Nine Reasons Why Globalization Can’t Be Permanent

Since the late 1990s, globalization has seemed to be the great hope for the future. Now this great hope seems to be dimming. Globalization sets up conflict in the area of jobs. Countries around the world compete for development and jobs. If there is not enough cheap-to-produce energy to go around, huge wage disparity is likely to result.

We know from physics and history that economies need to grow, or they collapse. The wage disparity that high-wage countries have been experiencing in recent years is evidence that the world economy is already reaching energy limits. There are no longer enough jobs that pay well to go around. Any drop in energy supply is likely to worsen the job situation.

Most observers miss this problem, because they expect high oil prices to signal energy limits. This time, the signal is low wages for a significant group of workers, rather than high oil prices. This situation is possible in a networked economy, but it is not what most people look for.

Unhappy citizens can be expected to react to the wage disparity problem by electing leaders who favor limits to globalization. This can only play out in terms of reduced globalization.

History and physics suggest that economies without adequate energy supply can be expected to collapse. We have several recent examples of partial collapses, including the Great Depression of the 1930s and the collapse of the Soviet Union. Such collapses, or even more extensive collapses, might occur again if we cannot find energy alternatives that can be quickly scaled up to replace oil and coal in the very near term. These replacements need to be cheap-to-produce, non-polluting, and available in huge quantities.

The story that the economy doesn’t really need a growing supply of very cheap-to-produce energy is simply a myth. Let’s look at some of the pieces of this story.

[1] The world economy needs to grow or it collapses. Once all of the nations of the world are included in the world economy, one obvious source of growth (incorporating nations that are not yet industrialized into the world economy) disappears. 

The reason why the world economy needs to grow is because the economy is a self-organized system that operates under the laws of physics. In many ways it is like a two-wheeled bicycle. A bicycle needs to roll quickly enough, or it will fall over. An economy must grow quickly enough, or debt cannot be repaid with interest.

Also, government promises may be a problem with slow growth. Pensions for the elderly are typically paid out of tax revenue collected in that same year. It is easy for a mismatch to take place if the number of younger workers is shrinking or if their wages are lagging behind.

Figure 1. Author’s view of analogies of speeding upright bicycle to speeding economy.

I explain a little more about my bicycle analogy in Will the World Economy Continue to “Roll Along” in 2018?

Economies throughout the ages have collapsed. In some cases, entire civilizations have disappeared. In the past 100 years, partial collapses have included the Great Depression of the 1930s, the collapse of the central government of the Soviet Union in 1991, and the Great Recession of 2008-2009. Economic collapses are analogous to bicycles falling over.

[2] A growing supply of energy products is extraordinarily important for keeping the world economy operating.

We can see in Figure 1 that the energy of the person operating a bicycle is very important in allowing the operation of the bicycle to continue. In the world’s economy, the situation is similar, except that we are facing a problem of a world population that is continually growing. In a sense, the economic situation is more like a rapidly growing army of bicycles with riders. Each member of the economy needs goods and services such as food, homes, clothing, and transportation. The members of the economy can collapse individually (for example, growing suicide rate) or in much larger groups (collapsing government of a country).

Figure 2. World population according to the United Nations 2017 historical estimates and Medium forecast of population growth after 2017.

In an economy, we have a choice regarding how much energy to use. If more energy is used, workers can have many tools (such as trucks and computers) to leverage their productivity. If all goods are made with few energy inputs other than human labor, most workers find themselves working in subsistence agriculture. The total amount of goods and services produced in such an economy tends to be very small.

If supplemental energy is used, many more jobs that pay well can be added, and many more goods and services can be created. Workers will be rich enough that they can pay taxes to support representative government that supports many services. The whole economy will look more like that of a rich nation, rather than the economy of Somalia or Haiti.

Individual nations can grow their economies by using available energy supply to create jobs that pay well. Globalization sets up competition for available jobs.

If a given country has a lot of high paying jobs, this is likely to be reflected in high per capita energy consumption for that country. There are two reasons for this phenomenon: (1) it takes energy for an employer to create jobs, and (2) workers can use their wealth to buy goods and services. This wealth buys more goods and services made with energy products.

[3] One measure of how well the world economy is doing is world energy consumption per capita. On this basis, the world economy is already reaching limits.

Figure 3. World energy per capita and world oil price in 2016 US$. Energy amounts from BP Statistical Review of World Energy, 2017. Population estimates from UN 2017 Population data and Medium Estimates.

It is clear from Figure 3 that energy consumption tends to move in the same direction as oil price. If “demand” (which is related to wages) is high, both oil price and the amount of energy products sold will tend to be high. If demand is low, both oil price and the amount of energy products sold will tend to be low.

Since 2014, energy consumption has remained quite high, but oil prices have fallen very low. Today’s oil prices (even at $70 per barrel) are too low for oil producers to make adequate investment in the development of new fields and make other needed expenditures. If this situation does not change, the only direction that production of oil can go is down, rather than up. Prices may temporarily spike, prior to the time production falls.

Looking at energy consumption per capita on Figure 3 (above), we notice that this amount has been fairly flat since 2011. Normally, in a growing world economy, a person would expect energy consumption per capita to rise, as it has most of the time since 1820 (Figure 4).

Figure 4. 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 fact that energy consumption per capita has been nearly flat since 2011 is worrying. It is a sign that the world economy may not be growing very rapidly, regardless of what government organizations are reporting to the World Bank. Some subsidized growth should not really be considered economic growth. For example, some Chinese cities have been buying off the country’s housing glut with borrowed money. A better accounting would likely show lower GDP growth for China and the world.

Looking more closely at Figure 3, we note that energy per capita hit a high point in 2013, just before world oil prices began sliding downward. Since then, world energy consumption per capita has been trending downward. This is part of the reason for gluts in supply. Producers had been planning as if normal growth in energy consumption would continue. In fact, something is seriously wrong with demand, so world energy consumption has not been rising as fast as in the past.

The point that is easy to miss is that (a) growing wage disparity plus oil gluts and (b) high oil prices are, in a sense, different ways of reflecting a similar problem, that of an inadequate supply of truly inexpensive-to-produce oil. High-cost-to-produce oil is not acceptable to the economy, because it doesn’t produce enough jobs that pay well, for each barrel produced. If oil prices today truly represented what oil producers (such as Saudi Arabia) need to maintain their production, including adequate tax revenue and funds to develop additional production, oil prices would be well over $100 per barrel.

We are dealing with a situation where no oil price works. Either prices are too high for a large number of consumers or they are too low for a large number of producers. When prices are low, relative to the cost of production, we tend to get wage disparity and gluts.

[4] The reason why energy demand is not growing is related to increased wage disparity. This is a problem for globalization, because globalization acts to increase wage disparity.

In the last section, I mentioned that demand is closely connected to wages. It is really wage disparity that becomes a problem. Goods and services become less affordable for the people most affected by wage disparity: the lower-paid workers. These people cut back on their purchases of goods such as homes and cars. Because there are so many lower-paid workers in the world, demand for energy products, such as oil and coal, fails to grow as rapidly as it otherwise would. This tends to depress prices for these commodities. It doesn’t necessarily reduce production immediately, however, because of the long-term nature of investments and because of the dependence of oil exporters on the revenue from oil.

Figure 5 shows that China and India’s energy consumption per capita has been rising, leaving less for everyone else.

Figure 5. Energy consumption per capita comparison, based on energy data from BP Statistical Review of World Energy 2017, and UN 2017 Population Estimates.

A major way that an economy (through the laws of physics) deals with “not enough goods and services to go around” is increased wage disparity. To some extent, this occurs because newly globalized countries can produce manufactured products more cheaply. Reasons for their advantage are varied, but include lower wages and less concern about pollution.

As a result, some jobs that previously would have been added in developed countries are replaced by jobs in newly globalized countries. It is probably not a coincidence that US labor force participation rates started falling about the time that China joined the World Trade Organization in 2001.

Figure 6. US Labor Force Participation Rate, as prepared by Federal Reserve Bank of St. Louis.

Lower wages for unskilled workers may also occur as the result of immigration, and the resulting greater competition for less skilled jobs. This has been a particular concern in the UK.

[5] Adding China, India, and other countries through globalization temporarily gives a boost to world energy production. This boost disappears as the energy resources of the newly added countries deplete.

Both China and India are primarily coal producers. They rapidly ramped up production since joining the World Trade Organization (in 1995 for India; in 2001 for China). Now China’s coal production is shrinking, falling 11% from 2013 to 2016. Both China and India are major importers of fossil fuels (difference between black line and their own production).

Figure 7. China’s total energy consumption compared to its energy production by type, based on BP Statistical Review of World Energy, 2017.

Figure 8. India’s total energy consumption compared to its energy production by type, based on BP Statistical Review of World Energy, 2017.

China and India’s big surge in coal production has had a major impact on world coal production. The fact that both countries have needed substantial imports has also added to the growth in coal production in the “Other” category in Figure 9.

Figure 9 also shows that with China’s coal production down since 2013, total world coal production is falling.

Figure 9. World coal production by part of the world, based on BP Statistical Review of World Energy, 2017.

Figure 10 shows that world GDP and world energy supply tend to rise and fall together. In fact, energy growth tends to precede GDP growth, strongly suggesting that energy growth is a cause of GDP growth.

Figure 10. World three-year average GDP growth compared to world three-year average energy consumption growth. GDP data is from the World Bank, based on 2010 US$ weights of GDP by country; energy consumption is from BP Statistical Review of World Energy, 2017.

If a growth in energy consumption is indeed a primary cause of world economic growth, the drop in world coal production shown in Figure 9 is worrying. Coal makes up a large share of world energy supply (28.1% according to Figure 12). If its supply shrinks, it seems likely to cause a decline in world GDP.

Figure 11 shows energy consumption growth on a basis comparable to the energy consumption growth shown on Figure 10, except for different groupings: for the world in total, the world excluding China, and for the combination of the US, EU, and Japan. We can see from Figure 11 that the addition of China and Japan has greatly propped up growth in world energy consumption since 2001, when China joined the World Trade Organization.

Figure 11. Three-year average growth in energy consumption, for the world total; the world less China and India; and for the sum of the United States, the European Union, and Japan. Energy data from BP Statistical Review of World Energy, 2017.

The amount of the “benefit” was greatest in the 2003-2007 period. If we look at Exhibit 10, we see that world economic growth was around 4% per year during that period. This was a recent record high. Now the benefit is rapidly disappearing, reducing the possibility that the world energy consumption can grow as rapidly as in the past.

If we want world energy consumption per capita to rise again, we need a new large rapidly growing source of cheap energy to replace the benefit we received from China and India’s rapidly growing coal extraction. We don’t have any candidates for a suitable replacement. Intermittent renewables (wind and solar) are not candidates at all. According to the IEA, they comprised only 1% of world energy supply in 2015, despite huge investment. They are part of the gray “Other” slice in Figure 11.

Figure 12. Figure prepared by IEA showing Total Primary Energy Supply by type from this IEA document

Academic studies regarding wind and solar have tended to focus on what they “might” do, without considering the cost of grid integration. They have also overlooked the fact that any energy solution, to be a true energy solution, needs to be a huge energy solution. It has been more pleasant to give people the impression that they can somehow operate a huge number of electric cars on a small amount of subsidized intermittent electricity.

[6] On a world basis, energy consumption per capita seems to need to be rising to maintain a healthy economy. 

When energy consumption is growing on a per capita basis, the situation is similar to one in which the average worker has more and more “tools” (such as trucks) available at his/her disposal, and sufficient fuel to operate these tools. It is easy to imagine how such a pattern of growing energy consumption per capita might lead to greater productivity and therefore economic growth.

If we look at historical periods when energy consumption has been approximately flat, we see a world economy with major problems.

Figure 13. 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 flat period of 1920-1940 seems to have been caused by limits reached on coal production, particularly in the United Kingdom, but also elsewhere. World War I , the Great Depression of the 1930s, and World War II all took place around this time period. Charles Hall and Kent Klitgaard in Energy and the Wealth of Nations argue that resource shortages are frequently the underlying cause for wars, including World Wars I and II.

The Great Depression seems to have been a partial economic collapse, indirectly related to great wage disparity at that time. Farmers, in particular, had a difficult time earning adequate wages.

The major event that took place in the 1990 to 2000 period was the collapse of the Soviet Union in 1991. The central government collapsed, leaving the individual republics to operate independently. The Soviet Union also had strong trade relationships with a number of “satellite” countries, including Cuba, North Korea, and several Eastern European countries. In the next section, we will see that this collapse had a serious long-term impact on both the republics making up the Soviet Union and the satellite countries operating more independently.

[7] The example of the Soviet Union shows that collapses can and do happen in the real world. The effects can be long lasting, and can affect trade partners as well as republics making up the original organization.

In Figure 14, the flat period of the 1980-2000 period seems to be related to intentional efforts of the United States, Europe, and other developed countries to conserve oil, after the oil price spikes of the 1970s. For example, smaller, more fuel conserving vehicles were produced, and oil-based electricity generation was converted to other types of generation. Unfortunately, there was still a “backfire” effect related to the intentional cutback in oil consumption. Oil prices fell very low, for an extended period.

The Soviet Union was an oil exporter. The government of the Soviet Union collapsed in 1991, indirectly because with these low oil prices, the government could not support adequate new investment in oil and gas extraction. Businesses closed; people lost their jobs. None of the countries shown on the Figures 14 and 15 have as high energy consumption per capita in 2016 as they did back when the Soviet Union collapsed.

Figure 14. Per capita energy consumption for the Soviet Union and three of its satellite countries. Energy data from BP Statistical Review of World Energy, 2017. Population data from UN 2017 Population data and Middle Estimates.

The three satellite countries shown on Figure 14 (Bulgaria, Hungary, and Poland) seem to be almost as much affected as the republics that had been part of the Soviet Union (Figure 15). This suggests that loss of established trading patterns was very important in this collapse.

Figure 15. Per capita energy consumption for the three largest (by population) republics that made up the Soviet Union. Energy data from BP Statistical Review of World Energy, 2017. Population data from UN 2017 Population data and Middle Estimates.

Russia’s per capita energy consumption dropped 29% between peak and trough. It had significant fossil fuel resources, so when prices rose again, it was again able to invest in new oil fields.

Ukraine was a major industrial center. It was significantly impacted by the loss of oil and gas imports. It has never recovered.

The country that seemed to fare best was Uzbekistan. It had little industry before the collapse, so was less dependent on energy imports than most. Of all of the countries shown on Figures 14 and 15, Uzbekistan is the only one that did not lose population.

[8] Today, there seem to be many countries that are not far from collapse. Some of these countries are energy exporters; some are energy importers.

Many of us have read about the problems that Venezuela has been having recently. Ironically, Venezuela has the largest oil reserves in the world. Its problem is that at today’s prices, it cannot afford to develop those reserves. The Wikipedia article linked above is labeled 2014-2018 Venezuelan protests. Oil prices dropped to a level much lower than they had been in 2014. It should not be surprising that civil unrest and protests came at the same time.

Figure 16. Monthly average spot Brent oil prices, through December 2017, based on EIA data.

Other oil producers are struggling as well. Saudi Arabia has recently changed leaders, and it is in the process of trying to sell part of its oil company, Saudi Aramco, to investors. The new leader, Mohamed bin Salman, has been trying to get money from wealthy individuals within the country, using an approach that looks to outsiders like a shake-down. These things seem like very strange behaviors, suggesting that the country is experiencing serious financial difficulties. This is not surprising, given the low price of oil since 2014.

On the oil-importer side, Greece seems to frequently need support from the EU. The lower oil prices since 2014 have somewhat helped the country, but the basic shape of the energy consumption per capita chart makes it look like it is struggling to avoid collapse.

Figure 17. Greece energy per capita. Energy data from BP Statistical Review of World Energy, 2017; population estimates from UN 2017 Population data and Medium projections.

There are many other countries struggling with falling energy consumption per capita. Figure 18 shows a chart with four such countries.

Figure 18. Energy consumption per capita for Japan, UK, Italy, and Spain. Energy consumption from BP Statistical Review of World Energy; population from UN 2017 Population data and Medium Estimates.

In a sense, even though oil prices have been lower since 2014, prices haven’t been low enough to fix the economic problems these countries have been having.

China is in a different kind of situation that could also lead to its collapse. It built its economy on coal production and rapidly growing debt. Now its coal production is down, and it is difficult for imports and substitution of other fuels to completely compensate. If slowing growth in fuel consumption slows economic growth, debt will become much harder to repay. Major debt defaults could theoretically lead to collapse. If China were to collapse, it would seriously affect the rest of the world because of its extensive trading relationships.

[9] Leaders of countries with increasing wage disparity and unhappy electorates can be expected to make decisions that will move away from globalization. 

Unhappy workers are likely to elect at least some leaders who recognize that globalization is at least a small part of their problems. This is what has happened in the US, with the election of President Trump.

The hope, of course, is that even though the rest of the world is becoming poorer and poorer (essentially because of inadequate growth of cheap-to-produce energy supplies), somehow a particular economy can “wall itself off” from this problem. President Donald Trump is trying to remake trading arrangements, based on this view. The UK Brexit vote was in a sense similar. These are the kinds of actions that can be expected to scale back globalization.

Conclusion

Having enough cheap energy for the world’s population has been a problem for a very long time. When there is enough cheap-to-produce energy to go around, the obvious choice is to co-operate. Thus the trend toward globalization makes sense. When there is not enough cheap-to-produce energy to go around, the obvious choice is to try reduce the effects of globalization and immigration. This is the major reason why globalization can’t last.

We now have problems with both coal and oil. With the decline in China’s coal supplies, we are reaching the point where there are no longer enough cheap energy supplies to go around. At first glance, it looks like there is enough, or perhaps even a superabundance. The problem is that no price works. Producers around the world need higher oil prices, to be compensated for their total cost, including the cost of extraction, developing new fields, and the tax levels governments of exporting countries need. Consumers around the world are already having trouble trying to afford $70 per barrel oil. This is what leads to gluts.

We have been told that adding wind and solar to the electric grid can solve our problems, but this solution is simply absurd. If the world is to go forward as before, it somehow needs a new very large, very cheap supply of energy, to offset our problems with both coal and oil. This new energy supply should not be polluting, either.

At this point, it is hard to see any solution to the energy problems that we are facing. The best we can try to do is “kick the can” down the road a little farther. Perhaps “globalization light” is the way to go.

We live in interesting times!

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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2,343 Responses to Nine Reasons Why Globalization Can’t Be Permanent

  1. JH Wyoming says:

    http://www.bbc.com/news/business-42973529

    Potato plastics; better for the environment and yet another layer of complexity, not to mention we must ask how much crop acreage it would take to produce enough plastic from potatoes to replace FF based plastic?

    • We need more acreage left without human use. Doing this would operate in the wrong direction. Among other things, it would increase deforestations.

    • grayfox says:

      At one time, if you wanted a cup of coffee or a cold drink you got it served in a glass or ceramic container, which was washed and reused over and over, along with plates and utensils, until broken or stolen. We’re going back there. The single use, throwaway containers have been a disaster for the environment.

      • agreed

        but you also had to sit where it was served–pay the server, pay for washing, storing, breakages and so on

        just sayin

        • grayfox says:

          I had a part-time summer job in the early 70’s – a wild-haired teenaged dishwasher in a truck stop diner. $1.85/hr. Good times.

          • lol

            i had a job like that too—driving a coal delivery truck–112lbs sacks on your back—delivered to coal cellars etc

            but i wasnt a doomster then…coal was just burned in fireplaces

    • Artleads says:

      I’m *slowly* getting to internalize Gail’s point (if I even am getting it) that oil producers need higher prices.

      I think it can be done.

      Society needs to support the fossil fuel industry. In an organized way. Not just left up to market forces. Dense fossil fuels taken from existing mines, and compensated at a higher (boutique) rate. That arrangement obviates the complexity in making new stuff meant to take the place of fossil fuel products.

      So how do we get a critical mass reoriented to see that FFs, far from being the worst things, are the best things? You can do more with less environmental destruction, including less deforestation.

      What would seem to be needed is to spread FF use out laterally instead of continue the vertical way of current use. First world countries need to hit the pause button and all the rest need to use more FF…in a targeted way that is much better than now at planning. There need to be restrictions–keeping people better served where they are without having them sprawl out beyond.

      The real enemy is the current developer and planning community.

      • djerek says:

        >FF use out laterally instead of continue the vertical way of current use.

        This is not really a possible way to arrange a complex system.

        • Artleads says:

          I’m trying to understand better. Please explain more.

          “The article shares some examples of these hotspot maps, along with a startling conclusion about the lack of long range planning to address and mitigate the loss of biodiversity in most of the world’s sprawling places.”

          https://dirt.asla.org/2018/02/06/new-maps-show-how-urban-sprawl-threatens-the-worlds-remaining-biodiversity/

          So I don’t entirely buy this approach. My type of “sprawl” would require dirt roads and no tree removal, going to outlying built places that already exist and made to yield more economic activity just the way they are. My approach to economic activity would be tourist oriented.

        • xabier says:

          The industrial globalised system was not a rational creation, and cannot, therefore, be re-directed rationally. Control is an illusion, we can only manipulate certain elements (Wall St does this very well, ). but it not total control

          • Artleads says:

            I’m not concerned what “(t)he industrial globalised system” does, being well aware that I have no capacity to even understand much less change it. I’m only concerned about what *I* can do. I’m also convinced that the system is self organizing, which I don’t consider whatever actions 7.5 billion people take as individuals or groups to be irrelevant to the self organizing.

          • Artleads says:

            I’m also convinced that the system is self organizing, which doesn’t mean the actions of 7.5 billion people–as individuals or groups–don’t matter to the self organizing.

      • DJ says:

        Society can’t support fossile fuel use.

        For that, first society must admit there is no alternative, and by that admitting the end is near (4 months or 40 years doesn’t matter), and then most of what society does becomes pointless.

        • Artleads says:

          There are great scholars like Spengler who conclude that societies work in prescribed ways; they begin, they grow, and they die. Their mental reasoning is a whole universe ahead of mine. I can only say that the intuition I depend on, and that has proved more or less correct over the decades, doesn’t see an end to civilization, whether or not it uses fossil fuels.

          Beyond that, I’ve been clear for a very long time that our civilization is too top down, too centralized and complicated for the world to afford. .What is utterly frustrating is how *impossible* it is for western people to understand.that. You always get referred back to way things work now. People try to prescribe a future, or no future, based on the same way of thinking that caused the problem in the first place. That does not and cannot work.

          I take things as I see them, based on simple empirical experience, and not from theory about anything. What kind of society is it that can’t afford fossil fuels? It is a society formed on western systems of belief. I happen not to sharer those beliefs. My flag is that of aesthetics and order. Others’ flag is some sort of determinism or other based on how society works now, having nothing to do with aesthetics or order. It is as if we have no agency to think in any way other than the mainstream way of western civilization.

          From my POV, there is nothing but abundance, even now when everything is gone all to hell. Were I put in prison, and was in fair physical and emotional shape, and had nothing but a blank wall to look at, I’d find a great deal of abundance in that.

          Knowing my limitations, I listen to all the theories on why growth has to happen in such and such a way. But I don’t understand those theories. Their purveyors are probably too smart for my reckoning. So all I can see is that we can control what FF we use, where and how we use it. We can grow our population or reduce it. If you insist on order its more likely you will cope than if you don’t.

          I’m counting on human intelligence to distinguish the immediate need to use FF in relation to how the society works now, from all the different ways it could be applied…while depending on aesthetics to take it to some other stage that I can’t intellectually predict.

          I don’t depend on new buildings to solve anything. The rest of the world is convinced of the contrary. Places can be warmed with FF, but can sometimes be kept warm simply through thicker walls. There is no set way to survive. If you don’t cut down forests, your FF budget is one thing. If you continue to cut them down, your FF budget is something different. There are choices. Planning leads you in one direction, while not planning takes you in another. People have been indoctrinated with very bad ideas. Adopting good ideas requires effort and intelligence. Life is always throwing you crises that can be used to adopt better (more survivable) ideas or to let things go batsh-t crazy. I choose the former, even, as is often the case, I’m the only one rowing in that boat.

          .

          • DJ says:

            Yadda yadda intuition cardboard …

            How do you as a politician force people to stuff away a large % to pension after just having admitted there won’t be a pension?

            How can you allow houses being built and written off over 100 years if they will be worthless in less than 40?

            How can you allow a single immigrant if what we have is finite and every extra capitas resources has to be taken from someone?

            How do you rationalize building infrastructure if there is no future beyond 2020? 2040? 2060?

            Everything governments, EU, central banks and companies does becomes invalid without a future.

            • djerek says:

              “Everything governments, EU, central banks and companies does becomes invalid without a future.”

              Bingo. Their entire legitimacy relies upon a fictional future that cannot ever occur.

            • xabier says:

              I agree, it’s all insane, with no viable future, but the game of make-believe goes on. The pension industry in the UK wants to force self-employed people like me to pay more money into pensions – totally irrational, but they want the rent, today! Much more rational for me to spend the money on a case of wine today,,,,,

            • But if you pay in more now, it gives the industry more to spend on current pension payouts, so that they don’t default as quickly. They don’t want you to think about the rationality. They want you to assume that the world economy will grow for the next 30 years, 50 years, or whatever.

            • DJ says:

              As I see it world leaders only have two choices:
              1. Preach renewables and hope for a miracle.
              2. Claim we have fossil fuels/uranium for hundreds of years. Will not work so good when production starts to decline.

            • We need jobs. Jobs come with “churn.” Jobs come with growth–homes for new immigrants, for example. Without jobs, our whole system comes to a halt. Think about Japan. It is using more debt to try to fix its lack of population growth.

          • It’s not a matter of “affording” fossil fuels

            fossil fuels made themselves ”affordable” by providing the means for their own extraction—ie, the energy that drove the pumps that extracted the water from deep coalseams—coal itself was known about for 000s of years—there was just no use for it in any large scale industrial context. and no way of getting at it below 30ft or so

            Once coal was available in colossal quantities, then the prime use for it was making iron—once iron became ultra-cheap (in terms of effort to produce it) then our industrial society became possible—ships, cannon, wartoys of all kinds.

            That was the sequence of societal progress—you can date it exactly to 1709, when Darby first smelted iron ore using coke.

            this is why turbines and solar panels cannot be ultimately viable—unlike fossil fuels they do not produce sufficient energy to reproduce themselves

            • This is when Wrigley shows the uptick in coal consumption occurring. But you are right about wind turbines and solar panels not producing enough energy to reproduce themselves.

          • xabier says:

            Artleads: if you can find the March issue of The World of Interiors magazine , there’s a very interesting article about a farmhouse made and decorated by a Berber peasant woman. Heated by cows in the basement, and beautifully painted.

            • Artleads says:

              Tried to find it. These mags sure are expensive! From the sound of it, this would work with lots of land and cattle, where the business model created convergence between dairy products, fuel (dung) production, appropriate house design codes, (or whatever) to accommodate the latter, etc.

              I tend to be weak on decoration, so a model like this would be helpful to have around with a whole panoply of attractive treatments which go beyond my excessively basic/crude approach. We have to attract the tourists. 🙂

        • strictly speaking—it should be fossil fuel use can’t (ultimately) support society in the modern context

          ”society” arose only when humankind began to produce surplus energy, first in food, then in material goods etc
          ie—when we grew away from the basic animal level of 1:1 EROEI

          without fossil fuels, society falls back on natural energy sources, which basically are biological, —-plant life and other animals, where we can no longer move faster than the speed of hoof and sail

          • Actually, I think that it started when humans (and pre-humans) began to burn biomass to supplement the food we eat. That began over 1 million years ago. That is what gave humans superiority over other animals. The basic animal level is something like 10:1, because animals have to maintain their metabolisms besides having the extra energy to get their food. Humans have had a different equation, once they learned to supplement their food energy with burned biomass and later other energy forms (using trained dogs for hunting, for example). They had a surplus that allowed their population to overtake that of competitors, long before fossil fuels came along.

            • Yet another important trans-formative threshold event must have been the effects from long distance luxury goods trade at least since 5-20K BC, contributing to much faster social stratification aka the path towards ever insaner ‘rat race’ among humanoids (and vs. the resource base environment)..

            • The thing that people overlook is that industrial agriculture improves efficiency by at least two orders of magnitude (probably more), over trying to farm by poking the ground with a stick. In the US, one industrial farm feeds about 170 people. https://www.fb.org/newsroom/fast-facts

              Economies, even back in the hunter-gatherer era, had a “supplemental energy” component besides a food component. It was the fact that they had a supplemental energy component that allowed the growth of “complexity” (tools and clothing), and the changes in the human body that allowed for more intelligence and less teeth and digestive operations.

              All of these analyses that try to look at food energy separately are interesting, but there should be no expectation that even back in the hunter-gatherer era that the EROEI of food energy should “turn out” like those of animals. And of course, the target for animals has nothing at all to do with 1:1.

          • Artleads says:

            ++++++++++++

  2. Fast Eddy says:

    https://wolfstreet.com/2018/02/09/what-the-headlines-about-tesla-snap-and-twitter-earnings-should-have-said/

    I am beginning to understand what it must have been like for some who lived under communist rule but were not drinking the kool aid

    • djerek says:

      The thing is, under communist rule (at least after Stalin’s time) almost everyone realized that the party line was something between partial and total bullshit. In our society people actually genuinely believe in the propaganda.

      • xabier says:

        Very true, although I get the impression that belief in the Party held good for quite a time after Stalin, well into the 1970’s – after all, living standards just went on improving, and they were promised ‘Full Communism’ in 1980 (!).

        A bit like us being promised that globalism and neo-liberalism would lift all boats even if some corporations do rotten things. .

        The more intelligent seem to have realised on reaching adulthood that it was mostly nonsense, and then reacted by becoming despairingdrunks, corrupt manipulators or tools of the system, or dissidents. Even those who saw that the Party itself was corrupt persisted in believing in the ideal it represented.

        As neo-liberalism has failed, it’s interesting to note that we are being distracted by social issues – LGBT rights, etc, being pointed to as proof of the superiority and goodness of our system.

        • Fast Eddy says:

          Most Russians Prefer Return of Soviet Union and Socialism: Poll

          Over 50 percent of Russian citizens believe the collapse of the Soviet Union was bad and could have been avoided.

          The majority of Russians polled in a 2016 study said they would prefer living under the old Soviet Union and would like to see the socialist system and the Soviet state restored.

          The center also published that nostalgia for the USSR is at an all-time high since 2000.

          This could be tied to the fact that for the first time since the recession era of 2008-2009, Russians are spending more than half of their monthly income on food, according to a study by the Institute of Social Analysis and Forecasting Institute. And state subsidies are minimal.

          https://www.telesurtv.net/english/news/Poll-Most-Russians-Prefer-Return-of-Soviet-Union-and-Socialism-20160420-0051.html

    • Lastcall says:

      It has a definition…’Multiplicative Idiocy’..where ignorance is wider and deeper the greater the numbers involved.

      /Users/Augerup/Desktop/allsorts/Multiplicative Idiocy – The Oatmeal.pdf

  3. Baby Doomer says:

    Here Are The 180 Toys ‘R’ Us Stores That Are Closing

    http://fortune.com/2018/01/24/toys-r-us-closings/

    • Davidin100millionbilliontrillionzillionyears says:

      it’s just digits on computers…

      but yes, digits on computers can cause real world effects…

      by 2030, things could be getting shaky.

    • JH Wyoming says:

      Debt has to rise in step with needed growth levels. If growth slows, debt increases to artificially jack it up, so it’s not surprising debt is rising faster than wealth.

      • xabier says:

        Debt has become the one ‘resource’ that we can control and increase on demand.

        Sadly, t will be trumped by the per capita decline of real, viable resources.

        But for the time being, it keeps our engines running.

        • Good observation:

          Debt has become the one ‘resource’ that we can control and increase on demand.

          • HD UK says:

            Hi Gail talking about debt, can you comment on this graph? Interbank lending appears to have fallen sharply, closely followed by a fall in the stock market. Haven’t we been here before? https://fred.stlouisfed.org/series/IBLACBW027SBOG?utm_source=series_page&utm_medium=related_content&utm_term=other_formats&utm_campaign=other_format

            • You are right; that chart is concerning. There was a big drop in interbank lending during the 2008 crisis. Wikipedia has an article giving a couple of explanations for it, namely “increase in counter-party risk” and “liquidity hoarding.” This is an article looking back at detail data, after the fact.
              https://voxeu.org/article/what-happened-us-interbank-lending-financial-crisis

              Now the situation seems to be happening again. Are banks concerned about the solvency of other banks, and reflecting it this way? This is an article asking this question:
              https://www.wallstreetoasis.com/forums/interbank-lending-decrease-looking-for-an-explanation
              It points out the massive increase in required reserves of depository institutions in recent years. Could this be part of it?

              The gradual increase in required reserves above seem to be related to requirements under Basel III, which of course is intended to help solvency. I wonder if increased Basel requirements in 2017 are having an adverse impact on lending. This article (which isn’t about the current situation) points out:

              Since the advent of Basel III in 2010, banks have been under considerable pressure to improve their capital ratios. . .Looking back at our original example, when the bank replaces $10m of reserves with a $10m commercial loan asset, risk assets increase and the capital ratio reduces. Putting banks under pressure to increase their capital ratios is thus a significant disincentive to lend at risk. This might explain why banks seem to have substituted safe assets (Treasury and Agency securities as well as reserves) for risky ones.

              There seem to be new tweaks to the system that are now being added. They are internally being referred to as Basel IV. (They are really an update to Basel III.) According to a January 8, 2018, Deutsche Bank article:

              The proposals announced recently, referred to as ‘Basel IV’, include updates to the ways banks calculate their capital requirements with the aim of making outcomes more comparable across banks globally. . . One principal feature is the way banks calculate risk weighted assets or RWAs. The BCBS proposes that a calculation of a bank’s RWAs using internal models should not fall below 72.5% of the calculation using standardised models. This lower limit is known as an “output floor”. In addition, when computing RWAs based on internal models, input parameters must not fall below certain minimum levels, so called “input floors”.

              I wonder with these new rules (just announced now), banks are “running scared.” They don’t dare make more loans until they can figure out how this new rules apply to themselves. Basel III rules seem like a place to start looking–they don’t really prevent bank failure, even though they look like they would. At some point, they squeeze lending. Squeezing banks with new Basel rules, at the same time interest rates are going up and the Federal Reserve is selling QE securities does not sound like a good idea.

  4. Baby Doomer says:

    US economic growth is all an illusion

    Here’s what a Wall Street hedge fund mogul, Paul Singer, head of Elliott Management Corp., told his clients the other day:

    “Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” Singer wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”

    https://nypost.com/2014/11/06/us-economic-growth-is-all-an-illusion/

    • Energy^2 says:

      Many on this forum have already predicted an answer for Singer’s question “…how long a system can last doing what it is doing?”;

      “The system will last for as long as there is affordable, high density energy sources like Fossil Fuels, available for it to run its engine”.

      If one could magically supply the Roman Empire in its final century or two with dirt-cheap fertilizers and agri machinery, it would likely have lasted few more centuries, even without new territories being concurred for their wealth.

      Effortless, free-of-charge free-of-energy Energy matters! 🙂 🙂 🙂

      If one splits the world into two, one has energy the other energy-less, known ff reserves today will be enough to keep the energised-tier doing what it’s doing for another century. Another split at the end of the extra century adds another one….

      At the end, humans will always default to physical Slavery, not only because greed and evilness etched in their DNA but because physics, and this is what ff made us, including Singer, unable to see since Carnot’s steam engine back in 1824! 🙂 🙂 🙂

      Prediction is now made. Hurray!

  5. adonis says:

    01.06.18

  6. Baby Doomer says:

    US has no evidence of Syrian use of sarin gas, Mattis says
    https://apnews.com/bd533182b7f244a4b771c73a0b601ec5

    This means Trump committed a war crime against Syria!

    • Fast Eddy says:

      You see… this is why presidents NEVER initiate war crimes proceedings against their predecessors….

      Remember how Obama said – in response to the war crimes committed by the Bush admin — we must not look back we must move on….

      Then he committed his own set of war crimes — including overseeing the gassing of women and children in Homs…. then trying to pin that on Assad… remember how just before he did that he made the statement ‘using chemical weapons would go over the line – and the US would need to take action if Assad did that’ – then of course as any rationale person would do Assad ordered… a CW attack!!!

      Anyways I digress….

      POTUS never punishes previous POTUS…. because he knows that this sets a dangerous precedent….

      Because he KNOWS that the el ders are going to order him to commit war crimes at some point….

      So any MORE ons who are operating on a grade 3 level….

      If Obama were to have had Bush hung (a la Saddam) ….. for faking WMD and torturing thousands….

      Then Obama opens himself up for attacking Syria and Libya without legal justification …. gassing women and children…. and killing and maiming hundreds of thousands of innocent people….

      Think About It.

      • Baby Doomer says:

        John Kerry claimed doctors without borders was one of their witnesses to the gas attack blamed on Assad..And Doctors without borders put on their website that they had nothing to do with the attack and were applauded that their name was being used…

  7. The Second Coming says:

    The Coopers have been farming at Limestone Permaculture Farm for close to a decade. They grow organic produce, and raise sheep, goats, and chickens. They also keep bees and build with recycled materials, and The farm is powered by energy from wood, water, and the sun – pretty much every greenie’s dream come true. TreeHugger said co-owner Brett suggested they can feed 50 families from the one-acre farm.
    https://inhabitat.com/1-acre-permaculture-farm-in-australia-feeds-50-families/
    This family in Australia completely shifted the way they source their food – with remarkable success. When wife Nici suffered an illness, the Coopers decided to start growing their own produce at home in Newcastle, and now their one-acre Limestone Permaculture Farm supplies dozens of families with fresh food. They also offer permaculture education and internships, sharing what they’ve learned with the greater community.

    • grayfox says:

      Interesting homestead. Probably does provide high quality, nutritious food to the family and as many as 50 families, but not total food supply to either. The usual labor-saving trappings of a modern home and yard. Perfectly wonderful as long as BAU continues.

      • The Second Coming says:

        Folks, you can click the link and read the article and watch the video clip.
        Just provided it to help with those that think it is impossible to provide for themselves or families on an acre of property. Of course, if there was cooperation among the community households that would provide better output and security.
        A lot of the know how has been figured out, we here need to apply it.
        Easier said, than done.
        Found some great podcasts on this subject that folks may want to select to listen what interests them.

        https://realeyeshomestead.com/permaculture-realized-podcast/

        Of course, there are numerous reason to claim it can’t be done or won’t work past BAU.
        So, no need to post it…

        • The Second Coming says:

          The thing there may be some to survive the bottleneck of collapse. Doubt those with the attitude “its all over, and nothing will work” can be the next offshoot of humankind, if there are any.
          Surprising, listened to a podcast of a noteworthy author of a massive work on Forest Gardening

          • Dan says:

            The Coopers have never had sheer violence on their doorstep. I don’t mean some guy showing up on the porch wanting a cup of milk and punching Mr. Cooper in the face violence. Real violence, kill everybody, burn it all, rape it all, piss on corpses, take the shoes off dead bodies violence.

            The next “offshoot of humankind” will have some Donner party genes in their DNA and when they are sitting in the cave fighting over bones around the campfire they surely won’t speak of what bad old grandad and their crazy uncle had to do to get them there.

            • Fast Eddy says:

              +++++++++++++++

            • Fast Eddy says:

              One way to understand how humans will react to the end of more ….

              Notice what happens when governments attempt to increase the tax rate on the very wealthy….

              Or when they try to reduce pensions and other entitlements on the working class.

              They do not roll over and accept these things….. they get downright ornery….

              They will do just about anything to make sure their piece pie does not shrink.

              Now imagine what the reaction will be when there is almost no pie at all… when there are only crumbs in the from of permie doomsteads here and there….

          • Fast Eddy says:

            On the contrary – those who recognize the futility of the situation … will be some of the first to pick up guns… and kill/enslave the forest gardeners and permie doomies…. and eat their babies.

        • DJ says:

          Many say gold is of no use.
          No one would sell food for gold in a crisis.
          If you sell gold you will be robbed for the remaining gold.

          Still venezuelans are selling gold now.
          https://www.theguardian.com/world/2018/feb/12/venezuelan-middle-class-economic-crisis-pawn-shops

          • Fast Eddy says:

            BAU has not collapsed… not in Venezuela… not anywhere….

            So gold still has value…

            But when any of the countries that any of us live in blows out…. BAU will quickly go to pieces… and gold will be worthless…

            You won’t be able to trade a kg of gold … for a can of beans….

            • DJ says:

              But for now a ring, maybe 1/10 oz of gold, buys many, many kg of beans in Venezuela.

              And probably there are a few Venezuelans grateful for their gardens.

        • Fast Eddy says:

          Meanwhile in the real world….

          Starving mob beat cattle to death with rocks in desperate search for food in Venezuela as the country’s economic collapse continues

    • Fast Eddy says:

      Koombaya… Koombaya… standing ovation for Koombaya…. let me guess… they are also big fans of essential oils….

      Meanwhile…. did I mention that if we stopped using chemical sprays on crops… the F789ing world would collapse into total starvation within a week?

      And that Koombaya-ists with their little hobby farms (that use electric pumps for irrigation and washing machines and chain saws and all the other gifts of BAU)…. would take on the shimmer of a bucket of diamonds…

      And 7.8 billion greedy hungry vicious humans… would pour through the gates and over the fences… and eat the whole f789ing lot in less than 30 seconds

      Koombyf789ingya.

      Let’s take a look at this joke

      The Coopers offer farm tours, workshops, internships, and a permaculture design certificate at their New South Wales farm. They still have jobs and only work the farm part-time, but are hoping to transition to permaculture farming full-time. “We feel there has been an awakening across our beautiful country, self-reliance is on the rise again; urban and rural homesteading has people taking their food and energy supply back into their own hands,” the Coopers say on their website. “With each passing day we are transitioning to a more wholesome life, creating a more fulfilling and positive future, not just for ourselves but also for our family, friends, and community.”

      Yep …. almost everyone has their version of utopia….

      • Fast Eddy says:

        Let’s play a game — who can see evidence of BAU in that image … let’s make a list.

        I spy with my BAU eye:

        – plastic sheeting which I assume is their greenhouse
        – I see more plastic sheeting covering some raised beds
        – I see metal fences
        – I see houses made of milled timber and concrete and nails and other industrial materials
        – I see solar panels from a factory in China no doubt coupled with batteries which will require replacements from a factory in China
        – I see a number of vehicles from the overhead shot on the website
        – in the video I see some stinky hippy types and other assorted MORE ons — probably woofers providing free labour in return for a dose of Koombaya
        – I see corrugated metal around the fruit trees to keep animals from eating them
        – in the video I see plastic irrigation pipes which are no doubt connected to a water pump which is no doubt powered by a coal fired plant
        – I see tools that were made in BAU factories and shipped half way around the world

        This is truly inspiring stuff!

        Isn’t it amazing what BAU can do!

        Bravo… BRAVO!

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