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. Third World person says:

    fast eddy mantra of burn more coal is happening in Germany
    Historic German church demolished to make way for brown coal mine
    The demolition of a historic church to clear the way for the expansion of an open-cast mine this week has outraged locals in western Germany and environmentalists, as politicians moot giving up their own clean energy targets.
    Built in large part by local people and consecrated in 1891, St Lambertus church in Immerath, North Rhine-Westphalia state, was ripped down by diggers’ hydraulic arms on Monday and Tuesday, leaving a heap of rubble where the neo-Roman nave and twin towers once stood.

    Police brought in reinforcements Monday to manage a crowd of protesters who held up the demolition for five hours, local newspaper Rheinische Post reported.

    “Those who destroy culture destroy people too,” a banner held up by Greenpeace demonstrators read.

    Immerath and its church have been doomed since 2013, when Germany’s constitutional court found that there was an overwhelming public interest in allowing energy firm RWE to expand its nearby Garzweiler open-cast brown coal mine.

    Almost all the 900 villagers have long since quit their homes, among a total of 7,900 people from the region making way for the mine, while the Catholic church was deconsecrated in preparation for its destruction.

    The demolition has drawn attention to the nation’s mining of brown coal, as calls grow to reduce greenhouse emissions by ending use of the cheap but polluting fuel.

    Germany has massively expanded renewable energy in recent years, part of its “energy transition” away from fossil fuels and nuclear power.

    Environmentalists point out that at times of peak production energy firms now pay neighbouring countries to take surpluses generated from coal off their hands.

    But power companies argue they need coal capacity as a stopgap for times when output from solar and wind is low.

    Meanwhile, politicians are loath to impose an end to coal, an industry that still employed almost 20,000 miners in 2015 according to official figures.

    As the towers fell in Immerath, talks between Chancellor Angela Merkel’s conservatives and their historic rivals the Social Democrats were getting underway on renewing a left-right “grand coalition” that has ruled since 2013.

    One of the first proposals to leak from the talks was giving up Germany’s 2020 goal of cutting carbon dioxide emissions by 40 percent compared with 1990’s level.

    “Who is fighting for an exit from coal or a real reduction in CO2 emissions? No-one that I know of,” prominent Greens party figure Robert Habeck told news agency DPA.
    https://www.thelocal.de/20180110/historic-church-demolished-to-make-way-for-brown-coal-mine

    • Davidin100millionbilliontrillionzillionyears says:

      so… good news from Germany!

      thanks!

      oh…

      and…

      Burn More Coal… we need to sustain the energy per capita plateau!

    • I think that it is much more likely that wind and solar are causing problems with neighbors regarding excess supply, rather than coal. But I don’t expect environmentalists would understand that.

      Wind and solar are making it harder and harder to run the grid. Unfortunately, something else is needed. Germany doesn’t have natural gas of its own, so it goes after brown coal. Such coal is of fairly low quality. So old churches get knocked down.

      • Christiana says:

        Actually the coal is not of low quality. We Germans have a perfect system for open pit mining with very large machines. You should see the industry in eastern germany which is way better than that at the Rhein region. The coal is used for generating electricity and heat. The heat is distributed in towns. The mine is fully operated on electricity to avoid fire. They need 20% of the generated electricity to operate the mine.
        So thanks to logistics they can have very cheap electrity. But the CO2 amount is huge!

        • What I should say is “low energy density,” rather than low quality. The coal is still expensive to transport long distances, because you need a lot of it to get a given amount of it. It sounds like that heat from the coal is used for “cogeneration.” This is a good way of using it. (Also using it fairly close to where it is mined, so the high transport cost is not an issue.)

          One thing you should be aware of is that where intermittent energy from wind and solar is added, it tends to make cogeneration less competitive, because some of the coal-fired-electricity needs to be sold for negative or zero rates. So it tends to drive cogeneration out of business, without subsidies. This is something you need to watch out for. Paul Frederik Bach writes about this issue in Denmark. This is part of why wind and solar are fake solutions.

          • Christiana says:

            Big power plants are close to the mines, as you said, to avoid transport. Then each town has a so called “Heizkraftwerk”, providing electricity and heat for housing. Remember, european countries are small, coal is transported by rail, which is operated by electricity.
            What is happening now, to get away from the coal, power plants are switching to gas. Very cheap at the moment. And the wind energy that is too much, will be used in systems called “power to heat”. Meaning, big tanks of water are heated up and then the heat is used to warm houses. (Fernwärme)
            But if it works out at the end, who knows?

          • Christiana says:

            I will look for Paul-Frederik Bach’s book.

    • Fast Eddy says:

      Get ready for even more record cold temperatures around the world.

  2. adonis says:

    great new article gail and it is interesting to see the price of oil spiking instead of dropping what does this tell us supply is dropping faster than demand we are about to see higher prices of oil which will translate to higher inflation as alan greenspan predicted we are entering stagflation this also tells us why the fed are raising rates they are simply acting in a predictable manner they know that the world is on the downslope of peak oil which means a permanent high price for oil prices this was all planned folks there are 140 days until the final stockmarket crash which will bring in the planned currency reset expect a very high permanent oil price which will allow the remaining barrels to be extracted to set up the renewable energy dream for a fraction of the world’s population what will happen to the rest of us we will be probably be living on a fraction of our current carbon footprint in a contracting economy we shall see some huge changes in the years to come such as no one being able to afford to run a car, family members moving in with well to do family ,education disappearing, paper currency replaced by digital currency, very high costs for food and health services, a wealth transfer from the stockmarket to precious metals and commodities elimination of the middle class, unless you play your cards right there is still time to protect yourself from whats coming learn to live on less learn to grow food learn to heal yourself naturally get some silver its still cheap and tell your family and friends the truth even if it results in them banning you from telling them when the system finally resets and all your well to do family members lose 99% of their wealth they may finally turn to you for help or give up on life.are you willing to gamble your life and your families lives that there is no plan B, that is the only choice we have make your choice wisely if you and your immediate family want to be around in ten years time.

    • Davidin100millionbilliontrillionzillionyears says:

      why would I scare or even just worry anyone by telling them that a crash is coming at the end of May?

      to be clear: I think that you are flat out wrong.

      but, it seems no one is going to change your mind, right?

      so, I will just say that it’s pretty sad to read about what you are going through…

      it’s some kind of self imposed inner turmoil…

      well, good luck with that…

      I think you’ll still be posting here in June.

      • Davidin100millionbilliontrillionzillionyears says:

        ps: the oil price is NOT spiking…

        it’s creeping higher very slowly.

      • adonis says:

        d day is first of june 2018 to be precise

        • Davidin100millionbilliontrillionzillionyears says:

          again, it’s very sad that you are saying this…

          the apt word is delusional…

          please take care of yourself…

          again, I’m sure you will be posting here after June 1st…

          peace be with you.

    • I think you have been reading too many precious metals sites.

      Oil prices have never stayed very high for very long in the past; it will be hard to for them to go very high, or to stay very high, for very long now. If interest rates rise, this will add to the effect. Recession will send oil prices down after a few months.

      A lot of people have not understood that our economy is a networked system. Oil prices affect job availability as well as the cost of goods. Employment goes down as oil prices go up. This is a very bad combination.

      I won’t go into the growing food issue. It is difficult to do, without a functioning economy.

      • T.Y. says:

        Hi Gail,

        Out of interest, what is your take on precious metals ? I do believe they might be a decent store of value, at least in the initial stages of collapse. Absent outright confiscation or extreme “capital gains” tax (by the way there are some european nations that have 0% capital gains tax on gold/bullion) The case for gold to hold purchasing power in inflationary times is very strong & clear. Perhaps less well known is that it could actually perform decent in deflation conditions as well; if too many loans were to turn delinquent / companies go bust, then banks get into trouble as well and various other investments such as stocks / corporate bonds & real estate are likely to tank as well. In such a scenario people might consider looking for other venues to park money. in a deflationary spiral the adage that “return OF capital is more important than return ON capital” seems to ring true to me. I’m not advocating to go “all-in” on precious metals, but some allocation seems prudent.

        Similarly what is your take on crypto-currencies ? As far as i understand them, the blockchain seems to be mainly a tracking tool. Although bitcoin limits the total amount of tokens with complex “mining algorithms”, anybody could create new cryptocurrencies and evidently they are (ethereum, ripple etc…), so as a store of value i reckon they are very dangerous. They are touted to have high utility as medium of exchange & would reportedly deal a blow to the “monopolies” of banks, but frankly i doubt that. Are banks making much money on regular savings & deposit accounts ? I don’t think so ? For most other financial products you would still need an intermediary, albeit that the currency has changed. Additionally the question needs to be asked “utility for whom ?”, surely not the individual small saver who is perfectly capable of tracking is own savings, but certainly for the surveillance state that wants to track everything.

        Thanks in advance

        • The issue is that things change quickly. As long as the system hangs together, and major recession doesn’t overtake they system, then prices of metals can rise with oil prices. But once the system starts to “break,” there is a problem of anything holding value. Oil prices will drop, as will precious metal prices.

          Ultimately, the problem will be that there will not be enough production of products of all kinds for citizens. There will be many different people who would like a share of these products: those holding precious metals, those holding annuities from insurance companies, those who are getting government pensions, such as Social Security, and of course the workers who make the goods themselves.

          It seems to me that it is the workers who make the goods should get first priority, or the system will fail altogether. I really don’t know for certain. Maybe there is a clean break, and we go from a high price, to not really working well at all.

          I personally believe in diversification. Silver looks like it “might” be a store of value. It probably is a worthwhile place to put some money, if that is your interest. But I wouldn’t really count on it saving any of us. The real question will be how many goods and services are available to buy.

      • adonis says:

        t he economy is a networked system that is in a flux of diminishing returns where job availability will get lower and lower think less of everything but the system will continue think of it if there was a cutback in car triips of 90 % that means the system could work with a lot less oil this is a realistic outlook of how the future will shape itself into. whats happening now is a transition into negative interest rates expectations of future entitlements will change into the real reality think 99% loss.

    • DJ says:

      “set up the renewable energy dream for a fraction of the world’s population ”

      What will stop the rest of us from smashing their PV panels?

  3. Baby Doomer says:

    WTI 64.64

    https://oilprice.com/oil-price-charts/block/1

    Gasoline was 2.79 where I live today!

    • Davidin100millionbilliontrillionzillionyears says:

      Brent $70.05…

      $2.79 gasoline is incredibly cheap…

      I burn about one gallon round trip for work…

      while I wouldn’t want to pay anywhere near $27.90 for one gallon, it would still be well worth burning that gallon to have my job 15 miles away.

      oh, is that controversial?

    • This is Gas Buddy’s take on the situation. The West Coast, Alaska and Hawaii are always highest.

      http://www.gasbuddy.com/GasPriceMap?z=4

      • Tango Oscar says:

        It’s approaching $3.00 in Oregon as I type this.

        • Davidin100millionbilliontrillionzillionyears says:

          that’s a very inexpensive product relative to the benefits it provides.

          what does a 20oz bottle of water cost per gallon?

          • Volvo740... says:

            Except that many times we “just burn it for fun”. There is no real benefit to society by driving to the ski slopes.

            • Fast Eddy says:

              Most activities we engage in have no more benefit to society than driving to a mountain — being pulled to the top by machines…. and repeating that over and over….

            • Davidin100millionbilliontrillionzillionyears says:

              yes, for fun!

              I occasionally drive out of my way because I have some great music playing and I want to hear the complete piece…

              car stereo volume at 40… that is max…

              huh?

              what did you just say?

            • Fast Eddy says:

              More people should be doing that

  4. Davidin100millionbilliontrillionzillionyears says:

    Cryptocurrencies: 1409
    Market Cap: $704,894,570,338

    apparently, the 1385 cryptocurrencies that the world had last week was not enough.

  5. Artleads says:

    ” I have written other articles regarding why debt is needed to pull the economic system forward.”

    Will look at this later.

    “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?”

    If it isn’t true GDP growth, what would be a better example of it? Why?

    “How about unneeded roads, built using the rising debt of the Japanese government?”

    You mean they are using debt in a ‘worse’ way than they otherwise could?

    “Or recycling performed around the world, because it makes people ‘feel good,’ but really requires substantial subsidies?”

    I can understand why this isn’t ‘real,’ but am less clear what a real alternative to recycling (etc,) could be.

    • Fast Eddy says:

      ‘but am less clear what a real alternative to recycling (etc,) could be’

      Just keep digging up new resources and making new stuff…. then toss it into the landfill where earth recycles it

    • JH Wyoming says:

      “I can understand why this isn’t ‘real,’ but am less clear what a real alternative to recycling (etc,) could be.”

      The only alternative is to go back to a one way road for all those raw materials, continue to load up landfill sites (which aren’t as easy to find now and are still being filled up with non-recyclable items), ignore the damage it does to the environment, especially oceans and be the irresponsible species we are always being blamed for being. To stop recycling would be tantamount to tossing in the proverbial towel and giving up.

      We are going to continue to recycle and electrify energy and we’ll see if it can work or not, but we aren’t going to ignore environmental concerns for the sake of a lower cost of energy. Whatever comes this way as a result will be what we have to make adjustments to even if they are wholesale changes or reductions in living standards. Come hell or high water when you know what it is you need to do, you do it and figure out how to overcome the problems as you go along.

      • Fast Eddy says:

        Are we running out of room for our garbage?

        As I was trying to cram a greasy pizza box down my apartment building’s garbage chute yesterday, I couldn’t help but wonder: How much room can we possibly have for garbage in this country? When will the United States run out of landfill space?

        Not for centuries. There are plenty of reasons to cut down on waste, but the amount of space left in the ground isn’t a pressing concern. Won’t you join the Lantern on a brief tour of American trash?

        From the 1920s until the mid-1970s, most of our household garbage ended up in dumps—nothing more than manmade craters scattered across the country. They were, in many ways, an environmental disaster. All the liquids in the decomposing trash filtered down to the bottom of the hole and, from there, into the soil and groundwater.

        This gloop, known as “leachate”, could have contained any number of hazardous chemicals, especially in an era when few people thought much about what they tossed. The rotting garbage also released significant amounts of methane, a greenhouse gas 20 times more potent than carbon dioxide, straight into the atmosphere.

        When Congress passed the Resource Conservation and Recovery Act in 1976, it fundamentally changed the way we store trash. The law and its subsequent amendments require disposal facilities to line their gigantic trash holes with layers of either plastic or clay, or both. These liners, and a subterranean piping system, collect the leachate, which is then hauled to sewage treatment plants. Landfill operators must also install pipes to vent the methane gas, which is burned off—reducing the superpotent greenhouse gas to mere carbon dioxide. (Some facilities take advantage of the heat created in the process, using it to power turbines or turn the methane directly into liquid natural gas.)

        Though the 1976 law was a huge win for the soil and groundwater, there are drawbacks. Technologically advanced landfills—the word dump now applies only to old-school holes in the ground—are more expensive to design and operate. To make up for these costs, landfill operators began to emphasize economies of scale. Rather than having lots of tiny dumps scattered everywhere, we now have a small number of mega-landfills. In 1986, there were 7,683 dumps in the United States. By 2009, there were just 1,908 landfills (PDF) nationwide—a 75 percent decline in disposal facilities in less than 25 years.

        http://www.slate.com/articles/health_and_science/the_green_lantern/2011/02/go_west_garbage_can.html

        • Artleads says:

          They had to go and spoil everything! 🙂 Capital turns everything to gold. Reminds me of someone…

        • Artleads says:

          I thought that nuclear waste could be distributed throughout the extent of their host countries, buried deep in tiny canisters whose respective exposure wouldn’t kill many. So the whole country would be at some risk, but less than if you dispose of everything in one place.

          • Fast Eddy says:

            You know what thought did?

            He thought he farted… but actually .. he sh it himself.

            • Artleads says:

              But that’s what we all would be doing if there is no plan of any sort. The alternative to thought may be certainty, which is damn stupid as well.

  6. Baby Doomer says:

    U.S. Household Debt Reaches Record $13 Trillion: Watch Subprime Auto Loans
    https://www.forbes.com/sites/zackfriedman/2017/11/14/debt-auto-loans/#33dea1f8ffbf

  7. Davidin100millionbilliontrillionzillionyears says:

    sweet… ha ha!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    https://www.cnbc.com/2018/01/11/california-climate-change-hypocrisy-exposed-by-big-oil-commentary.html

    “Of course California is hardly alone in this hypocrisy. This is a national problem. The civil engineering organization and website StrongTowns.org has long documented the massive costs to our finances and environment caused by almost every state government’s reliance on car-centered infrastructure policies. That includes New York state, which has just decided to also sue the oil companies for the same claim of climate change science suppression.”

    these states support the car-centric system, and they buy massive amounts of FF from the very companies they are suing!

    irony, much?

  8. Fast Eddy says:

    Who is protesting?
    Tunisians from different backgrounds are taking to the streets, though most are young. They include large numbers of students and the unemployed, many in towns that are in the neglected interior of Tunisia, away from the wealthier coastal areas.

    Why are they protesting?
    In the short term, demonstrators are angry at price and tax rises, imposed by the government to cut a soaring deficit and meet demands of international lenders. But protests are also fuelled by the lack of major economic improvement since the ousting in 2011 of the autocrat Zine al-Abidine Ben Ali. There is also widespread disillusionment with Tunisia’s political elite. One main protest group – Fesh Nestannew? (What Are We Waiting For?) – wants a return to the spirit of the 2011 revolt, demanding “employment, freedom, and national dignity”.

    What are the authorities doing about it?
    So far the response from politicians and officials has been to deploy thousands of police and even soldiers in some towns. There has been little attempt to engage with the grievances of the protesters and much effort to portray them as criminals. More than 300 arrests have been made. Hazem Chikhaoui, a 22-year-old student representative in Tunis, said the security forces were “aiming to terrorise and silence protesters through systematic violence”.

    https://www.theguardian.com/world/2018/jan/11/who-protesting-tunisia-why-authorities-students-angry

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