potatoes in one’s private personal vegetable patch for one’s personal private consumption does not count towards “economic activity” at all.
Perhaps this provides a clue as to why literally billions of Third World people can survive on the equivalent of US$2 a day while Johnny Depp is struggling on US2 million a day?
by “working” I meant the operating function of the human biological system, as well as physical labour—this requires calorific intake.
Our financial system is just a side issue related to energy usage.
Humans and machines have the same ultimate problem: Entropy
It’s just that they show in different orders of time.
I might go for a week without energy input, but a month would leave me dead. I could not be restarted with a beef sandwich after 5 weeks.
After that decomposition would set in and I would return whence i came.
On the other hand, you can leave a car for 5 years without moving, and probably restart it easily.
Leave it for 50 years, and entropy would be so far advanced that restarting would be unlikely.
100 years and it would be almost impossible and the car would begin to rust away to nothing.
We think of $2 a day in our terms. Because $2 cannot buy sufficient calories on which to live, plus all the other ”stuff” we need.
But if your living system has no frills, and food is available at that level, then you can live on $2 a day—not well–but just about.
But boost income to $10 a day, (Blame Al Bartlett/Jevons for this, not me) and your population will expand to fill the economic niche thus created
Ford did it—it only worked for as long as people bought cars as fast as he could make them (along with everyting else)
“But boost income to $10 a day, (Blame Al Bartlett/Jevons for this, not me) and your population will expand to fill the economic niche thus created”
I understand this point quite well. Which is why I opt for universal poverty, where people can survive, “just about.”
For instance, it never fails that poor cities which get an offer from a large chain to develop a new branch in the city–the case of so many Walmarts wordwide–they jump at it like a dog after a bone. They assure you that this will supply tax money and enable the city to improve services and pay its bills.
So what happens? Smaller stores that were just making it are driven out of business. Since real estate prices rise, renters get jettisoned, the old demographic is too strapped to refuse the offer to buy their homes at high prices. Since this syndrome applies especially to minority dominated cities, the removal of the old demographic due to gentrification also means the removal of minorities too. And to use yet another dog metaphor, this works like a dog chasing its tail. The people you were trying to help get prices out of town…yet the minorites that still run government and might not have done too badly from the development deals, STILL argue that the inevitable lingering tax and affordability problems will be solved merely by inviting in MORE large corporations. This is a case where adding money while ignoring the chain of exponential events that result makes you worse off than if you’d found a way to manage with a “just about” economy.
that’s the problem—no one will put up with a ”just about” standard of living if there is an alternative.
You dont want a house with a dirt floor and no sanitation/water, so we used our surplus energy to create systems to take care of that.
We like glazed windows and heating/cooling—and nobody has the right to take them away from us.
it’s ok for folks 000s of miles away having a ”just about ” economy…
our super-economy was a reflection of our innate genius—except that it wasn’t—and was the result of cheap surplus fossil fuel energy.
cheap energy meant there was jobs food and housing available for everyone—the american dream if you like—without it, we certainly will have a ”just about” economy—though not voluntarily
Even if we want to, I don’t think we can go backward this way. There are too many things that depend on everything else. We have to keep maintaining the roads, if we are to use them. We have to keep all of the electrical system operating, if we are to use it. We need to keep all of our pipelines repaired, if we are to have fresh water, natural gas, and oil, and have our sewage taken away. We need electricity for many purposes, including pumping water and gasoline. If we go back to a very low level, we cannot possibly produce food for our current population, not other issues, like lack of fresh water and too much problem with infections spreading.
“What we need is wages for humans, to keep our system going. Giving the cardboard to the worms cuts humans out of the “value” chain, except to the extent that you and your family get value from the compost pile.”
But of course, in a system strapped for food, the savings from growing food as discussed results in small businesses, mostly home based, that circulate money in the local economy. Nothing that isn’t elegant can work.
“that’s the problem—no one will put up with a ”just about” standard of living if there is an alternative.”
With respect, I disagree. I’ve seen people who are happy with their dirt floor. But it’s easy for a militarily and “economically” dominant society to shame them out of that acceptance. You should understand the role of colonialism and conquest in shaping aesthetic preferences. Aesthetic preferences–liker for a tile floor over a dirt one–are as much based on cultural transmission as on anything else. .
i said—”if there is an alternative”
and of course i was speaking in a collective sense. Obviously there are those who seek out the life of the ascetic, for whatever reason.
but as a society we move towards comfort and ease. My G- grandparents had a dirt floor—but everyone progressed as better living conditions became available
‘Obviously there are those who seek out the life of the ascetic, for whatever reason.’
Reason? Mentally ill … severely delusional….
Anyone who willingly chooses a dirt floor over a Sealy Mattress …. is not right in the head
and rugburns can be nasty too
It’s based on either mental illness — or if we are talking about primitive tribes it is based on that’s the best bed that is available so of course they will be happy with it…
However if the neighbouring tribe has Sealy mattresses — the dirt floor won’t seem so awesome after all… and there will be blood as one tribe attempts to take the mattresses….
You obviously come from a “peak oil” perspective. Their concern is oil; it is production; it is total amount, not per capita.
I think that the peak oilers basically got the story wrong.
All of the fuels move more or less together. In my opinion, the total is more important than oil. The fuel that has declined in the past two years is coal. I expect that this year coal will be up, and natural gas may be down–or at least the trends will change.
I consider “energy per capita” to be important, because it is really people who use energy, and it is people who take the jobs that energy products make available. Our problem historically has been populations that have grown faster than renewable resources. This can cause collapse, even without any other precipitating factor (such as drought, soil erosion, loss of fertility of soil). It is the “per capita” that makes a difference. We now are at the point where per capita energy consumption is falling, but total energy consumption is still growing. It is just growing a little less rapidly than population.
The third point is that the problem is consumption, not production. We can produce all we want, but unless there are productive uses for energy products that are affordable by customers, this production does no good. The car lots are full of cars that there are not enough buyers for. Restaurants have a lot of empty seats. Somehow citizens need to be able to afford a car that uses gasoline, for example, (or an electric car, for that matter). It is the affordability problem that leads to an end to the system.
One of the big issues is growing “complexity.” Growing complexity requires increased specialization. At least some of the workers need advanced training. Businesses need to be big enough to have a range of different kinds of workers. This whole process tends to leave some workers either “behind” or “out all together.” They cannot afford cars and homes. This is why the economy stalls. Complexity is a workaround to slow growth in energy supply, but growing complexity can push the economy toward collapse as well.
The importance of the “market” cannot be understated. Without a market there could be no excess energy and the “good life” it provides. The steam engine created all kinds markets and the ICE engine followed on steroids. Failing markets are now affecting production. If more purchasing power is not filtered to the consumer (and it is not), the base of the edifice will crumble and bring the whole structure down.
That is a good way of putting the situation!
If there is no use to put energy to (cars, trucks, factories), it will not be extracted. China knew about coal over 5000 years ago. http://history.alberta.ca/energyheritage/coal/early-coal-history-to-1900/unearthing-ancient-mysteries/ancient-china.aspx This article says they made carved ear ornament out of it.
Many Americans are only just getting by
http://www.marketwatch.com/story/many-americans-are-only-just-getting-by-2017-08-09
Thanks! They make many good points. I expect that young people with debt, who dropped out of college are especially badly off.
Uber and Lyft are providing part time jobs to some people who own cars, and are without jobs, making money operating without insurance and other things that those driving cabs have. This does provide some kind of a safety net for those who (at least at one point) could afford to buy a car. I have run into several people who are keeping themselves going, driving for these companies.
Yet Wall Street still seems stuck in the mindset that growth is the most important metric, which only creates a scenario for a worse bust.
When many shale oil companies released earnings reports in the middle of the summer, Wall Street rewarded the companies that showed growth regardless of profit or loss.
https://www.forbes.com/sites/ellenrwald/2017/08/11/this-is-what-the-end-of-shale-will-look-like/2/#284697084e79
Now call me crazy …. but that looks to me that some higher beings are essentially printing oil?
wall street wont go without fighting they will do anything to run bau
as long is possible
Been there, done that in the past!
http://www.veteranstoday.com/2015/07/23/british-fascism-why-british-nobility-hailed-adolf-hitler-and-nazi-germany/
http://www.veteranstoday.com/2016/06/11/hitler-was-financed-by-the-federal-reserve-and-the-bank-of-england/
Put up some links to the role of Wall St and City of London money in WW 2. Plenty of gu.ns and money for A.dolf;
…but its in moderation of course because thats the difficulty with the truth; it must be controlled!
Long before WW1, the British Deep State planned to smash Germany. The Germans were getting too strong economically. For the first time in 1000 years, France became and ally and Russia was prompted to become one too. A massive anti-German propaganda campaign went on for decades. Earlier, Germany was the friend and France the enemy.
“The Secret Origins of the First World War”
amzn.com/B00CPR6IWK
Before WW2, this Deep State feared Russia and Communism. They financed Hitler right from the beginning up to the last moment. They wanted him to conquer Russia. To their surprise and dismay, he made a deal with Stalin to split Poland and attacked France instead.
Now, they are have a massive propaganda campaign against Russia. Because Russia has the resources which they want for themselves. It is all so obvious when one reads a little unfiltered history.
Thanks for link.
Shame how the truth has no friends in high places!
My pleasure. People prefer fantasy to reality. Politicians are there to cater to their desires.
You can see something similar going on right now. USA put a puppet government in Kiev and bankrupt the country. In return, this “ally” has been selling rocket engines to North Korea – a threat to the USA. Rather comic, if you don’t live in California.
“North Korea’s Missile Success Is Linked to Ukrainian Plant, Investigators Say”
https://www.nytimes.com/2017/08/14/world/asia/north-korea-missiles-ukraine-factory.html
Some headlines are trying to blame the Russians – because the rockets were designed by the USSR many years ago. Hilarious.
“Report Links North Korea Rocket Engines to Russia, Ukraine”
https://www.wsj.com/articles/north-korea-obtained-rocket-engines-on-black-market-report-says-1502740949
I guess you should take care in choosing your friends. You can depend on Nazis to double-cross you.
Well, you are correct, although technically, Soviet Russia moved when Poland gov did not exist anymore after the German invasion. It was not a simultaneous operation as propagandists nowadays try to portray it. Besides the frontiers since WWI (as enforced by US+UK+FR+ ..) were moving so much in that area anyway, that it’s hard to paint it as some gross violation of sovereignty. Unless, we acknowledge it openly all, i.e. since WWI were robbed blind: Hungary, Russia, Germany, Austria, .. , many others..
Stalin portrayed the taking of eastern Poland as retrieving his lost Slavs: Ukrainians and Belarussians. He feared and despised Poland, which had snotted the Soviet Union in battle in the early 1920’s.
https://en.wikipedia.org/wiki/Polish%E2%80%93Soviet_War
My friend’s father, who died in England in the early 1980s, was born in eastern Poland. However, he was an ethnic Ukrainian, as many Polish citizens were in those days. In 1939, he suddenly found himself living in the USSR. He despised Stalin and eventually fought with the Galician Division as a Waffen SS volunteer:
https://en.wikipedia.org/wiki/14th_Waffen_Grenadier_Division_of_the_SS_(1st_Galician)
He ended up in Yugoslavia at the end of the war, in British captivity. The British thought he was a Cossack (and you know what happened to them, after they were sent back to Stalin) bu he managed to persuade them otherwise. He ended up as a miner in Nottingham, England, married to a German woman. There’s a high probability that he would have been involved in atrocities during the war, but the really big investigations did not start up again until the 1990s, after the fall of communism in Europe. In England he was a model citizen; there was no democracy in his part of the world during the war, so I can’t and won’t blame him for making his life or death choices in dire times.
Yep, that’s it more or less how it rolled.
The “Ukraine statehood” entity is modern post 1917-1921 Soviet invention of organizational governance over the area as well as an attempt to placate ethnic Ukrainian members of the politburo. The central-eastern area was always Russia proper with Ukrainian and Belarus branches to the northwest, which are very closely Russian origin related anyway. And only the most western parts around Lvov have been contested through times by Baltic, Prussian, Polish-French, Hungarian, .. interests. The south, Crimea was “originally” Tatar (and before much longer Byzantine-Greek), finally added to R. Empire in mid 18th century.
“the British Deep State planned to smash Germany. Before WW2, this Deep State feared Russia and Communism. They financed Hitler right from the beginning up to the last moment. They wanted him to conquer Russia. To their surprise and dismay, he made a deal with Stalin to split Poland and attacked France instead.”
If the British had wanted Hitler to conquer Russia at all costs, they would have continued to turn a blind eye to his Central and East European conquests. Hitler would not then have needed to cosy up to Stalin as part of his ploy to take Poland (then later the USSR). From one point of view, it would have been far easier for Britain to sit back, as Germany and Russia fought it out. Without the Allies to contend with, the Nazis might have defeated Russia at first, but in the long term, defeating Russia is impossible, so guerrilla warfare would have continued or years – especially given the way the Nazis treated the Russians as “slaves” and “subhumans”.
In reality, British policy has long been to prevent one power dominating the Continent, because then that power would ultimately dominate Britain (or constrain her). That is why Chamberlain declared war on Hitler, after he invaded Poland. So your thesis does not stand up.
Yes, the Brits fought hard .. for their post WWI crumbling Empire to see another day. Churchill was always scheming against Roosevelt and Stalin, for example he even pushed for the craziness of opening the second front instead in the Balkans via Yugo/NItaly->Austria->Bavaria..
Bankers have been financing both sides for a while. Win win for the banks! As long as they control a currency that is backed by energy supplies they are OK. But, those days are numbered.
Saudi Arabian Oil Is Running Out And That Will Affect Long-Term Oil Markets
https://seekingalpha.com/article/4098775-saudi-arabian-oil-running-will-affect-long-term-oil-markets
“As Matthew Simmons said “As goes Saudi Arabia goes the world’
Anyone seen plan B laying around?
Take your printed/stolen/illegitmate stockmarket gains via dollars/yuan/pounds/euros, get NZ citizenship, buy a lifestyle block, price the locals out of the market, and put that smug smile on your face?
Imagine if NZ was the ultimate life boat post BAU … and all these people who are rubbing their hands together as they watch the prices of their properties/stocks/bitcoins etc… go through the roof…
And instead of cashing in and doing a ‘Peter Thiel’ and investing NZD3M of the fake money they have realized on their fake investments https://www.newzealandnow.govt.nz/move-to-nz/new-zealand-visa/visas-to-invest/investor-visa they just watch the numbers climb higher — then collapse to zero…
Unfortunately NZ won’t be a haven as there are no havens except temporary ones…
https://i.pinimg.com/originals/1c/34/5c/1c345cb08c3d2bf651bb9c017483d7f5.jpg
A picture of the homestead?
“There are a number of ways to play this, but I personally prefer either betting on a long-term oil market recovery or against the Saudi Arabian economy.”
Now that is hilarious….
The author is basically explaining how civilization is about to collapse — because that is what will happen if KSA production falls of significantly — and he is suggesting ways to ‘play this’
Wow.
http://i2.wp.com/cleantechnica.com/files/2014/01/40b96f717103244d7d9dea023de22820619058efade0a529f2938430963ed6c7.jpg
Yes the pundits are insane if they think industrial civilization can do without Saudi Arabia and its Ghawar giant oil field. Read about Ghawar, http://www.geoexpro.com/articles/2010/04/the-king-of-giant-fields it is a miraculous field of wells. Just jaw dropping in it ability to produce 11 million barrels per day from some 300 wells. And for decades too!
Have to make money somehow, you know.
Pile it up higher … for retirement….. or perhaps he is planning to withdraw it all at the last moment in $1 bills — and use them to start his fire to roast rats…
Conjecture by many people including Matt Simmons and various peak oil sites on the implications of the Saudi’s running out or lower of oil has been going on now for decades. Simmons and others were wrong. It still isn’t twilight in the desert, as the Saudi’s have had new oil sources from offshore. And Ghawar is still pumping out 5 mbd all these decades later. Ghawar is something like 48 miles long and 15 miles wide. It’s the biggest elephant ever discovered and as it declines they infill drill or drill in new sites in that huge field. If I had a dime for every time I’ve read about the imminent demise of Saudi oil supply I’d be rolling in dough and laughing my head off.
Perhaps you could enlighten us as to why the Saudi’s are IPOing Aramco….
Why would they be doing that if everything was all peaches and cream over there?
And they are selling their airport as well.
And they are opening up the country to tourists and selling tickets to the weekly beheading ceremonies….
They are also in discussions with Gamepass to stream the beheading ceremonies packaged with MMA brawls to the death…
And then there is the new reality show ‘The Harem’ — where hot college girls from America — mired in enormous amounts of student debt and unable to find jobs even in fast food outlets because the robots have taken over — auction themselves off to Saudi Princes…. 90 cents on the dollar goes to Uncle Sam to repay their student debts…
Simon Cowell is apparently behind the concept ….
This is going to be huge
I don’t know if this is satire or not! Who can tell anymore?
https://media.giphy.com/media/xT5LMLhn56K6NchBQY/giphy.gif
It isn’t just about Saudi Arabia and its oil. The oil wealth has allowed the population of Saudi Arabia to explode. As population levels sky rocket the Saudis and using more and more oil internally, leaving less to export. At the same time the Saudis need to sell more and more oil via export to fund the ever growing programs it uses to placate the growing population of Saudi Arabia. Things in Saudi Arabia are destabilizing. If an “Arab Spring” occurs in Saudi Arabia and riots break out over lack of food, water or supplies, the oil could stop flowing very quickly as things descend into chaos. It isn’t a simple situation of poking holes in the ground and draining the oil out for the USA to use.
as ive been saying for years
the saudis have lived their life only for a single generation—but expect it to go on forever—just like us in fact
but pre oil, saudi pop was 1 million or so—now it’s 30m.
when the oilflow stops, 29m people don’t have a future.–the surviving 1 mn will go back to goat herding and camel trading
yet the insanity is endless—they build towers and ”cities in the desert” as a hedge against the oil running out.
nobody dare mention that without oil, no one will go to saudi except looters—and even they wont get the joke, that a set of gold bathtaps or gold plated mercedes has no value unless it is underpinned by oil.
Well, the posh mercedes limousine could be still used in stationary fashion as a club seating area for having a nice cool drink and such. Small external PV or genset running the AC and stereo of the car, while few subjects outside are moving a running loop of backdrop painted curtain with changing landscape motives (camels and oasis) as if the car is actually moving. In total, the overall energy expenditure to run this contraption equals ~1/100th of top highway speeds..
i like that
didnt they used to do that for old silent movie chase scenes
https://c1.staticflickr.com/4/3251/2866005383_3f312e6ae6_b.jpg
https://s-media-cache-ak0.pinimg.com/originals/2d/17/fa/2d17fa67dd401a5ecdc6b5ded7688995.jpg
I would expect the population of the ME to be zero within say — 6 months of the end of BAU
They are surrounded by death traps:
http://maptd.com/wp-content/uploads/2011/03/global-earthquake-activity-vs-nuclear-power-plant-locations.jpg
Correct on the destabilization front, latest news speak about possible Saudi intervention in Yemen withdrawal as other Gulfies are no longer in sync with Saudi on geopolitical and regional issues, mostly due to Eastern promises (false or real)..
Saudies must be already pretty wounded, without money, and their protector on the leave.. Otherwise these moves make no sense.
Saudi Arabia’s GDP in current dollars is dropping, even with debt. Saudi Arabian Foreign Exchange Reserves have been dropping as well. They can see that they have a problem.
It’s high time we started flooding the KSA with the highest grade of opiates…
Higher price allows investment in both new production from higher-price new wells in new fields and more-intensive extraction from existing sites.
The big limit is price. Simmons didn’t understand this. Right now, we are living in a world where prices are not high enough to sustain the cost of new production. This doesn’t cause production to fall immediately, but it will eventually.
Or Saudi Arabia could have problems in the near future, arising from uprisings of its people, indirectly because of low prices. At least the article does point out that Saudi Arabia has long-term concerns.
Thanks for the new post
lots to digest.
one takeaway: I think this answers why oil prices fell in 2014. The end of QE seems to be not just correlation but actual causation.
which makes me think (uh oh, he’s trying to think):
the future price of oil may not matter much at all.
though I think that oil prices will rise in a year or two, the value of the “money” in which this oil is priced may fall in sync with rising prices, leaving very little difference.
meanwhile, year by year, the net energy of this oil will continue shrinking, leaving the real economy with less economic activity per barrel of oil.
another decade of this process should prove to be a disaster.
time will tell.
True enough, David. The end of QE increased the perceived value of the USD and in turn the price of oil declined sharply.
The time may not be all that long to find out. We have people who want to sell the QE bonds and to raise interest rates. We also have real problems with getting a budget passed and the debt limit raised. These could be a problem in the next few months.
Wrong.
World GDP can grow infinitely, since dollar can be printed infinitely.
A simple truth not too many people comprehend.
Actually, it is a falsehood that you keep trying to repeat. So why is GDP in current $ dropping?
Because, more wealth is concentrated in America while the rest of the world is getting poorer (which can’t be helped), so the aggregate world GDP declines. However it may not be a bad thing, since the rest of the world had lived beyond their means for too long.
The US is the world’s consumer of last resort. For at least four decades it has been “paying” for its ongoing excess of imports over exports in US dollars or in foreign currency bought with US dollars printed as needed. OK so far? This exchange of monopoly money can continue as long as the rest of the world continues to accept US dollars in payment and not a day longer.
In the real world, all things must pass. And outside of mathematics, using the word “infinitely” is overkill.
http://izquotes.com/quotes-pictures/quote-don-t-use-words-too-big-for-the-subject-don-t-say-infinitely-when-you-mean-very-otherwise-c-s-lewis-111535.jpg
For how long?
Putting aside for a while the legacy transaction role of the USD/eurodollar universe, there is very little prospect for US economy to export in the latter near-mid term. The only remnants as of now are food, arms, airplanes, drilling rigs, ..
The wider “EuroAsia” is now able to supply it all, even the horizontal drilling sets, airplanes of next gen (better fuel economy and comfort), the US weapons are overpriced and often very politically restricted.
So, that means at best the US can export only food (water) in few years time, hm interesting, who predicted that already?
I think it’s a bit early to disregard the US prowess in semiconductors and software. Which is the same software and integrated circuits ending up in European and Asian arms.
This is partly due to migration of highly skilled (workers) engineers and scientists from Europe and Asia into the US. The US economy and entrepreneurial spirit is indeed attractive. Of course, other things too, as is important for many: A much better bread and circuses offered in the US of A, compared to “home”.
Which directly impacts the capability for the US to project power. Until/unless this simple fact changes, the US will remain the worlds sole superpower and thus dictating the rules of the “game”.
Plus Amazon, Apple, Microsoft and all the USA’s consulting, legal and financial services, which all have to be settled in dollars and are not too cheap.
Software?
Sorry, to pierce the bubble again, but in terms of semiconductors, the world in which clever US engineer merely outsourced the final product into some Asian manuf sweatshop has been dead for several decades already. It has evolved into mixed model of cooperation at all levels and stages of development in which the US know-how input is decreasing each year, slowly and steadily.. Similarly in software, it’s all international teams nowadays, and the backbone infrastructure in mil-defense, energy and transport no longer runs on western server/database or desktop stuff anyway, perhaps for past ~10yrs strictly domestic brew already..
“It has evolved into mixed model of cooperation at all levels and stages of development in which the US know-how input is decreasing each year, slowly and steadily.”
Yes, that’s probably right. But we are not there yet. And much of this is thanks to the Internet, more or less a DARPA project that went wild (and some previous attempts as well).
One example is the distributed development model of the (Swedish, sort of) SAAB Jas 39 Gripen, compared with the 100% in-house Lockheed Martin F-35.
Yes, and it will only accelerate.
Ladies and Gentlemen: Time to go west! 🙂
Well perhaps to Central Europe or East Asia, too. The rest… Uhm… Might as well forget about since it most likely turn into a toxic waste dump and a grueling quagmire to live in.
http://31.media.tumblr.com/93bef31f9e85af4408d7da9ecf2d489a/tumblr_n0heex7OSn1sn1gbwo1_500.gif
Printed money does not equal spent money. So we see money velocity dropping, and wealthy people end up with more and more dollars locked up in capital gain not GDP.
Remember that this is the petrodollar, and depends on huge military spending to keep it flowing. Military/govt spending crowds out the consumer and goes into hi-tech.
Yes, moving the money from those who can’t spend it wisely to those who can do so. Billions of people will be crowded out, but the aggregate economy will grow.
Yep, the generic humanoid FF bonanza is over; now let’s find who’s the real king of the hill.
https://chezstu.files.wordpress.com/2012/07/fight-club.jpg
Sure, nominal GDP can grow indefinitely, but that is meaningless. Real GDP is mostly smoke and mirrors too. Real growth comes from energy/entropy and that is no longer growing. Everyone is doing there best to make things look better than they really are, but that can only go on for so long.
Far longer than you think. Not too many people paid attention at London when millions of Irish were starving back in 1846. I think it can go on for at least a century if it is managed well.
Takes a special mind to think that will be possible. I hope you are right but am far from convinced. Money does not equal wealth, it is merely a claim on wealth.
You can print claims on gold, but alchemy has so far come up short.
“You can print claims on gold, but alchemy has so far come up short.”
Good point! Perhaps this is a point to keep in mind for trying to teach economists about how substitution doesn’t always work.
Except on a world basis, even nominal GDP (converted back to US dollars) isn’t growing. It is impossible to get fossil fuel prices up high enough.
kulm
The Nobel prize committee contacted me last week as they had decided to award me this year’s prize for economics… (which I richly deserve of course)
However, when i read the above comment, I felt it was only fair to pass it on to them.
They have subsequently changed their minds about giving the prize to me, and have decided to award it to you instead
Right on time. Just as LtG predicted. A few more years and economists, governments and corporations will be shaking in their boots.
I am glad for the new post I was going into blog withdrawals.
I believe inflation is more like ShadowStats numbers. But as we have been saying it is a predicament without any apparent solutions. Or none that leave BAU intact. Many crazy explanations will be offered across the spectrum. All of them wrong if they do not include finite resources.
We are plunging into the era of blame. Explanations take cool heads and understanding; no chance!
Thanks for your work Gail.
Agreed! Thanks Gail!
You are welcome. Sorry I wasn’t too fast in finishing this post up.
Sorry about the long blog. I will have to rest up after writing it. It is hard to write about something that you are just learning about yourself.
Thank you for your generous effort, Gail. You work should be lavishly paid, in pure solid gold (not dollars, bitcoins or any other fake money)
Cheers!
Just getting some time to read the article — clearly lots of work and thought went into this — well done!
“Although we have not looked at all possible groupings, the countries that seem to be doing best in terms of rising current US$ GDP countries that are exporters of manufactured goods, including the Asian countries shown. Countries that derive significant GDP from producing energy products and other commodities seem to be experiencing falling GDP in current US dollars.”
Exporters of manuf. goods vs. energy products & other commodities
That seems to indicate if a country produces goods from energy and commodities they do well, but just supplying energy & commodities is no longer a winning strategy. Presumably that’s primarily because net energy from FF is declining. Nothing new there, but interesting none the less to have data to back it up.
Basically, the prices of all energy products have tended to be low. This is even true of uranium, although I didn’t mention it in the article.
I think that the basic issue is affordability.
Whether or not it is “net energy” is a slightly different issue. The net energy issue is one created by people who thought we were going to “run out” of energy products. It subtracts energy of one kind, from energy of another kind, without any adjustment for quality, and without any consideration of debt (promises of future energy). I personally don’t think net energy is very important. As a practical matter, EROI of 1 doesn’t seem to be very important either. In order to positively contribute, an energy product seems to need to have an EROI of at least 3. In fact, the entire mix seems to need to have an EROI of at least 10 or 11. So what is the point of energy in excess of an EROI of 1.0?
To me the affordability problem (or lack of affordable energy products) makes the most sense. The oil industry seems to be a lot like the automobile industry. Inventories are backing up despite incentives to buy (lower oil prices). Just like with cars, people cannot afford them. At some point bankruptcy is in order for the automobile and oil industry.
++++++++++++
I am afraid you are right.
Thinking about the situation, I think the situation that I am showing is closer to Jeffery Brown’s Exportland Model. The countries extracting the oil + natural gas use more of these products, so that other countries get less.
EROI is concerned about the energy from coal in the drilling pipe made in China, but installed in Saudi Arabia. It is concerned about energy directly burned in the extraction of the oil (even it is part of the gas extracted at the site). It is generally not concerned about the energy used by humans, except when they are working at extraction site. It is not concerned that these countries need to collect enough taxes on the extracted products to make their roads either. That is part of the reason why a person needs a higher EROI than 1.0 to truly calculate “net” energy.
Conventional Oil Peaked in 2006 –IEA
http://imgur.com/a/hccu9
New Oil discoveries by scientists have been declining since 1965 and last year was the lowest in history -IEA
http://imgur.com/a/W60yn
International Energy Agency Chief warns of world oil shortages by 2020 as discoveries fall to record lows
https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000
Saudi Aramco CEO believes world oil shortage coming despite U.S. shale boom
http://www.foxbusiness.com/markets/2017/07/10/saudi-aramco-ceo-believes-oil-shortage-coming-despite-u-s-shale-boom.html
UAE warns of world oil shortages ahead by 2020 due to industry spending cuts
http://www.arabianindustry.com/oil-gas/news/2016/nov/6/more-spending-cuts-as-uae-predicts-oil-shortages-5531344/
HSBC Global Bank warns 80% of the worlds conventional fields are declining and world oil shortages by 2020
https://www.research.hsbc.com/R/24/vzchQwb
UBS Global Bank warns of industry slowdown and world Oil Shortages by 2020
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/12136886/Oil-slowdown-to-trigger-supply-crisis-by-2020-warns-bank.html
German Army (leaked) Peak Oil study concludes world oil shortages would collapse the world economy & world governments/democracies
http://www.spiegel.de/international/germany/peak-oil-and-the-german-government-military-study-warns-of-a-potentially-drastic-oil-crisis-a-715138.html
The Oil Age may come to an end for a shortage of oil. -Saudi Oil Minister Sheikh Yamani
Or the oil age could end, with a glut of oil, because citizens could not afford the oil that was being pumped.
Our problem is low prices, not high. Low prices are a sign of un-affordability.
If we found another Gwahar, ~165 billion barrels, it would extend BAU all of 4 and a half years. We are discovering way less and consuming way more. The masses are going to get a clue sooner or later that everyone is screwed. The vibe I’m getting is “sooner”. But then again I’m a doomer. 🙂
Hmmm…. 2006…
What else happened in 2006?
An Inconvenient Truth
Initial release 24 May 2006
You are right I think the whole global warming push is nothing more than a red herring to distract the sheep and environmentalist until it’s to late. Dr Hirsch has said before that Al Gore and Obama and Clinton are aware of Peak oil.
The timing of the release of that movie…. basically at the same time the conventional peak was acknowledged…. is rather suspicious…
The Golden Rule:
When the MSM repeats something ad nauseam …. assume you are being lied to.
Always.
The Oil Age may come to an end for a shortage of cheap to produce oil. – Fast Eddy Minister of Facts and Logic – RealitySTAN.
The Kyoto Protocol in 1997 was a very convenient way to transfer manufacturing to China and other Eastern nations. It essentially said, “We won’t compete with you, if you take over our manufacturing.” It gave multinational companies a way of growing in the world market. Big business hoped to profit from this change. Oil prices were way too low, and needed propping up from higher demand. If huge building programs could be undertaken in the Far East, this could be very profitable for investors and would fix the low price problem. Thus, it was an approach that would have been appealing to at least some financial interests. There was also the possibility of making money in new “green” businesses. Business people could be “green,” and make a whole lot of money off of the arrangement.
https://ourfiniteworld.com/2012/11/20/climate-change-the-standard-fixes-dont-work/
At the same time, there was a great deal of concern about peak oil. Furthermore, it was getting uncomfortably close. The 1998 World Energy Outlook has a long section on oil outlook, on pages 90 – 121. It is very much a peak conventional oil story, with an image of the Hubbert Curve on page 96, and charts showing unconventional oil needing to take over between 2012 (Figure 7.8) to 2020 (Figure 7.9). http://www.worldenergyoutlook.org/media/weowebsite/2008-1994/weo1998.pdf
The 1998 WEO also has information on CO2, with a forecast on Page 37 which has turned out to be fairly close to correct. There was indeed a big upturn, as the world ramped up globalization.
In 1999, the IEA did not publish a WEO. In 2000, the IEA had changed to a “Climate Change” only story. At that point, it was getting uncomfortably close to peak oil. It would need to publish a forecast to 2030, instead of 2020. The United States Geological Service conveniently came out with an optimistic forecast of fossil fuel (or was it just oil?) resources about the same time, which would provide cover for the change of story.
It is my understanding that the IEA provides the fossil fuel forecasts to the IPCC–only these are higher than anything they actually forecast in their reports. These climate forecasts are what lead the IEA to be one of the primary voices in making statements about the need to change renewables, etc. The situation starts sounding rather incestuous. (The IEA and OECD are very closely affiliated, by the way. They occupy the same building in Paris.)
All of these things led quite a few Peak Oil followers to start wondering whether Climate Change was being used as a cover for Peak Oil. There might be some kernel of truth to the story, but the motives of those involved seemed more than a little suspect.
Thanks, excellent summary.
It’s all getting together like puzzle, isn’t it. More transformation – catalyst events took place on that late 90s early 2000s time frame, go figure. But that’s for another site, lets only acknowledge the undisputed result as the mil-gov and CBs tightened control out of it.
It is also possible to add in all of the fame and fortune, and bigger funding, that climate scientists could get for building these models. Their motivation wasn’t to produce the lowest possible number. Also, they really didn’t understand how important the fossil fuel estimates were to the outputs of their models, and the fact that the inputs they were given were unrealistic. They also didn’t understand economic feedback loops.
When one pulls back the curtain … the macro looks to be like one giant planned economy…
Yep. Almost, just almost like an “economy” that is being run, more or less, by a bunch of supercomputers and fancy gee whiz algorithms. 😉
I guess the conclusions from The Limits to Growth study must have caused a few bigwigs in the upper echelons of the industrialized civilization to squirm.
Hi Gail,
Interesting read as always. Wonder what the line would look like if instead of a mean income for all of the US, one used the WTID and tossed out the top 1% 0r even 5% of earners and their huge % of total wage income, to give a more accurate sense of the very attenuated purchasing power for the rest of us. A lot of this data is available on Piketty’s website backing up Capital in the 21st Century, I believe, and in any case the WTID is available on its own.
I have just started reading Picketty. He does not seem to take finite world facts into consideration.
Perhpas not, but the issue here is per capita income extracted from GDP dtata and avoiding the skew provided by the very large share of the top 10% compared to the bottom 90%. I believe that wagw stagnation is an important part of Gail’s argument
Thanks for pointing this out. I hadn’t thought of tossing out the income of the top few percentage of wage earners. That would make the results even worse than I showed.
Question: who pulled the plug on QE in mid-2014 and for what reason(s)? Did the Fed act alone or were they essentially told to do so? And by whom, China?
I don’t really know. I recently ran across this report in the Whitehouse.gov budget information.
What struck me is the progression of the numbers in column (5), as well as the progression of amounts in other columns. Column (5) is the amount that the US really needed to borrow from the public. Column (2) and Column (4) are places where funding needs can be conveniently hidden, without having to borrow from the public. It struck me that Col (4) (The QE money) was a convenient place to hide excess borrowing for a time. Once the need for excess borrowing stopped, the program stopped.
Sorry I can’t answer that, only ask a possibly easier question: why did the oil price start plummeting the same month in 2014 when QE ended ? It feels like causation but I can’t see how.
Currency relativities rebalanced, so the United States suddenly became a better country to invest in. In fact, quite a bit of “Carry trade” seems to have ended, because of the fear that interest rates would rise. This is a chart I posted earlier this year, showing currency movements.
The plug has not been pulled…. it does not matter which CBs pumps out the cash — it can be the US — or the BOJ — or the ECB… or other …..it all has the same effect…
e.g. http://www.zerohedge.com/news/2017-08-09/mystery-central-bank-buyer-revealed-snb-now-owns-record-84-billion-us-stocks
And … who knows what is really going on behind the scenes — do you really think the Fed is going to tell all — heck they won’t even admit that they are a private company owned by _____.
Everything is at stake here…. they are most definitely not going to reveal their most desperate policies to the general public…. to what purpose?
Actually, it does depend on which CB pumps out the cash, because this is what helps determine the relativity among the various currencies. The fact that the US discontinued QE, and others did not, was what lowered the relativity of other currencies to the dollar.
The EU has figured out that if the US starts selling its bonds, and the EU does not, this disparity will get a lot worse, making it impossible for the EU to buy imported goods. So it is planning to sell bonds as well (making a huge mess). Japan is stuck at the bottom, regardless. I think it is running out of things to buy.
Right …
I was referring to the overall impact on the global economy in terms of propping up asset prices…
Quote from above>>>>>>>Debt is, in effect, the promise of future goods and services made with energy products. These promises are often helpful in allowing an economy to expand.<<<<<<
one of the key sentences in this article.
The casual observer might say "so what?"—As most unaware people certainly do, equally unaware that it infers infinite supply of energy and raw materials. There is a certainty that our 'now' is forever, (only better)…..again with an unawareness that we are robbing our grandchildren's future to pay for our immediate highlife.
Again, we hit that universal law:
——if a nation doesn’t produce enough indigenous surplus energy to support the demands of its people, they must beg, buy, borrow or steal it from somewhere else, or face eventual collapse and starvation until their numbers reach a sustainable level.——-
https://medium.com/@End_of_More/universal-law-16d41003fe2
Which seems to fit our current situation perfectly. Even the richest of the rich—Saudi, has been forced to accede to that law. If they weren't having problems supporting their profligate lifestyle, they wouldn't be selling the family silver. (Aramco) Right now Saudi are digesting the bitter truth that oil has no value until it is burned.
No nation can flout that law.
Fig 2 shows where the plunge starts,
Fig 13 shows it in close up where QE starts and ends. —-and that the plunge doesn't stop. It goes on down.
The real meaning of QE was that we were being paid to consume, to give ourselves employment. Essentially the same as Roosevelt's new deal in the 30s.—That too would have failed had one A Hit ler not intervened to provide jobs for everybody.
WW2 was a gigantic fuelfest. The losers were those who ran out of gas first. The impetus of WW2 rolled on to 1970
The industrialised world steamed ahead so long as oil coal and gas remained in cheap surplus, now that's all gone we are fostering our delusions that we can continue to do the same on expensive fuels.
That first chart of World GDP In Current US Dollars is a real eye-opener in terms of exponential growth. Look at that period from 2003 to 2008 – clearly that is not sustainable. It looks like a doubling time of about 5 years. Nuts. Absolutely nuts! If we could have continued on that growth trajectory, world GDP would be about 160 times what it was in 1960. That is just plain craziness. However, as Gail points out, things have fallen apart after about 2014. Could we get another doubling from where we are now? Doesn’t look like it.
I agree too that we are stalled out because of affordability problems. The consumer is broke and wages are just going to continue to collapse as more jobs are outsourced to robots and cheap labor. The deflationary death spiral is going to begin in earnest.
The 2003-2008 period is basically when China’s energy consumption of all kinds was going straight up.
The rising demand for energy from China was part of what sent energy prices soaring. We had one debt-related crash in 2008, because of this problem.
Notice how flat GDP growth is in the 1995 to 2002 period. This is when oil and other energy prices were relatively low.
Interesting. Looks like we need 3 new Ghawar’s to fuel 3 new China like GDP growth spurts over the next 10 years to keep the show on the road. What kind of a mess have we painted ourselves into?
Where’s ‘renewable’ energy in the mix? China is replacing fossil fuels at a tremendous clip (sarc)
This is what the chart looked like through 2015, with all “renewables” lumped together (wind, solar, burned waste, and anything else used to make electricity).
The way of counting this electricity is BP’s generous way of counting it. IEA would only give 38% as much credit. (BP figures out how much fossil fuels the electricity might theoretically displace.)
Hang on … let me get my
https://images-na.ssl-images-amazon.com/images/I/31NUGfRh3uL._SX466_.jpg
China would be aware of what happens when renewables becomes a big part of the energy mix…
https://gailtheactuary.files.wordpress.com/2016/08/euan-mearns-europe-electric-price.png
The world iseems unlikely to see anything like another doubling despite all those billions who currently consume very little of anything industrial. And China, query, apparently still growing at 7% per annum, is going to double GDP in the next 10 years? And their coal and oil production must be close to a physically constrained peaks. So, no world doubling, either?. I understand there are still 500m in China’s rural economy who mostly depend on semi-subsistence farming. (The village consumes a lot if not most of the food it grows. Actually in calories per hectare this farming is pretty efficient.)
best
Phil
Thanks for writing. We haven’t heard from you for a while. This is a photo I took in China in 2011.
https://gailtheactuary.files.wordpress.com/2011/05/man-with-water-buffalo.jpg
This is a photo I took in India in 2012.
https://gailtheactuary.files.wordpress.com/2016/11/woman-carrying-two-pots-of-water-on-her-head.jpg
These are workers in India that I saw harvesting rice, using small hand tools.
https://gailtheactuary.files.wordpress.com/2013/03/workers-harvesting-rice-v2.jpg
I think that there still is quite a bit of subsistence agriculture in both countries. Those who are making forecasts assume that all of this subsistence agriculture will “go away,” and be replaced by fossil fuel agriculture. This seems unlikely to me as well.
Thanks, nice rice paddy pic, almost looks like fish pond. Some cultures even combined it, but only further north, for obvious fast evaporation and shallow water depth temp spike reasons, but it was only small contribution catch-harvest to backbone rice production..
Those are good points you are making. 99.999% of the world’s population don’t understand that nearly all of the world’s forecasts are based on the assumption of a nearly infinite supply of energy. Government funding budgets assume infinite energy supply. So do insurance and bank models.
One thing that struck me as I was looking at the data is the huge amount of estimation that goes into any of the reported world economic growth rates we see. If some countries (such as China and perhaps India) are now providing GDP estimates that are unrealistically high, the PPP weighting process will tend to magnify this overstatement in the world amounts.
The estimates almost have to be unrealistically high because where we are now is clearly too high to sustain. What country wants to admit that GDP is heading down. The big questions in my mind is how fast will GDP unwind? Can it unwind slowly? Will the first chart fall from peak to 1960 levels in a short span of 5 to 10 years? Or, will it take 50 years to fall back to 1960 levels? Such uncertain times. I have always read that GDP must grow or the monetary system will fail. So, my instincts tell me that GDP cannot decline for long before things start to fall apart. So, if this cannot be unwound we are screwed.
It seems like the people from China that I talked to when I was in Montana were of the opinion that the Chinese GDP estimates are high. We have heard that there are layoffs in India, and we know that there have been big problems in trying to call back the bigger denomination bills. Yet GDP is being reported at 7.1%.
There is also the question of how high inflation really is. If a country underestimates inflation, it makes their inflation-adjusted GDP higher. I would be willing to bet that there are quite a few countries doing that.
This site may be a useful one for the toolkit-
http://pricedingold.com/
Maybe and maybe not. If people grow food for their own use, and there is nothing left over, they are not inclined to sell it for any price. I expect it will be possible to trade used clothing and furniture, but not things people really need.
Lots of MSM articles trying to explain why wage growth has stagnated … of course none explain that this is related to the energy story….
That’s another immutable ‘fact’ that must not be questioned by the MSM…. infinite energy is assumed
I love the way you can synthetize our predicament, always referring to the essential issues. I hope your book is selling more than viagra in the US senate. It deserves.
lol
thanks
i hadn’t thought of using that as a sales measure
Pingback: World GDP in current US dollars seems to have peaked; this is a problem – Enjeux énergies et environnement
Hmm. We can expect a lot more Charlottesvilles, then.
Charlottesville, Virginia.
Virginia Plain. Robert E Lee.
https://www.youtube.com/watch?v=y8DJP6XYGDQ
Make me a deal and make it straight
All signed and sealed, I’ll take it
To Robert E. Lee I’ll show it
I hope and pray he don’t blow it ’cause
We’ve been around a long time just try try try tryin’ to
Make the big time
You call it..
Different place, same people:
https://da4pli3l5vc0d.cloudfront.net/b3/04/b30443edbc24163adc3326672b0ef7123a00b0a4/h=300/?app=portal&sig=51bb5d0af651d7aec4a10085af72a45b1861319cd3f8649845ba7095250d4d73
—
Claire Meddock, 21, stands on a toppled Confederate statue on Monday, Aug. 14, 2017, in Durham, N.C. Activists on Monday evening used a rope to pull down the monument outside a Durham courthouse. The Durham protest was in response to a white nationalist rally held in Charlottesville, Va, over the weekend. Authorities say one woman was killed Saturday after one of the white nationalists drove his car into a group of counterprotesters. (AP Photo/Jonathan Drew)
Protesters topple Confederate statue in North Carolina
The Associated Press – By JONATHAN DREW – Associated Press
i seem to recall a statue being pulled down in iraq a while ago
interesting chain of events followed that
The Trump catalyst
(and internal gov chaos + public chaos) = Gorbi-Yeltsin times revival ahead, watch out.
If you know, how to trade it, pls share it..