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.

Conclusion

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

  1. I will now prove that happiness at
    Christmas is a hoax.

    According to at least a hundred and twenty years of rigorous scientific investigation we can conclude that presents cause warmthening of hearts on Christmas Day. A few diehards like to point out that some of the smiles and laughter are a little suspect to be genuine but the evidence of mirth is too mountainous to disprove this essential truth – children enjoy Christmas.

    However the mainstream media abetted by the efforts of parents have been telling lies about Christmas! Father Christmas is not real. Parents and the media believe that the way to make children happy is to spread myths about where presents come from. The problem is maximising happiness and the solution is to tell lies!

    Thereby by applying the following logic, which many regular readers here will be familiar with, we can conclude that the global warmthening of children is fake.

    A is problem with proposed solution B
    B is fake
    Therefore A is fake

    For example:
    Energy constraints in the real world lead many to propose cold fusion will save us
    Cold fusion is fake.
    Therefore energy constraints are fake.

    Or
    Potassium deficiencies cause many people to behave as if they have a sugar cravings.
    The cravings are illusory as they are caused by lack of potassium, not lack of sugar.
    Therefore potassium deficiencies are fake.

    te
    Cli..mate chan..ge has spurred many to make erroneous predictions about our response to clima..te chan..ge, such as a move to renewables.
    A move to renewables is not a solution to clima..te chan..ge.
    Therefore clima..te cha..nge is fake

    • Davidin100millionbilliontrillionzillionyears says:

      I will now prove that The Collapse will not happen until the 2030’s:

      A… The Collapse has never happened before

      B… the 2020’s have never happened before

      therefore A and B cancel each other out and…

      voila!

      The Collapse happens after December 31, 2029.

      it’s OBVIOUS… don’t you think?

  2. psile says:

    Looming oil price shock that could trigger the next global recession

    Despite the present glut in supply, the oil price has again been creeping up. Long in abeyance, we are seeing the re-emergence of a geopolitical risk premium. Generally, this is taken for granted in the oil price, but in recent years it all but disappeared, apparently made redundant by the advent of US shale. Now it is coming back. Like a siren going off, traders are suddenly waking up to an old bogey – the possibility that rising tensions could close the Strait of Hormuz, through which approximately a fifth of world oil supplies pass.

    Any such disruption, even for a few weeks, would cause the oil price to skyrocket anew, notwithstanding the newly emerged pressure valve of US shale.

    Well, I don’t know about the Ponzi scheme called “US shale”, but definitely the weirdness taking place in Saudi Arabia (KSA) is indicative of a grossly unsustainable society, built on the extraction of a single finite resource, facing the strengthening headwinds of entropy. Both physical and manmade. Just add a KSA melt down to the smorgasbord of existential delights waiting to be served up to industrial civilisation. The only way is down, baby.

    • JH Wyoming says:

      Blockage in the straits of Hormuz. Why is that necessary? The price is rising because the glut has dwindled so expect higher prices going forward as suppliers recoup from leaner times. I’m very curious to see how the world economy responds to higher oil prices. Not very good, I would expect.

    • Fast Eddy says:

      I would imagine that if anyone tried to close Hormuz…. that would invite a epic intervention by the US military …

      Now a peak in KSA oil… all the kings horses and all the kings men…. would not be able to put that back together….

      • psile says:

        Well, I think any kind of showdown in the Straits of Hormuz, assuming war between the US/Allies and Iran, would spell game over for everybody. Iran is armed with enough sophisticated Russian military equipment to turn the entire area into a wasteland of smoking ruins, including every one of those “mighty” U.S. aircraft carrier groups. With no nukes needed.

      • Greg Machala says:

        Our modern world really is very precarious when you think about it. We have a single point of failure – an oil supply shortage (reached by either geologic or financial limits). We don’t have to run out, just oil supply shortages will put an end to growth, finance, interest, pensions, jobs, manufacturing etc. Panic would ensue for sure.

      • Sungr says:

        FE said- “I would imagine that if anyone tried to close Hormuz…. that would invite a epic intervention by the US military …”

        Maybe not so much. The US isn’t influencing much these days. Here’s Bloomberg-

        “The Israelis and Turks, the Egyptians and Jordanians — they’re all beating a path to the Kremlin in the hope that Vladimir Putin, the new master of the Middle East, can secure their interests and fix their problems.

        “The latest in line is Saudi King Salman, who on Wednesday is due to become the first monarch of the oil-rich kingdom to visit Moscow. At the top of his agenda will be reining in Iran, a close Russian ally seen as a deadly foe by most Gulf Arab states.

        Until very recently, Washington stood alone as the go-to destination for such leaders. Right now, American power in the region is perceptibly in retreat — testimony to the success of Russia’s military intervention in Syria, which shored up President Bashar al-Assad after years of U.S. insistence that he must go.”

        https://www.bloomberg.com/news/articles/2017-10-03/putin-is-now-mr-middle-east-a-job-no-one-ever-succeeds-at

          • Fast Eddy says:

            That is US military spending vs the rest of the world….

            • psile says:

              And they still haven’t won a real war, against a real army, since WW2. Even then, the Soviets did the heavy lifting on the eastern front.

            • Fast Eddy says:

              The US took Afghanistan, Iraq and Libya back to the stone age…. they have never been at risk of losing in those countries… and they never even really took the gloves off…

              Russia got whipped in Afghanistan — China’s last war was against the Vietnamese — they did not do so well…

              Anyway — we don’t get real wars anymore — the big boys fight proxy wars now — can’t have nuclear powers going head to head can we…..

            • psile says:

              When push comes to shove Russia will simply lob a tactical nuke over some egregious NATO outrage at its doorstep. Probably to do with the Ukraine, and that’ll be that. As the next step for the humiliated side (i.e. NATO) would be an all out nuclear war.

              This is Russian strategic policy, for situations where the homeland is faced with an existential threat on its border. It will reach for the nukes first.

            • Fast Eddy says:

              Where is Nixon when we need him to convince the other side that we are out of control and insane and always on the verge of initiating global annihilation ….

              Personally… when the el ders see that whatever it takes is on the cusp of failure…. I would 100% support a move by all countries with nuclear weapons to launch every single missile in their arsenals blowing the living sh it out of everything.

              I doubt vapourization would be a painful death.

            • theblondbeast says:

              Never fear, nobody has enough oil to fight a real war again.

          • Jesse James says:

            The correct comparison is not how many dollars are spent, but what they buy. The US military industrial complex is caught in a vice of spending more and getting less. For example, for “x”dollars, how many fighter aircraft can the US build, versus how many can Russia or China build. Anyone with half a brain will know that Russia and China can build 2-4 fighters for every one that the US builds, if not more. The same comparison can be made for every other item the military uses. Now, who is the worlds largest producer of oil….Russia. Introducing the future superpower….Russia.

  3. Fast Eddy says:

    Never a bad idea to keep some (all?) of your spare cash in gold http://www.zerohedge.com/news/2017-11-19/ecb-proposes-end-deposit-protection

    • End of deposit protection may be necessary to make bail-ins work, but it seems like we could be back to a situation not too different from the bank holidays of the 1930s. This would not make people very happy–less happy than bailing out the banks.

      • xabier says:

        It would also destroy consumption: people who see savings disappear will not be happily tripping out to the shops, whatever the economists fancy.

        They will panic and close down, a natural human reaction to a threat.

        They could bail-in little Cyprus, but to do so in a core country would lead commercial disaster and political upheaval.

    • Ed Kitto says:

      The value of gold depends on BAU.

      Shampoo and tampons are better value apres collapse.

      Keep whatever access to food you have for yourself.

      Move away from high population density areas.

      Or die without a hope.

  4. Fast Eddy says:

    http://www.zerohedge.com/news/2017-11-19/difference-between-gaap-and-non-gaap-q3-eps-dow-jones-was-16

    When it gets really grim …. lie (or report using non-gap aka fake numbers)

  5. Baby Doomer says:

    Here are four peer reviewed scientific studies done by top scientists that prove beyond a reasonable doubt that global civilization will collapse around 2030.

    NASA Study: Industrial Civilization is Headed for Irreversible Collapse (Motesharrei, 2014)
    http://www.sciencedirect.com/science/article/pii/S0921800914000615

    The Royal Society: Study, Now for the First Time A Global Collapse Appears Likely (Ehrlich, 2013)
    http://rspb.royalsocietypublishing.org/content/280/1754/20122845

    Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)
    http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf

    Study: Financial System Supply-Chain Cross-Contagion: in Global Systemic Collapse (Korowicz, 2012)
    http://www.feasta.org/2012/06/17/trade-off-financial-system-supply-chain-cross-contagion-a-study-in-global-systemic-collapse/

    • Greg Machala says:

      I have read all of those. They basically reinforce what I have already figured out – there are limits to growth in a finite world. It is not rocket science. What is rocket science is trying to figure out how to keep the BAU going another day/week/year.

      • Those articles also don’t really give a date, either.

        The data could just as well be 2020 as the 2030 Baby Doomer chose.

      • Baby Doomer says:

        Keep in mind just because the studies conclude a collapse by 2030. That doesn’t mean everything will be fine up until new years eve 2029….All hell is going to break lose much sooner.

        • Ed Kitto says:

          The Mad Max Zombie Apocalypse scenarios presume the shutdown of everything overnight.

          TPTB know what is coming – they have contingency planners working 24/7. Are they going to say “oh dear! it’s over,” and retreat to their bunkers? Nope, they will be proactive by locking down the major cities and metro areas with ruthlessly enforced curfews and closure of access routes. They will not squander what resources they have keeping the “useless eaters” and the consumer fantasy economy afloat for a short while.

          The Zombie Apocalypse will be true for metro areas with typhus and cholera thrown in for good measure. But it will not suit TPTB to allow Mad Max to destroy their food supply.

          • Fast Eddy says:

            I used to think as you do … but then I ran the scenario through my super computer and turned off the cognitive dissonance function and came up with this:

            When the power goes off – and it will go off at some point — why would the elites bother to lock down cities?

            The end is the end… there will never be a reset …

            So what purpose does locking down the cities have? For the elites – and for those in the cities?

            Even if they tried to do that … eventually the centre would fall apart — and those locking down the cities would run out of the means – and interest – to continue….

            If I am a member of the elite…. I am fighting … I am clawing … I am gouging … I am stabbing….
            I am killing …. I am using ‘whatever it takes’ to keep BAU alive for as long as possible…

            But at some point I am running up against he physics of the problem …. and I instructing the MSM to report ‘record stock prices – record bit coin — full employment — get your welding glasses on – the future is bright!’ — not the slightest hint of what is to come….

            Then I calling up the pilot to fly me and my family to an airstrip where I am going to be picked up ‘to spend a weekend in the country’…

            Instead we will get into the waiting luxury vehicle… and I will drive to a place like this …. where we will be entombed…

            • Ed Kitto says:

              They will try; whether or not they will be successful is a separate issue.

              The attempt will, at a minimum, keep the smarter alive for a while, at least.

            • Fast Eddy says:

              Why would they try?

            • DJ says:

              What about your beloved spent fuel ponds?

            • Fast Eddy says:

              See the big doors? They keep that stuff out… there would also be filtration systems that make sure the poison does not get in…. there would be years of food and water in there…

              But all of these safe guards will not last forever … the poisons that get released will remain in the ecosystem for centuries…. they will eventually have to open the blast doors….

              And that will suck for them

          • psile says:

            Once the power goes down, cities will be a useful as tits on a bull.

  6. Baby Doomer says:

    Fast Eddy: NASA is now talking about non-man made icecap melting??? And James Hansen is NOT a climate scientist he is an Astrophysicist.

    • The Second Coming says:

      Your comment regarding Dr James Hansen is misleading,
      as trained in physics and astronomy in the space science program of James Van Allen at the University of Iowa. He obtained a B.A. in Physics and Mathematics with highest distinction in 1963, an M.S. in Astronomy in 1965 and a Ph.D. in Physics, in 1967, all three degrees from the University of Iowa
      a college student at the University of Iowa, Hansen was attracted to science and the research done by James Van Allen’s space science program in the physics and astronomy department. A decade later, his focus shifted to planetary research that involved trying to understand the climate change on earth that will result from anthropogenic changes of the atmospheric composition
      Hansen has stated that one of his research interests is radiative transfer in planetary atmospheres, especially the interpretation of remote sensing of the Earth’s atmosphere and surface from satellites. Because of the ability of satellites to monitor the entire globe, they may be one of the most effective ways to monitor and study global change. His other interests include the development of global circulation models to help understand the observed climate trends, and diagnosing human impacts on climate.
      https://en.m.wikipedia.org/wiki/James_Hansen
      When he embarked on his career there was no official title “climate scientist”.
      I would venture to say he was one of the first,
      As far as your story… OK “some melting”…fair enough.

    • Jesse James says:

      BD go back and look at my comments. Undersea or underice volcanoes are suspected of causing/contributing to Antarctic ice melting. This in no way means that Antarctica is melting away. It isn’t.
      Therefore any melting that may be occurring, is local ( in the sense that local in Antarctica could encompass a huge area). GW is not melting anything.

      • Fast Eddy says:

        Don’t sweat it Jesse…

        The caps can melt – who gives a sh it as to the why of it all….

        And to those who do give a sh it as to the why and believe it’s ggwwww — when the next hurricane or major storm hits:

        ‘I want you to get up. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell: I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!’ (Howard Beale)

        I know how unhappy you people are.

        But there is nothing you can do about that — there is nothing anybody can do about it (if it is real) — but you obviously need to relieve your frustration with the situation …. in the meantime scream at your dog… or better still — go find a rock — and scream at that….

        Fast Eddy cares about your mental health. He only wants whats best for you.

        Anyway….there are only two horses in this race — Deflationary Death Spiral and Peak Cheap Oil….

        Who cares about some nag that is 100 lengths behind… or not even in the race at all….

  7. MG says:

    The Germany coalition talks collapse

    http://www.dw.com/en/german-election-preliminary-coalition-talks-collapse-after-fdp-walks-out/a-41445987

    No wonder, when the involved parties do not understand the reality: CDU wants more immigrants that are not suitable, FDP free market, when the economy is more and more dependent on the money-printing of the central banks, the Greens more “green” (i.e. intermittent) energy…

    “The Greens also demanded that Germany wean itself off of coal to meet climate change goals.
    The FDP and CDU/CSU were against hastily shutting down coal-fired power plants over concerns about job growth and the economy.”

    • We now live in a world with no real solutions. It seems to be inevitable that the parties arrange themselves in ways that focus on one non-solution or another. It becomes impossible to agree, because all of the parties offer false hope.

      • MG says:

        If the political parties define one against another with their solutions and neither solution works, what is the result? No way out…

      • xabier says:

        For instance, in Britain:

        Right-wing: austerity, investment in innovation, mass immigration to maintain cheap labour supply, renewables.

        Left-wing: end austerity, borrow heavily, high taxes on wealth, investment in innovation, mass immigration to maintain cheap labour supply, renewables.

        Non-solutions indeed…..

        • Mark says:

          I think it was Lewis Black that said ‘it’s like two bowls of sh*t, and the only difference is the smell’ lol

      • Greg Machala says:

        Reminds me of an old wise saying: you can choose to disregard the truth but, you can’t ignore the consequence of denial.

        • Mark says:

          Ooo, I got another I saw recently.
          “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” –Woody Allen

          • That is quite the quote!

            • Fast Eddy says:

              Yes excellent.

              James Cameron should do a follow up to Avatar… in this production the animals of the world that we are driving extinct/enslaving for food… cheer as the humans destroy themselves…

              As starvation kicks off the animals flee deep into the forests to deny the humans their bodies…

              James can pretend that the spent fuel ponds don’t exist and therefore the animals live happily ever after.

        • craig moodie says:

          You can ignore reality, but you cannot ignore the consequences of ignoring reality.

  8. MG says:

    Why Japan, Germany and other western countries are similar to medieval monasteries?

    https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

    These countries are completely at the bottom of the chart, which means that you have to work in order to be the part of the community. Home ownership consumes a lot of energy, while rental homes are more like collectively owned.

    The countries that are not considered to be the most rich, are situated at the top of the chart.

    Owning something requires a lot of energy from you… The system can contintue functioning, when the homes are rented.

    • Interesting! I don’t remember seeing this chart before.

      My impression is that in the countries that have the highest home ownership rates, the homes have been in some sense “given” to those living in them. China has had a tradition of providing housing to its people. When they are displaced, they are provided with new housing. The new housing is very barebones–no floor covering, or doors, or other parts we would consider essential. Also without appliances. So even if the “condo” is given to someone, they still need to go into debt to fix it up.

      I heard that at one point, India divided up land and gave it away. I suppose that could apply to homes as well. Many of the homes seem to be very easy to build of local materials. This would make home ownership feasible. No bathrooms; very little electricity.

      The countries at the bottom of the list (or even the middle of the list) have more like two classes of citizens: (a) Those who can afford to buy, and (2) Those who must “make do” with renting. An awfully lot of young people are in this category.

      I don’t think the rental units are collectively owned. They tend to be owned by big businesses. Or by wealthy landowners.

      • MG says:

        When we look at the ownership of the rental houses from a different point of view, they are not owned by the big businesses or by wealthy landowners, as these collect money from the tenants and thus keep the existence of the houses. Moreover, when there is lack of tenants, there can be some loans from the banks or subsidies from the state which keep the in good state. Withouth the money from the tenants or the banks or the subsidies, the price of the houses becomes zero and they probably crumble down…

      • DJ says:

        In Sweden we have two classes:
        (1) those who are credit worthy, and
        (2) those who rent.

        In the second class rent is often paid by the 1st class.

        • Greg Machala says:

          Like a game of Monopoly. Sooner or later all the wealth concentrates into fewer and fewer hands until it is game-over.

  9. Pintada says:

    Its time the Tverbergian Collapse happened already …

    http://scientists.forestry.oregonstate.edu/sites/sw/files/Ripple_et_al_warning_2017.pdf

    Pretending that AGW and other environmental problems are not coming home to roost is fine for some. For those of us who can face the truth, it is very clear that there are environmental problems – including AGW – that will make any financial crash look like a picnic. Better that the financial crash happens sooner.

    • xabier says:

      What everyone contrives to ignore: The Pollution Problem.

    • The Second Coming says:

      Pintada…yes..all are interconnected..unfortunately for us humans require fossil fuels to maintain our current population, still expanding. For myself, AGW now is like talking about the weather, nothing really will alter the outcome.

      • I agree, ” AGW now is like talking about the weather, nothing really will alter the outcome.”

        We don’t have any solution, so what is the point. in fact, the Kyoto Protocol seemed to work in the wrong direction, encouraging countries to send their industry to coal consuming nations.

        • Greg Machala says:

          I agree, we face a predicament. BAU results in pollution. Too much pollution ends BAU. Ending BAU now ends pollution but billions must die. Rinse repeat. There is not way out of this circle of doom.

          • Fast Eddy says:

            The MSM WANTS everyone to talk about THAT…. so we don’t talk about our finite world.

            That means the MSM is the enemy of OFW. The MSM wants to put OFW out of business.

            Fight Back. Let’s talk about peak cheap oil and spent fuel ponds and starvation

            Those are the REAL issues at hand

      • Fast Eddy says:

        Yes that discussion is very boring ….

      • If Jonathan Swift lived now, he might be a commenter on OFW. I should have read this Modest Proposal years ago, but I don’t remember doing so. I remember hearing about it, though.

    • Mark says:

      ” Better that the financial crash happens sooner.”
      There are so many stress points on the global economy that it appears collapse will be very soon. That tends to marginalize the issue.

    • Slow Paul says:

      So you have found truth? Claymate scientists just go round in circles, referring each other’s papers and taking turns in being “concerned” and “warn us”. It’s just a job, there are no solutions, there is no alternative.

      • theblondbeast says:

        “Saving the planet” a heroic narrative to occupy ones time with. Much more comfortable than “we cannot save ourselves,” which is a bitter bill to swallow and requires, I think, a certain humility and gravitas.

        • We have a new religion: Our sins are environmental sins. If we somehow behaved better, we would be able to save the planet. Not really!

          • theblondbeast says:

            Interesting psychological possibility here: If as Freud would say guilt represents an unconscious intent to do something bad, perhaps environmental guilt arises in those who actually (unconsciously) intend to continue consuming more resources and the concomitant fear of coming into conflict with others over resources. In this psychoanalytic interpretation, as resource scarcity becomes more (unconsciously) obvious, one would predict to see increasing levels of denial among those who find their own potential for aggression to be shocking.

      • Fast Eddy says:

        Exactly…… I do not understand why people keep bleating on about this …

        Ok I will come around… it’s real…. that will make some people happy…..

        What should we do?

        That sort of ends the discussion … doesn’t it.

    • Pintada says:

      theblondbeast says: “Interesting psychological possibility here: If as Freud would say guilt represents an unconscious intent to do something bad, perhaps environmental guilt arises in those who actually (unconsciously) intend to continue consuming more resources and the concomitant fear of coming into conflict with others over resources. In this psychoanalytic interpretation, as resource scarcity becomes more (unconsciously) obvious, one would predict to see increasing levels of denial among those who find their own potential for aggression to be shocking.”

      As far as I know, nowhere else on the web would this quality comment ever appear. Thank you, Gail.

      This could be one good reason for the denial that one finds everywhere, even on OFW. But human beings are not so simple that one explanation will suffice. In the US, we must not only deny the fact that we are consuming all the resources now thus dooming all future generations, we must deny the fact that we – as individuals and as a nation – are in fact very aggressively fighting for resources.

      Is it any wonder that people like Robert Fanney ( https://robertscribbler.com/2017/11/20/the-equatorial-pacific-is-going-through-its-variable-cool-phase-but-2017-is-94-percent-likely-to-be-the-second-hottest-year-ever-recorded/ )
      exist. If you haven’t read him before, you are in for a treat. He will go for weeks explaining why AGW will get us regardless of any actions (intentional or not) that we might take, and then he will turn right around and explain at great length how everything will be fine if we just all buy Teslas. The poor guy has a ring side seat to the extinction of humanity via his chosen vehicle (AGW) but has chosen a profession where he must deny what he is seeing. I have read him for a long time, and it is clear to me that he is not lying – which means he is deeply and truly insane.

      But there is more …

      • Fast Eddy says:

        Ya well… ‘To avoid dangerous climate change of 2C, the world can only burn another half a trillion tonnes of carbon, climate change experts warn’

        Forgive for putting GGWWW at the bottom of my list of concerns as there are far more urgent problems staring me in the face like rabid dogs….

        HSBC: Brace for the oil, food and financial crash of 2018

        80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy

        View story at Medium.com

        • Fast Eddy says:

          2009:

          The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

          Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

          In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.

          http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

          2017:

          Global oil discoveries fell to a record low last year and are showing no sign of recovery, raising the risk of shortages in coming years, the International Energy Agency has warned.

          The number of conventional oil projects being sanctioned for development also dropped to the lowest level in more than 70 years as low crude prices stifled investment, the IEA said.

          https://www.thetimes.co.uk/article/warning-of-oil-shortages-as-global-discoveries-hit-record-low-nmv3x6l03

      • People don’t understand what is happening. We end up with very strange analyses suggesting that somehow we can easily fix the situation when, in fact, there is nothing we can do.

    • Fast Eddy says:

      You die sooner… everyone dies sooner.

      Then the fuel ponds exterminate everything.

      Bad.

      Burn More Coal. Urgent.

  10. The Second Coming says:

    Looking to escape the collapse?
    Hughes is a 61-year-old limo driver who’s spent the last few years building a steam-powered rocket out of salvage parts in his garage. His project has cost him a total of $20,000, which includes Rust-Oleum paint to fancy it up and a motor home he bought on Craig’s List that he converted into a ramp.

    His first test of the rocket will also be the launch date — Saturday , when he straps into his homemade contraption and attempts to hurtle over the ghost town of Amboy, California. He will travel about a mile at a speed of roughly 500 mph.

    “If you’re not scared to death, you’re an idiot,” Hughes said . “It’s scary as hell, but none of us are getting out of this world alive. I like to do extraordinary things that no one else can do, and no one in the history of mankind has designed, built and launched himself in his own rocket.
    https://apnews.com/9d8e5e8e9245412ab80f5a1f58d885b7

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