Oil prices are now as high as they have been for three years. At this writing, Brent is $74.14 per barrel and West Texas Intermediate is at $68.76. These prices aren’t really very high, if a person looks at the situation from a longer term point of view than the last three years.
Figure 1. EIA chart of weekly average Brent oil prices, through April 13, 2018.
There is always a question of how high oil prices can go, and for how long.
In fact, we have many resources, of many kinds, whose prices of extraction keep rising higher. For example, obtaining fresh water for the world’s population keeps getting more and more expensive. Some parts of the world need to resort to desalination.
The world economy cannot withstand high prices for any of these resources for very long. Certainly, it cannot withstand high prices for a combination of necessary resources, because people need to cut back on other purchases, in order to afford the necessities whose prices are rising. This article is a guest post by another actuary, who goes by the pseudonym Shunyata. He explains in a different way why high resource prices cannot last, whether they are for oil, or natural gas, water, or even fresh air.
Dear Readers:
As you are no doubt aware, Gail has created a fantastic portfolio of blogs that explore our energy/financial/economic system, blogs that reveal many hidden or misunderstood aspects of our situation. I have found these discussions invaluable and share them wherever I am able; to solve our societal problems we need to develop a societal understanding of these issues.
The problem I face is helping other people, like my grandparents, get a foothold in this complex discussion. They can understand why oil might “run out,” but trying to understand the problematic financial situation is more difficult. I like metaphors to explain things – metaphors that allow my grandparents to understand the major elements of the situation. The metaphors I am using are to the oil industry. My grandparents have been following the oil situation for a long time. If a person has been following the oil industry, they may be helpful.
Below you will see how I explain Gail’s detailed writing to my grandparents in three short chapters. I hope you find this outline helpful in your own discussions, and I welcome your suggestions for improving the transparency of the story.
PRODUCTION COST
What if air had to be produced from wells and purchased by businesses and families to conduct their normal affairs?
If air is readily available in the ground, we can always extract what we need, making it easy for businesses and families to operate, or even to grow.
What happens if air becomes harder to extract? Perhaps the easy air is gone and we are increasingly looking at extracting deep water air, or air dissolved in shale stone.
Technology may be able to help; sometimes it can help a lot. But there is an immediate production cost shock in funding the development of that technology. This cost shock occurs whether we are talking about conventional air or solar-based renewable air.
There is a lower but permanent increase in production cost, both to fund the complexity of the technology (a deep water air rig just costs more to operate than a land rig) and to pay off any debt needed to build the new technological infrastructure. This cost increase occurs whether we are talking about conventional air or solar-based renewable air.
This cost increase is a permanent drag on the economy. Wages don’t rise to compensate for the higher cost of air. There is no substitute for air, and air simply isn’t available in the quantities the economy previously enjoyed – unless we stop doing things that we were doing before and redirect those resources toward producing the same amount of air we used to have.
DEBT
In a modern financial system, we use “money” as a proxy for economic activity. In a barter system, I can obtain goods and services by trading my work product for your work product. But carting around packages of finished goods is unwieldy, so we use “money” as a medium of exchange. If you and I are both willing to trade our finished goods for a symbolic piece of paper, then I can trade my goods and services for paper, bring that paper to you and trade it for your goods and services. This medium of exchange makes it easy to trade complex goods and services over long distances, or at different points in time.
How would lending work in this barter system? Someone could produce many finished goods, trade it for symbolic paper, but not immediately trade it for other goods, and “save” their paper for later. Debt is a process of borrowing someone else’s saved symbolic paper to purchase goods and services for themselves. This is helpful when I need to build a deep water air rig but don’t have the money myself. I can borrow someone else’s money and pay them back later, after my rig is bringing in revenue.
This simple borrowing process only works if some people aren’t consuming goods and services in the economy, and are instead allowing others to “borrow” their ability to consume. What if there isn’t enough saving to make large borrowing possible? What if I want to maximize economic activity and don’t want people to defer their own individual consumption?
If we want more funding than barter can provide, this can be done in more than one way:
[a] Money can be loaned into existence. This happens every day, when people decide to buy a car, and take out a loan for that purpose. Or people buy something with a credit card, and decide to carry a balance, rather than pay it off immediately. Nearly all loans today represent new money to the system.
[b] Governments can also obtain money by issuing bonds. Or they can simply issue money certificates without having any backing for the money.
Let’s call the process of adding funding to the economy, over and above what would be available by debt, “money printing.” In each of these cases, symbolic paper is added to the economy without previous work having been performed.
[1] Money printing can be helpful when it represents an investment in growing the overall economy. Investment in deep water air rigs will make air more available in the economy and will spur an expansion of economic activity. In this case the goods and services in the economy eventually “grow into” the amount of money that has been printed and the extra economic activity in the future is used to repay the debt.
[2] Money printing is unhelpful when it simply becomes someone’s savings (i.e. growing wealth inequality). The economy is still obligated to repay the debt (usually through taxes) and economic activity becomes sequestered in wealthy people’s savings, without ever creating demand for someone else’s product.
[3] Money printing is also unhelpful when it is used to fund more air consumption without any investment in air production. For example, a family that borrows money for an air vacation (or for basic daily air subsistence):
- Now has a debt–repayment of which will reduce future air consumption
- Has created no permanent demand for air and does not require permanently expanding air production for the economy–so their vacation air demand tends to increase the cost of air for all other consumers.
PRICE
What happens when we put these two chapters together? When air becomes more difficult to extract:
[1] Production cost goes up permanently.
[2] Economic activity is redirected to maintain air production, and overall economic activity is reduced. With reduced overall economic activity there is a reduced need for air, resulting in excess air supply and a temporary reduction in air price.
[3] If air consumers spend their available money on air and defer other purchases, there is an additional reduction in economic activity, additional excess supply and further reduction in air price.
[4] Reduced price means less revenue to air producers.
[5] Owners of idled air rigs still have debts to pay (money borrowed to build air rig in the first place). They are willing to undercut the market price of air just to get revenue to pay their debts, even if they aren’t making a profit otherwise. This drives the price even lower.
So air prices fall, even though the cost of air production continues to rise.
This begins to look like an economic crisis. A natural response of governments is to print money so that consumers have more money available to purchase air, without deferring other purchases.
This can work for a while, but ultimately fails when there is no overall growth in economic activity to match the increased money supply. The debt comes due (usually in the form of higher taxes). There isn’t enough productive activity in the economy to easily pay back the debt. As a result, consumers must defer even more of their consumption to repay debt, ultimately resulting in even lower air prices.
Eventually either the debt market or air market runs the risk of failing entirely.
[1] When economic activity falters, people can no longer repay their debts (or earn enough income to pay taxes toward government debt). Either of these outcomes is bad both for borrowers and lenders.
[2] If economic activity falters, market forces push air producers to a zero-profit price point. At this point, producers have enough money to keep the rigs running and cover debt payments, but no more. Ultimately this cannibalizes the ability of air producers to maintain existing air supplies. They are unable to purchase replacement machines, if any one breaks. They cannot make new investments.
Clearly, this situation cannot continue. High prices cannot be passed on to consumers, or they will be unable to buy other necessities of life. At the same time, if the producers do not get high enough prices, they cannot continue to provide the air or any other commodity that is needed.
not to be outdone by Musk and Bezos, it’s Branson’s turn!
https://www.cnbc.com/2018/04/29/richard-branson-wants-hyperloop-up-and-running-within-3-years.html
“I think if we can build Virgin Hyperloops in a number of different countries, connecting countries, that will bring the world much closer.”
“When you’re talking about the pods going at 6, 7, 800 miles an hour, both with people and cargo, that’s tremendously exciting,” he said, describing the ability it will allow people to avoid traffic jams by “jumping into a pod.”
and:
“About 10 days ago, [we had] a very successful flight of our spaceship — in the next few weeks hopefully another one,” Branson said, referring to the early April launch of Virgin Galactic’s first rocket-powered, supersonic flight of its new spacecraft, Unity. The test flight was a crucial milestone before the company moves forward with its aim of sending tourists to space.
“We’re on the cusp of fulfilling our dream which has taken 30 years,” Branson said. “We’ve had 800 engineers working for 13 years on this project, but we hope in the not too distant future to be starting to send people into space.”
bravo!
“My children and grandchildren are going to want the same things as I’m going to want — they’re going to want to get to places quicker.”
yes, Richard, but first, let’s hope your grandchildren always have enough basic daily necessities…
I doubt it, but who am I compared to the genius of you?
Markets Today Have Much in Common With 2007
https://www.bloomberg.com/view/articles/2018-04-26/markets-today-have-much-in-common-with-2007
Well of course markets today have much in common with those of 2007 because none of the fundamentals have changed. We are still trying to create infinite growth in a finite world.
Ding Ding Ding
Buy this man a chicken dinner
Put it on my american express card
This is a great article. People do not realize that asset prices reflect the low interest rates. This is true for stocks, bonds, prices of homes, prices of land for agriculture, and the value of commercial real estate. As interest rates drop, asset prices tend to inflate. Raising interest rates brings asset prices down. The debt bubble holding the prices up is likely to collapse suddenly.
America Is Going Even Deeper Into Debt
https://www.bloomberg.com/view/articles/2018-04-23/america-is-going-even-deeper-into-debt
1. But but but…… we just owe it to ourselves.
2. But but but…….we have this thing called a printing press.
3. But but but…….US Treasuries are the gold standard of Govt Securities.
As explained already numerous times ago, this has not been about America per se for several past decades already. The international money and wealth is just superstructure positioned way above single countries, be it former hegemonic power or not..
There are basically two major near-mid term outcomes in terms of sequencing of events:
– Jettisoning out some of the most decrepit western economies first like US, UK, FR, IT ..
(not likely – disorderly maneuver for producers like DE/China/..)
or
– Continue increasing the debt levels to hundreds and low thousands %, keeping the consumer demand up both in old western and new Asian regions as long as possible, using whatever insane trick, and when it all smashes into wall, push global debt reset, and attempt re-start from there, let see what happens etc.
Evidently, both approaches won’t work or solve the issues long term, hey but given human nature we can realistically bet at the odds going favorably for the second option..
Government Intervention is triggered by a Keynesian belief that aggregate demand can be increased by lower interest rates and by increasing government deficits thereby somehow spurring economic growth. Debt grows faster than income growth and eventually has to be restructured, i.e., everyone loses in the end. Since 2007, global debt has grown by US$57 trillion and it’s had disastrous results. Greece, Detroit, Puerto Richo, Venezuela are just the beginning of this trend. Soon, it will be followed by larger countries like China and United States.
https://imgur.com/a/QHebNeI
Wake me up when we reach %%% triple,quintupling phase of debt growth over span of a decade or so.. The debt signer is just warming up..
…zzz..
Rising debt can “pull the economy forward” when it leads to a sufficient supply of cheap-to-extract energy products. (The quantity must be rising faster than population growth.) At some point, this stops working. We seem to be at that point now.
This is the crux of the matter. We seem to be unable to increase the production of goods and services without disrupting the energy sector, nominal monetary issues aside. One of our strategies has been to increase productivity and engage in labor arbitrage (globalizing production and immigration). Policies designed to increase the demand for labor could help perhaps, but inflation and oil price spikes are likely.
Money-financing can entitle people to consume. But if the goods and services aren’t available we will see these price spikes and crashes.
Every one cent increase in gasoline prices, reduces US household purchasing power by $1 billion.
https://media0.giphy.com/media/3og0IMJcSI8p6hYQXS/giphy.gif
Every one cent decrease in gasoline prices increases US household purchasing power by $1 billion.
Saudi Arabia and Venezuela get the reverse effect–more need to borrow, just to stay even.
Globalism lifted me out of poverty — but now, it’s clear why everyone is so angry
http://www.businessinsider.com/excerpt-ian-bremmer-us-vs-them-book-2018-4
If you think globalism is good, then you must think unions are bad. Back in the day, unions formed because corporations wouldn’t pay a living wage. This provided solidarity for the workers, who could strike when the company screwed them too hard. Now, with multinational corporations, if their workers strike in the USA, they can move to Mexico. If their workers in Mexico strike, they love to India. Etc, etc.
Globalization only works economically if the workers have the same multi-national mobility as the corporations. But workers don’t.Globalization might be lifting some people out of poverty, but it will eventually be a race to the bottom. Corporations love it
Solar panels on farmland? In Central Washington, that stirs a fight.
https://www.seattletimes.com/seattle-news/environment/solar-panels-on-farmland-in-central-washington-that-stirs-a-fight/
ICE wrongfully detained nearly 1,500 Americans: report
https://nypost.com/2018/04/27/ice-wrongfully-detained-nearly-1500-americans-report/
I wonder if these ICE raids are just to lay the ground work, for eventually detaining American citizens, for whatever reasons they want.
In Indianapolis, they are smoking bug spray and turning into zombies…
https://www.indystar.com/videos/news/2018/03/17/when-they-smoke-they-almost-become-zombie-like/32970225
https://imgur.com/a/zYBjvg4
The skull and crossbones on that Firefighter’s hat is kinda in your face.
“It’s very inexpensive.”
more downward pressure on products and resources…
That’s consoling: bug spray must be pretty cheap – one can always get a fix to dull the pain.
People took to drugs in a big way in Argentina after their Crisis: the effects of this showed up a few years later in a proliferation of drugged-up conscienceless young thugs and murderers.
This time… hungry drugged murderers… rapists…
Doomie Preppers… think of your wives… your daughters… you need a Plan B…. an exit from hell.
The End of the Democratic Century
Autocracy’s Global Ascendance
At the height of World War II, Henry Luce, the founder of Time magazine, argued that the United States had amassed such wealth and power that the twentieth century would come to be known simply as “the American Century.” His prediction proved prescient: despite being challenged for supremacy by Nazi Germany and, later, the Soviet Union, the United States prevailed against its adversaries. By the turn of the millennium, its position as the most powerful and influential state in the world appeared unimpeachable. As a result, the twentieth century was marked by the dominance not just of a particular country but also of the political system it helped spread: liberal democracy.
As democracy flourished across the world, it was tempting to ascribe its dominance to its inherent appeal. If citizens in India, Italy, or Venezuela seemed loyal to their political system, it must have been because they had developed a deep commitment to both individual rights and collective self-determination. And if Poles and Filipinos began to make the transition from dictatorship to democracy, it must have been because they, too, shared in the universal human desire for liberal democracy.
But the events of the second half of the twentieth century can also be interpreted in a very different way. Citizens across the world were attracted to liberal democracy not simply because of its norms and values but also because it offered the most salient model of economic and geopolitical success. Civic ideals may have played their part in converting the citizens of formerly authoritarian regimes into convinced democrats, but the astounding economic growth of western Europe in the 1950s and 1960s, the victory of democratic countries in the Cold War, and the defeat or collapse of democracy’s most powerful autocratic rivals were just as important.
Taking the material foundations of democratic hegemony seriously casts the story of democracy’s greatest successes in a different light, and it also changes how one thinks about its current crisis. As liberal democracies have become worse at improving their citizens’ living standards, populist movements that disavow liberalism are emerging from Brussels to Brasília and from Warsaw to Washington. A striking number of citizens have started to ascribe less importance to living in a democracy: whereas two-thirds of Americans above the age of 65 say it is absolutely important to them to live in a democracy, for example, less than one-third of those below the age of 35 say the same thing. A growing minority is even open to authoritarian alternatives: from 1995 to 2017, the share of French, Germans, and Italians who favored military rule more than tripled.
As recent elections around the world indicate, these opinions aren’t just abstract preferences; they reflect a deep groundswell of antiestablishment sentiment that can be easily mobilized by extremist political parties and candidates. As a result, authoritarian populists who disrespect some of the most basic rules and norms of the democratic system have made rapid advances across western Europe and North America over the past two decades. Meanwhile, authoritarian strongmen are rolling back democratic advances across much of Asia and eastern Europe. Could the changing balance of economic and military power in the world help explain these unforeseen developments?
That question is all the more pressing today, as the long-standing dominance of a set of consolidated democracies with developed economies and a common alliance structure is coming to an end. Ever since the last decade of the nineteenth century, the democracies that formed the West’s Cold War alliance against the Soviet Union—in North America, western Europe, Australasia, and postwar Japan—have commanded a majority of the world’s income. In the late nineteenth century, established democracies such as the United Kingdom and the United States made up the bulk of global GDP. In the second half of the twentieth century, as the geographic span of both democratic rule and the alliance structure headed by the United States expanded to include Japan and Germany, the power of this liberal democratic alliance became even more crushing. But now, for the first time in over a hundred years, its share of global GDP has fallen below half. According to forecasts by the International Monetary Fund, it will slump to a third within the next decade.
At the same time that the dominance of democracies has faded, the share of economic output coming from authoritarian states has grown rapidly. In 1990, countries rated “not free” by Freedom House (the lowest category, which excludes “partially free” countries such as Singapore) accounted for just 12 percent of global income. Now, they are responsible for 33 percent, matching the level they achieved in the early 1930s, during the rise of fascism in Europe, and surpassing the heights they reached in the Cold War when Soviet power was at its apex.
As a result, the world is now approaching a striking milestone: within the next five years, the share of global income held by countries considered “not free”—such as China, Russia, and Saudi Arabia—will surpass the share held by Western liberal democracies. In the span of a quarter century, liberal democracies have gone from a position of unprecedented economic strength to a position of unprecedented economic weakness.
It is looking less and less likely that the countries in North America and western Europe that made up the traditional heartland of liberal democracy can regain their erstwhile supremacy, with their democratic systems embattled at home and their share of the world economy continuing to shrink. So the future promises two realistic scenarios: either some of the most powerful autocratic countries in the world will transition to liberal democracy, or the period of democratic dominance that was expected to last forever will prove no more than an interlude before a new era of struggle between mutually hostile political systems.
THE WAGES OF WEALTH
Of all the ways in which economic prosperity buys a country power and influence, perhaps the most important is that it creates stability at home. As the political scientists Adam Przeworski and Fernando Limongi have shown, poor democracies often collapse. It is only rich democracies—those with a GDP per capita above $14,000 in today’s terms, according to their findings—that are reliably secure. Since the formation of the postwar alliance binding the United States to its allies in western Europe, no affluent member has experienced a breakdown of democratic rule.
Beyond keeping democracies stable, economic might also endows them with a number of tools to influence the development of other countries. Chief among these is cultural clout. During the apogee of Western liberal democracy, the United States—and, to a lesser extent, western Europe—was home to the most famous writers and musicians, the most watched television shows and movies, the most advanced industries, and the most prestigious universities. In the minds of many young people coming of age in Africa or Asia in the 1990s, all these things seemed to be of a piece: the desire to share in the unfathomable wealth of the West was also a desire to adopt its lifestyle, and the desire to adopt its lifestyle seemed to require emulating its political system.
This combination of economic power and cultural prestige facilitated a great degree of political influence. When the American soap opera Dallas began airing in the Soviet Union in the 1980s, for example, Soviet citizens naturally contrasted the impossible wealth of suburban America with their own material deprivation and wondered why their economic system had fallen so far behind. “We were directly or indirectly responsible for the fall of the [Soviet] empire,” Larry Hagman, one of its leading stars, boasted years later. It was, he claimed, not Soviet citizens’ idealism but rather “good old-fashioned greed” that “got them to question their authority.”
The economic prowess of Western democracies could also take on a harder edge. They could influence political events in other countries by promising to include them in the global economic system or threatening to exclude them from it. In the 1990s and the first decade of this century, the prospect of membership in organizations from the European Union to the World Trade Organization provided powerful incentives for democratic reforms in eastern Europe, Turkey, and parts of Asia, including Thailand and South Korea. Meanwhile, Western sanctions that prevented countries from participating in the global economy may have helped contain Iraqi President Saddam Hussein in the years following the Gulf War, and they were arguably instrumental in bringing about the fall of Serbian President Slobodan Milosevic after the war in Kosovo.
Finally, economic power could easily be converted into military might. This, too, did much to enhance the global standing of liberal democracies. It ensured that other countries could not topple democratic regimes by force and raised the domestic legitimacy of such regimes by making military humiliation a rarity. At the same time, it encouraged the spread of democracy though diplomatic leverage and the presence of boots on the ground. Countries that were physically located between a major democratic power and a major authoritarian power, such as Poland and Ukraine, were deeply influenced by the greater material and military benefits offered by an alliance with the West. Former colonies emulated the political systems of their erstwhile rulers when they gained independence, leaving parliamentary democracies from the islands of the Caribbean to the highlands of East Africa. And in at least two major cases—Germany and Japan—Western military occupation paved the way for the introduction of a model democratic constitution.
In short, it is impossible to understand the story of the democratic century without taking seriously the role that economic power played in spreading the ideals of liberal democracy around the world. This also means that it is impossible to make informed predictions about the future of liberal democracy without reflecting on the effects that the decline in the relative economic clout of the democratic alliance might have in the years and decades to come.
THE DANGERS OF DECLINE
At first glance, the conclusion that affluence breeds stability seems to bode well for the future of North America and western Europe, where the institutions of liberal democracy have traditionally been most firmly established. After all, even if their relative power declines, the absolute level of wealth in Canada or France is very unlikely to fall below the threshold at which democracies tend to fail. But absolute levels of wealth may have been just one of many economic features that kept Western democracies stable after World War II. Indeed, the stable democracies of that period also shared three other economic attributes that can plausibly help explain their past success: relative equality, rapidly growing incomes for most citizens, and the fact that authoritarian rivals to democracy were much less wealthy.
All these factors have begun to erode in recent years. Consider what has happened in the United States. In the 1970s, the top one percent of income earners commanded eight percent of pretax income; now, they command over 20 percent. For much of the twentieth century, inflation-adjusted wages roughly doubled from generation to generation; for the past 30 years, they have essentially remained flat. And throughout the Cold War, the U.S. economy, as measured by GDP based on purchasing power parity, remained two to three times as large as the Soviet economy; today, it is one-sixth smaller than China’s.
Of the 15 countries in the world with the highest per capita incomes, almost two-thirds are nondemocracies.
The ability of autocratic regimes to compete with the economic performance of liberal democracies is a particularly important and novel development. At the height of its influence, communism managed to rival the ideological appeal of liberal democracy across large parts of the developing world. But even then, it offered a weak economic alternative to capitalism. Indeed, the share of global income produced by the Soviet Union and its satellite states peaked at 13 percent in the mid-1950s. Over the following decades, it declined steadily, falling to ten percent by 1989. Communist countries also could not provide their citizens with a lifestyle that would rival the comfort of the capitalist West. From 1950 to 1989, per capita income in the Soviet Union fell from two-thirds to less than half of the western European level. As the German writer Hans Magnus Enzensberger put it, playing off the title of an essay by Lenin, Soviet socialism proved to be “the highest stage of underdevelopment.”
New forms of authoritarian capitalism may eventually suffer similar types of economic stagnation. So far, however, the form of authoritarian capitalism that has emerged in Arab Gulf states and East Asia—combining a strong state with relatively free markets and reasonably secure property rights—is having a good run. Of the 15 countries in the world with the highest per capita incomes, almost two-thirds are nondemocracies. Even comparatively unsuccessful authoritarian states, such as Iran, Kazakhstan, and Russia, can boast per capita incomes above $20,000. China, whose per capita income was vastly lower as recently as two decades ago, is rapidly starting to catch up. Although average incomes in its rural hinterlands remain low, the country has proved that it can offer a higher level of wealth in its more urban areas: the coastal region of China now comprises some 420 million people, with an average income of $23,000 and growing. In other words, hundreds of millions of people can now be said to live under conditions of “authoritarian modernity.” In the eyes of their less affluent imitators around the world, their remarkable prosperity serves as a testament to the fact that the road to prosperity no longer needs to run through liberal democracy.
AUTHORITARIAN SOFT POWER
One of the results of this transformation has been a much greater degree of ideological self-confidence among autocratic regimes—and, along with it, a willingness to meddle in Western democracies. Russia’s attempts to influence the 2016 U.S. presidential election have understandably drawn the most attention over the past two years. But the country has long had an even greater influence on politics across western Europe. In Italy and France, for example, Russia has helped finance extremist parties on both sides of the political divide for decades. In other European countries, Russia has enjoyed even more remarkable success in recruiting retired political leaders to lobby on its behalf, including former German Chancellor Gerhard Schröder and former Austrian Chancellor Alfred Gusenbauer.
The big question now is whether Russia will remain alone in its attempt to influence the politics of liberal democracies. The answer is almost certainly no: its campaigns have proved that outside meddling by authoritarian powers in deeply divided democracies is relatively easy and strikingly effective, making it very tempting for Russia’s authoritarian peers to follow suit. Indeed, China is already stepping up ideological pressure on its overseas residents and establishing influential Confucius Institutes in major centers of learning. And over the past two years, Saudi Arabia has dramatically upped its payments to registered U.S. lobbyists, increasing the number of registered foreign agents working on its behalf from 25 to 145.
If the changing balance of economic and technological power between Western democracies and authoritarian countries makes the former more susceptible to outside interference, it also makes it easier for the latter to spread their values. Indeed, the rise of authoritarian soft power is already apparent across a variety of domains, including academia, popular culture, foreign investment, and development aid. Until a few years ago, for example, all of the world’s leading universities were situated in liberal democracies, but authoritarian countries are starting to close the gap. According to the latest Times Higher Education survey, 16 of the world’s top 250 institutions can be found in nondemocracies, including China, Russia, Saudi Arabia, and Singapore.
Perhaps the most important form of authoritarian soft power, however, may be the growing ability of dictatorial regimes to soften the hold that democracies once enjoyed over the reporting and dissemination of news. Whereas the Soviet mouthpiece Pravda could never have dreamed of attracting a mass readership in the United States, the clips produced today by state-funded news channels, including Qatar’s Al Jazeera, China’s CCTV, and Russia’s RT, regularly find millions of American viewers. The result is the end of the West’s monopoly over media narratives, as well as an end to its ability to maintain a civic space untainted by foreign governments.
THE BEGINNING OF THE END?
During the long period of democratic stability, the United States was the dominant superpower, both culturally and economically. Authoritarian competitors such as the Soviet Union quickly stagnated economically and became discredited ideologically. As a result, democracy seemed to promise not only a greater degree of individual freedom and collective self-determination but also the more prosaic prospect of a vastly wealthier life. As long as these background conditions held, there seemed to be good reason to assume that democracy would continue to be safe in its traditional strongholds. There were even plausible grounds to hope that an ever-growing number of autocratic countries would join the democratic column.
But the era in which Western liberal democracies were the world’s top cultural and economic powers may now be drawing to a close. At the same time that liberal democracies are showing strong signs of institutional decay, authoritarian populists are starting to develop an ideological alternative in the form of illiberal democracy, and outright autocrats are offering their citizens a standard of living that increasingly rivals that of the richest countries in the West.
It is tempting to hope that Western liberal democracies could regain their dominance. One path toward that end would be economic. The recent economic success of authoritarian countries could prove to be short lived. Russia and Saudi Arabia remain overly reliant on income from fossil fuels. China’s recent growth has been fueled by a soaring debt bubble and favorable demographics, and it may end up being difficult to sustain once the country is forced to deleverage and the effects of an aging population hit home. At the same time, the economic performance of developed Western economies could improve. As the residual effects of the Great Recession wear off and European and North American economies roar back to life, these bastions of liberal democracy could once again outpace the modernized autocracies.
Projections about the exact speed and degree of the shifting power balance between democratic and authoritarian countries should therefore be taken with a large grain of salt. And yet a cursory glance at Western GDP growth rates for the past three to four decades shows that, due to demographic decline and low productivity growth, Western economies were stagnating long before the financial crisis. Meanwhile, China and many other emerging economies have large hinterlands that have yet to experience catch-up development, which suggests that these countries can continue to make considerable gains by following their current growth model.
The era in which Western liberal democracies were the world’s top cultural and economic powers may be drawing to a close. Another hope is that emerging democracies such as Brazil, India, and Indonesia may come to play a more active role in upholding an alliance of liberal democracies and diffusing their values around the world. But this would require a radical change in course. As the political scientist Marc Plattner has argued, these countries have not historically thought of “the defense of liberal democracy as a significant component of their foreign policies.” Following the Russian annexation of Crimea, for example, Brazil, India, and South Africa abstained from voting on a resolution in the UN General Assembly that condemned the move. They have also opposed sanctions against Russia. And they have tended to side with autocratic regimes in seeking a greater role for states in regulating the Internet.
To make things worse, emerging democracies have historically been much less stable than the supposedly consolidated democracies of North America, western Europe, and parts of East Asia. Indeed, recent democratic backsliding in Turkey, as well as signs of democratic slippage in Argentina, Indonesia, Mexico, and the Philippines, raises the possibility that some of these countries may become flawed democracies—or revert to outright authoritarian rule—in the coming decades. Instead of shoring up the dwindling forces of democracy, some of these countries may choose to align with autocratic powers.
Hopes that the current set of democratic countries could somehow regain their erstwhile global position are probably vain. The most likely scenario, then, is that democracies will come to look less and less attractive as they cease to be associated with wealth and power and fail to address their own challenges.
It’s conceivable, however, that the animating principles of liberal democracy will prove deeply appealing to the inhabitants of authoritarian countries even once those peoples enjoy a comparable standard of living. If large authoritarian countries such as Iran, Russia, and Saudi Arabia undertook democratic reforms, the aggregate power of democracies would be boosted significantly. If China were to do so, it would end the era of authoritarian resurgence in a single stroke.
But that is just another way of saying that the long century during which Western liberal democracies dominated the globe has ended for good. The only remaining question now is whether democracy will transcend its once firm anchoring in the West, a shift that would create the conditions for a truly global democratic century—or whether democracy will become, at best, the lingering form of government in an economically and demographically declining corner of the world.
https://www.foreignaffairs.com/articles/2018-04-16/end-democratic-century
Interestingly enough, the article hammers down lot of points which have been mentioned at OFW for years.. In other words it’s simply high time to disclose at least some “limited” reality – truths about the current situation, lolz..
I am deeply cynical with respect to articles like this. Face it, the so-called democracies of the West have always been run by an elite whose only concerns are worldly wealth and power, and who resorted to magic tricks of every variety to delude and manipulate the herd. Back when resources were still plentiful, the crumbs they (the elite) swept off their table were large enough to please the herd, so everyone was happy. The story’s a bit different now.
Exactly.
There may have been democracy in some countries — when for example royalty was overthrown…. and the vote was granted ….. that would have lasted all of a few weeks…
Because the royals and aristocrats would have immediately began scheming to work out how they could maintain control …
Which they have done … the world over…
Democracy does exist… on a local level … you can vote for the person who promises to fill the pot hole out front of your house….
But for important issues — the masses could never be trusted …. because they are f789ing sttoooopid….
Take the 300k man for instance… he spends every penny and then whatever the bank will loan him… that is the default setting for most people…
Should he be allowed to run the world? The answer is obvious
There is no little irony in reflecting on how Marxists during the great European boom of the 1960’s complained about the evils of Capitalism, and how factories and offices were really ‘concentration camps’, the scenes of ‘immense suffering’.
Quite disgraceful, incidentally, when one reflects that real death camps had existed very recently.
Their grandchildren in Italy, Spain, France, would simply kill to get the high employment , security and fun money of those days now.
Yes, they are fighting for jobs in the “industry”. Jobs, you can even inherit. Making cars on a assemly chain is the best you can get.
“At first glance, the conclusion that affluence breeds stability seems to bode well for the future of North America and western Europe, where the institutions of liberal democracy have traditionally been most firmly established. After all, even if their relative power declines, the absolute level of wealth in Canada or France is very unlikely to fall below the threshold at which democracies tend to fail.”
France has no FF resources, like most of western Europe…
if there indeed is a “threshold at which democracies tend to fail”, then France likely will be testing that threshold in a decade or two…
but first, they will get to see how others handle it, such as the PIGS countries… Portugal, Italy, Greece, Spain…
Why a middle-class lifestyle now costs you over $300,000 a year
https://www.cnbc.com/2018/04/27/sam-dogen-a-middle-class-lifestyle-now-costs-over-300000-a-year.html
“Based on my experience, happiness did not increase for me when I began making over $200,000 as an individual. Happiness did not increase for us when we began making over $300,000 either. Therefore, due to the increase taxes and increase stress, it seems pointless to put yourself through the ringer simply to try and make more from a day job.”
thanks, Sam!
I was thinking of applying for some of the huge number of $300,000+ jobs in my area…
but you have saved me the trouble!
thanks a million… 😉
The thing is…
If you make 300k … and you raise your standard of living to burn through that 300k … e.g. you buy a couple of flash cars.. an expensive house… a boat … all on credit of course…. then without a doubt your life will actually be as stressful or even more stressful … because you have all these debt obligations…. just as you had when you were on 100k… except that now you live in fear of losing the 300k job and being unable to service your debts…
However if you went from 100k to 300k and you didn’t increase your debt load at all … rather you lived much smaller by not taking on more debt (maybe you just paid down the debt you already owed)… then without a doubt the 300k would make you much happier.
But most people do not live like this — because they are f789ing stewwwpid …. they feel the need to demonstrate how awesome they are by buying as much stuff as the bank will allow them to
The world isn’t driven by greed, but envy.
-Warren Buffett
FE,
It seems $300K is pretty much middle class if one wants to raise a family and put children through college. After tax, it is about $150K, or say $12000 per month. It is not unreasonable for RE taxes to be $1000 per month in a good school district, and private schools are much more.
Looking forward, debt may be good, inflation seems to be increasing, my chocolate treat went from $2,99 to $3.49 per bar in the last week. Good food for a family of four is not trivial and eating out at a moderate restaurant is over $100 for two in the twin cities. Glenlivet just keeps going up.
Dennis L.
That sounds about right…. It is not easy to earn 300k per year – even if both spouses work….
Hence the massive trend towards opiate consumption … when you can’t live the dream… there is always Oxycontin
One entire week and Spark still has not connected my internet — and my mobile signal is weak — I am going to start on the Oxycontin if this doesn’t get sorted out soon
If we are collapsing, that’s the smart thing to do. You yourself have admitted this in some prior posts.
If it’s all going down, no amount of paying down debt, saving or investing is now worth it. Live for the day.
However, given that we cannot predict the rate, and manner, in which it will all go down, it is stills sensible to pay down debt or eliminate it, as debt is one of the claws of the Evil One.
A bit like handling cats: they might purr when stroked, and all is well: but sometimes those nasty claws shoot out when you least expect it – scratches, blood and pain.
Don’t stroke the pussy,it has teeth and claws! 🙂
The one who dies with the most debt wins! This is why the stock market will reach new highs just before the economic collapse.
The thing is…
We don’t know when the day is… so it is not a good idea to over-extend….
How much trouble we would if all had their income tattooed in the forehead and the reproductive organ hanging out of the trousers.
Around here, some men and women have ‘Heineken’ tattooed on the backs of their necks: clear indicator of their socio-economic level!
I love watching what the summer reveals about the Brits, who are repressed by the awful weather for 7 months of the year. 🙂
I’m not sure how this works, but I found that the companies that paid me well, treated me well. Then, again, there were jobs that I applied for that, at interview, made it clear that the Company owned you body and soul, for no additional money. That’s never going to work out well.
FE, exactly correct.
The game is about to undershoot your appetite/demand vs income level, most people are not able-willing-considering to live like that for substantial period of time.. no matter what social-economic strata they inhabit, curiously..
One has to chuckle on people in (sub)average neighborhood with $50K carz at the door. Or similarly “rich global businessperson” inside shared ownership club for old decrepit bizjet airplane with hairy bush pilots on board. In the end it’s all just one great joke on them..
It’s a matter of definition: a much older – European – definition of ‘middle class’ is to own a good property freehold, with no mortgage; and to be able to live from the interest on capital.
This is not, of course, the definition of ‘middle class’ that so many have fallen for post-WW2.
It has degraded to: ‘ Guess how high my credit card limit is!?’
Old style: ‘Manners Mayketh Mann’.
New style: ‘Credit Score Is What You Are’. 🙂
https://imgur.com/a/AdEYswT
3. …Demand will NOT peak before 2040…
which doesn’t make sense in light of the other 9 points…
but bravo, HSBC, bravo!
warning us about Peak Oil…
bravo!
I suppose the unrealized idea here is that oil is the uber-resource and is unlike most other resources…
a lower supply of apples doesn’t reduce the demand for apples…
but a drop in the supply of the best energy resource means humans will have a drop in productivity, which translates into less prosperity and therefore a lower demand for oil…
a lower supply of oil does reduce the demand for oil…
yes?
Early Warning Signals for Critical Transitions (Scheffer 2009) NATURE
Complex dynamical systems, ranging from ecosystems to financial markets and the climate ,can have tipping points at which a sudden shift to a contrasting dynamical regime may occur. Although predicting such critical points before they are reached is extremely difficult, work in different scientific fields is now suggesting the existence of generic early-warning signals that may indicate for a wide class of systems if a critical threshold is approaching.
https://www.scribd.com/document/377662710/Early-Warning-Signals-for-Critical-Transitions-Scheffer-2009
this was a dress rehearsal for our future
https://www.truthdig.com/articles/chaco-canyon-chaco-earth/
“There is hope; though not for us.”
-Kafka
no hope?
then why would I consider prepping to get myself through the next 100 years?
is this actually futile?
really?
I just let go. Lost in oblivion. Dark and silent and complete. I found freedom. Losing all hope was freedom…
Chuck Palahniak
Fight Club
Not at all, Norman; we’re smarter than that, we………err, we….
when visiting these Anasazi sites in the SW USA, I’ve always got some fun with the park rangers, who know the score on their collapse, but never bring up the extreme violence or canabalism aspects. most just leave the evidence of violent decline for the tourists to figure out for themselves, if at all. don’t want to spook the herd, do we?
if you push them with leading questions, they will speak to you aside in low tones and refer you to some academic papers on the evidence. extreme drought from climate change ultimately got them, err, just like now.
KKKllimate ccchhhange… extreme drought….
Impossible! They did not burn coal back then… nor oil….
when i brought up the anasazi peoples, i was trying to bring certain factors into a single viewpoint
1—yes they had climate change, it was the medieval warm period, which is well documented
2—they ultimately reacted by creating theocratic dictatorships
3—they killed each other to survive
they had overpopulated THEIR world—not all the world
none of those factors affected the survival of humankind
we are now in a different situation entirely—the same factors are in play again, but humanity has nowhere to go, and we have the means to kill ourselves off by pretending that we do have somewhere to go
Turmoil in Toyland
The demise of Toys “R” Us is hitting toy makers and clearly separating the weak from the strong.
The chain, which is liquidating its U.S. stores and considering the fate of its Asia and Europe operations, was a major driver of the $27 billion industry. Its 50,000 square-foot stores were cathedrals to play, places where children explored and discovered new toys. General merchandise retailers like Walmart or Target simply don’t have the space for that.
Last week both Hasbro HAS 1.81% and Mattel MAT 1.36% posted declining sales and losses for the first quarter. Lost sales from Toys “R” Us were partially to blame, but the companies also held back products from competing retailers, which would have been tempted to match the liquidating chain’s hugely discounted prices.
Toy manufacturers are in “self-preservation mode,” says Stephanie Wissink, an analyst at Jefferies LLC. “They’re protecting their brand equity so they don’t get tangled up in a price erosion they can’t unwind,” she added.
On Thursday Mattel, maker of Barbie dolls, American Girl dolls, Fisher-Price, and Hot Wheels toys, had a loss that was almost three times bigger than the same period last year. Revenue also fell to $708.4 million from $735.6 million a year ago, though it beat expectations.
Hasbro, which owns Transformers, My Little Pony, and the rights to Disney franchises “Frozen” and “Star Wars,” and has a market value more than twice as big as Mattel’s, suffered too. In the U.S. and Canada, sales fell 19%. (It was comparing against a very strong period last year, whereas Mattel was comparing against a very weak one.) The company reported a first-quarter loss of $112.5 million or 90 cents a share, and revenue dropped to $716.3 million.
Yet the disruption is likely a transitory one. Other retailers, including Amazon.com , are rushing to take Toys “R” Us’s market share and increase their toy offerings. Meanwhile, manufacturers are building out their e-commerce capabilities, which have lagged behind. Only about 20% of Hasbro’s sales occur online.
Of the two manufacturers, Hasbro is far better positioned to evolve with the industry. Unlike Mattel, Hasbro isn’t constrained by debt and it has more continuity and stability in its management team, which has been together for eight years. Mattel, which recently named a new CEO, has seen several abrupt pivots in leadership. It also has debt coming due beginning next year.
With a debt-adjusted market value about 50% higher than Mattel’s, Hasbro is the more expensive stock. But it has options and that is what the market values. One might be to take over Mattel. An offer it made last fall came to nothing. The timing may be right to revive that discussion. At its current level, Mattel is ripe for the taking.
https://www.wsj.com/articles/turmoil-in-toyland-1524924000?mod=e2tw
Why are all the toy makers now struggling? According to the MSM all the sales were just going online now?
Even as birth rates decline overpopulation remains a global challenge
https://www.weforum.org/agenda/2018/04/almost-everywhere-people-are-having-fewer-children-so-do-we-still-need-to-worry-about-overpopulation
The percentage growth in population may be declining, but the number added each year remains very high. The result is a world where the developing countries have far more people than there is local food or jobs for.
https://gailtheactuary.files.wordpress.com/2018/01/world-population-through-2018_un-2017-estimates.png
“Is the Petrodollar on Its Way Out?
” … Fiat currencies can all collapse at once, and the International Monetary Fund Special Drawing Right (SDR) could emerge as the new unit for global trade, perhaps backed by gold. Central banks are leveraged to the hilt, while the IMF has the cleanest balance sheet in the world (and 2,800 tons of gold). A gold-SDR used exclusively for international trade (including oil) would force the Fed to give up on the petrodollar and make do with the narco-dollar.”
https://www.americanthinker.com/articles/2018/04/is_the_petrodollar_on_its_way_out.html
“Is the Petrodollar on Its Way Out?
No, not even close…
https://imgur.com/a/5NCBobc
I think that it is the currency that the price is set in that makes a difference. The price is usually based on the US dollar price, regardless of the currency. That makes the percentage staying with the US base close to 100%.
Brexit Failure Looks More Likely Every Day
https://www.bloomberg.com/view/articles/2018-04-27/brexit-failure-looks-more-likely-every-day
From article:
“I don’t see any reason why the EU would do anything other than make this as uncomfortable for Britain as possible. Basic game theory suggests that the EU’s interests lie in the exact opposite direction, to make exiting as difficult as possible in order to discourage others from departing. There is no reason to expect the EU to reverse course.”
They know that disenchantment with the failed promise -to deliver universal prosperity – of the EU is quite high almost across the board (except perhaps Germany?), so they must resort to coercion and repression. Brexit has to be seen to be a disaster, if it even occurs.
It is hard to believe that universal prosperity is not possible. Also, our children aren especially excluded from it. No matter how hard they try, many will find only low-paying jobs, or none at all. Advanced degrees aren’t worth what people have to pay for them in the US.
As the purchasing power of the populations around the world is deteriorating, any detachment from the existing markets is a way to fastest decline.
Yes, all the latest super technology (like being able to make most self driving vehicles actually run) is hard to imagine being stopped in its tracks. You can’t seem to say, this is nonsense, and just walk away. Bezos is spending billions trying to send our garbage into space. No stopping these things voluntarily.
Peak Saudi Arabia
https://imgur.com/a/1ZIvRnR
by that chart…
they will still be going fairly strong in 2030…
thanks, BD…
Don’t forget the export land model.
Saudi Arabia ‘may run out of oil to export by 2030’
https://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9523903/Saudis-may-run-out-of-oil-to-export-by-2030.html
The collapse of Saudi Arabia is inevitable
http://www.middleeasteye.net/columns/collapse-saudi-arabia-inevitable-1895380679
‘Assumes no output restrictions and full investment.’
This is the real question. Decreasing production at increasing cost won’t be a smooth downward slope. Something’s gotta give, either one or other aspect of BAU sacrificed to make up for the cost, or failing that abandonment of the more expensive sources and a steeper decline.
30 m saudis need oil to buy food and other survival essentials
by–or probably well before– 2030 they won’t have enough oil to do that, so their economic/political system will collapse in on itself….because the saudis will ”demand” that their goldplated lifestyle continues, and will start to kill each other to prove that it can
https://imgur.com/a/X9DZKtd
I don’t know where you got that from,but it is incorrect. The quotation is from Kenneth Boulding.
https://www.goodreads.com/author/quotes/132720.Kenneth_E_Boulding
but what if humans leave this planet?
https://www.cnbc.com/2018/04/28/jeff-bezos-on-blue-origin-its-the-most-important-work-im-doing.html
it’s hard to decide what to quote in this article… so much inanity…
“Yes,” Bezos replied. Sending humans to outer space “is super important to me. I believe on the longest time frame — and really here I’m thinking of a time frame of a couple hundred years, so over many decades…that Blue Origin, the space company, is the most important work I’m doing.”
“He added that “I’m pursuing this work because I believe if we don’t, we will eventually end up with a civilization of stasis, which I find very demoralizing.” Humans “all enjoy a dynamic civilization of growth and change,” and space travel is integral to that continuing, he said.”
“Bezos predicted that heavy industry will be moved to other planets, while Earth, he said, would be reserved for living and for light industry. He also told Business Insider that he grows increasingly convinced of the necessity for space exploration and development “with every passing year.”
Eureka!
the Earth will be “reserved for living and for light industry”…
genius!
no mere mortal could think such lofty thoughts!
Very amusing.
Someone came up with the idea in the 1930’s of moving all dirty industry, etc, to Australia, Africa, and other parts of the Empire, and leaving Britain as a kind of bucolic play-zone for the pursuit of culture and sports – Bezos is so great, he thinks galactically!
On the other hand, we can note that certain early cultures in Central Europe, and elsewhere, were quite happy to live much the same life for periods of 10-15,000 years.
Which sounds rather appealing to me, faced with the ‘innovative, dynamic’ Doom Escalator we seem to be placed on at the moment…..
The sad part is how easy it is for the majority of people to be taken in by this. The basic thought model isn’t all that different from when freeways and mass car ownership dawned. It *was* kind of exhilarating. The energy was there for it then too. Now Bezos is squandering money on a “risky” (literally, far off) venture while not spending money on the people dropping like flies right now. But, yes, people will get taken in by a sort of compelling “logic” of his message. Countering thought processes just aren’t as evident, coherent or powerful currently.
Bezos is like Hawking—an undoubted genius but with a very narrowly focussed beam—unable to grasp much outside his personal scanning range
Ford fires its oil industry economists, bets the house on cheap gasoline. Hey, if you’re already ignoring the possibility of an oil crisis you may as well go all-in.
Or you may read OFW. The issue isn’t every-rising prices, it is collapsing economy. An economist will not figure that out.
The danger is just as much falling prices.
Even if gas stays cheap – these ludicrously expensive vehicles are depreciating assets.
Wages are dropping and interest rates are rising. How are the plebs going to be affording these things. Further, if they are unemployed they won’t need a fancy new auto…the old beater will serve just fine. If new car sales volume drops too much…the economy of scale breaks down and prices for vehicles will have to rise even higher for automaker to maintain profitability. The economy is out of its Goldilocks zone of wage and price/profitability balance. Maybe Ford should hire more actuaries in place of the economists!
NEW entry level Cars in my market are not expensive. I can buy a new 2017 Hyundai for 10k add 3k for tax and freight and that is in $cdn
https://www.oreganshyundaidartmouth.com/promotions/?gclid=EAIaIQobChMIxIXq_tvf2gIV24KzCh3GiAkMEAAYAiAAEgIlNPD_BwE
It comes with 8 tires and 8 rims We do have free trade with Korea and an auto-port tho
Subway, Rite Aid, Toys R Us, Teavana: Retailers closing the most stores in 2018, so far
https://www.usatoday.com/story/money/retail/2018/04/27/retailers-closing-most-stores-2018-so-far/557275002/
https://imgur.com/a/5HOuske
On incomes, Russia and the US are now equally unequal
https://qz.com/1250100/income-inequality-russia-and-the-us-are-now-equally-unequal/?utm_source=qzfb
Maybe you could use this in a future article Gail….
https://www.nature.com/articles/d41586-018-04931-6
https://imgur.com/a/l3DLEAu
Americans Haven’t Been This Poor and Indebted in Decades
http://nymag.com/daily/intelligencer/2018/01/americans-havent-been-this-poor-and-indebted-in-decades.html
The media always cites the unemployment rate and stock market as evidence of a great economy. And they always omit our economic growth (GDP) . Total denial and very dis-informative…
Ronda Rousey thinks doomsday is coming — and she’s ready for it
https://www.usatoday.com/story/sports/2018/04/27/wwe-ronda-rousey-becomes-doomsday-prepper/557469002/
One outta two ain’t bad!
https://media.giphy.com/media/qFo1JIyGJT06Q/giphy.gif
And Tim Morgan is wondering ‘whether we can save civilization?’
I suggest watching the above would update him on that subject….
” But I think as a self proclaimed genetic cream of the crop such as I am, I owe it to humanity to survive the end of the world. It’s my responsibility.”
(as if Reality cares about anything she “self proclaims”)
so says the woman who has most definitely been hit in the head too many times…
sure, she’s a prepper… when she’s not flying all over the place…
her understanding is superficial…
BD, you got it right that it’s a math problem…
she’s the “one in a thousand” who is prepping…
she has no clue about the hordes that will be showing up at her door if or when the stuff hits the fan…
She should have better odds than most of making it.
Otherwise she would be an interesting addition to Elons Mars heram.
As collapse becomes more obvious and awareness of it spreads, more and more celebrities will start voicing their invaluable opinions about it. Even collapse can’t get rid of celebrity bs.
: )
Even collapse can’t get rid of celebrity bs.
https://www.godlikeproductions.com/sm/c3549d16.gif
These are special people. They fit in to a very small very specialized field of mostly useless talent. They do well in a modern barbaric society with surpluses of cheap energy. No one will do well when energy becomes scarce. The first thing to go will surely be the frivolous consumption to prop up Hollywood, the NFL, NBA, NBAA and MMA.
Someone here must know at what stage of Romes collapse gladiator games peaked.
https://i.imgur.com/uZLAs5t.jpg
Depletion of Fossil Fuels and Anthropogenic Climate Change—a Review (Hook 2013)
https://www.scribd.com/document/377586256/Depletion-of-Fossil-Fuels-and-Anthropogenic-Climate-Change-a-Review-Hook-2013
This was published in 2012. The abstract says:
I considered cutting and printing this to read at an upcoming county commissioner meeting, but it would take most of the paltry 2 minutes allotment for speaking.
There must be a highly condensed version. The society is run on a fossil fuel based economic system.of infinite complexity. One segment of the complexity is climate catastrophe. If you remove fossil fuels to solve the climate, every one of a huge and interlaced set of segments fall apart as well. So we have an incomprehensible fossil based economic system we are told must grow debt and per capita consumption to survive, although that is not helping natural systems (and even aspects of the economic system) to survive. Go figure.
Right. It is all tied together. It is a no-win situation.
Art
Here is another paper that concludes the same thing, that was done back in 2015
Projection of World Fossil Fuels by Country (Mohr, 2015)
https://www.scribd.com/document/375110317/Projection-of-World-Fossil-Fuels-by-Country-Mohr-2015
Peak Oil may keep Climate Change in Check
https://www.scientificamerican.com/article/peak-oil-may-keep-catastrophic-climate-change-in-check/
Art you could show them this paper to explain how the world economy has to have its fossil fuel inputs.
University of Chicago Peer Reviewed Study: predicts world economy unlikely to stop relying on fossil fuels (Covert, 2016)
https://www.aeaweb.org/articles?id=10.1257/jep.30.1.117
Thanks, BD.
From the WSJ: Big Oil Firms Hold Back on Drilling: Despite higher prices, Exxon, Chevron, Shell spend carefully under investor pressure
Maybe they have been reading OFW!
If oil companies are holding back now as prices approach what is likely to be brief peak then, what incentive will they ever have to drill? When prices collapse again they sure won’t start drilling then. Not a good sign for future energy supplies.
I am afraid you are correct.
This would be on their radar… but they will never admit it…
OIL PRODUCERS NEED $100+ OIL
Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html
More than half of 60-somethings say they’re delaying retirement
https://www.cnbc.com/2018/04/27/delayed-retirement-is-in-the-cards-for-more-than-half-of-60-somethings.html?__source=twitter%7Cmain
Men who take early retirement tend to die early. I am not sure whether it is because people who are in poor heath tend to retire early, or because men who have no purpose to their life tend to die early.
https://www.aarp.org/health/healthy-living/info-2017/retirement-health-risks-fd.html
Would It Kill You to Retire? Maybe
The link between death rates and retirement
Also:
I believe that to be true in Canada the age is 60 for a .gov pension. at my work we have a ton of people over 70 and they are happy and productive…see Trump
There was a little group of men in their early 60’s in our local bookshop discussing how afraid they are of retirement – having to face their wives at home all day. Wives who don’t seem particularly interested in them any longer. 🙂
I have seen it both ways. In 1964 my grandfather retired from farming at 62. He never touched a tractor again even though he lived on the farm. He lived to be 89. We lost our farm when my dad was 62, he continued to work on other farms until he was 83. He will be 88 in July. I had to quit working ten years ago at 56, my heart is good, I have a bad back.
Then there are the men who don’t make it. The field manager of the farm next to ours talked about how he was going to enjoy his retirement. He retired at 62 and was dead within a year. My daughter’s father in law is five years younger than me but he became unable to work one year after I did. He is in the hospital at this moment fighting for his life. He lived with my daughter and her husband but kept to himself. He allowed himself to get dehydrated and devolved a urinary tract infection. Once in the hospital numinous other internal problems have devolved.
There is a saying, “I married her for better or worse, but not for lunch.”
our industrial civilization collapse remind of bronze ages
The major players in the bronze age were all in trade with each other down to a basic level, mimicking our globalized economy of today on a smaller scale. This eventually fell apart, and for a long time was blamed on mysterious “sea peoples
In other words, the cornerstones of their civilizations. This caused the major players to fall apart, and the rulers tried to place the blame on these sea people to try and keep the people from revolting against them. This worked to varying degrees, but even the surviving empires were weakened and never fully recovered.
Who do we blame now? The Baby Boomers? The oil companies?
Millennials are likely to be the first generation in US history that is worse off then their parents.
I am not so sure us born in the 70s will be better off than our parents, considering the whole life.
And that is exactly right, DJ – and that also applies to poor Boomers who never had much and did low-paid jobs.
The whole (self-pitying) Millennials v Boomers meme is bogus, and part of a classic tactic in political manipulation:
1/ Invent a ‘guilty’ generation or race, and 2/ Persecute.
Who should I persecute? The lazy millenials or greedy boomers?
Perhaps you should persecute the problem of diminishing returns that is causing the underlying problem. It is caused by the way the Universe is put together.
One can go outside on a clear night… and scream epithets at the stars….
I am going with boomers. On the upside the guy that replaced the muffler on my truck had an IQ above room temperature and a BA in history….We had a good chat and I like him.
If you are going to get it may as well enjoy it.
https://imgur.com/a/sa87qRz
GNC plans to close 200 stores
https://www.ajc.com/news/national/gnc-plans-close-200-stores/BaMtqYMiDLWZIU8ehNSZNN/
U.S. GDP slows a bit to 2.3% in first quarter
https://www.marketwatch.com/story/us-gdp-slows-a-bit-to-23-in-first-quarter-2018-04-27?siteid=bullytweet
Trump’s economy actually got worse after his tax cuts….EPIC FAIL…
Firms that burn up $1bn a year are sexy but statistically doomed
Five outliers – Chesapeake Energy, Netflix, Nextera Energy, Tesla and Uber – have collectively lost $100bn in the past decade
YVES SAINT LAURENT, Lady Gaga, David Bowie. Some people do not operate by the same rules as everyone else. Might the same be true of companies? Most bosses complain of being slaves to short-term profit targets. Yet a few flout the orthodoxy in flamboyant fashion. Consider Tesla, a maker of electric cars. This year, so far, it has missed its production targets and lost $1.8bn of free cashflow (the money firms generate after capital investment has been subtracted). No matter. If its founder Elon Musk muses aloud about driverless cars and space travel, its shares rise like a rocket—by 66% since the start of January. Tesla is one of a tiny cohort of firms with a licence to lose billions pursuing a dream. The odds of them achieving it are similar to those of aspiring pop stars and couture designers.
Investing today for profits tomorrow is what capitalism is all about. Amazon lost $4bn in 2012-14 while building an empire that now makes money. Nonetheless, it is rare for big companies to sustain heavy losses just to expand fast. If you examine the members of the Russell 1000 index of large American firms, only 25 of them, or 3.3%, lost over $1bn of free cashflow in 2016 (all figures exclude financial firms and are based on Bloomberg data). In 2007 the share was 1.4% and in 1997, under 1%. Most billion-dollar losers today are energy firms temporarily in the doldrums as they adjust to a recent plunge in oil prices. Their losses are an accident.
But a few firms love life in the fast lane. Netflix, Uber and Tesla are tech companies that say their (largely unproven) business models will transform industries. Two others stand out for the sheer persistence of their losses. Chesapeake Energy, a fracking firm at the heart of America’s shale revolution, has lost at least $1bn of free cashflow a year for an incredible 14 years in a row. Nextera Energy, a utility that runs wind and solar plants, and which investors value highly, has managed 12 years on the trot.
Collectively these five firms have burned $100bn in the past decade, yet they boast a total market value of about $300bn. Combining punchy valuations with massive losses means taking the entrepreneurial art form to a dizzying extreme. Steve Jobs, Apple’s co-founder, was said to have a “reality distortion field” that allowed him to bend the perception of others (although Apple itself was fairly timorous, losing just $874m in its worst year, in 1993). The experience of the five suggests that bending reality today has three elements: a vision, fast growth, and financing.
Take the vision thing first. A charismatic leader with a world-changing plan is de rigueur. For its first 23 years Chesapeake was led by Aubrey McClendon, a cocky Oklahoman who pioneered the process of blasting rocks to extract gas and oil (he died last year in a high-speed car crash). Reed Hastings at Netflix plans to destroy the conventional TV industry by selling films and shows over the internet. Like Mr Musk, Travis Kalanick, Uber’s tarnished former boss, dreams of changing how humans travel. Nextera is led by technocrats but their aim is grandiose—to usher in a new generation of energy technology.
The vision needs to be validated by runaway growth. Often firms emphasise a flattering operating measure, such as oil and gas pumped from the ground, the number of rides hailed and so on. Investors need to believe in a high “terminal value”, a point in the future when high, stable profits will arrive. So it helps to show that, hypothetically, profits would gush if breakneck growth were to stop. Uber says it is profitable in cities where it has operated longest, such as San Francisco. Nextera says that if it stopped investing in new capacity, it would make $6bn of free cashflow a year. Netflix amortises the cost of content over periods of up to five years, so reports an accounting profit even as it bleeds cash.
The third element is financing to pay for huge cumulative losses. Each of the five firms has been a financial innovator, taking advantage of cheap money and growth-hungry investors. Uber has tapped private capital markets, Nextera has structured part of its business as a partnership, Tesla has taken deposits from customers and also trades environmental tax credits. Chesapeake Energy sparked Wall Street’s lust for shale junk bonds, and Netflix has signed commitments to make $14bn of future payments to studios and artists to buy creative content.
So sustaining a reality distortion field is possible, but the longer it goes on for, the harder it gets. More capital has to be raised and, in order to justify it, the bigger the firm’s projected ultimate size—its terminal value—has to be. Fast growth puts huge strain on managers. At some point the edifice can come tumbling down. The five companies described here have $60bn of borrowings, and one, Chesapeake, is struggling with its debt load.
Poker face
A few firms other than Amazon have defied the odds. Over the past 20 years Las Vegas Sands, a casino firm, Royal Caribbean, a cruise-line company, and Micron Technology, a chip-maker, each lost $1bn or more for two consecutive years and went on to prosper. But the chances of success are slim. Of the current members of the Russell 1000 index, since 1997 only 37 have lost $1bn or more for at least two years in a row. Of these, 21 still lose money.
To justify their valuations, the five firms examined by Schumpeter must grow their sales by an estimated 8-33% each year for a decade. Based on the record of all American companies since 1950, and the five firms’ present revenue levels, the probability of this happening ranges between 0.1% and 25%, using statistical tables from Credit Suisse, a bank.
Firms that burn piles of cash are often lionised in an era when growth is sluggish and few companies reinvest all their profits. But losing a billion dollars or more a year is a wildly risky affair and the odds are that such businesses will fall flat. This should not be a surprise—hardly anyone can pull off building a fashion empire around androgyny, wearing a raw meat dress to an awards ceremony, or singing about life on Mars.
https://www.economist.com/news/business/21730446-five-outliers-chesapeake-energy-netflix-nextera-energy-tesla-and-uber-have-collectively
New Study Reveals the Unusual Reasons People Are Dying in These States
https://www.cheatsheet.com/health-fitness/new-study-reveals-unusual-reasons-people-dying-in-these-states.html/?a=viewall
At the end it says, “The report isn’t all bad news. Homicide rates dropped 44.9% and 6% for suicide nationwide. Alcohol-related deaths decreased by 8.1% in the U.S.” You wouldn’t get this idea from the state data that it shows.
A person can look at individual state data, and show that they are higher than other states. In many cases, this is a persistent pattern.
UK economy in weakest growth since 2012
http://www.bbc.com/news/business-43919094
The UK GDP growth rate dropped from 0.4% to 0.1%. I expect that at this growth rate, it is below “stall speed.” It becomes difficult for companies to repay debt with interest. If we believe UN population estimates, the population is growing by 0.6%. If the GDP growth rate was 0.1%, each person/business on average is getting poorer.
Yes, Solar And Wind Really Do Increase Electricity Prices — And For Inherently Physical Reasons
https://www.forbes.com/sites/michaelshellenberger/2018/04/25/yes-solar-and-wind-really-do-increase-electricity-prices-and-for-inherently-physical-reasons/#7c6d3f3217e8
This is a good article. I hope it gets read widely. It points out several issues involved. For one thing, transmission lines are necessarily used inefficiently, because they are needed only for the intermittent electricity. Another is the huge land area involved. This has a cost, even if most people don’t count it as an “energy cost.”
I recommend looking at the media articles on ‘ The Dutch Serengeti’: a re-wilding project in Europe which shows quite starkly what happens to animal populations when no attention is given to maintaining balance through predation……
How many tut-tutting over this ‘ecological disaster’ will realise that it applies just as much to us?
This is where the AI killer robots come in. They wonder about and cull the slow and weak.
I’ve just realised that this is the star ecological project initiated by the Dutch cousin, a politician, of a friend of mine: she was waxing lyrical about how beautiful it all was, a few years ago.
Now, mass starvation, as the animal population has exceeded the resource base.
Survivors are only being saved by people lobbing bales of hay in from outside: just as we in the UK are fed by the oil and gas of the Middle East…..
The story happens over and over. Someone should go back, after the fact, and see what the effect of US Peace Corp projects has been. I expect that they have inadvertently increased population, because (in the one I heard about) they helped provide more sanitary water supply and taught about hand washing. The families had many children. The project would allow many more live to maturity.
Yes they are sadistic evil people that get off on human suffering .
https://www.youtube.com/watch?v=omnskeu-puE
My personal fave is
But how does the Peace Corp adding population through hygiene compare with developers adding population through sprawl?
Look at population growth in the developing countries compared to the US, Europe, and Japan. It is huge!
Distributing population through sprawl reduces the land available for farming, so hit hurts the “resources per capita” ratio. But it doesn’t add to population. In fact, the people in suburbs may have so much time tied up in the long commute that having children is problematic.
Looks like the electric buses are starting to make a breaktrough in the mass transit sector. Or course the way the electricity is produced is affecting the local air pol-lution.
I see no future in private car ownership, but who knows how long we could keep electric mass transit going on.
https://www.bloomberg.com/news/articles/2018-04-23/electric-buses-are-hurting-the-oil-industry
“About 279,000 barrels a day of fuel won’t be needed this year”
This article makes it sound like the need for energy evaporates when you go electric.
Of course additional energy must be generated for the electric, starting with coal and natural gas and nuclear power plants. The net energy needed for electric is greater than if oil was used. China and cities are going to electric buses because it distributes the pollution problem tomsomewhere else.
“In the next decade, and probably within five years, some large states are going to face insolvency due to pensions, absent major changes.”
https://seekingalpha.com/article/4166196-pension-crisis-worse-think
When push comes to shove, pensioners will be cut off and ‘care’ ( aka rapid last-phase asset-stripping) will disappear.
Or, they might be murdered by Millennial Revolutionary Guards.
Only healthy and mobile pensioners can control politics and get their share of welfare, as they do today: the starving can’t vote…….
I recall Orlov mentioned people pushing granny out of the family apartment when they could no longer afford to maintain her.
Adios, Babushka, peeling potatoes all day for your keep doesn’t help when there are no potatoes!
‘Or, they might be murdered by Millennial Revolutionary Guards’
I can imagine that scenario….
Actuaries thought that the high rates of return (including inflation) available in the 1960s and 1970s were permanent. It didn’t occur to them that what they were seeing was a temporary aberration. Once pensions were in place with high interest rate assumptions, it has been almost impossible to get the interest rate assumptions down far enough to recognize the real state of affairs.
U.S. Income Inequality Hits a Disturbing New Threshold
https://www.bloomberg.com/news/articles/2018-03-01/america-s-wage-growth-remains-slow-and-uneven
Hello, ya’ll. I know it’s been a while.
http://media.steampowered.com/steamcommunity/public/images/avatars/02/02bcbb37cc8123ef9ffadb4d771417a8b2b946be_full.jpg
As real estate prices are purposefully being re-inflated, I thought it would be a good time to call attention to a contributing factor to rising real estate prices. This contributing factor has not been covered by mainstream outlets. Gail has mentioned this contributing factor some degree. The contributing factor in question is the rising cost of construction. Construction costs are rising partially because of rising costs of materials, but construction costs are also, reportedly rising because of labor shortages in construction. The shortages are of the most skilled workers in construction. I’m talking about the master carpenters and electricians, professionals who have experts in their area and “know a lot”. There is no school or program that can churn out a graduate with the skills of a master carpenter and master carpenters the kinds of carpenters in high demand (command high wages). The demand, has been revealed to me to be coming from wealthy people who need master-level blue collar workers to work on their properties .As we all know the majority of real estate being built is be built for the wealthy. In your opinion, everyone, how much do labor shortages in construction contribute to rising construction costs?
In other news, MIT Technology, a publication that once provided a sobering look at tech fixes has joined the Tech Fix brigage, where it shares company with AI and “renewable energy”.
https://www.technologyreview.com/s/610927/the-daunting-math-of-climate-change-means-well-need-carbon-capture/
or maybe it is the clickbait brigade that it’s joining
https://www.technologyreview.com/s/610882/this-startup-hopes-to-keep-barf-bags-out-of-self-driving-cars/
https://www.technologyreview.com/s/610806/inside-the-jordan-refugee-camp-that-runs-on-blockchain/
One thing I can say with more certainty is that the change in content has probably brought in more female readers.
Anyone?
The lack of qualified construction workers is a serious problem also in Slovakia, causing also delays of various public infrastructure projects. There is no problem with the relatively cheap construction materials, but with the rising costs of the qualified construction workforce, which is, moreover, in short supply.
In the end, the too low prices destroy the populations, as there is no future with the jobs that take more energy from the workers than they provide to them in the form of the wages.
I wonder if this all intentional, like the insistence that all new construction be in crowded urban areas, in order to keep real estate prices high.
Experts have said that the reason why construction is concentrated in already highly dense areas is because economies of scale make building infrastructure for energy and water cheaper, and industries benefit from what they call clustering–which mean firms benefit from being in proximity to each other as they compete. That, I think, only applies to the jet-set (i love this outdated term), who are fought over by elite firms. don’t see any benefit to clustering since the price of everything is more expensive in dense, urban areas. The only thing that I think may be cheaper is social welfare because of the concentration of wealthy taxpayers.
Nova Scotia is benefiting from returning oilfield construction workers that have some transferable skills. But is costing big bucks to get them up to speed…Will they stay.
I am in class about 1 month a year…This one freeks people out It was 3 weeks long and cost 12k https://www.youtube.com/watch?v=QFuORmIK_kk No guns but survival suits.
Young people are shying away from the trades they do not like working in the rain or starting at the bottom
Everyone starts at the bottom.
What do they think unpaid internships are?
There was a big drop-off in US construction after the 2008 crash. I expect that a lot of the people working in construction found jobs in other fields. Now the problem is building up from a lower base. This happens with oil as well.
If there’s a labor shortage of construction workers at the master-level, why didn’t these workers stay in construction upgrade their skills? The demand(high-paying work) for journeymen must have dropped off somewhat, but the demand for the people who were masters remained steady.
What other fields provided a better career path for these people?
There was a huge drop off in home building in 2008. It is only gradually sort of re-inflating. There were way too many people in the field.
If that is true, Gail, then why are employers saying that there is a shortage of workers?
What you aren’t taking into account is that all the newly homes will need some unkeep to keep in good working order, even if they are unoccupied.
There is a book from a Slovak man who realized his dream to work on the Norwegian oil platform that was issued last year. He mentions, among other things, that it is more and more difficut to find a job in Norway and the standard of living in Norway is going down with the rising living costs and he sees no future for himself and his girfriend there and he started to study applied informatics.
https://zurnal.pravda.sk/portret/clanok/467437-andrejova-cesta-na-ropnu-plosinu/
http://mrtns.eu/tovar/_l/292/l292194.jpg?v=1507300440
The interest in buing the US Steel subsidiary in Slovakia by the Chinese He Steel Group is over: the reason is the change in the government policy in China or the uncertain future of the Chinese economy.
https://hnonline.sk/hnbiznis/1735703-predaj-u-s-steel-padol-kosice-budu-americke
GOP Tax Law Bails Out Fracking Companies Buried in Debt
https://www.desmogblog.com/2018/04/26/gop-tax-law-bails-out-fracking-companies-debt-eog-hamm
Source: WSJ
https://www.wsj.com/articles/wall-streets-fracking-frenzy-runs-dry-as-profits-fail-to-materialize-1512577420
https://imgur.com/a/RkYx3D5
This article is dated December 13, 2017, so it is 4+ months old. The WSJ title is “Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits”.
The shale-oil revolution produces lots of oil but not enough upside for investors.
Production has continued to rise since then.
The IMF Is Freaking Out. Should You?
https://seekingalpha.com/article/4166065-imf-freaking
Christine Lagarde: “clutches pearls”
yes, actually, I am freaking out…
June 1st is only 36 days away…
I would be clutching my pearls, if I owned any…
https://www.youtube.com/watch?v=_5qrwbkmlEk
June the 1st isn’t a Monday, so no.
Biggest things happen Friday, after NYSE close.
I suspect a big crash that friday. And a nice rebound on monday…
Christine, the divine Christine, just needs to put some more of that vibrant orange make-up on and she’ll feel much better.
As an alien, she doesn’t know that real humans don’t go quite that colour when they tan: oh dear, the programming slips up sometimes.
2+0+1+4 = New World Order Magick Seven! (Remember that rather strange speech she made then?) 🙂
Xabier, I do! Peculiar woman. Didn’t Gail write a post about that?
And La Lagarde’s tantalising line at the beginning: ‘I say what I’m told to say’. How quickly all that was glossed over. Quite the strangest public speech I’ve ever heard in that sort of context …….
Intriguing! Almost enough to send me down FE’s ‘Elders’ rabbit hole. 😀
Was there ever any doubt who runs the show?
https://youtu.be/NR3RqMMIwD4
How sinister is that 10 second clip…..
She is a convicted criminal…Seriously…
Article ends with reference to another article of the author’s, telling how to short the market.
Amazon’s employee count declines for first time since 2009
https://www.seattletimes.com/business/amazon/amazons-employee-count-declines-for-first-time-since-2009/
And Big media keeps blaming Amazon for killing retail. And notice how they are framing it as our fault somehow.. We are all just to lazy and obese now to leave the couch and go shopping. So retail is collapsing…smh!
Fracking may have caused one of South Korean largest earthquake – study
https://www.theguardian.com/environment/2018/apr/27/fracking-south-korean-earthquake?CMP=twt_gu
Government debt as % of GDP in Europe by country
https://i.redd.it/96qxnizi2bu01.png
who is that really big country at 17.4%?
does anyone know?
It is the oil companies that carry the debt in Russia.
Lack of debt in Communist countries has meant lack of economic growth. It is hard to add capital goods without debt.