Introduction to the “World’s Fragile Economic Condition”

I will be giving a presentation to a group of casualty actuaries on September 17 called “The World’s Fragile Economic Condition.” I plan to write up the presentation in two posts, one covering the first three of the six sections of the presentation, and the second one covering the second three sections, so that it is easier to read online.

I am putting up a link now to the presentation, to allow those who want to look at the presentation now, a chance to do so.

The World’s Fragile Economic Condition

This presentation pulls together quite a few things I have been talking about. It also adds a new model of how our self-organizing economy works.

This is the outline of what I discuss in the presentation:

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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560 Responses to Introduction to the “World’s Fragile Economic Condition”

  1. Kurt says:

    I love turkey. So much. A little dressing and sweet potatoes – so good! I think I’ll invite FE over. Oh wait, he told us years ago that we would get no turkey. Wrong again. Don’t you get tired of being wrong? Tedious work I would think.

    • Davidin100millionbilliontrillionzillionyears says:

      2 months until Turkey Day…

      then a few more weeks until 1/1/2019…

      then I get to predict another year of BAU…

      again…

      well, at least in countries that celebrate Thanksgiving Day…

  2. The PTB/Deep State/Establishment/whatever you want to call it still has some weapons in its arsenal. A lot of ‘last minute saves’ are to help speculators to make huge buck.

    I think the ‘reset’ is going to happen, but not in favor of the general public.

    • Yep, what is interesting are these “pain thresholds” – what the general public would tolerate. And as we can directly observe the cattle sheep mentality, brief immediate pain avoidance for later even grater perennial pain is just too astounding..

      As i illustrated on previous page, the PTBs can easily obfuscate (the stagnation phase was already easy) even the real terminal energy supply shock for few years, in the meantime their personal battalions will be at least seeded if not directly assembled by then.. while large chunk of the “general public” will be left naked bare to rolling sequence of revolts, civil wars, sporadic – no supplies of essential, and never coming back supply of techno derived frivolous stuff..

      Obviously, only small portion of TPTB have a chance to emerge on the other side, and they would be bruised severely as well, not mentioning forced to socially and genetically intermingle with some of their former lesser rank security guys, who rise on the occasion of meritocracy rule and or sheer luck, as well as basal survival urge..

  3. Rodster says:

    In their campaign to contain the risks that caused the Great Recession, central bankers may have planted the seeds for the next global economic crisis.

    “How the Next Downturn Will Surprise Us”

    • Greg Machala says:

      It isn’t the downturn that will surprise us. It is the date that it occurs that will be a surprise.

  4. Tim Groves says:

    And Pharaoh said unto Joseph, I have dreamed a dream, and there is none that can interpret it: and I have heard say of you, that you can understand a dream to interpret it.

    And Joseph answered Pharaoh, saying, It is not in me: God shall give Pharaoh an answer of peace.

    And Pharaoh said unto Joseph, In my dream, behold, I stood upon the bank of the river:
    And, behold, there came up out of the river seven cows, fat and well favored; and they fed in a meadow:
    And, behold, seven other cows came up after them, poor and very ill favored and thin, such as I never saw in all the land of Egypt for badness:
    And the thin and the ill favored cows did eat up the first seven fat cows:
    And when they had eaten them up, it could not be known that they had eaten them; but they were still ill favored, as at the beginning. So I awoke.

    And I saw in my dream, and, behold, seven ears came up on one stalk, full and good:
    And, behold, seven ears, withered, thin, and dried by the east wind, sprung up after them:
    And the thin ears devoured the seven good ears: and I told this unto the magicians; but there was none that could declare it to me.

    And Joseph said unto Pharaoh, The dream of Pharaoh is one: God has showed Pharaoh what he is about to do.
    The seven good cows are seven years; and the seven good ears are seven years: the dream is one.
    And the seven thin and ill favored cows that came up after them are seven years; and the seven empty ears dried by the east wind shall be seven years of famine.
    This is the thing which I have spoken unto Pharaoh: What God is about to do he shows unto Pharaoh.
    Behold, there comes seven years of great plenty throughout all the land of Egypt:
    And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt; and the famine shall consume the land;
    And the plenty shall not be known in the land by reason of that famine following; for it shall be very grievous.

    And for that the dream was doubled unto Pharaoh twice; it is because the thing is established by God, and God will shortly bring it to pass.
    Now therefore let Pharaoh seek out a man discreet and wise, and set him over the land of Egypt.
    Let Pharaoh do this, and let him appoint officers over the land, and take up the fifth part of the land of Egypt in the seven plenteous years.
    And let them gather all the food of those good years that come, and lay up grain under the hand of Pharaoh, and let them keep food in the cities.
    And that food shall be for store to the land against the seven years of famine, which shall be in the land of Egypt; that the land perish not through the famine.

    • Interesting cycles and spikes, today he saying ~25% of global wheat supply is in danger and exporters to consider domestic priorities instead.. While if I recall correctly just 1-2yrs ago for example Italian hard grains where cheap to meter, discounts everywhere..
      Similarly, there is acute overproduction of apples and other fruits this season.. so presumably next year not so much..

    • Garth says:

      Bryan Ferry – A Hard Rain’s A’Gonna Fall

    • Interesting video. It is a little hard to evaluate how bad the problems are, from what the commenter says. But even if the issue is “only” rising prices, it will be a problem for a lot of poor people in the world. Could further act to pop the debt bubble.

  5. Fast Eddy says:

    Excellent presentation … very interesting lectures….

    We are NOT going back to that … I guarantee that.

    The Other Side of History: Daily Life in the Ancient World

    https://www.audible.com/pd/The-Other-Side-of-History-Daily-Life-in-the-Ancient-World-Audiobook/B00DDVPXJG?ref=a_lib_c4_libItem_5_B00DDVPXJG&pf_rd_p=ae76b2bb-e63d-4a67-b357-dab3dee05ca1&pf_rd_r=NX263PJBMZ88C93S60ZP&

    • I am sorry I don’t have time to listen to this (unless I can figure out how to listen to it on long-distance jet over the Atlantic Ocean).

      I think that reading the Bible gives an indirect look at what happened historically, especially when combined with historical research. Ancient people told each other myths, just as we tell ourselves myths. Today’s myth is that the economy will grow forever; we can fund our retirements with shares of stock and bonds. Pension plans and Social Security are totally safe.

      People of early days passed on what they had figured out. They figured out that they were in some way different from animals. They didn’t understand that it was because humans ate cooked food, and animals did not.

      They figured out that co-operation should be somehow encouraged, and that random killing of other people should be discouraged. Also, taking the wife of another person was likely to lead to retribution. They figured out that some kind of order was needed, if humans were to live in closer quarters than hunter-gatherers. (In fact, the laws of physics would seem to dictate this as well.) So part of the energy available to them was used in setting up rules to follow, and punishment if laws were not followed.

      They also figured out that living the way they did (often in densely populated cities), maintaining adequate population was a problem, because of disease transmission. Because of this, women needed to be encouraged to have as many children as possible. In more sparsely populated rural areas, this was not as much of an issue, because people were not so crowded together.

      • Fast Eddy says:

        You can download audible books/lectures and listen anytime…. in fact I’ve got a long haul to China later this week and will finish this during the flight.

        And if you decide at anytime while listening— that you don’t like a book … you can exchange it

  6. MG says:

    https://www.futuretimeline.net/21stcentury/2020-2029.htm

    Thnigs like “Open-source, 3D printed clothes at near-zero cost”…

    Well, what is zero cost? Who will produce, maintain and repair such big amonts of sophisticated machines that will be needed at near-zero cost?

    • Also, capital has a cost. The owners of the capital expect a return on their investment, whether it is interest expense or capital gains + dividends.

      People who look at these things look only a labor costs. The catch is that labor costs are what you need, if you are ever to sell any of the goods you are producing. Giving all of the returns to capital providers and management is a dead end.

  7. Harry McGibbs says:

    “The 10-year anniversary of the Lehman Brothers bankruptcy has been met with a lot of reflection about how things have changed since the dark days of 2008. Craigs Investment Partners head of private wealth research Mark Lister said… the elephant in the room was the fact debt levels across the world were higher than they were in 2008.”

    https://www.odt.co.nz/business/worlds-debt-burden-higher-2008-concerns-mount

  8. Harry McGibbs says:

    “The west’s leading economic thinktank has warned that the expansion in the global economy may have peaked after cutting its growth forecasts for an array of rich and developing countries.

    ““Confidence has also eased and investment and trade growth have proved softer than anticipated…””

    “It warned that the recovery since the recession of 10 years ago had been slow and only possible with an exceptional degree of stimulus from central banks. “A decade after the financial crisis, vulnerabilities remain in financial markets from elevated asset prices and high debt levels. Reforms have strengthened the banking system, but risks have shifted towards less tightly regulated non-bank institutions.””

    https://www.theguardian.com/business/2018/sep/20/global-growth-has-peaked-warns-oecd-economic-outlook

  9. Kanghi says:

    Spawn of Fast Eddy found from the coast of NZ. Story tells it was born from seed sown to sea, while franctically bashing and protolyzing the prophetic message of nihilism and doom, while seeking the solace from Fentanyl. There it multiplies and drags down soyboy surfers…

    https://www.livescience.com/63643-giant-alien-jellyfish.html?utm_source=notification

  10. Rodster says:

    A really good article by Charles Hugh Smith. “When Does This Travesty of a Mockery of a Sham Finally End?”

    http://charleshughsmith.blogspot.com/2018/09/when-does-this-travesty-of-mockery-of.html

    Quotes: “Credit bubbles are not engines of sustainable employment, they are only engines of malinvestment and wealth destruction on a grand scale. A number of other questions arise as we ponder these dynamics. How “cheap” will all that energy be to those without full-time jobs? How will 100 million workers support 100 million retirees, welfare recipients and parasitic Elites plus Universal Basic Income as costs rise, taxes soar and wages stagnate?

    The Status Quo is unsustainable on a number of fundamental fronts. How long it can maintain the facade of stability and sustainability is unknown, but the global willingness to squander additional years on artifice and propaganda suggests that another four years will fly by and the end-game will be at hand whether we approve of it or not.”

    • Sounds like Charles Hughes Smith and I are saying fairly similar things.

      Next week, I fly to Bermuda to talk to a group of life and annuity folks about related issues. It may be an interesting trip.

      • Rodster says:

        I forgot to copy this quote: “4. Peak oil, which does not mean the world runs out of oil, it simply means oil production no longer rises to meet demand and eventually declines even as new fields are brought online. It can also mean that the price of energy rises to the point that consumers can either buy energy or they can keep the consumer economy afloat, but they are no longer able to do both.”

        • He believes in Peak Oil. I guess we differ. Peak Oil helps make for better endings.

          • Rodster says:

            Hmm, the way I understand what CHS was trying to say is that we won’t run out of oil but it’s the cost of getting the oil out of the ground that is the problem. It will get to the point where the costs to pull it out of the ground will be so high that consumers won’t be able to afford it and it’ll be too low for the producers that they can’t pull it out of the ground without going bankrupt.

            Gail, when you talk about cheap energy that the world needs to grow the global economy, isn’t that directly related to “Peak Oil” where all the low hanging fruit has already been picked and it takes more energy, resources and capital to get the hard to get at oil out of the ground and sea? Also isn’t Peak Oil where the energy producers can’t supply demand at a low enough cost to grow the global economy?

            • Peak oil is when the debt bubble pops, contrary to what peak oilers think. Popping the debt bubble will bring down all types of energy supply at the same time.

              We went past the affordable price of oil long ago. We have been trying to hide the problem with more and more debt.

              The presentation is really related somewhat to this issue. The write-up of my talk is in two parts. I will put up the first part on Sunday evening, my time, I expect. Friday and Saturday are not good days for putting up posts. The second half will go up sometime after I get back from Bermuda.

            • Not exactly, “debt bubble” is virtual human construct, demonstrably stretchable at wish of the operator, while physical limits pushing on this artificial system from outside is another. These two obviously intersect (kaboom) as I provided on these linked graphs, when the depletion rate is not coming back as it used to after any previous recession, only then “the markets” or the entire mass of players finally over power TPTB’s lift athlon skills and tools, resulting the debt bubbles across their various segments to deflate..
              It’s perhaps not that important for most of the people, because these two megatrends are separated by only few month to years delay anyway, so most peoplez will be destructed by the tsunami wave anyway..

      • Fast Eddy says:

        Beware the Triangle.

    • Greg Machala says:

      I agree with his assessment. How long the facade of stability will last is the final question.

      • Davidin100millionbilliontrillionzillionyears says:

        I agree with his answer to his own question:

        “So when will the travesty of a mockery of a sham finally come to an end? Probably around 2022-25, with a few global crises and “saves” along the way to break up the monotony of devolution.”

        he could be right, could be wrong…

        there was a tremendous “save” in 2008/2009…

        we shall see if “they” can do it again when the time comes circa 2019-2020-2021…

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