Will China Bring an Energy-Debt Crisis?

It is easy for those of us in the West to overlook how important China has become to the world economy, and also the limits it is reaching. The two big areas in which China seems to be reaching limits are energy production and debt. Reaching either of these limits could eventually cause a collapse.

China is reaching energy production limits in a way few would have imagined. As long as coal and oil prices were rising, it made sense to keep drilling. Once fuel prices started dropping in 2014, it made sense to close unprofitable coal mines and oil wells. The thing that is striking is that the drop in prices corresponds to a slowdown in the wage growth of Chinese urban workers. Perhaps rapidly rising Chinese wages have been playing a significant role in maintaining high world “demand” (and thus prices) for energy products. Low Chinese wage growth thus seems to depress energy prices.

(Shown as Figure 5, below). China’s percentage growth in average urban wages. Values for 1999 based on China Statistical Yearbook data regarding the number of urban workers and their total wages. The percentage increase for 2016 was based on a Bloomberg Survey.

The debt situation has arisen because feedback loops in China are quite different from in the US. The economic system is set up in a way that tends to push the economy toward ever more growth in apartment buildings, energy installations, and factories. Feedbacks do indeed come from the centrally planned government, but they are not as immediate as feedbacks in the Western economic system. Thus, there is a tendency for a bubble of over-investment to grow. This bubble could collapse if interest rates rise, or if China reins in growing debt.

China’s Oversized Influence in the World

China plays an oversized role in the world’s economy. It is the world’s largest energy consumer, and the world’s largest energy producer. Recently, it has become the world’s largest importer of both oil and of coal.

In some sense, China is the world’s largest economy. Usually we see China referred to as the world’s second largest economy, based on GDP converted to US dollars. Economists use an approach called GDP (PPP) (where PPP is Purchasing Power Parity) when computing world GDP growth. When this approach is used, China is the world’s largest economy. The United States is second largest, and India is third.

Figure 1. World’s largest economies, based on energy consumption and GDP based on Purchasing Power Parity. Energy Consumption is from BP Statistical Review of World Energy, 2017; GDP on PPP Basis is from the World Bank.

Besides being (in some sense) the world’s largest economy, China is also a country with a very significant amount of debt. The government of China has traditionally somewhat guaranteed the debt of Chinese debtors. There is even a practice of businesses guaranteeing each other’s debt. Thus, it is hard to compare China’s debt to the debt level elsewhere. Some analyses suggest that its debt level is extraordinarily high.

How China’s Growth Spurt Started

Figure 2. China’s energy consumption, based on data from BP Statistical Review of World Energy, 2017.

From Figure 2, it is clear that something very dramatic happened to China’s coal consumption about 2002. China joined the World Trade Organization in December 2001, and immediately afterward, its coal consumption soared.

Countries in the OECD, whether they had signed the 1997 Kyoto Protocol or not, suddenly became interested in reducing their own greenhouse gas emissions. If they could outsource manufacturing to China, they would be able to reduce their reported CO2 emissions.

Besides reducing reported CO2 emissions, outsourcing manufacturing to China had two other benefits:

  • The goods being manufactured in China would be cheaper, allowing Americans, Europeans, and Japanese to buy more goods. If more “stuff” makes people happy, citizens should be happier.
  • Businesses would suddenly have a new market in China. Perhaps the people of China would start buying goods made elsewhere.

Of course, a major downside of moving jobs to China and other Asian nations was the likelihood of fewer jobs elsewhere.

Figure 3. US Labor Force Participation Rate, as prepared by Federal Reserve Bank of St. Louis.

In the early 2000s, when China started competing actively for jobs, the share of people in the US workforce started shrinking. The drop-off in labor force participation did not level out until mid-2014. This is about when world oil prices began to fall, and, as we will see in the next section, when China’s growth in average wages began to fall.

Another downside to moving jobs to China was more CO2 emissions on a worldwide basis, even if emissions remained somewhat lower locally. CO2 emissions on imported goods were not “counted against” a country in its CO2 calculations.

Figure 4. World carbon dioxide emissions, split between China and Rest of the World, based on BP Statistical Review of World Energy, 2017.

At some point, we should not be surprised if countries elsewhere start pushing back against the globalization that allowed China’s rapid growth. In some sense, China has lived in an artificial growth bubble for many years. When this artificial growth bubble ends, it will be much harder for China’s debtors to repay debt with interest.

China’s Rapid Wage Growth Stopped in 2014

Rising wages are important for making China’s growth possible. With rising wages, workers can increasingly afford the apartments that are being built for them. They can also increasingly afford consumer goods of many kinds, and they can easily repay debts taken out earlier. The catch, however, is that wage growth cannot get ahead of productivity growth, or the price of goods will become too expensive on the world market. If this happens, China will have difficulty selling its goods to others.

China’s wage growth seems to have slowed remarkably, starting in 2014.

Figure 5. China’s percent growth in average urban wages. Values for 1999 based on China Statistical Yearbook data regarding the number of urban workers and their total wages. The percentage increase for 2016 was estimated based on a Bloomberg Survey.

This is when China discovered that its high wage increases were making it uncompetitive with the outside world. Wage growth needed to be reined in. Its growth in productivity was no longer sufficient to support such large wage increases.

China’s Growth in Energy Consumption Also Slowed About 2014 

If we look at the annual growth in total energy consumption and electricity consumption, we see that by 2014 to 2016, their growth had slowed remarkably (Figure 6). Their growth pattern was starting to resemble the slow growth pattern of much of the rest of the world. Energy growth allows an economy to increasingly leverage the labor of its workforce with more energy-powered “tools.” With low energy growth, it should not be surprising if productivity growth lags. With low productivity growth, we can expect low wage growth.

Figure 6. China’s growth in consumption of total energy and of electricity based on data from BP Statistical Review of World Energy, 2017.

It is possible that the increased rate of electricity consumption in 2016 is related to China’s program of housing migrant workers in unsalable apartments that took place at that time. The fact that these apartments were otherwise unsalable was no doubt influenced by the slowing growth in wages.

This decrease in energy consumption most likely occurred because the price of China’s energy mix was becoming increasingly expensive. For one thing, the mix included a growing share of oil, and oil was expensive. The proportion of coal in the mix was falling, and the replacements were more expensive than coal. There was also the issue of the general increase in fossil fuel prices.

Lower Wage Growth in China Likely Affected Fossil Fuel Prices

Affordability is the big issue with respect to how high fossil fuel prices can rise. The issue is not just buying the oil or coal or natural gas itself; it is also being able to afford the goods made with these fuels, such as food, clothing, appliances, and apartments. If wages were depressed in the developed countries because of moving production to China, then rising wages in China (and other similar countries, such as India and the Philippines) must somehow offset this problem, if fossil fuel prices are to remain high enough for extraction to continue.

Figures 7 and 8 (below) show that oil, natural gas, and coal prices all started to slide, right about the time China’s urban wages growth began shrinking (shown in Figure 5).

Figure 7. Oil and natural gas prices, based on BP Statistical Review of World Energy data.

Figure 8. Coal prices between 2000 and 2016 from BP Statistical Review of World Energy. Chinese coal is China Qinhuangdao spot price and Japanese coal is Japan Steam import cif price, both per ton.

The lower recent increases made China’s urban wage growth look more like that of the US and Europe. Thus, in 2014 and later, Chinese urban wages present much less of a “push” on the growth of the world economy than they had previously. Without this push of rising wages, it becomes much harder for the world economy to grow very rapidly, and for it to have a very high inflation rate. There is simply not enough buying power to push prices very high.

It might be noted that the average Chinese urban wage increases shown previously in Figure 5 are not inflation adjusted. Thus, in some sense, they include whatever margin is available for inflation in prices as well as the margin that is available for a greater quantity of purchased goods. Because of this, these low wage increases may help explain the recent lack of inflation in much of the world.

Quite likely, there are other issues besides China’s urban wage growth affecting world (and local) energy prices, but this factor is probably more important than most people would expect.

Can low prices bring about “Peak Coal” and “Peak Oil”?

What does a producer do in response to suddenly lower market prices–prices that are too low to encourage more production?

This seems to vary, depending on the situation. In the case of coal production in China, a decision was made to close many of the coal plants that had suddenly become unprofitable, thanks to lower coal prices. No doubt pollution being caused by these plants entered into this decision, as well. So did the availability of other coal elsewhere (but probably at higher prices), if it is ever needed. The result of this voluntary closure of coal plants in response to low prices caused the drop in coal production shown in Figure 8, below.

Figure 8. China’s energy production, based on data from BP Statistical Review of World Energy, 2017.

It is my belief that this is precisely the way we should expect peak coal (or peak oil or peak natural gas) to take place. The issue is not that we “run out” of any of these fuels. It is that the coal mines and oil and gas wells become unprofitable because wages do not rise sufficiently to cover the fossil fuels’ higher cost of extraction.

We should note that China has also cut back on its oil production, in response to low prices. EIA data shows that China’s 2016 oil production dropped about 6.9% compared to 2015. The first seven months of 2017 seems to have dropped by another 4.2%. So China’s oil is also showing what we would consider to be a “peak oil” response. The price is too low to make production profitable, so it has decided that it is more cost-effective to import oil from elsewhere.

In the real world, this is the way energy limits are reached, as far as we can see. Economists have not figured out how the system works. They somehow believe that energy prices can rise ever higher, even if wages do not. The mismatch between prices and wages can be covered for a while by more government spending and by more debt, but eventually, energy prices must fall below the cost of production, at least for some producers. These producers voluntarily give up production; this is what causes “Peak Oil” or “Peak Coal” or “Peak Natural Gas.”

Why China’s Debt System Reaches Limits Differently Than Those in the West

Let me give you my understanding regarding how the Chinese system works. Basically, the system is gradually moving from (1) a system in which the government owns all land and most businesses to (2) a system with considerable individual ownership.

Back in the days when the government owned most businesses and all land, farmers farmed the land to which they were assigned. Businesses often provided housing as part of an individual’s “pay package.” These homes typically had a shared outhouse for a bathroom facility. They may or may not have had electricity. There was relatively little debt to the system, because there was little individual ownership.

In recent years, especially after joining the World Trade Organization in 2001, there has been a shift to more businesses of the types operated in the West, and to more individual home ownership, with mortgages.

The economy acts rather differently than in the West. While the economy is centrally planned in Beijing, quite a bit of the details are left to individual local governments. Local heads of state make decisions that seem to be best based on the issues they are facing. These may or may not match up with what Beijing central planning intended.

Historically, Five-Year Plans have provided GDP growth targets to the various lower-level heads of state. The pay and promotions of these local leaders have depended on their ability to meet (or exceed) their GDP goals. These goals did not have any debt limits attached, so local leaders could choose to use as much debt as they wanted.

A major consideration of these local leaders was that they also had responsibility for jobs for people in their area. This responsibility further pushed them to aim high in the amount of development they sought.

Another related issue is that sales of formerly agricultural land for apartments and other development are a major source of revenue for local governments. Local leaders did not generally have enough tax revenue for programs, without supplementing their tax revenue with funds obtained from selling land for development. This further pushed local leaders to add development, whether it was really needed or not.

The very great power of local heads of state and their administrators made these leaders tempting targets for bribery. Entrepreneur had a chance of getting projects approved for development, with a bribe to the right person. There has been a recent drive to eliminate this practice.

We have often heard the comment, “A rising tide raises all boats.” When the West decided to discourage local industrialization because of CO2 concerns, it gave a huge push to China’s economy. Almost any project could be successful. In such an environment, local rating agencies could be very generous in their ratings of proposed new bond offerings, because practically any project would be likely to succeed.

Furthermore, without many private businesses, there was little history of past defaults. What little experience was available suggested the possibility of few future defaults. Wages had been rising very rapidly, making individual loans easy to repay. What could go wrong?

With the central government perceived to be in control, it seemed to make sense for one governmental organization to guarantee the loans of other governmental organizations. Businesses often guaranteed the loans of other businesses as well.

Why the Chinese System Errs in the Direction of Overdevelopment

In the model of development we are used to in the West, there are feedback loops if too much of anything is built–apartment buildings (sold as condominiums), coal mines, electricity generating capacity, solar panels, steel mills, or whatever else.

In China, these feedback loops don’t work nearly as well. Instead of the financial system automatically “damping out” the overcapacity, the state (or perhaps a corrupt public official) figures out some way around what seems to be a temporary problem. To understand how the situation is different, let’s look at three examples:

Apartments. China has had a well-publicized problem of  building way too many apartments. In about 2016, this problem seems to have been mostly fixed by local governments providing subsidies to migrant workers so that they can afford to buy homes. Of course, where the local governments get this money, and for how long they can afford to pay these stipends, are open questions. It is also not clear that this arrangement is leading to a much-reduced supply of new homes, because cities need both the revenue from land sales and the jobs resulting from building more units.

Figure 9 shows one view of the annual increase in Chinese house prices, despite the oversupply problem. If this graph is correct, prices have increased remarkably in 2017, suggesting some type of stimulus has been involved this year to keep the property bubble growing. The size of an apartment a typical worker can now afford is very small, so this endless price run-up must end somewhere.

Figure 9. Chinese house price graph from GlobalPropertyGuide.com.

Coal-Fired Power Plants. With all of the problems that China has with pollution, a person might expect that China would stop building coal-fired power plants. Instead, the solution of local governments has been to build additional power plants that are more efficient and less polluting. The result is significant overcapacity, in total.

May 2017 article says that because of this overcapacity problem, Beijing is forcing every coal-fired power plant to run at the same utilization rate, which is approximately 47.7 % of total capacity. A Bloomberg New Energy Finance article estimates that at year-end 2016, the “national power oversupply” was 35%, considering all types of generation together. (This is likely an overestimate; the authors did not consider the flexibility of generation.)

Beijing is aware of the overcapacity problem, and is cancelling or delaying a considerable share of coal-fired capacity that is in the pipeline. The plan is to limit total coal-fired capacity to 1,100 gigawatts in 2020. China’s current coal-fired generating capacity seems to be 943 gigawatts, suggesting that as much as a 16% increase could still be added by 2020, even with planned cutbacks.

It is not clear what happens to the loans associated with all of the capacity that has been cancelled or delayed. Do these loans default? If “normal” feedbacks of lower prices had been allowed to play out, it is doubtful that such a large amount of overcapacity would have been added.

If China’s overall growth rate slows to a level more similar to that of other economies, it will have a huge amount of generation that it doesn’t need. This adds a very large debt risk, it would seem.

Wind and Solar. If we believe Darien Ma, author of “The Answer, Comrade, Is Not Blowing in the Wind,” there is less to Beijing’s seeming enthusiasm for renewables than meets the eye.

According to Ma, China’s solar industry was built with the idea of having a product that could be exported. It was only in 2013 when Western countries launched trade suits and levied tariffs that China decided to use a substantial number of these devices itself, saving the country from the embarrassment of having many of these producers go bankrupt. How this came about is not entirely certain, but the administrator in charge of wind and solar additions was later fired for accepting bribes, and responsibility for such decisions moved higher up the chain of authority.

Figure 10. China current view of solar investment risk in China. Chart by Bloomberg New Energy Finance.

Ma also reports, “Officials say that they want ‘healthy, orderly development,’ which is basically code for reining in the excesses in a renewable sector that has become yet another emblem of irrational exuberance.”

According to Ma, the Chinese National Energy Administration has figured out that wind and solar are still about 1.5 and 2.5 times more expensive, respectively, than coal-fired power. This fact dampens their enthusiasm for the use of these types of generation. China plans to phase out subsidies for them by 2020, in light of this issue. Ma expects that there will still be some wind and solar in China’s energy mix, but that natural gas will be the real winner in the search for cleaner electricity production.

Viewed one way, we are looking at yet another way Chinese officials have avoided closing Chinese businesses because the marketplace did not seek their products. Thus, the usual cycle of bankruptcies, with loan defaults, has not taken place. This issue makes China’s total electricity generating capacity even more excessive, and reduces the profitability of the overall system.


We have shown how low wages and low energy prices seem to be connected. When prices are too low, some producers, including China, make a rational decision to cut back on production. This seems to be the true nature of the “Peak Coal” and “Peak Oil” problem. Because China is reacting in a rational way to lower prices, its production is falling. China is already the largest importer of oil and coal. If there is a shortfall elsewhere, China will be affected.

We have also given several examples of how the current system has been able to avoid defaults on loans. The issue is that these problems don’t really go away; they get hidden, and get bigger and bigger. At some point, all of the manipulations by government officials cannot hide the problem of way too many apartments, or of way too much electricity generating capacity, or of way too many factories of all kinds. The postponed debt collapse is likely to be much bigger than if market forces had been allowed to bring about earlier bankruptcies and facility closures.

Chinese officials are now talking about reining in the growth of debt. There is also discussion by heads of Central Banks about raising interest rates and selling QE securities (something which would also tend to raise interest rates). China will be very vulnerable to rising interest rates, because of stresses that have been allowed to build up in the system. For example, many mortgage holders will not be able to afford the new higher monthly payments if rates rise. If interest rates rise, factories will find it even harder to be profitable. Some may reduce staff levels, to try to reach profitability. If this is done, it will tend to push the system toward recession.

We likely now are in the lull before the storm. There are many things that could push China toward an energy or debt crisis. China is so big that the rest of the world is likely to also be affected.



About Gail Tverberg

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

1,825 Responses to Will China Bring an Energy-Debt Crisis?

  1. Fast Eddy says:

    Unfortunately, it truly does appear that things will get even worse in 2018, because a tremendous amount of high-yield retail debt is coming due next year.

    In fact, Bloomberg is reporting that the amount of high-yield retail debt that will mature next year is approximately 19 times larger than the amount that matured this year…


    • Davidin100millionbilliontrillionzillionyears says:

      okay, things will be a bit worse in 2018…

      that still = BAU.

      can they refinance that debt to a near zero interest rate?

      which is also known as kicking the can down the road.

      since almost everything is now too big to fail, I would guess yes.

      let them kick that can right into the 2020’s!

      I would like The Collapse to be postponed, please.

      • JH Wyoming says:

        Yeah, BAU keeps on trucking. Coming close to putting yet another year behind us as they just keep on whizzing by. I’m with you – next stop 2020’s! Will collapse occur in 2021, or 2025 or 2029 or will things just keep on going? I think it’s a case of metamorphosis in which rather than collapse, it just divides and folds into something new. Even if X # of people fall off the wagon the one’s remaining keep things going.

        Let’s say things do keep going instead of collapse occurring. What we’ll likely have in 2100 are densely populated cities with high technology, surrounded by wide expanses of dead zones. No wildlife – just some scrub brush and cacti in searing heat.

        Crops will have to be grown in buildings or what’s known as vertical crop growth using hydroponics and refracted light. Not to avoid using pesticides because all the insects will have been eradicated 50 years earlier but because the weather will fluctuate too drastically.

        Just as the US is pretty much the same from coast to coast, in 2100 all cities around the world will be much the same, so it’s unlikely people will travel much. If they want to go to a south pacific beach, they’ll go to a building that mimics those conditions right down to the person serving a pino coloda with a mini umbrella on top. All the major attractions like the Eiffel Tower, Victoria Falls, the great wall of China will be mimicked and you’ll take a ride flying by them, so if you want to see the sights and sounds of the planet you’ll just need a half hour. You could do it during lunch.

        • Davidin100millionbilliontrillionzillionyears says:

          it’s hard to imagine a realistic scenario where BAU continues for 83 more years.
          population increase + FF decrease = a formula for disaster.

          but 13 more years?
          that seems somewhat possible, though not a certainty, of course.

          • Jesse James says:

            Baltimore is exhibiting signs of collapse as we speak. I think we are living through slow-mo collapse right now. The questions is will it pick up speed? Suddenly perhaps.

            • Davidin100millionbilliontrillionzillionyears says:

              the idea Tim Groves had a while back:

              we will always seem to be 10 years away from The Collapse until it suddenly happens.

              there is some appeal to that idea…

              though I think we will see major signs of upheaval and increasingly so, until The Collapse.

              “slow-mo” sounds about right…

              through the 2020’s…

              like the saying “slowly at first, then all at once”.

            • Fast Eddy says:

              If you still have a job that pays reasonably well…. things will likely feel pretty good… right up until the collapse hits…

              When it finally arrives it will be rapid … in fact… we may not even be able to read it about it in the MSM… why inform us… that is not what the MSM does… best we dont know … we just keep rolling along as if everything is normal…. until it is not

              Much like today — the stock market will hit another record high… all fake… and we will expect to wake up tomorrow and head to the office… we ignore the fake economy… the CBs can control the problem… eventually fix it

              But at some point something snaps… and chaos commences… I would expect that when the system breaks the power will go off… and it will not come back on ..

              Most people will have no clue as to what the cause is… they will expect it to come back on … but it will not….

              And then the gloves will come off

        • psile says:

          There’s simply no way, due to the power of the exponential function, that we’ll ever get to 2100. Not even anywhere close. The wheels are coming off the cart now, fer f&7ks sake… Oil consumption alone will have to have tripled from current levels by then, just to keep square. That’s 100 billion barrels per year!

        • Nope.avi says:

          Yes, things will keep trucking on to the year 2100, unless Trump screws it up.

    • There seem to be a lot of things coming together right now. They seem to be coming from many directions at once. This is a link about Chinese loans: China Oct new yuan loans hit one-year low as debt curbs weigh

      The China situation is especially worrisome.

      India is not doing all that well either.

      Property prices across India’s biggest cities have fallen or largely stagnated as sales dropped. Residential re-sale prices slid 20 per cent to 25 per cent after the cash ban, while new home prices weakened by seven per cent to 17 per cent, Mr Puri said.

      We have had experience with big drops in home prices. They usually don’t come out well.

      • Davidin100millionbilliontrillionzillionyears says:

        perhaps your next blog will be about India?

        I can see India being the major test case for collapse.

        more than one billion people and no slowdown in population growth.

        if their economy turns down, the world may see something that’s never been seen before.

    • thestarl says:

      Here in Oz as you are well aware on the eastern seaborne we are in a property ponzi madhouse but still they never pay much attention to consumer debt levels witch are at bats..t crazy levels not to mention wage stagnation.
      I give up predicting when this thing pops but that HSBC energy report scares the sh.. out of me.

      • thestarl says:

        The biggest four companies in Australia are banks 70% of their balance sheets are mortgages,good old Aussie taxpayer backstopping them when this goes down.

        • psile says:

          I came across this great article which highlights, in horrific detail, the extent of the Potemkin village called Australia. Like I’ve said so many times, you WILL be able to see the explosion from space, once this thing ends…Below is an excerpt from a read that will take about an hour. More if you count the comments.

          Australia’s Economy is a House of Cards

          Successive Australian governments have achieved economic growth by blowing a property bubble on a scale like no other.

          A bubble that has lasted for 55 years and seen prices increase 6556% since 1961, making this the longest running property bubble in the world (on average, “upswings” last 13 years).

          According to the Rider Levett Bucknall Crane Index, in Q4 2017 between Sydney, Melbourne and Brisbane, there are now 586 cranes in operation, with a total of 685 across all capital cities, 80% of which are focused on building apartments. There are 350 cranes in Sydney alone.

          By comparison, there are currently 28 cranes in New York, 24 in San Francisco and 40 in Los Angeles. There are more cranes in Sydney than Los Angeles (40), Washington DC (29), New York (28), Chicago (26), San Francisco (24), Portland (22), Denver (21), Boston (14) and Honolulu (13) combined.

          Rider Levett Bucknall counts less than 175 cranes working on residential buildings across the 14 major North American markets that it tracked in 3Q17, which is half of the number of cranes in Sydney alone.

          According to UBS, around one third of these cranes in Australian cities are in postcodes with ‘restricted lending’, because the inhabitants have bad credit ratings.

          This can only be described as completely “insane”.

          That was the exact word used by Jonathan Tepper, one of the world’s top experts in housing bubbles, to describe “one of the biggest housing bubbles in history”. “Australia”, he added, “is the only country we know of where middle-class houses are auctioned like paintings”.

          It’s best to not be within 500kms of the eastern seaboard when it blows…

          • Very good article. Lots of charts. I liked, “And a staggering 64% of all investor loans are interest only.”

            • Fast Eddy says:

              This is not the Onion…. this is REAL….

              IDEA! I wonder if I could get a personal loan for say USD50,000,000 and pay the interest only… ideally the interest would be less than 2%…. I could use some of the loan to meet the monthly payments… then just blow the rest on the Mother of All Bucket Lists….

              repayment of interest only

              If you want to repay the interest on your housing loan only considering a financial train facing you, you can apply for “repayment of interest only”.

              ·It can sharply decrease the monthly installment that you have to pay.

              ·You only need to pay the monthly interest on you housing loan.

              ·You can determine the period of the payment.

              ·It is applicable for first-hand/direct first-hand housing loan, second-hand housing loan, commercial property loan and personal consumption loan.

              Note: All the contents stated above are for your reference only. Please consult the local branch of China Merchants Bank for further information. China Merchants Bank reserves the ultimate right of interpretation for the contents in this page.


            • Fast Eddy says:

              It’s not quite this … but close… very close….

              I forgot to mention … when I blow through the 50M … I will declare bankruptcy … (then apply for another 50m interest only loan).

              That’s the whole point of this — isn’t it? Too encourage consumption … to keep BAU alive….

              I say again — where do I sign?

            • Greg Machala says:

              Careful FE your getting too clever!

      • Fast Eddy says:

        It’s all so bizarre.. how can this be happening….

      • I will have to admit that my first reaction is to take “Peak Oil” calculations with a grain of salt. The models have predicted disaster, time and time again. What has happened in the past is that rising prices has encouraged production, not considered in the model. As a result, actual production has turned out to be far higher than the model predicted.

        This time does seem to be different, however. Oil production does seem to have leveled out in the past year. This by itself is not a good sign for long term production. Good international data is becoming less available, now that the EIA has stopped producing many of the reports it used to produce, and the ones it does produce look sort of “iffy.” The best data seems to be from IEA, which is what Euan Mearns shows. http://euanmearns.com/oil-production-vital-statistics-october-2017/

        This is a chart of world oil production from his page.

        It shows fairly flat production in 2017 (which is what IEA has been reporting). There aren’t really areas that look like they are getting ready to ramp up. Iraq was at one point believed to be a place of great growth in future oil production, but without higher prices, it is unlikely that this will happen. https://oilprice.com/Latest-Energy-News/World-News/Iraq-Oil-Revenues-Not-Enough-For-Sustainable-Development.html
        This article says that prices are too low to provide key services to oil exporters in general.

  2. Baby Doomer says:

    15,000 scientists in 184 countries warn about negative global environmental trends

    Human well-being will be severely jeopardized by negative trends in some types of environmental harm, such as a changing climate, deforestation, loss of access to fresh water, species extinctions and human population growth, scientists warn.

  3. psile says:

    Cathal Haughian has a new post, he says phase 2.0 of The Reset commenced on Nov. 1. Somehow Rothschild is involved in all of this…

    Conversation with Warburg

    CH: The good news is that the War Kings are running out of time to make their big move: The second phase of the Reset began on November 1st, 2017.

    After the third phase begins, The Reset will go global and supercritical within two weeks. Which is when Rothschild makes his move.

    • Davidin100millionbilliontrillionzillionyears says:

      then, in the fourth phase, he will own almost everything.

      in the fifth phase, he will become King of the World.

      in the sixth phase, he will announce that he has obtained immortality through complete anti-aging based on all the science which he now owns.

      in the seventh phase, he will have difficulty keeping the secret that he has to eat human flesh to continue his anti-aging immortality.

      in the eighth phase, he will announce that he will spare the lives of all the posters on OFW, with special thanks to Davidin100etc…

      in the ninth phase, he will begin his program of populating all the planets of the solar system.

      in the tenth phase, aliens will return to Earth and eat him, because these aliens are Karmarulesians.

      The End.

    • Cathal seems more than a little “off,” but the timing could in theory prove to be correct.

      Things seem to be headed downhill now, but it seems like the next steps will probably take more time than two weeks, based on how slowly things have unfolded to date.

      • psile says:

        Crashes from unsustainable heights happen very quickly though.

        The Seneca Effect

        “It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.” Lucius Anneaus Seneca, Letters to Lucilius, n. 91

        • I have been one of the people talking about relatively rapid crashes for a long time. The quote from Lucius Anneaus Seneca is good!

          • Greg Machala says:

            I agree. It does not seem that our financial system could hold together if BAU is scaled back year after year, slowly for 100 years. With contraction every year how does the financial system work? I just don’t think it could work (slow collapse); something crucial will fail causing the whole system to grind to a halt.

            • psile says:

              Even the partial contraction of world GDP in 2008 almost put an end to the system and instituted the ensuing bizarro monetary policies aimed at restoring it, which has been achieved since.

              But next time, I don’t think we’ll be so lucky…

  4. Fast Eddy says:

    Thinking further about this http://www.zerohedge.com/news/2017-11-16/why-americas-retail-apocalypse-could-accelerate-even-more-2018

    A lot of bad things are scheduled for 2018… and we have HSBC and others calling for a bottleneck in oil resulting in shortages… perhaps a big spike in price… then a total collapse….

    The Year of Living Dangerously approaches….

    • Davidin100millionbilliontrillionzillionyears says:

      could be.
      but we’re not the only ones “in the know”…
      the El-ders see all of this unfolding.

      will they sit back and do nothing?

      if They think an oil price spike will destroy all of their wealth (The Collapse will be nearly total, you know?), then They will do what They need to do to keep THEIR BAU going…

      They don’t care about OUR BAU at all, but that’s immaterial.

      of course, it’s still 2017, so I’m discounting 2018 to nearly zero.

    • thestarl says:

      That HSBC report should have been front page news.

      • Baby Doomer says:

        People are almost completely ignoring a looming crisis for oil

        • Fast Eddy says:

          That HSBC report should absolutely NOT be front page news — it should be buried in a deep hole … or burned in a furnace.

          The last thing BAU needs is for the masses to be made aware of the fact that we are peaking out on oil….

          Anyway – there is no chance of that happening because the MSM is not in the business of informing — it is in the business of controlling what the masses think…. and it is important that the masses believe that the future will bring prosperity….

  5. Fast Eddy says:

    And here’s a bit of uplifting news as we head into the weekend….

    Registrations fall from 3,000 to single digits after end of full tax break

    HONG KONG — Tesla is skidding in Hong Kong, where city authorities earlier this year slashed tax incentives on purchases of new electric vehicles.

    The cars were once eligible for full exemptions but now come with a tax break up to only 97,500 Hong Kong dollars ($12,488). This means Tesla’s Model 3 sedan now costs over $120,000, nearly 80% more than it did with the total exemption.

    After the government’s tax decision in February, the U.S. automaker managed to move fewer than 10 units during the April-August period. This highlights an inconvenient truth about electric vehicles: They are extremely susceptible to tax carrots, even when they are aimed at a wealthy clientele.


    • Of course, when an electric car is resold, the buyer doesn’t get a similar tax credit. So from his point of view, the car needs to be evaluated next to other cars for resale, both electric and gas. So far the resale values have been terrible.

      EVs Are Cheap to Run but Expensive to Own, Thanks to Abysmal Resale Values

      Another option for those who want a new EV is to lease. Especially if you’re in California, Oregon, or one of the eight other ZEV-mandate states, you’re likely to find bargain lease deals—built around highly subsidized resale values and often with some incentives baked in—that can result in monthly payments under $200 for some EVs.

      But it’s those same incentives that are, at least in part, to blame for EVs’ depressed resale values. Anil Goyal, senior vice president of automotive valuation and analytics at Black Book, pointed to those, plus low gas prices, decreasing sticker prices as the technology scales up, and the lack of easy charging infrastructure as among the many issues that push values downward more steeply for EVs.

      • Greg Machala says:

        How good would the resale value be on a Tesla with a 7 or 10 year old battery? From 120K to 5K ?

      • Fast Eddy says:

        The DelusiSTANI hipster would not likely been aware of this when he walked into the Tesla shop in a daze and parted with 85k….

        But the price for ‘saving the world’ is very high… as one finds out when one tries to sell an EV (when the rattles become too much — and the battery is not holding the charge…)

        Just thinking of the look on a DelusiSTANI’s face when he sees the collapse in the value of his coal powered car has dropped in such a short time — puts a smile on my face.

  6. Fast Eddy says:

    In April and May, the company put up fat zeros in Hong Kong. Registrations hit four in June, two in July, and nil again in August, according to the transport department.

    I wonder what the sales people do with all that free time….

    The joke that is Tesla — is exposed — no subsidies NO SALES.

    The only good EV… is a golf cart

  7. A Real Black Person says:


    What you say about living in cardboard boxes is fallacious. I never mentioned living in cardboard boxes. I mentioned building houses from cardboard boxes, often reconfigured. ”


    If you had life experience with cardboard you’d realize a FEW things without necessarily trying them out.

    (a) A lot of cardboard is needed to build a human habitat that can withstand temperate weather.
    (b) Wet cardboard loses any strength that it has quickly.
    (c) Wet cardboard poses a huge mold problem.

    At best, cardboard could provide temporary shelter, as in for a few hours in most parts of the world where it rains regularly. It would last longer in a very dry area, but I’m not sure how much longer since it is a very ephemeral material.

    “I’m not concerned with what other people like. ”
    Yes, I’m sure you came up with cardboard houses all by yourself.

    Whoever came up with the idea of cardboard houses needs to realize that…
    This isn’t engineering:

    Rich people playing with industrial amounts of cardboard is not a mitigation strategy for the end of civilization.

    • Artleads says:

      Thanks for the article. I see my (practical) projects as art too, but they aren’t meant to be as ephemeral. Most of what I write isn’t about a particular new project that I think will solve the world’s problems. They are meant to illustrate a broader approach. I’m just sharing what I do, and explaining their limitations or possible benefits. So this was not meant to be a detailed discussion on the merits of cardboard. But while we’re on the subject of cardboard buildings, I’ll explain that I only mention things I’ve actually done.

      Everything I’ve done with cardboard structures left outside is predictable according to laws of physics. Packaging tape will start seriously fraying in around six months, making a nasty mess of strewn hard-to-see plastic bits that I imagine aren’t good for birds and insects. Soft beverage packages lines inside with silver last a couple years before their plastic film also frays. Nasty. Not good. But a painted surface (latex paint) will endure much longer yet. Fire is a major problem too. I’ve researched the issue with the fire chief here and do things to ensure fire safety, but more testing (that the average fire department won’t volunteer to do, though they should) is needed.

      Very densely packed cardboard boxes that air can’t circulate inside of seems similar to straw bales. Straw bale can be subject to mold and water retention, but I’m sure lot’s of research has been done to counteract that. Stuccoing the surface surely helps. Adobe is another material that can absorb moisture, but 2′-thick walls might counteract the harm of that. The oldest continuously inhabited building in the US, the Taos Pueblo, is 1000 years old. Regular, systematic community restoration is the reason for that.

      • xabier says:

        One of the wettest counties of England is Devon , in the West. Houses were traditionally built of rammed mud (cobb) walls with deeply thatched roofs, often on stone plinths. The surfaces of the walls facing the elements were plastered or pebble-dashed. Such walls could last centuries, but any imperfection in the roofs admitting moisture. and they collapsed.

      • A Real Black Person says:

        Latex paint is a petroleum product and will not be widely available without BAU.
        I don’t understand your obsession with reusing something that was not designed to last a long time and may not be available without BAU. You need to look at what will most likely be available locally as building materials, and not depend on obtaining cardboard, which will be used as insulation if it is available, rather than basic building material for structure.

        • Artleads says:

          I can’t see any possibility of survival post BAU. I’m hopin’ and prayin’ that BAU will last a longer time if some rational and creative behavior is imposed on it. I use cardboard because it’s free and I can cut it with a utility knife. In that sense, it’s as close as you get to pre-industrialism within industrialism. At this particular moment, cardboard functions like something you “hunt and gather.” If BAU collapses and you can’t get free-ish cardboard, we’re dead anyway. No problem.

        • Fast Eddy says:

          Cardboard… wouldn’t that be a very good material to use when starting a fire when BAU ends…

          Don’t imagine there will be much of that around after a week or two

          • theblondbeast says:

            That would be more alarming, but so few people know how to start fires – spoken from one who goes camping with city folks.

          • Artleads says:

            Good that I agree with you: there is nothing after BAU. Why people talk about an after BAU beats the hello out of me.

    • Tax cuts are a way of getting to deficit spending and more government debt. More debt (of any kind) is what stimulates the economy; it helps keeps commodity prices up, so that oil and gas companies don’t go bankrupt, and metal ore producers around the world can continue their exports.

      Of course, at some point the system is subject to collapse.

      • Artleads says:

        Why would a jobs program like the thirties CCC, etc. not have the effect of deficit spending and debt creation?

        • I think the problem is that the government is already over its head it programs that transfer money to citizen–the military, Social Security, Medicare, unemployment insurance, educational institutions, medical research programs. It is already creating large deficits each year, and the interest alone gets to be a larger and larger burden. Now that the Baby Boomer generation is retiring there are many more getting retirement benefits (and soon to get retirement benefits). At the same time, the number of workers is not growing rapidly, partly because young people end up in school for so long.

          These jobs programs were great ideas when they were first thought up. Now, we have so many we are already funding, we cannot afford any more.

          By the way, there would be deficit spending and debt creation, unless somehow taxes could be raised enough to pay for the new programs.

          Also, our problem now is not a lack of jobs; it is lack of jobs that pay enough to provide an adequate living.

          • Artleads says:

            “By the way, there would be deficit spending and debt creation, unless somehow taxes could be raised enough to pay for the new programs.”

            But you say there is a need for deficit spending to raise prices?

            Aren’t you promoting a “raise the bridge to counteract the rising water” strategy? Just as often you seem to be promoting the opposite strategy: lower the water. I admit to cottoning on the the lowering the water strategy. But I also see how I run into limits of understanding. There seems to be a high-flying, wild economic syndrome, which is analogous to raising the bridge, no matter what. But if you REALLY do propose these two strategies–only divorced from one another–couldn’t they be consciously combined. You raise the bridge AND lower the water simultaneously.

            One reason why the young can’t afford to buy anything is because medicine, rent, education cost too much. Medicine: I’ve heard doctors say they could manage with less pay. Single payer insurance is said to save a ton of money (No doubt there are complexities to this, but still…) Education: Lots of useless subjects being taught. Professors could manage on less money too. Better use can be made of our over-saturated information system to educate people. Rent: Everything in creation is done to make it hard for the young to find shelter. You can’t live in a backyard shed. You can’t live in abandoned buildings. You can’t sleep in your car.

            I’m saying that if you combine deficit spending on works programs with stopping the stupidness that raises costs, the system would work better?

            • I suppose that there is also the “print money to buy what you need” approach, too, besides the “add more debt” approach, but ultimately, all of the people of the world are sharing the same resources and these goods and resources they use. None of these approaches add more resources.

              You would think that doing things more simply would help, because it would use less resources. We don’t need all of the professors writing academic papers, for example. Research on Chaucer is not really all that useful, in some sense. But the problem of doing things more simply is that people right now need jobs that are only created if we do things in a wasteful manner. There are researchers who are working on high priced cures that will be available to only a handful of people. Not decorating homes with artwork might be considered by some a way of simplification, but you can see the direct financial impact that could have.

              Single payer health insurance is what quite a bit of Europe has, and Canada has. I think paying doctors for the treatments they give involves “moral hazard.” They will try to over treat everything, especially if a third party is paying the bills.

              My husband and I have bought coverage through Kaiser Permanente in the United States for many years. It comes moderately close to a single payer plan in the US. A person pays a monthly premiums, and uses the doctors in their system (or the ones they refer you to). They have contract programs with some hospitals in the Atlanta area. I believe they own their own hospitals some places. There is a small payment if a person sees one of their doctors, or buys a prescription from their pharmacy, buy not a huge deductible like a person sees with a lot of plans. In general, it is close to “one stop shopping”: You sees a doctor or other provider, quite often on the day you call; if needed, you stop and get whatever blood, urine, or x-ray tests you need; then you pick up any prescriptions, all without ever leaving the building. I don’t think that they are quite as bad in the “over treatment” area as seeing a series of self-employed doctors. There is also not the hassle of having an insurance company approve every procedure that is done.

            • Artleads says:

              Kaiser is the best medical provider that I’ve used in the US. In CA.
              The system is s large and complex, that even the smallest step in figuring how one’s individual actions fit in with it is helpful.


              – Waste: Built into the system, since it provides jobs at all levels.

              – Conserving (reducing waste): Enables more waste–leaves more to be wasted, over a longer period. Enabling more jobs.

              – Creating waste and inhibiting waste are part of the same system.

              – Excess Waste Supply: This era could be called one of peak resources. But BAU can keep on wasting for a while due to the extraordinary over production of manufactured stuff that serve as a secondary source of natural resources. (There’s still a lot to waste due to the profligacy of extraction and the unprecedented past power of IC to produce.)

              – Finiteness: The stuff to waste is finite. A simplified way of viewing our economy might be that the big heavy stuff based on a maxed out period of surplus energy and consequent industrial production (1945-1975) is over. So, while we can continue wasting embodied energy now, we can’t keep doing it for much longer.

              – The Economy of Refinement: Jobs that were once involved in producing raw natural energy now switch to jobs refining and extending the products of that original energy. For my focus on the “built environment,” it’s straightforward to see how shelter can be doubled using the existing structures and merely refining them.

              – Absorption: Part of refinement is absorption, a means of mitigating the harm of waste. For instance, an over development of a rural scenic route can be mitigated through refinements–landscaping, for instance–that disguise (absorb) the visual effect of this over development, enabling the route to continue serving a scenic-tourism economic role much longer.

              – A Design Economy: Refinement and absorption are generally based on aesthetic sophistication (which can be found among tribal people as well as in western art-related academies). It is not generally found in the business world, which has the major power to shape the world.

              – Overlap: It is unclear where more surplus energy will ever come from, and it might be that while the waste economy continues but steadily declines something to compensate for the decline has to be created before the decline goes too far. Food, water, health and nuclear security have to be part of this. Shelter need not be a problem.

            • Artleads says:

              What I learn on FW has an unexpected effect on my view of aesthetics (the study of beauty). If there HAS to be waste to survive–and I think aesthetics are bound up with what enables you to survive–your aesthetic ideas might change to accommodate waste. The same sea coast whose development I recently bemoaned now is seen differently, and might even prompt me to want more of it. Why? Because the mind seeks pattern, and pattern is involved with the idea of beauty. Now, the maze of roads you see on a Google satellite map is less like a creeping cancer and more like veins, enabling circulation in a new life form.

              NYC’s Manhattan island comes to mind. Early prints and maps give you a sketchy idea of what it was like before European settlement. Nothing like what a Google map would have shown. But if we’ve lived in Manhattan, or seen it represented in movies, we might think of it as having a compelling beauty based on its very rational pattern. Streets align one way, and avenues another, perpendicular to the streets. It’s very easy to figure out where you are and how to navigate your journey. The order of the road system produces an order to the buildings that line it. They all have the same setback from the curb. They are of similar height. There windows and story levels might more or less align too. A lot of energy is conserved through this patterning based on an original grid concept.

              But even though a human-imposed angularity replaces nature, it doesn’t remove the pleasure and efficacy of having nature nearby. In Manhattan, there is Central Park.


              So, in the name of economy to survive, must a lovely coastal area with endangered turtles and conches be turned into a version of Manhattan? Without FW (ourfiniteworld.com), I wouldn’t even have considered such a thing–despite the economic system steamrolling over my objections anyway. FW gives me a handle in why this it happening, why it might need to happen, and better ways to think about it.

            • Interesting observations! There is definitely more than one way to see situations.

              This is why we now have such diverse political parties.

      • Artleads says:

        “Tax cuts are a way of getting to deficit spending and more government debt. ”

        Tax cuts for the wealthy has been describes as unnecessary. The wealthy don’t have a particular hardship to be productive, it seems. So if you didn’t cut their taxes, but still wanted to create more definite spending, couldn’t some jobs program (equal to the amount saved by not cutting taxes) do just as well?

        And if this were true, wouldn’t that also raise demand within the system?

  8. Human pop will contract and Civilization and BAU will go on for longer than anyone expects.

    It is like abortion, which was quite dangerous in the old days but not quite so now.

    A systematic reduction of human pop, sparing the valuables and culling the rest, will take place, quietly and harmlessly.

    • Greg Machala says:

      “Human pop will contract and Civilization and BAU will go on for longer than anyone expects.” – that is a contradictory statement. How/why would the population contract if BAU continues? Where is the incentive to contract if BAU is humming along?

      • For the same reason the Crown could feed the starving Irish and didn’t. (And the engineer of this policy, Charles Trevelyan, became a baronet. His grandson, the eminent historian G.W. Trevelyan, didn’t find his granddad’s works worth writing about – it was common sense back then)

        They will simply let the periphery fall off, quietly. No reason to feed them when they are economically irrelevant.

    • Yorchichan says:

      A systematic reduction of human pop, sparing the valuables and culling the rest, will take place, quietly and harmlessly.

      What means do you envisage will be used to cull the “non-valuable” people? How can this cull be harmless? Not harmless to those that get culled, surely?

      • Artleads says:

        You’d think. But some people are convinced that they, and others like them, are the chosen.

        • xabier says:

          Mulla Nasrudin was called to court. He entered the witness box.

          ‘Are you Mulla Nasrudin, and is it true that you claim to be the most important and useful person in the whole wide world?’

          ‘Well, now you mention it……yes, on both counts!’ said the Mulla, blushing just slightly. 🙂

        • Slow Paul says:

          Yes, some sort of denial going on there.

          “Collapse will be OK, because I’m intelligent and therefore valuable to society”.

          If a “harmless culling” would take place, I suspect you stand a better chance if you are less aware of what’s going on in the world.

          • Yes, that is a true statement. In Asia, there are collapse once in a while, but the winners of such collapses tend to be quite cunning, wily, ruthless and intelligent.

            Mao Tse-tung began the Grand March with about 100,000 people (a lot of women too). Some left, some joined, some were killed by the KMT. After everything was said and done, there were 8,000 remaining. But the 8,000 were stronger than ever and we all know what happened next.

            • xabier says:

              The British SAS used to (maybe still do?) have Mao’s sayings about guerrilla warfare up in their mess: they particularly liked ‘So long as one man is standing with a gun, the war can be won!’ if I remember correctly. Greatly respected by the forces of capitalist imperialism. 🙂

      • Mark says:

        I like Bill’s idea

      • Re-read the history of Irish famine, which I summarized at here


        It was done before without modern tech. it will be done again.

        • Van Kent says:

          kulm, you don’t seem to grasp what the coming collapse will look like.

          The closest thing that has been even close, to the global collapse we will be witnessing soon, is the Toba eruption 75.000 years ago. If you are thinking that the Irish famine will be how it will look like, then you are wrong. The magnitude and the predicament in the coming global collapse will be like in the Toba eruption. In the end, perhaps 1.000 pairs survived what Toba brought fourth. Perhaps the situation will be like that again, in the coming decades, in Iceland, NZ, Alaska, Siberia and Patagonia, just a few hundred pairs remaining in each. Who knows. Too many problems, for anybody to know if anybody can survive what is coming.

          When the Toba supervolcano erupted, half the globe was covered by half a foot of white ash. And afterwards, it took six years of ‘nuclear winters’ and a few tens of thousands of years for the environment to recuperate.

          When our global collapse comes our way, a year not too far in the future now. The thing that will be equivalent to the white ash and nuclear winters, will be +7.5 billion people eating, burning and devastating everything. When the global supply chains go, when the oil stops flowing, when spare parts stop coming, people will burn anything that is burnable. Hunt and eat anything eatable. Destroy anything that is not done for already.

          Yes. We can grow potatoes. Yes. We can have a garden. Yes. We can ferment and have root cellars to store potatoes, cabbages, onions and carrots in them. But we would need hundreds of families doing this, having a strong community, forming a strong unified militia. Having plenty of woods to burn for fuel. And even then, the masses of peoples would overwhelm that community at some point anyways. Just as one example, I think there are about 1 million bigger sailing boats in the world. That you can live on for a year or two, with enough stored resources. Give or take about few million more smaller ones, with smaller storage spaces. Just that mass of people, with those sailing boats, can become like a swarm of locusts overwhelming any community that thinks it is safe. Anywhere in the world.

          Kulm, when the supply chains go, when oil stops flowing, it will NOT look like your basic Irish famine.

Comments are closed.