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. Baby Doomer says:

    • Tim Groves says:

      It’s a generational thing. The early Obama years were the years of peak “liberalism” for the court. Now it looks to be solidly “conservative” for at least a generation. Off the top of my head, the five conservatives have an average age of about 62 and the four liberals have an average of about 72, and Justice Sotomayor, still a sprightly 64 year old, lives with type I diabetes, which is likely to force her into relatively early retirement.

  2. Baby Doomer says:

    Oil prices are ‘entering the red zone,’ warns International Energy Agency chief

    https://www.marketwatch.com/story/oil-prices-are-entering-the-red-zone-warns-international-energy-agency-chief-2018-10-09

    • Duncan Idaho says:

      “He added that expensive energy “is back at a bad time, when the global economy is losing momentum. We really need more oil.””
      Well, we are entering, for the first time, a period where it is not supply chains, but supply restriction.
      We will get to see how this works out.
      The Permian working out transportation problems by next year will solve some of these issues.

      • Dan says:

        I’m loading up on Orrville Reddenbacher popcorn stock. Well since we don’t have the easy to extract oil anymore we’ll just print us up some money to pay for it. Watch’em dance!!!

        https://www.zerohedge.com/news/2018-10-09/trump-says-he-doesnt-what-fed-doing-considering-goldmans-powell-un-ambassador

        Today – With the dollar spiking and rates surging to 7 years highs, President Trump doubled down on his criticism of the Fed and on his way to a rally in Iowa, said the Federal Reserve is moving too fast with interest rates increases, dismissing concerns about inflation.

        “I don’t like what the Fed is doing”, Trump told reporters at the White House. “I think we don’t have to go as fast” on rate hikes. “I like low interest rates,” Trump said.

        http://www.usmessageboard.com/threads/donald-trump-the-self-professed-king-of-debt.496075/

        May 2016 – He sparked concerns last week, for instance, when he dubbed himself the “king of debt” in an interview on CNBC and said he would be open to renegotiating U.S. public debt by treating the interaction like a business deal.

        But on CNN’s “New Day” Monday, Trump said he never meant to suggest he would want the U.S. to default on its debt. In fact, Trump said, the country would never face such a potential outcome because it can “print” money.

        https://www.wsj.com/articles/trump-asks-saudi-arabia-to-boost-oil-production-1530360926

        June 2018 – U.S. President Donald Trump said he asked Saudi Arabia to significantly boost its oil production, ratcheting up pressure on Riyadh to help ease fast-rising crude prices.

        • Dan says:

          Sweet Gawd

          https://www.zerohedge.com/news/2018-10-09/trump-says-he-doesnt-what-fed-doing-considering-goldmans-powell-un-ambassador

          Trump also said that rates are too high because there’s no inflation, but said that he has not talked to Chair Powell about it because he doesn’t want to get involved.

        • Fast Eddy says:

          Hang on … isn’t Potus the ‘most powerful man on earth’?

          Want to see real power — look at the Fed – it controls interest rates — look at what happens when the Fed pushes rates higher… or lower…. mountains move… countries move…. the entire planet moves…

          Now that is power.

          Meanwhile politicians argue about which pot holes get filled first

          • Doesn’t POTUS have some smaller yet at time perhaps important role in FED board nomination (legitimate question)? But as we know from recent history across CBs around the IC world, often time even supposedly new “maverick” candidate entering the upper echelons of CB’s board very quickly changes tune and swiftly blends with the legacy agenda. One can only wonder why it tends to work that way.. lolz

            • Fast Eddy says:

              no … he is an errand boy of the owners of the fed

            • Obviously, both the POTUS and the FED board members are errand boyz..
              Now, the irony of the historical events is that sometimes on special occasion such subservient yet relatively closer individuals to the true levers of power interject themselves into the process and engage or at lest nudge some kaboom..

          • Greg Machala says:

            “Meanwhile politicians argue about which pot holes get filled first” – Ummm – they don’t even do that much anymore. All they do is smear each other, launder money through their foundations and run endless campaigns.

  3. Sven Røgeberg says:

    A Nobel Prize in Honor of Economic Growth
    William Nordhaus and Paul Romer have spent their careers studying ways to make and keep economies strong.

    https://www.google.no/amp/s/www.bloomberg.com/amp/view/articles/2018-10-08/romer-nordhaus-are-deserving-picks-for-economics-nobel

    • They seem to think that the physics behind what causes economic growth is unimportant. This is the way that all kinds of nice ideas can save us.

      • Kurt says:

        Yes, but they got the Nobel, which will prove very useful during the collapse.

      • Lastcall says:

        Wow, what a house of cards!
        These guys are all in awe of themselves aren’t they. I loved this part..

        ‘The future of econ is rigorous, empirical, and always engaged with the real world.’

        Silo economics; they would’t recognise the real world if was handed to them on a plate.

        • Harry McGibbs says:

          Delusional megalomania masquerading as rationalism.

          I hope they have the time to reflect on the hubristic folly of those words in the challenging years ahead.

  4. Baby Doomer says:

    One of oldest coal companies in US files for bankruptcy

    http://www.wect.com/2018/10/09/one-oldest-us-coal-companies-files-bankruptcy/

    • Greg Machala says:

      Wow, if coal isn’t profitable then things must ***really*** be bad.

    • The article mentions that this is the fourth major US coal company to file for bankruptcy in the last three years. After looking at some data, I think that this is another example of energy prices not rising to compensate for diminishing returns (rising cost of production).

      If we look at US coal production and consumption, we see that coal production peaked way back in 1998. Imports and exports have never amounted to much of the total. The US was a net importer for a short time after US production peaked, however.

      We can also see that exports have never amounted to a very large share of production. This is true, with or without any recent exports to China or India. They never amount to much in the whole scheme of things.

      I also found this chart of US coal production by rank, as well as EIA data to update this information to 2016.


      Source: https://en.wikipedia.org/wiki/History_of_coal_mining_in_the_United_States

      It appears to me that Anthracite production peaked back in 1918. Bituminous coal production peaked in 1991. Data through 2016 shows Bituminous production is down to 323, which is a reduction of 33% from the 2012 value shown on the Wikipedia chart.

      If you look closely at the chart, Sub-bituminous seems to reach a peak about 2008. More recent data shows that 2016 sub-bituminous production is down to 330, which is a 27% reduction from the 2012 value shown on the chart. Lignite production is down by “only” 7%.

      A look at coal prices shows that they rose a bit, but this did not increase production. Coal prices seem to depend on “how high the debt bubble is blown,” like all other prices. Thus, coal prices were very high in 2008, somewhat helping production, but not enough to offset the general downward trend.

  5. Lastcall says:

    Climate change is coming the same way it always has…from our local star.

    ‘The eleven-year cycle in sunspots itself builds in intensity like the Economic Confidence Model (ECM) reaching “grand maxima” and “grand minima” over the course of 300 years. The last grand maximum peaked circa 1958, after which the sun has been steadily quieting down. Today, the drop in activity is at its steepest in 9,300 years, which is being ignored by the Global Warming propaganda.

    The last Maunder Minimum, during which the sun languished for seventy years, took place from 1645 to 1715 when the sun’s brightness declined and the number of sunspots collapsed to almost zero. We are seeing almost zero so far in 2018.

    https://www.zerohedge.com/news/2018-10-09/martin-armstrong-napoleon-war-sunspots-human-excitability

    We are indeed “only human” to capture a saying normally invoked for human error. We have all heard that history repeats itself. Perhaps it is not history that repeats so much as human error. We are not immortal. We have not lived constantly throughout time. We die and are replaced by new generations. Each generation tends to believe that they are smarter than the last, failing to accurately study the errors made by previous generations; they will make the same mistakes

  6. Fast Eddy says:

    Chapter 3 or 4… when the Germanic tribes poured into the Roman province in Spain …. they created havoc with the farmers resulting in a massive drop in food production … they seized most of what was produced and ‘mothers were cooking and eating their babies’

    https://www.audible.com/pd/The-History-of-Spain-Land-on-a-Crossroad-Audiobook/B073PJ2227?ref=a_lib_c4_libItem_0_B073PJ2227&pf_rd_p=ae76b2bb-e63d-4a67-b357-dab3dee05ca1&pf_rd_r=1TKJKFV0E1V61V0J8NAG&

    But of course when nearly 8B people are hungry … DD Preppers will be left alone to enjoy a Little House on the Prairie lifestyle…

    • Different *situation, what’s going in reality instead is that today’s “first world” is increasingly falling into realities of the third world living condition arrangements on all fronts. In other words a process not overnight fantasies of rapid collapse ala GFC_verXY, although notable threshold events will happen obviously along the way..


      * and very problematic historical review short cut on your part as the Germanic tribe migrant flows where more like series of trashing waves not single event, and amusingly in later part the “first comers” who picked up some of the know-how and culture were very unhappy with the new inrushes of their “primitive” relatives.. at instances even fighting them off with the help of remnants of the falling/fallen dispersed Romans..

  7. Fast Eddy says:

    New Evidence of Hacked Supermicro Hardware Found in U.S. Telecom
    Senators Question Supermicro on Report of Chinese Hardware Hack
    The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies
    Inside the Chinese Cyberspies’ Bag of Tech Tricks

    https://www.bloomberg.com/news/articles/2018-10-09/new-evidence-of-hacked-supermicro-hardware-found-in-u-s-telecom?srnd=premium-asia

    And I am thinking … this is a big fat lie…. would any of these massive companies … who employ top engineers… not think to be checking their products for hacks…. I think not.

  8. Fast Eddy says:

    https://www.zerohedge.com/news/2018-10-09/nio-soars-after-teslas-biggest-outside-investor-takes-11-stake-its-chinese-rival

    I am sitting here in the HK airport wondering…WTF is going on…. these investors know that Mercedes, Porsche, Audi, BMW etc etc etc … established automakers who do not pump out lemons… and actually have spare parts for their vehicles…

    Are launching their own EVs in the coming year ….

    Why would anyone invest in Tesla or its Chinese rival????

    Anyone care to bet that when Tesla goes bankrupt … these other automakers ditch their EVs…. they know bloody well that EVs are not saving the world — and they will no doubt not make much if any money selling them… and that the mass market does not want them…. I believe they are only doing this because they believe having a strategy juices their share price….

    • Uhm, in terms of established manufacturers it’s a lit bit more nuanced situation.
      Notably only TSLA invested and partnered on such scale into the necessary battery production volumes. The Germans still don’t have anything comparable, and the Asians in this field of advanced chemistry / large capacity cells are predominately Korea, China is slowly picking up.. Even the Indian capital secured for their Jag/LR brands more partnership volumes in Asia then said traditional Euro brands.

      Perhaps it’s largely tight into this new car emission legislation ongoing in the EU parliament and Commission, and related implementing schedules. When this is done, they either pony up the money and commit into full EVs finally or not, in any case we will know for sure pretty soon.

      Hence, as it is confirmed most of the expected production till ~2025 is going to be not that much interesting plugin hybrids aka lightly amended legacy production plus some low volume dedicated full EVs like ultra light carbon body city car (ala BMW i3) at best..

      If real gigantic battery factories start to pop up, eventually, the situation changes, not sooner. But that’s not for now or near term, mid term.

      • Harry McGibbs says:

        I just had the dubious pleasure of watching the latest Johnny English movie with my kids – dubious because Rowan Atkinson hasn’t done anything funny since Blackadder IMO – and it features what is basically an extended advertisement for the BMW i3 electric car.

        Johnny’s V8 Aston Martin Vantage is in pursuit of the i3, which is being driven by a glamorous Russian spy, along a twisty road in the South of France. Johnny’s sidekick marvels at the i3’s cornering abilities and then the Aston runs out of fuel in humiliating fashion – beaten by the superior range of the class-leading i3. In such ways are we brainwashing the younger generation.

    • Rodster says:

      You can also add Ford to that list. They plan on introducing 16 EV models by 2022.

  9. Rodster says:

    From the Fast Eddy Newsroom:

    “Like A Ritz-Carlton Underground” – Paranoid Hampton Billionaires Build Luxury Panic Rooms Amid MS-13 Threat https://www.zerohedge.com/news/2018-10-07/it-ritz-carlton-underground-paranoid-hampton-billionaires-build-luxury-panic-rooms

    “In the most extended bull market ever, a new trend has emerged in the Hamptons, a luxury Long Island playground for millionaires and billionaires, which involves the ultra-wealthy installing panic rooms packed with guns for the next apocalypse, according to a New York Post report Saturday.”

    • Uncle Bill says:

      But Fast gets the Boobie Prize in his multiple efforts to seek safe passage through the bottleneck…Still can picture him drenching his turnip patch full of quack grass with Roundup….that is the funniest ….sounds like he’s bored of NZ….what’s his next stop?

    • Greg Machala says:

      So, an underground prison is now considered a luxury room? Call it whatever you want but that doesn’t change the fact that it is a prison from which you cannot escape without being killed. Panic rooms packed with guns to be used by people who haven’t ever shot a gun. What could possibly go wrong.

      These prisons will be no more useful than the million dollar “artwork” these ultra-wealthy buy. Money doesn’t buy common sense or taste.

      • Rodster says:

        +1

        Yup in the article it said the wife of one billionaire mistakenly thought she heard a noise from an intruder outside her bedroom and fired off a shotgun blast at the door. Then again they have enough money to fix it.

        I think the takeaway from all this is that the upper 1% knows something is coming their way and so far the system is functioning. Just wait until the system starts failing and people who are pissed will be looking for those who got wealthy off their backs.

        • Greg Machala says:

          A remote island in the Southern Hemisphere would be much better bet for security than anything underground in Long Island. Once you go underground your pretty much committed to that since there is likely only one entrance/exit. And then hope it doesn’t flood. Modern buildings seem to not last very long even above ground. I’d be even more wary about buildings underground. Water is one of those forces that is hard to stop.

          I can just picture all these wealthy people accustomed to a life of luxury suddenly experiencing shortages and hardship for the first time in their lives. And then to be stuck underground surrounded by the same greedy, narcissistic, spoiled whiny brats. Mmmm, no thanks. The guns will be more likely be used to shoot each other.

          • I doubt that article has much to offer, they either focused on the lesser rich or don’t get the full picture. On the latter option, panic rooms dispersed across the city could be valuable insurance asset, how to pause and wait for that get away car entourage, and or get away plane etc..

            Seriously rich guys have got bunker style airports with tiny runways masked as park or golf terrain (STOL), assets dispersed globally, established farmland, militia, gov/mil/police contacts in various junta regimes etc. I would not worry about them, instead worry about you and yours.. as your (any IC) country goes gradually closer to 3rd world realities..

            • Greg Machala says:

              I don’t think the ultra-wealthy are not going to do well in the decades ahead. I suspect the ultra-wealthy would do even worse if there are in groups. I think the only people positioned to survive the decades that lie ahead is those that are already living without industrial inputs to any large extent. Indigenous tribes or civilizations close to that lifestyle will go on. Well, as long as there isn’t some nuclear catastrophe or meteor impact.

            • Fast Eddy says:

              Their guards will beat them to death… and take…

              Just like other violent people will be beating DPs to death — or enslaving them… and taking

              Always

            • Yes, probable, and possible, that’s not disputed. But the timing and sequencing is of the essence. Let say you are security adviser for such nine figures or richer guy, it’s much better strategy to keep calm and go with the original plan, why to complicate stuff and increase probabilities for accidental failure, therefor getting rid of the former boss is advisable afterwards when re-settling..

            • jupiviv says:

              “Seriously rich guys have got bunker style airports with tiny runways masked as park or golf terrain (STOL), assets dispersed globally, established farmland, militia, gov/mil/police contacts in various junta regimes etc.”

              Full-fledged collapse will almost certainly deter the functionality of such assets, if only because they are not and cannot be tested or built for such conditions (due to, respectively, impossibility of replication and necessarily highly tentative and nonspecific understanding).

            • That’s perhaps just misunderstanding.

              I don’t claim this pricey/complex stuff will survive deeper collapse, certainly not.
              The comment was more about the scale these people operate now and pre collapse, sort of I could afford a tooth brush and “expensive paste” as hedge against premature visit to a dentist, while these fat cats can act similarly (on much higher footprint level) in described theater of for example hidden getaway airfields, already prepared bio/permies farms across the globe etc..

          • Fast Eddy says:

            Imagining these very serious masters of the universe … starving … makes me 🙂

            It is one of the few silver linings of this situation

        • Fast Eddy says:

          Just back from Hong Kong and pretty much everyone in finance that I spoke to sees a massive crash a fait accompli …

          One buddy (MD at a big US bank) after a few vodka tonics was babbling about cashing out and moving somewhere completely detached from ‘all this bull sh it’… followed by ‘I am serious’…. another friend who has a small hedge fund has been taking trip after trip after trip in the past year or so …. non-stop … I suspect they know the game will soon be up and are bucket listing (did not ask them…)

          You’d have to be blind – du mb – deaf – re tar ded – delu sional and dead … not to see what is headed our way — understanding why… well nobody sees that

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