Raising Interest Rates Is Like Starting a Fission Chain Reaction

Central bankers seem to think that adjusting interest rates is a nice little tool that they can easily handle. The problem is that higher interest rates affect the economy in many ways simultaneously. The lessons that seem to have been learned from past rate hikes may not be applicable today.

Furthermore, there can be quite a long time lag involved. Thus, by the time a central banker starts seeing an effect, it may be clear that the amount of the interest rate change is far too large.

A recent Zerohedge article seems to suggest that problems can arise with 10-year Treasury interest rates of less than 3%. We may be facing a period of declining acceptable interest rates.

Figure 1. Chart from The Scariest Chart in the Market.

Let’s look at a few of the issues involved:

[1] The standard reason for raising interest rates seems to be concern about inflationary impacts occurring as a result of rising food and energy prices. In practice, the impact of such an interest rate change can be quite severe and quite delayed. 

Figure 2 is an illustration from the Bureau of Labor Statistics website showing one of today’s concerns: rising energy costs. Food prices are not yet rising. Normally, however, if oil prices rise, the cost of producing food will also rise. This happens because modern agricultural methods and transportation to markets both require the use of petroleum products.

Figure 2. Figure created by the US Bureau of Labor Statistics showing percentage change in the Consumer Price Index between January 2017 and January 2018, for selected categories.

In fact, raising short-term interest rates seems to have been associated with trying to bring down rising food and energy costs, as early as the 1970s and early 1980s.

Figure 3. US three-month treasury interest rates. Chart prepared by St. Louis Federal Reserve.

The reason why an increase in short-term interest rates is helpful is because it reliably induces a recession. A person can see the close connection between short-term interest rate increases and recessions (gray bars) in Figure 3. Recessions in turn damp down food and energy prices.

The reason why this damping down effect occurs is because when there is a recession, many people are laid off from work. These people purchase fewer goods and services. With people out of work, “demand” for goods and services falls. (Demand is very closely related to “amount affordable.”) We might think of demand for goods and services as helping to maintain the “production” of new homes, new cars, upscale food products, toys, and even consulting services.

When demand falls, fewer goods of practically every type are made. This indirectly leads to less need for commodities of many types, including oil, natural gas, metals, and food. Commodities have very long production cycles, and only modest storage facilities. When lower demand for a commodity such as oil occurs, prices tend to adjust sharply downward, in order to signal the need for lower production. Figure 4 shows that interest rate spikes corresponded to the 1973-1974 oil price spike, the 1979 oil price spike, the 2004-2008 price run-up, and perhaps to other shorter oil price spikes.

Figure 4. Annual averages of Brent oil prices (in 2016$) and 3-month average interest rates, based on data similar to that shown in Figure 3 from “FRED.”

The annual data in Figure 4 loses the detail of month-to-month variations. Because of this, it makes the impact of the Great Recession look much less severe than it really was. Figure 5, using monthly data for recent periods, shows more clearly the severe fall in oil prices following the run-up in short-term interest rates in the 2004-2007 period.

Figure 5. Three-month US Treasury interest rates and Brent oil prices, both on a monthly average basis. Graph by FRED.

If a person looks at the indirect impacts on the economy as a whole, it becomes clear that the rise in short-term interest rates was one of the proximate causes of the Great Recession of 2008-2009. I talk about this in Oil Supply Limits and the Continuing Financial Crisis. The minutes of the June 2004 Federal Reserve Open Market Committee indicate that the committee decided to start raising interest rates at a rate of 0.25% per quarter for the purpose of stopping the rise in energy and food prices.

The huge financial problems that indirectly resulted did not occur until four years later, in 2008. It is likely that most economists are unaware of the connection between the decision to raise rates back in 2004 and the Great Recession several years later.

[2] Higher energy prices squeeze a person’s “spendable income.” Higher interest rates have the same effect.

Economist James Hamilton showed that ten out of eleven recent recessions were associated with oil price shocks. We would argue that if an economy is subject to higher interest rates in addition to higher oil prices, the economy is doubly likely to go into recession. Figure 6 shows an illustration of the situation.

Figure 6. Image by author showing recessionary impact of rising energy costs and interest costs.

A wage earner’s pay does not normally increase as energy costs rise, or as interest costs rise. Even if energy and interest costs are well buried (in higher food costs, or in the higher cost of goods transported across the country, or in higher student loan payments) the amount of income that a person has available to spend on discretionary goods and services falls if energy and interest costs rise. Having both energy and interest costs take a bigger share of available income at the same time is especially a problem.

[3] Reduced interest rates can be used to conceal the adverse impact of rising energy prices.

This is another version of what we saw in Figure 6. If interest rates can be reduced, they can offset most of the bad impacts of higher energy prices. For example, if oil prices are higher, it helps if auto loans and mortgage loans are lower in cost.

Figure 7. Image by author showing that artificially low interest rates can mostly offset the impact of rising energy costs.

Of course, central bankers don’t necessarily think this through. To what extent is today’s economy really dependent on very low interest rates?

[4] Falling interest rates have an almost magical impact on the economy. Rising interest rates reverse these magical impacts, and replace them with very negative impacts.

We saw in Figure 6 how falling interest rates could more or less conceal a rise in energy prices. The following are a few of the additional magical things that falling interest rates can do:

(a) Falling interest can raise asset prices of many kinds, including homes, stock prices, resale prices of bonds, and the price of land.

(b) Falling interest rates can raise commodity prices, making it possible to extract more fossil fuels and metals. Resources that previously did not look economic to extract, suddenly become economic to extract. This change occurs because with lower interest rates, more people can afford to purchase goods that use oil, such as cars and motorcycles. This tends to raise demand for oil products, and thus prices.

(c) Because higher-priced energy extraction becomes feasible at lower interest rates, more advanced technology, at higher prices, suddenly becomes feasible. Jobs open up in research areas that would not previously have made sense at lower energy prices.

(d) Falling interest rates can make the balance sheets of companies holding stocks and bonds as assets look better, because of their rising prices.

(e) Rising asset prices “feed back” into spendable income. People with homes that have risen in value can refinance, and use the proceeds to fix up their home (add an additional room or an updated kitchen, for example). Individual citizens and companies can sell shares of stock that have risen in value and use those proceeds to augment other income.

If interest rates rise rather than fall, the impacts can be expected to be extremely recessionary. The stock market may crash. Homes are likely to lose value because of a lack of buyers that can afford them. Energy resources that seemed to be available can suddenly seem not to be feasible because of low prices.

[5] The economy was able to reasonably tolerate the run-up in interest rates in the 1950 – 1980 period because the economy was growing very rapidly. 

A person can see the pattern of short-term interest rates in Figure 3, above. Long-term (10-year) interest rates follow a somewhat similar, but smoother, pattern (Figure 8).

Figure 8. Monthly average 10-year Treasury interest rates, through January 2018, in chart by FRED.

World per capita energy consumption was rising very rapidly in the 1950 to 1970 period. Even in the troubled 1970 to 1980 period, per capita energy consumption continued to rise, although not as quickly (Figure 9).

Figure 9. World per capita energy consumption, with 1950-1980 period of rapid growth highlighted. 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.

When world per capita energy consumption is growing this rapidly, jobs tend to be plentiful and wages tend to rise faster than inflation. According to Figure 10, US wages rose more rapidly than inflation in the 1950 to 1970 period, without wage disparity becoming a problem. Even in the 1970 to 1980 period, when high oil prices were a problem, US wages were able to rise quickly enough to keep up with inflation. Rising wage disparity did not become a problem until after 1980.

Figure 10. Chart comparing income gains by the top 10% to income gains by the bottom 90% by economist Emmanuel Saez. Amounts are inflation adjusted. Based on an analysis of IRS data, published in Forbes.

The share of US citizens in the workforce also rose during the period up to 1980, as an increasing percentage of women joined the workforce (Figure 11).

Figure 11. Employment as a percentage of the population, aged 25-54. Chart from FRED, using OECD amounts.

The thing that made the 1950-1970 period unusual was the growing availability of inexpensive fossil fuels. With fossil fuels, it was possible to add expressways where they had never been before. This allowed more interstate trade and improved the productivity of truck drivers. Labor saving devices allowed women to join the workforce. Farming continued to become more productive, with all of its labor saving equipment. Even as energy prices rose in the 1970 to 1980 period, citizens were able to continue to buy energy products because their wages were rising enough to keep up with inflation.

The growth in productivity was so great that wages plus government benefits (as measured by “Disposable Personal Income”) rose almost too fast. This added inflationary pressures to the economy. It is my opinion that these inflationary pressures contributed greatly to the oil price run-up in the 1973-1974 and the 1979-1981 periods.

Figure 12. Three-year average growth in Disposable Personal Income compared to inflation as measured by CPI-Urban. DPI from US Bureau of Economic Analysis; CPI from Bureau of Labor Statistics. Per Capita Disposable Personal Income is calculated by dividing DPI by US population, also from the BEA.

The run-up in oil prices also to some extent reflected a scarcity problem; note the two spikes in CPI-Urban in the 1970s in Figure 12, which are higher than would be expected, if the problem were simply a problem caused by the very high per capita Disposable Personal Income growth.

A major problem of the 1970s was a decline in US crude oil production for the area outside Alaska.

Figure 13. US crude oil production by type, based on EIA data.

This scarcity problem was significantly mitigated by the development of oil fields in Alaska, Mexico, and the North Sea in the next few years.

One of the things that substantially helped fix the oil problems of the 1970s was the fact that the US, as well as other developed countries, was able to make changes that substantially reduced their oil consumption. These changes included:

  • Moving to smaller, more fuel-efficient cars
  • Finding fuel substitutes when oil was being burned to create electricity
  • Changing oil-based home heating to approaches that used other fuels

Figure 14. Oil consumption by part of the world. Data from BP Statistical Report of World Energy 2017.

The combination of these approaches brought supply and demand more into balance. There was a small dip in consumption in the 1973-1975 period, and a larger dip in the 1979 to 1984 period. In comparison, the Great Recession of 2008-2009 hardly made a dent.

An indirect impact of these changes was the fact that the US economy needed to become more integrated into the world market. The US started importing smaller, more fuel-efficient vehicles from Japan, since Japan was already making these cars. Japan started making other kinds of goods as well to sell to the US and other markets. The US and other countries built nuclear electric generation to replace some of the oil-fired electricity generation. These plants were capital intensive and required growing debt.

Especially after 1981, changes started to take place in the US economy, reflecting its changed role in the world. US companies grew in size, as they began to add overseas markets to their local markets. Wage disparity became more of an issue, as high tech operations required more specialized high-wage workers and fewer of those with only a general education. Increased competition for jobs with workers from lower-wage countries also tended to hold down wages of those without advanced training.

[6] The situation is very different now, compared to the 1970s. It is doubtful that today’s economy could tolerate a spike in interest rates.

Today, we are not seeing rapid growth in per capita energy consumption, the way we were in the 1950 to 1980 period (Figure 9). In fact, world per capita energy consumption is almost flat (Figure 15), the way it was during the period of the Great Depression of the 1930s, and the way it was at the time of the collapse of the former Soviet Union in the 1990s (Figure 9).

Figure 15. 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.

There are other similarities to the 1930s period. Short-term interest rates are back to the low level they were in the 1930s (Figure 3). Growth in Disposable Personal Income per capita is persistently low (Figure 12). Wage disparity is at the high level experienced back in the 1930s (Figure 16).

Figure 16. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.

It is probably because of this renewed wage disparity that we are having difficulty with oil gluts. Oil gluts were also experienced in the 1930s. People with inadequate wages cannot afford goods made with oil products. These gluts occur because of affordability problems–inadequate wages for part of the workforce.

Figure 17. US ending stock of crude oil, excluding the strategic petroleum reserve. Figure produced by EIA. Figure by EIA.

Despite the spike in oil prices that central bankers are concerned about, oil prices are currently too low for producers. Oil exporting countries, such as Venezuela, Saudi Arabia, and Nigeria, depend on high oil prices so that they can collect high tax revenue. These countries are especially hurt by today’s low oil prices.

An increase in interest rates could very easily create a recession and drop oil prices even lower than they are today. Of course, that is precisely the intent of the central bankers. Our problem is that the economy cannot operate without energy products, particularly oil. The cost of producing oil is rising because of diminishing returns. It simply is not possible to drop its price as low as oil-importing countries would like it to be.

[7] Economists and central bankers think that they have good models of how the economy operates, but they really do not. 

The economy is a self-organized system that is able to create goods and services using energy products. In fact, it cannot continue its existence, without continued very substantial energy consumption. The economy gradually builds itself up, with new businesses, new consumers, newly invented products, and with transportation and financial systems. I envision the economy as looking something like a child’s toy that is built from many pieces. If one or more pieces are removed, the system could collapse.

Figure 18. Dome constructed using Leonardo Sticks

The economy has been built based on the laws of physics. It requires sufficient energy. It is in many ways like a hurricane that loses power if it is forced to go over land for any distance. A hurricane gets extra strength if it is able to pass over very warm water, which provides the energy it needs. Right now, the world economy is showing signs that it does not have sufficient energy; the standard of living of young people around the world is falling. The return on energy investment is far too low.

While it may be true that the US economy looks like it is at full employment, based on the number of people looking for jobs, the percentage of people aged 25-54 with jobs tells a different story (Figure 11). This percentage has fallen since 2000, at least partly because of globalization.

Unfortunately, the approach that economists are taking to model the economy cannot provide a good representation of how the economy really works. A self-organized system has many feedback loops that are difficult to understand and model. One change leads to other changes that are hard to see in advance. The problem with current models is that they are likely to produce misleading indications.

[8] Conclusion

We have heard the saying, “That which does not kill you makes you stronger.” The theory behind raising interest rates seems to follow a similar line of reasoning. If central bankers can raise interest rates, economies will be stronger.

The catch is that we are too close to the “edge” to be testing an increase in interest rates. Economies, below a certain “stall speed,” cannot repay debt with interest, and cannot hope to provide entrepreneurs with an adequate return on investment. Our low rate of growth is already close to this stall speed.

Given where we are today, it would be quite possible to accidentally “kill” the economy with rising interest rates. This would be especially the case if short-term and longer-term interest rates rise at the same time. A budget with large deficits could cause longer-term interest rates to rise. So could selling large amounts of QE debt.

Also, feedbacks don’t come quickly enough to make necessary course corrections. This makes raising interest rates way too much like playing with physics reactions we don’t fully understand. Interest rate increases (like fission reactions) start chain reactions. In an open environment such as the world economy, we have limited understanding of the outcome of these chain reactions.

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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2,489 Responses to Raising Interest Rates Is Like Starting a Fission Chain Reaction

  1. Sven Røgeberg says:

    «Don’t cry for the rentier class. For the past forty years (ever since Federal Reserve Chairman Paul Volcker manufactured a brutal recession in order to eliminate 1970s inflation) economic policymakers have concentrated on ensuring the profitability of the bond market more than just about anything else. They focused their attention on financial stability and low inflation rather than the traditional goal of promoting full employment.

    Consequently, the financial sector has quadrupled in size relative to the rest of the economy, the rich absorb most of the benefits of growth, and workers’ real wages have stagnated or even declined. Financialization has made wealthholders richer than ever, but it hasn’t done much for the rest of us. What is good for the bankers has not been good for the economy as a whole.»
    http://evonomics.com/three-cheers-for-financial-repression/

  2. jupiviv says:

    https://www.reuters.com/article/us-iea-oil/surge-in-global-oil-supply-may-overtake-demand-in-2018-iea-idUSKBN1FX0VQ

    “Today, having cut costs dramatically, U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA said.

    “In just three months to November, (U.S.) crude output increased by a colossal 846,000 bpd and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”

    Whether this production boom can be sustained till next year or the one after will determine whether us doomers are crazy pessimists or actually have something important to say.

    • name says:

      US oil output actually dropped in December (the last month we have data).

      • But total liquids oil production for the month of November 2017, for the world as a whole, set a new record, looking at EIA’s International Oil Production data. Average daily production is shown as 99,227,237. This is quite a bit higher than IEA is showing for November 2017.

    • doomphd says:

      my guess as to why shale oil and tar sands have become profitable is the economic game as been changed to allow previously expensive oil resources to come to market on the back of some previous portion of society that was economically supported, but is no longer so. perhaps that missing support is reflected in the growing number of working and non-working poor. it would be intersing to plot the number of homeless and unemployed versus the rise in oil shale and tar sands production.

    • Davidin100millionbilliontrillionzillionyears says:

      “Whether this production boom can be sustained till next year or the one after will determine whether us doomers are crazy pessimists or actually have something important to say.”

      why do you think this 2 or 3 year window is so important?

      do you think some Doomers are (borderline) crazy pessimists?

      even if true, don’t you think Doomers have important things to say “in the long run”?

      • Kurt says:

        Remember, Doomer spelled backwards is Remood.

        There have always been Doomers.

        • Davidin100millionbilliontrillionzillionyears says:

          all true!

          yet, there has now emerged in the world a special type of Doomer…

          the kind that knows about the inevitable decline of FF to nearly zero…

          whereas the meteor-zombie-apocalypse-Doomers are short of facts to support their doom…

          “we” know that the decline of FF energy sources guarantees a similar decline in prosperity…

          whether it’s 10 days or 10 decades, the decline is coming, where (almost) all humans will be living in poverty…

          what an exciting time to be alive!

        • Baby Doomer says:

          And remember a Doomer only has to be right once…

          • Davidin100millionbilliontrillionzillionyears says:

            yes…

            my memory is still fair to good…

            in the meantime, Doomers may very well have 12+ years to plan their celebration…

            if The Collapse happens before 2030, I will admit I was wrong…

            and I will sincerely apologize for misleading so many folks here at OFW…

            Celebrate good times, come on!

      • jupiviv says:

        “why do you think this 2 or 3 year window is so important?”

        Various estimates say conventional crude production in many countries will start declining ca 2020.

    • Davidin100millionbilliontrillionzillionyears says:

      so then China shouldn’t impose any tariffs of their own.

  3. Artleads says:

    On a FB page someone brings up need for planning and preservation to a man who is desperate and bitter by officials’ yers log stalling on allowing him to develop his undev eloped land.

    My reponse:

    Planning and preservation indeed! If you fail to plan you plan to fail. And we ARE tying to figure how to save colonial heritage, which is a basis for tourism and having a sense of identity. A lot of people are passionate about putting up new buildings, while I’ve spent my life opposing new buildings. All over Jamaica, they have erased history through demolition of the old. The cement to build them comes at the cost of environment and scenic value. I wonder if a better way to provide jobs can’rt be found.

    We must consider fossil fuel for all the modern conveniences–electricty, cooling, refrigeration, transportation–that come with new buildings.

    There is C crisis. The percentage of g house gases in the atmosphere is higher than in all of human history.

    We have a topsoil crisis, vegetation is being scraped away uncritically, wildlife has halved in the past 40 years, the oceans are almost dead.

    We have a population crisis. Population has doubled in the last 40 years alone, based on the the exponential growth factor. This crisis in growth troubles the heck out of me, even if it doesn’t disturb others at all. Half the Amazon Rainforest, the lungs of the planet, has gone since I was born.

    I don’t put individual rights over the ability of planetary life to exist into the future.

    If there was planning, people with land wouldn’t be left hanging. There would be transfer of development rights, like we sort of have in some places here. The land holder gets money from the sale of their development quota to a buyer in a “receiver” site that is allowed to build more densely than would be normal for that zoning. But while that is more thoughtful and fair, we’re still up against absolute limits of a finite world. So I don’t know what is a fair way out of the hell we’ve backed into. One suggestion might be to wrest deserted buildings away in some deal and compensate open-land owners by letting them restore it and use it profitably.

    It’s not that I have any power over planning, or the destruction of the planet. It’s not that my side is winning. It’s just that as long as I live, I will oppose new buildings with my puny ability to affect anything. I can give assurance that I’m not into win/lose outcomes. I believe you have to plan like crazy to avoid that and see that everyone comes out with something. You can turn lemons into lemonade. Every dark cloud has a silver lining. Open land can be used for camping and retreats..,.producing some income rather than none. All of these thorny issues require intense planning.

  4. Dennis L says:

    Maybe it is not all so black after all and maybe we don’t know everything.
    https://www.zerohedge.com/news/2018-03-11/what-f-thing-fast-moving-ufo-stuns-us-navy-pilots

    We have billionaires building rockets/planes etc. to go into space. Taking the opposite side of the trade from these guys might be worth a second thought.

  5. Fast Eddy says:

    See the interview https://www.bloomberg.com/news/articles/2018-03-11/china-at-risk-of-banking-crisis-in-bis-s-early-warning-signal

    Further evidence that the what normally would have taken down the global economy … will not be allowed to happen….

    The focus remains on the oil supply story.

    • Davidin100millionbilliontrillionzillionyears says:

      and Canada, not just China…

      “The focus remains on the oil supply…” of the core countries…

      you’re right… CBs know and will do anything to keep The Core well supplied with oil, and monetary digits.

    • Baby Doomer says:

      Declining conventional oil will be the final nail in the coffin. Because they can’t do anything about it..

      • Peak oilers have been saying this, but why not something else, such as declining coal usage, because of pollution issues and depletion? The peak oil view is a widely expressed view, not a fact.

        Rising average cost of energy production could be expected to push the system down as well. This could be caused by requirements that “renewable” energy be used, rather than fossil fuels.

        Rising population may also be the final straw, because it brings down the energy per capita ratio.

        Modeling of the real system is essentially impossible for a complex self-organized system. The temptation is to take the output of one partial model, and put it forth as the “final answer.”

  6. Fast Eddy says:

    Am I dreaming or did I just read this … or maybe my entire life is a dream…

    To remedy this — and this is pretty out there — Amazon recently patented what it calls an “airborne fulfillment center.” This basically amounts to a warehouse that doubles as a drone airport, one that would hang suspended from a blimp. Another issue Amazon has to deal with is where to put these drones when they’re not in use. For this one, the company has suggested using street lights, cell towers, and other high-lofted objects as potential “docking stations.” And how about getting the package to you? Does the drone land on your front porch? Maybe not — it might deliver the package via parachute.

    https://www.digitaltrends.com/cool-tech/amazon-prime-air-delivery-drones-history-progress/

    • Davidin100millionbilliontrillionzillionyears says:

      ” As for a timeline, it looks like we will have to wait until as late as 2020, if not later, for large-scale availability.”

      this is so very disappointing…

      I was looking forward to drone delivery this year…

      oh, well…

      gotta go…

      have to order my flight tickets to Mars…

      round trip, of course.

      • Curt Kurschus says:

        Has Elon Musk specified that the flights to Mars will be round trips? That may be counterproductive if he wants people to slave away in the mines there to supply the minerals he needs to build Tesla flying cars for people back on Earth.

        Anyway, he will probably be bankrupt, homeless, begging for bread and broth before he has the opportunity to fly to Mars.

    • doomphd says:

      they’re planning on low aviation fuel availability and high prices. blimps and drones are slow but high efficiency air transport. they assume they’ll still have customers to buy their products.

      • Fast Eddy says:

        Maybe the hovering Stuff Blimps… can also house factories… the factories churn out stuff using 3D printers… and immediately delivered by drones! Vertical integration

        BTW – weren’t we told by the MSM that everything would be 3D printed by now — and that China factories would be made obsolete?

        Funny how we keep getting fed this techno fantasies that are more absurd by the day… that NEVER happen….

        I wonder if there is a purpose to all of this….. well I don;t actually wonder… I know

    • Dennis L says:

      FE, I can go on line and specify that packages be left on my front porch now, using a drone for many of the things I get would seem reasonable. This might be in part a solution to HIrsch’s liquid fuel issue and as inside joke well understood here, it would be fossil fuel free. Or,maybe they are cheap enough to be charged with dedicated solar panels mounted on the top of telephone poles alongside the drone.Think of a catchy slogan, “We charge by day and deliver by night while you sleep, all with zero emissions. ” Bezos is a pretty smart cookie and the business landscape is becoming littered with firms that didn’t adapt to the environment he created.

      If you are bored intellectually, read about strange entanglement particles communicating across the universe instantaneously, weird stuff. LED’s operate on quantum mechanics engineering if I recall correctly. We do not solve tomorrows problems with today’s ideas or something similar.

      • Lastcall says:

        ‘Fortunately, solutions to these global challenges are all around us. Biomimicry is an approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time- tested patterns …’

        But, we are too ego-centric to believe we are a subset of nature, therefore there are no solutions for our predicament. History proves this point time and again.

        Therefore we continue to create problems, today, tomorrow and for how ever long our DNA remains viable. Dissipative entities indeed.

        • JH Wyoming says:

          biological systems: zero waste

          It does produce waste, such as dead animals, but has a complete system in which to process the waste so that other biological entities are nourished by its consumption. Recycling of plastic, glass and metal are examples of human made systems emulating nature.

          Human made systems: Simple

          What about a super computer? Or an EV? Or a TV? Wouldn’t those constitute complex systems?

          Human made systems:

          Engineered to maximize one goal

          Yes, but the spectrum of engineered items can be brought together to optimize a whole system. That’s what businesses do – they bring many different engineered items together to make their business model work.

          All of these categories can be argued pro and con, but my point is it’s not as black and white as that list would suggest.

          • Lastcall says:

            To take one example of yours, computers. They are realising only now what an incredible amount of complexity and computing power it will take to have self driving cars; a relatively simple human function. Don’t confuse the mechanics/construction of the device with its performance.
            We spend over a $100 mill a year in NZ trying to get a decent handle on the weather; heres to the butterfly effect in all its annoying COMPLEXITY!
            I stand by the chart…just saying, don’t be too ego-centric dude.

            • There are limits in directions that people don’t consider. How much traffic the Internet can handle, and its electricity consumption are things we don’t think about.

              Also the learning curve associated with increasingly complex programs. I tried briefly this week to use the version of Excel included with Office 365 (used on a Macintosh). I gave up and went back to Excel 2011 for Macintosh. With the Office 365 program, a person can do practically anything. The problem is that it now takes a large number of different steps (plus calls to tech support to figure out what these steps might be) to get to plain, ordinary-looking graphs.

        • That is a really nice chart. Too bad that there is no possible way that we can use only biological systems to support human life on earth. Unfortunately, the use of human-made systems is a major part of what we are. We started mining flints as hunter-gatherers. We started burning down trees to make wild game more accessible as hunter gatherers. We started cooking food, over one million years ago.

      • Fast Eddy says:

        The obstacles to drown delivery are at least as big as those that will ensure self driving cars never happen.

        The list is endless….

    • Greg Machala says:

      Dumber than yeast. We are drowning in our own pollution yet people still think growth is good.

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