Will the World Economy Continue to “Roll Along” in 2018?

Once upon a time, we worried about oil and other energy. Now, a song from 1930 seems to be appropriate:

Today, we have a surplus of oil, which we are trying to use up. That never happened before, or did it? Well, actually, it did, back around 1930. As most of us remember, that was not a pleasant time. It was during the Great Depression.

Figure 1. US ending stocks of crude oil, excluding the Strategic Petroleum Reserve. Amounts will include crude oil in pipelines and in “tank farms,” awaiting processing. Businesses normally do not hold more crude oil than they need in the immediate future, because holding this excess inventory has a cost involved. Figure produced by EIA. Amounts through early 2016.

A surplus of a major energy commodity is a sign of economic illness; the economy is not balancing itself correctly. Energy supplies are available for use, but the economy is not adequately utilizing them. It is a sign that something is seriously wrong in the economy–perhaps too much income disparity.

Figure 2. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.

If incomes are relatively equal, it is possible for even the poorest citizens of the economy to be able to buy necessary goods and services. Things like food, homes, and transportation become affordable by all. It is easy for “Demand” and “Supply” to balance out, because a very large share of the population has incomes that are adequate to buy the goods and services created by the economy.

It is when we have too much income and wage disparity that we have gluts of oil and food supplies. Food gluts happened in the 1930s and are happening again now. We lose sight of the extent to which the economy can actually absorb rising quantities of commodities of many types, if they are inexpensive, compared to wages. The word “Demand” might better be replaced by the term “Quantity Affordable.” Top wage earners can always afford goods and services for their families; the question is whether earners lower in the wage hierarchy can. In today’s world, some of these low-wage earners are in India and Africa, or have no employment at all.

What is Going Right, As We Enter 2018?

[1] The stock market keeps rising.

The stock market keeps rising, month after month. Volatility is very low. In fact, the growth in the stock market looks rigged. A recent Seeking Alpha article notes that in 2017, the S&P 500 showed positive returns for all 12 months of the year, something that has never happened before in the last 90 years.

Very long runs of rising stock prices are not necessarily a good sign. According to the same article, the S&P 500 rose in 22 of 23 months between April 1935 and February 1937, in response to government spending aimed at jumpstarting the economy. By late 1937, the economy was again back in recession. The market experienced a severe correction that it would not fully recover from until after World War II.

The year 2006 was another notable year for stock market rise, with increases in 11 out of 12 months. According to the article,

Equity markets rallied amidst a volatility void in the lead-up to the Great Recession. Markets would make new all-time highs in late 2007 before collapsing in 2008, marking the worst annual returns (-37%) since the aforementioned infamous 1937 correction.

So while the stock market consistently rising looks like a good sign, it is not necessarily a good sign for market performance 6 to 24 months later. It could simply represent a bubble forming, which will later pop.

[2] Oil and other commodity prices are recently somewhat higher.

Recently, oil prices have been too low for most producers. Now, things are looking up. While prices still aren’t at an adequate level, they are somewhat higher. This gives producers (and lenders) hope that prices will eventually rise sufficiently that oil companies can make an adequate profit, and governments of oil exporters can collect adequate taxes to keep their economies operating.

Figure 3. Monthly average spot Brent oil prices, through December 2017, based on EIA data.

A major reason for the recent upward trend in commodity prices seems to be a shift in currency relativities for Emerging Markets.

Figure 4. Figure from Financial Times showing currency relativities based on the MSCI Emerging Market currency index.

While the currency relativities for emerging markets had fallen quite low when commodity prices first dropped, they have now made up most of their lost ground. This makes commodities more affordable in Emerging Market countries, and allows them to do more manufacturing, thus stimulating the world economy.

Of course, if China runs into debt problems, or if India runs into problems of some sort, or if oil prices rise further than they have to date, the run-up in currency relativities might run right back down again.

[3] US tax cuts create a bubble of wealth for corporations and the 1%.

With low commodity prices, returns have been far too low for many corporations involved with commodity production. “Fixing” the tax law will help these corporations continue to operate, even if commodity prices remain low, because taxes will be lower. These lower tax rates are important in helping commodity producers to avoid collapsing as a result of low commodity prices.

The problem that occurs is that the change in tax law opens up all kinds of opportunities for companies to improve their tax situation, either by changing the form of the corporation, or by merging with another company with a suitable tax situation, allowing the combined taxes to be minimized. See this recent Michael Hudson video for a discussion of some of the issues involved. This link is to a related Hudson video.

Groups evaluating the expected impact of the proposed tax law did their evaluations as if corporate structure would remain unchanged. We know that tax accountants will help companies quickly make changes to maximize the benefit of the new tax law. This is likely to mean that US governmental debt will need to rise much more than most forecasts have predicted.

In a way, this is a “good” impact, because more debt helps keep commodity prices and production to rise, and thus helps keep the economy from collapsing. But it does raise the question of how long, and by how much, governmental debt can rise. Will the addition of all of this new debt raise interest rates even above other planned interest rate increases?

[4] We have been experiencing artificially low oil prices since 2013. This helps the economic growth to be higher than it otherwise would be. 

In February 2014, I published an article documenting that back in 2013, oil prices were too low for oil producers. If a person looks at Figure 3, oil prices were over $100 per barrel that year. Clearly, oil prices have been much too low for producers since that time.

Unfortunately, it looks like these artificially low oil prices may be coming to an end, simply because the “glut” of oil that developed is gradually being reduced. Figure 5 shows the timing of the recent glut of oil. It seems to have started early in 2014.

Figure 5. US Stocks of crude oil and petroleum products (including Strategic Petroleum Reserve), based on EIA data.

If we look at the combination of oil prices and amount of oil in storage, a person can make a rough estimate of how this glut of oil might disappear. Quite a bit of it may be gone by the end of 2018 (Figure 6).

Figure 6. Figure showing US oil stocks (crude plus oil products) together with the corresponding oil prices. Rough guess of how balance might disappear and future prices by author.

Of course, one of the big issues is that consumers cannot really afford high-priced oil products. If consumers could not afford $100+ prices back in 2013, how would it be possible for oil prices to rise to something like $97 per barrel by the end of 2018?

I am not certain that oil prices can really rise this high, or that they can stay at this level very long. Certainly, we cannot expect oil prices to rise to the level they did in July 2008, without recession causing oil prices to crash back down.

What the Economy Needs Is Rising Energy Per Capita

I have published energy per capita graphs in the past. Flat spots tend to represent problem periods.

Figure 7. World per Capita Energy Consumption with two circles relating to flat consumption. World Energy Consumption by Source, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent, divided by population estimates by Angus Maddison.

The 1920-1940 flat period came shortly after the United Kingdom reached Peak Coal in 1913.

Figure 8. United Kingdom coal production since 1855, in figure by David Strahan. First published in New Scientist, 17 January 2008.

In fact, the UK invaded Mesopotamia (Iraq) in 1914, to protect its oil interests. The UK wasn’t stupid; it knew that if it didn’t have sufficient coal, it would need oil, instead.

There were many other disturbing events during this period, including World War I, the 1918 flu pandemic, the Great Depression, and World War II. If there are not enough energy resources to go around, many things tend to go wrong: countries tend to fight for available resources; jobs that pay well become less available; deflation becomes more likely; population becomes weakened, and epidemics become more likely. I wrote about the 1920 to 1940 period in a recent post, The Depression of the 1930s Was an Energy Crisis.

The 1980-2000 flat period included the collapse of the Soviet Union, in 1991. The Soviet Union was an oil producer. The Soviet Union collapsed after prices had been low for a long time.

Figure 9. Former Soviet Union oil consumption, production, and inflation-adjusted price, all from BP Statistical Review of World Energy, 2015.

Even many years after the collapse of the Soviet Union, population growth in former Soviet Union countries and its affiliates was much lower than in the rest of the world.

Figure 10. World population growth rates between 2005 and 2010. Source: https://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate

Lower population (through falling birth rates, rising death rates, or rising emigration) are a major way that economies self-adjust because of falling energy per capita. Economies tend to fix the low-energy per capita problem by adjusting the population downward.

Recently, we have again been hitting flat periods in energy consumption per capita.

Figure 11. World per capita consumption of oil and of total energy, based on BP Statistical Review of World Energy data and UN 2017 population data.

The slowdown in world energy consumption per capita in 2008-2009 was clearly a major problem. Oil, coal and natural gas consumption fell simultaneously. Oil consumption per capita fell more than the overall mix, especially affecting countries heavily dependent on oil (Greece with its tourism, but also the US, Japan, and Europe).

The recent shift in political strategy to more isolationist stances also seems to be the result of flat energy consumption per capita. It is doubtful that Donald Trump would have been elected in the US, if world energy consumption per capita had been growing robustly, and if wage disparity had been less of a problem.

The primary cause of the 2013 to 2016 flat trend in world energy consumption per capita (Figure 11) is falling coal consumption (Figure 12). Many people think coal is unimportant, but it is the world’s second largest source of energy, after oil. We don’t have a good way of getting natural gas production to rise enough, to make up for loss of coal production.

Figure 12

Wind and solar simply do not work for solving our problem of flat or shrinking energy consumption per capita. After spending trillions of dollars on them, they make up only a tiny (1%) share of world energy supply, according to the International Energy Agency. They are part of the little gray “Other” sliver on Figure 13.

Figure 13. Figure prepared by IEA showing Total Primary Energy Supply by type from this IEA document.

Something Has to “Give” When There Is Not Enough Energy Consumption per Capita

The predicament we are facing is that energy consumption per capita seems to be reaching a maximum. This happens because of affordability issues. Over time, the price of energy products needs to rise to keep up with the rising cost of creating these energy products. But if energy prices do rise, workers earning low wages cannot afford to buy goods and services made with high-priced energy products, plus honor all of their other commitments (such as mortgages, auto loans, and student loans). This leads to debt defaults, as it did in the 2008-2009 recession.

At some point, the affordability problem can be expected to hold down energy consumption. This could happen in many ways. Spiking prices and affordability issues could lead to a worse rerun of the 2008-2009 recession. Or if oil prices stay fairly low, oil-exporting countries (such as Venezuela) may collapse because of low prices. Even if oil prices do rise, we may find that higher prices do not lead to sufficient additional supply because investment in new oil fields has been low for many years, because of past low prices.

As long as the world economy is expanding (Figure 14), individual citizens can expect to benefit. Jobs that pay well are likely to be available, and citizens can afford to buy goods with their growing wages. People who sell shares of stock and people who get pension benefits can all receive part of this growing economic output.

Figure 14. Author’s image of an expanding economy.

Once the economy starts to shrink (Figure 15), we start having problems with dividing up the goods and services that are available. How much should retirees get? Governments? Today’s workers? Holders of shares of stocks and bonds? Not all commitments can be honored, simultaneously.

Figure 15. Author’s image of declining economy.


One obvious problem in a shrinking economy is that loans become harder to repay. The problem is that there is less left over for other goods and services, after debt plus interest is subtracted, in a shrinking economy.

Figure 16. Figure by author.

Changing interest rates can to some extent help offset problems related to higher energy prices and shrinking supply. The danger is that interest rates can move in the wrong direction and make our problems worse. In the lead-up to the Great Recession of 2008-2009, the US raised short-term interest rates, helping to puncture the sub-prime mortgage debt bubble.

Figure 17. Figure comparing Case-Shiller Seasonally Adjusted Home Price Index and Federal Reserve End of Quarter Target Interest Rates. See Oil Supply Limits and the Continuing Financial Crisis for details.

We now hear a lot of talk about raising interest rates and selling QE securities (which would also tend to raise interest rates). If growth in energy consumption per capita is already flat, these changes could make the problems that the economy is facing even worse.

Our Economy Works Like a Bicycle

Have you ever wondered why a two-wheeled bicycle is able to stay upright? Research shows that a bicycle will stay upright, as long as its speed is greater than 2.3 meters (7.5 feet) per second. This is the result of the physics of the situation. A related academic article states, “This stability typically can occur at forward speeds v near to the square root of (gL), where g is gravity and L is a characteristic length (about 1 m for a modern bicycle).”

Thus, a bicycle will be able to continue in an upright manner, as long as it goes fast enough. If it slows down too much, it will fall down. Our economy is similar.

Gravity plays an important role in determining the speed of a bicycle. If the bicycle is going downhill, gravity gives an important boost to the speed of the bicycle. If the bicycle is going uphill, gravity very much pulls back on the bicycle.

I think of the situation of an economy having rising energy consumption per capita as being very much like riding on a bicycle, speeding down a hill. The person operating the bicycle would not need to provide much extra energy to keep the bicycle going.

If energy consumption per capita is flat, the person riding the bicycle must provide the energy to make it go fast enough, so it doesn’t fall over. This is somewhat of a problem. If energy consumption per capita actually falls, it is a true disaster. The bicyclist himself must provide the energy necessary to push the bicycle and rider uphill.

In fact, there are other ways that a speeding bicycle is analogous to the world economy.

Figure 18. Author’s view of analogies of speeding upright bicycle to speeding economy.

The economy needs a constant flow of outside energy. In the case of the bicycle, the human rider can provide the energy flow. In the case of the economy, the energy flow comes from a mixture of various fuel types, typically dominated by fossil fuels.

Growing debt (front wheel) is important as well. It tends to pull the economy along, because this debt can be used to pay wages and to buy materials to make additional goods and services. Thus, the effect of this increase in debt is indirect; it ultimately works through the bicyclist, the gears, and the back wheel.

In fact, the financial system as a whole is important for the “steering” of the economy. It tells investors which investments are likely to be profitable.

The gearing system of the bicycle plays a modest role in the system. Changing gears allows greater efficiency in the use of the energy that is available, under certain circumstances. But energy efficiency, by itself, cannot operate the system.

If the human rider does not provide sufficient energy for the bicycle to go rapidly enough, the bicycle glides for a while, and then falls over. The world economy seems to be similar. If the world economy does not obtain enough energy per capita, economic growth tends to slow and eventually collapses. The collapse can relate to the whole world economy, or to parts of the economy.

The Problem of Parts of the Economy Not Getting Enough Energy

We can think of the economy as being made up of many bicycles, operated by bicycle riders. At the beginning of the post, I talked about the problem of wage disparity. This issue occurred at the time of the 1930’s Great Depression and is occurring again now.

We might call wage disparity “too low a return on the labor of some workers.” In groups of animals in ecosystems, too low a return on the effort of these animals is what causes ecosystems to collapse. For example, if fish have to swim too far to obtain additional food, their population will collapse. It should not be surprising that economies tend to collapse, when the return on the efforts of part of their workers falls too low.

Wage disparity has to do with how well the operators of bicycles are doing. Are the operators of these bicycles receiving enough calories, so that they can keep pumping their bicycles fast enough so that the speed is high enough to remain upright?

If energy consumption per capita is growing, this greatly helps the operation of the economic system. If there is growing availability of inexpensive energy, machines of various types, including trucks, can be used to increasingly leverage the labor of workers. This increased leveraging helps each worker to become more “productive.” This growing productivity, thanks to growing energy consumption, allows more goods and services to be produced in total. It also allows the wages of the workers to stay high enough that they can afford to buy a reasonable share of the output of the economy. When this happens, “gluts” of unaffordable goods are less of a problem.

If energy consumption per capita is flat (or worse yet, falling), greater “complexity” is needed, to keep output of goods and services rising. Greater complexity involves more specialization and more training of individual members of the economy. Greater complexity leads to larger companies, more government services, and more wage disparity. Unfortunately, there are diminishing returns to complexity, according to Joseph Tainter in “The Collapse of Complex Societies.” Ultimately, increased complexity fails to provide an adequate number of high-paying jobs. Wage disparity becomes a problem that can cause an economy to collapse.

If there is not enough economic output, the physics of the economy tries to “freeze out” workers at the bottom of the hierarchy. Workers with low wages cannot afford homes and families. The incidence of depression rises. Debt levels of disadvantaged groups (such as young people in the US) may rise.

So the situation may not be that the whole world economy fails; it may be that parts of the economy collapse. In fact, we are already seeing evidence that this is taking place. For example, life expectancies for US men have been falling for two years, because of growing problems with drug overdoses.


In 2017, the world economy seemed to be gliding smoothly along because the economy has been able to get the benefit of artificially low energy prices and artificially low interest rates. These artificially low prices and interest rates have given a temporary boost to the world economy. Countries using large amounts of energy products, including the US, especially benefitted.

We cannot expect this temporary condition to continue, however. Low oil prices have already started to disappear, with Brent oil prices at nearly $69 per barrel at this writing. The trends in oil prices and oil stocks in Figure 6 are disturbing. If oil prices begin to rise toward the price needed by oil producers, they are likely to trigger a recession and a drop in world energy consumption, just as spiking prices did in 2008-2009. There is a significant chance of collapse in the next 12 to 24 months. It is hard to know how widespread such a collapse may be; it may primarily affect particular countries and population groups.

To make matters worse, our leaders do not seem to understand the situation. The world economy badly needs rising energy consumption per capita. Plans to raise interest rates and sell QE securities, when the economy is already “at the edge,” are playing with fire. If we are to keep the world economy operating, large quantities of additional energy supplies need to be found at very low cost. It is hard to be optimistic about this happening. High-cost energy supplies are worthless when it comes to operating the economy because they are unaffordable.

Many followers of the oil situation have had great faith in Energy Returned on Energy Invested (EROI) analysis telling us which kinds of energy supplies we should increase. Unfortunately, EROI doesn’t tell us enough. It doesn’t tell us if a particular product is scalable at reasonable cost. Wind and solar are great disappointments, when total costs, including the cost of mitigating intermittency on the grid, are considered. They do not appear to be solutions on any major scale.

Other researchers looking at the energy situation have not understood how “baked into the cake” the need for economic growth, rising per capita energy consumption, and rising debt levels really are. Rising debt is not an error in how the financial system is put together; a bicycle needs a front wheel, or it cannot operate at all (Figure 18). I have written other articles regarding why debt is needed to pull the economic system forward.

This economic growth cannot be “fake growth” either, where a debt Ponzi Scheme seems to allow purchases that real-life consumers cannot afford. Quite a bit of what is reported as world GDP today is of a very “iffy” nature. If China builds a huge number of apartments that citizens cannot afford without subsidies, should these be counted as true GDP growth? How about unneeded roads, built using the rising debt of the Japanese government? Or recycling performed around the world, because it makes people “feel good,” but really requires substantial subsidies?

At this point, it is hard for us to know where we really are, because every government wants to make GDP results look as favorable as possible. It is clear, however, that 2018 and 2019 can be expected to have more challenges than 2017. We have interesting times ahead!

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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2,782 Responses to Will the World Economy Continue to “Roll Along” in 2018?

  1. Baby Doomer says:

    Why Trump Is Probably to Blame for the Weak Dollar

    President Donald Trump keeps bragging about the stock index gains since his election. He did so again on Friday, claiming he’d helped create “six trillion dollars in value.” Be that as it may, it’s also likely that Trump is at least partially responsible for the dollar’s weak performance in 2017, which, from an international perspective, wiped out much of that “value.”


    • Baby Doomer says:

      All of Trump’s stock market gains were wiped out by the decline of the US dollar! LOL EPIC FAIL!

      • If it is possible to truly raise interest rates (rather than just say that interest rates are being raised), then the dollar will likely rise again. The lower dollar is contributing to the rise in oil prices, as expressed in US$ terms.

  2. Tim Groves says:

    Ugo Bardi’s bookYhe Seneca Effect is out and on his website he has published translation of a German review. The following is an excerpt.

    Even if a balloon bursts, an avalanche emerges, or the tension of the continental plates discharges in an earthquake, these are ultimately links in a network structure that suddenly reorganize itself – with possibly catastrophic consequences for humans, a real “Seneca ruin”, as Ugo Bardi says. He shows that financial bubbles and the collapse of powerful empires have comparable properties. An example is the Roman Empire. According to Bardi’s analysis, it had to go down mainly because the minerals gold and silver, the most important elixir of the Roman financial system, were increasingly difficult to obtain: “Depletion is a tricky concept which has little or nothing to do with the fact that a mineral actually becomes scarce or even runs out. Rather, it is a question of costs and benefits. Mining costs increase over time as miners first exploit the easily accessible and highly concentrated ores. ”

    At first, the Romans and their vassals did not need more than a sieve to wash the gold nuggets out of the river sand. Soon, they needed pickaxes and shovels, as well as digging mines and employing machinery and trolleys. In the end, mining devoured so much money that it was no longer worth it. And it is precisely on this point that today’s humanity is heading for at high speed, says Bardi. Even if today they can resort to incomparably more sophisticated technologies, we are currently in danger because of the low oil price: “Unfortunately, at present it does not look as if the governments of the world and the public are realizing the problem of mineral scarcity and that we are moving only very slowly towards a decline in consumption. But no matter what is done or not done today, the world’s current industrial system has to undergo major changes, so great that its continued existence is by no means assured.”


    • Artleads says:

      “The author shows that the earth maintained an approximately constant temperature over the last 542 million years because more complex life forms have continued to exist all over this time. It seems that the earth has compensated for increasing intensity of the sun’s irradiation, which has been increasing, by regulating the carbon content of the air. As we know, humankind is currently and consistently turning the carbon thermostat in the wrong direction.”

      Big picture views like this tend to go missing.

      • dje says:

        Very constant:

      • Tim Groves says:

        Ugo’s seems to be an adherent of Clive Lovelock’s Gaia hypothesis in which life regulates the biosphere to ensure its own continuance.

        But things are a bit more complicated than that. The sun has been slowly but steadily increasing its output over the billions of years while the earth has been warming and cooling, as dje’s well-timed graph shows, and geologists and paleo-clim-atologists are having lots of fun trying to find out why those major temp-erature variations occur.

        Reducing the amount of see oh two in the air and oceans by squirreling it away in chalk, limestone or coal must have played a big role in reducing the density of the atmosphere and cooling the planet, and life played a big role in that business. Although limestone formation needn’t involve life. Once water condensed out of the early atmosphere, inorganic limestone could begin forming by precipitating out of water supersaturated with calcium carbonate. And the ocean was also necessary for life to begin to flourish.

        Today’s fun factoid: What Venus and Mars have in common are remarkably similar atmospheres that are more than 95% see oh two (Venus 96.5% see oh two, 3.5% nitrogen; Mars see oh two 95.32%, nitrogen 2.7%). They have these atmospheres because they never developed complex life because they never developed oceans. Venus was too hot for liquid water and Mars, while it had a large ocean 4 billion years ago, had too low a gravity to hold on to very much of its atmosphere or its water. The earth, by contrast with its neighbors, was just right. It developed a water ocean, developed life, and over the eons, reduced its atmospheric see oh two down to well below 1%. The current level of of 0.04% makes see oh two a trace gas.

        It was only a billion years ago that the blue green algae began photosynthesizing, thereby consuming more see oh two and allowing free oxygen to accumulate in the atmosphere, The process was slow at first. It took until 600 million years ago for the O2 to reach 10% of its present concentration and begin to form an ozone layer to shield the ground from UV radiation, thereby giving life the chance to gain a foothold on land. And the rest is prehistory….

      • Ugo talked about the first part of that statement (approximate long-term balance) in his earlier book, “Extracted.” I don’t remember the climate change statement in “Extracted,” but I haven’t gone back and looked.

        Big picture statements which are not really true are best not made.

        • Artleads says:

          I’ve had a post in moderation for what seems like ages. Can you help?

          • Fast Eddy says:

            If you admit Fast Eddy is right and the xxx xxx is a ho ax….. I will put a good word in for you….

          • Perhaps it is about climate change a permanently gone.

            • Fast Eddy says:

              KKKK limate CCCChange is causing posts to be held?

              Someone tell Leo and Al….

              Perhaps they can make a documentary about this

            • Artleads says:

              It was, but it also included me saying that CC was far from being at the top of my list of worries and troubles. 🙂

            • Artleads says:

              I also addressed the same question that somebody like Groucho asked: “Which one do you trust, me or your lying eyes?” And if my lying eyes see clear evidence of CC it doesn’t mean I care a bit for Al Gore or his cohorts. (And I had to show off a word whose meaning I just learned at the time of my post: syllogism) To assume that i do is a syllogism.

    • xabier says:

      The Romans traded that gold and silver, won at such great cost, for squares and strips of Chinese silks, which were all they could get their hands on at first.

      How the merchants of the Silk Road must have laughed, knowing that in China itself people wore whole robes of silk…..

    • I have a copy of “The Seneca Effect.” I was a little disappointed.

      Ugo doesn’t settle exactly how collapse will occur, only that it will occur. His first chapter is “Collapse Is Not a Bug, It Is a Feature.” I would agree 100% with that!

      The Second Chapter is on the Fall of Rome.

      In the (much longer) Third Chapter, Ugo describes a number of examples of collapses. I hadn’t thought about a glass breaking being an example of collapse, or of a ship developing a crack and gradually breaking in two. He also gives quite a number of examples of collapse that I had been familiar with from Oil Drum days.

      His fourth and last Chapter is “Managing Collapse.” This chapter seems “iffy” to me. I am doubtful that we can really manage collapse. One chart (4.2) is called “Detailed Sustainable Energy Transition Path.” It shows how growth in wind and solar can save our economy. I am sure that the chart impressed Springer a lot more than it impressed me.

      There is also an appendix showing how it is possible to model a Seneca curve.

      I found some interesting things in the book, and I am sure that other readers would too. But I found Chapter 4: Managing Collapse objectionable. I also had seen quite a bit of what was included in Chapters 2 and 3 before, from things Ugo had published at The Oil Drum or on his blog more recently. But I have read more of Ugo’s writing than most people have.

      Is the book worth its $69.90 price on Amazon? That is a question every potential buyer will want to ask themselves. I notice that the book doesn’t have a single review up on Amazon, yet. This probably indicates that there haven’t been a lot of buyers, so far.

      • dje says:

        It seems like those Springer books are unrealistically priced. Alice Friedemann’s book is the same kind of thing and also published by them; something I’d be interested in reading but not something I’m going to buy at $60+.

        • This book doesn’t even have a lot of color in it. It does have a total of 209 pages in it, if you count five pages of advertising for other books also available in this series.

        • Christiana says:

          Everything Bardi has to say is on his Blog. I don’t think in his book there are new ideas.

      • Fast Eddy says:

        His fourth and last Chapter is “Managing Collapse.” This chapter seems “iffy” to me. I am doubtful that we can really manage collapse. One chart (4.2) is called “Detailed Sustainable Energy Transition Path.” It shows how growth in wind and solar can save our economy.

        This another symptom of Feebility of Mind.

        • i started an interesting comment thread on this piece on Bardi’s blog


          The man’s undoubtedly very clever but somehow misguided on this

          • Fast Eddy says:

            ‘If we want to avoid this sad destiny, the only hope we have is to replace the fossil slaves with renewable, solid-state slaves who won’t complain about staying in the sun to provide energy for us. A solar powered society doesn’t need human slaves and it can be reasonably peaceful. We can build a society based on solar energy, but we have to do it fast, before the dark fossil slaves leave us forever.’

          • Fast Eddy says:

            Ugo BardiJanuary 9, 2018 at 12:09 AM
            Which means, I think, that there exists a moral case for renewables. We should at least try.

            • Fast Eddy says:

              Ugo = Feeble of mind

            • given his academic credentials, i don’t think that description applies

            • Fast Eddy says:

              Anyone who is unable to recognize that ‘renewable’ energy is a ho ax… is feeble of mind… regardless of how many letters they post after their name….

            • dje says:

              Honestly the moral argument is a weak one anyway when you consider longer time horizons. Leaving more fields covered with glass and metal debris is far more immoral.

            • Ugo is very bright. The book is a “Report to the Club of Rome.” The COR has become a very “green” organization over the years. Advance praise for the book comes from Richard Heinberg and Nate Hagens (also from the Sec. General of the Club of Rome).

              The Foreward is written by John Rogers, an “investment professional” “interested in promoting sustainability and investment.”

              The acknowledgment section includes at least some people I recognize as promoting happily ever after outcomes.

              It is easy for a person to fall in with the group-think of others. If the book is a “Report to the Club of Rome,” I would expect that Ugo is getting some funding from them. Ugo has always had a very optimistic bias. He doesn’t do well at integrating findings across
              fields, but that is a common academic problem. I have learned quite a bit from Ugo over the years, but I know how to partition off the stuff that is optimistic group-think.

            • I am perhaps getting cynical in my old age, but I see the uses of the book to be:

              Richard Heinberg: To hand out to potential major donors, who might give funds to the Post Carbon Institute

              Club of Rome: To hand out to potential major donors, who might give funds to the Club of Rome

              Investment Advisers, Peddling Wind and Solar Stocks: To show that wind and solar have major growth potential.

              Universities: For academic courses to show that while we perhaps do have a collapse problem, we can work around it with wind and solar.

              In a sense, it doesn’t matter if any “regular” readers buy the book.

            • Fast Eddy says:

              That’s the way the world works….

              No need to be real — you just have to manage perceptions….

              ‘Experts’ for hire are a key component of that.

              How does one say no to perhaps hundreds of thousands of dollars per year to play ball….when at the end of the day — you understand — one way or the other … it does not matter…

  3. Fast Eddy says:

    THIS is priceless!!!

    • xabier says:

      Delightful. Solar panels and wind turbines = No ‘fossil fuel’ wars. Peace and Harmony, with EV’s and i-phones……

      • Fast Eddy says:

        Notice the anger…. notice how he grabs at the microphone….

        These Feebles are frightening…. they believe so deeply that if you confront them with facts and logic that attack their feeble position…… you embarrass them…. and they begin to act like dangerous cornered animals….

        Observe some of the Feebles comments on FW…. how DARE anyone challenge the ___ ____.

        A few steps away from this


        • nope.avi says:

          Fast Eddy, I think you’ve touched on something here that hasn’t been discussed much.

          The politically correct are just as prone to violence as any other group but they have to have enough motivation.
          I’ve heard that people are motivated not by gaining something but losing something.
          The PC crowd are the status quo and are terrified and angry–yes, those two feelings are somewhat related–about losing power.. One of the few segments of the PC crowd not considering violence to avoid losing power (influence). are the environmentalists. Eco-terrorism never took hold, as far as I know.

    • Tim Groves says:

      In 2008, RFK Jnr. reminisced about back in the 1960s when it used to snow in Virginia and he noted how scarce the white stuff is there these days.

      Of course, anyone living in Virginia will recall there’s been a lot of heavy snow there these past few winters, beginning just one year after RFK Jnr.’s weather recollection piece with the December 2009 “North American Blizzard” which caused Kentucky, Maryland, Virginia, West Virginia, and parts of Delaware to declare a state of emergency. But is RFK Jnr. going to man up and admit to being a total dipstick? Nope. He’s just going to brush it under the carpet and double down on his whining.

      Palin’s Big Oil infatuation
      Los Angeles Times
      September 24, 2008

      I was water-skiing with my children in a light drizzle off Hyannis, Mass., last month when a sudden, fierce storm plunged us into a melee of towering waves, raking rain, painful hail and midday darkness broken by blinding flashes of lightning. As I hurried to get my children out of the water and back to the dock, I shouted over the roaring wind, “This is some kind of tornado.”

      The fog consolidated and a waterspout hundreds of feet high rose from the white ocean and darted across its surface, landing for a moment on a moored outboard to spin it like a top, moving toward a distant shore where it briefly became a sand funnel, and then diffusing into the atmosphere as it rained down bits of beach on the harbor. For 24 hours, a light show of violent storms illuminated the coastline, accompanied by booming thunder. My dog was so undone by the display that she kept us all awake with her terrified whining. That same day, two waterspouts appeared on Long Island Sound.

      Those odd climatological phenomena led me to reflect on the rapidly changing weather patterns that are altering the way we live. Lightning storms and strikes have tripled just since the beginning of the decade on Cape Cod. In the 1960s, we rarely saw lightning or heard thunder on the Massachusetts coast. I associate electrical storms with McLean, Va., where I spent the school year when I was growing up.

      In Virginia, the weather also has changed dramatically. Recently arrived residents in the northern suburbs, accustomed to today’s anemic winters, might find it astonishing to learn that there were once ski runs on Ballantrae Hill in McLean, with a rope tow and local ski club. Snow is so scarce today that most Virginia children probably don’t own a sled. But neighbors came to our home at Hickory Hill nearly every winter weekend to ride saucers and Flexible Flyers.

      In those days, I recall my uncle, President Kennedy, standing erect as he rode a toboggan in his top coat, never faltering until he slid into the boxwood at the bottom of the hill. Once, my father, Atty. Gen. Robert Kennedy, brought a delegation of visiting Eskimos home from the Justice Department for lunch at our house. They spent the afternoon building a great igloo in the deep snow in our backyard. My brothers and sisters played in the structure for several weeks before it began to melt. On weekend afternoons, we commonly joined hundreds of Georgetown residents for ice skating on Washington’s C&O Canal, which these days rarely freezes enough to safely skate.

  4. Baby Doomer says:

    Last year GE, FORD, GM, SEARS, MACYS, WALMART, SAMS CLUB, GO PRO, UNDER ARMOR, SUBWAY, LEGO, AT&T, COMCAST, APPLEBEES, OUTBAcK, IHOP. All laid off thousands of workers. And 8k retail stores closed an all time record. And Hollywood had their worst year in 22 years..And the dollar had its worst year in 15 years..These are all very alarming statistics!

    • Christiana says:

      And still, European newspapers say: US-american economy is doing very good and helping growing world. So what?

      • Low fuel prices have been helping the US economy. There are a lot of jobs available, but they often are part time and low paying.

        • nope.avi says:

          It might be my imagination but It seems like full time and high paid workers are becoming increasingly inefficient. They are highly productive but also require increasing amounts of input in the form of increasingly complex machinery and lengthy educations.

          Low wage workers and part-time workers don’t seem to be getting more or less efficient but I might be wrong about this, too.

          • We keep adding machines to do part of the work of low-paid and part-time workers. More check-out is self checkout now, for example. I understand that Walmart is adding devices that will scan shelves for low inventory, for example. Fast food places are finding ways to automate the taking of orders. So I think at least some of the low-paid workers are getting more efficient, or are being replaced by machines.

  5. JH Wyoming says:


    Oil already trading overseas this Sun. evening, with WTI up to 64.55 and Brent up to 69.99, one penny shy of $70. then it heads for $80.

    Brent may matter more in other parts of the world, but still it’s going to apply pressure to CB’s need to shovel more cheap money to keep BAU ticking. The squeeze is building on those inflated bubbles.

    • JH Wyoming says:


      They now have a pop up to try and force people to join, but had enough time to glimpse this morning’s numbers on oil.

      WTI up .51 to $64.81 & Brent up .26 to $70.13
      Remember, Brent is imported to East coast refineries and mixed with that condensate thin stuff they frack and other US oil to refine oil byproducts.

      These prices on oil are consistently going up every day. At this rate it won’t be long before fuel at the pumps is enough to force strong downward pressure on an economy held together by cheap money.

      • Davidin100millionbilliontrillionzillionyears says:

        what percent of the average person’s income goes into the gas pump?

        a percent or two?

        so gas could double to $5 per gallon…

        and the hit is only a half to one percent or so of average income…

        $4 gas is a very inexpensive product.

        • Niko (This One Not The Other One) says:

          For people driving cars, yes. For factories, ships, planes, and trains… not so much. Any time a significant % of operating budget is fuel cost, small changes make a big difference.

          • few people factor in the cost of oilwars

            if that is factored in, the true cost would be around $15 a gallon—as it is, that is paid by the taxpayer—and explains why the basic infrastructure is crumbling—getting fuel is draining the national economy.

            • Energy^2 says:

              Speaking Oilwars while the 27th anniversary of the 1991 First Gulf War happens today, “War Crime Compensations-Backed Securities” has been proposed few years back to mitigate damage caused by those Oilwars on their opposite side, the victims, if that would do any enough justice, at all.

              No human can understand such a desperate ‘Margin Call’-type hypothesis other than those who lived and witnessed how hundreds and hundreds of thousands of innocent civilian humans might be killed for their national energy reserves in the process of competition over depleting fossil fuels energy resources between nations while the rest of the world is not attending to explore the root resource depletion predicament.

              The negative part of the hypothesis is that it may assist in turning Oilwars into a ‘legitimised’ human recycling campaigns.

              Here is the link to a copy of WCCBS thesis.

            • “It is likely that claims in the Middle East alone will be settled at multi-trillion dollar levels, with ongoing payments for another 100 years.”

              I don’t think this can happen. There are not enough resources available, among other problems. No one would be able to force the perpetrators to make payment.

        • Everything we buy (food, clothing, cars, houses), are directly or directly made with oil and other energy supplies. If the price of oil goes up, the price of almost everything goes up. What doesn’t go up is wages. This becomes a problem.

  6. Third World person says:

    the company that run uk goes bankrupt

    Carillion to go into liquidation
    Construction giant Carillion is to go into liquidation, threatening thousands of jobs.

    The move came after talks between the firm, its lenders and the government failed to reach a deal to save the UK’s second biggest construction company.

    However, the government will provide funding to maintain the public services run by Carillion.

    The firm is involved in major projects like the HS2 high-speed rail line, as well as managing schools and prisons.

    It is the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence.

    The company has 43,000 staff worldwide – 20,000 in the UK. It is not clear yet how those staff will be affected.

    • I saw that article. The government will bail them out, but at some point, the government ability to bail out companies fails.

      • Fast Eddy says:

        Follow the Chinese model — give them contracts to build a few thousand apartment buildings — then give them to the peasants.

        • richarda says:

          The UK Treasury guidelines provide opportunities to award contracts to other than the lowest bid contractor. I seem to recall that if more than five bids are sought, the lowest bid contract most likely will be let on an error. Then, it’s a pain in the arse to manage.
          You won’t get fired for placing the contract with the second lowest bid, but a lot of people are going to be unhappy.

  7. psile says:

    Again with the moderation?!

  8. grayfox says:

    Still not believing the ending of the Vikings / Saints football game yesterday. Sports can occasionally take us for a ride that transcends the here and now. Almost enough to make you believe in miracles.

    • Davidin100millionbilliontrillionzillionyears says:

      well, miracles do not happen…

      but yes, American football rocks!

      Saturday had a game where, on the last play, the perfect pass went straight between the star pass catcher’s hands…


      go Patriots!

    • nope.avi says:

      “Almost enough to make you believe in miracles.”
      There are no miracles.
      There are only cheaters.
      Ha ha, I have no proof of teams cheating. Someone said that part of the thrill of watching football is that it’s unpredictable. Sometimes, excellent players play badly and sometimes “bad” players take advantage of that and play well. No team remains good forever. Despite the zero-sum nature of sports, sports gives people the hope that way every dog can have its day…In the natural world…losers tend to die or get eaten. Sports, as brutal as it can be, like all forms of play are much more forgiving than real conflict.

  9. richarda says:

    Wow Gail, that’s another monster post.
    I loved the initial quote – I might have chosen Monty Pythons “Always look on the bright side of Life” but th’s just me.

    • I liked the timing of this song.

      • richarda says:

        🙂 yes, I spotted that too. There’s another reason for my choice, and I hesitated to give it.
        Models leave things out. Like all models, your analogy of the bicycle only works within limits. A slightly better stability model is that of a bicycle on the middle of an upturned large boat. Your best option is static balance. Your next best option is to ride in a circle. Once you start cycling in a straight line your options begin to narrow (because of increasing debt). That’s really as far as the bicycle model goes.
        I hesitated before replying because this area of finance is difficult to cover without offending people. Consider the Roman Empire just before Constantine. In those times the Temples, specifically the Temple of Saturn, acted as banks. By becoming a Christian , Constantine gained the moral high ground, the ability to plunder the gold held in Pagan Temples, and released many from debt slavery. Probably not what Christ had in mind as recorded in Luke 4, but it was beginning of Christianity as a national religion.
        That said, periodical debt forgiveness in one form or another predated Christainity. It the unwillingness of the wealthy and powerful to become impoverished down the ages that is the major roadblock to workable financial systems. The issue, fundamentally, is one of morality rather than a striclty technical solution. The technical solution is there in Leviticus and probably before that time. Cue Monty Python ….

        • As I understand from reading some of the writings of Michael Hudson, the big problem with debt is the wealth disparity it tends to cause. It was my understanding that while there were frequent debt forgiveness programs (jubilees), they related to only a portion of the debt–agricultural debt, and perhaps other small debt. These were not a problem, when the debt was all owed to the state, or the king, or the church.

          Now, one person’s outstanding debt becomes another person’s balance sheet items. It is hard to forgive debt, without bankrupting banks, insurance companies, and pension plans.

  10. psile says:

    Let’s see how far this goes…

    London Housing Woe Endures as Prices Drop to 2 1/2-Year Low

    The new year brought little cheer for London’s housing market with asking prices dropping to the lowest since August 2015.

    New sellers cut prices 1.4 percent in January to an average of 600,926 pounds ($821,500), according to a report by Rightmove Plc on Monday. In a further concerning sign for the market, the average number of days required to sell a house jumped to the longest since January 2012, reaching 78 from 71 a month earlier.

    • xabier says:

      However, in the UK high-tech growth hub where I currently live, property just goes up and up: for example, a very commonplace little (2 bed) house which might have made £100-120k in 2000 now sells for £425-475k. They used to house railway workers 10 years ago.

      I remember an estate agent telling me that £185k being asked for such properties in 2006 was ‘simply mad’…

      They sell in about two weeks or less on the market.

      Prices lifted off in 2001 and haven’t faltered since. I find myself saying ‘I can’t sell at that!’ and then they do.

      A bungalow in this village sold for £500k this week: previous highest price, two years ago, £325K.

      I would say London has fnally reached its ceiling,and tax changes have played a part in this. No doubt I will be proved wrong.

      • 300 years ago, a good investment (by any unaware people) was a share in the slave trade—(sugar plantations etc)

        200 years ago–it was investments in canals and coalmines

        150 years ago it was railways

        100 years or less, it was cars and oil

        All produced a tangible return—that was their common thread, but that return could only be sustained as long as fuel was available to be burned

        The above might be generalised, and overlap a bit but you get my drift. Each stage was a consumption of available energy sources

        Now one of the few ”energy investments” left (maybe the only one) are buildings. Houses are blocks of embodied energy, and can be seen to be producing a ‘return’ either as rental, or for ”the future”—
        money is piling into houses, because that’s all there is. Money cant be invested in the list above because they don’t produce a return
        When the fuel that drives house prices (higher and higher wages for fewer and fewer people) runs out, house prices will collapse.

        remember mortgages are a promise based on an energy rich future, which isnt going to be.

        All this has been the result of our system of capitalising energy resources—or put another way, of thinking we owned the earth, with the right to sell it.

        Ever rising ”costs” are proving that we don’t own the earth, that we are merely tenants.

      • xabier says:

        That was ‘house railway workers 100 years ago’!

      • Artleads says:

        The same EXACT thing is happening to prices in the working class (minority majority) CA city I once was active in. Facebook’s world HQ is just a street over outside city bounds. I keep suggesting that the first order of business is to buy property for ultra low income residents and take that land off the market. (Houses can come later.) FB offered quite a few million to build housing, but the “realists” see all this as them having a corporate agenda for the city and not much else. OTOH, the town seems to lack any kind of strategy for affordability, whether it’s mine or anything else.

    • Tango Oscar says:

      I don’t understand how gullible people need to be in order to actually believe in the first place that we can all just keep buying our houses from each other forever as the price just ascends to infinity. There was never any appreciating wealth there in the first place, it’s just some 2×4’s, nails, and boards. If that stuff were all just lying about on the floor, would it make sense that those just keep increasing in value, year after year? People are dumb.

      • If the value of money falls, maybe so.

      • Davidin100millionbilliontrillionzillionyears says:

        I’d rather live in a house than in a cave.

      • psile says:

        Just speaking to a client in the building game. He’s very nervous about the bubble here downunder, but only sees a correction of 10-12%, based solely on groupthink. I said who would provide a floor when prices really start to tank? He stared back blankly…

      • Theophilus says:

        It is not that the house is becoming more valuable. You are right.

        It is that the currency used to purchase the house is declining in value. It takes more and more paper promisary notes to purchase real things. Why? Because fewer and fewer people believe that the trillions created out of nothing are worth something.

        Ps. Please don’t tell anyone. BAU requires billions of ignorant people to continue gowing to work to earn pieces of paper.

      • nope.avi says:

        Government policy and the behavior of the 1%, buying up property as a store of value because there is less profit from investing in commerce, make it appear as if housing prices will appreciate forever and people will somehow be able to pay more and more for property and rent. I can’t really blame them. There seems to be growing number of people who can pay for luxury apartments and Mcmansions.

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