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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1,647 Responses to Will the World Economy Continue to “Roll Along” in 2018?

  1. Fast Eddy says:

    As has been pointed out — the purpose of GW…. is to distract the masses from the real problems we are facing – problems without solutions….

    To keep the masses from panicking.

    FEEL the PROPAGANDA!!!!

    “A decade after An Inconvenient Truth (2006) brought climate change into the heart of popular culture comes the follow-up that shows just how close we are to a real energy revolution.”

    http://www.imdb.com/title/tt6322922/

    We are ALMOST THERE… just a little more effort…. let’s all pull together.

    Ooops!

    • Mark says:

      I don’t really research the subject, but I thought this was great.

      • The nobel laureate says physics is a pseudoscience. Global warming science begins with a hypotheses, and then only looks for things to confirm it. It becomes a religion.

        In my opinion, about the time that interest in climate change started rising, many people were getting concerned about Peak Oil. Climate change looked like it might be a convenient “answer” to all of the concern about Peak Oil. Raising interest in Climate Change would get people to be concerned about something other than Peak Oil. Furthermore, if a solution could be found, it might answer the Peak Oil problem as well as the Climate Change problem. Of course, a solution has not been found for either Peak Oil or Climate Change.

        The new focus has elevated the status of climate scientists, and given excuse for a lot of funding for “renewables.” It has made it look like we have a fairly distant, solvable problem rather than a fairly near-term predicament without a solution. Emphasizing climate change over peak oil is an expedient solution to a political problem.

        • Fast Eddy says:

          OK ___ ___ groooopies….

          Let’s distill this issue to its bare essence:

          – Al Gore is the key figure in the __ __ debate

          – he has been urging us to Take Action since 2006

          – if we do not Take Action very quickly he predicts the Arctic will melt within the next 10 years and that Manhattan will be under water

          – he lives in a mansion that uses 30x the energy of an average house

          – he regularly flies in private jets for business purposes – and to cities where he makes appearances URGING us to stop burning fossil fuels now

          – even though he believes Manhattan will be underwater within 10 years (and this means all coastal cities will be under water because water has this habit of seeking its own level) – he recently purchased a $9,000,000 home that sits on a beach — less than a 1 metre above sea level.

          – when asked about any of this he will not comment

          – when asked why his predictions have not come true he claims that ‘renewable’ energy has advanced to the point where it is mitigating the ___ ___ — conveniently ignoring the fact that we are burning far more fossil fuels now than in 2006

          Ask yourself — are these things that the key player in the fight against ___ ___ would do if he truly believed what he was saying????

          Now there is duuumb … and there is duuumbbber…… but if, after reading the above, you still believe that ____ ___ is not a hoax (aimed at distracting us from peak everything) …..

          Then I am sorry to say — you are experiencing what is known as extreme R E T A R D A T I O N.

          I regret to inform you that if the above facts and logic do not cure you…. then your R E T A R D A T I O N is permanent. Nothing will cure you.

          The good news is that this defect will not impair your ability to function in society – 99.99999% of all people share your defect….. and they get along just fine.

          • Fast Eddy says:

            Repent yee sinners repent!!! Salvation is at hand!!!

            Who is going to be the first to have the courage to say: I WAS WRONG.

            It is ok to be WRONG. Up until 6 months ago I was living in filthy sin as well — I too believed that the ___ ___ was real. I too mocked and ridiculed anyone who dissented…

            But then … BUT THEN… BUT THEN!!!!!!!!!!!! I saw the light. The lord of logic pulled the wool from my eyes… and I began to rejoice…. and I asked myself Fast — how could you have been so f789ing steeewwpid????

            You pride yourself and not being sucked in and played by the MSM…. but you formed your position based on the fact that the MSM overwhelming propones the ___ ___ narrative…. when you KNOW that when the MSM repeats something endlessly – that indicates that the MSM is lying.

            But never mind that …. all that matters is that the light has broken through.

            I was wrong. I was wrong. I WAS WRONG!!!!

            Hallef789ingluya… I was wrong!

            Come before The World Champion — psile… norman…. and yee other sinners…. throw the chains of propaganda and indoctrination from your bent shoulders…. smash them to pieces….

            Come out of the darkness…

            All together:

  2. Davidin100millionbilliontrillionzillionyears says:
    • Fast Eddy says:

      Cool – a perpetual economic prosperity machine.

      Please tell me that is from a fake news site that is making this up?

      Oh I see… it’s CNBC….

      I feel better now.

      We have to be really close to the edge… teetering in fact.

      I guarantee you — people will be putting money down for that contraption.

      • What is sad is that there are people who are in some ways concerned about limits, but when they hear about these fantastic ideas, they assume that our problems have all been solved. Technology will save us!

    • Fast Eddy says:

      I feel the need… to sacrifice a small animal…. maybe bite the head off of a rat or a bird….

  3. Davidin100millionbilliontrillionzillionyears says:

    Uber to give us autonomous flying cars:

    https://www.cnbc.com/2018/01/11/autonomous-flying-vehicles-heres-what-the-future-of-cars-could-be.html

    “With a push of a button, a flying vehicle could pick a passenger up and take them to their destination, he said. “This is something where we’re working with a variety of stakeholders… internationally to bring this technology about, including NASA.”

    “Uber’s goal, he said, was to target the piloting of such a service by 2020 before rolling it out as a “mainstream service” in 2023.”

    by 2023!

    wow!

    thanks, Uber!

    • Greek two year bonds are trading at a lower interest rate than US government two-year bonds? Things are getting very strange. Of course, Greece is one country that has benefitted from the lower oil prices since 2014. So there are some aspects that are better.

  4. The Second Coming says:

    Thanks for the article…looks like we will roll BAU for 2018
    Whatever it takes…and then some

    Fed’s Dudley warns that tax cuts putting economy on an ‘unsustainable path’

    New York Fed President William Dudley said recently passed tax cuts are putting the U.S. on an “unsustainable” fiscal path that will threaten growth in the future.
    The comments echo recent remarks from Fed Chair Janet Yellen, who said in November that escalating public debt and deficits “should keep people awake at night.”
    Despite his longer-term pessimism, Dudley raised his outlook for 2018 GDP growth from 2.5 percent to 2.75 percent

    While he said the reforms that slash corporate taxes and lower rates for many earners will boost the economy in the near term, that “will come at a cost.”

    “After all, there is no such thing as a free lunch,” Dudley said during a speech in New York, according to prepared remarks. “The legislation will increase the nation’s longer-term fiscal burden, which is already facing other pressures, such as higher debt service costs and entitlement spending as the baby-boom generation retires.”
    https://www.cnbc.com/amp/2018/01/11/dudley-warns-that-tax-cuts-putting-economy-on-an-unsustainable-path.html

    Seems are long term planning now is year to year!

    • I agree; it is hard to do long term planning any more.

      At some point, there has to be a conflict between the resources that are available and the resources that are needed for the world’s population. Also, the financial system cannot hold up under the strains.

  5. grayfox says:

    https://www.sciencedaily.com/releases/2018/01/180110141317.htm
    Sorry to bring up the bad 7 letter word (science). Around here we are expecting some possible flooding today and this weekend from an early winter thaw.

    • As long as you follow your introduction with a suitable course of action (move uphill), there is no problem.

      Or perhaps, tell people to reduce their meat consumption, to try to reduce our demands on world resources.

    • Fast Eddy says:

      Yep – it rained in the winter… cuz of ___ ____. Then it snowed.

      Where I am from – Northern Ontario – it was raining the other day — now it’s – 35 C with the wind chill. And so far it has been one of the coldest winters in a long time.

      I guess that C02 blanket only covers select parts of the planet.

  6. i1 says:

    Mission “may” have failed? Ahhh, no. If the “mission” was extorting stock holder and taxpayer funds, “mission” accomplished.

    • JH Wyoming says:

      That makes no sense whatsoever. Business models on this scale are not based on failure or duping clients. To get future business they need other clients or at least investors and that can’t be based on conning people. If it is, it fails and their business model also fails. They will have to figure out what went wrong, convince people they’re past that problem to reinstill confidence/faith in future launchings.

    • I noticed his example of a good country is Norway according to Trump is a very high “energy per capita” country. The problematic countries are very low energy-per-capita countries. We need a less vulgar way of describing low energy-per-capita countries. People from low energy-per-capita countries have generally had very little education. (Either that, or we are taking the best-educated people from poor countries, and moving them to rich countries, leaving the low energy-er-capita countries worse off than they were before.) Education is a big piece of what high energy-per-capita buys. Culture may be a problem as well. Many very poor countries allow multiple wives, for example.

      The reason why people want to move from the areas that Trump is concerned about is not that they currently have resources, but that they used to have resources. Too many of the countries were rich in resources at one time, but are no longer.

      • xabier says:

        The museums of the industrial world are full of beautiful works of art originating in countries, continents and cities which once had resources, and empires.

        • Fast Eddy says:

          Was in the British Museum a few years ago with M Fast…. and I commented how there was no admission fee… and M Fast said — that’s the least they could do considering everything in here is stolen.

          Nice one Madame… very nice….

          • xabier says:

            The Victorian imperialists might have been thieves, but at least they had some style – they got the pick of the world.

      • Brian Woods Snr. says:

        Governance. That’s the key. A country may be well endowed with natural resources but if the rulers are kleptocrats – then it will be a ‘toilet bowl’.

        In respect of the different amounts of liquid fossil fuels consumed per person per day, they are giving quite contradictory outcomes when I convert the values to liters/person/day.

        First world countries should be above 12 liters; second world countries will be below 7 liters and above 3 ; third world will lie in range 3 liters or below. China and India should be in 1 to 2 liter range; India is, but China gives a value of almost 6! Data needs careful analysis.

        Brian.

        • Fast Eddy says:

          A country may be well endowed with natural resources but if the rulers are kleptocrats – then it will be a ‘toilet bowl’.

          I prefer to call the rulers of these countries puppets…. we put them in power… they allow us to rape the resources… they get a nice slice of the pie for playing ball… and if they refuse to play ball…

          Our long years of negotiations with foreign countries… have yielded no results thus far. With the oil revenues we could meet our entire budget and combat poverty, disease, and backwardness among our people. Another important consideration is that by the elimination of the power of the British company, we would also eliminate corruption and intrigue, by means of which the internal affairs of our country have been influenced. Once this tutelage has ceased, Iran will have achieved its economic and political independence. The Iranian state prefers to take over the production of petroleum itself. The company should do nothing else but return its property to the rightful owners. The nationalization law provide that 25% of the net profits on oil be set aside to meet all the legitimate claims of the company for compensation. It has been asserted abroad that Iran intends to expel the foreign oil experts from the country and then shut down oil installations. Not only is this allegation absurd; it is utter invention.[31]

          They get this:

          https://en.wikipedia.org/wiki/Mohammad_Mosaddegh#Plot_to_depose_Mosaddegh

    • Karl says:

      All of our countries are going to be “Holes” once the depletion rates overtake the frackers……..

  7. MG says:

    The Czech presidential election 2018:

    The dark-skinned FEMMEN activist attacks the current president and presidential candidate Milos Zeman (he worked in the area of economic forecasts during the communism) during his voting

    https://volby.idnes.cz/milos-zeman-prezidentske-volby-aktivistka-utok-hlasovani-mistnost-1gi-/prezidentske-volby-2018.aspx?c=A180112_151018_prezidentske-volby-2018_ane

    http://www.ahaonline.cz/clanek/zhave-drby/142806/utok-na-zemana-polonahou-utocnici-zpacifikovala-ochranka.html

    https://en.wikipedia.org/wiki/Milo%C5%A1_Zeman

    • Mark Nunez says:

      “The dark-skinned FEMMEN activist attacks the current president and presidential candidate Milos Zeman …”

      Not much of an attack if you ask me. More like an over-reaction to a non-violent protest.

      • MG says:

        She was very close, entered into his private zone. According to other articles, her fater was from Angola and mother from Ukraine.

        I ask myself, if it is possible that a white-skinned woman of European origin would attacked him, too? The text “Zeman is Putins s1 u t”, she had on her naked body, is just one part of this scene among various other components, like her biological characteristics.

  8. I ran across an article in the WSJ called, Merkel Edges Closer to Fourth Term as Chancellor.

    According to the article, it is not yet a “done deal,” but it looks like there is hope.

    I would describe the magic ingredient as more debt. According to the article,

    Friday’s agreement is heavy on extra spending. It foresees some €46 billion ($55.4 billion) in new expenditures, mainly benefit increases, and includes a €10 billion tax cut over four years—smaller than anticipated and only benefiting lower earners.​ Not included in this figure are additional but still unquantified payments to pensioners.

    While conservatives in Ms. Merkel’s camp will lament the scale of the tax cuts, they will likely welcome a decision to limit the number of new refugees entering the country to 220,000 a year.

    I think that the US tax change will be seen in retrospect to be very much a more debt scheme. There were goodies for almost everyone; it wasn’t just tax cuts for the rich. It seems like Germany is following the same route.

    Perhaps all of the additional governmental debt will keep things together a bit longer, and allow fuel prices to rise a little higher.

    • Fast Eddy says:

      If you cut taxes… you need to make up for that loss of revenue in some other manner… so yep — pile on more debt.

      Alas it does not seem to matter – at least anytime soon …. look at Japan’s debt… the dung is piled so high it should have fallen over years ago….

      • You can use the debt to create lots of jobs. Eighty year old ladies can pour tea for visiting tourists.

        You can have crossing guards and extra police, wherever they might be helpful. You can pave every stream with stones.

        You can build roads that have no cars, and bridges that are rarely used. And big concrete rocks to hold back the sea.

        People with jobs will feel good, because they are at least somewhat benefiting the system.

        But at some point, the system worldwide has to stop working. The amount of resources extracted each year starts falling. Some “bicycles” will fall over. Maybe whole economies will fail.

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