The World’s Fragile Economic Condition – Part 1

Where is the world economy heading? In my opinion, a large portion of the story that we usually hear about how the world economy operates and the role energy plays is not really correct. In this post (to be continued in Part 2 in the near future), I explain how some of the major elements of the world economy seem to function. I also point out some relationships that tend to make the world’s economic condition more fragile.

Trying to explain the situation a bit further, the economy is a networked system. It doesn’t behave the way nearly everyone expects it to behave. Many people believe that any energy problem will be signaled by high prices. A look at history shows that this is not really the case: fighting and conflict are also likely outcomes. In fact, rising tariffs are a sign of energy problems.

The underlying energy problem represents a conflict between supply and demand, but not in the way most people expect. The world needs rising demand to support the rising cost of energy products, but this rising demand is, in fact, very difficult to produce. The way that this rising demand is normally produced is by adding increasing amounts of debt, at ever-lower interest rates. At some point, the debt bubble created to provide the necessary demand becomes overstretched. Now, we seem to be reaching a situation where the debt bubble may pop, at least in some parts of the world. This is a very concerning situation.

Context. The presentation discussed in this post was given to the Casualty Actuaries of the Southeast. (I am a casualty actuary myself, living in the Southeast.) The attendees tended to be quite young, and they tended not to be very aware of energy issues. I was trying to “bring them up to speed.” This is a link to the presentation: The World’s Fragile Economic Condition.

Slide 1

Slide 2

This post covers only Items 1, 2, and 3 from the Outline in Slide 2. I will save Items 3 through 6 for a post called “The World’s Fragile Economic Condition-Part 2.”

Slide 3

Slide 4

The audience was able to guess that the situation for humans and the economy are parallel. Energy in some sense powers the economy, in a way similar to how food powers humans.

Slide 5

On Slide 5, I am pointing out that changes in the red line, denoting energy consumption growth, tend to come before the corresponding changes in the blue line. This is one way of confirming that energy consumption causes GDP growth, rather than vice versa.

In recent years, countries have found ways of creating GDP growth, without adding true value. This may explain why GDP growth is higher than Energy growth since 2013 on Slide 5. As an example of GDP growth with overstated value, a large share of young people are now being encouraged to purchase advanced education, at considerable cost. This would make sense, if there were suitable high-paying jobs for all of those graduating. It is questionable whether this is the case.

Slide 6

Of course, the issue is not only energy consumption, just as our health is influenced by more than simply what food we eat.

Slide 7

At one time, the emphasis in physics was on systems that are “closed” from an energy point of view. Such systems never grow; they simply decline toward “heat death.”

The real world is made up of many structures that grow and change over time. This growth and ability to change is possible because the energy system we live in is thermodynamically “open,” thanks to flows of energy from the sun, and thanks to fossil fuel energy, which represents stored solar energy from long ago.

Slide 8

The answers to the questions on Slide 8 are easy to guess.

Slide 9

The economy adds new businesses, as citizens see new needs and set up companies to meet those needs. Customers make choices regarding which goods and services to buy, based on their income (primarily wages) and the prices of available goods and services. Governments gradually add new laws, including changes to the way taxes are assessed. The system gradually grows and changes, as the population grows, and as the quantity of goods and services created to meet the needs of that population increases.

One thing to note is that the goods and services produced by the system will eventually be divided among the various players in the system. If one group gets more (say, those receiving interest income), then other groups will necessarily receive less.

Another important point to note is that as new products are added, old ones disappear. For example, once cars came into use, we lost the ability to go back to horses and buggies. There are no longer enough horses; there are no longer facilities to “park” the horses in downtown areas, while at work or shopping; and there are no longer services to clean up after the mess that the horses make.

Without being able to go backward, the system is quite brittle. It would appear that under sufficiently adverse conditions, the entire system could collapse. In fact, we know that many ancient civilizations did collapse, when conditions weren’t right.

Slide 10

The strange interconnections of a networked system make the world economy behave in a different way than we might initially expect. Later in this presentation (in Part 2 of the write-up), I will show some examples of inadequate energy supplies leading to very different results than high prices.

Slide 11

The model of The Limits to Growth looked at how long resources might last, before the growth of the world economy came to a halt from a variety of problems, including a lack of easy-to-extract resources. In some ways, the model was quite simple. For example, the model did not include a financial system or debt. In the single most likely scenario, the base run, the world economy hit limits about now, in the 2015 to 2025 time period. The authors have said that, once limits are hit, the forecast on the right-hand side of the chart cannot be relied upon; the model is too simple to forecast how the down slope might actually occur.

Slide 12

Slide 13

The pattern of world energy consumption seems to be one of rapid growth, especially in the period since World War II.

Slide 14

Energy consumption growth is particularly high in the period covered by the red box. In other words, energy consumption growth is particularly high from the 1940s through the 1970s. If the economy relies on energy, we would expect this to be a particularly booming period for the economy.

Slide 15

We can break energy consumption growth down into two components: (1) the portion to cover higher population, and (2) the portion to cover improved standards of living. Looking at this chart, it is clear that “higher population” takes the majority of the increase, except when increases are very large.

Slide 16

I have labelled the three big bumps with my view of what seems to have led to them. The first is early electrification, when street cars were added and when the early mechanization of farming was implemented. The second is the postwar boom and the third is the recent period of globalization, led by China’s major ramp up in coal production.

Slide 17

China’s energy consumption grew rapidly after it joined the World Trade Organization in 2001. The thing that most people don’t realize is that China is reaching limits on its coal extraction. Its coal production seems to have peaked about 2013. Its comparatively tiny amount of wind and solar (shown in orange on the chart) is not making up the shortfall. Instead, China is being forced to rely more on imported energy. Imported energy tends to be higher in cost, and may be limited in supply. For all these reasons, we cannot rely on China to continue to power future world economic growth.

Slide 18

It is not just China that gets only a small share of its energy production from wind and solar. This is also true of the world as a whole.

Slide 19

Slide 20

Boxes 1 through 4 show a different model of how the world economy works than that shown earlier (in Slide 9). In Slide 20, the Economy (in Box 3) acts like a giant factory. It uses Resources of various kinds (a few of which are listed in Box 2) to make Goods and Services (a few of which are listed in Box 4). If the Economy is getting to be more and more efficient, Box 4 will expand much more rapidly than Box 2, producing a great abundance of goods and services. If this happens, all of the Resource Providers in Box 1 (plus some I have failed to list) can be rewarded more than adequately for their services, with Goods and Services produced by the economy. The transfer of these Goods and Services occurs through the use of money.

Slide 21

Everyone can get rich at once!

Slide 22

The top line is GDP growth including inflation; the bottom line is GDP growth excluding inflation. Before the dotted line, both GDP growth rates and inflation rates are high; after the dotted line (when energy growth was lower), they tend to be lower.

Slide 23

Interest rates were raised to try to damp down oil and other energy prices. We will see in a later section that reducing interest rates helped hide the fact that energy growth was slower after 1980.

Slide 24

The wages shown on Slide 24 have already been inflation adjusted. Thus, in the period before 1968, wages for both the lower 90% of workers and for the top 10% of workers were rising rapidly, even considering the impact of inflation. Many families were able to afford a car for the first time. After 1980, the wages of the top 10% rose much more quickly than the wages of the bottom 90%.

Slide 25

In 1930, wage disparity seems to have been at about today’s level. Early mechanization had replaced many jobs, both on the farm and elsewhere. Farmers who could not afford the new technology found that they could not produce food cheaply enough to compete with the low prices made possible by the new technology. The growing wage disparity meant that a large share of the population could not afford more than the basic necessities of life. The many people with low wages kept demand for most goods and services low. Oil prices were low, and there was a glut of oil, not unlike what recent markets have experienced. New tariffs were added, and immigration was restricted.

Slide 26

The period before the mid-1970s is when a great deal of the United States’ infrastructure was built. The Eisenhower Interstate Highway System dates from this time period. Many of the oil and gas pipelines and electricity transmission systems in use today were also built in this period.

Once the price of oil and other energy products started rising, it became much more expensive to add or replace this type of infrastructure. Once oil prices rose, more debt at lower interest rates seemed to be needed to keep the economy growing, as I will explain in Part 2 of this write-up.

Slide 27

The least expensive to extract oil supply–US oil supply in the contiguous 48 states that could be extracted by conventional means–was developed first. Alaska production was added when it was clear that the early supply was starting to deplete. It was more expensive, as was North Sea oil, which was also added after early US oil began to deplete.

Once oil prices rose in the 2005-2008 period, companies became interested in developing oil from shale formations (sometimes called tight oil). This oil seems to be much more expensive. It is doubtful that this oil is profitable at today’s prices.

Slide 28

Many people believe that oil prices will rise, indefinitely, with the cost of production. The thing that they don’t realize is that high oil prices tend to lead to recession. When this happens, employment drops, and the average buying power of the population no longer rises–it tends to remain flat or falls. As a result, high oil prices do not “stick.”

Slide 29

We are today in a situation where oil prices have been too low for years. For a while, this situation can be hidden, but eventually low investment can be expected to lead to lower production of energy products. It is even possible that some governments of oil exporters may collapse from lack of adequate tax revenue. Governments of oil exporters often obtain over half of their total tax revenue from taxes on oil production. Adequate tax revenue for these governments requires a high selling price for oil.

The situation with food prices tends to parallel oil prices. This occurs partly because oil is used in growing and transporting food, and partly because of substitution issues. For example, corn can be used to make either ethanol for vehicles or food for people.

Slide 30

M. King Hubbert was one of the early scientists who talked about what appeared to be a problem of running out of oil and other fossil fuels. While I call him a geologist, he really was a geophysicist. The catch was that the physics thinking of the day was mostly about “thermodynamically closed systems.” If closed systems were the problem, then running out of fossil fuels that could be extracted using current techniques was the major issue.

Hubbert and others did not realize that energy supply is part of a larger economic system, which also functions under the laws of physics. The economic system is part of a thermodynamically open system, not a closed system. It gets energy both directly from the sun and from fossil fuels, which provide solar energy stored as fossil fuels.

The issue is how this larger economic system behaves: does it allow the oil prices to rise to a high enough level to extract all of the oil and other fossil fuels that seem to be available? I don’t think it does. But under the “right” conditions (lots of debt growth), the economic system does allow energy prices to rise somewhat. This is what we have seen since the 1970s.

It is extremely difficult to figure out what true costs and true benefits are in a networked system. The standard approach for evaluating the benefit of wind and solar considers only a small part of the system. If the proposed devices do not directly burn fossil fuels and if not too much fossil fuel is used in their production, the usual practice is to assume that the devices must be helpful to the overall system, because they seem to be “low carbon.” This approach leaves out many important costs.

The problem is that wind and solar are not now, and never can be, standalone devices. When all costs are considered, they are simply very inefficient add-ons to the fossil fuel system. These costs include buffering services (using batteries or other storage), the cost of capital, the cost of leases, and wages and taxes. A very high-cost electricity generating system is not likely to be helpful to the economy because such a system is very inefficient. It can be expected to affect the economy as adversely as high-priced oil does.

Slide 31

An economy operates best when energy costs are very low because goods and services made with this low-cost energy tend to be low-cost as well. Oil is used in producing and transporting food. Thus, low-cost oil tends to produce inexpensive food.

If energy costs begin to rise in a country, it tends to make that country less competitive in the world marketplace. It also tends to push the country toward recession, because the higher costs are difficult to recover from customers whose wages don’t rise to cover the higher costs.

Slide 32

Many people believe that the amount of fossil fuel that will ultimately be extracted depends on a combination of (a) the amount of resources in the ground, and (b) the technology developed for extraction. While these are indeed eventual limits, I think that a maximum affordable price limit comes much sooner. This depends on how high a debt bubble the economy can sustain. The role of debt will be discussed in Part 2.

Slide 33

One thing that is confusing is the familiar supply and demand curve for energy. Many people believe that “of course” prices must rise if energy is scarce. The catch is that energy consumption affects all parts of the economy. It takes energy to create jobs, just as it takes energy to produce goods and services. Because both supply and demand are affected by a shortage of energy, our intuition regarding how prices should move can be totally wrong.

The word “Demand” is confusing, also, because most energy use is difficult to see. Most energy use is not found in the gasoline we buy at the pump or the electricity we purchase. Instead, energy is used in creating the streets that we drive on, and in building the schools that our children attend. Building new homes and manufacturing cars also takes huge amounts of energy. If energy costs rise very much, the problem is that many people can no longer afford homes or cars. Instead, young people live in their parents’ basements indefinitely. Governments may decide to stop paving some roads, because repaving is too expensive to afford. Reduced demand for oil might be better described as reduced purchases of goods and services of all kinds, because certain groups of would-be buyers find prices too high to afford.

[To be continued in “The World’s Fragile Economic Condition – Part 2”]

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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1,500 Responses to The World’s Fragile Economic Condition – Part 1

  1. aaaa says:

    Are lithium vehicles a fire hazard? Let’s find out!

    • If airlines don’t want lithium batteries, there is a question whether we want them in our vehicles–especially if electric bicycles are charged in our homes and electric cars are charged in our garages.

      • Duncan Idaho says:

        But it s the best we have, that scales.
        The Japanese first commercialized it in the early 1990’s— it been a while comrades.

      • PeterEV says:

        Hello Gail,

        I think we have to remember that there are various Lithium Ion battery chemistry configurations. Some are more volatile than others. We carry lithium ion batteries in our cell phones, as CMOS batteries in our computers, electric watches, etc. While you can search on “Tesla battery pack fire” and score several hits you can then try it with “Bolt battery pack fire” and you won’t find any hits. Why??? It’s a matter of chemistry and how the packs are managed.

        One of the other things to keep in mind is that Tesla is aiming to break the $100/kwhr barrier and eventually go to $50/kwhr. If you can get a 1,000 cycles out of a pack, that’s $0.10 and $0.05 /kwhr, respectively for storing excess solar and wind energy. A123 was able to achieve 7,000 cycles several years ago. While A123 cells are not being used, it points to the fact that high cycle lifes are possible with the lithium chemistry.

        I’ve often drawn the analogy that we are in the 1920’s of aviation with respect to battery storage. Higher energy densities and safer chemistries are being worked on and we are seeing the results with longer range EVs with costs per unit coming down. I drive an EV and get about 45 miles per 10 kwhr or about $1.00 of electricity; some of it directly from solar. The money I save from not buying gasoline can be used to buy a replacement pack further down the road.

        I think you need to seriously think of **how** renewables and batteries will replace oil as it dwindles. We could eventually see a time where oil based equipment and tools are only used from some major projects while everyone else will be using renewables in some fashion or other. I no longer drive using gasoline and I don’t miss it. No long lines before a hurricane or after natural disaster. No oil changes!! No fan belts. No timing chains. No spark plugs. No compression rings wearing out. Also, the smoothness and acceleration make driving a pleasure!!

        I seriously think you need to project our energy usage based on adapting renewables and battery storage with an eye on decreasing costs; much the same way that decreasing costs and government subsidies fostered cheap airline flight today. Somewhere there will be a crossover and I don’t think it is that far away. It’s one of the reason that GM is using the Bolt as a “test bed” for development of their future drive trains for their other models. They see the writing on the wall with regard to fossil fuels and if they want to be relevant in the transportation field, they need to change with the times.

        Have you talked with anyone from GM about how they see us transitioning from a fossil fuel based to renewable based transportation systems? I think it would be a very interesting discussion.

        • What you say is interesting. Indeed, batteries can offset the extreme variability that goes with wind and solar. But without extremely huge quantities, it doesn’t offset the more normal variability–the night to day variability and the seasonal variability, especially if sun from the summer is to be stored from summer to winter. It still needs a lot of fossil fuel back up for this purpose, and will pretty much forever.

          We have been subsidizing renewables for an awfully long time. Allowing them to “go first” on the grid is a big subsidy in itself. They seem to be a long way from needing a subsidy. I would like to see them and their batteries go without any subsidy, including the going first subsidy. I will believe it when I see it.

        • Davidin100millionbilliontrillionzillionyears says:

          Hello Peter…

          please allow me to offer a not-Gail reply:

          “I’ve often drawn the analogy that we are in the 1920’s of aviation with respect to battery storage.”

          the 1920’s had 8 decades of cheap FF ahead…

          “I think you need to seriously think of **how** renewables and batteries will replace oil as it dwindles.”

          they rely on cheaper FF to be produced so they can’t “replace oil as it dwindles”…

          “I seriously think you need to project our energy usage based on adapting renewables and battery storage with an eye on decreasing costs; much the same way that decreasing costs and government subsidies fostered cheap airline flight today.”

          again, 8 decades of cheap FF “fostered cheap airline flight”… costs will be increasing on everything made with natural resources, because of the diminishing returns on extracting natural resources…

          “Have you talked with anyone from GM about how they see us transitioning from a fossil fuel based to renewable based transportation systems? I think it would be a very interesting discussion.”

          in my wise ash opinion, Gail would learn almost nothing and GM would be shocked at the details of the discussion…

          I seriously think you need to reread all of Gail’s articles…

          or do you just read to enhance your confirmation bias?

          • Those are good points, David!

          • PeterEV says:

            I hear what you are saying and I can see your point. I’ll offer you this: How many jet fighters, aircraft carriers, Abrams tanks would it take to alternatively buy enough solar and wind generation to be totally self sufficient in the USA? There is no economic profit from a tank or jet fighter in of themselves. So what productive use do they serve? It can be argued – none but self defense always comes into play.

            According to Exxon – Mobil, world oil production will start to decline after around 2040. Oil will still be pumped in the decades after that. This generally means that if demand stays high, citizens will either pay a higher price or seek an alternative. I think that electric based transportation will be that alternative along with bicycles and public transportation. Costs have come down for solar cells and wind turbines and they will continue to come down through technological advances. For instance, lithium iron phosphate batteries have an energy density of around 90 whr/kg. I have read reports of where that density has increased into the 400 to 500 whr/kg range. The theoretical maximum is in the range of 1500 to 3000 whr/kg. Here is something on recent battery development: https://www.sciencedaily.com/releases/2018/08/180806104319.htm

            About a year or so ago, Gail said she could not see Lithium Ion battery costs getting below $150/kg. GM is currently at $153/kg for production cost. Musk is shooting to getting the pack cost down to around $100/kg (https://cleantechnica.com/2018/06/09/100-kwh-tesla-battery-cells-this-year-100-kwh-tesla-battery-packs-in-2020/). You add to that longer battery life, higher energy densities, cheaper and more efficient renewables and there can be an economic scenario that makes sense even with dwindling FF resources. Will technology “save us”? I don’t know but I do know that people are working on “solutions”. It will be interesting how this all plays out and hopefully it will not be in a macabre way. My concern with this site is that renewables are being downplayed using conventional economics.

            I drive an EV and get an average of around 45 miles on 10 kwhr of electricity. Some of which is from solar. With gasoline creeping up close to $3/gallon, the savings is roughly $2/gallon. It looks like I will drive it about 9,000 miles this year. If I compare it to a 30 mpg SUV, that’s 300 gallons and $600 saved each year. I ran the numbers for a Leaf, and somewhere near 100K miles, I would have saved enough to replace tits 24kwhr pack ($5600).

            I think this is one of the reasons why China is going toward EVs in a big way and GM is using the Bolt as their gateway to a fleet of EV offerings beginning in the early 2020’s. They see the dwindling resources and see the need for getting food and supplies from point A to point B. There is limited upside to FF and a lot of potential to renewables with cheaper battery storage. We’ll see what happens. We’re living in interesting times.

        • Davidin100millionbilliontrillionzillionyears says:

          “I no longer drive using gasoline and I don’t miss it… Also, the smoothness and acceleration make driving a pleasure!!”

          yes, EVs are quite excellent…

          and they exist because of the FF industry…

          you may not use gasoline, but you use a car whose entire manufacturing process is dependent on FF…

          and the entire worldwide infrastructure for producing electricity is dependent on FF…

          it’s no big deal that you don’t seem to get this…

          ps: I would encourage you to post here MORE, not less…

          we need more replies like yours, to have easy targets for rebuttal…

          thank you for your above post…

          • PeterEV says:

            While we use a lot of FF today, the shift is to renewables for tomorrow. Like you, I drive an EV and have greatly enjoyed the experience. I don’t miss using an ICE except for long trips as I don’t own a Tesla but could plan a trip based on the existing network of Level 2 and 3 stations.

            How do you manufacture a car with less FF input and then with extremely little to none? Those that can answer that question will be manufacturing tomorrow and those that can’t will be hurting or out of business. While Gail is conservative with a lot of things as they are, I think we are at the bottom of an “S-curve” with respect to renewables. I understand that the west Texas area is powered a lot by renewables/battery storage and that the Australians want another one of Musk’s battery storage stations. Each time I drive out west, I see more wind farms and my local PV installer is very busy even after experiencing head winds from the local utilities.

            I remember reading where someone was trying to extract Lithium from sea water. That might be a game changer. Whether that will happen or not, I do not know. I know that FF’s will be peaking this century; sooner than later.

            What is my response to the peaking of FF’s and resources? What do I need to do to lessen my use of FF’s? My answer so far is to drive electric, weatherize, recycle, and install renewables. Am I energy self sufficient? NO, but could be. What do I have to do to become energy self sufficient? or Do I need to become energy self sufficient? What is my local utility doing to become self sufficient and thereby future proofing itself into future viability? What should we be doing as a society to shift from FF to renewables? If you can answer any of these, you can consider yourself to be useful to others who will be asking these same questions.

            • Lastcall says:

              I wonder if gold will ever be extracted from the sea as well, but hey, lets start with the plastics first. Anyway we have just about finished extracting the fish huh?

            • I agree on “just about finished extracting the fish.” The situation is sad.

            • Slow Paul says:

              What difference does it make if YOU are “energy self sufficient”?

            • Kowalainen says:

              Whatever you are yapping about is a part of the problem, can you see? Is your mental myopia really that severe you can’t even squint through your own blurred perception of physical reality?

              Yes, your electrical trinkets and gizmos ARE the problem NOT the solution for mankind.

              People like you are the worst of the worst. Evangelizing your wastefulness and then zooming online to share your shallow thoughts.

              Hey, just smoke some some weed with Elon, Gore and DiCaprio instead of wasting comment space here!

              I much rather read other commenters that I can agree or disagree with. Yours are just delusional and boring.

    • 99% of fire hazard are related to fast charging..
      So, you don’t have to engage in that optional behavior, running instead ~ 30% to 85% degree of discharge followed by slow charge is more than good enough for most people at this stage anyways..

      Is electric car worth the extra expense? It depends, perhaps better option for next ~15yrs is natural gas/LPG car or diesel, who knows, the sequential future is unknown, but if you are in the position of owning several carz per family is definitely wise to have one fully electric. Although, nothing is certain in this world, so be ready for expropriation action aimed at alt fuel vehicles by govs within that time horizon as well.

      • We always have problems maintaining a steady supply of electricity. These will only get worse in the future. Counting on electricity for a long time in the future is wishful thinking.

        • Yes, indeed specific regions even within some industrialized countries are running unreliable grid now, so what about the future.. But more importantly there are various modes of electrified-assisted transport and obviously the smaller less power demanding preferred option the better prospect to feed it off grid or on seriously un reliable grid, long term, ~8-12yrs of longevity should be realistic estimate with some spare parts set aside.. Some people even buy entire setups twice (thrice) and harden the the second unit for storage against EMP situation (natural or man-made). Surprisingly still within budget of most average people, but you have to get your priorities straight first, abandon frivolous purchases and activities..

          Now, the eternal summation question, but is it worth the effort after-all?
          And again it depends..

          • The need for replacement parts and for food and water becomes a problem very quickly. It is necessary to keep the whole system operating. Perhaps, a local system can be kept operating, but somehow you have to meet your ongoing needs, which cannot entirely be forecast and saved up for.

            • Artleads says:

              For marginal countries in the North American orbit, where the local currencies get devalued every minute, I was suggesting using the US dollar as currency–it would be relatively stable–and using the local currency as a back-up for the poorer or alternative populations. That currency would be artificially stabilized and would be merely for local use to buy no-frills essentials with a local flavor? Producers would benefit by the stability but would have to sacrifice some profit. A slight variation on the Cuban model? No need to print new currency. Just agree to set values.

  2. Rodster says:

    “Danske Bank Shares Plummet As More Details On $234 Billion Money Laundering Scandal Emerge”
    https://www.zerohedge.com/news/2018-10-05/danske-bank-shares-plummet-more-details-234-billion-money-laundering-scandal-emerge

    “Largest US Mattress Retailer “Mattress Firm” Files For Bankruptcy”
    https://www.zerohedge.com/news/2018-10-05/largest-us-mattress-retailer-files-bankruptcy

      • Duncan Idaho says:

        Knowledge brings fear.
        — Mars University motto

      • I checked to see who IL&FS is. https://www.ilfsindia.com/about-us/

        According to the web, “We develop high quality infrastructure and financial solutions to catalyze India’s growth.”

        One heading says, “Partnerships, innovation and empowerment for sustainable infrastructure development”

        Nice photos of wind turbines

        Wikipedia says

        IL&FS was formed in 1987 as an “RBI registered Core Investment Company” by three financial institutions owned by the government of India, namely the Central Bank of India, Housing Development Finance Corporation (HDFC) and Unit Trust of India (UTI), to provide finance and loans for major infrastructure projects.[6] Gradually, as the organization needed better financing, it additionally opened itself to two large international players, namely Mitsubishi (through Orix corporation Japan) and the Abu Dhabi Investment authority. Subsequently, Life Insurance Corporation India, Orix and ADIA became its largest shareholders, a pattern that continues to this day.[7]

        Currently, its institutional shareholders include Life Insurance Corporation of India (LIC), ORIX and Abu Dhabi Investment Authority, with small shareholdings by a few Indian banksState Bank of India (SBI) was a share holder till 2017, after which it sold its stake in the company. A few foreign investors including Greenspring associates remain investors in its subsidiary companies, especially IL&FS transportation and IL&FS infrastructure services.[8][9][10]

        In 2012, A2Z Group acquired the property management subsidiary of IL & FS (IL&FS Property Management & Services Ltd) in a cash and stock deal. The deal was done through its subsidiary A2Z Infraservices Ltd for Rs250 million. While Rs70 million cash payment was made to IL&FS Infrastructure Equity Fund and IL&FS Employees Welfare Trust, the infrastructure major also took a 20% stake in A2Z Infraservices by way of a stock swap.[11]

        According to the article, “IL&FS has 256 group companies as of 2018, including subsidiaries, joint venture companies and associate entities.”

        So IL&FS seems to be building stuff that it is not possible to get a high enough return on in the market place.

    • Another article says that up to 700 mattress stores will be closed; Simons and Serta are listed as the largest creditors.

    • Neil says:

      So much for the habit of keeping your money in the mattress because you don’t trust the bank.

  3. xabier says:

    Isn’t it enlivening to stand on the precipice, the winds of Destiny blowing in your face, knowing that this is to be on the cusp of disaster, but alive? !

    Isn’t this better than slumbering in deluded complacency? !

    Isn’t every moment all the more precious?!

    ‘Cease man to weep, to mourn, to wail/ Enjoy the shining hour of sun!/ We dance along Death’s icy brink/ But is the dance less full of fun?’ (‘The Kasidah’)

    • aaaa says:

      Perhaps if you’re a homesteader it is cause for inspiration. For most, it’s an abstract, additional stresser in their rat-race existence.

      • xabier says:

        I would agree that if our knowledge served only as an additional stressor, then it would be far better to be ignorant.

        • Davidin100millionbilliontrillionzillionyears says:

          ah, the winds of Destiny are blowing as strong as ever…

          every day, we are nearer to our inevitable fate of the nothingness of eternal death…

          and there may be a growing awareness of the certainty of human extinction…

          but the winds blow warm…

          after human extinction, all of the stress of human existence will be gone…

          though for now, some of us can gaze knowingly at the massive spectacle of the wobbling tower of BAU…

          the tower stands shakily in the strong wind of Destiny…

          for now…

          at least until October 29…

          a Monday…

    • Harry McGibbs says:

      Agreed in principle, Xabier, and yet, even carrying this awareness, one can still so easily get swept up in the petty dramas of day-to-day life, I find. Perhaps I should start meditating.

      • xabier says:

        Some of the greatest saints of the Dark Ages lived on wind-swept Northern islands. Didn’t one dig a hole so that he could see only the sky, and no temptations? 🙂

      • jupiviv says:

        Not to mention that too much certainty about the acuity of such awareness inevitably leads to disappointment and possibly also the same error in the opposite direction.

        • xabier says:

          There is of course no certainty, but the probabilities are stacking up…….

          • Davidin100millionbilliontrillionzillionyears says:

            “On a long enough timeline, the survival rate for everyone drops to zero.”

  4. Lastcall says:

    https://www.zerohedge.com/news/2018-10-05/deception-about-catch-david-einhorn-unleashes-elon-musk-compares-tesla-lehman

    ‘Lehman threatened short sellers, refused to raise capital (it even bought back stock), and management publicly suggested it would go private. Months later, shareholders, creditors, employees and the global economy paid a big price when management’s reckless behavior led to bankruptcy.’

    ‘Meanwhile, the brand is in trouble. The blocking and tackling of the Model 3 rollout is leaving customers unhappy. There have been lots of reports of delivery snafus and poor quality cars. There are anecdotes about TSLA accepting full payment for cars and then not delivering them. There are many stories of cars (even Model S and Model X) in service shops for months for lack of spare parts. With so many new TSLA cars on the road, the problem is overwhelming TSLA’s limited service infrastructure. The Model 3 is the least reliable car on the market.’

    I wonder if the ’emperor has no clothes’ moment for Tes.la, that is getting closer and closer, is the event that will trigger a loss of faith in asset valuations, then leading to the whole house of cards collapsing. It would be ironic…well IMHO.

    • Great article!

      One of the sections I liked:

      In 2016, TSLA thought its Fremont plant could make 5,000, 10,000 and 20,000 vehicles a week in late 2017, 2018 and 2020, respectively. This can’t happen at people speed. Consequently, the cost structure of the Model 3 is much higher than Elon Musk expected when he took deposits from hundreds of thousands of people for a $35,000 car. It’s a promise he can’t keep.

      UBS did a teardown analysis and estimated that the cost to make a stripped down version of the Model 3 is $41,000. That’s a long way from $35,000, let alone $26,250 – the level needed for TSLA to make a 25% margin.

      In May, Elon Musk tweeted that the $35,000 version would be launched 3-6 months after the company achieved 5,000 cars a week. That milestone was hit with great fanfare in June. However, investor relations has leaked that the company now expects the $35,000 version in the second quarter of next year. Tellingly, TSLA has stopped taking orders for the $35,000 version, as it may already know that it won’t be releasing a $35,000 version anytime soon or ever. The company has changed its policy on refunding deposits so that customers who are tired of hoping TSLA makes a car that doesn’t exist and want their money back have to wait 45 days.

  5. Interest rates keep rising rapidly.

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

    US Treasury says yield on 10 year bond is up to 3.23%. It was only 3.05% on Tuesday. A month ago, on Sept. 9, it was 2.90%. These changes will be harmful to the mortgage market, I expect. And they could adversely affect stock prices.

  6. Rodster says:

    “Hot Economic Warfare: Scrambling For Rare-Earth Minerals”
    https://www.zerohedge.com/news/2018-10-05/hot-economic-warfare-scrambling-rare-earth-minerals

    Infinite growth on a finite plant. What could possibly go wrong?

    • I thought that at least part of the problem with rare earth minerals was that their extraction tends to be terribly polluting. Despite the name, there seem to be moderately large supplies of these minerals, but developed countries don’t want to mess with the pollution involved. The article mentions cobalt, too. This is in a different category.

      There is certainly a lot of truth to the story, though. We will quickly come to overuse any mineral in short supply. We decided we couldn’t/ didn’t want to use as much fossil fuels. The substitutes quickly go into short supply, too. We don’t understand how quickly, though. And part of the reason they go into short supply is because of other issues, such as pollution that is too difficult to deal with, or cutbacks on international trade.

      • Rodster says:

        “And part of the reason they go into short supply is because of other issues, such as pollution that is too difficult to deal with, or cutbacks on international trade.”

        …and of course it all takes money to go find and extract those minerals and deal with the pollution. The global economic system is getting wobbly once again just like in 2008.

  7. Dr. Tim looks at de-growth:
    https://surplusenergyeconomics.wordpress.com/2018/10/06/136-the-challenge-for-government/


    I guess it dissects nicely the expected trends for next ~10-15yrs. Now I speculate towards the latter stage of this time window with the prosperity (as shown on graphs) falling markedly bellow 1970s proportions, bigger shocks – societal resets are likely to finally appear and alter the trajectories substantially..

    • Van Kent says:

      Anything worthwile would be a plan or policy or institution infrastructure, that would acknowledge that
      1. a. collapse is coming b. sooner to some c. but when GFC vol.2 hits with full force, no bank or currency or government that will be left standing

      2. There are different stages in collapse.
      Stage 1: Financial collapse. Faith in “business as usual” is lost.
      Stage 2: Commercial collapse. Faith that “the market shall provide” is lost.
      Stage 3: Political collapse. Faith that “the government will take care of you” is lost.
      Stage 4: Social collapse. Faith that “your people will take care of you” is lost.
      Stage 5: Cultural collapse. Faith in “the goodness of humanity” is lost. 

      = one part of Chicago is in Stage 1. as another part of Chicago is already in Stage 3 etc. etc.

      3. Therefore what we would needed are plans for each stage. Its not about governments or government policy as such. Its about having a plan in general for each stage. Currently all plans are about governments, federal reserves, military, “and bury your head in the sand untill the storm blows over” -plans. But as GFC vol.2. will make large scale plans impossible.. What would be needed are local plans that could be implemented by regular folk, with the resources then available to them

      4. Local plans like this:
      Stage 1. Tax available citizens and create a Public Bank.. within hours of GFC vol.2, use digital currency if electricity is still available
      Stage 2. Create co-ops.. gardening co-ops.. in the like of Russian Dachas in 1990 and 1991, thirty or so gardeners could differentiate their personal expertise, for the benefit of them all
      Stage 3. Create militia, provided by the gardening co-ops
      Stage 4. Ask yourself, what would Fast Eddy do, and do that
      Stage 5. Go hibernate like Norm

      • Sorry, I just don’t understand the over fixation on the GFCv2.0 event, there could be likely several steps in between and afterwards.

        I agree with your point of wide gamut of collapse stages not going on the same pace. Everything is indeed differentiated on the timeline, and local wise..

        In terms of local plans, “Dachas” meant as second place of residence or summer house or perhaps as just small agri plots in the ownership of poor to average income people can be still found in some token places within the Western and industrialized world, notably Baltica, CEE, Russia, Balkans, perhaps even some parts of Holland and France. But for the most part nowadays it’s completely unknown impossible concept for the largest metro areas such as London, Paris, not mentioning the sub/urban situation in the US.

        Moreover, it’s hard to quantify the potential of people actually doing “victory gardens” or the “dacha” thing vs more expedient trend of abandonment of cities and proper countryside re-localization or dispersion. It will be mostly inter connected with the govs propensity and capacity to continuously supply urban areas with at least some energy, food, water.

        Interestingly enough expected riots in some places won’t take even weeks or months to start a blaze, while in some places perhaps years or decade or two..

        And again while the US tends to score among the worst on the list ever, in actual reality the can kicking effect of some countries triaged away way sooner might surprise us, not mentioning the already demonstrated weaponization for local order (e.g. Katrina).

        Therefore, as first precautionary step, I’d certainly not risk anything like French (ghettos and weak gov), Italian (ghettos and weak gov), Spanish (ideology civil war prone) or Greek (fuel heavy logistics and defenseless to next mega migrant wave) urban areas.. Not sure on the German speaking countries as their docile pop will take early measures of brutal austerity relatively in calm mood, although larger cities at today’s sad stage (mosques everywhere) obviously should be avoided as well.

    • Looking at his post, Dr. Tim just doesn’t understand why the economy cannot shrink back. He is obsessed with the EROEI story (from Charles Hall), but the EROEI story is too limited to be of much help. In fact, it tends to be misleading. It looks like there is just a minor problem, when there is a huge problem, coming at us from several directions at once.

      What is happening is that we are reaching diminishing returns in many directions, simultaneously, including returns to capital investment. The economy tends to grow too slowly, and tends to fall over, like a bicycle that goes too slowly. It becomes impossible to repay debt with interest. The debt bubble tends to collapse, and all asset prices tend to fall. Commodity prices also tend to fall. It becomes impossible to extract oil, gas, and coal, because citizens are unable to afford goods and services made with fossil fuels (and even more expensive renewables).

      I do not know how long this debt problem/lack of adequate returns problem can be hidden. This is what determines how long until we have until GFC 2.0 pulls the economy down.

      • We are perhaps all talking too much past each other.

        Dr. Tim clearly presents a viewpoint and quantified analysis by which large segments of the pop are already under the condition of “managed” de-growth since the year ~2005 ! While the global aggregate demand is still somewhat rising thanks to the buildup of China, RoW etc. Now, we don’t know what is going to happen at the threshold of no aggregate growth at all, because this boundary could be again obfuscated by some “temporary phenomenon” like several countries sliding from the systemic equation for ever, others fencing out some quasi autarky trade blocs, or at least attempting and what have you.. Also Dr. Tim hints at some monetary even down the road, so in such turmoil “no growth” situation or deep realization eventually won’t matter much as the system already cascades, fractures, and re-adjusts on the go to something else, different entity and mode of operation.

        • Dr. Tim’s future forecasts he shows on his charts seem to me to be way too optimistic, however he justifies them. I don’t think he is talking US only. He lives in the UK, I believe.

      • Fast Eddy says:

        Tim also thinks that the aftermath of this …is survivable….

        He is living in DelusiSTAN.

  8. i1 says:

    It’s akin to policy makers using the interest rate weapon to slay the dragon of high energy prices. Apparently what worked in the last century is of little or no use today due to the economic pollution of debt.

    • I hadn’t thought of debt being like pollution. Return on capital spending has been falling lower and lower, so true return on debt seems to keep falling.

  9. Hubbs says:

    I don’t see how anyone can really predict how things will turn out when the credit bubble bursts, the trucks stop running in time, and a well-armed population- the latter which sets us apart from other societal collapse scenarios whereby the military had been able to dampen some of the extreme chaos- at least temporarily.
    In the Great Depression,70% or more of the people were already self-sufficient, there was less complexity etc, and most people probably less than one generation removed from the farm with tighter family and community units.

    Today, 95% of the population is helpless, dependent on just-in-time delivery of food and removal of waste, government subsidies through SS, pensions, and entitlement minded more than ever, and unable and unwilling (too much hardship) to revert to self -sufficiency.

    This “toxic brew” could argue for an ultra-violent spontaneous event whereby the Black Friday fights at Wal Mart over non-essentials like big screen TVs would transform into all-out fights to the death in local community apartment complexes, whereby every person would be considered an immediate competitor for resources and to be shot on sight. Remember, there is no sense of community. I don’t even know my neighbors in my apartment complex section/stairwell!

    Furthermore, trying to establish local more self sufficient communities would be difficult. Even now, I would love to move to a smaller, self-sufficient community, do my share of the farming, animal husbandry chores etc., but the problem is, there are too many weirdos out there. I don’t want to join a hippy commune in which everyone thinks “all you need is love,” or a religious fanatical group, nor do I want to join a preppers-gone -wild place where all they do is focus on guns, patrols, and building defenses, or just plain out druggies whose only interest is producing Met and growing pot. My understanding is most tight-knit communities, if they indeed exist, will resist newcomers anyway, even professionals or highly skilled people- doctors, engineers, electricians etc.

    I for one, am very skeptical about these FEMA camps. I cynically ask myself, “which way is the barbwire facing?” In- to keep prisoners, or out- to prevent people from looting what really is a cleverly disguised government supply depot needed by the military to sustain martial law?

    I simply don’t like any of the options.

    • I am afraid you are right. Unless things are happening that we don’t understand.

    • Artleads says:

      Yup. I’m in a village that had a high sense of community at the start, and now is overrun by people with a different sense of community–one more dependent on money–than the oldsters. They will be less resilient, more dense, more brutal, more demanding under emergency circumstances than the oldsters. They’re going the wrong way in every sense.

      But what would have happened had we explained from childhood how to behave more rationally?

    • Lastcall says:

      ‘…will resist newcomers anyway, even professionals or highly skilled people – doctors, engineers, electricians etc.’ Hmmmm…

      They will reject them because they will be next to useless without their modern props; farmers, builders, plumbers, hunters, scrap metal merchants, naturopaths/herbalists, ex-military will be the useful people/skill-sets. Especially older ones who can make-do with what is available and don’t just order parts for replacement. Cuba would seem to be a case in point.
      I work with some professionals, and meet with many others; they are specialist to the point of absurdity and are often unable/unwilling/ un-interested in gaining other skills when money has always worked to solve problems for them.

    • Again, what credit bubble bursting are we talking here?

      Given the evidence, we have already established the global gov-CBs nexus is currently way past any type former organic credit bubble bursting event anyway. We have been on deliberate prop up program of the system for quite some time already as all the major players (US,EU, Asia, Gulfies, RoW) came together to furnish the system with enough debt, credit, liquidity..

      In other words we happen to reside inside some managed virtual economic plane, how they are going to proceed further into the future is unknown from our ants vantage point.
      It could be triage of non systemic countries, societies and channeling the resource path elsewhere, to the core and among the chosen production-consumer group. And or combined with selective debt jubilees, also obfuscated mandate for pushing austerity, e.g. via k-limaa-te related scams etc.

      Simply, there are ample methods and reasoning not taking the past models (understanding of debt) seriously anymore.. we are in different world now.

      • We will find out. Maybe TPTB can hold things together for a little while. They did better than expected last time.

      • Lastcall says:

        The credit bubble keeps the US energy flowing; forget your other asset-valuations. This issue is not of the virtual plane. Shale/oilsands energy is propped up on life support and will be exposed as a capital destroying ra.t hole as funding is with held. Maybe the US govt will prop it up for longer, but this has the shades of the collapse of the USSR written all over it.
        When the shale sh*ts itself watch the he.gemon go looking for trouble. The entire Russia and/or Iran narrative is a psychops preparation for the domesticated Anglo’s.

        • Yes, the energy flow question is one of the core pillars, that has been generally agreed upon here many times.

          However, I’d posit the USSR collapse example is not much relevant, as it was driven by different situation and conditions. Remember, the US and West are the host nations of the global order, most notably in finance, debt/credit instruments. While the USSR was always at best just junior partner a somewhat competing subset in the global scheme, lesser player locked inside the rules of domination of others. That’s the fundamental crucial difference always to remember.

          And as we know by late 1970s and early mid 1980s the plan was to simply out spent the USSR on fraudulent debt increase. Hence why the seemingly run away train of that era on overcoming the 1970s stagnation, suddenly there was enough capital for off shore drilling (EU/Alaska), and onshore advanced oil drilling-recovery techniques etc.

          USSR simply knew and internally acknowledged defeat in such skewed game, hence the late mid 1980s Perestroika action plan which was response to opening of Chinese regions to capitalist enclaves as well as Eastern block countries flirting with western credit and investments (Poland, Hungary, Yugo..).

          The deal was to let be incorporated into the global system in the Chinese style, but this transition process has been probe attacked via the 1989 “revolutions” hence the West got even much better deal, everything on the plate (labor, resources, infrastructure, ..) for almost free, not much equitable sharing as previously assumed (and promised) occurred.

          If you like the one liner summary, the Pirates simply outfoxed the gullible.

          They tried it at the same junction in China and failed, hence return to the “fair deal” different strategy and more revenue sharing and technology transfer plan had to proceed in the 1990s-2000s there.

    • Aubrey Enoch says:

      “I would love to………….do my share of the chores…. ”
      Well Mr.Hubbs I’ve often wondered if they were folks like you that would fit in around here. I’ve got 100 rows with a drip irrigation header ready to grow some food or crop to sell but there is no one to work it.
      We need a geezer farm. All geezers have bad days but they don’t all have them in the on the same day. These animals are here every day. One of these mornings I’m not going to get up. The dogs and chickens and goats will still be hungry
      I’d do an RV park thing but everyone would have to use a .compost toilet like the Humanure Handbook by Joe Jenkins. I’ve got three wells all on different electric services and I’ve kept the water on for 4 households for forty years. Keeping life going is plenty video game for me. Check out berryfarm.com and contact me if it looks interesting.
      I know what you mean about the kookie thing and thats the other hold up.. I don’t have the energy to deal with the delusionstanies. I’m sorry their brains are damaged. I’m sorry for the people that build in flood plains but I got my hands full already.
      The herd is about to get culled but in the mean time there are better and worse places to be. The Old Religion believes, it’s not whether you win or lose but that you die trying.

  10. MG says:

    https://www.lutheranfranciscans.org/

    …this is interesting. (I found it here https://en.wikipedia.org/wiki/Evangelical_Lutheran_Church_in_America)

    The most beloved apostle of Jesus Christ was the celibate John. He also wrote apocalypse.

    And what happened to the two Slovak catholic priests who recently unveiled a memorial tablet to a catholic priest who lived with a woman and their 3 children at a parish in the village in the depopulating central Slovakia:

    Logically, both of them were suspended by their bishop:

    https://spectator.sme.sk/c/20928353/two-catholic-priests-suspended-after-publishing-a-book-on-celibacy.html

    • There seem to be a whole lot of different religious groups, each adapted to the needs and situations of a particular time and place.

      My father grew up in Madagascar, the child of Lutheran Missionaries. In fact, he was born in Madagascar. The religion brought to Africa was no doubt a variation on what was taught elsewhere. The God Is So Good song I posted a link to previously is a song that was used by different types of African missionaries, in different languages.

      Each time and place needs a religion for that time and place. That is why religions keep changing. Our current religion seems to be, “We humans can save ourselves through technology and hard work.”

      • MG says:

        The point for me is how religions change vis-a-vis population changes. Especially, when the human beings are energy dependent creatures.

        The social structures of the populations that face energy limits desintegrate, i.e. marriages break up, generations become alienated, the number of single individuals is rising. The point about the celibacy is, that it accepts the truth about the limited existence of the human species. That is why celibacy must be taken into account by every religion, if peace is to be maintained within the populations, and this is even more important when the populations face the serious truth of energy constraints.

        The religions that do not value celibacy are easily overcome by those that value it: that is why judaism was overcome by christianity. And buddhism is more attractive than christianity for many people today facing the desintegration of the ephemeral world created by the vast amounts of energy of the fossil fuels, the energy of the previous higher populations before they declined etc.

        • Kowalainen says:

          Buddhism is not a religion.

          • MG says:

            Tt is o.k., because the last stage is atheism. So the line judaism – christianity – buddhism – atheism is about the move from religion to philosophy, i.e. giving up efforts to influence the higher power in favor of doing what is possible within the given limits.

            • Kowalainen says:

              When you wrote “higher power” I got confused, because I was certain you meant TPTB and not the god figure. I guess the Scandinavian atheism runs deep in me.

              Buddhism is a method to see through the confusion of our mind, senses, desires, the smoke and mirrors, present everywhere and nowhere. And of course a way of escaping the Nietzschean ‘eternal recurrence’.

              Indeed it is a way for men who does not find appeal in the bread and circuses of BAU for sure, but needs a living nonetheless.

            • MG says:

              When the world of the previous generations based on energy from wood, coal and oil is desintegrating and you live in the era of nuclear and natural gas. And there is nothing to surpass the last two fuels. Everything seems to be without a perspective: you do not have energy to preserve the past and to build something superior to that, too. This is the dilemma of todays people: YOU ARE STUCK IN THE DISAPPEARING HUMAN WORLD.

            • Kowalainen says:

              You see, I never wanted the human world. For me it is basically worthless. The faster it goes away, the better. Indeed, I want to understand the mechanisms, the essence of reality. This human form is severely limiting what I would like to understand and to feel, experience.

            • MG says:

              “You see, I never wanted the human world. For me it is basically worthless. The faster it goes away, the better.”
              – this is ridiculous, as the human world infrastructure and its energy flows are needed for your survival

            • Kowalainen says:

              How do you want it? Either BAU is part of ‘human world’ or it isn’t?

              The problem with verbose people like you is that they usually are not very clear thinkers, but enjoy writing about their vague perception of reality clouded by imprecise semantics.

            • MG says:

              “verbose people like you” – as the human reality is disappearing and being temporarily replaced by machines, in the end, all words will be empty, as there will be no human beings to use them for communication. Like the texts of the ancient died out civilizations.

            • I hadn’t thought about it that way.

            • Artleads says:

              Unless religion is all there is, and philosophy is a religion too.

            • Kowalainen says:

              Humanoids; prepare for the inevitable downgrade onto irrelevance.

          • doomphd says:

            Buddhism is more a philosophy than a religion, although the god-botherers who need a crutch to get through life will interpret it that way.

        • I expect that part of the reason that the Catholic Church supported celibacy was because there were already population constraints. Families had (excess) sons and daughters who needed jobs, but could not inherit land or marry someone who had inherited land. The church could provide employment for them. It was a lot easier to do this, for a large number of people (excess children), if they would take vows of celibacy and poverty. If they received large salaries, and married and had families, they would add to the problem that needed to be solved.

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