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.

Conclusions

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:

    Crash fears escalate as markets hit highs not seen since Black Tuesday and dotcom disaster
    http://www.telegraph.co.uk/business/2017/11/05/markets-lookout-shock-crash-us-stocks-record-highs/

  2. Baby Doomer says:

    Markets are ignoring ‘major risk’ of rising interest rates and end of QE, warns Citigroup
    http://www.telegraph.co.uk/business/2018/01/08/markets-ignore-danger-central-banks-reverse-qe-warns-citigroup/

  3. Fast Eddy says:

    As Bitcoin Sinks, Crypto Bros Party Hard on a Blockchain Cruise

    When 600 cryptocurrency enthusiasts set sail from Singapore on Monday night for their second annual Blockchain Cruise, the price of Bitcoin was hovering comfortably above $13,500.

    By the time their 1,020-foot-long ship pulled into Thailand on Wednesday, for an afternoon of bottomless drinks and crypto-focused talks on a sun-soaked private beach, Bitcoin had cratered to $10,000.

    The group consisted largely of young men, many of whom became wildly rich — at least on paper — as Bitcoin and other digital tokens skyrocketed last year. In all likelihood, they had just lost millions.

    But if anyone was fazed, they didn’t show it. The party rolled on as the sangria and Red Bull flowed, Bitcoin-themed rap music blared and drones filmed it all from above.

    “Nothing goes up in a straight line,” explained Ronnie Moas, the founder of Miami Beach-based Standpoint Research, who was one of the event’s speakers on Wednesday. In a best-case scenario, he said, Bitcoin could jump to $300,000 in as little as seven years.

    For skeptics of the crypto craze, it’s hard not to see all this as another sign of runaway exuberance — a repeat of the boosterish Las Vegas securitization conference, dramatized in The Big Short, that preceded the subprime mortgage meltdown of 2007. But the steadfast optimism on display at this week’s Blockchain Cruise also carries a warning for anyone betting on a cryptocurrency crash: It’s going to take more than a 50 percent drop in Bitcoin from its Dec. 18 high to drive out the diehards.

    “This is something that you either believe in or not,” said Moas, who has become a crypto-celebrity after issuing stratospheric price forecasts for Bitcoin.

    The cruise’s eclectic list of speakers included Jose Gomez, a former aide to the late Venezuelan President Hugo Chavez; Kaspar Korjus, the head of Estonia’s e-residency program (which may issue its own cryptocurrency); and Jorg Molt, an early digital currency backer whose claim to hold 250,000 Bitcoins (worth $2.8 billion at the current price) couldn’t be verified.

    But perhaps the biggest draw on the Blockchain Cruise was John McAfee, the anti-virus software pioneer with a checkered past. In 2012, while living in Belize, McAfee had run-ins with local police for alleged unlicensed drug manufacturing and weapons possession, but was released without charge. At one point, Belize police started a search for him as a person of interest in connection with the murder of his neighbor. McAfee said he was innocent and that he fled Belize because of persecution by corrupt officials.

    He now helps run MGT Capital Investments Inc., a small-cap tech company with a Bitcoin mining business. He has become a cryptocurrency evangelist on Twitter, touting the technology and various tokens to his more than 700,000 followers. Coinsbank, the digital currency exchange and wallet operator that organized the cruise, made him a headline speaker.

    More https://www.bloomberg.com/news/articles/2018-01-19/as-bitcoin-sinks-crypto-bros-party-hard-on-a-blockchain-cruise

  4. Baby Doomer says:

    The world is headed towards an Economic/Financial collapse. And everyone is arguing over a border wall and eating tide pods! 😝

    • If Mexico is headed the same direction as Venezuela because of a collapse in its oil production, a border wall may not be entirely irrational, unfortunately.

    • jupiviv says:

      My gut tells me the crash is a couple of months away, but then it also tells me to eat junk food when I feel hungry. Either way, I’m getting the “a little -too- quiet” feeling about world affairs.

      • Tim Groves says:

        If I were a betting man, I would bet on an autumn rather than a spring crash, because the three largest crashes of the past century have all occurred in autumn. Spring is usually a season of optimism, growth and planting the seeds of hope. Autumn is the time for harvesting what we’ve sown. However, we’re currently living in desperate times.

        The Wall Street Crash of 1929, also known as Black Tuesday, the Great Crash, or the Stock Market Crash of 1929, began on October 24, 1929, and was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its aftereffects.

        The Stock Market Crash of 1987 or Black Monday was the largest one-day market crash in history. The Dow lost 22.6% of its value or $500 billion dollars on October 19th 1987.. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin.

        The stock market crash of 2008 occurred on September 29, 2008. The Dow Jones Industrial Average fell 777.68 points in intra-day trading. That was the largest point drop in any single day in history.

  5. Victør says:

    This post and all Gail’s work is very interesting but I have a question : Are you really sure that barrel prices higher than $40 are already too high for the economy? Everything seems to be working and the liberal economy is relocating a lot abroad, especially in China.

    • The problem with high priced energy products is partly that they become unaffordable for employers. Because of this, the employer fail to leverage human labor with things like more bigger and better trucks and more bigger and better pipelines. Also, all goods become more expensive as prices rise. Wages don’t rise in a corresponding manner. In fact, they often show more wage disparity. Some workers find themselves without jobs that pay enough to cover the cost of transportation to work. People drop out of the workforce. In European countries, people collect government benefits for those without jobs.

      At this point, we still have extremely low interest rates and a lot of debt growth propping the economy up. If it weren’t for those things, we would be in much worse shape.

      • JH Wyoming says:

        Because of wages declining over time for all the reasons we’ve delved into on this site, it’s probably a foregone conclusion people in the future will live in smaller domiciles i.e. a smaller footprint and thus at a lower cost. There are all these TV programs now on Tiny Homes and YouTube videos on people living in vans. People are already starting to move in that direction – it just needs something done on a grander architectural scale. Instead of 2500 sq. ft. single family dwelling, it will be 800 sq. ft. Instead of big appliances, they will all be small. Instead of their own plot of land, they’ll be in a concrete tube stacked on dozens of others. Instead of big windows, they will be smaller and fewer of them, etc. Instead of changing cloths daily people will wear the same cloths for 3-4 days in a row because of a small washing machine. People will have to seriously downscale their existence to support the people the tiny minority the Republican’s support.

        Like Lee Iacocca said, “Lead, follow or get out of the way.” What the R’s are saying to middle and lower income people is get out of the way! Support your local super wealthy person to enjoy palatial massive mansions with helicopter pad, sports building, heated Olympic size pools and all the solar to power that lifestyle. Those wealthy people are in quick need of expanding their complex of financial holdings, so get use to less, much less. In winter hover over a pen light to get some warmth on your hands.

    • Baby Doomer says:

      High oil prices have been connected to every recession since WW2 except for one..And the last four we have had…High oil prices cause inflation in 95 percent of all manufactured goods and food. And they decrease consumer spending and consumer confidence.

      https://www.brookings.edu/bpea-articles/causes-and-consequences-of-the-oil-shock-of-2007-08/

      • This is true with respect to US recessions.

        The collapse of the Soviet Union, however, was associated with low oil prices. Venezuela’s problems are caused by low oil prices. It depends on whether you are on the buying end of oil, or the selling end of oil. If a country is an oil importer, high prices will cause recession. If a country is an oil exporter, low prices will cause recession.

        • JH Wyoming says:

          True, but our own WTI oil is also going up in price as the value of the dollar dives.

          Sorry, no link on this next part because it’s just from memory, but there is this person well versed on the topic of ups and downs in the economy and he says everything he’s expected to happen before and after the mortgage meltdown has occurred, except one. That is the substantial devaluation of the dollar. Maybe it’s finally beginning to happen.

  6. Mark says:

    Thankfully, we’re investing in the future.

    /sarc

    • I can think of one project whose funding can be cut, if there is a need to try to balance the budget.

      • Fast Eddy says:

        What is astounding about this …. is that it is well known that humans cannot remain in space for extended periods of time without dying from radiation. This is just one of many reasons why colonies on Mars or any other planet are not viable.

        YET…. these clowns have created a very nice video presentation and they seem to actually be developing their mini reactors — and they seem to actually believe what they are saying (maybe they are actors playing roles?)

        • HideAway says:

          One of the funniest aspects of the plan to travel to Mars is the effect of Gravity on Astronauts. It is well known that a week or 2 in space and the Astronauts need help and physio to walk again once back on Earth.

          Let’s send them on a mission that takes many months, probably over a year to Mars, set them down on the planet, and watch them go nowhere, as even Mars’s reduced gravity will be way too much. Then again maybe they will all have wheelchairs to get around on the surface. That will look good on TV.

        • psile says:

          The psychological toll is even greater. We need suspended animation for deep space travel, just to avoid psychosis.

    • JH Wyoming says:

      Thanks for sharing, Mark. Just goes to show that energy is needed wherever we go. Looks like a well thought out design for that application. I’m all in favor with space exploration. It doesn’t make any sense to just put food on the table, wash the dishes, procreate, etc., if it doesn’t include exploration and gaining knowledge. Forget about collapse or no collapse for a moment, because the money spent on this type of endeavor pales in comparison to the bucks spent on war toys and overseas military expenses. I’d actually like to see NASA’s budget quadrupled and the defense budget slashed.

      • When there is no chance of the program working?

        • Mark says:

          Oh, but “when you’re green, your growing.” Now I know where “Kroc of Sh*t” came from 🙂

      • Sungr says:

        “I’d actually like to see NASA’s budget quadrupled and the defense budget slashed.”

        YES!

        For the US, maintaining an empire and running constant wars is not going to make us stronger- it’s going to hollow out the remainder of the US economy. And all the signs are present for a massive exit from the U$D. No foreign governments want dealings with the volatile Trumpster.

        • JH Wyoming says:

          All right, Sungr. I’m right there with you on those points incl. the one on volatile (unpredictable) Trumpster.

        • Energy^2 says:

          All 3rd World nations, including Russia, are unable to function domestically without the US dollar, having their currencies being highly de-trusted, owning to cartoonish political regimes running them (likely being installed and sustained by big powers).

          People there will pray day and night for god to save the US dollar. If the US$ recedes, the 3rd World people would incur colossal loss as their own currencies would lose the reference scale. Be careful listening blindly to voices telling you otherwise.

          What NASA’s budget? NASA’s real budget wouldn’t be known until a ‘Donald Rumsfeld’ comes up one day saying Trillions are not accounted-for, otherwise, it is open. The Pentagon’s, too, the Shale Oil & Gas industry, as well, etc.

          After decoupling energy supplies from wealth creation in the 1970’s, the system became a huge global virtual engine scattered all over the place, and growing, nothing in it is on any single book any more, where Madoff and Enron’s accountancy practices would look like books written by angles, if the two compared to today’s status quo.

          This is also due to Physics constrains and how humans become incapable of coping with continuously-growing systems they themselves create, due to the un-metered abundance of fossil fuels (i.e. try and read all the comments posted on Gail’s ” Will the World Economy Continue to “Roll Along” in 2018?” alone, since Gail has posted it few days ago, and you’ll find yourself in the middle of next week physically fatigued and psychologically ruined!).

          After the 2003 Iraq War, it is on records that no electro-mechanical meters, like the ones you see when fueling your car at the gas station showing gallons’ figure, are installed to register Iraqi exported oil supplies going into tanker ships. They measure what they pumped into the tanker by dipping a wooden stick, seriously. And this is how all your global system operates today everywhere, too, more or less! 🙂

          • Actually, it is my understanding that Saudi oil exports are (or were until recently) estimated by people counting ships leaving Saudi Arabia, apparently carrying oil. The figures that Saudi Arabia gives regarding its exports are never considered reliable. Other countries, including Venezuela, are not considered reliable in the figures that they provide, either.

          • Sungr says:

            Just a few questions-

            1. Since when is Russia a 3rd world country?

            2. How did energy get decoupled from wealth creation in the 70s? The graph for energy consumed vs gdp growth seems to been tightly coupled from past to present.

            Oh, also. Measuring tank depth with a calibrated wooden stick is a time honored method of measuring tank liquid volume.

            • Energy^2 says:

              1. Since when is Russia a 3rd world country? Always, since 1905 and earlier, being under experiment run by big powers. That’s doesn’t mean Russia is not a great nation and a unique homeland, and having ones of most brilliant people, historically and at present, like any other nation. One needs to live in Russia for years to realise and understand that disappointing fine line. You may ask “and who is not under experiment run by big powers?”, and that’s true, to that extent, the ‘big powers’ might be us, the humans collectively 🙂

              2.How did energy get decoupled from wealth creation in the 70s? When crude oil supplies have not been allowed a natural market value, forced to hover around a Big Mac’s meal price for a barrel, that decade-long reality has eroded the essence of Capitalism itself, by losing the physics-reference-point (i.e. how the price of a one-person meal comes roughly equal to the energy of hundreds of man hours-worth or work stored in the barrel?). One can keep seeing charts, but physics fundamentals rule and they will come back hitting who messes with them even with carefully-crafted economy engines.

              3. …a calibrated wooden stick is a time honored method of measuring tank liquid volume. Yes, but it is now superseded. Human errors and accountability are two weaknesses that flow-meter audit digital-mechanical systems are on the market to prevent, and they are selling cheaper than a calibrated wooden stick, maybe, so why not using them, especially with a critical commodity such as crude oil?

        • psile says:

          Was it really any different under Obama? He came in with 2 wars, left fighting 7. Empires have their own dynamic, irrespective of the peculiarities of its leaders, who come and go.

      • JesseJames says:

        Robots are the way to go in exploration. All this human stuff is window dressing for little elementary school presentations (that is the intellectual level of many Americans these days).
        The James Webb Telescope that will launch in 2018 can be thought of as a semi-autonomous robot. It is a machine. Robots can explore our solar system for us. They can go to the sun. We now have such super duper AI that our Robots can even think for themselves while they look over Pluto.
        I personally think we should have robots prepare a human habitable base on the moon. A human colony could survive there quite handily…underground…if they have energy.

    • HideAway says:

      Basically that chart is saying that twice before the market has been this overpriced. So there is no reason why it cannot go to the same extreme as before, or perhaps a bit higher given low/zero/negative interest rates.
      There is an old saying in markets about the market remaining irrational longer than you can stay solvent (if betting against it).

      Those that read the book, watched the movie ‘The Big Short’, should be well aware of this. This was an example of some that could see the sub-prime fiasco, and duly bet against it. However they were too early for the market to wake up to what was happening, and were losing money/investors for quite a period of time until the market turned.
      The stock market is in highly irrational mode now, but is likely to go way MORE irrational before it turns viciously.

      • Fast Eddy says:

        The main difference between now and 2007…. is that the central banks are backing everything and anything that is TBTF

        Basically the central banks have to fail in this mission for this to come apart…

        Not sure what causes the fail….

  7. JH Wyoming says:

    http://www.bbc.com/news/world-us-canada-42752298

    In an apparent reference to Russia, he warned against “threaten[ing] America’s experiment in democracy”.

    “If you challenge us, it will be your longest and worst day,” he warned.

    Wow, finally some actual tough talk regarding Russia’s interference in US elections. My personal opinion is the US should engage in a limited military action against Russia to drive home the point that our elections are none of their business.

    • DJ says:

      Hmm… interfering with elections.

      Of course US should bomb a few more countries.

    • Sungr says:

      Ha! The Russians are bush league compared to the hegemon.

      “Dov Levin, a postdoctoral fellow at the Institute for Politics and Strategy at Carnegie-Mellon University, found that the U.S. attempted to influence the elections of foreign countries as many as 81 times between 1946 and 2000.

      Comment: That’s just till 2000! The US has gone nuts since then.

      Often covert in their execution, these efforts included everything from CIA operatives running successful presidential campaigns in the Philippines during the 1950s to leaking damaging information on Marxist Sandanistas in order to sway Nicaraguan voters in 1990. All told, the U.S. allegedly targeted the elections of 45 nations across the globe during this period, Levin’s research shows. In the case of some countries, such as Italy and Japan, the U.S. attempted to intervene in four or more separate elections.

      Levin’s figures do not include military coups or regime change attempts following the election of a candidate the U.S. opposed, such as when the CIA helped overthrow Mohammad Mosaddeq, Iran’s democratically elected prime minister, in 1953.

      Comment: If we add those in, we’re looking at the entire Earth having suffered from US meddling.”

      https://www.globalresearch.ca/us-interfered-in-elections-of-at-least-85-countries-worldwide-since-1945/5601481

      • JH Wyoming says:

        Good, so there’s some well funded govt. agencies that can cause some havoc with the Russians. Maybe even some cyber-warfare. Let’s teach those ruskies a lesson they’ll never forget. Stay out of our elections or suffer the consequences.

        • psile says:

          You do realise that this whole Russia election hacking thing was cooked up by bad loser Hillary and her crooked men over at the FBI? I do hope so…

        • Tim Groves says:

          A year old, but, sadly, still relevant because some d*mb bunnies just don’t get it, James Corbett looks behind the screaming headlines at the bizarre reality of the “Russia hacking” narrative.

      • Sungr says:

        Our US political system is so riddled with idiocy and corruption that a Russian hack might even improve the integrity of our electoral system. Haha.

        Our esteemed Congressional representatives spend 75% of their working time lobbying for money from powerful interests. When it comes time for a vote, they have no time to research the issues and then just vote how their moneyed interests tell them.

        The Republic has been purchased by private interests who are now running the country for their own interests & profit.

        We are well and truly f@cked.

    • Oops! Too many families can’t really afford a second child in China.

    • As discussed at the Econimica blog for ages, especially we should watch for projected deep knees in their demography graphs come ~2025-2035, serious challenges to world order to be expected.

      • HideAway says:

        2025-2035? I don’t think too many of us will be worried about China’s demographics by then. Survival at home is likely to be of far higher concern for most.

        Gail, in China’s case of having a one child policy for so long, it might also just be a social norm to only have one child these days. Those that might consider a second child would be unique compared to peers, parents etc so stop at one. Much poorer people throughout the world are still having high numbers of children, so it must be more than lack of affordability in China.

        • There are different kinds of “lack of affordability.”

          In China, many people live in large cities and owe large monthly payments on small apartments. In Africa, people get together with neighbors and put up a simple house, with no monthly payments.

          When it comes to having children, the people in China are handicapped, because both parents must work to have sufficient funds for the apartment (really condominium).

          The people in Africa count their wealth in cows, not in apartments. I would expect the big concern would be enough food for all of the children. It is easy to pile another child into the house.

          I was reading recently that polygamy is widely practiced in Africa, and helps drive up birth rates. As it works out, wealthy men can have multiple wives, and poor men are mostly left out. This approach is optimal for producing lots of children. A related issue is a common practice of families of sons being required to pay the parents of a prospective wife a fee (perhaps 30 cows), in order for the son to marry. Parents can use timing to their advantage, in obtaining the necessary cows for trade. They sell off the daughters when they are quite young, and use their earnings to be able to afford to buy wives for their sons. With this system, wealthy families often obtain multiple wives for their sons. Poor families often cannot afford wives for their sons. With polygamy and early marriage for women, it is possible to grow the population very rapidly.

          China, of course, does not use polygamy. I met some men who married one wife, had a child by the first wife, then divorced and married again, and had another child. But I expect this is uncommon, and limited to the fairly well-to-do.

          • DJ says:

            I agree with Gail. Once a country is developed enough many become to poor to have children. I don’t know the minimum cost to have a child in southern/eastern europe, but it will definitely cut down on discretionary spending.

            Do you prefer one child in a two bedroomapartment or two childs (and no car) in a one bedroom?

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