The world’s weird self-organizing economy

Why is it so difficult to make accurate long-term economic forecasts for the world economy? There are many separate countries involved, each with a self-organizing economy made up of businesses, consumers, governments, and laws. These individual economies together create a single world economy, which again is self-organizing.

Self-organizing economies don’t work in a convenient linear pattern–in other words, in a way that makes it possible to make valid straight line predictions from the past. Instead, they work in ways that don’t match up well with standard projection techniques.

How do we forecast what lies ahead? Today, some economists believe that the economy of the United States is in danger of overheating. Others believe that Italy and the United Kingdom are facing dire problems, and that these problems could adversely affect the world economy. The world economy should be our highest concern because each country is dependent on a combination of imported and exported goods. The forecasting question becomes, “How will divergent economic results affect the world’s economy?”

I am not an economist; I am a retired actuary. I have spent years making forecasts within the insurance industry. These forecasts were financial in nature, so I have had hands-on experience with how various parts of the financial system work. I was one of the people who correctly forecast the Great Recession. I also wrote the frequently cited academic article, Oil Supply Limits and the Continuing Financial Crisis, which points out the connection between the Great Recession and oil limits.

Today’s indications seem to suggest that an even more major recession than the Great Recession may strike in the not too distant future. Why should this be the case? Am I imagining problems where none exist?

The next ten sections provide an introduction to how the world’s self-organizing economy seems to operate.

[1] The economy is one of many self-organized systems that grow. All are governed by the laws of physics. All use energy in their operation.

There are many other self-organizing systems that grow. One such system is the sun. Some forecasts indicate that it will keep expanding in size and brightness for about the next five billion years. Eventually, it is expected to collapse under its own weight.

Hurricanes are a type of self-organizing system that grows. Hurricanes grow over warm ocean waters. If they travel over land for a short time, they can sometimes shrink back a bit and grow again once they have an adequate source of heat-energy from warm water. Eventually, they collapse.

Plants and animals also represent self-organizing systems that grow. Some plants grow throughout their lifetimes; others stabilize in size after reaching maturity. Animals continue to require food (a form of energy) even after they stabilize at their mature size.

We can’t use the typical patterns of these other growing self-organized systems to conclude much about the future path of the world’s economic growth because individual patterns are quite different. However, we notice that cutting off the energy supply used by any of these systems (for example, moving a hurricane permanently over land or starving a human) will lead to the demise of that system.

We also know that lack of food is not the only reason why humans die. Based on this observation, it is a reasonable conclusion that having enough energy available is not a sufficient condition to guarantee that the world economy will continue to operate as in the past. For example, a blocked shipping channel, such as at the Strait of Hormuz, could pose a significant problem for the world economy. This would be analogous to a blocked artery in a human.

[2] The use of energy products is hidden deeply within the economy. As a result, many people overlook their significance. They are also difficult for researchers to measure. 

It is easy to see that gasoline provides the energy supply needed for our cars, and that electricity provides the power needed to clean our clothes. What is missing? The answer seems to be, “Everything that makes humans different from wild animals is something that was made possible by the use of supplemental energy in addition to the energy from food.”

All goods and services require the use of energy. While some of this energy use is easy to see, other portions are well hidden. Energy used in manufacturing and transport is most visible; energy used in services tends to be hidden.

Governments are major users of energy, both for their own programs and for directing energy use to others. Retirees get the benefit of goods and services made with energy products through pension checks issued by governments; researchers get the benefit of goods and services made with energy products through research grants they receive. Wars require energy.

Medical treatments are possible because of the availability of medicines and equipment made with energy products. Schools and books, as well as free time to study in schools (rather than working in the field), are possible because of energy consumption. Jobs of all kinds require the use of energy.

One thing we don’t often consider is that if energy supplies are growing sufficiently, they permit an expanding population. In fact, expanding population seems to be the single largest use of growth in energy consumption (Figure 1). Growing energy consumption also seems to be associated with prosperity.

Figure 1. World energy consumption growth for ten-year periods (ended at dates shown) divided between population growth (based on Angus Maddison estimates) and total energy consumption growth, based on the author’s review of BP Statistical Review of World Energy 2011 data and estimates from Energy Transitions: History, Requirements and Prospects by Vaclav Smil.

[3] Prices of energy services need to be low relative to overall costs of the economy. Falling energy costs relative to overall GDP tend to encourage economic growth.

Most economists expect energy prices to represent a large share of GDP costs, if energy is truly important. The statement above says the opposite. There are at least two reasons why low energy prices, and energy prices that are truly falling when inflation and productivity changes are considered, are helpful.

First, tools (broadly defined) used to leverage the labor of human workers often require considerable energy to manufacture and operate. Examples of such tools include computers, machines used in manufacturing, vehicles, and roads for these vehicles to drive on. The lower the cost to purchase and operate these tools, relative to the benefit of the tools, the more likely employers are to purchase them. If energy costs tend to fall over time, it becomes progressively easier to add more tools to leverage the labor of employees. Thus, employees become increasingly productive over time, raising the economy’s output of goods and services. For a similar reason, rising energy costs, if not offset by efficiency gains, present a barrier to economic growth.

Second, if the cost of energy production is low, it is easy to tax energy producers and thereby capture some of the benefit of their energy for the rest of the economy. If there is truly a “net energy” benefit to the economy, this is one way it gets transferred to the rest of the economy.

[4] There is indeed an energy problem, but it is not quite the same one that Peak Oilers have been concerned about.

The energy problem that Peak Oilers write about is the possibility that as easy-to-extract oil supplies deplete, oil production will reach a peak in production and begin to decline. Once decline sets in, they expect that oil prices will rise, partly because of the higher cost of production and partly because of scarcity. With these higher prices, they expect that producers will be able to extract at least a portion of the remaining oil resources. They also expect that higher prices will allow portions of the remaining natural gas and coal resources to be extracted. With higher prices, expanded use of renewable energy is expected to become feasible. All of these energy sources are expected to keep the economy operating at some level.

There are several problems with this story. First, it tends to encourage people to look for high oil prices as a sign of an oil shortage. This is not the correct indication to look for. Prior to 1970, oil prices averaged less than $20 per barrel. Comparing pre-1970 prices to today’s oil prices, current prices are already very high, at $75 per barrel. The idea that oil prices can keep rising indefinitely assumes that there is no affordability limit. Furthermore, a loss of energy consumption can be expected to reduce demand (because of its impact on jobs, productivity, and wages) at the same time that it reduces supply. If both supply and demand are affected, we don’t know which way prices will move.

Second, my analysis suggests that part of the story is that total energy consumption is very important, including oil, coal, natural gas, nuclear, and various forms of electricity. All of the attention given to oil has drawn attention away from the economy’s need for a range of energy types to keep devices of all types operating. Deciding to reduce coal usage because of pollution issues, or deciding to shut down nuclear because it is aging, has an equally adverse impact on the economy as reducing oil supply, unless the shortfall can be made up with other energy products of precisely the type needed by current devices.

Third, my analysis suggests that energy consumption per capita needs to rise for the economy to function in the way that we expect it to function. If world energy consumption per capita is too flat, we can expect to see many of the symptoms that the world has been experiencing recently: more radical leaders, less cooperation among leaders, slowing economic growth and increasing debt problems. In fact, wars are possible, as are collapses of governments (as with the Soviet Union central government in 1991). The current situation seems to be more parallel to the 1920 to 1940 flat period than it does to the 1980 to 2000 flat period.

Finally, with low energy prices rather than high quite possibly being much of the problem, there is a significant chance that oil and other production will decline because producers do not make enough profit for reinvestment and because oil exporting countries cannot collect enough taxes to fund the many subsidies that citizens expect. This makes for a steeper energy decline than forecast by Peak Oilers; it also reduces the possibility that high-priced renewables will be helpful.

[5] Part of the world’s energy problem is a distribution problem; the world becomes divided into haves and have-nots in many ways. It is this distribution problem that tends to push the world economy toward collapse. 

There are many parts to this distribution problem. One is the distribution of goods and services (created using energy) by country. Over time, this tends to change, especially as commodity prices change. Oil exporters are favored when oil prices are high; oil importers are favored when oil prices are low. The relative values of currencies can change quickly, as commodity prices change.

Another part of this distribution problem is growing wage and wealth disparity, as more technology is added. If there is too much wage disparity, low-paid workers often cannot afford adequate food, homes, and transportation for their families. Their lack of demand for goods made with energy products (because of their low wages) tends to work through the system as low commodity prices. This happens because (a) there are so many of these workers and (b) these workers tend to purchase a disproportionate share of goods and services that are highly energy-dependent.

[6] Debt-like promises play a major role in making the economy operate.

Taking out a loan allows an individual or business to purchase goods without saving for the purchase in advance. To some extent, taking out a loan moves up the timing of purchases. At times, it even permits purchases that otherwise would not be possible. For example, if a young person tries to decide between (a) working at a low wage until he has saved up enough to afford to go to college and (b) taking out a loan and going to school now, so his wages would be higher in future years, his optimal choice will often be scenario (b). The time would likely never come when the low-paid individual could save up enough wages to afford to go to college. If the young person strongly desires high wages, his optimal strategy would be to take the loan and hope that his future wages will be high enough to repay it.

If the goal of the economy is to produce an ever-increasing amount of goods and services, growing debt can very much help this growth. This happens because with more debt, more individuals and businesses can afford* to buy the goods and services that they want now. In a sense, debt acts like a promise of the future energy needed to make future goods and services with which the loan can be repaid. Thus, adding debt acts somewhat like adding energy to the economy.

Because of the way debt works, the economy behaves much like a bicycle, with growing debt pulling the system forward. If the economy is growing too slowly, the tendency is to add more debt. This solution works if a rapidly growing supply of cheap-to-produce energy is available; the additional debt can be used to create a growing supply of affordable goods and services. If energy costs are high, the goods and services produced tend to be unaffordable.

Figure 2. The author’s view of the analogy of a speeding upright bicycle and a speeding economy.

A bicycle needs to operate at a fast enough speed (about 7.5 feet per second), or it will fall over. Similarly, the world economy needs to grow fast enough, or it will not be able to meet its obligations, including repayment of debt with interest. If the economy grows too slowly, debt defaults are likely to grow, pulling the economy down.

[7] It looks like it should be possible to work around energy problems with improved technology, but experience suggests that this approach represents only a temporary “fix.”

There are two issues that make improved technology less of a solution than it appears to be. The first is diminishing returns. For example, if a business faces a choice between (a) paying a worker to perform a process and (b) adding a machine that can perform the same process, the business will tend to make the changes that seem to provide the largest cost savings first. At some point, as more technology is added, capital costs can be expected to become excessive relative to the human labor that might be saved. The issue of the diminishing returns to added complexity (which includes growing technology) was pointed out by Joseph Tainter in The Collapse of Complex Societies.

The second reason why added technology tends to be only a temporary solution is because it tends to lead to wage disparity. Wage disparity has a tendency to grow because of the greater specialization and larger organizations needed to coordinate the ever-larger projects. The reduced purchasing power of those at the bottom of the hierarchy can eventually bring an economy down because it can lead to commodity prices that are below the level needed to maintain the extraction of fossil fuels. Fossil fuels are required to maintain today’s economy.

[8] Renewable energy has been vastly oversold as a solution. What is needed is an ever-increasing quantity of inexpensive energy in forms that match the energy needs of current devices. 

The wind and solar story is far different from the story presented in the press. Essentially, wind and solar are extensions of today’s fossil fuel system. The evidence that they are truly beneficial to the economy is shaky at best. We know that if energy sources are truly transferring significant “net energy” to the system, they generally can afford to pay high taxes. The fact that wind and solar require subsidies raises questions regarding whether standard calculations are providing accurate guidance. The press rarely mentions the high tax revenue that high oil prices make possible, worldwide. Tax revenues largely support many oil exporting countries.

Furthermore, the share of the world’s energy supply that wind and solar provide is very low: 1.9% and 0.7%, respectively. They are shown in the almost invisible blue and orange lines at the very top of Figure 3. Fossil fuels contributed 85% of total energy supply in 2017.

Figure 3. World energy consumption divided between fossil fuels and non-fossil fuel energy sources, based on data from BP Statistical Review of World Energy 2018.

[9] The world economy becomes very fragile as energy limits approach.

Energy limits seem to be affordable energy limits. Oil prices need to be high enough for exporting countries to obtain adequate tax revenue. In addition, oil producers need prices that are high enough so that they can make the necessary reinvestment, as fields deplete. At the same time, energy prices need to be low enough for consumers to afford goods and services made with energy products.

Much of developed world’s infrastructure was built when oil prices were less than $20 per barrel, in inflation-adjusted terms. A rising price of oil will lead to a higher cost of replacing roads and pipelines. If these were built using $20 per barrel oil, even a current price of $40 per barrel would represent a significant cost increase. The world has experienced high oil prices for sufficiently long that we have collectively forgotten how low oil prices were between 1900 and 1970.

Most people know that the earth holds a huge quantity of energy resources. The problem is extracting these resources in a way that is both affordable to consumers and sufficiently high-priced for producers. Falling long-term interest rates between 1981 and 2002 allowed the world economy to tolerate somewhat higher oil and other energy prices than it otherwise could because these falling interest rates permitted ever-lower monthly payments for a given loan amount. For example, if interest rates on a $300,000 mortgage would fall from 5% to 4% on a 25-year mortgage, monthly payments would decrease from $1,753 to $1,584. The lower interest rates would allow more people to buy homes with a given size of mortgage. Indirectly, the lower mortgage rates would permit additional new homes to be built and would allow more inflation in home prices. These benefits would at least partially offset the adverse impact of high energy prices.

Since the natural decline in long term interest rates stopped in 2002, the world economy has become increasingly fragile; the Great Recession took place in 2007-2009, when oil prices spiked and long-term interest rates were already low by historical standards. It was only when the United States’ program of quantitative easing (QE) was put in place that long-term interest rates could fall to even lower levels, helping the economy hide the problem of high energy prices a little longer.

The artificially low interest rates made possible by QE have problems of their own. They tend to inflate asset prices, including both real estate prices and stock market prices. Thus, they tend to create bubbles, which are prone to collapse if interest rates rise. Artificially low interest rates also tend to encourage investment in schemes with very low profit potential. Artificially low interest rates also encourage cross-border investments to try to take advantage of interest rate differences. If interest rate relativities change, the money that quickly would enter a country can almost as quickly leave the country, causing major fluctuations in currency relativities.

Regulators do not understand the role that physics plays in making the economy operate as it does. They assume that they, alone, have the power to make the economy behave as it does. They do not understand how important falling interest rates are in creating growing demand for goods and services. The economy, since 1981, has spent most of its time with falling interest rates; the most recent part of this decline in long-term interest rates has been made possible by QE. These falling interest rates have played a major role in disguising the world’s long-term problem of rising energy costs. These rising energy costs are taking place primarily because the cheapest-to-extract resources were produced first; the resources that are left have higher costs associated with them, for a variety of reasons, such as being farther away from the user, deeper, or needing more advanced extraction techniques. These issues have not been sufficiently offset by improved technology to keep extraction costs low.

US regulators now want to raise interest rates by raising short term interest rates and by selling QE securities. They don’t understand that they are playing with fire. If they can raise interest rates now, they will have the flexibility to lower them later if the economy should later slow excessively. They think that the higher rates will give them more control over the economy. They don’t understand how much of the world’s economy may really be a bubble, created by the decline in interest rates since 1981.

[10] The adverse economic outcome we should be concerned about is collapse, as encountered by prior civilizations when their economies hit limits. 

The stories in the press have been so focused on oil “running out” and finding alternatives to oil that few have stopped to ask whether this is really the correct story. Instead of creating a new story, it might have been better to look more closely at history. Based on the historical record, collapse seems to have been associated with situations where populations have outgrown their resource bases. In other words, collapse can be considered an energy consumption per capita problem. The oil problem (and other fuel problems) we are facing today can be viewed as an energy consumption per capita problem, as well.

We know from research that has been done by Peter Turchin, Joseph Tainter, and others how collapse has played out in the past. The situation is different this time, however, because the world economy is very interconnected. Oil consumption depends on electricity consumption, and vice versa. Our financial system is also extraordinarily important. For these reasons, a collapse may occur more quickly than in the past.

Differences Between My View and the Standard View

One of the big differences between the way I see the economy and the standard view of the economy is the answer to the question of “Who is in charge?” The standard view is that politicians and economists are in charge. They have all of the answers. The dire collapse outcomes that afflicted early civilizations could not possibly affect us. We are too smart. We know how to adjust interest rates correctly. We can even make QE available to lower long-term interest rates. We can also add more technology and other complexity than has ever been added in the past.

The answer I see to the question, “Who is in charge?” is, “The laws of physics are in charge.” Politicians play a fairly minor role in directing the fate of economies. If there is not enough energy available of the type needed (inexpensive and matching the current infrastructure), the economy may very well collapse. It is nature and the laws of physics that call most of the shots.

Another big difference between my view and the standard view is the observation that a decrease in oil supply (or total energy supply) affects both the supply and demand of energy. Because both supply and demand are affected, we don’t know which direction oil and other energy prices will move. They may move erratically, as interest rates are adjusted by regulators. A more complex model is needed.

Climate change becomes less of an issue in my view of the future, for several reasons. First, humans don’t really have very much control over the direction of the economy, so talking about anthropogenic climate change doesn’t make a whole lot of sense. The laws of physics that allowed human population to rise are also allowing climate change to happen. Second, we seem to be limited in our ability to use renewables to fix the situation. Furthermore, the possibility of collapse in the near future makes the various scenarios that hypothesize the use of large amounts of fossil fuels over many years in the future seem very unrealistic. Perhaps efforts to fix climate change should be focused in new directions, such as planting trees.

Help from Others

The subject matter of this post requires the knowledge of information from a wide range of academic areas. I could not have figured out all of this information on my own. I have been fortunate to have been able to learn from of a wide range of experts. Quite a number of academic groups have seen my articles, and invited me to speak at their conferences. In particular, I have had a long-term involvement with the BioPhysical Economics organization and have spoken at many of their conferences. I have learned much from Dr. Charles Hall, although at times I don’t 100% agree with him.

I have also learned from the many commenters on OurFiniteWorld.com. They form a self-organizing system of people from a wide range of backgrounds. Earlier, my involvement at TheOilDrum.com as “Gail the Actuary” allowed me to get acquainted with a range of researchers, looking at different aspect of the energy problem.

In future posts, I intend to expand further on the ideas presented in this post.

*Here I am using the term afford loosely. What borrowers can actually afford is the current required monthly payments.

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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2,524 Responses to The world’s weird self-organizing economy

  1. Fast Eddy says:

    Let’s get BD’s excellent post up on this new article…. let’s pound the DPs over the head with this …. not that it will do any good…. this goes in one ear … past the rocks… and out the other….

    Prepping is futile

    Myth: Well-prepared individuals, groups, and communities will survive our impending collapse and maintain healthy, fulfilling, and productive lives in its aftermath.

    Reality: Those who survive our collapse will be those who can obtain sufficient life sustaining essentials—especially clean water and food—on a continuous basis, both during and after collapse. Those who store large quantities of these essentials and those who attempt to produce food, either individually or in communities, will be easy targets for the vast majority who have neither the foresight to store nor the skills to produce. No matter how remote or secluded your sanctuary, somebody will know about it; and they will come to call when they become desperate; and they will be well armed and devoid of compassion. You can prepare for a last stand, but you cannot prepare for post-collapse survival. Post-collapse Life Will Be Preferable to Our Industrial Lifestyle Paradigm

    Myth: Industrialization has brought nothing but misery and degradation to the human race; our quality of life (and spiritual wellbeing) will improve substantially in a post-collapse world.

    Reality: The post-collapse lifestyle awaiting the few who survive will, under the best of circumstances, share many attributes with pre-Columbian America. Unfortunately, the realities associated with subsistence level existence bear little semblance to the Hollywood accounts. Those who anxiously await our post-collapse world will be disappointed, assuming they live to experience it. The fact that nobody is opting to jettison the amenities afforded by an industrialized way of life in favor of a hunter-gatherer lifestyle today should be sufficient proof that our future way of life is not something to be anticipated. Industrialism is not inherently “evil” or immoral; it is simply physically impossible going forward.

    • Rodster says:

      It will be the haves vs the have-not’s and the have-not’s are typically not the friendly type but instead the ruthless type. Or to put it another way “when people lose everything and have nothing else to lose….THEY LOSE IT !”.

      If someone is a DP’er best not let on cause people will target you when angry, violent people are desperate.

  2. Ed says:

    I’m going to have my AI do the hunting and gathering for me.

  3. Baby Doomer says:

    BP questions pace of US tight oil growth as productivity fades –Platts

    “It does perhaps suggest that the very rapid increases in tight oil productivity that characterized much of the initial phase of the shale revolution may be beginning to fade,” Dale said.

    “More recently, increasing bottlenecks within the supply chain, together with signs that investors are becoming less willing to finance continued high levels of investment, suggest there may be some limits to the speed with which tight oil can grow going forward,” he said.

    https://www.spglobal.com/platts/en/market-insights/latest-news/oil/061318-bp-questions-pace-of-us-tight-oil-growth-as-productivity-fades

    • Davidin100millionbilliontrillionzillionyears says:

      it doesn’t need to grow…

      demand will be shrinking in the 2020s…

      the world won’t be able to afford to use more oil…

      • Baby Doomer says:

        Yea right..Asia’s per capita income has increased five fold over the last 30 years..And even in Africa the world worst preforming economy, their per capita incomes have doubled..

        • Duncan Idaho says:

          Lack of supply as prices increase will retard use.
          But the cheap stuff is about gone.

  4. There will be an equilibrium.

    After most of the world’s less economically productive people are downsized, survivors will form a new normal.

    • The equilibrium could be very low, however. It could be at zero. Or it could be at a few hunter-gatherers.

      • Ed says:

        This is a fascinating question what will the world on the other side of the bottle neck look like? Alas, I think it is too complex a situation for anyone to predict. We can of course, spin stories which offer ideas about the outcome.

        I expect humans will still have the use of metals and chemical poisons for warfare. Land possession will be possession of the means of production of food. There will still be a hierarchy of rich over poor. With poor hived off in the various traditional methods.

      • Artleads says:

        So the economy fluctuates? Venezuela, Greece, PR have fallen behind and are unlikely to return to the mainstream. Some other places are getting into the mainstream. The global economy has to grow and is growing. The deterioration of the fuel economy means that the mainstream is struggling even while growing. What will be the point where the mainstream stops growing? Will everything fall apart, or will there be a way to prevent that?

  5. Pingback: The world’s weird self-organizing economy | Achaques e Remoques

  6. Fast Eddy says:

    May I interrupt the opprobrium directed at Pauliver…. with a few words….

    I’d like to say….. uh hum…. I’d like to say….. (snicker snicker)…. I’d just like to say …. f789 you Pauliver….

    You know why?

    Because in the physical world when I encounter someone like you I have to grin and bear the f789ing idi iocy the spews out the blow hole…

    Because to question the id iot — results in bad feelings… because there is no questioning a green groopie DelusisTANI… they know it all … they have all the facts… and they get pisssed if one tosses a bit of fact or logic that challenges their beliefs…

    Madame Fast sometimes asks me why we have to shut the f789 up in these situations… and listen while a DelusiSTANI pours pissss and shiiiit on us…. and I say Madame Fast…. we don’t want this to end up in a fight do we… and if we challenged everyone who thrives on this BS…. I’d bust my hand and I could not type/work… and you’d ditch me and I’d be left dumpster diving out back of Ferg Burger to stay alive …. She gets that.

    Alas we are not in the physical world… so all this pent up frustration can be unleashed… with no consequences.

    Isn’t it great?

  7. Shane says:

    I have really enjoyed how Gail has gradually refined and extended her understanding of this central issue over the years. This article feels like a significant step forward in developing the model. The big unknown as I see it lies in the systems capacity to fragment as the collapse progresses. As they say, the future is already here, it just isn’t evenly distributed. The wildcard in my mind would be if the USA or another major oil importer like China or Japan collapsed first, taking out its demand from the world market and freeing up spare capacity for a period of time for other importers. The other big question for each nation is the ability to come together and adapt to challenges, versus fragmenting and potentially falling into conflict. Cultural homogeneity may be key here, giving places like Japan an advantage while the USA seems more likely to balkanise. For industrial societies that do hold together politically there is a large amount of fossil fuel demand that could be eliminated in favour of maintaining basic necessities to sustain life at a subsistence level.

    • Thanks for your comments. I have been thinking that I need to pull things together in some form. Putting my thoughts together in this form at least gives a first pass at something that might be expanded into a book. (I am not certain that this piece, the way it stands, would be in a book, however.)

      A major problem with a book is the long time-frame needed to write and publish the book. Another issues is all of the “hoops” one normally has to jump through in the process, especially with the large number of images involved. The comments on this post (here and on forums such as Facebook and LinkedIn) give ideas as to what topics need to be covered at greater length.

      I think all of the tariff changes reflect the underlying issue that there no longer are enough cheap-to-extract fossil fuels to go around. Some countries need to be eliminated from the competition, if a partial system is to continue to operate. The US sees itself as ahead at this time. If it can play King of the Mountain, and push others down, perhaps it can last a bit longer. The EU and Japan are clearly very weak, with their lack of fossil fuels. China has a major problem with coal. The cost of extraction has risen with depletion; it also is very polluting, both nearby and with respect to CO2. China likely cannot handle the debt it currently has. The Middle East is likely to see political collapse, with low oil prices. But how long could the US last without the others? I don’t think very long. Where would we obtain all of our needed replacement parts, for example? At a minimum, we need Canada with the US, for its bitumen.

      • Rodster says:

        “The Middle East is likely to see political collapse, with low oil prices. But how long could the US last without the others? I don’t think very long. Where would we obtain all of our needed replacement parts, for example? At a minimum, we need Canada with the US, for its bitumen.”

        The global eCONomic system is too interconnected for it to all stay together if one of the pieces is removed, let alone a MAJOR player. Just look at all the turmoil a little country like Greece caused the markets when it threatened to default on it’s EU loans a few years ago. The US collapsing would be Greece x1000.

        • Dan says:

          I’m not entirely convinced this is true but the naïvety of most politicians and economists in regards to energy and money / debt is very disconnected. The Bush / Cheney administration clearly knew that energy security is badly needed and the importance for the US to gain that advantage is pivotal to how long we can hold the proverbial mountain top. Granted I was no fan of the admin (I hate them all because they all lie and steal irregardless of party) and in Bush they lied their way into Iraq after all of Cheney’s secret WH energy meetings with the big oil. They tried to make it a war against “evil doers and terrorists” when everyone knows it was about the oil. As a result the narrative was lost and ultimately the objective was lost due to the truth being lost.

          The US at the end of the day doesn’t care about Israel it’s nothing more than a landbased aircraft carrier for the US to dominate the ME in pursuit of oil flows / security. When we go to war with Iran and we will it will be for the oil as it is always about the oil, it will be framed as something else. If the peons knew how temporary and futile everything is at this point there would be torches, pitchforks, and a massive purging in the streets tonight.

          Tic Toc

          • Rodster says:

            “If the peons knew how temporary and futile everything is at this point there would be torches, pitchforks, and a massive purging in the streets tonight.”

            And that’s why the US Gov’t purchased several billion rounds of hollow point bullets just for that scenario when the plebs took out their pitchforks and yelled: “THERE THEY ARE”

            • Dan says:

              Hence the absolute need to keep BAU going as long as possible no matter what it takes. Bear in mind this latest move is 2 days worth of BAU here at home – every little bit is a day longer. I’m sure TPTB are aware that their troops and police require massive amounts of fuel to fight against the hoards – case in point in Iraq it was 16-17 gallons per day per troop. It won’t be long before it comes down to ground level.

              In response to billions of hollow pointed rounds I speak as a former USMC 2311 (ammo tech) bullets are heavy even small rounds in quantity. They have to be stored and distributed. The average grunt carries enough to last about 10 minutes in a straight up gun battle. They will have to stay close to their supplies. The military and the police will be impotent with a country in turmoil and rightly targeting them if they make the poor choice of defending the elites. Best to starve with the rest of us.

              https://www.zerohedge.com/news/2018-07-13/trump-may-tap-30-million-barrels-spr-halt-rising-gas-prices

            • Fast Eddy says:

              No doubt there will be a few weeks… just prior to the end of BAU… where riots and extreme violence grab hold of the US…. and the bullets will fly…. in a last ditch effort to extend civilization a little bit longer.

              The positive here is that because BAU will be alive and kicking…. we will get to watch all this on the tee vee…. It will be very entertaining.

        • Good points!

          Just look at all the turmoil a little country like Greece caused the markets when it threatened to default on it’s EU loans a few years ago. The US collapsing would be Greece x1000.

          Think about Deutsche Bank failing. That seems to come up frequently now.

      • the bottom line is:

        that all nations (politicians anyway) think its an economy/trade/money problem

        whereas its an energy problem, and no politico dare admit to that even if they know it—so they to repeat the ”economy” mantra over and over

        • Ed says:

          Basic rule of “leadership” never mention a problem you do not have a good solution for, it only makes you look incompetent and lands people fears and anger on ones self. For example Jimmy Carter and his sweater.

          • which is why i was self employed for 40 years

            • Duncan Idaho says:

              Yea, I was self employed at least that long also. Kinda separates the men from the boys—-

            • i went that way for 2 reasons

              i was the worlds worst employee

              and the worlds worst employer

              dont leave much choice does it—but you feel a lot safer going it alone

            • Artleads says:

              “i was the worlds worst employee

              and the worlds worst employer”

              You’d have to come good to get past me. Just the same, there were very small interludes when I was a good employee–working as site manager for a community gallery and teaching their summer school. I was a good employer running my own nonprofit, paying the employees the same as myself, trusting them implicitly, admittedly dependent on their skills and judgment… The strong/weak leader.

          • I guess I should stop mentioning the problem our self-organizing economy is having then.

            Related to killing the messenger bearing the bad news.

            • Tim Groves says:

              It’s fine to keep mentioning the dilemma, as a service to that tiny group of people who want to listen, read and talk about it. But don’t expect to get much recognition from the controllers, the elites, the media or the masses.

              Doubtless the controllers already know the extent of the dilemma but are not about to come clean about it. If they have any solutions prepared, they are going to try to implement them surreptitiously, clandestinely, on the sly, while keeping everybody else distracted.

              Running out of affordable energy is one thing, but running out of hope for a decent future is even worse. What happens if all those average decent hard-working people are made aware of the stark facts and they come to the conclusion that there is no point in being decent or working hard anymore?

            • This is one reason for not trying to sell a best-selling book on the subject. A few university-educated intellectuals can discuss the dilemma fine. Trying to transfer the knowledge to the general public has a great deal of perils attached.

            • yup

              i’m thinking of going over to the other side

            • Artleads says:

              Tim Groves,

              “Doubtless the controllers already know the extent of the dilemma but are not about to come clean about it. ”

              I don’t see how they can understand that which is beyond understanding. They can guess, or they can arrogantly plunge ahead with mistaken views they, by definition, are saddled with. Just like the rest of us. Well, at least some of us know we don’t and can’t know.

              The masses are at least part of a self organizing system, and their being better informed would nudge the system in a perhaps saner direction. Which is where the notion of beauty might help. When faced with a dilemma, follow beauty.

            • People can understand when they don’t have enough money at the end of the month. In a way, that is all that they need to know.

              When we have lots of spare energy, we can add lots of do-good programs. When energy supplies are scarce, the leaders who get elected are ones who advocate getting rid of these do-good programs. They are no longer affordable. Nature seems to try to provide an outcome (as much as possible) in a way that perhaps some can live, even if not everyone.

            • John Doyle says:

              The financial world doesn’t behave logically. As Keynes said [more or less] ” The market can be fickle far longer than you can stay solvent” The federal governments can raise money through spending theoretically without limit. When push come to shove, that is what they will do. Bet on it.
              Anything for one more day of BAU.

            • “Spending theoretically without limit” does, in fact, have limits. Venezuela has reached these limits. A lot of other countries may reach these limits as well.

            • John Doyle says:

              That’s why I said “theoretically”. Real resources are the limits. Somehow the financial world seems to get away without having to face limits [?]. It’s all down to insurance schemes which is what derivatives and other financial instruments are getting money out of. $583 TRILLION is the latest figure put onto it [although an earlier guesstimate was $1.4Quadrillion] It makes the $29Trillion spent by the Fed from 2008 -10 a trifle. The whole business is Off the books which is why it’s all guesswork.
              It would be simple to crash it. Just declare the whole game off limits and unclaimable, like a jubilee. Of course we don’t have any government with the balls to take action. But no bank is too big to fail, when the time comes, and not too far off now.

            • Artleads says:

              “People can understand when they don’t have enough money at the end of the month. In a way, that is all that they need to know.”

              Point taken. Maybe that’s the whole story. I don’t know. But since people do just about nothing now that could help with resilience–which they might if they saw beauty and status in their grandparents’ more durable lifestyles–ignoring the beauty in that earlier lifestyle could be forfeiting an opportunity to help make for general resilience in “hard” times. If you don’t talk about those hard times, and associate beauty with the “solution,” we have fewer rather than more people working for resilience in social structures.

            • I have very little hope that working on resilience gets us anywhere.

              Some people believe that if they personally, can have solar panels, it will help them. I can almost see that; at least I can understand why they might believe that, even if it won’t likely be true for most people.

            • Artleads says:

              Not solar panels at all. More like your starchy root crops cooked over a coal stove, leaving trees be, walking to places, demolishing nothing, building nothing, allowing abortion (which can be done safely through planning). These are places that are being thrown off the bus anyway. They have no other option than to love “scarcity.” If they see the beauty in scarcity, that would help them to adapt. Cuba’s is high society compared to the lifestyle I’m recommending. But Cuba points (pointed) minimally to the implied direction. Cuba didn’t adequately celebrate the beauty of scarcity.

            • Tim Groves says:

              Artleads, thank you. I like your ideas and I see the intention behind them is to try to build “resilience” so that if and when the world economic system crumbles, there will be national or regional or local community structures in place to provide people with the basics for a life that’s worth living.

              I think this sort of thing may work in some places and even if it doesn’t work, I think it’s still worth making the effort, just in case. We—the general “we”—may think we know how things are going to pan out, but in practice most of us are going to be surprised with what the future brings. In any case, the futility of an exercise is no excuse for not giving it our best shot.

            • Artleads says:

              Tim Groves,

              Thanks! Something like that. A boss of mine once said, “The universe rewards effort.” As far as I can define anything (including the universe ;-)), this is true.

            • Artleads says:

              Correction: “…so that if and when the world economic system crumbles, there will be national or regional or local community structures in place to provide people with the basics for a life that’s worth living.”

              I don’t claim to have a good take on the Leonardo Dome. But it’s a fairly convenient analog for the following: If you can’t remove a stick without the whole collapsing, we wonder why not rig up a replacement stick for a faulty one, replace the pressure of the faulty stick by hand while moving it and sliding a replacement in, all without leaving the dome unsupported. But this might not be the exact issue.

              Somehow, a large portion of the system has been pushed aside so that the system can work without it. That’s the section I’m interested in. There’s no loss to the system (the dome) by these marginal places consuming much less. (Apparently, it leaves more for the core itself to consume.) If these places can be made viable (and “attractive”!) people in the mainstream economy might be inclined to adapt some of their culture just the right way that it would come in like a replacement for faulty dome sticks. (A process that is self organizing, of course.)

              In that sense, the above quote might still be true.

            • I think that Trump is trying to move in the direction you are talking about.

              It is hard to go backward (move away from globalization and remove protection for the disabled) for example, but these are ways money (really energy) can be saved so that the rest of the population can go on longer.

              I was talking to someone today who told me that the two new buttons that the handicapped can use to open the doors to the restrooms will cost $3,000 apiece (one for the men’s room, one for the women’s room). If that requirement is removed, it will make building and renovating buildings like churches cheaper.

              If affirmative action is removed for schools, children can attend schools closer to their homes. Some will be able to walk to school. Bus rides, on average, will be shorter, so fuel will be saved. Schools will be more segregated, but desgregation was a benefit of cheap oil.

              I am sure that there a bunch of going-backwards ideas like these that would save energy. But once people have come to see the benefit, they will have a terrible time adapting to a more unequal world.

              Getting rid of globalization means much less choice of products, and higher prices for what are available. Will people accept this?

            • i can’t think of any physical improvement in human living standards that have not required energy input

              here in UK, the disabled have electric buggies if they can walk—which is to be applauded of course

              but at the same time the energy needed to do that is colossal on a national scale—eventually the means to do this will run out

            • meant can’t walk—sorry

            • Artleads says:

              I don’t see “unequal” as a problem. It exists in a major way now. So does inequity, which I understand is where the real problem lies. If we can get rid of some inequity, things might work better. Equality is affected by value judgments, after all. But I haven’t looked into the exact definitions of “equity.”

              I like what Tim Groves says here: “…there will be national or regional or local community structures in place to provide people with the basics for a life that’s worth living.”

              A life worth living is what I see as the main thing.

              Equitable segregation might be where people control their own land?

        • Greg Machala says:

          That’s true Norm. Saying we have an energy problem sounds rather terminal.

      • Ed says:

        Gail, you say “we need Canada with the US, for its bitumen”. I am quite sure Canada has no choice in this. Canada is with the US like it or not. No Chinese, Russian, nor EU troops will be allowed in Canada. It is also in the interests of Canada to have an intact function neighbor to the south.

        Maybe we should start to think about blocks. US/Canada, China/Russia+Iran, ??/KSA.

        • Duncan Idaho says:

          You kinda got to lose nationalism– it is collapsing.
          ism’s are generally bad- racism, sexism, etc– well even the diminished can get a glimpse.

          • Ed says:

            Pools of energy resource controlled by people with weapons will be the order of the day.
            The dictator of US (who is that FE?) controlling Canada’s energy
            The dictator of China controlling Russian and Iranian energy
            The dictator of ??? controlling KSA energy

        • Artleads says:

          Where would Central and South America fit? China is very present there.

        • I think you are correct about blocks of countries that might be allies.

          I think Europe and Japan are likely losers in this.

        • milan says:

          I work in the oil and gas industry in a none elite role and had the pleasure of meeting a former executive who at one time worked in the Alberta oilsands. This of course perked my interest and had to ask him how many years did he think there was left of oil to extract up there? He replied about 20 years left. Wow, I thought too myself that’s it and then he replied that the Alberta oilsands was a strategic reserve of the United States. If anything should happen to the Middle East that is where America will go for oil. It is why all of the American oil companies are up there. Needless to say I was floored.

  8. Luis G de la Fuente says:

    Very interesting thoughts…

    No doubt, the chaotic attractor we have been living for the last 40-50 years (probably since the end of the gold standard) may be coming to an end.

    Debt becomes too high for homeostasis to keep adjusting, and we´ll suddenly jump into another, different attractor with different rules: kind of a different world.

    But why should that be bad? Its the kind of event that we may need to finally discover a profitable way for nuclear fusion. Or may be the system is ‘waiting’ for that event to happen.

    That would mean the end of energy problems forever, a new non finite World 🙂

    • A major problem is that even if we figured out tomorrow how to do nuclear fusion, that does not create an all-electric economy for us. Also, it doesn’t scale up quickly, based on past experience. So a miracle tomorrow likely cannot fix our problems.

      • Duncan Idaho says:

        nuclear fusion is kinda like the speed of light- a constant.
        Viewed from 1950, or 2018, it is always 20 years away.

    • Greg Machala says:

      “That would mean the end of energy problems forever” – I hope that is a joke. This seems to be a common misconception folks have about energy. Once the devices (solar, nuclear and wind turbines) are built they will last “forever”. So all we have to to is build these magical devices and revel in an electrical utopia.

      Secondly, fusion is essentially electricity., it does not replace what liquid fuels do for us. It does not build the infrastructure we need to convert everything to run on electricity; if that is even possible. So, it is not the end of our energy problems. And certainly not “forever”.

      • there are certain sectors of human kind who will never understand that you can’t build a tarmac road from the output of a fusion reactor.

        and if you cant build roads, then EVs are a waste of resources

        but keep trying Greg

      • doomphd says:

        you are missing the important point that fusion will produce abundant electrical energy that can be used to do presently unprofitable operations, like converting CO2 and H2O into methane. Methane (CH4) is a starting point to make other hydrocarbons. One could make a synthetic light hydrocarbon liquid fuel, to fly planes. I doubt that one would go all the way to asphalt, but i recall we still have an abundance of the heavy hydrocarbons that can be used to make roads and parking lots, roofing tar, etc.

        • all or at least some of that is possible–maybe,

          however you miss the big hurdle(s)

          fusion power is so far a theory that has not yet been proven in commercial practice.

          that being the case it seems unlikely to be made practical in less than 50 years on a world scale—and in that i think i’m being optimistic

          but lets say it’s feasible

          A functioning industrial environment such as we have now is entirely supported by fossil fuels–just as are conventional fission reactors
          We cannot build fusion reactors without our current industries

          We might–just might–have 30 years of such an system left —not before ff’s run out, but before fighting over whats left destroys any sophisticated industrial system. There will be no post war rebuilding next time.

          The current antics of the USA might just be the first shocks of that–Herr Trump is the product of a desperate delusional denialist people, who have unrealistic expectations of a future dreamworld and want it NOW—let alone find the resources to build fusion reactors. When the Don doesn’t come through with his promises, all hell is going to break loose. Because the economy will nosedive.

          A nation has just so much resource available–diverting stuff to built new reactors might just tip the nation into total destitution—consuming itself in order to sustain itself

          (eating its own tail–to explain it more simply)

          This isnt the 1940s all over again, and the manhattan project—tho many see it in that way. They are going to be sadly, badly disillusioned.

          If you get through those problems, you are left with actually supplying food to everybody, from depleted land/.water and a population that’s going to hit 9 or 10 bn if left unchecked.

          Other than that—I wish you the best of luck

          feel free to correct anything Ive said—I want to be wrong as much as you want me to.

    • hold my hand Luis and we’ll jump together

      are you familiar with the attraction of gravitational forces on Wile Coyote?

      • JT Roberts says:

        It’s not the fall that kills you. It’s the sudden stop. Kinetic energy is a good analogy for what’s coming. That’s why all efforts are focused on maintaining momentum.

        It’s the stop that kills.

        • am glad you pointed that out before i hit the ground

          coulda been very messy

        • Fast Eddy says:

          ‘That’s why all efforts are focused on maintaining momentum.’

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

          This is why — when we do smash into the wall — the CBs will not ride to the rescue again — they will have used up every trick in the book trying to keep us on the rails and rolling….

          The next time around there will be no electric shock paddles to the chest…. this heart attack will be massive, and fatal

    • Fast Eddy says:

      Koombaya to that Luis… I am with you…. let’s do it!

      BTW – are you snorting ketamine? It has this kind of effect….

  9. Initially I did not pay attention to it, guessed it was just pre-summit stunt, and PR for the home audience (“taxpayer”), but if you actually look at it, he really is enough buffoon to spill the beans out there, especially in the concluding part.

    • And on German TV in opening remarks:

      • theblondbeast says:

        It’s a pretty good point in my opinion. Why should we protect Germany from Russia militarily if Germany decides to expose itself to Russian reprisal through reliance on Russian gas?

        Stopping the protection may make more sense than forcing them to buy gas they can’t afford (and we can’t ship profitably).

        • Well, firstly we don’t know if the fact Germany/+NATO(European leg) have been paying way less throughout the decades was a bug or a very deliberate feature. Since one of the working theories is that the owners of global CBs cartel are predominantly European based bunch and the US is just the host animal – bully.

          I’m not disagreeing with you, but with posting the video aimed more on the surprising fact, such geopolitical matters (energy over alliances or trade) are now exposed in the plain open like another football match. Similarly, when watching that, Google offered me link to very cheesy msm hit piece on demonique Russia supposedly meddling in 2016, but to my another surprise-astonishment, they concluded it basically by voicing and mixing the critics of deep state with old intelligence honcho basically admitting, deep state ok as long as have to face such treacherous enemy..

          If you stand back a bit, that’s all very astonishing development and ~1963 style riot material, which sadly never happened. Evidently we are getting closer to some resolution or at least new temporary era.. when such stuff starts sprinkle out..
          Good to be around.

          Not worth watching but for some of the buffs rewind it to the last third or so..

          • Fast Eddy says:

            The Germans need to decide which ring to kiss … which master offers the most … they cannot kiss both

        • Duncan Idaho says:

          Surely you are joking?

      • Two comments:

        1. I am sure that the Nordstream issue is about wanting to get rid of Russia as a competitor for selling natural gas to Germany. US natural gas prices have been too low for a long time, and US producers have been wanting to export LNG to Europe for a long time, to drive the US natural gas price up (because of scarcity). The latest US natural gas price is about $2.75 per MCF. In energy value, this equates to a cost of about $16.50 per barrel of oil. (So any sensible person would substitute natural gas for oil, where ever it is an option.) If I look at BP’s latest Statistical Review of World Energy, Germany’s average price of imported natural gas was $4.93 per MCF in 2016 and $5.62 per MCF in 2017. The problem is that shipping natural gas as LNG is expensive–I forget the price range, but I am fairly certain that it is generally in the $4 per MCF range. So, just to cover the current price in the US, the German price would need to be at least $2.75 + $4.00, or $6.75. Back a few years ago (when oil prices were higher), Germany’s natural gas price was in the $10+ range. If it were in the $10 range, then the US could perhaps sell the gas for $6.00 per MCF for natural gas, and still pay the shipping charges of $4, based on the $10 total cost. And of course, getting rid of some of the excess supply at $6.00 would also drive up the US prices, so that natural gas producers could get a higher US price. I am sure that a $6 price in the US would make natural gas producers a whole lot happier as well.

        2. Regarding all NATO countries spending more on defense, the US is a big supplier of armaments. This would help fuel US exports.

        • Yes, but this reveals and confirms the wider “deny/block” powerplay on global scale, for example why is necessary to block Qatar/Iran natgas pipeline to the ClubMed via Syria etc. Not mentioning the whole charade of 2001, explainable only as an over reaction to early peakers (threat of hard peak prior ~2010), or perhaps cunning pre-positioning of energy control domination before allowing the final hockey stick stage occurring n China since 2000s..

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