2019: World Economy Is Reaching Growth Limits; Expect Low Oil Prices, Financial Turbulence

Financial markets have been behaving in a very turbulent manner in the last couple of months. The issue, as I see it, is that the world economy is gradually changing from a growth mode to a mode of shrinkage. This is something like a ship changing course, from going in one direction to going in reverse. The system acts as if the brakes are being very forcefully applied, and reaction of the economy is to almost shake.

What seems to be happening is that the world economy is reaching Limits to Growth, as predicted in the computer simulations modeled in the 1972 book, The Limits to Growth. In fact, the base model of that set of simulations indicated that peak industrial output per capita might be reached right about now. Peak food per capita might be reached about the same time. I have added a dotted line to the forecast from this model, indicating where the economy seems to be in 2019, relative to the base model.1

Figure 1. Base scenario from The Limits to Growth, printed using today’s graphics by Charles Hall and John Day in Revisiting Limits to Growth After Peak Oil with dotted line at 2019 added by author. The 2019 line is drawn based on where the world economy seems to be now, rather than on precisely where the base model would put the year 2019.

The economy is a self-organizing structure that operates under the laws of physics. Many people have thought that when the world economy reaches limits, the limits would be of the form of high prices and “running out” of oil. This represents an overly simple understanding of how the system works. What we should really expect, and in fact, what we are now beginning to see, is production cuts in finished goods made by the industrial system, such as cell phones and automobiles, because of affordability issues. Indirectly, these affordability issues lead to low commodity prices and low profitability for commodity producers. For example:

  • The sale of Chinese private passenger vehicles for the year of 2018 through November is down by 2.8%, with November sales off by 16.1%. Most analysts are forecasting this trend of contracting sales to continue into 2019. Lower sales seem to reflect affordability issues.
  • Saudi Arabia plans to cut oil production by 800,000 barrels per day from the November 2018 level, to try to raise oil prices. Profits are too low at current prices.
  • Coal is reported not to have an economic future in Australia, partly because of competition from subsidized renewables and partly because China and India want to prop up the prices of coal from their own coal mines.

The Significance of Trump’s Tariffs

If a person looks at history, it becomes clear that tariffs are a standard response to a problem of shrinking food or industrial output per capita. Tariffs were put in place in the 1920s in the time leading up to the Great Depression, and were investigated after the Panic of 1857, which seems to have indirectly led to the US Civil War.

Whenever an economy produces less industrial or food output per capita there is an allocation problem: who gets cut off from buying output similar to the amount that they previously purchased? Tariffs are a standard way that a relatively strong economy tries to gain an advantage over weaker economies. Tariffs are intended to help the citizens of the strong economy maintain their previous quantity of goods and services, even as other economies are forced to get along with less.

I see Trump’s trade policies primarily as evidence of an underlying problem, namely, the falling affordability of goods and services for a major segment of the population. Thus, Trump’s tariffs are one of the pieces of evidence that lead me to believe that the world economy is reaching Limits to Growth.

The Nature of World Economic Growth

Economic growth seems to require growth in three dimensions (a) Complexity, (b) Debt Bubble, and (c) Use of Resources. Today, the world economy seems to be reaching limits in all three of these dimensions (Figure 2).

Figure 2.

Complexity involves adding more technology, more international trade and more specialization. Its downside is that it indirectly tends to reduce affordability of finished end products because of growing wage disparity; many non-elite workers have wages that are too low to afford very much of the output of the economy. As more complexity is added, wage disparity tends to increase. International wage competition makes the situation worse.

A growing debt bubble can help keep commodity prices up because a rising amount of debt can indirectly provide more demand for goods and services. For example, if there is growing debt, it can be used to buy homes, cars, and vacation travel, all of which require oil and other energy consumption.

If debt levels become too high, or if regulators decide to raise short-term interest rates as a method of slowing the economy, the debt bubble is in danger of collapsing. A collapsing debt bubble tends to lead to recession and falling commodity prices. Commodity prices fell dramatically in the second half of 2008. Prices now seem to be headed downward again, starting in October 2018.

Figure 3. Brent oil prices with what appear to be debt bubble collapses marked.

Figure 4. Three-month treasury secondary market rates compared to 10-year treasuries from FRED, with points where short term interest rates exceed long term rates marked by author with arrows.

Even the relatively slow recent rise in short-term interest rates (Figure 4) seems to be producing a decrease in oil prices (Figure 3) in a way that a person might expect from a debt bubble collapse. The sale of US Quantitative Easing assets at the same time that interest rates have been rising no doubt adds to the problem of falling oil prices and volatile stock markets. The gray bars in Figure 4 indicate recessions.

Growing use of resources becomes increasingly problematic for two reasons. One is population growth. As population rises, the economy needs more food to feed the growing population. This leads to the need for more complexity (irrigation, better seed, fertilizer, world trade) to feed the growing world population.

The other problem with growing use of resources is diminishing returns, leading to the rising cost of extracting commodities over time. Diminishing returns occur because producers tend to extract the cheapest to extract commodities first, leaving in place the commodities requiring deeper wells or more processing. Even water has this difficulty. At times, desalination, at very high cost, is needed to obtain sufficient fresh water for a growing population.

Why Inadequate Energy Supplies Lead to Low Oil Prices Rather than High

In the last section, I discussed the cost of producing commodities of many kinds rising because of diminishing returns. Higher costs should lead to higher prices, shouldn’t they?

Strangely enough, higher costs translate to higher prices only sometimes. When energy consumption per capita is rising rapidly (peaks of red areas on Figure 5), rising costs do seem to translate to rising prices. Spiking oil prices were experienced several times: 1917 to 1920; 1974 to 1982; 2004 to mid 2008; and 2011 to 2014. All of these high oil prices occurred toward the end of the red peaks on Figure 5. In fact, these high oil prices (as well as other high commodity prices that tend to rise at the same time as oil prices) are likely what brought growth in energy consumption down. The prices of goods and services made with these commodities became unaffordable for lower-wage workers, indirectly decreasing the growth rate in energy products consumed.

Figure 5.

The red peaks represented periods of very rapid growth, fed by growing supplies of very cheap energy: coal and hydroelectricity in the Electrification and Early Mechanization period, oil in the Postwar Boom, and coal in the China period. With low energy prices,  many countries were able to expand their economies simultaneously, keeping demand high. The Postwar Boom also reflected the addition of many women to the labor force, increasing the ability of families to afford second cars and nicer homes.

Rapidly growing energy consumption allowed per capita output of both food (with meat protein given a higher count than carbohydrates) and industrial products to grow rapidly during these peaks. The reason that output of these products could grow is because the laws of physics require energy consumption for heat, transportation, refrigeration and other processes required by industrialization and farming. In these boom periods, higher energy costs were easy to pass on. Eventually the higher energy costs “caught up with” the economy, and pushed growth in energy consumption per capita down, putting an end to the peaks.

Figure 6 shows Figure 5 with the valleys labeled, instead of the peaks.

Figure 6.

When I say that the world economy is reaching “peak industrial output per capita” and “peak food per capita,” this represents the opposite of a rapidly growing economy. In fact, if the world is reaching Limits to Growth, the situation is even worse than all of the labeled valleys on Figure 6. In such a case, energy consumption growth is likely to shrink so low that even the blue area (population growth) turns negative.

In such a situation, the big problem is “not enough to go around.” While cost increases due to diminishing returns could easily be passed along when growth in industrial and food output per capita were rapidly rising (the Figure 5 situation), this ability seems to disappear when the economy is near limits. Part of the problem is that the lower growth in per capita energy affects the kinds of jobs that are available. With low energy consumption growth, many of the jobs that are available are service jobs that do not pay well. Wage disparity becomes an increasing problem.

When wage disparity grows, the share of low wage workers rises. If businesses try to pass along their higher costs of production, they encounter market resistance because lower wage workers cannot afford the finished goods made with high cost energy products. For example, auto and iPhone sales in China decline. The lack of Chinese demand tends to lead to a drop in demand for the many commodities used in manufacturing these goods, including both energy products and metals. Because there is very little storage capacity for commodities, a small decline in demand tends to lead to quite a large decline in prices. Even a small decline in China’s demand for energy products can lead to a big decline in oil prices.

Strange as it may seem, the economy ends up with low oil prices, rather than high oil prices, being the problem. Other commodity prices tend to be low as well.

What Is Ahead, If We Are Reaching Economic Growth Limits?

1. Figure 1 at the top of this post seems to give an indication of what is ahead after 2019, but this forecast cannot be relied on. A major issue is that the limited model used at that time did not include the financial system or debt. Even if the model seems to provide a reasonably accurate estimate of when limits will hit, it won’t necessarily give a correct view of what the impact of limits will be on the rest of the economy, after limits hit. The authors, in fact, have said that the model should not be expected to provide reliable indications regarding how the economy will behave after limits have started to have an impact on economic output.

2. As indicated in the title of this post, considerable financial volatility can be expected in 2019 if the economy is trying to slow itself. Stock prices will be erratic; interest rates will be erratic; currency relativities will tend to bounce around. The likelihood that derivatives will cause major problems for banks will rise because derivatives tend to assume more stability in values than now seems to be the case. Increasing problems with derivatives raises the risk of bank failure.

3. The world economy doesn’t necessarily fail all at once. Instead, pieces that are, in some sense, “less efficient” users of energy may shrink back. During the Great Recession of 2008-2009, the countries that seemed to be most affected were countries such as Greece, Spain, and Italy that depend on oil for a disproportionately large share of their total energy consumption. China and India, with energy mixes dominated by coal, were much less affected.

Figure 7. Oil consumption as a percentage of total energy consumption, based on 2018 BP Statistical Review of World Energy data.

Figure 8. Energy consumption per capita for selected areas, based on energy consumption data from 2018 BP Statistical Review of World Energy and United Nations 2017 Population Estimates by Country.

In the 2002-2008 period, oil prices were rising faster than prices of other fossil fuels. This tended to make countries using a high share of oil in their energy mix less competitive in the world market. The low labor costs of China and India gave these countries another advantage. By the end of 2007, China’s energy consumption per capita had risen to a point where it almost matched the (now lower) energy consumption of the European countries shown. China, with its low energy costs, seems to have “eaten the lunch” of some of its European competitors.

In 2019 and the years that follow, some countries may fare at least somewhat better than others. The United States, for now, seems to be faring better than many other parts of the world.

4. While we have been depending upon China to be a leader in economic growth, China’s growth is already faltering and may turn to contraction in the near future. One reason is an energy problem: China’s coal production has fallen because many of its coal mines have been closed due to lack of profitability. As a result, China’s need for imported energy (difference between black line and top of energy production stack) has been growing rapidly. China is now the largest importer of oil, coal, and natural gas in the world. It is very vulnerable to tariffs and to lack of available supplies for import.

Figure 9. China energy production by fuel plus its total energy consumption, based on BP Statistical Review of World Energy 2018 data.

A second issue is that demographics are working against China; its working-age population already seems to be shrinking. A third reason why China is vulnerable to economic difficulties is because of its growing debt level. Debt becomes difficult to repay with interest if the economy slows.

5. Oil exporters such as Venezuela, Saudi Arabia, and Nigeria have become vulnerable to government overthrow or collapse because of low world oil prices since 2014. If the central government of one or more of these exporters disappears, it is possible that the pieces of the country will struggle along, producing a lower amount of oil, as Libya has done in recent years. It is also possible that another larger country will attempt to take over the failing production of the country and secure the output for itself.

6. Epidemics become increasingly likely, especially in countries with serious financial problems, such as Yemen, Syria, and Venezuela. Historically, much of the decrease in population in countries with collapsing economies has come from epidemics. Of course, epidemics can spread across national boundaries, exporting the problems elsewhere.

7. Resource wars become increasingly likely. These can be local wars, perhaps over the availability of water. They can also be large, international wars. The timing of World War I and World War II make it seem likely that these wars were both resource wars.

Figure 10.

8. Collapsing intergovernmental agencies, such as the European Union, the World Trade Organization, and the International Monetary Fund, seem likely. The United Kingdom’s planned exit from the European Union in 2019 is a step toward dissolving the European Union.

9. Privately funded pension funds will increasingly be subject to default because of continued low interest rates. Some governments may choose to cut back the amounts they provide to pensioners because governments cannot collect adequate tax revenue for this purpose. Some countries may purposely shut down parts of their governments, in an attempt to hold down government spending.

10. A far worse and more permanent recession than that of the Great Recession seems likely because of the difficulty in repaying debt with interest in a shrinking economy. It is not clear when such a recession will start. It could start later in 2019, or perhaps it may wait until 2020. As with the Great Recession, some countries will be affected more than others. Eventually, because of the interconnected nature of financial systems, all countries are likely to be drawn in.


It is not entirely clear exactly what is ahead if we are reaching Limits to Growth. Perhaps that is for the best. If we cannot do anything about it, worrying about the many details of what is ahead is not the best for anyone’s mental health. While it is possible that this is an end point for the human race, this is not certain, by any means. There have been many amazing coincidences over the past 4 billion years that have allowed life to continue to evolve on this planet. More of these coincidences may be ahead. We also know that humans lived through past ice ages. They likely can live through other kinds of adversity, including worldwide economic collapse.


[1] Note that where the dotted line for 2019 is placed is based on where I see the 2019 economy relative to the downturn in industrial output per capita, based on a number of kinds of evidence, not all of which is cited in this article. The 1972 base model would give a slightly different timing of the downturn, a few years earlier. Also note that while the original “The Limits to Growth” book is no longer in print, Limits to Growth: The 30-Year Update by the same authors is available for sale.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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2,080 Responses to 2019: World Economy Is Reaching Growth Limits; Expect Low Oil Prices, Financial Turbulence

  1. Baby Doomer says:

    Here is Sean Hannity with another whopper that is pure fake news..

    Very bottom of the story

    “The US became the world’s largest exporter of oil towards the end of 2018 after the Trump administration eased restrictions and allowed more off-shore drilling opportunities for American businesses.”

    And he sites a bloomberg story as a link that is about the central bank president of India..It has nothing to do about US oil production..And makes up a baseless claim that Trump’s deregulation is the reason for this.


    The US isn’t even in the top ten of worlds largest exporters..And the Saudi’s are by far the largest exporters

    This is how Trump won the election..Via right wing conservative fake news..Just like numerous studies have shown..

    • If a person restricts the statement to “crude oil,” and takes a fairly short time period, the statement might be right. This is a chart of US exports of crude oil by month, through October 2018.

      US refineries are operating pretty much 24/7/365, except for needed downtime spring and fall. They don’t have more capacity for oil. This cuts back on how much the US can imports from Canada, and it tends to depress US WTI prices relative to Brent. In October 2018, the US exported 2.3 million barrels per day.

      Looking at BP Statistical Review of World Energy, Crude oil exports were higher than 2.3 million bpd in 2017 for Canada (3.5), Russia (5.6), Iraq (3.8), Saudi Arabia (7.2), and United Arab Emirates (2.5). The US did not become the world’s largest exporter of crude oil, but it certainly ranks up near the top.

      The US’s production of crude oil keeps rising. It exceeded 11.5 million barrels per day in October 2018. On this basis, the US seems to have become the world’s largest producer of crude oil.

      All of the details about whether it is “producer” or “exporter” of “oil” or “crude oil” become difficult for novices to keep straight.

      • I was looking at this further. In October 2018, the US exported 2.3 million barrels per day of crude oil and 5.7 million barrels per day of other stuff (mostly products) for a total of 8.0 million barrels per day of oil exports.

        BP Statistical Review of World energy shows total oil exports for Russia (crude oil and products) 8.6 million barrels per day, and for Saudi Arabia of 8.2 million barrels per day. Thus, the US is not far from becoming the world’s largest oil exporter on this basis. Of course, these amounts are not net of imports.

      • Chrome Mags says:

        “All of the details about whether it is “producer” or “exporter” of “oil” or “crude oil” become difficult for novices to keep straight.”

        I did a Google search to find an article that spelled out the numbers on the US oil situation, or at least according to the linked article below. The last paragraph gets to a bottom line, but includes other supply, NGL’s and ethanol as feedstock for refining.


        “20.5 million BPD is a fairly accurate representation of U.S. consumption, but there is a large U.S. production number that isn’t included in the crude oil production numbers.

        There is a line item called Other Supply, which consists primarily of natural gas liquids (NGLs) and fuel ethanol. This category represents a significant input to refiners in addition to the 11.7 million BPD of production (and the 4.0 million BPD of net crude oil imports). Other Supply represented 6.9 million BPD of production, and it mostly ends up as feedstock for refiners or petrochemical production. (Note that this category also includes “Refinery Processing Gain” of 1.2 million BPD, which results from refiners making products that are of a lower density than crude oil).

        So, Domestic Production of crude oil plus Other Supply is equal to (11.7 + 6.9) = 18.6 million BPD — which is still about 2 million BPD less than the U.S. consumes.”

        • I know Robert Rapier from Oil Drum days. The numbers I was quoting were different, but related.

          The EIA calculates a “net import” amount each week, which is what all of the discussion was about in early December. I am not sure how good these weekly amounts are; I was using the monthly amounts that are put up later, and seem to have a little more review to them. One of these weekly amounts reported as “net imports” was slightly negative, namely for the week ended November 30. Thus, with the highly variable weekly numbers, the US for one week seemed to look like a net exporter. I wouldn’t believe it over any longer period. I didn’t go back through Roberts’s numbers. I suspect he also looked at more stable numbers than the weekly estimates. This is a link to the weekly estimates that got people excited.


          The pieces can be seen at this link.


    • Lastcall says:

      I thought Trump won because he was the ‘new liar, nit the same tired ‘old liar’.
      Remember Obama was a lame duck President at the end.

      • Duncan Idaho says:

        Its late stage capitalism– Trump was an appropriate candidate.
        No morals or rules to get in the way, no one will do business with him except the Russians, can be the needed sleazy actions to increase elites wealth.
        I think we have the perfect candidate.

        • aaaa says:

          I liked the line that somebody said on MOA upon his election, that he’s being elected to do for USA like he does in business ventures, declare bankruptcy. It’s amazing that we’re already in year 3 of his presidency; time sure goes fast.

      • Duncan Idaho says:

        “Meanwhile, the US elected an insane, kleptocratic gang to the White House and Senate, is exploding its national debt, and for the first time since WWI, has seen its life expectancy decline for the third year in a row. More USAnians will die in 2019 from opioids than died from the entire Vietnam war. “

      • Duncan Idaho says:

        Went with my wife to the Women’s March today in Bend Oregon.
        Well attended.

        • JesseJames says:

          I am sure There are many oppressed women in Bend Oregon.

        • kevin moore says:

          Did you tell them that civilization is fast approaching collapse and they were wasting their time?

        • Very Far Frank says:

          Isn’t it wonderful when people use social justice as a smokescreen for self interest? If they’re interested in social justice they could try thinking about those who actually need it.

      • xabier says:

        Highly privileged, self-indulgent, beneficiaries of an unjust global capitalist system which makes it possible for them to waste time on marches, and resources on disposable placards…… 🙂

    • Davidin100millionbilliontrillionzillionyears says:

      “Women around the world march for social justice”…

      well, not in Muzzlim countries…

      isn’t it ironic that the women who are most in need of social justice live in countries where they can’t march for social justice?


      another topic…

      social justice for women also seems to correlate with the modern prosperity delivered via the huge net (surplus) energy of FF…

      as this energy drops towards zero in the coming decades, any modern gains in social justice might just be reversed…

      End of Growth has big implications for the social order…

      • xabier says:

        Very true: the interesting thing is that pre-FF societies show such a wide variety in the relative status of men and women.

        The radical-feminist proposition that it ‘will all be like the Handmaid’s Tale’ is pure bunk.

        Even more so the idea that these spoiled people are ‘victims of the Patriarchy.’

        For instance, a muslim Kurdish woman went unveiled, looked men in the eye and could hit her husband, but not so the Arab women in the same town, who were veiled and had to keep their eyes on the ground and often beaten. (My Iranian Kurdish friend beat up her arranged-husband!)

        And Germanic, Norse and Celtic and Basque women had very much higher status than Ancient Greek females, as history shows: most tribal chiefs – until Christianity imposed itself – would do nothing without the approval of the tribal witch and one even scared a Roman general into running away.

      • Third World person says:

        well, not in Muzzlim countries really ?

        Women’s March protesters stay silent as Iranian women fight for freedom

      • I don’t think the situation is “might.” Before birth control pills, and the good transportation we have today, married women mostly stayed at home. Businesses did not hire them. Single women became nuns for the church, or took on a few other professions (teacher, nurses, store clerks).

    • Slow Paul says:

      More like social media march…

  2. Baby Doomer says:

    Website forecast 2/3 die off in the US by 2025 from an economic collapse

    Here is there reasoning behind the forecast.

    “The key element to understand the process that the USA will enter in the upcoming decade is migration. In the past, specially in the 20th century, the key factor that allowed the USA to rise to its colossus status was immigration with the benefits of a demographic expansion supporting the credit expansion and the brain drain from the rest of the world benefiting the States. The collapse of the Western financial system will wipe out the standard of living of its population while ending ponzi schemes such as the stock exchange and the pension funds. The population will be hit so badly by a full array of bubbles and ponzi schemes that the migration engine will start to work in reverse accelerating itself due to ripple effects thus leading to the demise of the States.

    This unseen situation for the States will develop itself in a cascade pattern with unprecedented and devastating effects for the economy. Jobs offshoring will surely end with many American Corporations relocating overseas thus becoming foreign Corporations!!!! We see a significant part of the American population migrating to Latin America and Asia while migration to Europe – suffering a similar illness – won’t be relevant. Nevertheless the death toll will be horrible. Take into account that the Soviet Union’s population was poorer than the Americans nowadays or even then. The ex-Soviets suffered during the following struggle in the 1990s with a significant death toll and the loss of national pride. Might we say “Twice the pride, double the fall”? Nope. T

    he American standard of living is one of the highest, far more than double of the Soviets while having added a services economy that will be gone along with the financial system. When pensioners see their retirement disappear in front of their eyes and there are no servicing jobs you can imagine what is going to happen next. At least younger people can migrate. Never in human history were so many elders among the population. In past centuries people were lucky to get to their 30s or 40s. The American downfall is set to be far worse than the Soviet Union’s one. A confluence of crisis with a devastating result.”


    • Baby Doomer says:

      After the economic collapse, they see migration going into the opposite way..Americans fleeing to central America..Maybe Trump’s wall is to keep us in? Wouldn’t that be a hell of a plot twist..

      • Except Mexico seems to already losing its oil exports, making the country much worse off financially. What does it do, when it cannot pay for the programs it needs for its people?

    • A 2/3 die off in the US by 2025 may be better than what Mexico experiences. All things are relative. When a person doesn’t know the various pieces, it is hard to judge.

      • Bruce Steele says:

        Maybe a farmer in Calif. meets a segment of Mexican immigrants that are tilted to immigrants that are also farmers, yet even separated from their immigrant relatives by a couple generations the Mexicans I know are good gardeners and farmers. Gotta count for something in the event of a nasty economic downturn.

    • Davidin100millionbilliontrillionzillionyears says:

      “The key element to understand the process that the USA will enter in the upcoming decade is migration. In the past, specially in the 20th century, the key factor that allowed the USA to rise to its colossus status was immigration…”

      no! this is absolutely wrong…

      the key to the USA rising to its “colossus status” was FF…

      so much of it that over 200 million people can now have modern prosperity…

      that reality pretty much blows up the “reasoning” of this article…

    • Sheila chambers says:

      ‘Mericans migrating to Mexico & Central america? ha ha ha ha ha ha ha ha, tell me another one!
      People are fleeing those countries because they can’t survive there!
      Their flooding our border expecting us to give them our non existent jobs, unafordable housing & I also expect most of those women towing children expect us to support them.

      ‘Mericans have no place to flee to, go north? there are too many of us, it’s still too cold & with poor soils, go south, way too many people & it’s getting hotter & dryer, flee to Asia, your kidding, their even more overpopulated than we are & they will be fleeing towards Europe & poor Europe will also be flooded with even more Africans!
      Rich ‘mericans might try fleeing towards New Zealand but they don’t want more northerners & neither does Australia, nobody will be welcoming more migrants.

      We are in a trap & we keep digging it ever deeper with our growing overpopulation.

  3. adonis says:

    Monetary policy space remains constrained by the lower bound in many countries, limiting
    the policy options available to address future deflationary shocks. The existence of cash
    prevents central banks from cutting interest rates much below zero. In this paper, we consider
    the practical feasibility of recent proposals for decoupling cash from electronic money to
    achieve a negative yield on cash which would remove the lower bound constraint on
    monetary policy. We discuss how central banks could design and operate such a system, and
    raise some unanswered questions. file:///C:/Users/computer/Downloads/wp18191.pdf

  4. Very Far Frank says:

    I’ve been reading Vaclav Smil’s ‘Energy and Civilization: A History’ recently. It’s been a great read so far, and I would recommend it since it’s so closely relevant to what we discuss here.

    “Energy is the only universal currency; it is necessary for getting anything done. The conversion of energy on Earth ranges from terra-forming forces of plate tectonics to cumulative erosive effects of raindrops. Life on Earth depends on the photosynthetic conversion of solar energy into plant biomass. Humans have come to rely on many more energy flows—ranging from fossil fuels to photovoltaic generation of electricity—for their civilized existence. In this monumental history, Vaclav Smil provides a comprehensive account of how energy has shaped society, from pre-agricultural foraging societies through today’s fossil fuel–driven civilization. Humans are the only species that can systematically harness energies outside their bodies, using the power of their intellect and an enormous variety of artifacts—from the simplest tools to internal combustion engines and nuclear reactors. The epochal transition to fossil fuels affected everything: agriculture, industry, transportation, weapons, communication, economics, urbanization, quality of life, politics, and the environment. Smil describes humanity’s energy eras in panoramic and interdisciplinary fashion, offering readers a magisterial overview.”

    Smil seems to recognise the deterministic patterns that societies follow in their response to energy flows, the sociocultural and political implications of this, and our ultimate fate as a civilisational ‘flash in the pan’ abberation in the long history of humanity. Also discussed in the book, and something that might be of interest, is the correlation between new innovations capable of utilising energy and the expression of business cycles. I’d be interested to know whether Gail has heard of Smil and what she thinks of him.

    • Duncan Idaho says:

      Smil seems to understand on a basic level.
      Good choice, interesting.
      Is probably not the ideal person for this blog.

    • I have read some of his books and have met him in person once, when we spoke at the same conference in Brussels.

      I agree with a lot of his conclusions. He says any transition to renewables is a long way off, for example. But he doesn’t think of limits at all, and he is not at all interested in blogs.

      When he spoke in Brussels, he skipped the night-before speakers’ dinner (without telling people his plans, I believe). I am sure he was busy with his many things. He did talk to me and the other speakers briefly in the morning before our talks. I am sure he had never heard of me and had no interest in me. Blogs were of no interest to him. I mostly asked him questions, and he responded. He left immediately after his talk, so he didn’t hear my talk, or the EU responses to our talks.

      He must spend an awfully large share of time on his books and talks, to pump out as many as he does. His talk was very good. It was basically an anti wind and solar talk. He talked about their deficiencies as replacements for fossil fuels, as I recall.

      He is slender, about 75 years old. Wikipedia says

      Smil is known for being “intensely private”, shunning the press while letting his books speak for themselves.At UM, he only ever showed up at one faculty meeting (since the 1980s). The school accepted his reclusiveness so long as he kept teaching and publishing highly-rated books.

      • xabier says:

        I had a tutor like Smil, a wonderful dedicated scholar and very reclusive – he went a little mad in the end, sadly (having to teach me had nothing to do with it, I swear!).

  5. Baby Doomer says:

    Mexican oil pipeline explosion..

  6. Uncle Bill says:

    “Tesla’s Decline Causes Concern for Almost $1 Billion in Bond Payments
    Tesla stock was buried on Friday and its looming $920 million convertible debt payment could be coming straight out of the bank.
    Despite the flurry of questions and the onslaught of selling on Friday, one note worth covering its Tesla’s 2019 convertible bonds. On March 1st, $920 million worth of convertible debt will come due. If Tesla stock is trading at or above $359.88, the company can elect to pay back that debt with stock rather than cash.
    Tesla has already said that should the stock close above the conversion price, that it will pay it back with a 50/50 combination of cash and stock. However, with Tesla’s recent pullback and Friday’s 13% plunge, that puts Tesla’s strategy in jeopardy.
    As of last quarter, Tesla had about $2.9 billion in cash and equivalents. Tesla’s cash and liquidity situation is more complicated than a simple glance at the balance sheet, but it gives us a rough idea of where the automaker stands.
    Of course, it’s always possible that Tesla stock will be able to rally above that conversion price in time to pay part of the debt with stock. After all, it’s more than a month away and we’ve seen crazier things than a 20% rally in Tesla’s share price in a short time period. Earnings will likely be a big catalyst between now and then, too.”

    Either way, keep the debt in mind
    It might me a good idea to avoid tweeting and toking Mary Jane for Elon till then!, just saying.

    • Uncle Bill says:

      How is Elon going to do it???

      Tesla’s Model 3 Wait List May Undermine Musk, One Way or Another
      (Bloomberg) — Elon Musk has backed himself into a corner with Tesla Inc.’s most crucial car.

      Some would-be customers have waited almost three years to take delivery of the Model 3, a sedan they plopped down a $1,000 deposit for as early as March 2016. Musk, Tesla’s charismatic chief executive officer, has pitched it as the company’s first car for the masses, with a base price of just $35,000.

      Thousands of those deposit holders still are standing by, and they could spell trouble for Tesla — whether they stay patient or not.

      Selling too many Model 3s at that price too soon would put the company out of business, Musk tweeted last year. At the very least, it undermines Tesla’s profitability, as he alluded to in an email to staff on Friday. He announced Tesla will cut about 7 percent of its workforce — roughly more than 3,000 employees

      Maybe free Red Bull for assembly line workers?

  7. Chrome Mags says:


    ‘Planetary health diet: Developed countries must cut red meat eating by 80% to protect Earth’

    How is that ever going to happen? Not voluntarily, people just aren’t like that. The only way probably is to find a way to produce meat in some kind of grow tank, so as to eliminate the animals and in so doing their emissions.

    So is that possible? Well here’s an article on it;


    “Call it clean meat, cultured meat, or even lab-grown meat – the questions remain the same: What’s it going to take to get this revolutionary product on grocery store shelves, and how close are we right now? Today, The Good Food Institute’s Science & Technology Department released the world’s first public guide to the clean meat industry: an industry that is poised to completely transform the way we produce meat by removing the animal from the equation. That is, this is technology that allows us to produce meat directly from cells outside of an animal, circumventing the need for factory farming and its myriad harms.”

    • xabier says:

      Clean Meat; Clean, Good, Energy; Smart Houses; a De-materialized Economy: how bright the future is looking!

      Perhaps we have been inclined to be a little too pessimistic here?

      • Chrome Mags says:

        “Perhaps we have been inclined to be a little too pessimistic here?”

        I’m not suggesting that, but the idea of clean meat as they refer to it sure is interesting. Would be nice if animals are not slaughtered or that methane emissions don’t need to be part of the process to have a meat sandwich. Even if we still are on a course for collapse, would be interesting to try some ‘clean meat’ before the oil age is over.

        • Slow Paul says:

          Or we could just eat less meat. My wife looks at me funny every time I suggest a dinner meal that does not include some kind of meat.

  8. Third World person says:

    For $1, or less than a pizza slice, you can buy a house in Italy
    A semi-abandoned town in Italy is selling homes for just over $1 in hopes of luring foreigners to renovate the properties and revive its local economy.

    Sambuca, a hilltop town in Sicily with sweeping views of the Mediterranean, is selling dozens of bargain basement-priced homes after other Italian towns and villages have made similar offers. Sambuca — no relation to the liqueur of the same name — has a population of fewer than 6,000 residents and is located about 40 miles south of Palermo.

    rural Italy is dying

    • Third World person says:

      well one mayor in italy did try do a different thing
      to his ghost town

      but now he in jail

    • xabier says:

      You buy the house cheap but pay the municipal taxes……

    • With more use of machinery, there is less need for human labor in villages. Also, citizens can drive further to stores than they did in the past, so there is less need local stores. So there aren’t many jobs in small towns.

      • Sheila chambers says:

        That’s not going to last much longer. Hilltop villages will be abandoned as too difficult to reach & sustain, they have to be self sustaining if they want to remain viable but on a hilltop? unlikely.
        After oil they will want to be near a navigatable river or ocean with good flat land nearby to grow food & wood.
        Your so right about there being no jobs in small towns but that will change, a lot more farmers & farm workers will be needed even in small towns. They will also need many other skilled workers to produce their durable goods.
        There will be very little unemployment in the future IF we have a “future”.

        • xabier says:

          The hill-top villages and towns of Southern Europe originated in the need to be away from the coast and mostly Muslim pirates/slavers; a problem into the early 19th century, until the British and the American navies put an end to the piracy conducted from North Africa.

        • This happens assuming that somehow, the farms can feed the local populations post collapse, using resources at hand. If imports drop way off, the availability of farm equipment disappears. Small boats for navigation also have to be built with local materials. I am not optimistic about making the transition. We currently are geared toward a one-crop approach for farmers, and most of the one crop is for animals.

          • Sheila chambers says:

            Obviously that will have to change as a monoculture is not sustainable.
            Before we had factory farms, farmers grew several crops including wood for fires, fruit trees & nut trees & fodder for their animals in rotation. fodder one year, food crop the next, cover crop, grazing, food crop etc etc etc.
            Those on the hills traded wood or crafts for food or other items, farmers traded their production for what they needed, everyone had a job of some kind wether it was as a blacksmith, wood worker, sheep shearer, weaver, animal raiser & trainer, shop owner etc etc.
            You can still see this today in small, isolated rural villages in the third world, people work until they can’t, the only “retirement benifits” they might have was support from their families.
            “Money” in some form or other served as a portable means of trade, it’s easier to trade using a silver coin than a cow, cord of wood or a heavy bag of grain.

            More people need to stop reading fiction & instead READ more about the real world & how people in other areas of the world live today & in the past, history is a great teacher.

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