The world economy seems to be seriously ill. The problem is not overly high oil prices, but that does not rule out energy as being a major underlying problem.
Two of the symptoms of the economy’s malaise are slow wage growth and increasing wage disparity. Tariffs are being used as solutions to these issues. Radical leaders are increasingly being elected. The Bank for International Settlements and the International Monetary Fund have raised concerns about the world’s aggregate debt levels. The IMF has even suggested that a second Great Depression might be ahead if major banks should fail in the manner that Lehman Brothers did in 2008.
Figure 1. Ratio of Core Debt Growth (non-financial debt including governmental debt) to GDP, based on data of the Bank of International Settlements.
If the economy were a human being, we would send it to a physician for a diagnosis regarding what is wrong. What really is needed is a physician who has a wide overview, and thus can understand the many symptoms. Hopefully, the physician can also provide a reasonable prognosis of what lies ahead.
Individual specialists studying the world’s economic and energy problems tend to look at these problems from narrow points of view. Some examples include:
- Curve fitting and cycle analysis using economic data by country since World War II, as is often performed by economists
- Analysis of oil supply based on technically recoverable reserves or resources
- Analysis of fresh water supply problems
- Analysis of population problems, including rising population relative to arable land, and rising retiree population relative to working population
- Analysis of ocean problems, including rising acidity and depleting fish stocks
- Analysis of the expected impact of CO2 production from fossil fuels on climate
- Analysis of rising debt levels
In fact, we are facing a combined problem, but most analysts/economists are looking at only their own piece of the problem. They assume that the other aspects have little or no influence on their particular result. What we really need is an analysis of the overall economic malady from a broader perspective.
In some ways, the situation is analogous to having no physician with a sufficient overview of where the world economy is headed. Instead, we have a number of specialists (perhaps analogous to a psychiatrist, a urologist, a podiatrist, and a dermatologist), none of whom really understands the underlying problem the patient is facing.
One point of confusion regarding whether today’s oil prices should be of concern is the fact that the maximum affordable oil price seems to decline over time. This happens because workers around the world increasingly cannot afford to buy the goods and services that the world economy produces. Inadequate wage growth within countries, growing globalization and rising interest rates all contribute to this growing affordability problem. To make matters confusing, this growing affordability problem corresponds to “falling demand” in the way economists frame the issues we are facing.
If we believe the technical analysis shown in Figure 2, the maximum affordable West Texas Intermediate oil price has declined from $147 per barrel in July 2008 to $76 per barrel recently. The current price is about $62 per barrel. The chart suggests that downward price resistance might be reached at $55 per barrel, assuming no major event occurs to change the current trend line. Any upward price bounce would appear to leave the price still much lower than oil producers need in order to reinvest sufficiently to allow future oil production to be maintained at current levels.
Figure 2. Down sloping diagonal line at the top of chart gives an estimate of the trend in maximum affordable West Texas Intermediate (WTI) oil prices. The downward trend line starts in July 2008, when oil prices hit a maximum. This high point occurred when the US real estate debt bubble started unwinding. Later maximum points correspond to points when oil prices stopped rising and crude oil reservoirs started refilling. Chart prepared by Amit Noam Tal.
Thus, our concern about adequate future oil supplies should perhaps be focused on keeping oil prices high enough. It takes a growing debt bubble to keep oil demand high; perhaps our concern should be keeping this debt bubble high enough to allow extraction of commodities of all kinds, including oil. Figure 1 seems to show a recent downward trend in Debt to GDP ratios for the Eurozone, the United States and China. This may be part of today’s low price problem for commodities of all types.
Needless to say, climate analyses do not consider the severity of our energy problems, nor do they consider the extent to which there is a connection between energy supply and the ability of the economy to operate as usual. If the real issue is a near-term financial crash that will radically affect future fossil fuel consumption, the climate analysis will certainly miss this event.
The Real Nature of the Limits to Growth Problem
To truly understand the headwinds that the economy is facing, we should be looking at the combined effect of all of the limits that the individual specialists have been studying. We might also include other issues not listed. The 1972 book The Limits to Growth presents an early computer model of how at least some of the limits of a finite world might be expected to play out.
Figure 3. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil” http://www.esf.edu/efb/hall/2009-05Hall0327.pdf
This early approach reflected an engineering view of the problem, considering expected diminishing returns with respect to resources of all types. Other considerations included likely resource needs based on prior economic and population growth trends and efficiency gains. The Base Scenario shown in the 1972 book (Figure 3) showed collapse taking place about now–in other words, in the early part of the 21st century.
In the time since the 1972 Limits to Growth analysis was prepared, there has been a major discovery relating the importance of energy to the economy. Ilya Prigogine tackled the problem of the physics of thermodynamically dynamic open systems, earning a Nobel Prize for his efforts in 1977. When energy flows are available, many structures, called dissipative structures, can grow and change over time. Examples include plants and animals, hurricanes, stars (they expand in size, then collapse at the end of their lives), ecosystems, and economies. These structures are utterly dependent on energy flows. The economy needs energy in almost the same way that humans need food. Without sufficient energy flows, the world economy will collapse.
It is because of the laws of physics and energy flows that markets are able to set price levels. Indirectly, physics sets the maximum affordable price for energy products based upon the total quantity of goods and services individual workers can afford. These maximum affordable prices may be invisible, but they are very real. Economists may talk about “demand” for energy products, but the real issue is affordability: “Will the laws of physics allow prices to stay high enough to provide the commodities the world economy needs?”
It is because of the laws of physics that debt can play a major role in the economy. Debt can provide time-shifting services if an economy does not have sufficient energy supplies to permit the equivalent of bartering of finished goods and services for new capital goods. Debt can allow future goods and services (manufactured with energy products) to serve as payment for capital goods and other goods purchased using debt. Thus, debt acts as a promise of future energy supplies. These future energy supplies may not, in fact, actually be available at prices that consumers can afford. This is why debt bubbles so often collapse and have a devastating impact on economies.
In theory, the new physics discoveries might also be added to the Limits to Growth model. If this were done, I would expect the downslopes in Figure 3 to be much steeper. Also, the date when the population decline starts would likely move forward, relative to other declines. The actual dates of the declines would of course be expected to change as well, because of updated knowledge regarding resources, population, and other factors.
Including the physics aspect of the economy would lead to many periods when sharp changes take place. When these sharp changes take place, there might be wars, collapsing governments, and epidemics, all causing large numbers of deaths. Debt bubbles might pop, causing deflation and widespread banking problems. These types of events are similar to those that economies have experienced in the past. There is no reason to expect that today’s world economy will have unusual lasting power.
Of course, modeling one piece of the economy at a time, as described at the beginning of this post, leaves out such troublesome implications. Economists tell us all we need to worry about is price fluctuations as the economy substitutes one product for another. If a person has blinders on, perhaps this a good description of the world we live in. Otherwise, the model leaves a lot to be desired.
Implication of the Laws of Physics Being in Charge of How the Economy Operates
Politicians would very much like us to believe that they are in charge. They would like us to believe that adding more technology can solve all of our problems. They would like us to believe that citizens can make a significant difference by voluntarily cutting back on their own energy consumption. They would also like us to believe that countries can cut back on their debt levels without the whole Ponzi Scheme unraveling.
Anyone who has watched bread rise in a bowl can see the implications of growth within a finite structure. It doesn’t take very long for the volume growth of bread dough to exceed the space available. Even if the bread maker pushes the dough back down again, the effect is only temporary. The bread dough quickly rises again to overfill the bowl it is in.
One possible implication of the 2008 financial (and oil price) crash is that we are very close to limits, right now. Regulators can try to fine tune how the economy operates by raising and lowering interest rates (sometimes using Quantitative Easing (QE) in the process), but they are, in some sense, playing with fire. Figure 4 shows the dramatic impact that popping the real estate debt bubble seems to have had in 2008. It also shows the impact that adding and removing QE has had.
Figure 4. Figure showing collapsing debt bubble at the time US oil prices peaked. Figure also shows the use of Quantitative Easing (QE) to stimulate the economy, and thus bring oil prices back up again. Ending US QE seems to have had the reverse effect.
By raising interest rates, regulators could easily send part, or all, of the world’s economy to a financial crash that is worse than 2008’s. Or the economy could again reach limits, by itself, with just a little economic growth. In some sense, the world economy is very close to filling the bread bowl, as it was before the 2008 crash pushed it back down.
The World Economy Is Reaching Limits in Many Areas Simultaneously
Many people believe that we are reaching limits in at most a few areas of the economy, such as “running out of oil.” The evidence suggests that because of the networked nature of the economy, we are really reaching limits in many places, simultaneously. The following represent some problem areas:
(1) Too Low a Return on Labor for Workers Whose Jobs Are Easily Exportable. With globalization, workers are indirectly competing with workers around the world regarding who can produce goods and services most cheaply. They are also competing with computers and robots that can easily replicate their functions. The net impact is a world where a large share of the citizens find themselves living at a level not much above the subsistence level. In more developed countries, young people may live with their parents longer and may delay having children almost indefinitely, because wages are not keeping up with living costs. Many studies have shown rising wage disparity. In some ways, the wage disparity now seems to be as bad as in the 1930s.
Figure 5. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.
(2) Interest Rates. Interest rates are the lever that economists like to adjust upward or downward to try to stimulate the economy or push the economy downward. Short term interest rates, up until about the end of 2015, were at the level they were at during the Depression of the 1930s.
Figure 6. Monthly average 3-month term treasury bill rates in chart prepared by FRED. Amounts shown through October 2018. Grey bars indicate recessions.
Raising interest rates is like adding a little more dough to the already over-full bread bowl. With these higher interest rates, borrowers need to pay more for monthly payments, making the strain on their finances even worse than it was previously. Figure 6 shows that raising interest rates very often creates a recession. In fact, the Great Recession of 2008-2009 seems to be the result of an increase in short term interest rates. This time we are being told that the increase will be gentle, but if the bread bowl is already overly full (in the sense that affordability of the output of the economy is already way too low, for many workers), what difference does “gentle” make?
(3) Return on Capital Investment/Added Debt. Falling long-term interest rates between 1981 and 2016 seem to be an indirect reflection of falling long-term return on capital investment. If capital returns had been higher, there would be more demand for debt, forcing interest rates up to levels closer to where they had been when the economy was growing more quickly.
Figure 7. Monthly average 10-year US Treasury interest rates in chart prepared by FRED. Amounts shown through October 2018. Grey bars indicate recessions.
Another way we can look at how productive the addition of debt has been is by comparing the debt increase each year with the GDP increase (including inflation) each year. We use current year GDP as the denominator in both calculations. Figure 8 shows the indications for what the Bank for International Settlements calls “Core Debt” (that is, Total Non-Financial Debt, Including Government Debt).
Figure 8. Dollar Increase in US Core Debt as % of GDP, shown beside GDP dollar increase, as percentage of ending GDP. Amounts based on FRED data.
Comparing the red and blue lines on Figure 8, GDP rose fairly reliably in the pre-1981 period, as the amount of core debt rose. The core debt increases tended to be higher than the GDP increases, but not a great deal higher. Thus, the US ratios on Figure 1 could be close to 1.0 in early years.
Once interest rates started falling after 1981 (see Figures 6 and 7), core debt growth and GDP growth greatly diverged. I expect that quite a bit of this change was related to asset price inflation as interest rates fell. With lower interest rates, assets of all types started becoming more affordable. Thus, a greater number of buyers could be expected, driving up prices of assets of all kinds, including homes, stores, and factories. Owners of these assets could “take the equity out” as prices rose and could use the equity to purchase other goods and services. In theory, these activities might somewhat stimulate the economy. Figure 8 suggests that the benefits of these activities with respect to the “goods and services” portion of the economy (red line) were slight at best, however.
Figure 9. Dollar Increase in US Financial Debt as % of GDP, shown beside GDP dollar increase % of ending GDP. Amounts based on FRED data.
Figure 9 shows Financial Debt amounts corresponding to the Core Debt amounts shown in Figure 8. At first glance, it appears that Financial Debt (blue line ) has provided no benefit whatsoever for the Goods and Services part of the economy (red line). But clearly the bankers who created these financial products benefitted from the income they received from them. So did the low-income home buyers who bought homes that they could not really afford in the early 2000s. Home building was stimulated, and inflation in home prices was stimulated. Banks benefitted by being able to transfer their problem home loans to unsuspecting buyers. Whether this whole arrangement had any net benefit to the economy, other than to create pseudo-solutions for people who could not really afford the homes they were purchasing, is doubtful. But when the economy is near limits, strange solutions to stimulating the economy are attempted.
(4) Commodity Prices. If we have a supply problem with one kind of commodity, we likely have a supply problem with many kinds of commodities at the same time. The reason why this happens is because the prices of many types of commodities tend to move together, in response to general market conditions. This is why the US government talks about inflation in oil and food prices as a separate category of Consumer Price Inflation.
If prices for commodities are generally low, as they have been since 2014, this means that commodity investors have received low rates of return for several years. With low rates of return, producers of many commodities have cut back on reinvestment. With inadequate reinvestment, supply crunches are likely to occur across a broad spectrum of commodities simultaneously. A recent Wall Street Journal article says, Supply Crunch Looms in Commodities Markets. The article mentions copper, zinc, aluminum and nickel. Other articles talk about oil in a similar fashion.
The question becomes, “Can consumers bid up the prices of all of these minerals sufficiently, to encourage enough reinvestment to solve the world’s commodity supply problem?” Food prices would likely need to be bid up as well, because oil is used heavily in the production and transport of food.
It was possible to bid up commodity prices in the 1970s, because the economies of the United States, Europe, Japan, and the Soviet Union were all growing rapidly. Also, women were joining the labor force in large numbers. It was possible to bid up commodity prices in the 2002 to 2008 era, because China and other Asian nations were rapidly ramping up their demand for goods and services of all kinds.
Figure 10. China energy production by fuel plus its total energy consumption, based on BP Statistical Review of World Energy 2018 data. The difference between the production figures shown and the black line consumption total is imports.
Now we are facing a much different situation. China is in much worse shape than most people recognize because its coal supply seems to have passed peak production. This has happened because the cheap-to-extract coal is mostly depleted, making it unprofitable to increase coal production without significantly higher prices. Imported coal and natural gas are expensive options. China also has a serious debt problem.
Because of China’s problems, the country will necessarily need to cut back on manufacturing, road building and home building in the years ahead. (This would happen, with or without Trump’s tariffs!) For some minerals, China currently represents over 50% of the world’s demand. China is the largest oil importer in the world. It is doubtful that China can make major cutbacks in its use of commodities without lowering prices for many commodities worldwide.
Persistence of Outdated Models
We are dealing with a situation where a large number of people suspect, at least vaguely, that the world economy is like bread dough about to outgrow its bowl, but this is not an issue anyone really wants to quantify. Everyone wants solutions; they don’t want a better delineation of the problem. Repeated publication of climate change forecasts is, in a sense, a denial of the possibility that we may be facing resource limits that are close at hand. Such publication is saying, in effect, that the closest limit that citizens need to worry about is the climate limit.
Also, the reliance of researchers on the past work by others in the same field tends to reinforce what are essentially incorrect models. Cross-pollination across fields is difficult, given the technical nature of today’s academic research. Furthermore, it becomes increasingly difficult to properly model a situation that is very complex and depends upon non-linear interactions.
Putting All of These Issues Together
The focuses of today’s narrow research can give a surprisingly distorted overview of where the economy is. A few areas in particular stand out:
(a) The choice of the word “Demand” instead of “Affordable Quantity” makes it sound like the buyer has more control over purchases than he really does. Growing demand seems to depend on continually increasing debt. This is the reason for the debt bubble problem.
(b) Framing the energy problem as “running out of oil” makes it sound like searching for substitutes will be a fruitful area for solution. Because of the affordability issue, this search is futile unless the substitutes are truly cheaper, when all costs are considered. Declining availability of many minerals because of persistently low commodity prices could be an issue as well.
(c) If limits are being reached in many areas simultaneously, incentives for countries to co-operate seem likely to go downhill quickly. Bullies who claim to be able to obtain a bigger share of the shrinking total supply will tend to be elected.
(d) The physics tie between energy and the economy makes major energy consumption cutbacks virtually impossible, without risking economic collapse.
(e) Adding technology isn’t really a solution to the debt problem, because it tends to make the affordability problem worse. The problem is that while adding technology seems to lead to more employment for a few elite workers, it tends to displace lower-wage workers at the same time. The spending of lower-wage workers is really needed if adequate demand for commodities is to be maintained. Additionally, the ownership of the technology-related capital goods tends to be concentrated among the elite; this further shifts wealth from the non-elite to the elite.
The long term prognosis for the world economy seems pretty grim, when all of these issues are put together. Defaulting debt and a resulting collapse in asset prices of all kinds is of particular concern. The default of subprime housing debt was an issue in the US at the time of the Great Recession; the next round of defaults is likely to start elsewhere. Debt defaults could start fairly soon, perhaps in the next 6 to 12 months. The more hostile political situation we have been seeing recently seems to be evidence that limits are close at hand.
The gap between poor and rich neighborhoods is growing
And fewer poor Americans are moving in search of a better life
THE seizing of opportunity is a recurring theme in American culture, from “Little House on the Prairie” to “The Gold Rush”. Historically, it has been a force for reducing income inequality. But two new reports that look at changing local fortunes in America over the last decade and over the past 35 years suggest that opportunities for poor Americans are diminishing. Both report that there has been no recent progress in achieving regional income equality. They also find evidence of decreased worker mobility, suggesting that poor people are increasingly stuck in poor places.
The Economic Innovation Group’s Distressed Communities Index combines measures of education, income, employment, housing and business growth into a measure of community economic wellbeing at the level of 25,800 zip codes. From the Brooking Institution the Hamilton Project’s vitality index similarly includes measures of income, employment and housing at the county level but adds life expectancy while excluding business growth and education.
Both reports highlight the continuing disparity of outcomes across regions of America. The Hamilton project finds that median income is twice as high in the richest one fifth of counties as in the poorest fifth, while unemployment is twice as high in the worst-performing counties as the best performing. Life expectancy between top and bottom of county quintiles varies by six years. The Economic Innovation Group’s measure, meanwhile, suggests that across quintiles of zip codes divided by their index score the percentage of adults without a high school diploma ranges from 22% at the bottom to 5% in the top quintile, poverty rates from 26% to 6% and business establishment creation from 5% to 11%.
The data also suggests that regional income inequality has stopped falling—over the past three decades, there is evidence of dramatically slowing convergence. Between 1930 and 1980, incomes in the south-east rose from 50% to 86% of average national income, and other historically poorer regions also caught up. The same result held at the county level. But in 1980 that trend halted. Between 1980 and 2016 at both the regional and country level there is no evidence that poorer areas saw faster growth in median household income than richer areas.
The economic crisis and recovery made matters worse, affecting struggling and successful neighborhoods very differently. Every quintile of zip codes tracked by the Economic Innovation Group’s data saw the number of jobs decline between 2007 and 2010. But distressed quintiles effectively saw no recovery and still had 1.4% fewer jobs in 2016 than they did in 2007. This compares to a rise of over 3.6m jobs in the richest quintile over that same period. The poorest quintile of zip codes had fewer businesses in 2016 than 2012 while the richest quintile added 180,100 net new businesses between 2012 and 2016—more than the other 80% of zip codes combined.
Both reports suggest the role played by education. The Hamilton Project data suggest that counties that had more college-educated workers in 1980 saw a faster growth in their college-educated workforce than those already behind in 1980—and these were the areas that stayed richer. The Economic Innovation Group found that prosperous zip codes contain six times the number of people with a bachelor’s degree than distressed zip codes do.
Given Americans’ freedom to move around the country, an obvious solution for people living in unsuccessful neighborhoods with low employment is to relocate to richer areas with plentiful jobs. But that is happening less often than it used to. The Hamilton Project’s data suggest that the migration rate at the country level averaged about 4% a year in 1987 but had fallen below 2.5% by 2017.
Why is this happening? Foreign-born immigrants move to more prosperous areas—they are twice as likely to live in the top quintile of zip codes than in the lowest quintile according to the Economic Innovation Group. Immigrants have already left home, of course; it could be that one of the factors that keep poor native-born people in impoverished places is neighborhood ties including family and friends.
https://www.economist.com/democracy-in-america/2018/11/13/the-gap-between-poor-and-rich-neighbourhoods-is-growing
by the way a new date fot the planned collapse 20th of November 2018
adonis,
perhaps you could give us a list of all the possible dates off collapse between now and say end of 2029. Just make sure there are plenty of Mondays in there.
So when is the right time for the OFW end of world party?
Gail organises a venue, everyone sends in an anonymous photo, and when everyone (100 odd…) turns up at the party no-one wears a name badge.
Later that night the photos are put on a large screen and everyone votes who they think the photo is? Be an interesting experiment to see how our minds eye imagines each person to appear.
i am sort of done with watching the wheels fall off.
Party has to be outside US; too many obstacles geeting there, plus who knows how much info is had on all of us?
what a great idea are partners invited too ?
This entrance mode will probably give away FE…
https://www.ancient-origins.net/sites/default/files/field/image/nubia-kingdom-kush.jpg
II’d be down with a collapse party – My wife would find it out of my character to get passports and spend money not budgeted. However I think we are getting close. She may also think it odd when I purchase some lions on the black market to greet FE’s entourage.
You bring the lions… I’ll bring some DelusiSTANIS …. Gail can supply the cage….. that will be the entertainment.
I will have to think about an OFW end of the world party.
Canada?
Norway.
While admiring the aurora borealis over the fjords.
http://synthegra.ch/wp-content/uploads/2015/08/Bruecke.jpg
Waiting to hear from FE; over on Zerohedge https://www.zerohedge.com/news/2018-11-14/mini-ice-age-looms-nasa-scientist-warns-lack-sunspots-could-bring-record-cold this article should warm the cold heart of FE.
Well, increasing natural gas prices are consistent with this even though correlation is not causation. If it is not one thing it is another and with apparent decreasing fossil fuel usage as evidenced by falling prices global …… will not save us. FE needs to increase his coal usage fast.
Dennis L.
These sort of articles bounce of the thick skulls of G___ Wormers… like rocks.
The current long range forecast seems to be for above normal temperatures for the Northwest half of the US, and more or less normal temperatures for the Southeast.
If it turns out greatly different from this, I suppose that questions might start to be raised.
I’m still running the Rayburn … and December approaches… I might need to pick up another truck load … I can feel the ice age creeping in….
I’m a coal advocate too these days. But when they see me coming, people lock the doors and leave a do not disturb sign on the doorknob.
October 2018 was second warmest on record: https://data.giss.nasa.gov/gistemp/tabledata_v3/GLB.Ts+dSST.txt
We must continue to break climate and financial records to keep BAU alive. Every year needs to have a month of record heat, record student loan debt, record credit card debt, record gas consumption, record cold, record gdp, record corporate profits, record truck sales – ad infinitum.
KKKLIMATE DATA FAKED
by John Bates (leading kkklimate scientist)
In the following sections, I provide the details of how Mr. Karl failed to disclose critical information to NOAA, Science Magazine, and Chairman Smith regarding the datasets used in K15. I have extensive documentation that provides independent verification of the story below. I also provide my suggestions for how we might keep such a flagrant manipulation of scientific integrity guidelines and scientific publication standards from happening in the future. Finally, I provide some links to examples of what well documented CDRs look like that readers might contrast and compare with what Mr. Karl has provided.
https://judithcurry.com/2017/02/04/c limate-scientists-versus-c limate-data/
Does this describe anyone else’s Thanksgiving 🤣🤣
https://i.redd.it/hglxh4xoxgy11.jpg
I will be making a nearly 2000 mile round trip with my family for our annual guilt trip. The whole clan will be there and there will be lots of bad blood and arguments. That being said with our system picking winners and losers what difference does it make?
Enough with the labels – What is the term for f++ked and 21 trillion in debt with not much of it having “trickled” down? BAU maybe but that window is closing. I’m thankful for yet one more Thanksgiving pulled forward by debt and sheer might and faith.
I will be showing up at trigger fest wearing my MAGA hat and lock her up t shirt.
No one will say anything to my face.
interesting post today in the Vancouver Province:
Canada’s oil price woes reaching an ’emergency situation’: Cenovus CEO
https://www.msn.com/en-ca/money/topstories/canadas-oil-price-woes-reaching-an-emergency-situation-cenovus-ceo/ar-BBPIOTh?ocid=spartandhp
The head of one of the country’s largest oilsands producers says Canada’s oil price woes are reaching an “emergency situation,” and on Wednesday saw his company’s call for production cuts echoed by a competitor.
Oil “is a provincial resource and… we’re giving it away for free,” Cenovus Energy CEO Alex Pourbaix said on CBC Calgary’s morning show, The Eyeopener.
“Nobody is making money at this price and this is rapidly becoming an emergency situation in the economy.”
Pourbaix made the comments following his company’s calls for the Alberta government to mandate temporary production cuts to help deal with an oil glut and pipeline bottlenecks that are weighing heavily on many producers.
The value of Western Canadian Select is tracking roughly $40 per barrel less than the U.S. benchmark. On Wednesday it was at $15.75 US a barrel, compared to $56.18 US for West Texas Intermediate.
How’s that for falling prices being the problem Gail
Canada is a prime example for the low prices. If there aren’t good ways of getting the oil to market, the price tends to go down a whole lot. Also, if the refineries have as much as they can use, they won’t go out of the way for your oil, unless it is cheaper.
So their solution is to cut production …. Meanwhile everyone else will continue to pump like mad….
They can cut to shave losses… but the problem is they need cash flow to service debt … even if it means taking on more debt to maintain production …
What a horrible position to be in as a CEO…. every which way you turn…. there are demons….
And what you are left with is – as well as unviable production facilities and rising unemployment, bankruptcies, etc – a permanently (from the perspective of a human life) wrecked ecosystem. Well done, Canada!
Alice Friedmann’s article on the Tar Sands is very good.
I am not sure what you are talking about. This is a recent book review she did, with respect to a book published in 2010 called Tar Sands: Dirty Oil and the Future of a Continent.
http://energyskeptic.com/2018/why-tar-sands-a-toxic-ecosystem-destroying-asphalt-cant-fill-in-for-declining-conventional-oil/
Unfortunately, there were power tools back in 1900.
http://edisontechcenter.org/Mechanicville.html
Built in 1897
Still working
Older than any human alive (Yes, the engineers of 19th century built something which outlived everyone who was alive at that point of time!)
http://image.chosun.com/sitedata/image/201102/07/2011020701760_0.jpg
Electric lights , installed by Edison Company, illuminating the palace at Seoul, Korea, 1887
People who are alive today and are good with electronics will be able to use the older stations.
Tesla Model 3 is starting to show some important flaws in cold weather
https://electrek.co/2018/11/14/tesla-model-3-cold-weather-flaws/?fbclid=IwAR2eW_45p3emuNtniQV9FL9mc1BPAHqFvmkRZf2m1B7mENRsi-vg2l1ifJM
https://media.giphy.com/media/2Y8Iq3xe121Ba3hUAM/giphy.gif
Must be some really weak stuff to have to be such a big stogy.
Or a vacuum of space between the ears.
China’s coming recession has pushed oil below $60
The Chinese “economic miracle” is built on a mountain of debt. As Chinese GDP grew over 12-fold in 20 years to $12.24 trillion at the end of 2017, credit in the Chinese financial system grew over 40-fold, taking the debt-to-GDP ratio from 100% to 400%, if one counts the shadow banking system. Shadow banking credit aggregates are omitted from official statistics, but they add at a minimum 100% to the total debt to GDP ratio for China (see this Brookings Institution paper).
https://www.marketwatch.com/story/chinas-coming-recession-has-pushed-oil-below-60-2018-11-13?link=sfmw_fb
I think the author has the story correct.
J.C. Penney Could be in Danger of Following Sears Into Bankruptcy
https://www.cnn.com/2018/11/14/business/jcpenney-future/index.html?fbclid=IwAR2d3FLk9vi5DcJ9PdB2H7nytMCvBxKxmc70HO6NAD4nj3WAK-9XiH81MXE
https://www.cnbc.com/2018/11/15/us-china-trade-war-beijing-written-response-to-us-trade-form-demands.html
“China has delivered a written response to U.S. demands for wide-ranging trade reforms, three U.S. government sources said on Wednesday, a move that could trigger negotiations to bring an end to a withering trade war between the world’s top economies. U.S. President Donald Trump has imposed tariffs on $250 billion of Chinese imports to force concessions from Beijing on the list of demands that would change the terms of trade between the two countries. China has responded with import tariffs on U.S. goods. Trump is expected to meet Chinese President Xi Jinping on the sidelines of a G20 summit in Argentina at the end of November and in early December.”
One of the interesting thing that happened in the 1980s when there were financial “liberalization” was that it started a process that ultimately will end up destroying civilization. It was called “short-termism”. Many large corporations think only about quarters instead of long term because of this liberalization. Evey thing is about meeting the numbers today at the expense of tomorrow. The “tomorrow” or 1980s is “today”. Yes, what we sowed in 1980, we reaped in now.
GE is one good example. Do you think the existential crisis that happened today was a result of something bad happening in 2016 or 2017? No. It is not. It started probably when Welch was there.
JIT is another example. People think about inventory as money that is stuck and they pushed all the inventory back up the supply chain until the source. They don’t want to hold parts because it is money to them. They want their supplier to hold for them and the supplier of the supplier will hold for them. As the chains become too long due to globalization and the increase in complexity (internet toaster or fridge anyone?), the entire supply chain became too convoluted and interconnected (supply chain used to a subject in school but now, you can even get a degree or masters in supply chain – that is complexity). With the source holding all the inventory, it is very difficult for the inventory to flow down quickly to the end users if there is a disruption.
https://www.ukessays.com/essays/information-technology/dells-just-in-time-inventory-management-system-business-essay.php
“Interconnectedness”- (new word) – we are essentially living on “luck” and “low cost energy” when it comes to supply chain. We are living in a circular economy and when there is a break somewhere, it will be felt somewhere else instantly.
There is just anecdote that I heard a few decades ago (unverified claims) but it showed what a circular argument is – One day, Steve Jobs (Apple CEO) went to the office Cray Supercomputers. He walked in and talk to the receptionist that he wanted to buy a supercomputer. The receptionist was surprised because no one will actually walked in and say they want to buy a supercomputer. She lead Steve in and set up an appointment with Seymour Cray. They sat down and discussed. Seymour asked Steve on the reason why he needed a Cary Supercomputer. Steve replied that he needed on to design his latest Apply computers. Seymour laughed because they use Apple computers to design the Cray Supercomputers.
Now just imagine a food processor (say canning chicken soup) has a JIT system where the chicken stock, cans,etc are all under JIT. They keep about one day’s worth of inventory with them and they will make them based on the order they received. To cut cost, they do not even want to hire truck drivers and all their IT systems, HR and accounts are all outsourced. The logistics company whom this food processor hires also outsourced (this is the “interconnectedness”) some of their trucks because some work are seasonal and they just don’t want to hire them. One small trucking company managed to get this business from this logistic company. This small company is poorly run and when the financial crisis starts (like in 2008 at the point where everything froze) they have problem with cash flow and they closed down immediately leaving all the workers stranded (when they report to work the next day). The logistics company that contracted them are screwed because it needs the trucks to carry cans from the aluminium can makers to the chicken food processor. They have only a few hundred cans and without the cans, the local supermarkets will not have any food 3 days later.
Now think about, the food processor outsourced the trucking, IT systems, HR, finance. The IT company who contracted this may also outsource some to India, etc. The accountant or HR “supplier” may also do the same. The can factory that is supplying to this company may also do the same. The levels of “interconnectedness” is just too mind boggling that many just (1) don’t understand how fragile it is (2)too complex to even comprehend how it works and how one part can bring the other down. (3) It is heled together by the glue of “cheap energy” and “banking/finance/credit/trade financing”
In Asia, it is very common for companies to go the bank and show the bank that they have a large order for a reputable company and this company wants the bank to give a loan so that they can produce for this order. International trades requires LC (letter of credit). I have seen so many cases of companies shutting down their doors immediately without any warning when their cash flow has gone negative and they have no access to credit. The workers who turned up the next step found that the company is already bankrupt and they get no wages. It is very common in Asia.
Now imagine the “interconnectedness” between financial companies after the liberalization that started in 1980. Exotic products, financial services, etc. I sell to you, you sell to him. I underwrite yours and you underwrite hers. It is a tangled web, same like the example above but much more complex and the sum of money are orders of magnitude higher.
So, what is my point
1. When it crashes, it will be spectacular and JIT and population overshoot in urban areas will be in big trouble. The amount of ‘credit/money” is just way too much even compared to 2008. It is always the straw hat broke the camel’s back. It is just that we don’t what straw that will be.
2. Compared to 2015, 2016, 2017, there are way too many indicators that points to a very bad situation – falling credit, failing companies, falling trade, housing pricing slumping, etc. These were not present in 2012-2017. It was rising and there are many optimists than realist in those years.
3. Interest rates goes back to zero will not help to make the property prices go up again because people (buyers) are just “too tired/weak/broke” buy.
Lastly – almost everyone cannot accept – our system must grown in order to continue. Without growth, our system will collapse. People talk about China has USD1T in reserves. They have a long way to go. Why they say that? It is because they think that the problem will only start when the USD1T becomes zero. NO! that is not the case. Just the fact that they want to draw down may be the trigger. They don’t even need to drawdown any money to trigger this event.
You may have a lot of money, gold or silver at home but you have no way to buy any food when the time comes because the food is made by machines made in China with parts from Japan, Singapore and the wheat comes from Ukraine with harvesters made in USA from parts from UK, Europe, etc.
That is why I just keep to myself when people say that it will drag on for another 3, 5 or 10 years. This is exactly the same type of person who thinks that China will only have a problem when their reserves drop from USD1T to zero. The world does not work that way.
With you except for the China USD1T part. All they can do with this money (which by the way only exists digitally on a computer at the US federal reserve) is use it to buy goods and services priced in dollars – which would create demand/jobs. Possible inflation if they did it quickly – but so what, aren’t we afraid of a deflationary death spiral?
So if China draws down these savings all it means is that (a) the Federal reserve strikes a key moving dollars from digital savings to digital checking, (b) holders of these dollars can now make purchases. The degree of inflation this purchasing power causes (in goods denominated in U.S. dollars) is related to the ability to increase production of said goods.
Actually my point for the USD1T (China)is just to show that things need not go down to zero before bad things happen. You can use Sears. The stock price need not go down to zero before it goes into bankruptcy. The 1T need not go down to zero before bad things happen. People always say that they have 1T and can last a long time. My point is that, these people think that it needs to go down to zero before bad things happen.
When Enron went down, it was at its peak and when the accounting fraud was discovered, it just went down to zero instantly. Same goes to Lehman Bros.
Yep-
The 80’s were a strong turn to the right.
Reagan, Thatcher, and all the rest of the rape and scrape people.
It isn’t rocket science to understand that our growth based financial system cannot continue indefinitely. The fact that there are so many dependencies in our industrialized economy makes me wary that the whole system is prone to catastrophic and very rapid failure. We have literally built a house of cards on a foundation of a house of cards. And we have repeated that blunder a thousand times over by now. Nearly every aspect of human existence (medicine, food, water, clothing, shelter etc) for billions of people on this planet depend on this house of cards to survive. One small example of this is the idea of careers.
Persons in one career assume all the other careers will remain functioning but take this idea completely for granted. There are people today who literally think they built their own livelihood themselves. The invisible machine that made this livelihood possible remains hidden. For those who care to look, the machine is not well. The people who made its gears turn can no longer afford to live on its output of goods and services. To make matters worse, careers are so specialized now that no one sees the big picture and too many assumptions are being made.
And of course all this takes ever increasing amounts of energy to function. This is yet another house of cards whose initial abundance gave the impression that humans can essentially have infinite growth in a finite world.
I was on the road working yesterday and caught a portion of the Rush Limbaugh radio show and he says not to worry. I found it so insane I even tried to call into the show to explain that it was debt pulling future consumption / resources forward not what he was proclaiming. I know it would have been futile to go against the self imposed narrative – the narrative most people have “that we’ll just invent our way out of the box we are currently in”, but I found it to be maddening. I arrived at the job site and had to hang up while on hold.
Here is an excerpt:
All of this stuff, it was all part of the psychological game that was needed to make people believe in the finite supply of things, and the reason for that was ultimately to raise prices on it all. But you don’t hear about that anymore, because the whole idea that I’ll comes from fossilized dinosaurs is gone. Oil is being produced all the time. The earth is making oil everywhere. We just have to find it.
Remember it wasn’t long ago the United States, you would hear this in political campaigns every year, “We’ve got to do something about the dependence on foreign oil. We are too subject to the whims of people who hate us, like the militant Islamists in Saudi Arabia.”
How many campaigns did we put up with this, that we had no oil, that American oil wells are being capped because producers couldn’t make any money, they’re being capped forever. U.S. oil production plummeting, down to absolutely nothing. We’ve become totally dependent on Saudi Arabia or anywhere else we could buy it, the Russians.
From then — and that’s not very long ago — we are now among the largest exporters of oil and producers of oil in the world. Now, how did this happen? How did we go from being total prisoners and totally dependent on the Saudis to now having more oil than they do? How did it happen? A simple invention called fracking, invented and created by the human mind.
We went from a belief of finite fossil fuel resources, so finite that your grandkids might run out during their lifetimes, to now we are presented with an abundance of those same fossil fuels and abundance of oil to the point that we have become among the largest producers in the world. How does that happen?
https://www.rushlimbaugh.com/daily/2018/11/14/the-human-mind-is-the-answer-to-every-liberal-apocalypse/
Rush Limbaugh: incredible…….so ‘Liberals’ are the only people who ‘believe’ in a finite world, rather than it being a self-evident fact?
X,
That is a very inconvenient fact that does not fit the narrative and our way of life. A life built on JIT systems, massive debt, and a world of nearly 8 billion people.
folks listen to rush because he tells them what they want to hear—thats how the don got elected
life’s easier like that
Liberals believe in that solar panels and other green products can allow BAU to continue indefinitely.
The only real threats to BAU are Co2 emissions according to liberals.
We can see this point of view embodied in people like Elon Musk and Silicon Valley.
Huh? And Rush the spokesperson for hard core conservatism can’t grasp the concept of ERORI with debt pulling it forward. By god its all those poor people that rang up all that debt. Jesus Fing Christ their lobbying power is unbelievable. Who gives a flying rip about global warming at this point? You are damned if you do and damned if you don’t.
They believe in one additional threat – being mean. The belief that we only have enemies of our own making, of course, because there are plenty of resources for all.
“Liberals believe in that solar panels and other green products can allow BAU to continue indefinitely.” – You mean uninformed people not liberals! A liberal would want to use fossil fuels liberally not conservatively. A conservative would want to conserve energy!
How simpleton a comment that is Norm….truth is, folks, both liberal and conservative, listen to politicians ( and other “leaders”) because they tell them what they want to hear—thats how the pols get elected
“How did we go from being total prisoners and totally dependent on the Saudis to now having more oil than they do? How did it happen? A simple invention called fracking, invented and created by the human mind.” – We did it by using massive amounts of new debt to pump millions of gallons of (essentially toxic waste) solvent deep into the ground (contamination ground water and causing earthquakes) to fracture very dense rocks to extract a small fraction of their oil content. Never mind that these types of wells deplete incredibly fast compared to conventional Saudi oil wells. No, we have done nothing but extend and pretend. We went from being prisoners of foreign oil to being debt slaves. These fracking companies are all in the red. The production is not profitable. The US oil production “revolution” is only possible as long as we can import cheap conventional crude to “finance” the extraction of shale oi.
Bingo.
That was the point I was going to make if I had gotten through.
Fracking is not new technology and ZIRP and debt is what has fueled this phenomenon.
Granted it can be argued that ZIRP and debt has artificially extended BAU, but it is a BAU that is fleeting and limited on finite resources. Debt is simply the mechanism bringing it forward.
The human mind no matter how hard one tries or wishes cannot escape EROEI
Someday this war is gonna end
https://www.bing.com/videos/search?q=youtube+apocalypse+now+someday+this+war+is+going+to+end&&view=detail&mid=D4D9D39C00E8A9C9E05CD4D9D39C00E8A9C9E05C&&FORM=VDRVRV
It is actually more than EROEI. It is diminishing returns to complexity. And the need for super low interest rates to offset higher prices.
The return on human labor needs to be high enough. This is related to quantity of energy resources per capita.
FYI, fracking has been around since the 1930s.
Yes doomphd, that is true as well. Rush will be thankful on November 22nd for all his uninformed listeners.
Rush has a bad case of https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
Either that or we are all really over-thinking a non-problem!
Maybe oil is like weeds… you tear them out… but they just keep on regrowing….
‘Prone to catastrophe’ is probably the best way to put it: compare to the bio-mass civilization which could be hit by something like the Black Death – a real catastrophe – and yet survive.
Right now the world ain’t looking too hot
Unless you’re dead you must know what I mean
There’s a lot we lost (……..) nothing to see
They say they’ve got an answer but I think it’s all a dream
Well it’s easy to forget about it, just get high
Live up in your castle in the sky
But you still breathe in the same air as me
Eating, drinking, poisoning where it should be
We’re messin’ up the land
We’re messin’ up the sea
We’re messin’ up the air
Messin’ up on you and me
(repeat)
Things are worse than going wrong
Here we still go rushing proudly on
Take a look around, (like?) around you everywhere
This must be the age, the age of I don’t care
Right now the world ain’t looking too hot
Unless you’re dead you must know what I mean
You can read it in the papers, hear it on the news
The earth is going down, going down in pollution blues
I could never stand that sun of a bi tch Welch… the sanctimonious jack a ss…. with the voice of a pre-pubescent school boy …. and his wife… someone should stuff a baseball in her mouth to shut her up…
They both came across as if they believed they were the greatest thing since sliced bread… Jack even had a book about his ‘system’
Well his system was a pile of f789ing sh it… he simply financialized GE …. and when 2008 hit his system was exposed …. and needed a massive bailout https://seekingalpha.com/article/105984-general-electric-gets-a-140b-bailout-whats-the-point-of-aaa
The rat and his More onic wife don’t say too much these days… I guess they are under a rock or down in the rat hole… where they belong
As for your wise words on JIT… the thing is…. most people do not believe it can possibly come to that…. they believe in BAU Lite or that ‘They’ would never allow the system to collapse.
Of course people who believe this nonsense — particularly after seeing what nearly happened in 2008… are just plain f789ing stoooopid.
Then there are those who are completely unaware of what happened in 2008…. I had the window repair man here the other day and he was complaining about the high cost of living in Queenstown… particularly the property prices… he expects the madness to end….
And I mentioned… ya … we are due for another 2008 situation… a big correction ….
He said 2008? That’s when I moved to Queenstown – what happened in 2008???
This is about the depth of the understanding of the vast majority of people…. they are clueless…. and they do not want to know
Scary isn’t it? 2008 was such a turning point and somehow the world didn’t end. I wonder what happens when faith and credit meets energy.
Great stuff CTG. But what I’m not fully grasping is how this will grind everything to a halt instantaneously. My view is that JIT supply chains will fail in pieces and chunks at a time, not necessarily all at once, and then people will manage with their existing stock for a while until that also dries out.
E.g. if the Volkswagen factory suddenly stops receiving gaskets and pistons for their engines, they will stop making _new_ cars of that model/brand. But there are still plenty of existing cars both on the road and in storage, to be driven as the day before or scavenged for parts.
Same goes for the financial system. There will probably be a collapse at some point where nobody’s credit is good. But people will not sit on their behinds and starve. The ukrainians will call Russia for help, the UK will call France, and so on making ad-hoc deals, this-for-that, until a somewhat stable situation is reached. This won’t be BAU as we know it but it might work for a while in regions where the food/energy-to-people-ratio is decent.
At the moment the VW factory in Pamplona is actually suspending production for random 5-9 day periods, claiming that it ‘can’t source the right (diesel) engines’. And it has told the workers that it ‘can’t foresee when things will return to normal’. Stop, start, stop, start.
But of course, this is not due to finance problems in VW as far as one can tell. If anyone has heard of this happening at other VW plants it would be interesting.
in a city with 8m people—the food/energy ratio to people is non existent
all developed nations now have multi-million cities that are forced to suck in energy from the surrounding country in which they exist
London, as one example uses the energy equivalent of 2.5X the rest of the UK. The same applies everywhere.
Once the system begins to fail (ie foodtrucks no longer supply city shops) there will be a tsunami of people leaving the cities. They will overwhelm surrounding farmland and consume what’s there.
Then, just like a tsunami—their force will collapse because there will be no energy left to sustain the outflow.
Those who live through that might be able to sustain some kind of basic existence.
A horrible forecast I agree, but we built our world on oil. There doesn’t appear to be an alternative
In his ‘Trade Off’ paper, David Korowicz cites this study by the US Trucking Association, which gives a timeline of what would happen in the event that trucks ceased operating:
https://amp.businessinsider.com/images/506c5225ecad042639000023-750-790.jpg
Slow Paul, probably you are not exposed to HIT or financial systems. JIT is either fully functional or not. It is an extremely complex system that is solely dependent on all parts/components working in sync. If any of the critical nodes are not functioning then the whole system collapses. Same as in financial systems. It works out does not. Kind of like pregnant but not a little bit pregnant. I don’t blame people for not understand. Unless you are involved in it, you will take it for granted that there will always be good at the supermarket and that the parts of any equipment will always be available. At mist you wait for a few days for it to arrive.
The 1980s was the beginning of many related bad trends.
Employees suddenly started to become something that companies used and disposed of. Before that, companies were more concerned about training and keeping their employees.
Utilities had been paid to keep up their infrastructure, prior to the push toward deregulation and “competition.” Once everything was based on the low bid, the trend was to defer maintenance as long as possible. Overuse infrastructure. Then we end up with the California fire problem.
I tend to agree. The 1980s (in hindsights) was a de-humanizing and de-moralizing turning point in history.
Agree…
https://wikitesti.com/wp-content/uploads/2016/08/Duran-Duran-01.jpg
The NEW Economics of Scale..
The U.S. Postal Service lost almost $4 billion in 2018 even as package deliveries rose, according to results released on Wednesday, potentially giving U.S. President Donald Trump ammunition against Amazon.com Inc (AMZN.O), which he claims pays too little for the agency’s services.
Trump, without presenting evidence, has accused the world’s largest online retailer repeatedly over the past year of taking advantage of USPS by not paying enough for deliveries to make the service profitable
https://mobile.reuters.com/article/amp/idUSKCN1NJ2HS
The new norm…pile on the debt until you exit out the door…
P.S. is Amazon turning a profit!?
And for the Average Joe, shipping costs are incredibly high. I used to trade and ship a lot of car parts on Ebay. Shipping costs for me have tripled over the last 10 years. Shippers are hitting the Average Joe shipper to try to offset all their losses shipping for the Wal-Marts and the Amazons. If things could continue to go the way they are, shipping would only be used by mega corporations. It seems that would then bankrupt the shipping companies as most of their shipping would be below costs. If shippers relied only on a handful of bulk shippers like Wal-Mart and Amazon they would loose all their business if Wal-Mart and Amazon walked away. The shipper would be trapped. It is becoming increasingly clear to me that centralizing retail (like Amazon is trying to do), will not work by itself. There has to be a thriving middle and working class that underlies the economy of scale to really make things work. Amazon is chasing the dust of what was a thriving middle class thinking they have a valid business model. Amazon will bankrupt suppliers and shippers by trying to monopolizing their services.
Recently, Amazon has started up a delivery service enticing independent operators to slepp their good to their final addresses. See several plain white vans in my neighborhood doing such, often late at night!!! Seems “contractors” can be utilized in a more efficient, profitable structure. Same system is in place at airports..more and more contract workers not directly hired by the airlines….we are going backwards…
My local newspaper was talking about people calling up and reporting white vans in town. Amazon is basically bringing chinese-tier management practices to America, i.e., anti-worker.. no, anti-human
Just some of my thoughts. It may sound trivial but it does have a a huge impact.
From the beginning of time until early 1900s, people lived in a world where things or technology do not change much. Things/tools/equipment used in the 1800s are basically almost the same as the previous hundreds of years. It is not complicated. Smart people can look, take them apart and understand how it works and possibly replicate them. Unfortunately, from the 1900s until today, it is just not possible.
Our latest technological marvels today are basically electronics and it is far too complex for anyone except the designer to understand. No one else can replicate them unless you steal the information related to it.
** The key here ** All these new tools/equipment/toys need a comprehensive supporting ecosystem in order for them to work. ** This is the key.
Just some thoughts for academic exercise – if you time travel back from 1800s to 1500s and your brought along what is the latest in 1800s (steam engines), can you use it in 1500? Yes you can. Can the people of 1500 replicate that engine? Yes they can because it is not complex and even people in 1500 know that steam is powerful (it is just that they don’t know how to harness it).
Now, think about it. You bring what is best now in 2018 and bring it back to 1980 or even 1950 or 1900. Will those things work? No
Smartphones will not even work if you bring it back to 2000. When new phones comes out, they push out the old technology. Smartphones do not support 2G anymore. They support 3G, 4G, 5G, etc.
Computers – even if you bring it back to 2000, it can still be used but they don’t have USB back then. The computer does not floppy disks, etc. So, this 2018 computer may have a problems working with the devices back in 2000 (remember this is just like 2 decades ago only, not 200 years).
** In 1990s, we have the 80286, 80386 with DOS and Word Perfect, Lotus 123, etc. Was the system slow? No, it was pretty good to me. 99% of the users of latest Office 365 (2018) will not use any advanced features and they can continue to be productive with Word Perfect and DOS. I am a avid computer user (gaming, productive work, etc) and I remembered that DOS was very stable and it did not crash often. Uses little memory and what I do today, I can do it easily with the old system.
Microprocessors advanced leaps and bounds but the OS took away all the processing power (in the name of “ease of use”). Compare with 1980s and present system, we did the same set of things (word processing, spreadsheet). Once with old system and one with new system. Improvements? no. Productivity increase? Maybe but not significant (can you draft more letters with Office 365 as compared to Word Perfect 5.1?) Headaches? Yes (more complexity more crashes). So, in other words, we spent 30 years improving something for nothing.. What a waste of energy.
Power tools cannot be used in 1900 because electricity was not easily available. Can anyone replicate that power tool in 1900 ? Cannot.
Supporting ecosystem
If you were to time travel yourself and a brand new and best 4WD SUV, tractors or any modern conveniences back to 1900s, you will realize that you can only use them for a short while. Let us assume that you transported a huge tank of gasoline/petrol/diesel, you will soon realize that if your puncture your tire, you have no way to repair the leak If your windscreen cracks, you have no way to change it. If your car or tractor breaks down, you cannot even tow it back. Will the locals in 1900s help you? yes, just to tow it back to your place and it will be a piece of junk because no one knows how to repair it and they have no idea how to replicate the parts. If you want to fully utilize the modern conveniences, you need to bring along everything (the ecosystem) with you. That includes everything and everyone. Tesla? you cannot even charge it unless you have a way to generate electricity. New cars/trucks/tractors are full of electronics. They need special people, special tools (and yes electricity and internet) to diagnose what happen to your car/tractor/truck.
There was a movie that I saw a long time ago. It was about a US aircraft carrier time travel back to the days of World War 2 where Japan was about to attack Pearl Harbour. If the aircraft carrier was a 1960s type of aircraft carrier and its jet planes, the people of 1940s may still be able to use/repair them. However, if you send back the 2010s version of military equipment, it is just as good as junk once the tools/equipment/parts spoil because no one knows how to repair them easily. They are all too complex and top secret (only certain people know how to repair them).
So, after writing all these paragraphs above, what is my point?
** In a post apocalyptic world, only the delusional will say they can salvage parts of the collapsed society and make things work.
difficult to replicate a steam engine with 1500s ”technology”
the power of steam relies on the close tolerances of the machined cylinder–ie metal cutting/finishing
same applied to gun barrels of relevant eras
They can learn, they can try to do it and there is a chance they can do it. But this?
http://www.custompcbboards.com/pl4283167-fr4_double_sided_printed_circuit_board_manufacturers_for_car_reader_speaker_circuit_board.jpg
Those 6 assembled PCB’s look quite rustic.
Here is one that is above and beyond:
https://cdn.macrumors.com/article-new/2017/11/a11-bionic-iphone-x-teardown.jpg
This is only the wiring. Modern PCB’s is almost of the complexity of the semiconductor devices that sits on top and bottom of them.
https://www.softcad-technologies.com/wp-content/uploads/HDI8.jpg
Exactly, CTG,: what I’ve summarised as ‘kicking the rungs out as you climb the ladder’.
I’ve been reading about early aviators, the trans (no, not that kind of Trans!) and inter-continental flyers. Amazing what the mechanics could do when they crashed with some simple tools and some wire, cloth, etc.
In contrast, I watched a film about elite British soldiers in Iraq: when some computerised element failed on one of their – admittedly fantastic and very expensive – trucks, the mechanic could hardly do a thing, and they had to limp home after barely starting the tour, and very vulnerable. In the 1940’s, he’d have had that truck up and running, or cannibalised it for parts.
The first species to do itself in through sheer inventiveness?
I will always remember what you said many years ago in your posts here… “‘kicking the rungs out as you climb the ladder”
Read Grapes of Wrath about how they repaired their Model T mid trip. It is an amazing story. CTG, you are correct… when it goes it will be spectacular.
And the new things are ugly. The most beautiful vehicles might be the skeletal boxy ones built before 1920. Follow the beauty.
People will starve to death in the shadow of wind turbines they can’t even reach…..
Where’s the up arrow for Xabier’s comment? Spot on
Doomer poetry!
Use a few ++++++ in your comment to him.
@ CTG
You remind me of a guy ‘greek extraction’ who back in the late 1970,s decided to ship over to Greece a brand new Camaro. He had fun with it driving the roads of Greece looking like a big shot with his American Muscle until lol what you have described happened to him.
Thanks for memory lane CTG lol
And remember how streaming p orn (or sports) was impossible 20 years ago?
How could we ever go back!
Interesting. The EM + Chinese debt bubble still inflating:
“Emerging market debt rose by $1 trillion to more than $71 trillion in the second quarter, with China accounting for more than 80 percent of that increase, the Institute of International Finance (IIF) said in a report on Wednesday. The latest numbers from China pointed to a continued issuance boom in the world’s second-largest economy, wrote IIF executive managing director Hung Tran.”
https://uk.reuters.com/article/us-global-markets-debt-iif/emerging-economies-see-debt-rise-1-trillion-in-second-quarter-face-record-redemptions-iif-idUKKCN1NJ2IT
It has to rise. Stagnating is bad
Agreed – happy that it is. I guess I’m just a little bit surprised by how much it is still rising, given China’s rap on the knuckles from the rating agencies and all their talk of reining in credit growth.
Really, from now on I just want to hear about everyone buying magnums of champagne on credit – wonderful for GDP and keeping the debt bubble pumped up.
Throw Prudence to the wind if you want to save the world.
(Prudence probably needs livening up anyway).
YES! Harry … can you grab some stories about people living large? All this negativity is getting me down… surely there must be some feel-good stories out there…
You *know* you need to re-evaluate your life when FE is finding you too negative!
So, in more positive news, the old space reptiles had a nice party for Charles’s 70th. I think that’s something we can all feel good about:
“Royals from across Europe descended on London last night for a glittering party honouring Prince Charles’ landmark birthday.
“King Harald, 81, thanked the Queen, 92, for her hospitality last night as the pair carried out their engagement at The Naval & Military Club in London without Queen Sonja of Norway, who was said to be feeling unwell.
“Harald said: “Thank you for a nice party yesterday.”
“The Queen replied: “I’m so glad Charles enjoyed himself.” [Scintillating stuff!]
https://www.express.co.uk/news/royal/1045841/the-queen-news-prince-charles-birthday-party-pictures-king-harald-norway
Did they all compare birth defects and low IQ’s and complain about their ancestors who insisted on breeding with brothers, sisters and first cousins?
http://christchurchohio.org/wp-content/uploads/2012/03/PrimethePump_WP.jpg
The big problem area in the report is the falling overall global debt level, not the rising EM debt levels.
This looks like a sign of the global debt bubble starting to collapse!
Oh, I skim-read it and missed that – very concerning!
I looked back at the IIF report itself, and it was the decline in the total that the IIF highlighted. So they thought the overall decline was important, even if Bloomberg decided to highlight the rise of the debt of EM countries.
“Fifteen percent (15%) of Americans – including roughly two in 10 millennials (19%) – say they’re still paying off debt from the 2017 holiday season, which could put a damper on spending in 2018. Majorities of Americans indicate that they’re planning to spend less and hoping to use credit cards less that they did during last year’s holiday season (58% each), and the ghosts of spending past can have an exaggerated effect on future spending plans.”
https://today.yougov.com/topics/consumer/articles-reports/2018/11/14/americans-holiday-debt-credit
“The world’s third- and fourth-largest economies are shrinking. The European Union is battling with the UK and Italy over Brexit and a deficit-boosting budget, respectively. Traders are reeling from a plummet in oil prices that sent shockwaves through the stock market.”
https://qz.com/1463327/the-global-economy-is-looking-shaky-heres-whats-happening-today/
“Maersk, the world’s biggest container shipper, said the effect of trade tensions could reduce global container trade between 0.5 and 2 percent during 2019 and 2020. It said volume growth in container shipping, excluding those from Hamburg Sud, was lower than expected and unexpectedly fell by 1.9 percent from the previous quarter.”
https://www.cnbc.com/2018/11/14/maersk-earnings-q3-2018.html
“Oil prices rallied Wednesday amid reports OPEC is weighing a steep production cut, but a key U.S. supply report Thursday could dampen hopes for a rebound. OPEC and its partners are discussing a proposal to slash output by 1.4 million barrels per day, sources told Reuters, ahead of the oil group’s meeting next month.”
https://www.investors.com/news/oil-prices-opec-production-cut-eia-data/
“Hong Kong housing prices could fall 25 percent next year if the trade war between the United States and China worsens, real-estate and investment management company JLL has warned. The forecast is the latest bearish call for what is traditionally one of the world’s most expensive real-estate markets.”
https://www.cnbc.com/2018/11/15/hong-kong-housing-prices-could-fall-25-percent-on-trade-war-jll.html
“A potent combination of nervous buyers, cautious lenders and retreating investors has turned Australia’s once booming housing market to dust. With the downturn now in its second year, the question for home-owners, house-hunters and property investors is how much further there is to go. Prices in Sydney, the epicenter of the preceding boom, are falling at an annualized pace of about 8 percent.”
https://www.bloomberg.com/news/articles/2018-11-14/this-is-what-s-killing-australia-s-property-boom
There will always be vultures trying to make money off collapse….in the end, the vultures will be left holding an empty bag.
Hong Kong will be the new Japan!
Indian developer rupee bond sales have slumped to the lowest in almost four years as investors become more cautious about default risks after the shock from non-payments by Infrastructure & Leasing Financial Services Ltd… Dwindling sales may make it harder for developers to repay $4.9 billion of debt that comes due in 2019.”
https://www.bloomberg.com/news/articles/2018-11-14/india-property-bond-sales-stall-as-il-fs-fuels-default-concerns
Excerpts:
This is another Indian real estate article I found. 2018, the year real estate died: Invest in residential real estate only if you have the patience and the staying power to play a very long waiting game for returns.
The article shows charts indicating huge property inventories and practically no one buying. The article says that real estate prices have escalated irrationally in past years, so the author of the article does not expect upward price appreciation for quite some time.
“Iran has executed the so-called “Sultan of Coins” and his accomplice for hoarding gold coins and other hard currency, signalling zero tolerance as it tries to shore up its currency in the face of an economic crisis. State TV reported that Vahid Mazloumin and his accomplice, Mohammad Ismail Ghasemi, were hanged early on Wednesday (local time).”
https://www.abc.net.au/news/2018-11-15/iran-executes-sultan-of-coins-convicted-of-hoarding/10499818
Success smashed? In the US they’d build a shrine to that kind of person and start a reality show. “Ok, we’re now going into the vault of…”
Hmm…gold bugs should take note…the Homeland Guard is no doubt keeping track of bulk sales to individuals here in the USA. FDR called in all physical gold back in the Depression…wait till the perpetual Downturn occurs….turn over it to the Feds for IOUs
LOL..or be shot…
molon lobe
labe
https://en.wikipedia.org/wiki/Molon_labe
Molon labe (Ancient Greek: μολὼν λαβέ, translit. molṑn labé, lit. ‘having come, take’), meaning “come and take [them]”, is a classical expression of defiance. According to Plutarch, Xerxes I—king of the Achaemenid Empire—demanded that the Spartans surrender their weapons and King Leonidas I responded with this phrase.
https://www.zerohedge.com/news/2018-11-14/climate-scientists-admit-major-math-error-after-global-warming-study-debunked
“Brexit Secretary Dominic Raab has resigned saying he “cannot in good conscience support” the UK’s draft Brexit agreement with the EU. Theresa May announced on Wednesday evening that she had secured the backing of her cabinet for the agreement, after a five hour meeting. But several ministers were understood to have spoken against it. And there are suggestions of moves among Conservative backbenchers to force a no-confidence vote in her.”
https://www.bbc.co.uk/news/uk-politics-46219495
“Italian bond yields hit three-week highs and the country’s stocks slumped after Rome defied the European Commission over its controversial budget plan. The Italian government intensified its standoff with the EU last night by refusing to change its deficit target of 2.4 per cent of GDP and its growth forecast of 1.5 per cent.”
http://www.cityam.com/269089/italian-bond-yields-rise-sharply-and-stocks-fall-after-rome
“Vulnerabilities in the German financial system are building up and risks to growth have increased substantially, the country’s central bank said on Wednesday, warning that banks may have insufficient buffers… “The risks to future economic activity are today skewed to the downside,” Bundesbank Vice President Claudia Buch said as the bank presented a regular stability report.”
https://uk.reuters.com/article/uk-germany-economy-bundesbank/german-central-bank-warns-of-risks-to-growth-and-banks-idUKKCN1NJ18X
Deutsche Bank is probably high on the worry list.
A politician referring to his ‘conscience’: splendid comedy to start the day!
Brexit? Chop wood.
Hard Brexit? Chop wood.
No Brexit? Chop wood.
Focusing on the comedic aspects of this gobsmacking clusterf*ck not a bad strategy, Xabier! Here’s some vintage Fry & Laurie to get us in the mood:
Ah, we have a zen approach.
Works great, with a global population of 500 million.
This is unnerving on the heels of China’s 11.7% yoy fall for October car sales. They can’t blame *this* on the new emissions tests .
“New car registrations in Europe slumped 7.4 percent in October on falling demand in Germany, France, Italy and Spain and as registrations of Audi, Nissan and VW branded vehicles saw sharp declines, monthly auto industry data showed.”
https://uk.reuters.com/article/us-europe-vehicleregistrations/european-passenger-car-sales-slump-7-4-percent-in-october-idUKKCN1NK0LN
Wow! Things seem to be falling apart quickly in Europe. Also, negative GDP growth reported for Germany yesterday.
It would seem the masses needed a HUGE does of hopium today … these are the 4 top headlines on Bloomber
The Year Ahead/Consumer
China Is Giving the World’s Carmakers an Electric Ultimatum
New emission rules will force global carmakers to redraw their road maps.
China Is About to Shake Up the World of Electric Cars
Electric Vehicle Revolution Goes Underground With Mine Truck
Pioneering Electric Plane Needs $200 Million for Final Push
Someone needs to do their PHD examining what happens in the brain of a Green Groopie when you demonstrate the EVs are powered by coal
I HEARD.,…
In December 1973, Carson joked on Tonight about an alleged shortage of toilet paper. Viewers believed the story and panic buying and hoarding ensued across the United States as consumers emptied stores,[34] causing a real shortage that lasted for weeks. Stores and toilet paper manufacturers had to ration supplies until the panic ended.[35][36] Carson apologized in January 1974[37] for the incident, which became what The New York Times called a “classic study” of how rumors spread.[38]
That we are at PEAK
Growing demand for oil will lead to shortage and high prices in 2020s
https://www.newscientist.com/article/2185046-growing-demand-for-oil-will-lead-to-shortage-and-high-prices-in-2020s/
#Vanlife, the Bohemian Social-Media Movement
https://www.newyorker.com/magazine/2017/04/24/vanlife-the-bohemian-social-media-movement
I posted this on reddit and someone left this comment.
“I live in a van. I do so because rents in my city are hilariously unaffordable and landlords regularly turn open houses into bidding wars between desperate renters.
I am not rich, I could not afford a fancy sprinter or comfy hipster wagon. My van is cold, because I live in Canada and it is winter. It is damp, because it rains here constantly and the windshield is leaking. It is uncomfortable, because the area behind the seats is about the same length as I am laying down. I spend every day afraid I will return to find that one of this cities hundreds of Junkies has smashed a window and stolen everything I own. My feet got icky from public showers.
I do eat much healthier, and fewer calories now, however.
Fuck the Instagrammers, fuck the trustfund kids, and fuck #vanlife. I’m doing this because it’s the only route I had to stop living paycheque to paycheque in an economy where the ladders have all been pulled.”
“My feet got icky from public showers.”
Put rubbing alcohol in a spray bottle and spray one foot, then put into a clean, dry sock, shoe, then repeat other foot.
The thing is…
In Canada …. there are loans and grants available for those who want to get an education … and by education I do not mean a PDH in https://www.zerohedge.com/news/2018-11-15/nc-state-rolls-out-phd-social-justice-education
I mean learning something useful… in industries where there are jobs…. engineering, medicine, accounting, business, welding, plumbing, electrician etc….
At this point nobody should be living in a van — Canada is not yet Venezuela….
So if someone is living in a van in Canada too f789ing bad…. don’t moan and bleat on about the unfairness of life…. don’t blame others…. look in the mirror … and admit — it was too hard to get a decent education — and I was too f789ing lazy to study… I p issed away the student loans on iphones and beer and dope…. and now look at me … living rough in the back of a van….
Then reach for the Fentanyl and do us all a favour
Global oil demand will never peak for the simple reason that there will never be a post-oil era throughout the 21st century and probably far beyond. Even a wider usage of electric vehicles (EVs) into the global transport system will not change that outlook. However, it can decelerate the rate at which global oil demand is growing but will never replace oil as the major transport fuel nor lead to a peak oil demand.
The projection by the IEA that there could be some 300 million EVs on the roads by 2040 is just a myth. Still, let’s assume hypothetically that it is possible.
Global oil consumption has already hit 100 mbd in 2018 and is projected to reach 120 mbd by 2040.
Currently, electric and hybrid cars combined number under 2 million cars out of 1.477 billion internal combustion engines (ICEs) on the roads worldwide, or a negligible 0.14%. This is despite support by significant government subsidies. The total number of ICEs is projected to reach 2.79 bn by 2040 according to US Research.
Let us assume hypothetically that we might have some 300 million EVs on the roads by 2040. By that time the world will be using 43.8 billion barrels a year (bb) of which 75% or 32.85 bb will be used to power 2.790 billion ICEs around the world. Bringing 300 EVs on the roads will reduce the global oil demand by only 3.53 bb (9.57 mbd) or 8% to 100.43 mbd by 2040.
However, I hasten to add that even 300 million EVs by 2040 is an impossibility. The reason is that current manufacturing capacity of EVs amounts to only 500,000. So it will take many decades to manufacture 300 million EVs.
Moreover, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 300 million EVs.
Last but not least is that projections and figures offered by the IEA and masqueraded as research have been discredited time and again.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
I would agree that EVs won’t do much.
But Dr. Salameh misses the fact that demand is driven to a significant extent by the wages of non-elite workers. This demand is what is a problem.
okay, so WTI is down around $55…
meanwhile, natural gas has spiked from 3.50 to 4.70…
https://www.cnbc.com/quotes/?symbol=%40NG.1
what’s “up” with that?
highest in almost 5 years…
US natural gas producers have been complaining for years that US natural gas prices are too low, compared to the price of oil and compared to the price of oil in other countries. So US companies have undertaken a big LNG export project to try to sell natural gas abroad. It is very hard to make money selling the LNG abroad at much of a profit, because transportation costs are normally more than the price of the LNG, but the real reason for selling the LNG abroad was to try to force US prices upward.
Also, the US is increasing pipeline exports to Mexico, no doubt with the same intent.
The US is increasing natural gas use for electricity as well. Ostensibly, the reason is CO2 issues, but I think coal depletion is just as important an issue.
With these three forces pushing on supplies, there is also the issue of demand for winter heating. Less than the usual amount had been stored up this year. But now a round of quite cold weather is hitting, and it is only November.
Natural gas prices tend to be volatile, because so little can be stored up. The EIA has an article today about how much less is being put in storage this winter, compared to other winters. https://www.eia.gov/todayinenergy/detail.php?id=37512
US Natural gas production is up something like 12% from last year, so in theory, it might be able to fill a lot of needs at once. But a cold winter could still be a problem, or shifts to even more natural gas for electricity could be a problem. It would take some looking at data to see what is happening.
Some states use a lot more natural gas for electricity than others. Their electricity prices could spike, if there is a natural gas shortage this winter. This could be a problem both for businesses and residential customers.
California has ‘extraordinary’ budget surplus, analysts say
https://www.sfgate.com/politics/article/California-has-extraordinary-budget-13392995.php?t=bd3d2d1ec9
With the 5th largest GNP on the planet, it will eventually get tired of supporting our Red States, and they will become even more third world.
Oh well, deporting a dreamer will make them feel better..
so CA had the resources to maintain/upgrade its electric transmission lines before the recent major fires that were caused by them?
who is responsible for not putting the CA budget surplus to such a good use?
They defiantly had the resources.
The UK is below CA.
Obviously, private enterprise failed with private energy companies.
“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”
~ John Kenneth Galbraith
On the flipside when you decide you have the right to spend other people’s money it’s hard to decide where to stop. It seems to me there is no end to justifying ones behavior which includes both the desires to have more consumption and to look good doing it.
With the 5th largest economy on Earth, CA is going to tire of supporting the Red States.
Our conservative friends are going to have to produce.
Ca will be even richer then, not having the economic burden of supporting conservatives.
Time to produce– or put down that beer.
Jerry Brown
[Part of comment deleted]
CA is going bankrupt.
https://www.zerohedge.com/news/2018-02-24/former-calpers-board-members-shocking-admission-calpers-near-insolvency-it-needs
This is only a forecast of a future budget surplus, not a real budget surplus. The article notes that a previously forecast budget surplus turned into a deficit. I didn’t figure out which year that was. My guess is that the forecast was made just before the Great Recession, when things looked great, and the result was quite negative instead of positive.
If the State of California has to bail out the utility that is responsible for Northern California’s power lines, I expect that could make a big dent in the budget, for example.
My, admittedly vague, impression is that their pension situation is a mess, too:
“California’s public employee pension systems have immense gaps – called “unfunded liabilities” – between what they have in assets and what they will need to meet their obligations to retirees.
“The California Public Employees Retirement System, the nation’s largest pension trust fund, and other state and local systems are desperately trying to close those shortfalls, or at least reduce them, mostly by ramping up mandatory “contributions” from public agencies.
“Everyone is getting hit by those rapidly escalating demands and it’s no secret that they are pushing some school districts and cities to the brink of insolvency, forcing them to slash other spending, even vital police and fire services, and/or seek higher taxes from their voters to keep their heads above water.
“Moreover, the squeeze is destined to get even tighter…”
https://www.ocregister.com/2018/04/23/the-realities-of-californias-pension-crisis/
Pensions are a problem almost everywhere.
America has spent $5.9 trillion on wars in the Middle East and Asia since 2001, a new study says
https://www.cnbc.com/2018/11/14/us-has-spent-5point9-trillion-on-middle-east-asia-wars-since-2001-study.html?__source=Facebook%7Cmain
We can’t afford healthcare but we can spend endless money on wars..I swear the Boomers should have overthrown the government decades ago..Instead they danced around with flowers in their hair and had a million stupid kids..
Think of all the non-elite jobs the military supplies, directly and indirectly.
Healthcare has also created a huge number of jobs, but too large a share of these jobs are ones that pay very elite wages. This is part of what sends wage disparity through the roof. Someone making minimum wage can never pay the hourly pay rate of an orthopedic surgeon.
If we look at the non-elite jobs aspect alone, we need more spent on wars.
this morning on uk radio was a prog about selling typhoon jets to saudi and killing yemenis
they interviewed the woman running the sandwich shop opposite the main gate of the factory
‘quote’—-”if they stop selling fighter jets, my business closes—i don’t care who they sell the planes to”
which neatly sums up attitudes to the arms trade
And pretty much everybody in general. I can’t possibly say my lifestyle is evidence for anything but the fact that “I don’t care where the oil comes from.”
well at least you admit it
most people have trouble with that
Killing people is easier than providing them with healthcare. Doctors are much more expensive than soldiers, wage wise and we refuse to have anything but top-notch healthcare on demand–and that is more expensive than killing people.
and , genius, some boomers DID try to overthrow the government, that’s what the radical elements of the New Left were hoping to accomplish in the late 1960s. The government intervened put an end to their plans. Many of them were just upset about the Vietnam War. There is no where near the level of outrage about the War on Terror.
You’re foolish to think radicals have any idea of how to run things better than the current people in power. The war machine exists for a reason— because people in far-away lands are not going to hand over their resources if you ask politely, the resources that allow you to be comfortable enough to make numerous posts on here.
Wars to obtain resources on the cheap are excellent investments for all of us. The ROI is generally off the charts
https://www.reuters.com/article/us-usa-trade-troubleshooters-insight/u-s-farmers-scramble-to-contain-trade-war-damage-find-new-markets-idUSKCN1NJ1LS
‘U.S. farmers scramble to contain trade-war damage, find new markets’
“Inside a nearby seed barn, they made their pitch to eight Sri Lankan government officials: Please buy our soybeans. The wooing of such a tiny market underscores the depth of U.S. farmers’ problems after losing their biggest customer, China, to a global trade war. Sri Lanka bought about 3,000 metric tons of U.S. soybeans last year. China bought about 32 million tons – but now buys almost none after Beijing slapped a 25 percent tariff on U.S. imports in July. The move came in retaliation for U.S. duties on Chinese goods imposed by U.S. President Donald Trump. U.S. farmers would need about 11,000 markets the size of Sri Lanka to replace Chinese soybean purchases, but these days many growers will take any shred of new business they can get. A small but growing number of farmers have all but given up waiting for diplomatic solutions and started scrambling themselves to help open new markets and salvage existing ones disrupted by tariffs, according to dozens of interviews with producers, industry officials and trade lobbying groups.”
1965 — Vietnam:
November 14-16, 1965 The first major military engagement occurs between US & North Vietnamese forces.
Check back in about 6 years, I’ll tell you who won.
Products anyone wants to sell are only worth what buyers are willing to pay for them. Farmers are learning this about soybeans.
It’s not clear to me why the soybeans aren’t selling. Presumably the Chinese are buying soybeans from “non USA producers”. Where are “non USA producers” former customers getting their soybeans? Is this a case of substitution? I always assumed global food demand was somewhat inelastic. Especially with 200k new people added everyday.
The biggest use of soybeans in China seems to be to feed pigs. The amount of meat people eat is fairly elastic. Meat is very inefficient to produce, versus grains, so has traditionally been something reserved for feast days and the wealthy (who tend to become overweight, eating it). Also, the pork industry is under threat in China because of an epidemic of African Swine Fever. There is no vaccine for it. One report said that 40,000 pigs had died by Aug. 1. So China will likely be cutting back in its pork production, simply because of the epidemic, which it is difficult to stop. https://www.usatoday.com/story/money/nation-now/2018/09/18/china-pig-virus-swine-fever-pork-industry/1343511002/
China also uses soybeans to make soybean oil, soy milk, and tofu. The amount of these used is also somewhat elastic. People can live with a larger share of rice, wheat, and vegetables in their diets. And they can get vegetable oil from palm oil or corn oil, or use less in their diet.
So it is easy to cut back on soybean usage. China’s cutback may relate primarily to not needing as much of it for pigs right now, as much as anything. The tariff was a way to look like it was in control of the situation, and to collect some more tax dollars.
This list of world soy bean exports for 2017 shows Brazil at 44.2%, the US at 37.2%, Argentina at 4.7%, Paraguay at 3.7%, and Canada at 3.3%.
I expect total soy bean exports will go down worldwide, because of the pig epidemic in China/tariffs.
In general, it takes 10 calories of plant food to create one calorie of meat (plus quite a bit of water), which is why meat has traditionally been a food of the wealthy.
https://i.redd.it/77bc0pb578y11.jpg
1968 was a year of a lot of big events. Things weren’t as benign as your chart suggest.
Eight unforgettable ways 1968 made history
1. January 23: North Korea captures the USS Pueblo
When North Korea captured the American surveillance ship USS Pueblo, it sparked an 11-month crisis that threatened to worsen already high Cold War tensions in the region.
2. January 30: North Vietnam launches the Tet Offensive against the United States and South Vietnam
In many ways, the bloody Tet Offensive signified the beginning of the end of U.S. involvement in the Vietnam War.
3. April 4: Martin Luther King Jr. assassinated in Memphis, Tennessee
The Rev. Martin Luther King Jr. was standing on the second floor balcony of room 306 at the Lorraine Motel when he was struck by a bullet at 6:01 p.m.
4. June 5: Robert F. Kennedy assassinated in Los Angeles
Just two months later, Kennedy himself was gunned down by an assassin at the Ambassador Hotel in Los Angeles.
5. September 30: Boeing introduces the first 747 “Jumbo Jet”
When demand for air travel reached sky-high levels in the 1960s, the world’s then-largest passenger aircraft — the Boeing 747 Jumbo Jet — was a game changer.
6. October 16: U.S. athletes take a stand at the Summer Olympics
During the 1968 Summer Olympics in Mexico City, two black athletes staged a silent demonstration against racial discrimination in the United States.
7. November 22: “Star Trek” airs American television’s first interracial kiss
In an episode of TV’s original “Star Trek” entitled “Plato’s Stepchildren,” the crew aboard the Starship Enterprise became enslaved by humanoid Platonians, who possessed a telekinetic ability to force them to do anything the Platonians wanted them to do. Enterprise Capt. James Kirk, a white man played by William Shatner, was forced to kiss Nichelle Nichols’ character, Lt. Nyota Uhura, a black woman.
8. December 24: Apollo 8 is the first manned spacecraft to orbit the moon
On Christmas Eve, three astronauts circled the moon 10 times. Jim Lovell, Bill Anders and Frank Borman became the first human beings to travel to the moon.
Someone is looking through rose colored glasses. There has always been strife in the world. It is easy to romanticize about times past. But, for many in the world life has always been a struggle.
1968 was a year to remember– not one that slips into the past unnoticed.
It is probably “the year” in the second half of the 20th Century.
(maybe 1953– Iran overthrow by US, and discovery of DNA- but not really)
You might also want to consider 1989 as a candidate for “the year.”
Free election held for Soviet Congress of Deputies
Solidarity wins elections in Poland
Berlin Wall comes down
Havel becomes president of Czechoslovakia
Nicole Ceausecu deposed in Romania
Japanese emperor Hirohito dies
Pro-democracy rallies in Tiananmen Square
Angolan Civil War halted by cease fire
Earthquake hits San Francisco
Exxon Valdez tanker runs aground
US troops invade Panama
Chileans vote to end military rule
First liver transplant
And last but not least:
“Driving Miss Daisy” wins Oscar for Best Picture!
I was in Europe in 1989.
It was one of those years, but not 1968.
1979 beats 1968 as well as 1989 in importance. «By comparison, the events of 10 years earlier-in 1979-surely have a better claim to being truly historic. Just think what was happening in the world 30 years ago. The Soviets began their policy of self-destruction by invading Afghanistan. The British started the revival of free-market economics in the West by electing Margaret Thatcher. Deng Xiaoping set China on a new economic course by visiting the United States and seeing for himself what the free market can achieve. And, of course, the Iranians ushered in the new era of clashing civilizations by overthrowing the shah and proclaiming an Islamic Republic.» http://www.niallferguson.com/journalism/history/the-year-the-world-really-changed
When did those insane school shootings really start in the US? Was there a tipping point?
This is a summary of an academic study on the subject
https://www.sciencedaily.com/releases/2018/04/180419131025.htm
I think differently..I say “live large now”..Screw prepping..there is no way you are going to be able to survive against the unprepared..You are just going to end up preparing for a last stand..So live it up now and then you wont have any regrets later..
Well said. I recommend living like there is another decade of BAU for the core. No fun to leave the party before everyone else.
you are both correct, BD and SP…
who is going to “bet” their lifestyle that a global economic collapse is coming soon… what will they do if they are right? say “yay me”, “told you so”, “na, na na, na, na”…
this is where I would hope some Doomer Preppers chime in with their opinions…
but I doubt we’re going to see that…
so…
here’s hope for BAU circa 2030…
and, for sure:
BAU tonight, baby!
A man who lives fully is prepared to die at anytime..
-Mark Twain
you are thinking that the elders have no plan B what if they do and certain investments could have set you up to survive i believe that the collapse looks like its going to happen in 2018 so time is running short we could be in a permanent great depression after 2018
We are already in a depression ie fascism rising, trade wars, police brutality, and dust bowl weather..
The Great Depression 1929-1940 US Economic Growth GDP (1%)
https://en.wikipedia.org/wiki/Great_Depression
The Great Recession 2006-2017 US Economic Growth GDP (1.5%)
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locati
*Note: 20% Great Recession 2006-2017 (GDP) includes (FIRE) finance, insurance and real estate
I just discovered the real date for collapse:
the last Monday in December 2029…
so, adonis, buddy…
start planning now!
you don’t have much time…
Plan C was put into effect in 2008. Plan B was way back in 1970 with the Saudi deal to price oil in dollars. We have been in a pickle for a long time.
Good advice!
If I was flattened by a steam roller as I was picking up coins today…. my last words as it crushed me would definitely not be ‘damn … I knew I should have done that!’
Could this be an ahaa moment for global economics? Why does Amazon have to get so powerful for the economic system to survive? Politicians are looking at this in a new way? The so called progressives have shown their ignorance here. They don’t seem to understand the circle of effects that lead to lowered demand–especially creating ever greater levels of inequality?
https://www.democracynow.org/2018/11/14/ny_politician_we_need_to_block
Return on investment is so low that we seem to be resort to all kinds of incentives to spur investment, even if what Amazon does is take away sales from brick and mortar stores.
I see “energy surplus” being transferred to the government via taxes. That is the real meaning of having net energy. If we are in a deficit energy situation, then we have businesses looking at handouts forever, to hide their true lack of profitability.
World less USA peaked in November 2016 at 73,407,000 barrels per day. In July it was down 2,388,000 barrels per day from that point.
https://imgur.com/a/AkO4mg5
And the US needs the world’s oil production in addition to its own to get enough oil supplies. Global conventional oil is also cheaper than US shale oil. I can’t imagine the world running on only shale oil. It is simply too labor and resource intensive to extract. It seems that much of the recent surge in US oil production is shale oil. I understand that the US and the Saudis are near record levels of oil production too. One only wonders how long this production can hold out if prices
continue to drop. Of course there is a lag between when prices drop and production drops.
Notice how shale production has spiked in recent months… US is the largest oil producer at the moment…
It must be all hands on deck… balls to the wall…. utter desperation drilling now…. these guys are fighting for BAU’s life… (and ours’)
Heros:
https://amp.businessinsider.com/images/57e02a20b0ef975f148b68a1-750-562.jpg
https://stateimpact.npr.org/pennsylvania/files/2013/10/cabot_drill_site03a.jpg
http://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2013/02/21/100480155-96792568.530×298.jpg
HSBC: Brace for the oil, food and financial crash of 2018
80% of the world’s oil has peaked.
https://medium.com/insurge-intelligence/brace-for-the-financial-crash-of-2018-b2f81f85686b#.z9uwvj2gd
that article keeps going around–I’ve commented on it in the replies section ages ago
trouble with Ahmed is he keeps putting dates on it—we all know it’s going to happen, but dating it is impossible, we could be 10 years—maybe 20 adrift
so people shut off and ignore it all
https://thehill.com/policy/international/europe/416412-merkel-calls-for-creation-of-real-true-european-army
After Macron weighed in on the forming of a European Army, now Merkel is tossing in her interest as well. Could that lead to an elimination of a US/EU NATO alliance? I think they wouldn’t go to all that trouble if that wasn’t the goal. Maybe it can be seen as another sign of deglobalization.
NATO needs to go to a smaller size, if at all.
I would not be poking Russia currently.
Probably a good move—–
All of these alliances have an energy cost associated with them. Shutting down ones that are not really accomplishing anything would be no great surprise.
http://m.spiegel.de/fotostrecke/cartoon-des-tages-fotostrecke-142907.html
https://www.businessinsider.com/us-china-trade-war-worlds-largest-shipping-firm-warns-on-tariffs-2018-11
“The US has already introduced tariffs ranging from 10% to 25% on $250 billion worth of Chinese goods entering the US, prompting Chinese policymakers to retaliate, albeit on a smaller scale. President Trump has also repeatedly threatened to place tariffs on all US imports from China, an amount totaling more than $500 billion annually, a move that would most likely slow global trade significantly. Trade restrictions introduced this year could reduce global container trade by 0.5% to 2.0% next year and in 2020, the company said.”
Any one remembered that crude oil dropped from 140+ to 20+ in 2007? A very fast drop. Which ever comes first, subprime or this crash that cause the Great Financial Crisis? I don’t want to speculate but are we seeing a redux?
It is hard to know where the price of oil is going to, except that ultimately it will trend downwards as debt bubbles collapse and our collective ability to afford the goods and services into which it goes does likewise, as per Gail’s analysis.
I think all we can safely say is that there is going to be some crazy volatility moving forwards.
In support of prices:
OPEC + Russia may cut production.
Some countries may follow Venezuela and struggle to maintain production due to an overwhelming economic crisis (Iran?).
An unexpected and swift resolution to the Trade War could also push prices up.
At some point you would imagine that the recent dearth of investment in E&P could manifest as constrained supply.
Undermining prices:
Demand seems likely to stall out, as we are seeing ominous signs of slowdown (for a host of reasons) in China, Europe, Japan the emerging markets and, if we look closely enough, the US.
The central banks are starting to push on a string.
The Saudis have been pumping extra oil to compensate for any Iranian oil that might go off-line due to sanctions.
US shale production is hitting record highs.
World less USA peaked in November 2016 at 73,407,000 barrels per day. In July it was down 2,388,000 barrels per day from that point.
When the string goes limp…. and they realize that the 5 horsemen are mounting up …. I bet the CBs use the string to hang themselves….
I wrote an academic article on the subject, which has been cited many, many times. The debt bubble collapsed, just at the time the prices started falling. https://ourfiniteworld.com/oil-supply-limits-and-the-continuing-financial-crisis/
I also wrote an article on The Oil Drum on Dec. 1, 2008, talking about the fact that the crash in prices had hit every kind of energy, even uranium. It clearly was demand driven.
http://www.theoildrum.com/node/4805
Both made quite an impression on me, Gail. I now live on an island off Scotland. 😀
We will actually see a restriction in supply soon (probably next year).
We have not had that in 200 years, so it is new to all living humans.
It will be interesting- we will get to see what happens.
The restriction on supply may look like low prices, not high. Without rising debt, it is very difficult to keep prices up.
We have seen restriction on coal supply multiple times. I showed this chart earlier, regarding the timing of World War I and II.
https://gailtheactuary.files.wordpress.com/2018/10/52-peak-coal-in-uk-and-germany-led-to-world-wars.png
China is having problems with its coal supply:
https://gailtheactuary.files.wordpress.com/2018/09/17-chinas-coal-production-seems-to-have-peaked.png
The United States’ coal supply seems to have begun irreversible decline, due to depletion. Price did not rise to hold its production up.
https://gailtheactuary.files.wordpress.com/2018/10/us-coal-production-consumption-and-imports-to-2017.png
What China and the US need is more EVs….
As we know — they are powered by coal-generated electricity …. if we had enough EVs that would drive the price of coal higher allowing for money losing mines to be profitable….
More subsidies for Elon please
I need this to hold for another 3 months…. that’s all I ask… I have a couple of trips I want to get out of the way…. however if it does tumble while I am away …. I will be sure to place the biggest room service order for wine and whiskey in the history of the hotel where I will be staying….
Maybe some fireworks??? Get a room with a balcony and get all drunked up and let them fly into the sky …
It would be a celebration after all… celebrating the extinction of the wickedest species to ever walk the earth….
“”China’s economy is under considerable strain from deleveraging, and we expect growth to take another leg down in Q1 2019… We are also not optimistic for a quick end to US-Sino trade frictions…
“Across many EM economies, financial conditions have tightened and will likely continue to do so, as the Fed continues hiking rates and as aggregate QE of the G4 central banks switches to QT…”
https://www.fxstreet.com/news/a-global-economic-slowdown-is-upon-us-nomura-201811131630
“International Monetary Fund head Christine Lagarde said central banks around the world should consider issuing digital currency.
“Speaking in Singapore, Ms Lagarde said this could make digital currency transactions safer. Non-cash payments have increased over the years, raising challenges for governments and central banks.”
https://www.bbc.co.uk/news/business-46203869
No surprise as the World’s Banksters want to make it a cash-less society. Why? Because then they really control you. If you don’t spend enough they tax your money via negative interest rates to get you to part with your cash like a Las Vegas Casino. If you’re a bad boy or girl that’s making trouble for the Gov’t, they can cut you off just like they cutoff those that Apple, Google, Farcebook and Twitter doesn’t agree with and they will shut you down.
Isn’t that great to actually cut you off from spending your money. What a Wonderful World.
Hey Einstein. Your paper money isn’t real either.
The only thing that matters is controlling the information/economy and energy.
Of course it’s not real Cousin Einstein, we all know that. At least with cash you have more anonymity than digital. As long as the system is still functioning cash still has its advantages.
Your anonymity isn’t worth jack. ‘They’ own and control everything. You are insignificant.
Get used to it, because more of that is coming down the road to dystopia.
“The Federal Reserve needs to take note of the economic forces already weighing on the U.S. economy before it plans more rate hikes for 2019, CNBC’s Jim Cramer argued after yet another wild trading session on Wall Street. “It’s important to recognize that the most important inputs … for future inflation are already going lower, not higher. It’d be crazy to ignore that,” he said Tuesday.”
https://www.cnbc.com/2018/11/13/cramer-it-would-be-crazy-for-fed-to-ignore-these-slowdown-signals.html
“Rising levels of corporate debt are well and truly on the radar of global fund managers, and that doesn’t bode well for global stocks. US corporate debt levels have now risen to a record-high 46% of GDP, according to the latest Bank of America survey of global fund managers. The past decade has seen a sharp rise in corporate debt issuance, as investors hunt for yield in a low interest rate environment.”
http://uk.businessinsider.com/swelling-corporate-debt-piles-are-now-global-fund-managers-major-concern-2018-11
More people are figuring out the problem!
“A decade after the start of the financial crisis, supervisors are still trying to make the banking sector more robust and avoid a repeat of the meltdown that started on trading floors and brought low the whole euro zone economy.
“ECB Vice President Luis De Guindos said after results of the Europe-wide stress test were published on Nov. 2 that the job was not done.”
https://www.reuters.com/article/us-eurozone-banks-ecb/euro-zones-investment-banking-trio-faces-11-billion-euro-question-as-ecb-raises-bar-idUSKCN1NI1LQ
“Spain may be the EU’s poster child for economic recovery, but impressive growth rates have failed to make a dent in the number of people struggling to make ends meet despite having jobs, the “working poor”.
“A combination of low wages and reliance on temporary contracts is keeping millions of workers stuck below the poverty line – nearly one in six, according to labour ministry figures.”
https://www.channelnewsasia.com/news/world/-working-poor–abound-in-spain-despite-economic-recovery-10928956
“Italy’s populist government defied the European Commission Tuesday by sticking to its big-spending budget plan, risking financial sanctions in a high-stakes standoff with Brussels.
“Despite pressure from the European Commission, which rejected Rome’s budget outright last month in a first for the EU, Italian Deputy Prime Minister Luigi Di Maio vowed to stand firm on the country’s anti-austerity plans.”
https://www.france24.com/en/20181114-italy-refuses-back-down-budget-standoff-with-eu
I don’t blame Italy! Without growing debt, it can go nowhere.
Stress tests will fail until cheap, abundant and dense energy sources return. It isn’t rocket science.
We also need a better wage/wealth distribution. With the buying power unduly concentrated, too many would-be buyers are locked out of the market.
US records 17% spike in hate crimes, African-Americans & J…e..ws most targeted
Religion took second place as a motivating factor, accounting for 20.6 percent of single-bias hate crimes. Of those, the Je
wish population was the most targeted, with 1,017 people falling victim in 938 incidents.
https://www.rt.com/usa/443888-us-surge-hate-crimes/
I can imagine a lot of bullying when you are a guy with pigtails…
http://www1.pictures.zimbio.com/gi/Ultra%2BOrthodox%2BJews%2BProtest%2BAgainst%2BMilitary%2B9xYUiC_3_nsl.jpg
https://static.independent.co.uk/s3fs-public/thumbnails/image/2016/02/16/22/web-ultra-orthodox-children-getty.jpg
The rise of extremism.
What extremism? Some whites meekly asserting their right to exist?
There is no indication that the “hate crimes” were committed by white people. Even if there were, an attack by a white on an non-white is far more likely to be recorded as a “hate crime” than an attack by a non-white on a white, because only whites can be racist.
The kind of collapse we talk about here has no overlap with your race realist bs.
“hate crimes”. Ha ha ha ha ha.
Rabbis and blacks scrawling swastikas on synagogues.
How the human brain has shrunk.
Since when were you appointed the arbiter of who may post what on this site? I must have missed the memo.
Ah, the future owning class. Getting ready to loan sheke1s to the g0y1m.
Oh, how I laugh at the debt slaves.
https://www.bibliotecapleyades.net/imagenes_sociopol/internet84_01.jpg
See how much more presentable one looks without the pigtails! Another idea is to change one’s surname to Jones or Smith…. very tricky that one… wolf in sheep’s clothing!
https://img.memecdn.com/that-jewish-meme-guy-is-real_o_5093263.jpg
Oh how the tables has turned. How does it feel to go to your ‘work’ every day, just to keep up with the debts? Dear arbiters. Or else…
https://cdn.getyourguide.com/img/tour_img-1115187-146.jpg
NWO pledge, New York Times, OCT. 6, 1940
Too WHO???????????????????
https://www.bitchute.com/video/9lNmsOLDAdUC/
All it would take … is for Things to Fall Apart…. and one charismatic person … to point this out…. and the situation would get very bad… very bad indeed.
BTW – the stab in the back was real….
“I can imagine a lot of bullying when you are a guy with pigtails”
https://www.youtube.com/watch?v=2nXGPZaTKik
Awful song, awful look.
And the look wasn’t even original.
A young Chinese model, who has been described as a living, breathing animé doll has achieved international fame for her uncanny cartoon-like facial features and unmoving poses.
Kina Shen has amassed almost one million followers across Instagram and China’s Twitter equivalent Weibo, where she shows viewers how to achieve her doll-like makeup.
https://www.rt.com/news/443901-kina-shen-doll-model/
https://nextshark-vxdsockgvw3ki.stackpathdns.com/wp-content/uploads/2017/07/12-7.jpg
Wonder if there is a bord ello version (for Smite)
1 million followers… why?
Now there is the perfect image of a useless eater. If she even eats. Lord!
In Argentina there is a chap by the name of Luis Padron who describes himself as ‘trans-species’ and who is ploughing $5,000 p/m into looking like an elf. Money tremendously well spent, I’m sure all on OFW will agree.
https://www.thesun.co.uk/wp-content/uploads/2017/05/ad-composite-elf.jpg?strip=all&quality=100&w=750&h=500&crop=1
https://i2-prod.mirror.co.uk/incoming/article10346287.ece/ALTERNATES/s615/PAY-35K-TO-BE-REAL-LIFE-ELF.jpg
well—it is the busiest time of year for Santa’s little helpers
Are we going to see separate bathrooms for ‘fairies’?
I’m claiming the 5th
Because why not. Plenty of folks in China, ya know’
The indicator is 46.8 points below its long-run average level of +22.7!T his is happening even though the ECB’s negative-interest-rate policy (NIRP) still rules.
https://wolfstreet.com/2018/11/13/germany-zew-us-china-trade-dispute-not-only-thing-hitting-economy/
https://wolfstreet.com/wp-content/uploads/2018/11/Germany-ZEW-current-conditions-2018-11B.png
This article is about Germany’s economic troubles. According to the article:
One way or another, spending by consumers gets cut back. Really the non-elite workers.
Tapering QE to 0 in this climate is crazy.
Germany has lots of troubles! No wonder Angela Merkel is stepping aside.
The mall/box/village
https://youtu.be/R6HnLvubtQE
Looks like wild animals.
Amazing. People already fight in the streets for trivial stuff, what will this look like when people are fighting for food and water?
https://splinternews.com/after-trumps-tax-cuts-companies-eliminated-more-jobs-t-1830423273
‘After Trump’s Tax Cuts, Companies Eliminated More Jobs Than They Created’
“One of President Trump’s major campaign promises, both in his original presidential campaign and during his midterm stump speeches, was the idea that he was going to “bring back jobs” to Americans who have been pushed out of work by globalization and automation. Republicans pitched their tax cuts as another way to do that, by giving corporations more money to indirectly fund their hiring. According to a new examination of the policy’s effects by the New York Times, that strategy didn’t work. In fact, companies actually cut more jobs more enthusiastically after the tax cuts.”
“Much of the “growth” promised by the tax cuts has taken the form of companies like Google, Facebook, and Goldman Sachs investing their money in technology. As a way to boost hiring, the tax cuts have unequivocally been a bust.”
Plus the deficit in 2018 so far is 17% higher than in 2017, and that was suppose to not go up because the economy was suppose to jack up into such a higher gear because of the tax cuts, it would trigger higher revenue to make up for lost revenue. Wrong! That didn’t work either.
ka-BOOM
Is the UK’s “Next Carillion” About to Fall?
The outsourcing giant with 70,000 employees is “circling the drain.”
When UK construction giant Carillion collapsed in January, it shook the foundations of Britain’s outsourcing industry to its core, casting a harsh light on the high-growth, thinning-margin, poor cash-flow, high-debt business model that has come to dominate the sector. It was the country’s biggest corporate bankruptcy in years. But now another outsourcing firm may be about to follow Carillion’s doomed footsteps.
That firm’s name is Interserve. It employs over 70,000 people worldwide, with around 20,000 employees based in the UK. On Monday its shares plunged over 30% to 30 pence a piece, their lowest level in 30 years, before rebounding somewhat. They’re down 95% since April 2014.
https://wolfstreet.com/2018/11/13/interserve-uk-next-carillion-about-to-fall/
But Interserve is not the only major UK construction company that is struggling in this post-Carillion, pre-Brexit reality. Recent research by the weekly publication Construction News revealed that the average pre-tax margin for the 10 biggest UK contractors has fallen for the fifth consecutive year, to -0.9%, while their combined debt rocketed 24% year-on-year to €3.9 billion. Dividends have also been slashed, as evidence emerges of firms tightening their belts ahead of Brexit.
By Don Quijones.
This is what shrinkage looks like….. at some point the entire construction (or other major) industry implodes… and the UK becomes
http://www.elitereaders.com/wp-content/uploads/2015/02/burnt-toast.jpg
We keep hearing about these big companies with huge problems.
In India, we read, India takes control of infrastructure group IL&FS to stem contagion
I thought that IL&FS was heavily into things like building electricity transmission and many other kinds of infrastructure for India. https://www.ilfsindia.com
India’s credit rating wasn’t very good before this bailout. It would seem like the bailout is likely to send it down further.
Delusion was much stronger than I expected
https://www.zerohedge.com/news/2018-11-13/autonomous-vehicles-and-rise-mobile-sex-workers
That is proof that stuupidity is infinite
https://srplus.files.wordpress.com/2012/07/stupidyhasnolimits.jpg
the feds raising of rates and removal of 50billion a month and climbing is causing the oil price to drop
bullseye.
That must be a key driver.
This article has some good insights:
“The way to know if this move in crude oil is a demand-side issue is to look at the prices of industrial metals, which are also very economically sensitive. There has been a heavy correlation between the London Metals Exchange Index and the price of crude oil over the years, and, albeit not perfect, it has held up pretty well over time. Sometimes the LME Index leads, and sometimes it’s the price of oil, but over time both industrial metals and energy prices correspond very well to major economic shifts.
“During the most recent weakening in the price of oil, the metals led the decline…
“Last week the Chinese government made history by specifying exactly how much new lending should be directed at the private sector. Previously, Chinese authorities had been more concerned with the overall level of new loans, not necessarily whether they go to private or to state-owned enterprises…
“I have stated on multiple occasions in this column over the past couple of years that China is in the midst of a credit bubble, the deflation of which is likely to cause a bad recession. Many investors erroneously assume that China’s trade friction with the United States, which is frankly overdue, is the cause of the declining Chinese stock market. It is not, in my view. It is the deflating Chinese credit bubble.
“One way to know that China is in a credit bubble is by looking at the surging credit aggregates and the slowing economy
“Many observers have tried to call a recession in China since 2010. The reason for their failure is precisely this forced lending business. Every time the economy weakens, the Chinese authorities jack up the lending quotas in the banking system they control.
“My point is simple: The fact that such centralized macroeconomic management has worked for 25 years does not mean that it will keep working forever. I do not believe the Chinese can eliminate the economic cycle. Instead, the credit bubble that they have engineered will cause the coming recession to be a lot worse than it otherwise would have been, drawing parallels to the 1930s Great Depression in the U.S.
“I think that what we will see in China, soon, will be the equivalent of what we saw in 2008.”
https://www.marketwatch.com/story/chinas-coming-recession-has-pushed-oil-below-60-2018-11-13
“I think that what we will see in China, soon, will be the equivalent of what we saw in 2008.”
This will be exponentially worse than 08
MILAN (Reuters) – Oil struggled to find a floor and stocks tumbled on Wednesday as disappointing German GDP figures heightened worries over slowing global growth.
European shares fell as much as 1.2 percent after data showed the German economy contracted for the first time since 2015, tracking similar losses in Asia where data in Japan and China underscored worries about weaker growth.
https://www.reuters.com/article/us-global-markets/crude-oil-extends-steep-dive-stocks-fall-on-growth-fears-idUSKCN1NJ03S
The deflationary vortex beckons. Send in the cash ‘copters, central banks!
Fundamentally, China has a diminishing returns problem. Its cheap coal is gone. The world import market is not large enough to absorb goods and services at the rate at which it would like to keep adding exports. China’s return in capital investment is falling too low. All of this is adversely affecting its ability to repay debt with interest.