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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912 Responses to Will China Bring an Energy-Debt Crisis?

  1. Fast Eddy says:

    http://www.zerohedge.com/news/2017-11-13/are-electric-cars-clean-they-seem#comment-10646450

    Buckaroo Banzai Looney Nov 13, 2017 11:26 AM

    Swapping simple gasoline-powered cars, for more complex coal-powered cars, that require batteries to function and a gigantic new supply-chain infrastructure to build and use economically…IS F789ING RETARDED

    • xabier says:

      It’s the cornerstone of the EU ‘Stardust Project’, so it can’t be mad. Can’t you see the stardust glittering?! 🙂

    • EVs are simpler than gasoline power vehicles as a battery/electric motor is simpler than a gasoline enghttps://1.gravatar.com/avatar/4bd65131ceb1fd50aef9df768be76d11?s=25&d=https%3A%2F%2Fs0.wp.com%2Fi%2Fmu.gif&r=Gine. And say goodbye to tune-ups, oil changes and smog checks.

      • I couldn’t read your link. Somehow, Tesla X is tied for worst car, in terms of reliability, according to Consumer Reports. It isn’t the drive train; it is everything else. This seems to be the same link you were trying to give, above.

        If Tesla had inexpensive, easily available repairs available, its problems would be extreme. Its problem is that with its financial problems, it cannot afford to build a suitable network of servicing units. Thus, service issues are likely to become more and more extreme, as more of their cars are put on the road.

        The moral is–if you are going to buy an electric car, buy it from an established company, not from Tesla. That way you have at least a chance of keeping it repaired. Less chance the company will go bankrupt, as well.

      • Greg Machala says:

        “EVs are simpler than gasoline power vehicles” – an electric scooter I would agree. But a car like a Tesla I would disagree. EV’s that are on equal footing with their gas powered counterparts are different but, no less complex. The supply chains (raw materials, machinery to build them) and supporting infrastructure (road, bridges etc) is basically the same. However, EV’s use much more exotic (rare earth metals) raw materials that are more scarce and more polluting to mine. EV’s also introduce a whole new host of issues with the battery recycling as well. Engine blocks are really straight forward to recycle. Lithium batteries, not so much. So your point of simpler (in a like for like comparison) just doesn’t ring true for me.

        • Fast Eddy says:

          +++++++

          Of course this is what the MSM would have us believe though…. there is no ICE engine so we eliminate a lot of components… but at the end of the day an ICE engine is really just a bunch of metal twisted and pounded into all the pieces that go into an engine…. it is not exactly rocket science… of shall we say … battery science….

          And it is much easier and cheaper to scale something made from iron … than something made from rare earths.

          The MSM will not tell us that though…. why would they. They want to calm us….

      • Fast Eddy says:

        If they are simpler then why are they so much more expensive to build?

        Hint: 1200 lb batteries do not come cheap….

        And before you start your rant on how cost will come down with increased volume… recall the research posted here that indicated that was not going to happen because of rare earths and other materials that go into making the batteries are in limited supply….

        Increased Demand + Limited Supply = Higher Prices (not Lower)

        You lose. Fast Eddy wins.

        Next…..

  2. Fast Eddy says:

    A BUBBLE AND A SPIKE, PART 2

    We may not be clear yet about when the next crash will come, but we understand a very great deal about the mechanism that will make it happen. Put another way, we have a narrative that puts all the pieces in the right places.

    This narrative is telling us that a crash is highly likely – and that it may happen a lot sooner than we think.

    Let’s start with the fundamentals.

    https://surplusenergyeconomics.wordpress.com/2017/11/13/112-will-things-go-bang-soon/

    • Good post–I agree.

      He ends with, “All that we’re waiting for is an oil price spike, and a trigger equivalent to the “Lehman moment”.”

      At this point, it does look like prices could spike a little higher, and that would be the end.

      But even in the absence of an oil price spike, we could see a collapse of supply, from low prices.

      • Fast Eddy says:

        It is looking ominous…. especially when institutions such as HSBC are pointing to 2018 as the Year of the Great Detonation….

        • Davidin100millionbilliontrillionzillionyears says:

          but wait!
          I do want to point out that TPTB have lived through the 2008/2009 crisis…
          and they aren’t, you know, stew pid…

          so…

          I could conclude that the next crisis will not begin with similar issues to those back then…
          but that the next crisis will come out of more Black Swan-ish issues.

          in other words, “they” will do everything they can do to prevent the chain reactions of 2008/2009…
          and in doing so, will inadvertently start the new crisis.

          all theoretical and vague-ish…
          but that’s what musing about the future gives us, isn’t it?

        • This is where the HSBC report from December 2016 can be downloaded.

          Global Oil Supply: Will Mature Fields Drive the Next Supply Crunch?

          According to it:

          Supply constraints seem a distant prospect in the current oil market, but a return to balance in 2017 will leave the World with severely limited spare capacity.

          We think risks of supply constraints will resurface long before risks of global demand peaking, and a steady tightening in the supply/demand balance post-2017 is behind our unchanged USD75/b long-term Brent price assumption. Our unchanged Brent price assumptions are USD60/b in 2017e and USD75/b in 2018e.

          The report focuses on decline rates and limited discoveries recently.

          This is the graph of EIA’s Nov. 8 “This Week in Petroleum,” crude oil supply chart.

          This Week in Petroleum Supply Chart Nov. 8, 2017

          US Crude supplies are still relatively high, but with the addition of storage space at Cushing, there is at least room for the extra supplies. Also, the trend continues to be downward.

          One of the things that Euan Mearns recently said about current oil supplies is somewhat helpful:

          One reason it has taken so long for the production cuts to work is that production in both Libya and Nigeria have recovered from lows, caused by civil unrest, adding over 1 Mbpd to OPEC supply. Both are now on cyclical highs and are unlikely to rise much further. Indeed, the normal direction post-high is downward. At worst, the Libya – Nigeria market drag should now become neutral.

          Thus, with normal fluctuations, Libya and Nigeria’s production may decline. He also points out that biofuels are at their high point at this time of year. We know that Venezuela is not doing well; its production may be headed down. The issues would tend to reduce available supply in the near future. When a person adds the Mideast political problems, that also tends to raise prices. So there are likely to be upward pressures on prices, in the near future.

          Any kind of financial disruption from higher interest rates would tend to have the opposite effect–would reduce oil demand and prices. So the question is how long the financial disruption stays away.

      • Greg Machala says:

        I agree. We are between a rock and a hard place.

    • psile says:

      Everything is “priced to perfection” as financial analysts might say.

  3. Third World person says:

    another funny video from economist

    Space tourism will lift-off in 2018 As the race between spaceflight companies Virgin Galactic and SpaceX heats up, those who can afford it will be able to travel to low Earth orbit and possibly even around the moon.

    • People will believe anything!

      • Fast Eddy says:

        I wonder how the DelusiSTANIS rationalize this delusion with the green delusions that they hold so dearly….

        One would think that the ability to hold the two thoughts in one mind at the same time would cause the synapses to explode…. or at least melt down…

        I suppose they drink large volumes of Kool Aid to prevent that….

      • Lastcall says:

        Hyper-marketing joins the hyper loop; why not? Been waiting for things to go pop for some time, so lets get as absurd as possible. Tefla now has competition for the Nobel hype prize.

      • Greg Machala says:

        I agree. People are in a drunken-techno-stupor right now.
        They just don’t think or question about what they are believing in at all.

        • Fast Eddy says:

          The Bernays/Drapers of the world understand how the human donkey’s mind works… it wants to believe there is a future so badly that it will absorb and embrace even the most ridiculous of lies… particularly when the human looks to the future and sees the possibility of a cliff….

          Even the most intelligent humans toss all logic out the window … look at Hawkings…

          We cannot handle the truth… so best not to give it to us

          • A Real Black Person says:

            Hawkings is a symbolic figurehead at this point.

            I don’t think it’s a coincidence how his opinions always fall in line with prevailing beliefs or norms within the scientific community.

            Furthermore, I don’t even think the original Hawkings is alive anymore.The evidence doesn’t suggest that someone with ALS or someone who has a similar condition could have lived this long,

            • Tim Groves says:

              Absolutely right. The present Hawking is a fake.
              And yet 99% of people can’t see that and/or don’t care.

              But if something as widely assumed to be real as Hawking is fake, even though anyone who bothers to take a close look and consider the facts should easily be able to recognize Hawking as fake, then a good follow-up question is, what isn’t fake? Or more precisely, what is it that is presented as fact by the mass media is actually fact and what is fiction?

              Are we justified, at this point, in assuming the validity of anything that the media has told us over the years, and if so, what?

              My personal stance these days is to greet all news with skepticism as something the news provider wants the general public to accept as true, and to withhold my personal acceptance until I’m confident it isn’t fabricated fiction. Actually, this has made me more ignorant in that it doesn’t leave me with a whole lot of solid facts I can rely on in the realms of history or current events. But on the upside, I am no longer burdened by all the false facts I used to believe were true. And I can still navigate the world by pretending that George Washington really did cut down his father’s cherry tree, FDR died of polio, or Freddie Mercury died of AIDS, even though I no longer know that I know those facts to be true.

              Just as I go about my day noting that the sun is rising or setting, even though my actual current understanding is that it’s doing no such thing and the rising and setting are optical illusions caused by the rotation of the earth and my location on its surface, so I can talk quite comfortably about the latest ideas voiced by Steven Hawking, even though my actual current understanding is that he died 30 years ago and on his subsequent appearances he has been played by an actor.

  4. Baby Doomer says:

    PE Firm Roark Capital Makes Offer to Buy Buffalo Wild Wings – The Wall Street Journal

    https://www.wsj.com/articles/roark-capital-makes-offer-to-buy-buffalo-wild-wings-1510608642?tesla=y

    • Davidin100millionbilliontrillionzillionyears says:

      “Buffalo Wild Wings has been hurt by rising chicken prices and slumping traffic in its restaurants…”

      sure, I suppose it would be better for them to be bought out, than to have their company go over a Cliff… !

      and, also, where’s Rob Bell been lately?

      I would wonder what his opinion would be.

      ps: I don’t like “buffalo” kinds of food…

      but I sure like BAU…

      tonight, baby!

  5. Fast Eddy says:

    http://www.zerohedge.com/news/2017-11-13/millions-face-starvation-yemen-due-us-ally-saudi-arabias-blockade

    So KSA is forcefully unplugging Yemen from BAU…. and they are starving????? Come on now…

    Don’t they know that all they have to do is turn to permie culture and their problems will be solved.

    Surely some permies on FW might put their hands up and volunteer to head over there to show them the way?

    But then of course permie doomies really only know how to do this with the support of BAU …. they only know how to do it if the tractor has diesel — if the lights work — if the chain saw revs… if the seed shop is open — if the knob on the faucet is turned and the irrigation water magically appears….

    So they would be helpless in a place like Yemen.

    I do wonder how the two brothers who toured me around the capital when I visited some years ago are making out…. hopefully they are able to numb the suffering with sacks of khat….

    • This is not an up-to-date graph, but you get the idea of Yemen’s underlying problem.

      Yemen oil production and consumption

      • Fast Eddy says:

        The MSM will write reams of lies on this … when all one really needs do to understand what is happening … is look at that image

        The MSM is not fond of showing the sheeple such images…. they smell like wolves

      • Davidin100millionbilliontrillionzillionyears says:

        I haven’t kept up with the latest data from Jeff Brown and his Export Land Model, but this is a classic case.

        an oil exporting country which has rising consumption (largely because they are wealthier from selling oil) and faces grave consequences when their declining production eventually matches that rising consumption:

        voila! no more exports!

      • Greg Machala says:

        Yep and those production/consumption curves are spreading like wildfire across the OPEC countries.

    • Tim Groves says:

      The Yemeni food crisis has been developing for several years with the war making things much worse for the general population.

      Some 17 million people estimated to be food insecure in March 2017

      According to the latest Integrated Food Security Phase Classification, 17 million people are estimated to be in Crisis (IPC Phase 3) and Emergency (IPC Phase 4) and require urgent humanitarian assistance from March to July 2017. This corresponds to 60 percent of the total Yemeni population and represents a 20 percent increase compared to the last IPC analysis conducted in June 2016. The most affected governorates are Al Hodeidah and Taiz where almost 2.2 million people are in Crisis and over 1.9 million in Emergency. Here the Global Acute Malnutrition (GAM) prevalence is estimated to be above the WHO critical threshold of 15 percent. Similar levels of GAM prevalence are also reported in Abyan and Hadramount governorates.

      The multi-agency EFSNA estimates that some 65 percent of the Yemeni households are food insecure, compared to 41 percent in the pre‑crisis period (2014). About 75 percent of the households report that the current economic situation is worse compared to the pre‑crisis. The cost of living is now 40 percent higher than pre‑crisis, with income levels significantly deteriorating due to disruptions in livelihoods and salaries of the public employees not being paid. High food prices continue to limit the household access to food. In February 2017, according to the Food Security Technical Secretariat Market update, the average prices of locally‑produced commodities (sorghum, millet, and maize) were relatively stable compared to January 2017, but remained up to between 46 and 77 percent above their pre‑crisis (February 2015) levels. Prices of imported wheat and wheat flour increased by about 4 percent and are over 35 percent above the pre‑crisis levels. Large regional differences persist in prices reflecting significant market fragmentation.

      As of February 2017, there were approximately 2 million Internally-Displaced Persons (IDPs) and 1 million IDP returnees in the country, with the highest number residing in Hajjah, Taiz, Amanat, Al Asimah and Sana’a governorates. Most IDPs and IDP returnees are in need of urgent food assistance and they are putting strain on host communities, which are struggling to cope with the already stretched limited resources.

      The majority of Yemenis have little access to Government services and support. Many people do not have access to clean water and are struggling to feed themselves and their families. Basic service infrastructure is near collapse, with fewer and fewer people able to access life‑saving assistance, basic health care and education. Children and women have been the hardest hit.

      http://www.fao.org/giews/countrybrief/country.jsp?code=YEM

      • Fast Eddy says:

        The capital of Yemen is elevated… and is running low on fresh water (that’s what a Canadian diplomat told me when I was there) …. they needed to desalinate and pump water up to the city from the ocean … they were running out of oil so could not afford any of this….

        And now we are seeing how the story ends… disease… starvation … violence.

        Take notes.

    • Kanghi says:

      FE, If you would be there, you would be happy to have your permie style food production systems going on, instead of being totally reliant from what you can affort from free or black market or wait for UN handouts. But of course it is always possible to chew khat instead :p

      • Fast Eddy says:

        I am sure I would … the problem is that when the power goes out … as I am sure it has in Yemen … it becomes very difficult to live the permie life style…. because that life style is dependent on electricity … and diesel…. without them … it is not possible…

        Then there are the hungry people who inconvenience you by killing and eating your farm animals… and stealing your crops….

        Permie Doomie is Delusion. But it clearly does make some people feel better to do this.

        Just like it makes some people feel better to install solar panels or drive an EV.

        All Delusion.

        Try unplugging for a week …. of course nobody will try that… it would shatter the Delusion

        • Tim Groves says:

          I like living on the homestead—my little emerald kingdom in the hills—and chopping my own firewood and growing my own vegetables. It’s a lot of fun. But I’m not deluded enough to believe I could live here in the absence of the surrounding relatively affluent society to bring me the goodies I crave but can’t produce for myself. The permies’ vision of being able to survive or even thrive after the cities go dark is something they have clearly not thought very long or hard enough about. They’ve simply embraced a myth and are following it unquestioningly.

  6. JH Wyoming says:

    https://www.bloomberg.com/news/articles/2017-11-13/tesla-model-3-depositors-staying-put-as-wait-in-line-lengthens

    “Tesla Model 3 Depositors Staying Put as Wait in Line Lengthens”

    Battery packing part of assembly line behind schedule and so they are now delayed a QTR, 3 months behind schedule on the Model 3. Demand exceeds production capability. The weakest link is always what determines how long something takes.

    • Faith in Tesla seems be what it takes to place an order for a Tesla. That faith is unshakeable.

      • Greg Machala says:

        Tesla, like many “renewable” techno-fantasies, has a scaleability problem.

      • Fast Eddy says:

        Their faith is indeed very strong (assuming these numbers are not lies)…. I suspect those who are waiting are saying daily prayers to the Tesla God … and his son Elon….

        Our father who art in heaven
        hallowed be thy name
        deliver us from the evil of fossil fuels
        please hurry!

  7. Pingback: Mideast Turmoil: Follow the Oil, Follow the Money - Investing Video & Audio Jay Taylor Media

  8. MG says:

    30 workers from the operation center of the nuclear power plant Jaslovske Bohunice in Slovakia want higher wages and filed letters of resignation. This is in sharp contrast with the envisaged job cuts and austerity measures going on and planned into the future…

    https://spravy.pravda.sk/domace/clanok/448021-vypovede-mozu-polozit-bohunice/

  9. psile says:

    Doubts grow over giant battery plan to cut blackout risk

    It was the key selling point of the Andrews government’s plan to head off the risk of blackouts and energy price spikes in Victoria this summer.

    Two giant batteries would provide four hours of reserve power for a population roughly equal to that of Ballarat and Bendigo.They were announced in July with much fanfare and the assistance of of former US vice-president Al Gore.

    The 20 megawatt batteries were to have been built and switched on in the state’s west by January or earlier.

    So where are they?

    Time is running out to have them installed and in use by this summer, increasing pressure on the state’s strained power supply.

    On Tuesday the government would not say if the batteries would be switched on by the promised deadline.

    The winning bidder to deliver the $25 million project was supposed to have been announced in late August, but no decision has been made.

    Oh, Elon. Wherefore art thou?

    • A Real Black Person says:

      I can imagine Elon looking at this situation and remarking that the only reason why renewable energy is having trouble being implemented because the government lacks the power to follow through with its own initiatives. Therefore the solution, is more central planning of society and a universal basic income high enough to allow everyone to purchase renewable energy products.

      https://www.theguardian.com/commentisfree/2013/mar/15/bill-gates-capitalism-attacks

      • Fast Eddy says:

        ‘If only…’ the mantra of the Green Groopie…

        Failing to recognize that the mantra of those in charge … Only enough to create the perception that we will soon be weaned off of fossil fuels…. a fossil fuel world – tomorrow… always tomorrow.

    • You probably saw this article earlier about the Tesla batteries for South Australia: There’s Less to Tesla’s Big Australian Battery Deal than Meets the Eye. That article said,

      Adequate cooling systems are important for high power, energy-dense battery installations. High discharge rates generate enough heat to damage the battery and its supporting electronics. Fires and explosions are more frequent occurrences than desired and are a high risk for improperly cooled or controlled systems.

      With those additional installation investments, an estimate of $500-$600 per kilowatt-hour of storage is probably closer to reality. An installed 100 MW/300 MWhr lithium-ion power station would cost somewhere between $150 million -$180 million (200 million Australian dollars to A$240 million)

      Within the context of addressing South Australia’s electric power system stability needs, a 300 MW-hr installation appears to have been unaffordable. Premier Jay Weatherill has a total of A$550 million available, and Tesla’s massive battery is only a part of the necessary capability.

      As Gizmodo has reported, the system that Tesla will be installing will provide 129 MW-hr of energy storage capacity, less than half of what Rive originally hinted could be delivered. At a discharge rate of 100 MW, the battery will be totally depleted in less than 80 minutes. As all cell phone, tablet or laptop computer owners should know, it isn’t advisable to fully discharge a Li-ion battery. It can dramatically reduce battery lifetime.

      I am guessing that the problem is that the cost/benefit analysis of installing the battery yields dreadful results. It is far too expensive for the benefit it provides. Besides, it is not clear how long it would last. Oil to power generators is cheaper and more dependable.

      There is also the issue of the financial stability of the sellers. Tesla seems to buy buying its batteries from Samsung, and selling them at a loss (according to an analysis based on its 10-K reports). This does not sound like a sustainable business model.

      • psile says:

        Yep, never a more lame-brained idea was ever cooked up by an Australian politician. But on the positive side, look at all the sweet PR Elon got? Now he’s off to save Puerto Rico with another magic pudding.

  10. Sven Røgeberg says:

    Is it possible to get some long timeseries of statistic about the rate of productivity growth both in the West and for the whole world economy from the 1970s and onwards? Gails write regarding the devolpement in China: «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.»

    In 1990 the industrialized worle hat 650 million innhabitans in the working age, against 650 million in China. The opening up of Chinas economy ment a doubling of the workforce for global production.
    The working age population in China grew 12 million annualy, four time the rate of that in the industrialized countries. In additon came the fall of the Berlin wall wich made the globalization penetrate also East-Europe.
    The industrialized workforce became global when companies transfered their production to countries with cheap labor, and in the case of China, also with cheap engergy from coal. The consequense seems to be acording to the textbooks in standard economics: With more labourers, but roughly the same amount of machines and other ressources, the lobour productivity and the real wages of the workforce decreased?

    • This is a post I wrote that touches upon this issue. https://ourfiniteworld.com/2015/09/14/how-our-energy-problem-leads-to-a-debt-collapse-problem/

      This is an image from that post.

      World GDP Growth and Energy Growth historically

      The caption on the image is

      World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.

      The problem now is that the increase in energy consumption is becoming smaller and smaller over time. This is what is causing the problem.

      With respect to your question, “With more labourers, but roughly the same amount of machines and other ressources, the lobour productivity and the real wages of the workforce decreased?” Think about this situation as being parallel to an ancient world, in which nearly all output came from resources from the land, particularly food and wood cut to provide energy. A rise in population, without an increase in resources, would be equivalent to dividing farms (or areas used to cut trees) into smaller and smaller units. Each farmer would become less productive, unless with additional tilling, or other techniques, he could force more crops out of a smaller plot of land.

      With fewer machines per capita today, it would be like the Tesla operation, trying to build part of its cars by hand. This would be horribly inefficient.

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