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. Duncan Idaho says:

    Happy Bastille Day Comrades!
    We got rid of the Kings and Queens (kept a few symbolically ), but were captured by Capitalism, which is failing as our ecosystem is in collapse.

    • Sven Røgeberg says:

      A fossil fuel based economy is a more basic category than both capitalism and socialism. A good read: https://www.amazon.com/Foragers-Farmers-Fossil-Fuels-Values/dp/0691160392

      • I discovered that quite a sizable piece of this book is available through the “Read More” part on Amazon.

        • Fast Eddy says:

          Arghh… its not on Audible… and I have shrunk my brain to the point I am unable to read a print book

      • Duncan Idaho says:

        True– Its just capitalism’s dominance, and its business model that ceases to function without expansion– but any system based on a vertical, hierarchal structure will eventually get taken over by sociopaths (or, currently in the US, psychopaths)

        • It is not just capitalism that has a problem. The population keeps rising. So the quantity of goods and services has to rise.

          Economies of scale are helpful for any business, whether it is a government operated one or capitalistic one. Diminishing returns assures that greater investment will be needed over time, just to stay even. This is true, regardless of the business model.

          Paying everyone the same wage has a huge problem with actually getting anything accomplished; goods and services made. That no doubt contributed to the collapse of the Soviet Union in 1991.

          • Duncan Idaho says:

            Agree Gail–
            I blame Haber. But capitalism has provided the age 16 go for it all, Ayn Rand world.

            • Fast Eddy says:

              What’s wrong with Rand’s message that no matter your position in life … you should do your best… whether a lowly janitor or the CEO of a major corporation?

              That was the message I took away from Atlas Shrugged… which should be required reading for all high school students…

            • Duncan Idaho says:

              which should be required reading for all high school students…
              Well Rand does have some appeal when you are 16.
              Being a hero for being a complete a hole does work at 16, and is encouraged.
              However by the time you are 18, the simplicity and ignorance becomes obvious—-

            • Fast Eddy says:

              It still has appeal to me at 53… you might be able to get away with half assed effort in most endeavours… particularly if you work for the govt …

              But if you run a business (or are in a high paid position as an employee) — you have sharks coming at you every single day wanting to knock you on your ass…. you bring your A game and hope that it is enough to fend them off…

              Or you end up in a busted heap of bones on the floor….

              If you reject the message of Rand when you are 18… then you’ll be mediocre at best…. in fact these days… as the pie shrinks.. competition is even more fierce…. you’ll probably end up as a pizza delivery boy

          • Fast Eddy says:

            Paying the same wage…. regardless of the effort hours and ability…

            Didn’t work so well in the USSR or China… production plummeted….

            I guess this might appeal to the indolent, stuuuuupid, and useless…

            • jupiviv says:

              Capitalism is no more rational about resource allocation than communism. Without ownership and useless activity rewarding each other and denying labour its share, economies of scale are impossible.

              The fact global state-corporate capitalism will take ~40 years more to fail than global state capitalism proves nothing either way.

            • Fast Eddy says:

              Capitalism has been around for a whole lot longer than communism… if communism had overtaken the world 100 years ago … BAU would have been long dead by now.

            • jupiviv says:

              I thought you insta-doomers were supposed to have transcended such petty distinctions? But I guess you just cherry-pick what you believe like everyone else. Anyway, capitalism and communism can only exist in an industrialised and interconnected world, and all industrial economies are some combination of both.

            • Fast Eddy says:

              You said 40 years… I am not cherry picking…. capitalism has been around in some form for a very very long time…. as you may be aware markets were in existence from the time that humans established permanent settlements…

              Communism is an attempt to upset the self organizing system….

              Note that the only when countries attempted this follow… they had to resort to EXTREME brutality to attempt to subvert the self organizing system … i.e. it attempted to thwart human nature….

              Therefore it was bound to fail.

              There are no countries that are a combination of both — you are either one or the other. Social programs are not communism… and if you take social programs to far … you are messing with the self organizing system… and your system will collapse.

            • jupiviv says:

              “Communism is an attempt to upset the self organizing system….”

              This is an example of cherry-picking: redefining self-organisation as capitalism. Self-organisation is in no way related to capitalism, and certainly doesn’t preclude “EXTREME brutality”.

              Likewise, to label any system before industrialism either capitalist or communist requires redefinition. To the extent an industrial activity requires state intervention or investment (i.e. all of them), it is communistic.

            • Are you so sure?

              Late comers to this development anyway, China and USSR went on industrialized hockey stick in their authoritarian socialist past till late mid 1970s, then the Soviets hit the oil shock/per capita energy plateau few years later after the West, and then during mid late 1980s disintegrated in botched transition by Gorbi (aided by ext/int coup). While the West went on supercharged debt explosion, firstly taking over duped former Eastern bloc markets, and secondly and more importantly ($trillion scale) since 2000s leveraging of the SARs to all China’s market, inducing their second (or upper stage if you will) hockey stick stage of industrialization, now under mixed model, largely biased to the crony capital side obviously..

              Besides cooperatives thrived back then and now prosper in the West too, and no they don’t (did not) pay the same wages.. We could debate how the high taxation and subsidies (agriculture) helping, enabling that in the Western content.

              You can’t have it both ways, either the msm lies about everything important or you go along the way of their cheesy propaganda on economics and development as well as you see fit..

            • Fast Eddy says:

              Between 1978 and 1984 Chinese crop yields increased by 61%

              These impressive gains followed the adoption of a system stressing individual responsibility in place of communal decision making……

              https://www.jstor.org/stable/1832191?seq=1#page_scan_tab_contents

            • Fast Eddy says:

            • So there was a famine in China and Russia till 1978?

              Besides you only confirm my point Chinese started flirting with mixed econ model sooner than Soviets, which later enabled their SARs inspired by chine$e in Hong Kong, and others Taiwan, Singapore, SKorea..

            • Fast Eddy says:

              Let me put it this way — i know traders in Hong Kong who were doing business in Shanghai … in 1991 when I met them they moaned about having to travel to Shanghai … it was a shit hole of rutted roads and shitttty hotels…

              Just a few years after that it had all changed.

              That is what a free market economy does… it lifts all boats….

              Communism guarantees poverty — Lada cars…. and no more than 5 items in the shop when you want to buy something.

              Communism is an attempt to kill human nature … and that is why it failed.

            • When I visited Cuba, the common description of the problem was, “We pretend to work and the government pretends to pay us.”

              When everyone gets the same low pay, absenteeism is rampant. People come in late. Initiative is low. It works very poorly.

            • Fast Eddy says:

              The armchair communists on FW don’t seem to get this ….

              It’s all koombaya for them … they like to attack Fast Eddy the hard core capitalist pig….

              But they all want their salaries raised… every year.

    • Fast Eddy says:

      Which system do you think would have been better?

      • Tim Groves says:

        It’s only because of capitalism that it’s possible to ask this question. Under any system, whether it involves working for the Inca, the Pharaoh or the Dear Leader, or as a member of any of a thousand Kumbaya cults, the question would be trivial and the answer a totally predictable: “This is the only way for decent people to live!” It’s only under capitalism that the average drone is given leave to allow their thoughts to wander at least a little way off the reservation without being accused of treason, heresy or some other variant of thoughtcrime.

        • jupiviv says:

          It’s ironic how both you and Fast Eddy are essentially right wing loonies masquerading as doomers, which makes you the SJWs of this blog. The subject of collapse is just a means to the end of convincing everybody why your loony opinions about other things are correct.

          • Tim Groves says:

            It’s a point of view, Jupiviv. Not one I would concur with, mind you—as loonies wax and wane in phase with the moon while we are as constant as the Northern Star—but you’re welcome to hold it, just as you’re welcome to hold all the numerous IMHO often inane, simplistic, demented and predictable bits of piffle on a host of subjects that you’ve picked up from dubious sources and taken personal ownership of over the years.

            You’re welcome to hold these views, but if you must insult the intelligence of other people by regurgitating them in public, you are bound to get called on them occasionally, and when this inevitably happens, making personal attacks on the people who embarrass you by revealing the depths of your ignorance, naivety and brainwashing is no substitute for owning up, growing up and smartening up, now is it?

            In case you haven’t realized it, Eddy and I, among others, are feeding you to make up for your woeful lack of a decent education in the realities. Not that we expect any thanks for our unpaid efforts.

            • jupiviv says:

              The claim that capitalism per se engenders freedom or even prosperity is false. It is doubly false if the contra- examples provided are Pharaohs and ‘kumbaya cults’, in other words anything but a ‘traditional’ western example which would after all undercut the premiss of this trud of an argument.

              You’ll notice I don’t have problems with anyone on this blog who openly advertises their political affiliations whatever they may be. The people who pass me off are the ones who use the context of collapse to proseltyse their respective ideologies, and quelle fracking surprise that those are precisely the insta-doomers! Insta-doom after all is the solution to everything – from liberal impudence to anarcho-socialist hunter-gatherer communities.

              I hope that was educational. If not, keep waiting for the glorious insta-doom.

            • Tim Groves says:

              Jup, we could go around in circles sniping at each other, calling each other silly names and trying to score points without to bothering to explain what we’re trying to assert until the cows come home. Again, that’s no substitute for clarifying and substantiating the points we want to make in way that even those who might tend to disagree with them can at least be given a chance to grasp them.

              What I read far too frequently in your posts, and also in those of Our Mutual Friend Duncan, are snap judgements and strong assertions, often entirely unsubstantiated, and delivered in arrogant, supercilious and even condescending tones. If I were a social justice warrior, I might be offended. Instead, I tell myself that the reasons you two irritate me are that I am uncomfortable with your conversation style. But it goes deeper than that. To lapse into my best Mark Twain voice, you both think you know a lot of things for sure that just ain’t so, and you both have this annoying habit of turning nasty on people who disagree with.

              I would be quite happy to talk about the demerits of capitalism and how other economic systems may be more workable (or many other subjects), and I’ be happy to have my own ignorance pointed out and to be educated and learn new things from people who posses genuine knowledge, but I’m unlikely to get the chance to learn anything substantial from people who are more interested in posing as know-it-alls, whose store of knowledge is delivered like a load of bombs in an air raid mixed with put downs, and who make a habit of straw-manning, misconstruing and over simplifying the words of the people they are trying to bomb.

              One of the biggest drawbacks of Internet communication is that it allows people to bring out the worst in their behavior. Compared to the general state of the cesspit, OFW is an oasis conviviality and gentility in that respect. But even here, cesspit habits creep in.

              I could spend time taking apart and rebutting every item of misinformation, mischaracterization and nonsense you’ve said about me, but what would be the point? You’d just come back with something else equally obnoxious. You wouldn’t apologize. You wouldn’t acknowledge the validity of any of my points. You would just twist anything I said into some grotesque caricature in order to attack that.

              But I will mention one thing. For some reason, you’ve characterized me as an insta-doomer, when all I’ve ever been is an agnostic on the subject of doom. You may have confused me with some of the other posters here. or more probably you are displaying a symptom of the Tyranny of the Dichotomous Mind, where the unfortunate victim sees the world in terms of binary opposites and tars all their adversaries with the same brush. If you would update that card index or whatever it is you use to keep track to read “TG is neither an insta-doomer nor an SJW” you could improve your aim when launching future put downs. Less embarrassing for you in the long run.

              .

          • Duncan Idaho says:

            You need to get out of the shallow end where they wade.
            You understand.

          • Fast Eddy says:

            I fly with no wings…..

        • SomeoneInAsia says:

          In premodern China the Confucian scholars formed a class which significantly moderated the excesses of the ruler. It wasn’t a perfect system, but it did work to a degree. Some of the said scholars were prepared to place their lives on the line in the name of justice, and continue to be celebrated as heroes today. Not all premodern societies were that devoid of choice and independent thought.

          Contrariwise, modern capitalist society for the most part merely gave the illusion of choice. How much weight, after all, is the opinion of the common man as opposed to that of the corporate leaders?

          Even if modern capitalist society did provide us with any genuine pluses, the fact is that they’re all about to be negated by a big, fat minus. And that after a mere 200 years. The pluses are no compensation to me, sorry.

          • Tim Groves says:

            It’s very doubtful that any pre-modern Chinese scholar would have gotten away with the sort of things Meryl Streep or Robert Di Niro have said about the current POTUS. And the talking heads of CNN would very soon have been been rolling heads had they been this cheeky to the the Emperor, the Pope, the Mikado, the Khan, the Shah, the Sultan, the Mogul, the Tsar, the Emir, or even the Grand Vizier.

            Basically, if you were living in a pre-modern society that was ruled over by a king who was considered a living god or appointed by heaven, you wouldn’t have lasted long had you made a habit of publicly criticizing the bloke’s hairstyle, lack of manners, lack of intelligence, or body language.

            I can see your point about the ancient world—at some times in some places—being a better place for people to live in than today’s world. But none of us has a choice. We can’t go back and we can’t even remain here. We must go forward with the flow of people and events, because for those who haven’t noticed, we are the equivalent of pieces of flotsam carried along by the stream of humanity, which in our day has swollen into a raging torrent.

            Someone is drowning down there in the flood
            This river will dry by tomorrow…

      • SomeoneInAsia says:

        Which is better, a severe injury from the impact of some physical object, or a slow, wasting disease that spreads through your body without you knowing it?

        I think they both suck.

        • Tim Groves says:

          A tap on the head has been known to cure water on the brain. 🙂

          But all this talk of which system works best is so last century. We are currently stuck with our current ramshackle oil-based economic system until we find out how to run it on something else or, far more likely, until it breaks down completely. After that, any survivors—if there are any—who can tolerate the background radiation levels will be able to have a go at hunter gathering or homesteading or fishing for a living or building their very own Bartertown with it’s very own Thunderdome. And depending on population level and environmental conditions, new civilizations with their own forms of exploitation may arise.

          Life on earth will go on for a long long time yet, and even human life may well go on a lot longer than most commenters on this blog seem to think it will. Our remote descendants will have as little in common with us culturally as we do with our remote ancestors. Richard Dawkins has talked about “my cousin the chimpanzee” stressing our close genetic relationship with our fellow primates, but Richard Adams pointed out that we don’t often invite these distant relatives to tea parties. We humans might survive as a species but not in a form that we contemporaries would recognize as human.

  2. Yoshua says:

    The U.S has a trade deficit with Europe, but it has a positive current account balance with Europe.

    Europe in not only shipping away its goods to America, we are also shipping away our money.

    America is still not satisfied. What more can we do for our master?
    Buy expensive LNG that will ruin the European economy?
    Buy more U.S weapons so that we at least can kiII our selves when Europe collapses?

    Sure. Why not? A grand final European war might just be a proper way to end Europe.

    • Duncan Idaho says:

      Hint– continue to get your cheap gas from Russia, try and maintain a educated populace, (unlike the US), and keep making really high quality goods.
      Germany can pay its workers a top wage, and still out compete cheap goods from the rest of the world.

      • It’s not that clear cut situation, Germany is managing a ring of protectorates-colonies around, where lot of sub assembly or even complete work is done at ~1/4 wage levels, obviously the added value stays in Germany, in similar vein they leverage and outsource the energy, water, pollution issues per item produced over there.. Un / fortunately enough recent and past mistakes such as swelling unproductive migrant influx (“educated pop” highly approved until very recently hah) drags this whole system down. And the credit-reserves recycling scheme lifeline to “PIGS” is not helpful for the overall balance of the system in the long term either.. All this increasingly ricochets into wider EU instability..

        Hence the recent little illustrative gem of deeply rotting structures as completely wasted and immobilized EU head Claude “Cognac” Juncker at public venue was smirked upon by relatively fit Donaldo demanding his ~2-4% defense budget hike for NATO.. They are all mafiosi to some extent but weakness even among thief cartel is usually to be smelled at great distance, this is perhaps one of the last chances of extending BAU by drowning the Europeans a bit for a while.

    • name says:

      USA is a European country, but on another continent, just like Australia.

  3. Yoshua says:

    Protests have now spread to Iraq. After a week of protests there are now reports of clashes with militia that have opened fire and killed and injured protesters.

    Drought, heat, energy cuts, unemployment, poverty, lack of social services and government corruption have fueled anger among the people in Iraq.

  4. Denial says:

    There is no real system…..all countries will stay tied to the U.S dollar because it is a manipulated currency and the U.S has shown that it will keep other countries barley alive with their fake currency. I don’t know ho going forward we can say anything is real pricing because it is all manipulated on and on…..I was shocked that they have been able to keep the “system” going as they have but then what choice does anyone have? Can things be manipulated indefinitely ? If you are printing currency all the time I think we are heading to massive inflation ….we are trying to rationalize a system that does not work in the realm that we are thinking. This can easily go on for another 10 years!

    • dolph says:

      I predict our current system will last until 2030s, breakdown 2030s to 2050s, and 2050s and beyond will be the permanent return to reality.

    • It revolves basically around the same throughout history: only the most vicious, mad like, blood thirsty nasty piece of bloke, able to scheme and murder with the same intensity abroad as well as home becomes ultimately the top dog over any situation. The rest of players out of real or imagined fear stay self sub-jugged, while the very few “competitors” try rather evade direct confrontation as long as possible. help to plant traps if desirable, and wait in the corner for their moment. You see this in a way BAU extension formula in itself..

      Given the preponderance of evidence we are surely almost two decades already into heightened state of pre-crisis mode and on general bouncy plateau since 1970s. So many surprises to the plot already one could not deny the scenario of yet more ~15yrs.. although with likely higher amplitude of chaos and periphery falling into abyss for good.

  5. Fast Eddy says:

    I was down at the ice rink last night to watch the local team play Auckland… there was a bench brawl …. and I observed the full house go absolutely berzerk …. some people were screaming kill him kill him!!!!

    And I am standing next to the glass calmly observing all of this … and I am thinking …. this is our true nature … this is a glimpse of behind the curtain…. this is what we are capable of…

    Rip that curtain off — and starve this beast that is sated on fossil fuels…. and the vicious animals that we are … will be on the loose…. their will be no police to enforce the rules of civilized behaviour …. in fact there will be no rules… and anyone who tries to live by pre end of BAU rules… will be the first to have their throats slit…

    The veneer is wafer thin….. and getting thinner by the day

    I must admit… a good fight on the ice does get the adrenaline flowing…. it does induce the Call of the Wild….

    • Or this was just a hockey game. Some group of people expect to act this way at a hockey game. The penalty for fighting is very low. It is almost as if they want to encourage it. (That was what my son and I figured out, when we went to one game. It, of course had fighting.) People go for the show, and plan to participate themselves somewhat in it.

      • Fast Eddy says:

        Hockey has cleaned up its act quite a bit … and in NZ there is not culture of extreme violence in hockey at all… it is more like the European leagues where fighting almost never happens… the players involved were booted and will be given suspensions

        So it was interesting to see how people would react to an incident that was not expected…

        They were loving it!

  6. Baby Doomer says:

    Daily reminder to never take *anything* Elon Musk says at face value.

  7. Fast Eddy says:

    http://www.latimes.com/politics/la-pol-sac-skelton-recycling-problems-california-20180709-story.html

    Eric Potashner, a government relations official for Recology, a curbside hauler that sorts San Francisco Bay Area trash for recycling, says, “There’s no market for a lot of stuff in the blue bin. What we can’t recycle we take to a landfill.”

  8. Baby Doomer says:

    Declining mental health among disadvantaged Americans – PNAS June 18, 2018.

    http://www.pnas.org/content/early/2018/06/13/1722023115

  9. milan says:

    Don’t know if anyone has heard or talked about a new company called petroteq but it seems they have invented a new tech that can extract clean oil from the oilsands?

    Is This The Oil Tech Breakthrough Of The Decade?

    “Heavy Oil” is basically a dirty word in the energy world.
    But that’s all about to change.
    Tech company Petroteq Inc. is using a new proprietary Enhanced Oil Recovery (EOR) system that could completely revolutionize oil sands extraction. This technology just might be the key to unlocking the next wave of the energy boom leading to domestic energy independence.
    Through a closed-loop system, Petroteq’s EOR can extract 99 percent of all hydrocarbons without releasing ANY greenhouse gases.
    At their Asphalt Ridge property in Utah, Petroteq (TSX:PQE.V; OTC:PQEFF) is sitting on a contingent deposit of 86 million barrels…and their extraction facility is now fully operational.
    The grand opening, according to CEO David Sealock, “was the culmination of two years of hard work by our entire team…as well as the harbinger of value creation to come.”
    The company can produce oil for as little as $28 per barrel, they’re already set to produce 1,000 bpd by the end of this year and 5,000 bpd by the end of 2020.
    The Big Picture– Scattered throughout Utah, Colorado, and Wyoming are oil sands deposits equal to 1 trillion barrels. There are trillions more locked away in deposits around the world. And Petroteq’s proprietary oil tech can get to it. The company is filing patents around the world, and the licensing opportunities for its EOR closed-loop system are enormous.
    Petroteq’s secret is its technology. The patented Liquid Extraction System is the first successful method ever tested that can extract the heavy oil sands of Utah in an environmentally safe and sustainable manner.
    The method extracts 99 percent of all hydrocarbons, generating zero greenhouse gases and requiring no high temperatures or pressures.
    The company’s deposit at Asphalt Ridge could be worth $6.2 billion at today’s prices, and cost of production is as low as $28 a barrel.
    The company plans to ratchet up production to 30,000 bpd from reserves. But that’s not even the biggest opportunity here.
    The licensing opportunities for Petroteq’s proprietary technology are staggering. Heavy oil drillers around the world will likely be lining up to use their methods, which could unlock trillions of barrels of heavy oil locked in oil sands worldwide.

    • Duncan Idaho says:

      “The company can produce oil for as little as $28 per barrel, they’re already set to produce 1,000 bpd by the end of this year and 5,000 bpd by the end of 2020.”

      Please, comedy is not usually part of the blog.

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