The way the world economy is manipulated by world leaders is a little like a giant video game. The object of the game is to keep the world economy growing, without too many adverse consequences to particular members of the world economy. We represent this need for growth of the world economy as being similar to making a jet airplane fly at ever-higher altitudes.
Figure 1. Author’s view of the situation we are facing. World leaders look at their video screens and adjust their controllers to try to make the world economy fly at ever-higher levels.
World leaders look at their video game screens for indications regarding where the world economy is now. They also want to see whether there are specific parts of the economy that are doing badly.
The game controllers that the world leaders have are somewhat limited in the functions they can perform. Typical adjustments they can make include the following:
- Add or remove government programs aimed at providing jobs for would-be workers
- Add or remove government sponsored pension plans and payments to those without jobs
- Add or remove laws regulating efficiencies of new vehicles
- Change who or what is taxed, and the overall level of taxation
- Through the above mechanisms, change government debt levels
- Change interest rates
There are numerous problems with this approach. For one thing, the video game screen doesn’t give a very complete picture of what is happening. For another, the aspects of the economy that can be controlled are rather limited. Furthermore, the situation is very complex–there seem to be several “sides” of the economy that need to “win” at the same time, for the economy to continue to grow: (a) oil importers and oil exporters, (b) businesses and their would-be customers, (c) governments and their would-be taxpayers, and (d) asset holders and the would-be buyers of these assets, such as families needing new homes.
An even bigger problem is a physics problem that is hidden from the view of those operating the control mechanism. Jet airplanes in the real world cannot rise beyond a certain altitude (varying depending upon the plane), because the atmosphere becomes “too thin.” There is a parallel problem in the economic world. The atmosphere that allows an economy to grow is provided by a combination of (a) an increasing supply of cheap-to-produce energy, and (b) increased technology to put this growing energy supply to use. This atmosphere can become too thin for several reasons, including the higher cost of energy production, rising population, and growing wage disparity.
We know that in the real world, a jet airplane cannot rise ever-higher. Instead, at some point, the airplane hits what has been called its “coffin corner.”
Figure 2. Diagram of Coffin Corner by Aleks Udris of Boldmethod. On the chart, Vs is the velocity; MMO is the Maximum Mach Number.
According to Aleks Udris, “The region is deadly. Get too slow, and you’ll stall the jet at high altitude. Get too fast, and you’ll exceed your critical mach number. The air over your wings will go supersonic, you’ll pitch down, the aircraft will accelerate, and your wings will fall off. Also bad.”
What Happens As Coffin Corner Limits Are Reached in the Economic World?
What do world leaders do, as the world economy hits limits? One temptation is for the world leaders in Figure 1 to take their foot off the throttle that is operated by low interest rates and more debt, because they don’t seem to be providing very much benefit anymore. The leaders fear that if more debt is added at low interest rates, it risks creating “asset bubbles” that are easily disturbed if any little bump to the economy occurs. If a big bubble pops, there is a significant risk that the economy could fall down to a much lower level. This is like stalling the jet at high altitude.
World leaders can also use approaches that create situations more like “making the wings come off” the economy. These approaches involve favoring one group over another. For example, a government can give big tax breaks to businesses, but raise taxes on individual citizens. Businesses will ultimately be harmed by this approach, because they depend on individual citizens for their sales. The result is like tearing the wings off the airplane.
Another approach that would tear the wings off the economy involves actions by a different group of world leaders than those shown in Figure 1, namely the leaders from OPEC and Russia. These leaders have different video game screens and different game controllers. They can manipulate the world economy by reducing the supply of oil they provide. With this approach, they hope to increase the price of oil, and thus obtain a larger share of the world’s goods and services through higher tax revenue.
Raising the oil price would benefit oil exporters, but would make goods and services more expensive for oil importing countries. Ultimately, this approach would lead to recession in oil importing nations. The result would likely be worse than the 2008-2009 recession–another way to make the wings come off the economy.
Let’s look in a little more detail at what is happening, and what goes wrong:
[1] Energy plays a huge role in this game, because a growing supply of cheap-to-produce energy allows greater worker productivity.
It takes energy of various types to make the economy grow, because energy is needed whenever we move something, or heat something, or use electricity to operate something. We use energy products to leverage our human labor. For example, we use a truck to deliver a package, rather than walking and carrying the item in our hands. If fresh water is in short supply, we use energy to operate a desalination plant, and thus produce the fresh water we need.
It is generally workers who produce goods and services. If energy supply is inexpensive and readily available, it is easy for governments or businesses to create “tools” to make these workers more productive. These tools include such things as roads, vehicles, machines of all types, and even computers. If the quantity and capability of these tools are increasing, the labor of these workers is increasingly leveraged by the availability of these tools. This is what allows economic growth.
[2] The extent of world economic growth seems to depend primarily on how quickly total energy consumption is growing.
If we look at historical economic growth, we see that the rate of growth of energy consumption seems to play a major role.
Figure 3. 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 highest rates of world economic growth took place in the 1950-1965 period, and in the 1965-1975 period. These were both periods of very high growth in energy consumption. As we will see below, these were both periods when the price of oil was less than $20 per barrel, for almost the entire period.
If we look at economic growth over shorter periods, we also see a strong correlation between world economic growth and growth in energy consumption:
Figure 4. World growth in energy consumption vs. world GDP growth. Energy consumption from BP Statistical Review of World Energy, 2017. World GDP is GDP in US 2010$, as compiled by World Bank.
[3] On Figure 4 (above), the widening gap between GDP growth and energy consumption since 2013 could either represent (a) Much greater efficiency in using energy or (b) A problem in measuring true economic growth.
We can see true efficiency improvements in the 1975-1985 and the 1985-1995 periods shown on Figure 3. These were the periods when the world was truly trying to “get away from oil,” after a spike of high prices in the 1970s. Governments around the world were encouraging new smaller cars; electricity generation was being changed from oil to nuclear; home heating was being changed from oil to natural gas or electricity. The new furnaces installed were much more efficient than the old ones. Thus, during this period, efficiency/technology improvements were aiding economic growth to a greater extent than usual.
Now, in the period since 2013, much of the “low hanging fruit” has already been picked. We may still be finding some technology gains, but it seems likely that at least part of the problem is an “economic growth counting problem.” GDP looks like it is growing, but it is really very hollow economic growth. Governments invest in projects of essentially no value, and their investment is counted as GDP. For example, they invest in unneeded roads, in apartments that citizens cannot really afford, in educational institutions that do not produce graduates with wages that are sufficiently high to pay for education’s high cost, and in high-priced medical cures that are unaffordable by 99% of the population. Are these things truly contributions to GDP?
We also find businesses that look like they are growing, but in fact are taking on increasing amounts of debt as they sell off assets. This is not a sustainable model! We encounter energy companies that claim to be doing “sort of” alright, but their profits are so low that they need to cut back on new investment, and they need to borrow in order to have funds to pay dividends to shareholders. There is something seriously wrong with this growth!
[4] The economic “atmosphere” becomes thinner and thinner, when oil prices rise above an inflation-adjusted price of $20 per barrel.
Back in the time period prior to 1973, oil prices were generally below $20 per barrel, in inflation adjusted terms. Since then, prices have tended to be above this level.
Figure 5. Historical oil prices are Brent oil prices in 2016$ from BP Statistical Review of World Energy 2017; $20 per barrel is the maximum price level where oil is truly affordable; and $300 per barrel is the maximum price per barrel that the International Energy Agency seems to believe is possible for the world economy.
When oil (and other energy prices) were very low, companies could add tools to make workers more effective with little expenditure. As a result, the United States saw wages growing much more rapidly than inflation prior to 1968 (Figure 6).
Figure 6. Chart comparing income gains by the top 10% to income gains by the bottom 90% by economist Emmanuel Saez. Based on an analysis of IRS data, published in Forbes.
Once prices of oil started rising, prices of tools (broadly defined) rose. Governments and companies needed more debt to buy these tools. It became more of a burden to add capital goods of all kinds. Governments tried to raise GDP by adding debt, but to a significant extent they ended up with higher debt to GDP ratios rather than the rapid growth they were looking for (Figure 7).
Figure 7. Worldwide average inflation-adjusted annual growth rates in debt and GDP, for selected time periods. See post on debt for explanation of methodology.
The changes in the economy that allowed continued growth (more debt and more technology) tended to push the economy toward more wage disparity, in part because more technology required more training for some of the workers, but not for others. This allowed wages of the workers with special training to rise.
Furthermore, the need to repay debt with interest tended to funnel wealth toward the financial sector, and toward those within the economy who could afford to hold financial assets. These changes left less of the output of the economy for non-elite workers.
Economists never really understood what was happening. They had never thought through the important role that energy plays in the economy. Cheap energy is needed to create jobs. It is jobs, and the wages that those jobs pay, that tend to suffer when oil prices are too high (Figure 8). Thus, high-priced oil has a double impact on the economy:
- It makes goods of many kinds more expensive.
- It reduces job availability and wages.
Figure 8. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
Logic would suggest that the economy cannot really operate on high-priced oil. Lower wages and higher prices do not peacefully coexist! We should expect high oil prices to be very unstable. Even if prices can reach a high level in response to a specific shortage or stimulus, we cannot expect these high prices to be maintained for a sustained period, without added stimulus. Unstable high prices are not likely to give rise to more oil production; they cannot be depended upon.
Economists have never understood this situation. Instead, they have made pronouncements that at some point in the future, they expect that oil would become scarce. Because of this scarcity, oil prices would rise. In their view, when oil prices rise, high-priced substitutes would suddenly become the best option available; somehow, the economy would become able to operate using these high-priced substitutes. (If energy products were not needed for labor productivity, this view might make some sense. In the real world, it does not.)
It never occurred to organizations such as the International Energy Association (IEA) that high oil prices might be a problem for the economy. The IEA has shown exhibits suggesting that oil prices could theoretically rise to $300 per barrel. Of course, at such an elevated price, there would be an almost unlimited amount of oil available to extract (Exhibit 9).
Figure 9. IEA Figure 1.4 from its World Energy Outlook 2015, showing how much oil can be produced at various price levels.
[5] The real enemies of continued economic growth are (a) diminishing returns with respect to oil and other energy production, (b) continued population growth, and (c) increasing wage and wealth disparity.
We seem to be playing a video game where the players don’t understand who the real enemies are.
Diminishing returns with respect to oil and other energy production have to do with the cost of energy extraction rising ever-higher, as more resources are extracted. There are a lot of resources that we can “see,” but that we cannot economically extract, unless prices rise to very high levels.
Figure 9. My version of the resource triangle for oil. Note that oil shale is not the same as tight oil, found in shale formations. Oil shale is kerogen that must be processed at very high temperatures in order to produce oil. This is rarely done, because of the high processing cost. Tight oil is not on this chart. Tight oil probably would be above “onshore heavy oil; oil sands.” It still would disappear, if oil prices permanently fell to $20 per barrel or less.
Continued population growth is a problem because it is really “energy per capita” that matters. Each individual needs food, transportation, and housing. All of these things take energy. Many years ago, when most of the workers were farmers, it was necessary to create ever-smaller farms, as population rose. This clearly would lead to lower food production per farmer, unless some sort of technological breakthrough was taking place at the same time. Today, we have a parallel issue.
Increasing wage disparity tends to be associated with the rising use of technology. When most labor is hand labor, workers truly do “pay each other’s wages.” All wages can be fairly equal. With increased technology, some workers have specialized training; others do not. Some workers are supervisors; others are laborers. Unless the overall output of the economy is rising very rapidly, non-elite workers find themselves increasingly unable to afford the output of the economy. It is this falling “demand” (really affordability) that tends to pull an economy downward.
[6] High oil prices can be temporarily tolerated by an economy, if interest rates are lowered to make this arrangement work.
Clearly, lower interest rates make capital goods of all kinds more affordable to both businesses and individual workers. If we look back at the period since 1981, we see a long period of falling interest rates, acting to stimulate the economy.
When oil prices exceeded $20 per barrel, the economy did not collapse immediately. In “normal” times, lowering interest rates was sufficient stimulus to keep the economy growing (Figure 4).
Figure 10. Ten-year treasuries through Nov. 17, 2017. Chart produced by FRED.
When there is a very big drop in oil prices (as in 2008, related to falling debt levels), then Quantitative Easing (QE) has been helpful (Figure 11). The US began its program of QE in late 2008, when oil prices were near their low point. There were three phases of the US’s QE. The US discontinued the third phase in late 2014, just as oil prices started to slide again.
Figure 11. Monthly Brent oil prices with dates of US beginning and ending QE.
[7] It is quite possible for a disconnect to occur between (a) the cost of oil extraction, and (b) the selling price of oil.
Oil that costs more than $20 per barrel is never very affordable by the economy. It really needs continual stimulus to keep prices at an elevated level. Once debt growth falls too low, the balance between the supply and demand for oil is settled in the direction of the amount of goods and services made with oil that non-elite workers can afford. Prices fall below the cost of production. This seems to be what has happened since 2014.
[8] In fact, since 2014, the selling prices of oil, natural gas, and coal have all fallen below the cost of extraction.
Figure 12. Price per ton of oil equivalent, based on comparative prices for oil, natural gas, and coal given in BP Statistical Review of World Energy. Not inflation adjusted.
It is popular to think that the reason why oil prices are too low is because of overproduction by the United States or Saudi Arabia. When a person stops to realize that essentially the same situation arises for all three fossil fuels, a person begins to understand that there likely is an affordability issue underlying the low prices for all three fuels. The affordability issue, of course, arises because energy supply is not rising quickly enough because (at over $20 per barrel), it is too expensive to be truly affordable. The “atmosphere is too thin” at today’s high cost of energy extraction.
9. Coal production seems to have “peaked” because at today’s low prices, few mines find the extraction of coal profitable.
It is popular in “Peak Oil” circles to believe as the economists do: oil and other energy prices can rise endlessly, because of growing “demand.” Economists have never stopped to think that at any given price, there is an affordability issue for customers. If prices drop too low, there is a profitability issue for those operating extraction facilities.
If we look at the situation with coal, we see a situation where peak production seems to have been reached because of low prices. China has closed down mines because falling prices have made mines that were previously profitable, unprofitable (Figure 13). Coal is the lowest-cost fuel; if it cannot be mined profitably, the world economy has a problem.
Figure 13. China’s energy production, based on data from BP Statistical Review of World Energy, 2017.
In fact, it appears as though we have reached peak coal on a worldwide basis, as a result of low prices (Figure 14). It is hard to see any major production area that can grow substantially in the future, without much higher prices.
Figure 14. World coal production, based on BP Statistical Review of World Energy Data. (For 1965-1980, consumption is substituted for production, because only consumption is given, and imports/exports are likely small.
[10] The world economy needs to be able to keep repaying debt with interest. If world economic growth slows too much, this will not be possible.
We may already be reaching a “too slow growth limit.” Below this growth limit, it becomes impossible to repay debt with interest, especially if interest rates rise. We may already be reaching this point, based on the lack of growth in energy consumption per capita shown in Figure 15. (Also, as noted in Item [3], it seems quite possible that recent GDP growth indications are overstated.)
Figure 15. Average energy prices (averaging oil, coal, and natural gas) versus the total quantity of energy products consumed per capita, based on BP energy consumption data and UN population data. (Prices have not been inflation adjusted.)
Figure 15 suggests that affordability and price go together. When the world economy is growing rapidly, energy prices tend to rise (as does energy consumption). When energy consumption per capita falls, it is a sign that the world economy is not doing well.
One of the things that confuses matters is the very different economic growth results for different parts of the world. If oil prices are low, this improves economic growth prospects from the point of oil importers, such as the United States and China. This is what our video game players are looking at, not the results for the world as a whole. It is oil exporters, such as Venezuela and Saudi Arabia, who are having problems.
If we look at world news, Venezuela may collapse because of low oil prices. Saudi Arabia has found it necessary to take on debt, and has undergone regime change, at least partly related to low oil prices. Norway is proposing that its oil and gas fund no longer invest in oil and gas companies, because it expects that there is a significant chance the oil price will not rise high enough to bring companies back to adequate profitability.
[11] The whole “game” has been confused by a lot of not-quite-correct pronouncements from academic circles.
A lot of well-meaning people have tried to solve our energy problems, but haven’t gotten the story right.
Economists have gotten the story pretty much 100% wrong. Energy is very important for the economy. Furthermore, energy prices don’t rise endlessly.
Peak Oilers have confused matters by talking about oil, coal and natural gas being determined by the amount of technically recoverable resources in the ground. This might be true if energy prices could rise endlessly, but clearly they cannot. By following the wrong views of economists, Peak Oilers have led world leaders to believe that far more resources are available to be extracted than really is the case.
People who call themselves Biophysical Economists haven’t really gotten the story correct either. The Biophysical Economists realized that there was a need for a measure for diminishing returns. They put together a measure which they called Energy Returned on Energy Invested. The measure, unfortunately, only “sort of” works. It gives a lot of wrong answers. It does not suggest that oil prices above $20 per barrel are a problem. It also does not suggest that substitutes for oil that are priced above $20 per barrel are a problem. It tends to give a lot of “false positives” when it comes to the question of whether renewables can be substituted for fossil fuels. It seems to suggest that a particular ratio is important, when it is really the total quantity of an energy product available at a very low price that is important.
I should not pick on the Biophysical Economists. There are many others with academic credentials who produce metrics that really aren’t very helpful. Energy payback time is not a very helpful metric, especially from the point of view of deciding whether or not to use a particular device. It is not the energy that the economy must pay back; it is the full cost of manufacturing the device that needs to be recovered, including human labor costs and taxes. In some applications, the cost of mitigating intermittency may also need to be considered.
Even the standard Levelized Cost of Energy calculations can give misleading indications, if they are used on intermittent renewables without taking into account the cost of mitigating the intermittency.
Conclusion
With all of these issues, it is not surprising that world leaders have difficulty playing the energy and economy game. In fact, it is hard to see any winning strategy.
One of the issues that makes the game impossible to win is the fact that all sides must win. A solution that cuts out the oil exporters is a problem for an economy dependent on oil. Any solution that cuts out the workers is a problem, partly because businesses need workers as consumers, and partly because governments need workers as taxpayers.
The reason I have not included any discussion of renewables is because at this point in time, we do not have any renewables that are sufficiently inexpensive and sufficiently scalable to represent a solution.
Passengers make their way through Hartfield-Jackson Atlanta International Airport after the lights went out at the airport.
People used flashlights on their phones to see where they were going, said passenger Heather Kerwin, an Atlanta resident bound for New York.
“There were a few emergency lights on, but it was really dark — felt totally apocalyptic,” she said. “I decided to get the hell out of there.”
Some passengers told CNN that airport and airline staff offered no updates as hours passed, leaving people scanning their phones and tablets for information. Stores stopped serving food and passengers were evacuated to alleviate crowding.
eorgia Power said in a statement that its equipment — a piece of switchgear — which was in an underground electrical facility, could have failed and started a fire. The incident is still being evaluated, according to the utility.
e fire’s intensity prevented Georgia Power crews from immediately being able to access the tunnels and work on restoring power, Reed added. By 3:30 p.m., fire crews were able to contain the fire and started to work on restoring power. The cause of the fire has yet to be determined, but nothing suggests it was set deliberately, he said
Atlanta (CNN)Nearly 11 hours after a power outage paralyzed the world’s busiest airport, Atlanta’s Hartsfield-Jackson International got its electricity back late Sunday night.
The lights flickered on shortly before midnight, after an exhausting day for travelers, that had left thousands stranded in dark terminals and on planes sitting on the tarmac. A ground stop in Atlanta disrupted air travel across the United States and led to cancellations of more than 1,000 flights in and out of the airport
A SWITCH failed?…very fragile system
I saw this story on the front page of the Atlanta paper this morning. Backup systems failed at the same time as the main system. Electricity cannot be counted on, all too often. A large share of people here have backup batteries for their computers, so they will not lose their work, if the electricity goes off.
https://www.bloomberg.com/energy
Oil price has pretty much stabilized for a few weeks now. 62 and change for Brent.
Everyone quotes the WTI price. It’s the benchmark crude.
In the US, anyhow.
ho hum, Bitcoin down $1,000 today…
https://www.coindesk.com/price/
and ha ha, I predicted it would go to $1 million in 2018…
this guy says $300,000 to $400,000…
https://www.cnbc.com/2017/12/17/bitcoin-price-ronnie-moas-sees-cryptocurrency-at-300000-400000.html
up another 500 percent?
I’m predicting he’s too low.
Hmm … bitcoin may indeed hit such big numbers, but what will a dollar be worth?
even if their is nobody in power who really knows what is ailing our financial system the central banks will have to permanently enter negative territory in order to ramp up more debt to keep BAU going and that means an objective of a cashless society would be the central banks main umission that is why i now believe yes we will collapse and leave this planet to whatever can survive once the spent fuel pools physically react with our atmosphere when any of them fails it will be a’ topsy turvy’ world of unthinkable financial tricks by the central banks for who really knows how long
yes!
a cheerful story for a winter’s evening…
but, when? that’s the biggie…
but now…
BAU, baby, tonight is.
i have been watching bitcoin carefully i think 100 000 us dollars by the end of 2018 but i still have my money in silver ‘the poor man’s gold’
Silver at least has the possibility of being able to buy a loaf of bread or some reasonably needed product.
http://greyenlightenment.com/boosting-the-economy-through-high-iq-investment/
I am sorry. Debt can grow much higher.
In fact it can grow at least 10 times what we have now, and economy will still grow.
I presume that you don’t pay any interest on the debt. Maybe you have negative interest rates.
Also, that concentration of wealth is not a concern.
Let’s see, each of us will buy a boat, a second house, and send our children to private colleges for their degrees. Governments will build more roads to nowhere and more apartment buildings that no one can afford. I think you are imagining things.
i am just guessing when i think what governments will spend the money on when negative interest rates are the new normal but because of the higher cost of infrastructure programs we should not expect much money left over for the citizens so i think the common man will be spending most of their money on food not cars boats or houses as the net energy from energy sources will not be their that is why i think the only way a family could enjoy and prosper in the future is through collective action with other families say if a small group of families were living together in a self-sufficient system on acreage in a good location near food and water sources
With nearly negative interest rates, there will be plenty to spend money on. Energy is probably the major area funding will be directed at. If shale oil is already cashflow negative, then I can see no problem Govts spending more and more on all types of energy and low grade resources to keep BAU going at any cost.
The low grade resources are ne.eded for the EV future (copper, silver, lithium, cobalt, nickel etc).
There will be justifications of ‘new economy’, or ‘better climate’ or new paradigm etc, but eventually bring the next crash.
Of course at some point, debt will be spent on Energy/resources instead of food, which will bring bigger problems in some/most areas.
It is all about kicking the can down the road a little further, no matter what the cost
As I understand your hypothesis, debt is used to pull resources with embedded energy through the economy as quickly as they can be used; if there is not embedded energy this does not work which is why although all the Cu, Ag, etc. is still on earth, it is too diffuse in landfills to be of any use. CB seem to perform a function of balancing out the cashflow to member banks when too many assets are produced or assets depreciate more quickly than anticipated. War helps this in that it can be throttled up or down and in non war times an f35 can be built which even if it does not work will provide jobs and knowledge of how to build a better next generation as in the F111 followed by the f16 Tomcat which apparently worked, or at least it did for Tom Cruise. The knowledge of how to build a B52 was used to build out the 707 fleet and successors. The issue is when resources are exhausted that have embedded energy, and it is no longer a micro, local event limited to a few asset classes but a marcro event which is no longer a cashflow issue, but a solvency issue.
Am I getting warm?
Dennis L.
We find that the energy required to get resources from landfills is too high to justify their use. The whole cycle of profitability for companies cannot take place, without adequate low-priced energy. Wage disparity causes demand to fall too much.
So that’s why we have fast collapse? At one point you’re profitable and then you are not.
Seems kinda slow to me…
We have picked the low hanging fruit, now we need more tools and education (to build a ladder) to pick the high hanging fruit. I think we have climbed past the rung of profitability and are living off the fruits in our baskets, picked long ago.
So now, instead of investing in to bigger and better ladders, we must learn to eat fewer apples a year.
Sorry, I need to work on finishing my new post.
Owning things requires repair, maintenance, storage etc. If you are poor and buy a costly bulky thing, where will you store it? There are certainly space limits for owning of the things: it is simply more economical to rent them when you need them than own them. And you can not rent and use several things from various sources at the same time and use them as the logistics of their delivery and return would be uneconomical, too….
hey Kulm, don’t be sorry…
I agree that debt can grow higher…
but 10X the $20 trillion US debt is… um… like $200 trillion…
no, never will get that high…
but $30 trillion by mid to late 2020s? sure, why not?
Testing 123
roger that, JT…
loud and clear, I read you.
test, this is not…
BAU, baby, tonight is.
The State of Delusion – Fast Eddy’s Log Stardate Sunday December 18, 2017:
I was informed yesterday that two NZ hockey players were busted using PEDS – 100 other athletes were implicated but for some reason only these two were outted… (so far)
https://www.stuff.co.nz/sport/other-sports/99728957/new-zealand-ice-hockey-brothers-lachlan-and-mitchell-frear-hit-with-twoyear-doping-bans
My comment was – no surprise here — if players in some butt f789 league are taking this stuff — you can bet your bottom dollar they are doing the same at the highest levels – in ALL sports
The response was — in rugby there is a lot of steroids in the lower levels — because there is little or no testing – but nothing at the highest levels.
To which I responded — at pro level sports most leagues have agreements to notify the players of testing dates. Also until recently there was no test for HGH human growth hormone — and even now — they are not effective because HGH clears the system within a day … so if you are not tested on the day you inject – you are clean.
As the scientists state — it is almost impossible to catch athletes — they have be very careless… very stupid … or very unlucky.
Case in point Lance Armstrong — Marion Jones — both competed for years without failing tests… in fact neither of them ever failed tests — they were only caught when others informed on them.
Response — I don’t think top level rugby has a steroids problem.
Hmmm… well how about that weather — really hot eh —- ya … ggg wwww is a huge problem — we need the NZ govt to subsidize solar!
Pray tell … what does on talk about when one meets people —- that Xanax idea is sounding better all the time
What is the point of testing?
It seems to move focus from the best athlete to best doctor and manager.
i still could not understanding why usa invaded Vietnam
of my point of view vietnam did not had any oil
then why usa screw this country
Think of all of the debt you can justify, when you are fighting a war. It helps “pump up” the economy, especially when you are not fighting the war on your own land, and thus being bombed.
Also, quite a bit of that debt can go back into wages for soldiers and spending on munitions. This helps the economy along as well.
Gail, I really don’t get this.
It is understandable at this juncture ie energy & resource access are getting pretty rocky and so debt is being used to try to force up aggegate demand. Probably because there is no other way to deal with this.
But the Vietnam War was certainly not an attempt to force up US debt levels into the stratosphere. This was a case of the US seeing Communism as a an active menace which was capable of pulling vulnerable resource nations into their sphere. The theory of “falling dominos” seemed credible in the 60s and N.Vietnam was being actively courted by the USSR and had an active communist govt. US vs the so-called “Communist Bloc” rivalry had a lot of action in the mid-60s-
*Berlin Wall
*Formation of Warsaw Pact
*Cuban Missile Crisis
*China nuclearizes- 100 megaton hydrogen bomb blast test
*Invasion of Czechozslovakia in 68
*USSR rapidly building ICBM inventories including subs
*Sputnik in 50s
*Cold War getting traction ie increased military budgets w/o actual war
The big issue here was the financing of both the Vietnam War and the Great Society spending programs as well as US reaching peak oil in 1971. The 70s was regarded as a disastrous decade of weak US dollar, high consumer inflation, stock market crashes. Most observers attributed the 70s to the money printing attempt to fund the Great Society and ambitious military actions like the Vietnam War.
in 1967 “The Report from Iron Mountain” was published which was coincident with the Viet Nam War. If war is seen as a way to maximize through put of raw materials both oil and those with embedded energy, then war is consistent with a good economy. WWI, roaring twenties, WWII prosperous fifties/sixties, Viet Nam, well things went fairly well after that period of time, first war in Iraq, 80’s and 90’s were not too bad and indeed today some say that over all economic well being on people living on the planet has never been better. Wikipedia has a section on this book.
Dennis L.
Think of what happens if you are a mafia don … and someone does not pay back a loan … and you pat him on the back and say — that’s ok — just pay next month … then he doesn’t pay next month and you say … no problem — you are a good guy —- pay whenever you find some spare cash….
Of course you are seen as weak — and then nobody pays you — then you are very soon broke and out of business.
Unless you are stuuuuupppid or a member of the Koombaya Mafia — you bust that MOTHER F789ers knees if he doesn’t pay – and you add 50% — and if he doesn’t pay the next week you put him in a sack and pound him to bits with a baseball bat — then you fill the sack with bricks and sink the son of a b i tch in a river…. you send a message.
The Vietnam War was sort of like that…. if a country does not kiss the ring (and socialism/communism is like spitting on the ring) ….. get ready to rumble.
And even if you win – you lose — Vietnam was one of the poorest countries in the world after that war… the el ders made damn sure of that.
But then they meekly approaches in the early 90’s and offered to kiss the ring… and wipe the a.ss of Uncle Sam.
The el ders quickly forgave and forgot … and are now doing a brisk business with Vietnam.
++++ This is the first reasonable answer to that question I have heard in 50 years.
Sort of “Lets play King of the Mountain.” The word a person often sees used is “hegemony.” https://www.merriam-webster.com/dictionary/hegemony
1: preponderant influence or authority over others : domination battled for hegemony in Asia
2 : the social, cultural, ideological, or economic influence exerted by a dominant group
I am afraid I haven’t studied this enough to give a good answer.
The US problems in the 1970s certainly had a lot to do with peak oil. Adding debt is a standard workaround for inadequate energy supplies. Hopefully, added debt will act to create more wages, and the wages will pull the economy along. I wouldn’t pay a whole lot of attention to standard explanations of what happened. Debt certainly exploded after Reagan took office in 1981.
I expect that the slow growth in oil supplies was adversely affecting the US economy, even prior to 1970. We know that wage studies said that wages stopped growing faster than inflation, about 1968. This may have influenced the Viet Nam policies. Or maybe all of the growth “went to the head” of the leaders back in the 1960s, and they thought they had the “power” to do anything they wanted –save poor people, free the world from communism, you name it. There was a very definite rivalry between the US and Russia in the 1960s, and winning wars in fought in third world countries to prove their superiority seemed to be important.
Colonial wars are unpalatable to most Americans, so their understanding of the conflict is not served well by documentary whitewashing and Hollywood special effects. Indochina was sold to the cia by french intelligence officers as something that could be won by changing the parameters to an economic struggle from outright colonial subjugation. There was not a lot of support for the war even among Vietnamese Catholics which should have been the tell it was unwinnable.
Leaders did think they had the power to do anything….example…Johnson’s Great Society program. With the exception of defense, probably the most wasteful failure of a program ever devised.
And speaking as an active investors/speculator, if I knew that a nation or financial company was actually trying to accumulate large amounts of debt, I would avoid them like the plague.
Taking on large amounts of debt results in domestic inflation, exit of corporate and individual investors, lowered Moody’s credit ratings, credit lines being canceled, weakness in international value of domestic currency, etc Just nothing good comes irresponsible accumulation of debts.
All bad stuff.
Gail, don’t tell me you have fallen for that myth that war is good for the economy. Anybody who believes that should shoot themselves in the foot and blow up their house and then see how that works out for them.
You have to make certain that war is fought outside of your own territory, so you do not destroy perfectly good businesses and houses, and don’t kill off too many people.
Anything that pumps up debt helps commodity production increase, and helps the economy, at least for a while (until the debt comes due). Even war. Hurricanes are good in this regard as well. The problem is that you need to keep ramping up more and more debt, for more and more ridiculous purposes.
Look at this chart regarding the ramp up in US GDP and personal income in World War II.
It would be better to use the debt for worthwhile purposes (building roads and factories), but we seem to run out of the need for more of them rather quickly.
Wars are destructive, not constructive. Destruction can never benefit the economy. “The broken window fallacy” describes it best. The capital that goes into war is a one time use. Sure you get the benefit of killing your enemy but let’s say you put that capital into making air conditioners, you then get the benefit of having years of comfort.
Wars are great – but you don’t want to drop bombs on your own country … because you destroy the infrastructure and potentially collapse your economy.
Hurricanes, earthquakes and fires — are good – damage is limited — and repairs boost GDP
Only if you can “afford” to borrow for repairs.
And resources are available for repairs. I suppose that goes with affordability.
The creeping collapse is seen in many small ways also. My sister in Houston had flood insurance. Her neighbors, facing financial strain, did not, and had just placed their home for sale. Harvey hit. My sister has basically a totally renovated home and many new appliances. Now the neighbor home is a cesspool of mold, and will probably be unfit to live in some day.
It could have simply been random noise. Did JFK actually believe the domino theory? Quite possible. After that, LBJ simply continued on because he didn’t no what else to do.
http://www.historylearningsite.co.uk/vietnam-war/john-f-kennedy-and-vietnam/
Mistake piled on mistake piled on mistake … ad infinitum. Some historian can make up a plausible and rational reason for it, but it is also very possible that there was no rational reason at all.
we all know at ofw we are near the end of bau
so it does not matter whether it happen in 2018 or 2022
we should enjoy last days of bau without worried too much
https://youtu.be/CIrvSJwwJUE
We seem to be getting further away from our actual reality.
The Doors understood it in the 60’s.
yes!
the End is near!
but, I predict, not in 2018.
2022 is more like it.
BAU, baby, tonight is!
The tech industry is hot to say they are serving the social good. At least when they talk to their under 40 employees. I do not remember this being the case in the past. I take it as active denial, active repression (in the psychological sense).
In days of old the only thing that the greens could offer was a future of mung beans and sackcloth. Tech has changed it all.
Now, with Teflon Musk et al on the scene the greens can be all techie and cool and offer rainbows and unicorns. The sky is the limit and now there is no need to mention population control because tech (new religion) will save us all.
So we can all wear suits and sell solar panels and bit-cons’ to each other. Denial is the bridge that gets us to the other side of the energy dilemma.
There are few, if any, over 40 employees in many of these companies.
https://www.nytimes.com/interactive/2017/12/17/world/americas/venezuela-children-starving.html?_r=0
we have 2 choices about food
1 food is produced and consumed within walking distance, then starvation is inevitable
2 food is produced further away than that, in which case surplus energy must be made available to deliver the food where its needed
if that supply system breaks down, starvation is inevitable.
if several generations get used to –2— then they have no means of getting themselves fed
venezueala is our dress rehearsal
Yes – watch what happens to the few who are growing food without petro chemicals … when that country implodes…. people will be eating cats and dogs and rats… oh – but they will leave the organic farmers alone ….
Har Har Har
Without the wealth of oil it will be the four traditional means of population control starvation, disease, war, and pollution (the horse-person formerly known as pestilence). This will happen globally before 2070.