Why it (sort of) makes sense for the US to impose tariffs

Nearly everyone wonders, “Why is Donald Trump crazy enough to impose tariffs on imports from other countries? How could this possibly make sense?”

As long as the world economy is growing rapidly, it makes sense for countries to cooperate with each other. With the use of cooperation, scarce resources can become part of supply lines that allow the production of complex goods, such as computers, requiring materials from around the world. The downsides of cooperation include:

(a) The use of more oil to transport goods around the world;

(b) The more rapid exhaustion of resources of all kinds around the world; and

(c) Growing wage disparity as workers from high-wage countries compete more directly with workers from low-wages countries.

These issues can be tolerated as long as the world economy is growing fast enough. As the saying goes, “A rising tide lifts all boats.”

In this post, I will explain what is going wrong and how Donald Trump’s actions fit in with the situation we are facing. Strangely enough, there is a physics aspect to what is happening, even though it is likely that Donald Trump and the voters who elected him would probably not recognize this. In fact, the world economy seems to be on the cusp of a shrinking-back event, with or without the tariffs. Adding tariffs is an indirect way of allowing the US to obtain a better position in the new, shrunken economy, if this is really possible.

The upcoming shrinking-back event is the result of too little energy consumption in relation to total world population. Most researchers have completely missed the possibility that energy limits could manifest themselves as excessive wage disparity. In fact, they have tended to assume that energy limits would manifest themselves as high energy prices, especially for oil.

The world’s networked economy doesn’t work in the simple way that most researchers have assumed. Too much wage disparity tends to lead to low energy prices, rather than high, because of increasing affordability issues. The result is energy prices that are too low for producers, rather than too high for consumers. Producers (such as OPEC nations) willingly cut back on production in an attempt to get prices back up. The resulting shortage can be expected to more closely resemble financial collapse than high prices and a need for rationing. Trump’s tariffs may provide the US a better position, if the world economy should partially collapse.

Let me try to explain some pieces of this story.

1. Energy is needed to power the world economy. This fact has been missed by politicians and most economists. 

Economist Steven Keen recently developed a graphical explanation of the role energy plays in the world economy. In his graphic, he shows that workers need food (an energy product) just as machines need some sort of energy product to operate. In Steve Keen’s words, “Labor without energy is a corpse: capital without energy is a sculpture.”

Figure 1. Graphic by Steven Keen, depicting the role of energy in the economy. Energy in the form of food is necessary for human labor, just as energy (in one of its many forms) is needed for physical transformations that make the activities underlying GDP possible. These physical transformations necessarily lead to both the desired products and multiple types of waste.

In fact, there is a physics reason why energy consumption is needed in the economy. Energy “dissipation” is needed for the physical actions underlying GDP. For example, transportation requires a physical movement of people or objects. This can only happen with the use of energy. Even the use of heat or of electricity requires energy dissipation.

2. China’s huge growth in energy consumption since it joined the World Trade Organization (WTO) in December 2001 is truly amazing. It has changed the world order in a few years.

China’s energy consumption ramped up very quickly after joining the WTO in late 2001. At the same time, the energy consumption of the US and the EU stagnated, as manufacturing moved to China and other Emerging Markets.

Figure 2. Energy Consumption for the United States, China, and European Union, based on data from BP’s 2018 Statistical Review of World Energy.

As the shift in energy consumption occurred, jobs shifted elsewhere. Also, the competition with China and other low-wage countries tended to hold down wages of workers whose jobs could be shifted overseas. When we look at labor force participation rates for the US, we see that these seem to have turned down about the same time that China joined the WTO. This suggests that workers started leaving the workforce about the time competition with China ramped up.

Figure 3. US Labor Force Participation Rate, in chart prepared by the Federal Reserve of St. Louis.

3. China is now facing a problem with Peak Coal. Its level of coal production is barely sustainable because of depletion and low coal prices. 

Figure 4. China energy production by fuel, based on BP Statistical Review of World Energy 2018 data. “Other Ren” means Other Renewables. This includes wind, solar and other renewables, such as wood burned for fuel.

If China is to manufacture goods and services for the world economy as well as its own people, it needs a growing supply of cheap-to-produce energy. China’s largest source of energy is coal. China’s coal production hit a peak in 2013 and has been on a bumpy plateau, or falling, since. The problem has been a combination of (a) a higher cost of coal production, because existing mines are depleting, combined with (b) coal prices that do not rise high enough to make production from these mines profitable.

Of course, if coal prices were to rise higher, China would have a different, but equally serious problem: The cost of finished goods created for the world marketplace would be quite a bit higher, making it difficult to export them profitably. If customers’ wages rose at the same time coal prices rose, there would be no problem. The problem could be described in some sense as growing mining inefficiency because of coal depletion. Unfortunately, the world economy does not reward a shift toward inefficiency.

4. With Peak Coal occurring in China, it makes little sense for the United States, the European Union and others to depend as heavily on China as in the past.

The economy of every country today is built on debt. If the world economy is growing, this debt pile can rise higher and higher. If interest rates can be brought ever lower, this also helps the pile of debt rise higher and higher.

China’s economy also uses increasing debt to sustain its economic growth. If the economy of China should slow down or start shrinking because of energy limits, debt defaults could start overwhelming the system. Uprisings from laid-off workers might become difficult to quell. The situation could easily spiral out of control.

Economies around the world depend on China for many manufactured goods. In fact, for many minerals, China’s usage amounts to over half of the world’s consumption. This arrangement doesn’t really make sense because (a) China cannot really be depended on for the long term because of coal depletion, (b) jobs that pay well in Advanced Economies are being lost to China and other Emerging Markets, and (c) the level of concentration of manufacturing in China puts the world system at risk if China has any kind of adverse shift in its economy.

5. The whole idea of buying fuels from other countries only works as long as there is enough to go around. 

Many people are of the opinion that if there is not enough fuel of a particular kind, fuel prices will rise, and the market will continue to operate normally. There are at least two reasons why this doesn’t make sense:

Reason #1. The issue underlying rising costs of fossil fuels is nearly always depletion. For example, with coal mines, the coal closest to the surface in the thickest seams is extracted first. As this is depleted, deeper coal in thinner seams can also be extracted, but the cost tends to be higher. When depletion takes place, it is nearly always possible to extract more of the given fuel if some combination of more human labor and more technology (powered by energy) is used. Of course, adding labor and/or technology leads to a higher cost of production. 

But the prices of commodities are not determined based on the cost of production; prices are determined in the marketplace. They reflect the quantity of finished goods and services made with these commodities, that consumers (in the aggregate) can afford. Extracting coal or another fuel in what is essentially a less efficient manner doesn’t add to what consumers can afford. The combination of flat prices and higher costs leads to unprofitable producers–precisely China’s problem. Producers tend to cut back on production.

We can see that higher energy prices don’t lead to higher wages by looking at what happened when oil prices rose a few years ago in the US. We see that higher oil prices led to lower average wages because of recession.

Figure 5. Average wages in 2017$ compared to Brent oil price, also in 2017$. Oil prices in 2017 dollars are from BP Statistical Review of World Energy 2018. Average wages are total wages based on BEA data adjusted by the GDP price deflator, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

Reason #2. If we look back at the timing of Peak Coal in the UK and in Germany, it looks very much as if depleting coal supply was one of the causes of both World War I and World War II. Governments know that energy supplies are required to operate their economies. If they cannot get enough energy products internally or through trade, they will fight other countries for access to supplies.

Figure 6. Image by author.

Economists, sitting in their ivory towers, have not stopped to think through the obvious. Their standard supply and demand curve does not work for energy because an adequate supply of cheap energy is needed for both the demand for goods and services (coming from wages workers earn) and the supply of goods and services. Once affordability becomes a problem, because too many people have low wages, the prices of fuels stop rising. It is the fact that prices don’t rise high enough that causes the “peaking” of oil, natural gas, and coal production. Extraction stops, even though there seem to be plenty of resources still available with current technology.

6. A major energy issue today is the fact that China and India have run through their own energy supplies and now need to import energy from outside their countries to supplement domestic supplies.

As shown in Figure 4 (above), China’s coal production stopped rising in 2013, keeping the total amount of energy it produces close to flat. To compensate for this shortfall, China has started to import oil, coal and natural gas. The difference between the thick black line and the top of the “stack” of types of energy produced in China (in Figure 7 below) represents the quantity of fuel that it has needed to import. Clearly, this quantity has been increasing.

Figure 7. China energy production by fuel plus its total energy consumption, based on BP 2018 Statistical Review of World Energy data.

India’s coal supply is not yet decreasing, but it is running into a similar problem. It needs to import more and more energy products from abroad, as its energy consumption (thick black line) rises above its energy production “stack.”

Figure 8. India’s total energy consumption compared to its energy production by type, based on BP 2018 Statistical Review of World Energy. “Other Ren” includes wind, solar, and other commercially traded renewable types of renewable energy, such as geothermal.

7. Worldwide, there is a growing need for imported fuels of many kinds.

Figure 9 shows the imports needed for five major areas of the world. In this analysis, the European Union is treated as a single unit. Thus, in this analysis, the imports it receives are only those from outside the European Union, taken as a whole.

Figure 9. Required energy imports for five major areas of the world, based on the difference of energy consumption and energy production shown in BP’s 2018 Statistical Review of World Energy.

We can see from Figure 9 that the European Union and Japan have been major importers of fuels for a very long time. India and China have only in recent years become energy importers. At the same time, the US is becoming more and more energy sufficient with its own fuel production.

Figure 10 shows the ratio of imported energy to total energy consumption for these five areas.

Figure 10. Percentage of energy imported in 2017 in Japan, India, the EU, China, and the US. Imports calculated as the difference between Total Energy Consumption and Total Energy Production based on data from BP 2018 Statistical Review of World Energy. The European Union is treated as a single unit. Thus, energy imports are those from outside the EU.

The US is clearly in a better position than other countries/groups shown, with a smaller share of energy imported in Figure 10 and a declining trend in imported energy in Figure 9. Japan, the EU and India are all subject to substantial risk if available imports should fall.

8. The ramp up of “clean energy” to date has proven to be a major disappointment. The quantities added are far below what the IEA believes is needed.

Partial confirmation of this statement can be seen by observing the tiny orange “Other Ren” bands on Figures 4, 7, and 8 for China and India, which include wind, solar, and other non-hydroelectric renewables. China is the largest user of wind and solar in the world, yet its use of these devices provides only a tiny portion of its total energy consumption.

We have known since the 1950s that fossil fuel supply would eventually become a problem. Academics, with their focus on making models, have been able to come up with hypotheses regarding what might act as substitutes. But these models tend to miss a lot of things, including the following:

  • Adverse events, such as Fukushima for nuclear.
  • The need for electricity storage and extra long distance transmission lines, as wind and solar usage are ramped up. The cost-benefit analysis is much less favorable with these added.
  • Issues that affect only some installations, such as workarounds to keep long-distance transmission lines from starting fires in dry areas, or the high cost of underground transmission lines.
  • The best sites are taken early.

It is not until the actual experience arrives that we see how these substitutes are working in practice. If we think back, the nuclear promise of producing electricity that was hoped to be “too cheap to meter” hasn’t really panned out. In fact, many Advanced Economies are cutting back on their use of nuclear.

With respect to “renewables,” (including hydroelectric, wind, solar, and others) the amount of new generation added each year seems to have hit a plateau. It may be that the additional need for storage and transmission lines are already slowing the growth of renewables.

Figure 11. IEA Renewable Net Capacity Additions as of May 2019. Source: Chart from India Times.

The IEA has started pointing out that far more energy investment is needed if sustainable development goals are to be met–about 300 GW per year, instead of the current 177 per year in additions, on average, between 2018 and 2030.

9. Donald Trump and his advisors have sensed that the current economic system is not working because of too much wage disparity. If the economic system is destined to break in one way or another, Trump can influence which way the break will occur by the imposition of tariffs.

Trump and his advisors no doubt recognize the importance of a cheap, available energy supply. They also realize that energy is an important enough factor of production to fight over. Furthermore, many past wars have been resource wars. Tariffs are, in some sense, a step toward a resource war.

One of the immediate problems at hand is too much wage disparity. Strange as it may seem, excessive wage disparity can be a sign of inadequate energy supply because in a networked economy, high prices of commodities and low wages of workers are almost “mirror images” of each other. High commodity prices tend to cut off consumption of commodities (such as oil or coal) by prices of finished goods that are too high for consumers.

Excessive wage disparity works in reverse: It sends prices of commodities (such as coal and oil) too low, cutting off production because prices fall too low for producers of these commodities. Production falls because producers cannot make a profit. When wage disparity is very high, a large share of workers have very low wages, leaving them unable to purchase more than a small amount of high-priced goods (such as cars and homes) made with commodities. It is this low “demand” that holds down commodity prices.

Figure 10 shows that wide income disparities were issues both at the time of the Great Depression and in recent years. Commodity prices have been relatively low each of these times. The problems didn’t look like shortages; they looked like gluts because of issues related to lack of affordability.

Figure 12. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.

The US has raised tariffs in the past. One time was immediately before the US Civil War. Tariffs were again raised in 1922 and 1930, when wage disparities were at a high level.

Unfortunately, there is a significant chance that major parts of the world economy will start collapsing, with or without Trump’s tariffs and the trade war, because energy supplies worldwide are not growing sufficiently. In fact, some of these energy supplies are purposely being removed by producers, such as Saudi Arabia, because prices are too low.

By putting tariffs on some goods, Trump is providing a substitute for the missing high oil prices needed to slow the growth of globalization, if the issue of ever-increasing wage disparity is to be solved. The tariffs tend to raise the value of the US dollar relative to other currencies, making the cost of commodities (including fossil fuels) cheaper for US consumers than for other consumers around the world. The tariffs tend to encourage new investment in US production of many types, at the same time that they make investment in other countries, such as China, less appealing.

All of these changes indirectly give the US an advantage if there should be a partial collapse of the world economy. With the benefit of the tariffs, perhaps the partial collapse would leave some combination of countries, including the US and Canada, mostly unaffected. There might be other groups remaining as well. Weak economies, such as Venezuela, Cuba, and Haiti, would likely be pushed aside. Even Europe and Japan would likely have major problems.

Conclusion

Most observers have missed the point that excessive wage and wealth disparity can be a sign of serious energy problems, just as high prices can be a sign of short supply. They have also missed the point that coal supply is very important, just as oil supply is very important.

In the real world, when there is not enough to go around, wars are a definite possibility. A trade war is a somewhat reduced version of a war. Trump and his advisors, whether or not they understand the real situation, seem to be trying to guide the US to as good an outcome as possible, in the current situation of excessive wage disparity.

The underlying issue is likely the Limits to Growth problem modeled in the 1972 book, The Limits to Growth, by Donella Meadows, et al.

Figure 13. 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,” with dotted line added corresponding to where I see the world economy to be in 2019.

As resources become depleted, it becomes increasingly difficult to maintain economic growth. Industrial output per capita (for example, the number of new cars or number of smartphones per 1000 people) starts falling. The 1972 computer simulations did not consider wages or prices, only physical quantities of various items.

Now, as we can see how the limits are playing out in the real world, it appears that the most prominent manifestation of the world’s low resource problem is excessive wage disparity–an issue most people have never considered as being related to shortages of resource supplies. Few people have stopped to think that goods made with energy products are equally unaffordable whether the problem is prices being too high, or wages of most people being too low.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,341 Responses to Why it (sort of) makes sense for the US to impose tariffs

  1. SUPERTRUMP says:

    No reason, because I wanted to…..
    The Dow Is Climbing and Sometimes the Market Just Doesn’t Need a Reason to Rise
    Barrons.com
    Ben Levisohn
    Barrons.comJune 11, 2019
    There’s nothing happening—no news on negotiations with China, no meaningful economic surprises, no big earnings reports—and yet the market is heading higher
    “With little news from any geopolitical or macroeconomic fronts, the bullish bias should remain in place,” writes Konstantinos Anthis, head of research at ADSS.
    We’ll take him at his word.
    All together now..Rate Cut, Rate, Cut, QE, QE, QE….

  2. “The “fastest growing major economy” tag India boasted of till recently may have been based on spurious numbers. The country’s GDP growth between the financial years 2012 and 2017 was overestimated by around 2.5 percentage points, according to Arvind Subramanian, former chief economic advisor (CEA) to prime minister Narendra Modi.”

    https://qz.com/india/1640510/india-gdp-growth-overestimated-says-ex-cea-arvind-subramanian/

    • “[India’s] top automakers — Maruti Suzuki, Honda Cars, Mahindra, Hyundai, and Nissan among others have applied brakes on their production for some days in order to clear the piling inventory. “There has been demand by the dealers across brands in the country to reduce the production as the sales are not happening,” an industry source told DH.

      “Even as many of the auto majors officially declined any plans to curb production, yet a regulatory filing by the country’s largest automaker — Maruti Suzuki — revealed a drop of 18.9% in its production during the month of May.”

      https://www.deccanherald.com/business/business-news/carmakers-hit-brakes-as-unsold-inventory-at-rs-35k-cr-739427.html

    • 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.
      Gail Tverberg says:

      India’s growth rate is overestimated according to Modi. Almost everyone says China’s growth rate has been overestimated.

      The agencies that calculate world GDP growth seem to take whatever ridiculous numbers they have been given, and aggregate them together. To make matters worse, in the PPP world GDP estimates that are always publicized give disproportionate weight to China, India and other “Emerging Markets.”

  3. “European banks have transferred 21.4 billion euros ($24.2 billion) in revenues to the European Central Bank (ECB) in the five years since negative interest rates were introduced… The negative rates were intended to discourage banks from parking cash with the ECB rather than lending it out or investing it.”

    https://www.cnbc.com/2019/06/10/european-banks-have-paid-over-20-billion-euros-to-the-ecb-since-negative-interest-rates.html

    • “The next time a recession harkens, the Fed might consider being more democratic — not just lend money cheaply to banks but rather give it away to ordinary working folks. As the Fed would have to account for that money on its balance sheet, that would require the Treasury to place on deposit securities of equal value.”

      https://www.marketwatch.com/story/the-next-time-the-economy-tanks-the-fed-should-give-people-not-banks-free-money-2019-06-10

      • “The Reserve Bank of Australia is approaching the limits of interest rate cuts, so financial market attention is turning to the possibility of it resorting to an unconventional stimulus known as quantitative easing. Undoubtedly, this would be an extraordinary step for the RBA.”

        https://www.afr.com/news/economy/monetary-policy/rba-has-extreme-stimulus-measures-on-standby-20190611-p51wf9

        • 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.
          Gail Tverberg says:

          QE = A way to reduce interest rates further, especially long term interest rates.

    • 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.
      Gail Tverberg says:

      Negative interest rates indirectly reduce lending, if they reduce bank’s profitability. The lack of debt growth in the EU is part of what has been holding back EU and world economic growth. Thus, negative interest rates contribute to low commodity prices.

      • I can’t recall where I read about it but I rather like the idea of helicopter money for the masses that comes with an expiration date and a mandate that it must be spent into the ‘real’ economy rather than used to pay down debt. It’d be like getting one last round of drinks on the house.

        • 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.
          Gail Tverberg says:

          The checks that the US issued in 2008 seemed to be spent partly on goods from China, if I recall correctly. That would be goods in the real economy, just not the preferred part of the real economy. Some of it was, of course, spent on paying down debt.

  4. “China’s imports of crude oil stumbled in May, and while the loss of Iranian cargoes offers a convenient explanation, there are other reasons to be cautious over the strength of demand in the world’s biggest oil importer.”

    https://in.reuters.com/article/column-russell-crude-china/column-chinas-oil-import-slump-is-more-than-just-the-loss-of-iranian-crude-russell-idINL4N23I1KA

    • “Oil prices stabilized on Tuesday on expectations that producer group OPEC and its allies will keep withholding supply to prevent prices from tumbling amid a broad economic slowdown which has started eating away at fuel demand growth.”

      https://www.cnbc.com/2019/06/11/oil-market-opec-supply-cuts-economic-slowdown-in-focus.html

      • “Less than two months ago, gasoline prices were headed for $3 a gallon. Today they’re headed for $2 a gallon…

        “U.S. frackers haven’t turned a profit in 10 years, and investors have not only been putting pressure on them to show them a return on their investments, but have largely shut off the flow of new investment capital until they do. Last year oil companies raised about $22 billion from both equity and debt financing, less than half what they raised in 2017 and less than a third of what they raised just five years ago.

        “More than 170 small fracking companies weren’t able to survive and declared bankruptcy last year. Another eight small fracking companies have cratered so far this year. And if oil prices continue to slide — crude oil hit $66 a barrel less than two months ago but now trades at $54 a barrel — lack of investors’ funds will be the least of their worries. Survival will be their top priority. Those companies going bankrupt last year left investors holding the bag on nearly $100 billion, and new investors aren’t interested in repeating the experience.”

        https://www.thenewamerican.com/tech/energy/item/32559-as-oil-and-gas-prices-drop-frackers-declare-bankruptcy

        • 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.
          Gail Tverberg says:

          Frackers seem to be putting their “Drilled but Uncomplete” wells into operation, rather than drilling new wells. This temporarily holds up oil production, but causes it to fall more steeply later. OPEC showed this chart in its last report on the oil market.

          https://gailtheactuary.files.wordpress.com/2019/05/us-well-activities-and-ducs-through-april-2019-opec.png

          Notice that the DUC well count is shown on the right hand size. There are many months worth of previously drilled wells in inventory.

          Cutting way back on new well drilling cuts revenue for the companies that specialize in this.

  5. SuperTramp says:

    This relates to my last post….this from the site Automic Earth,…..

    The top 1% of U.S. households are holding a record $303.9 billion of cash, a quantum leap from the under $15 billion they held just before the financial crisis.”
    • Too Much Money -And Too Few Places To Invest It- (Axios)
    A truly bizarre trend is having an impact on the economy — wealthy people and corporations have so much money they literally don’t know what to do with it. Why it matters: At a time when growing income inequality is fueling voter discontent and underpinning an array of social movements, the top 1% of earners and big companies are holding record levels of unused cash. The big picture: U.S. companies raked in a record $2.3 trillion in corporate profits last year, while the country’s total wealth increased by $6 trillion to $98.2 trillion (40% of which went to those with wealth over $100,000). So, where is all the money going?
    The IMF notes large companies around the world are overwhelmingly and uniformly choosing not to reinvest much of it into their businesses…
    Between the lines: These factors, combined with legislative policies that have consistently favored business owners over workers, eroded unions and reduced employees ability to demand higher wages.

    The Tax Cut and Jobs Act — i.e., the Trump tax cut —exacerbated these issues, slashing the share of U.S. taxes that companies paid to its lowest level in at least half a century and provided companies even more capital for buybacks, dividends and executive compensation.
    “Perhaps the fallacy of the tax plan to begin with was companies were not starved for capital coming into this,” Mark Hackett, chief of investment research at Nationwide, tells Axios. “They were starved for growth opportunities.

    https://www.axios.com/money-companies-investors-assets-buybacks-dividends-f0a4d79b-bfa7-4205-9d27-f09b50266307.html

    What can possibly happen here!? Maybe I should go out and invest in artwork, like obtaining a nice sculpture of a stainless steel Bunny for 90 million dollars!
    Boy, the problems of the very very rich.

    • 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.
      Gail Tverberg says:

      “They were starved for growth opportunities.” I think that this is the big issue. It is difficult to make profitable investments.

  6. Dan says:

    https://getyarn.io/yarn-clip/227a90f6-ab40-4b4e-8011-b8cd9fa238a2

    After half a decade of lower spending on new projects, oil production growth was supposed to slow to a trickle just as demand was supercharged by a once-in-a-generation shake up in the shipping fuel market. Many market commentators predicted that if $100 a barrel-oil was going to make a come back, it would happen in 2020.

    S&P Global Platts, the owner of what was previously named PIRA Energy consultants, put the surplus next year at around 400,000 barrels a day in a report to clients in May. The Energy Information Administration, the statistical arm of the U.S. Department of Energy, sees a 100,000 barrel-a-day excess. And Energy Aspects, another influential consultant popular with hedge funds and big trading houses, sees a “large” stock-build of 500,000 barrels a day. IHS Markit expects a total surplus of 800,000 barrels a day next year.

    The surpluses, however, mask notable differences within the petroleum market, with most consultants anticipating a larger overhang in refined products than in crude.

    Although the Paris-based IEA hasn’t yet published its first detailed look into 2020, it offered some glimpses of its thinking earlier this year when it published a 5-year outlook from 2019 to 2024. In that report, it forecast oil demand next year at 102 million barrels a day, and production from non-OPEC countries plus condensates from OPEC at 71.9 million barrels. That, effectively, will leave a gap for OPEC crude to fill of just 30.1 million barrels, close to the cartel’s current production.

    https://www.msn.com/en-us/money/markets/bulls-beware-the-2020-oil-market-is-quickly-turning-ugly/ar-AACC99h?li=BBnbfcN

    • worldofhanumanotg
      worldofhanumanotg says:

      Thanks, seems as yet another ominous sign of brief false calm before ~2025 then onward rodeo marked with real shortages, bankruptcies and general unobtanium panicky mentality spreading over JITs..

      • Xabier says:

        Yes, that’s pretty much how it seems to be shaping up, the writing is on the wall for all to see if they take time to inform themselves. We’ve enjoyed a reprieve of a decade, and most of us let it slip past without full appreciation and gratitude.

        Although we know it’s only plate, not solid metal, these are truly the Golden Years at the end of the Age of Abundance; and one should enjoy them to the utmost – while trying to toughen up mentally and physically to prepare as best as possible for what is to come and face it with a calm soul.

        The believers in Real Socialism, Real Capitalism, the Green New Deal, The Rapture, etc, are all going to be gravely disappointed and waste this interval in useless and deluded efforts to bring about their infantile dreams; but we know what the reality is likely to be, and can dispose of our time and emotions wisely.

  7. “The CFR Japan physical naphtha crack against front-month August ICE Brent crude slumped to a near 11-year low on the back of supply overhang and cracker outages…

    “According to market sources, the Asian naphtha market sagged under the weight of a supply glut as spot demand remained sluggish.”

    https://www.spglobal.com/platts/en/market-insights/latest-news/oil/061019-cfr-japan-physical-naphtha-crack-lowest-in-over-a-decade-on-bearish-fundamentals

    • 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.
      Gail Tverberg says:

      In Canada, naphtha is used as a diluent for the bitumen extracted in Alberta. It makes the mixture flow well, and can be extracted when it is no longer needed.

      I can see, though that low prices for one part of the oil barrel can lead to low prices nearby. LNG has been trading at low prices recently. To the extent that LNG can replace naphtha for some uses, it will tend to bring the price down. They are both quite “light” (short chain) hydrocarbons.

      • hkeithhenson
        hkeithhenson says:

        “(short chain)” Naphtha is 5-7 carbon atoms. Natural gas is only a single carbon atom.

        • 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.
          Gail Tverberg says:

          You are right. What I said doesn’t make much sense.

          The article discusses substitution by LPG, rather than LNG. Somewhere in the back of my mind, I was thinking Natural Gas Liquids, which is of course different yet (but closer to Naphtha). It is the longer chain molecules, removed from the mix of natural gases extracted.

          LPG is Liquid Petroleum Gas. This is propane with 3 carbon molecules, or butane, with 4 carbon molecules, according to one source.

          The number of acronyms is very high in this business.

          • hkeithhenson
            hkeithhenson says:

            “acronyms”

            No kidding. You almost need to be a chemical engineer specializing in oil refining.

            I spent several years in the late 1970s and early 1980s intermittently working here: https://en.wikipedia.org/wiki/Houston_Refining I was there when they quit adding lead to gasoline and tore out the delivery rail tracks.

            One thing that is not well known is the difference between winter and summer gasoline. Winter gasoline can have up to 40% butane in it.

            • 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.
              Gail Tverberg says:

              Increases the quantity and butane is cheap! No wonder winter gasoline is cheaper. Butane tends to evaporate in summer. Robert Rapier would write about this subject from time to time.

          • worldofhanumanotg
            worldofhanumanotg says:

            Understandable, I guess LPG is more of European, Asian and third world thing.
            Not that much popular thing in the NAmerica..

            • 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.
              Gail Tverberg says:

              I think it is popular for cooking in India.

  8. SuperTramp says:

    Hmmm.something don’t add up here? Imagine that.. sarcasm
    Lu Wang
    BloombergJune 10, 2019, 6:11 AM EDT
    If Supply and Demand Set Stock Prices, U.S. Market Has a Problem
    (Bloomberg) — The U.S. stock market has been staging a vanishing act for years. Which is to say, it’s gotten smaller, due to a combination of takeovers, buybacks and fewer new listings. Investors don’t mind this. They often cite the contraction as part of a bull case premised on scarcity.
    Something is happening to tilt the calculus against them.
    While American firms almost always repurchase way more stock than they sell via offerings, May was different, as deals by Uber Technologies Inc. and Lyft Inc. glutted the market with new supply.
    All told, U.S. companies announced plans to sell $43 billion of stock via initial and secondary offerings last month, roughly matching the amount they said they would remove via buybacks and takeovers. Only twice in the past six years has issuance exceeded supply, according to data compiled by TrimTabs Investment Research. For context, about $4.30 had been bought back for every $1 raised, on average, over the past year.
    In a world where a trade war rages, bond yields are falling and every Federal Reserve utterance is combed for its interest-rate implications, it’s easy to dismiss swelling share issuance as a mortal threat to the rally. Not everyone sees it that way. The shift in the market’s supply and demand dynamic plays into a host of late-cycle anxieties in which companies pressure buyers with last-ditch efforts to cash in on stretched valuations before they deflate.
    “Companies are looking at this as a great time to unload shares rather than to buy shares,” said Winston Chua, an analyst with TrimTabs. “You’re removing the buffer from the market that’d normally prevent more dramatic declines,” he said. “That’s usually a bad sign.”

    [I cut back the length of the quote. We aren’t supposed to copy whole copyrighted articles. – Gail ]

    • 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.
      Gail Tverberg says:

      I hadn’t thought about “supply of stock” being a variable in the prices of stocks in general. Supply of debt (to buy on margin) does seem to be a variable in the prices, though.

  9. Grant says:

    The UK tries once again to lead the global battle to save the planet from the proposed Climate Emergency.

    https://www.gov.uk/government/news/new-laws-to-guarantee-payment-for-solar-homes-providing-excess-electricity

    Next up – a Unicorn pet for every home with cheap loans for converting a room in the house into a stable and a guaranteed price for every tonne of dirty chemical fertiliser replaced by the Unicorn’s clean, green manure.

    • 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.
      Gail Tverberg says:

      Solar homes in the UK–give us a break! The UK must be in pretty desperate circumstances.

    • HDUK says:

      Ohh dear, looks like the lights will be going out, I had better invest in bees. Current supply from wind and solar 10.1 GW at 5.04pm UK time, total use 37.2GW AND that’s without a fleet of electric cars etc and I think we are banning gas home boilers soon for new homes and wood burners because they pollute too much. I despair. On the plus side our local cement factory has become a recycling plant, it is now burning all kinds of rubbish inc tyres and recycling the energy into cement. I think there will be a lot more of this.
      http://clivebest.com/rgraph/Wind.html

      • 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.
        Gail Tverberg says:

        Until the supply of tires runs out.

        • Lastcall says:

          If it tires of tyres maybe the deceased will be turned into elrctrons; are we a net energy source when cremated?

          • doomphd – Honolulu – I really hold a doctor of philosophy (phd) in geological sciences and study pretty doomy topics like giant landslides, volcanic eruptions and megatsunamis.
            doomphd says:

            I attended a friend of a friend’s cremation ceremony, and there appeared to be a lot of natural gas being consumed to quickly convert his body into a tray of ash. i think the muslims have the correct idea of a sack in place of an expensive coffin, to make it easier to compost the remains and return the components to the earth.

      • Xabier says:

        There will be more of that in the UK, certainly.

        The proud owners of ‘luxury’ new homes in a big development near here have been told that they will be heated by the burning of waste in a power plant on the very edge of the development.

        Not what they planned for in moving to a green-field development I’m sure! The definition of luxury is changing, it seems.

        Add to that 5G to fry our brains even more……

        • Tsubion says:

          Things do not appear to be getting better.

          It’s almost as if we’re being coralled into prison like environments for “our own good.”

  10. “Ballooning healthcare costs, labour shortages and financial services for the elderly: for the first time Sunday, the world’s top policymakers are tackling economic issues relating to ageing and shrinking birthrates.”

    https://www.france24.com/en/20190609-historic-first-g20-weighs-ageing-global-risk

    • 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.
      Gail Tverberg says:

      I don’t think that there are real ways to tackle the issue of rising costs for the elderly other than (1) cut benefits and (2) raise taxes, either of which reduces aggregate demand for goods and services. Commodity prices can be expected to fall; debt can be expected to default. In my view, this whole process simply leads to collapse.

      The other alternative is add more debt, and try to keep the system going a little longer. Maybe add some more immigrants, to keep the younger population up.

      • Tsubion says:

        Do you think adding more immigrants has worked for europe so far?

        Also… (3) identify and deal with the root cause of problems instead of throwing more and more money at temporary superficial patches that inevitably leads to more and more problems and more and more patches because somebody somewhere profits from not dealiing with the root cause of problems.

        • Tsubion says:

          At some point, our profit based economy breaks down because problems are not dealt with as they should be in the most efficient way possible.

          Instead of wise choices being made we see boardrooms full of moneymen, women and non-binary executives brainstorming how to extract as much profit from a scam as possible.

          We see China building ghost cities and pouring more concrete than ever before when many chinese are quite happy where they are.

          70% of healthcare costs would evaporate if people just eat a healthy diet and according to their needs. Reduce smoking and alchohol intake and you’re half way there. Heart disease and cancer would plummet – the two top healthcare drains on funds.

          How do you get people to change their ways? Education only goes so far so an incentives program needs to be implemented. Cash rewards, a points system, anything that motivates people to change their habits.

          Otherwise you have a shrinking healthy worker population supporting an increasingly unhealthy, lazy, very costly population. Unsustainable.

          Maybe China has the right idea after all with their good citizen points system. What’s the alternative?

          • worldofhanumanotg
            worldofhanumanotg says:

            Yes, this overall theme seems to resonate through ages, simply the best form of gov to be found is moderate authoritarianism, keeping various extreme factions in check (e.g. both chaos brewing libertines as well as hard conservatives, plus obviously trimming and weeding out corruption in the epicenter in your own support base). However, keeping such delicate balance is a mastery class and usually did not last very long.. but when it ~worked it was heavenly..

            ps I’m not implying-saying contemporary China is the model case for it though!

          • Artleads says:

            FW has me now looking at the whole system…which I would think has to be intensely and lovingly observed if there’s a chance to change it. That helps me not to get upset, for if you can point out how the system is working (or not), and not get too personal about it, people tend to listen better. (I generally meet hell on the local blog when I discuss OFW, but recently I find if I stick to the point, some of the attacks get defused.

      • Dennis L. says:

        Hmmm, unfortunately for us seniors, there is a third way. A politically acceptable way is to require multiple consultations and reviews for life saving treatments after a given age, or even wonderful procedures that enhance life quality such as hips, knees, etc.
        For all people complain, Medicare with a good supplemental program and drug program for those who need it is wonderful, our children are getting the short end of the stick.
        Dennis L.

        • Dan says:

          I’m definitely in agreement that this thing is going to end in collapse. What a freak show it is becoming (as if the last 10 years has been normal). The weakest jobs report in nearly 10 years and the feds acknowledging that the “greatest economy ever” cannot sustain 2.5% interest rates. Trade wars, and our leader continues to flip and flop and tweet, the congress too cow towed to speak up and deranged to focus on anything besides transsexuals and coddling illegal invaders. Markets are up – pure madness.
          Yes it is going to end, but we need BAU to persist.

          https://www.msn.com/en-us/sports/mma/conor-mcgregor-offers-to-host-fight-between-justin-bieber-and-tom-cruise/ar-AACD535?li=BBnb7Kz

          Yes, the Beeebs has challenged Tom Cruise to a fight. It should be a fight to the death and this will lift my spirits immensely. Of course the smart money is on Cruise. Having never even heard a Justin Beiber song in my life I know enough to hate him – look at him. Maybe we can have seniors in need of medical care to fight to the death on live national T.V. (they are going to die anyway). It may even generate some much needed revenue and it gets rid of old people in an honorable and entertaining fashion (a twofer).
          So we need BAU to continue for the insanity to continue. We are almost there, almost to the point where nearly everyone will welcome the sweet release of collapse.

          • Grant says:

            For some reason as I read Dan’s message I recalled the very old National Lampoon audio skit about Monolithic Oil. Although I think the message probably comes from several different political directions these days.

            Search for ‘National Lampoon Monolithic Oil’ and you should see a YouTube link pop up quickly, complete with a picture of the album cover.

          • Tsubion says:

            I’m starting to view the human race as an old friend that’s lost her marbles and is now running around naked down the street screaming obscenities at everyone and pooping in every corner.

            What can you do? The feeling of helplessness is overwhelming. The patient is too far gone. There is no going back Bob. You can’t put the genie back in the bottle. The demons have been unleashed and they have infected the once noble creature known as human beings.

            We put suffering animals down with a bullet to the head because it becomes unbearable to simply allow nature to take its course. A needle is preferable now but the point is to make it quick.

            The promoters of tolerance and progress have become the most insufferably intolerant people ever known and the backlash is arriving right on cue.

            To make things more interesting, as you suggest, you only have to take away all the medication that people are currently using to hold back the demons. Then the games can truly begin. The streets will be filled with rampaging agents of madness, climbing the walls and pooping on every doorstep.

            Then it’s open season and no one will be arrested for their actions.

      • Sheila chambers – Brookings, Oregon USA – I'm a lover of SCIENCE, TRUTH & I can't stand RELIGION as it's just lies used to frighten & control us. I love wildlife, what there is left of it, photography, learning & of course the internet. I'm currently a 78yo female so I can't get around as much as in the past, I have no family & live alone but I do have a loaded gun for self protection which I needed last winter when a home invader was in my home, he was lucky I didn't shoot him. He was too STUPID to be worth the lead & I also didn't want to have to clean up the mess afterwards!
        Sheila chambers says:

        Adding more immigrants leads to MORE DEMAND for housing, roads, fuel, health care, food, water, trash collection, transportation, electricity, more JOB demand & higher taxes.
        I think that “fix” leads to more problems than it solves & then what do you do when THEY get OLD?
        Import even more people?
        Perhaps cutting benifits for those who have plenty & raise taxes on those that have too much.
        What is really NEEDED are FEWER PEOPLE!
        THAT”S the foundation of all our other delemas, HUMAN OVERPOPULATION!
        That’s the BIGGEST “ELEPHANT” in the room that is constantly IGNORED!

        • Grant says:

          If one puts forward that point of view one also needs to be prepared act accordingly.

          So small or no family. No possible reliance on others to care for one in older age or because of infirmity. That’s not to say there will be no care but that one should not rely on it.

          No extended healthcare to keep people alive beyond what is ‘natural’ just because the medics can do it.

          For a reduction process rapid enough to be meaningful in terms of proposal from the ‘green’ brigade it seems to me that there would need to be active reduction rather that waiting a few generations and hoping that numbers may go down (presumably across all parts of the world.)

          So one might have to agree with one’s family who should be on the exit list. Or let the authorities make the decision.

          I can’t imagine many people would vote for that. There might be some resistance.

          Still, that would be a good excuse for a bit of war and destruction which, if half planned in advance, might achieve the objectives anyway.

          All of that decision making is based on forecasts of what MAY happen a generation or three from now. Basically generations that will barely exist if a voluntary birth rate reduction campaign is persuasive and successful from its inception.

          There will be few people around to recognise the success of the campaign.

          What a shame?

          How convincing should such an argument be for it to be morally acceptable to the masses across all cultures?

        • Nope.avi says:

          The importation of immigrants is as ideologically driven as it is economically. I see it as a continuation of post-World War 2 ideal of chipping away at nation-states, and monolithic cultures.so that we don’t succumb to intolerance. The people pushing for more immigration are also pushing for more cultural diversity. They people pushing for more immigration believe that people with a weak or non-existent sense of identity are less likely to persecute others for being different. Basically, a room of strangers are less likely to gang up on any one person.

          There’s also this theory that putting people in close proximity to each other, make them friendly and that hostility is due to people being afraid of the unknown and strange.

        • John Doyle – Seeker of truth in a world of falsehoods
          John Doyle says:

          We humans are a Ponzi scheme. Australia’s growth is testament to high immigration figures. Nothing else is doing well among the usual considerations for the economy’s GDP. I’ve no idea when the penny will drop.

        • DJ says:

          “what do you do when THEY get OLD?”

          Since they don’t produce, but only is a vehicle for debt, it will be game over well before THEY get old.

          • Tsubion says:

            You take busloads of them on a trip to the Grand Canyon and guide them through a door that leads to a precipice on the other side.

            I can’t think of a nicer way to go.

        • Nope.avi says:

          The importation of immigrants is as ideologically driven as it is economically. I see it as a continuation of post-World War 2 ideal of chipping away at nation-states, and monolithic cultures.so that we don’t succumb to intolerance. The people pushing for more immigration are also pushing for more cultural diversity. They people pushing for more immigration believe that people with a weak or non-existent sense of identity are less likely to persecute others for being different. Basically, a room of strangers are less likely to gang up on any one person.

          There’s also this theory that putting people in close proximity to each other, make them friendly and that hostility is due to people being afraid of the unknown and strange.

          • DJ says:

            “Basically, a room of strangers are less likely to gang up on any one person.”

            But what happens when you put a tribe into a room of strangers?

    • “Japan is producing fewer babies than in the 19th century, according to figures that confirm the extreme demographic crisis threatening the country’s economy, industries and welfare system. According to the health, labour and welfare ministry, the population fell to 124.22 million last year, a drop of 444,000 people. Barely 918,000 babies were born, 28,000 fewer than in 2017, and the smallest number since records began in 1899.”

      https://www.thetimes.co.uk/article/falling-population-leaves-japan-fearing-economic-crisis-cx59tcf2r

      • 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.
        Gail Tverberg says:

        Wow!

  11. SuperTramp says:

    Chinamerica….doing just fine

    China says its May trade surplus was $41.65 billion, significantly more than expected
    Yen Nee Lee | @YenNee_Lee
    CNBC.com
    China said on Monday its overall trade surplus in May was $41.65 billion, significantly more than expected.
    Economists polled by Reuters had expected the world’s second largest economy to post an overall trade surplus of $20.5 billion.
    China’s trade surplus with the U.S. rose to $26.89 billion in May from $21.01 billion in April, customs data showed
    Trump threatened that more levies could come — a point reiterated by U.S. Treasury Secretary Steven Mnuchin, who told CNBC the president “is perfectly happy” to increase tariffs on China if his expected meeting with Chinese President Xi Jinping doesn’t go well. Trump said that he’s expected to meet Xi later this month.
    Many analysts expect China to experience a larger economic hit from its ongoing trade war, with data in recent months showing signs of slowing activity. The International Monetary Fund and major banks such as Morgan Stanley recently lowered their growth forecasts for China citing trade concerns.
    But the latest employment data in the U.S. — which showed weaker than expected jobs creation — put the two countries on roughly equal footing, said Johanna Chua, head of Asia economics and market analysis at Citi.
    Chua told CNBC’s “Street Signs” after the latest Chinese data release that the U.S. jobs data may be the first sign that the American economy is getting hit by the escalation in trade tensions

    Seems we are one economy now….

    • 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.
      Gail Tverberg says:

      Yes, we are one economy now. Unfortunately.

  12. “A source close to French President Emmanuel Macron said on Sunday that failing to pay a 39 billion pound ($50 billion) Brexit bill when Britain leaves the European Union would amount to a sovereign debt default…

    “Boris Johnson, the leading candidate to succeed Theresa May as leader of Britain’s Conservative party and therefore its next prime minister, said in a newspaper interview that he would withhold the previously agreed Brexit payment until the EU gave Britain better exit terms.”

    https://www.reuters.com/article/us-britain-eu-johnson-france/uk-not-paying-brexit-bill-would-be-debt-default-french-source-says-idUSKCN1TA0O0

    • “The [UK] economy contracted in April, hit by a plunge in car production. City forecasters predict a 0.1% drop in output compared with March when official data is published tomorrow — a second successive monthly decline as the positive effects of Brexit stockpiling at the start of the year slam into reverse… car production slumped by 45% in April…”

      https://www.thetimes.co.uk/edition/business/car-production-slump-hits-growth-qk9mknz5t

    • Grant says:

      They need the funds.

      Germany is, reportedly, about to consider spending 40Bn to try to make the former East Germany area socially viable as working age population runs to a handful of cities and the coal mining industry is shut down.

      • Grant says:

        Financial Times story link realted to the previos reply.

        https://www.ft.com/content/05baa6ae-86dd-11e9-a028-86cea8523dc2

        • 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.
          Gail Tverberg says:

          The title of this article is, “East Germany on brink of demographic collapse.” You may be able to get the article by typing in the name to the search engine..

          • Grant says:

            Good point Gail.

            Apologies for the non-working link. The article originally came up on random news feed from, I think, Google and I was surprised that I could read it, being the FT.

            I ran a search very generic search to find it again before posting the link and could read that to on a different device. The link is from that ‘find’.

            There must be something complicated go on in the allow/disallow reading settings.

            • 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.
              Gail Tverberg says:

              Searching for a title or first line of text seems to work better than the direct link to an article behind a paywall.

      • Xabier says:

        So, in effect still two economies, West and East.

        The boot of history leaves a deep impression……

  13. “China’s import unexpectedly contracted by -8.5% yoy in May. That’s the large contraction since July 2016, indicating underlying weakness in the economy. Exports did unexpectedly rose 1.1% yoy. But that was likely because of front-loading ahead of new US tariffs. Trade surplus, thus, widened to USD 41.7B. Meanwhile, trade with US continued to deteriorate.”

    https://www.actionforex.com/live-comments/205923-chinas-trade-surplus-widened-on-sharp-contraction-in-imports/

    • “On Friday, the 7th of June 2019, the Central of Chile had unprecedentedly slashed its benchmark interest rate by 50 points to 2.5 percent, as the world’s largest copper producing nation, long-cherished for its bulk of natural resources, had been bracing for a sharp economic slowdown in the wake of a withering Sino-US trade spat.”

      https://www.financial-world.org/news/news/economy/2199/chiles-central-bank-slashes-borrowing-cost-braces-for-global-slowdown/

      • “International Monetary Fund head Christine Lagarde has warned that global growth is under threat from mounting trade tensions and climbing debt levels. She urged the US and China to remove tariffs affecting goods worth hundreds of billions of dollars to “give more certainty and confidence to their economies and to help, not hinder, global growth”.”

        https://www.telegraph.co.uk/business/2019/06/09/trade-war-debt-mountains-threaten-global-economy-warns-imf-boss/

      • 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.
        Gail Tverberg says:

        I see the article says,

        “Chile is the largest copper producer of the world, but its demand had almost entirely been driven by Chinese economy over the last three decades of Chinese expansion.”

        People do not appreciate how important China is for the world’s production of goods and services.

  14. “The elephant in the room that no one wants to acknowledge is that the “unconventional” policies that were introduced to fight a “once in a century” crisis are now the conventional policies of choice to combat the normal fluctuations of the business cycle. But zero percent interest rates and quantitative easing only worked a decade ago because people thought they were temporary. If they knew that the policies were permanent, the dollar may have plummeted and the resulting inflation may well have overwhelmed any benefits the stimulation delivered.

    “But the naïve belief that the Fed could reverse course, unwind its bloated balance sheet and normalize interest rates, kept the game going and kept the dollar strong. Now that the illusion may about to be shattered, the dollar may not survive the next round of enhanced QE and ZIRP.

    “QE4 will have to be larger than the three earlier rounds combined, as the annual Federal budget deficits could exceed 3 trillion. However, while China, Russia, and many emerging market nations were eager buyers of Treasuries during those initial rounds, they may likely be sellers of Treasuries during the next round. That means none of the inflation created to finance QE would be exported. So the big price increases next time may take place in the supermarket rather than the stock market. Americans would finally be forced to deal with the adverse effects of inflation that we have been spared for the past 10 years. It’s not going to be pretty.”

    https://www.fxstreet.com/analysis/the-fed-stops-pretending-201906100556

    • 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.
      Gail Tverberg says:

      Good points! More and more unconventional policies are needed, just to stay level.

    • worldofhanumanotg
      worldofhanumanotg says:

      That has been always a plausible ‘end game’ scenario but I doubt the specific timing-sequencing they offer in the article. I edu-esti-guess it’s more for the ‘GFCv3’ as the dollar regime is chiefly supported not only by gov-cb pillars only but rather via affluent upper classes across the global, incl. factions inside China, Russia, India, .. In order to affect change as to brake the status quo of the legacy system those people have to panic first, and they won’t panic out of just severe recession only. They will change their ways only by witnessing the host entity for the system going down, be it civil unrest (FUSA), major natural disaster, war disproportionate humiliation (e.g. Iran sinking carrier group), energy implosion (alt. oils scam abruptly ending and or mixing lite+heavy oil suddenly impossibility + Gulfie export embargo), etc..

      We are NOT there YET.

  15. Pintada says:

    Maybe everyone that reads OFW also reads Dr. Morgan, so I guess this URL is just for completeness.

    https://surplusenergyeconomics.wordpress.com/2019/06/06/151-the-great-brick-wall-of-china

    • 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.
      Gail Tverberg says:

      Thanks for the link. I haven’t paid much attention to the blog.

      I agree that China is in deep trouble. Morgan misses the point that China is past peak coal. This is a huge problem for the country. In fact, it is a huge problem for the world economy. China has increasingly been living a lie, covered up by more and more debt.

      I am trying to write more on a related topic myself. We depend way too much on China. China provided temporary help in growing the world economy, but that time is past, I am afraid.

      • Ian says:

        I refer you back to my comment on this blog on September 26 last year :

        “Approaching tsunami” of coal plants

        China is building an extra 259 gigawatts of coal plants, increasing capacity by 25%. This is huge, bearing in mind that apparently half the planet’s existing coal plants are in China.

        https://www.theguardian.com/world/2018/sep/26/satellite-images-show-runaway-expansion-of-coal-power-in-china

        • 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.
          Gail Tverberg says:

          I know that they have been upgrading the efficiency of their coal plants. New plants added are in new locations (not in the center of town) and more efficient

          Also, local officials know that they need jobs for their people. Building and power plants in theory adds jobs both for the building process and later. Local officials likely have never considered the possibility that coal won’t really be available to operate the plants. The problem is prices that do not rise high enough for coal producers to be profitable.

          I am sure that China has no intention of running their country on wind and solar. I expect a major reason they are using these devices is because they produced more of them than they could find buyers for elsewhere–at least that is what Chinese news stories were saying about solar. One official got fired for corruption, as I recall–presumably taking bribes to use the devices.

      • Country Joe says:

        China was there when we needed them. Enough of the United Auto Workers and United Steelworkers and United this and International Brotherhood of that. Enough already with this Organized Labor BS. China was right there when we needed to send those jobs overseas and show this so called “working class ” how it really works.
        FAILURE TO COWER….. is the number one crime on our finite planet.

        • 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.
          Gail Tverberg says:

          Europe and Japan were desperately short of energy. The US was in somewhat better shape, but still had energy concerns. The climate change story gave cover for sending jobs overseas to China, where coal was abundant and cheap and labor was abundant and cheap. This certainly did not help union workers. Quite a few found their wage potential lower. Some working in other industries lost their jobs too. Tech support was outsourced (via telephone) to

          But sending jobs to China did keep the economy going for a while. 2001 to 2019 is 18 years. That is quite a while!

          • Xabier says:

            The desperate energy situation in W. Europe isn’t appreciated: plans for ‘renewing’ and ‘rejuvenating’ stagnant economies – eg that of the British Labour party in The Guardian yesterday – rely on increased public borrowing, redistribution and raising taxes on higher incomes to solve all issues and maintain the infrastructure built in the decades of abundance; and, on the Neo-liberal Right, we have the usual stale exhortations to ‘innovate’ and ‘ be dynamic’ to accomplish the same end.

            How all this is meant to work out against the background of the global energy crisis, and a Europe exhausted after two centuries of intensive industrial exploitation of resources is not explained.

            Oh, of course, ‘Green New Deal’ is going to provide abundant energy, I forgot…..problem solved!

            • 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.
              Gail Tverberg says:

              People don’t understand Western Europe’s problem!

          • doomphd – Honolulu – I really hold a doctor of philosophy (phd) in geological sciences and study pretty doomy topics like giant landslides, volcanic eruptions and megatsunamis.
            doomphd says:

            Western Europe needs to tuck it up, stiffen those upper lips, test the wind, smell the espresso, and make lasting friends with the Russians. Russia has vast resources and low population, Western Europe has the opposite. together they could keep most of their culture going for some time, lest they continue to accept MENA refugees.

            • Tsubion says:

              Eurasia should definitely be a thing but I think animosity between ziolondon and post ziomoscow will continue for some time. Unless it’s all a sham and MI6 and Russia’s FIS are actually best buddies and simply acting out their roles in a play.

              The Old World meets The New World is a movie that doesn’t have a happy ending. War is coming and scapegoats and saviors are coming into view as they always have done.

              Someone somewhere will profit from all this of course. At least until the curtain falls.

              Whatever comes next, all the current players will be viewed as horribly incompetent and possibly evil. And I don’t see people falling for a Union of Saintly Elders beyond that point. Trust will most certainly be at its lowest in history.

              And how do you turn things around during and after a collapse unless you have magical cheap to extract energy and resources?

      • Grant says:

        The problem, surely, is that China now entirely relies on the rest of the world and container ships.

        So much so that even when it has managed to dominate the supplies of chemicals that are key (currently) to smart people’s plans for a carbon free future they fear that other sources may upset their strategy and so wish to control those as well. Hence their activity in Africa and anywhere else that their wider , growing expertise, whether ‘bought’ from a western education system or simply copied as part of a catching up exercise after so many lost decades, can be used to influence those who run other countries that have something to offer.

        They can seek the rights to mining and minerals or they can offer to build infrastructure. It doesn’t matter so long as the end result is to keep as many balls in the air as they need to attract notional wealth advantage from external sources.

        Whether or not they wish to do so for political reasons, which they may well do, hardly matters since they MUST do it to keep the economic model running in some form.

        Having most of the developed world reliant on ones output for components may be more important than controlling the supply of larger finished products.

        • 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.
          Gail Tverberg says:

          China indeed absolutely needs to keep demand up, to keep commodity prices high enough to allow continued extraction.

          Part of the problem is that most of the EU, plus Japan, are not going to provide any increased demand. In fact, with the electric car mandate in Europe, they are likely to provide a lot less demand.

          China can go around the world, offering to put in new projects in return for a long term payment plan, that includes interest. The catch is that these projects are increasingly not working out as hoped. When the world is growing rapidly, it is easy to find projects that will have good payback. When the world economy is stagnant or shrinking, adding more capacity is not helpful.

          • Grant says:

            If they can establish a near monopoly of the chemicals required (currently) to both generate and utilise ‘green’ and ‘clean’ electricity for the mandated new ‘electric only’ environment they may not win financially in conventional economic terms but they would be in a better strategic position than most – unless a few nations have managed to cling on to fossil based energy or maybe even nuclear.

            Always assuming some form of survival through transition is possible.

    • John Doyle – Seeker of truth in a world of falsehoods
      John Doyle says:

      More good reading is Yanis Varoufakis’ “Talking to my Daughter” a very readable brief history of Capitalism and the economy. His description, starting from chapter 6 “Haunted Machines” give an opinion about our interaction with machines, much alluded to in AFW. Well worth reading.It’s aimed at his 15 year old daughter so it is very easy to follow.

      • Duncan Idaho says:

        Yep, the Greek Minister of Finance who really got to the EU finance minister.
        A great mind–

        • Grant says:

          A very smart guy.

          Married a wealthy woman, so I read somewhere, allowing him the possibility to indulge whatever whims most appealed to him without too much concern for long term career security or the cost of living.

          Always a good move for a philosopher.

  16. SuperTramp says:

    Human interest story….one step away from the good old days…

    Surgeons opened her skull to remove a cancerous tumor. Instead, they found a tapeworm.
    By Lindsey Bever, The Washington Post
    Doctors diagnosed Palma with neurocysticercosis, a parasitic infection in the brain caused by the tapeworm Taenia solium.

    Bobbi Pritt, director of the Clinical Parasitology Laboratory in the Mayo Clinic’s Department of Laboratory Medicine and Pathology, said Taenia solium is not common in the United States but, when people do become infected, the parasite can present in two different forms. The most common form, she said, is the adult tapeworm, which is ingested from undercooked pork and lives in the gut.
    But there’s another, less common way to get the parasite.
    People who have the adult form shed microscopic eggs in their stool and, if they do not properly wash their hands, they can pass on the tapeworm to others, Pritt said.
    For example, Pritt said, if the person who has the adult tapeworm gets the eggs on his or her hands and then prepares another person’s food, that other person can unknowingly eat the eggs. She said the eggs then travel to the small intestine, hatch into larvae, penetrate the bowel wall and get into the bloodstream, where they can migrate throughout the entire body, including the brain
    Pritt said the adult form is treated with an antiparasitic medication, but treatment for the larval form can be complex and depends on the location and stage of infection.
    https://www.boston.com/news/health/2019/06/08/cancerous-tumor-tapeworm/amp
    Without Modern Medicine this is what the common folk will have to deal with on a daily basis without washing properly.
    Something to look forward to….Oy

    • 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.
      Gail Tverberg says:

      Lives likely shorter. Perhaps much shorter.

  17. John Doyle – Seeker of truth in a world of falsehoods
    John Doyle says:

    A recent bit of news is that the Trump regime has decided to talk with Iran without all the add ons. Apparently what has occurred to the tiny minds in Washington is that Iran has a huge weapon it can use; closing the straits of Hormuz. Thinking goes that if that happened the world oil supply would go over a cliff and the price go up to maybe $200 a barrel, thus strangling world economies.and crashing into a major problem, to put it mildly.

  18. Lastcall says:

    Well here in NZ we have banned opening new areas for offshore oil exploration. So our locally listed explorer is now shifting focus to prospects around Australia. Hows’ that for an own goal.

    As for solar panels etc, their best use is for remote small scale applications; back country huts for lighting/recharging phones/maintaining a shortwave radio presence.
    They also seem to do good work as automatic gate openers to save the horsey set from alighting their SUV’s to open and close gates; the kids won’t do it now cos they are immersed in the tech device of choice or the program being shown on the in-car screens.

    • 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.
      Gail Tverberg says:

      The solar panels are also good for keeping electrical equipment in oil and gas developments operating, when they are far from regular electrical lines. They need backup batteries, of course. There can be a problem with theft, if they are left unattended for long periods of time. I saw them used back in 2008 in Wyoming for this purpose.

      https://gailtheactuary.files.wordpress.com/2013/03/nat_gas_wells_sm.jpg

  19. “Nuclear experts have warned that two Scottish reactors should not be reopened because of cracks that could force both Glasgow and Edinburgh to be evacuated. 

    Earlier this year, worrying footage of almost 400 cracks 2mm-wide at Hunterston B in North Ayrshire were revealed. 

    “Owners EDF Energy and trade union GMB want the reactors put back into service, after they were closed in October 2018. 

    But Dr Ian Fairlie, an independent consultant on radioactivity in the environment, and Dr David Toke, of the University of Aberdeen, are warning against attempts to reopen the reactors.”

    https://www.dailymail.co.uk/news/article-7117817/Experts-warn-Glasgow-Edinburgh-contaminated-radiation.html

    • worldofhanumanotg
      worldofhanumanotg says:

      If this situation develops further that means yet another (fatal) blow for the french industry. So, the only remaining NPP industries keep soldiering on in viable manner would be left in Russia, China*, and South Korea..


      * they run and develop several designs, possibly incl. that by Bill Gates venture, so very theoretically this could one day in the future return to some location within FUSA

    • Rodster says:

      I wonder how many other NPP’s around the world and even in the US have major safety concerns? Yet we keep building more without considering the nuclear waste these power plants generate and the care and commitment that’s required for many hundreds of years before they are no longer a risk.

      • Tsubion says:

        What do you suggest we do?

        • neil says:

          I suspect the alternative is to wear a thick jumper in the dark. Scotland reverting to its default position.

          • Xabier says:

            Jumper? Och man, d’ye mean a plaid? And a nice warm, young, haggis clutched close to the heart for extra heat…..

          • Tsubion says:

            I already wear thermals and thick socks and jumpers five months of the year so I guess I’m on the right track to saving the world.

            • Grant says:

              If you are over 40 the correct solution would be to stop wearing the warm clothing (except in a heatwave] and make a pitch for a hypothermic exit before your health starts to falter slowly putting stress on medical services or you reach the age at which a pension is payable.

              If you are under 40 and still need warm clothing then avoid healthcare at any cost and accept an early checkout when it becomes available.

              That would seem to be the morally correct approach.

            • Tsubion says:

              I’m over 40. But I identify as a 25 year old. So I’m exempt. Thanks for your concern.

        • Grant says:

          Well, if life is going to fall apart by 2030 it won’t matter if people commit to building nuclear because they won’t be operational by then.

          If it all falls apart by 2050 – who will care if they are operational or not?

          • Tsubion says:

            So we should just sit around and wait for the lights to go out?

            • Grant says:

              There is no chance of that. Plenty of people out there see a way to make themselves rich between now and a form of Armageddon that might occur at some time in the future.

              If they are rich enough maybe they can dodge the worst effects of any economic catastrophe. They hope.

              Long term performance bonus is no good to them. Gotta make the gains right now! Let it all crash and burn later.

            • Tsubion says:

              Oh good. That’s a great relief. Thanks for putting my mind to rest. I’ve asked Google to map out the path to the nearest cliff… just in case.

          • 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.
            Gail Tverberg says:

            Seaborg says, “Our Compact Molten Salt Reactor, the CMSR, is safe, significantly smaller, better for the environment, and inexpensive even compared to fossil fuels.”

      • worldofhanumanotg
        worldofhanumanotg says:

        Sorry, this has been explained numerous times a;ready, nuclear fuel is reusable-recyclable. And if you don’t posses the technology there is the -passive- option of long term storage in seismically stable (‘granite mountain’) long term deposit, which most of the major countries either already have or is under construction.

        • 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.
          Gail Tverberg says:

          There is a very significant cost (both energy and human labor) associated with building and maintaining either or both of these options. If a country is running short of funds, they will likely skip them.

        • 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.
          Gail Tverberg says:

          I believe that the cost of recycling spent fuel is higher than the cost of mining new uranium. This was true years ago, and uranium prices have generally been falling, since the uranium price peak in 2008 (with the price peak in oil).

          Most of the recycling of uranium that has been done has been from old nuclear bombs, especially from Russia. In fact, for many years, this was a major part of fuel for nuclear power plants.

          http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/uranium-and-depleted-uranium.aspx

          • worldofhanumanotg
            worldofhanumanotg says:

            As mentioned numerous time before, Russian facilities for recycling spent fuel actually enlarged recently as they will have to work not only with domestic fuel (more reactors) but also exported one as the industry supplies fuel pellets (for VVER reactors) to China/Finland/Hungary/Czech-Slovakia/ few in the Balkans.. These are multi decade deals. Several years ago, the ‘diversification’ attempt of US companies taking over that market ended up in fiasco with unreliable low quality – dangerous fuel pellets..

            Moreover the overhang from dismantled nuclear weapons is gone, it took ~30+ yrs..

            • 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.
              Gail Tverberg says:

              I agree that the overhang of the dismantled nuclear weapons is gone. That agrees with what I have read too. Some people thought that the price of uranium would rise when there was no longer competition from dismantled nuclear weapons, but uranium follows the same price curve as all of the other fuels. It depends on “demand,” not on the cost of extraction/production.

        • Tsubion says:

          Except it’s not mostly stored under mountains.

          Most of the fuel is stored on site in the spent fuel ponds.

          I know you know this but it’s worth repeating. Whatever corners can be cut are ususally cut. When something goes wrong blame the cost cutters.

          At least the windmills and solar panels will just sit there and slowly rust. Not such a big deal.

          • 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.
            Gail Tverberg says:

            Actually, solar panels slowly degrade and leach toxic substances into the water supply.

            https://notrickszone.com/2018/05/23/new-study-solar-module-owners-sitting-on-a-pile-of-hazardous-lead-and-cadmium/

            Wind turbines are more of a problem at the construction end of the project, as far as I know. Also, they disturb marine ecosystems.

            • Tsubion says:

              I guess nothing is really walk away safe. If infrastructure is abandoned and not decommissioned properly then entire areas will become no go zones like the Chernobyl glow in the dark theme park and Fukushima.

              But abandoned factories, bridges, refineries, industrial estates have always been danger zones. We can add solar and wind farms and batteries to the list the more that get built.

              Obviously BAU has to be fully functional for any of these toxic waste dumps to be properly dealt with. There’s so much pollution already with BAU intact. Imagine if there’s a sudden decline in services. Abandonment ends up being the cheapest option in most of these cases.

              I did see the new floating wind farms being contructed off the coast of UK. Seems like another ludicrous endeavour probably for short term profit. Maintenance of the turbines and cables under these conditions must be incredibly costly, even more so than it already is for their land based cousins.

              The turbines I can see from my window are on and off every other week. They’re on a hilltop but there doesn’t appear to be anywhere near favorable wind conditions for them to be profitable. And solar is a total no no where I live. We’re overcast half of the year.

            • Tsubion says:

              Actually… the floating turbines don’t need massive concrete bases so there is that I suppose.

      • Slow Paul says:

        Yeah, well it’s kind of a similar situation with pathogens gaining resistance to antibiotics. Or increasing dependence on the internet and the grid. We are climbing higher and higher up complexity mountain and the way back down will be steep.

    • 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.
      Gail Tverberg says:

      Oh, dear. Reactors do get old. And building new ones has been too expensive and worrisome. Various people have spread the story that wind turbines and solar panels work just as well, but this is not true.

      • Grant says:

        Wind turbines and solar panels also get old.

        If in their possibly 20 to 30 year lives they can generate Xtimes the energy that was the cost of building plus Ytimes the cost of manufacturing the replacement and also cover the cost of in service maintenance AS WELL AS providing plenty of surplus for more general use … I would be surprised.

        • doomphd – Honolulu – I really hold a doctor of philosophy (phd) in geological sciences and study pretty doomy topics like giant landslides, volcanic eruptions and megatsunamis.
          doomphd says:

          ironically, they will go away with the fossil fuels they were meant to replace.

          • Duncan Idaho says:

            Plutonium has a half life of 24,000 years.
            How were things 24,000 years ago?

            • doomphd – Honolulu – I really hold a doctor of philosophy (phd) in geological sciences and study pretty doomy topics like giant landslides, volcanic eruptions and megatsunamis.
              doomphd says:

              humm… the Ice Age megafauna were still roaming around, but our ancestors were getting better at hunting them into extinction.

              i think the movie “Time Machine” hinted at cryptic things that were in forbidden zones. maybe those were the plutonium storage areas. our descendents will have to be so instructed, assuming there are some and that they can still read.

  20. Chrome Mags says:

    https://www.youtube.com/watch?v=XVxxxc8D2jA

    This is a video about the effect of the trade war on certain types of companies. One pricing expose’ they did was on the Iphone. It is assembled in China, so the price of the product gets labeled under China’s exports to the US, however all the parts are sourced from other countries – China only assembles it at $8.46 each. The US makes 68.69 and other countries are also listed for making money on its sale. Apple doesn’t manuf. anything which is partly why they are so profitable.

    There are other examples of how the trade war is hitting the US. Definitely worth watching.

    • 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.
      Gail Tverberg says:

      Thanks! Interesting.

      Regarding iPhones, I think a point could be made that if China is going to become increasingly unstable in the future, there would be great benefit to moving the iPhone assembly somewhere else, say South Korea (which gets its electric power from nuclear, rather than coal, which seems to be past peak in China). This would keep the supply chain intact, even without China’s contribution. Thus, the phones could continue to be made, without China’s contribution.

      If the phones are instead assembled in South Korea, with parts from around the world (except China), it would not seem that tariffs would be a major problem. There wouldn’t be the benefit of bringing the jobs to the US. But perhaps this is not the only point of the tariffs.

      • Sheila chambers – Brookings, Oregon USA – I'm a lover of SCIENCE, TRUTH & I can't stand RELIGION as it's just lies used to frighten & control us. I love wildlife, what there is left of it, photography, learning & of course the internet. I'm currently a 78yo female so I can't get around as much as in the past, I have no family & live alone but I do have a loaded gun for self protection which I needed last winter when a home invader was in my home, he was lucky I didn't shoot him. He was too STUPID to be worth the lead & I also didn't want to have to clean up the mess afterwards!
        Sheila chambers says:

        China controls essential rare earths & other minerals, what’s to stop China from refusing to export those resources to other manufacturing countries like Korea?
        We can’t manufacture high tech electronics here any longer because we allowed US corporations to move manufacturing to China, Mexico, Malaysia, India etc leading to massive unemployment in the USA.
        The US unemployment numbers are fake, you only have to work one hour a week to be counted as ’employed’, they don’t count those forced to work part time when they need full time work, they don’t count those who gave up looking for work, those who’s unemployment has run out & the growing numbers of homeless who are also unemployed but don’t have addresses any longer so their also not counted as “unemployed”.

        Low wage service jobs can’t replace well paying manufacturing jobs with benifits. That’s another reason why so many companies here are going out of business, it’s not just because we are “all” buying online, we simply aren’t buying.
        New cars abandoned by the thousands in empty lots, people driving old wreaks & stop eating out, stop getting their hair ‘done’ etc, for an economy that thrives on consumption, that will lead to recession or depression.

        • Tsubion says:

          That’s what I pretty much see happening everywhere. I’m in Spain and it’s the same story. Employed now includes drug dealers and prostitutes. Anything to bump up the numbers. But it’s all fake.

          The whole world is a house of cards waiting to implode. I personally don’t think it will take as long as some here think it will for a large scale implosion. The whole banking industry is clutching at straws and teetering on the edge. At this point all that is required is a small gust of wind and the whole thing comes crashing down. Then we see reality.

          When much of our economy boils down to people making and serving coffee to each other, what on earth would you expect to be the outcome.

  21. “A new study examines green growth policies as articulated in major reports by the World Bank, the OECD and the UN Environment Programme, and tests the theory against extant empirical evidence and models of the relationship between GDP and both material footprint and CO2 emissions…

    “Their findings show that empirical projections show no absolute decoupling at a global scale, even under highly optimistic conditions.”

    https://phys.org/news/2019-05-dismisses-green-growth-policies-route.html?fbclid=IwAR1Lq1mEJHSE0lSR-Qi4EaHr22O-d-2Gu1xfJtmB6A0kj4C1YjCVOWpf7n4

    • 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.
      Gail Tverberg says:

      The new study is available free at this link. Is Green Growth Possible?

      According to the abstract:

      We conclude that green growth is likely to be a misguided objective, and that policymakers need to look toward alternative strategies.

      • “Billionaire Michael Bloomberg said Thursday he will spend half a billion dollars in the ‘fight of our time’ to move the U.S. away from carbon energy and combat climate change.

        “The former New York mayor and philanthropist said the $500 million investment will go toward launching the Beyond Carbon initiative, which aims to close nearly 250 coal plants throughout the country by 2030 and prevent new ones being built.”

        https://www.dailymail.co.uk/news/article-7114973/Bloomberg-pledges-500m-clean-energy-fight-time.html

        • 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.
          Gail Tverberg says:

          How ridiculous!

          • Grant says:

            Most ridiculous, IMO, is that he is in a position to be able to release that much spending power into the economy.

            Presumably others someway down the food chain have been short changed for years to give him that possibility.

            Of course he is not the only one seeking a cause to raise the flag of the virtue signaller.

            • 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.
              Gail Tverberg says:

              “‘Between robotics and nanotechnology, we could probably clean up the planet significantly, if not totally, in 10 years.” How much would air-conditioning have to increase, just for people to be comfortable in those suits? How much work time would be lost, every time someone needed to remove part of the suit, to handle a normal bodily function?

            • even as a very small kid, when i used to watch westerns—i was always trying to figure out how cowboys managed a 1000 mile trail ride without going to the bathroom once

              Even then I think I was destined for OFW

              Hawking, Musk, et al prove one thing, that being famous doesn’t make you clever

            • Tim Groves – Japan
              Tim Groves says:

              Come to think of it, John Wayne, Clint Eastwood and Steve McQueen always looked a bit constipated.

              Mind you, when Wayne was asked why he was sneaking off into the bushes, he used to reply, “A man’s gotta do what a man’s gotta do.”

      • Country Joe says:

        At this point the Green thing is all confusion and obfuscation. BAU will last until the pension/retirement funds are cleaned out and then it’s The Correction.

        • 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.
          Gail Tverberg says:

          Part of what goes wrong is that governments cannot afford to pay all of their planned contributions to the elderly. These take the form of both monthly pension payments and health care cost support. These are pretty much not funded in advance, so there aren’t “funds to be cleaned out.” The problem is that taxes cannot be raised enough to pay for all of these benefits, especially given everything else that is going wrong with the system.

      • Interesting study. Nonetheless the autors seem to believe in the hope «to find ways to decouple prosperity and development from growth.» «Legislative limits, green taxes, shifts in public investment and working hour-reductions or new social security institutions such as a basic income all have a role to play in such a transition.»

        • 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.
          Gail Tverberg says:

          They wanted to get their study published, I expect. Some “happily ever after” ending may be needed for this purpose.

  22. “The grand central bank experiment of the past 10 years has ended in utter and complete failure. The games of cheap money and constant intervention that have brought you record global debt to the tune of $250 trillion and record wealth inequality are about to embark on a new round of peddling blue meth again.

    “Australia has already cut interest rates, and so has India. The European Central Bank (ECB) is talking about it, and markets are already pricing in multiple Federal Reserve cuts. The new global rate-cutting cycle begins anew before the last one ever ended. Brace yourselves as no one, absolutely no one, can know how this will turn out.

    “We are witnessing a historic unraveling here. Everything every central banker has uttered last year was completely wrong. Every projection they made over the past 10 years has been wrong. No wonder Fed boss Jay Powell wants to toss the dot plot. It’s a public record of failure.”

    https://www.marketwatch.com/story/its-game-over-for-the-fed-as-the-central-banks-credibility-crumbles-2019-06-07?fbclid=IwAR02O-N-7esFjS0_e-ISXlHCNCfcWtXHbk1VTAQC7mQhrttUq8cnHJSPE1k

    • Chrome Mags says:

      That’s because there is no way to fight back a situation in which surplus energy is constantly and incrementally declining. For those not completely understanding that, imagine California trying to fund a completely new aquaduct for runoff water from the Sierra’s to southern cal., or imagine the US trying to pave a whole new countrywide highway system. We’re having trouble just trying maintaining existing infrastructure. That’s like having the money to purchase a very expensive vehicle, then later having trouble coming up with the money to change the tires.

      • The global economy will always self-organise to try to maintain the circa 3% p/a growth rate to which it is adaptive, whether that entails the election of a pro-coal government in Australia, for example, or the obfuscation of legitimate price discovery via increasingly surreal central banking interventions. It is probably psychologically beneficial to be a fatalist in these matters.

        • 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.
          Gail Tverberg says:

          I think “try” is the important word here.

          Once resource limits are hit, the economy will try to find a subset of the total world economy that can continue to grow, even if inefficient portions of the total world economy must be discarded. It will then be only this subset that continues to grow, until it also reaches limits.

      • Xabier says:

        I’ve lost the reference, but a few years back an Institute for engineers in Britain bluntly stated that no new infrastructure should be built, as the existing infrastructure could not possibly be maintained.

        What are politicians and planners doing? Building even more, above all in the ‘growth hubs’ (I live bang in the middle of one) which are meant to deliver national prosperity, spread around by the central government.

        But surely it is logical to expect whole regions of Britain outside the hubs to be left to decay, physically and in terms of commercial and government services provided, which is in fact happening alongside the crazy (and hideously ugly and shoddy) building schemes in the ‘hot’ regions.

        It all has its own momentum, and concrete will be poured and tarmac laid, as everyday life deteriorates for most, until it can’t be anymore: as Sir Harry says below, it’s best to be a fatalist and not entertain naive expectations of a sudden outbreak of wisdom, or even realism.

        • Tim Groves – Japan
          Tim Groves says:

          On a local level here in Japan, I’ve been warning people for 30 years that the uneconomic infrastructure being built now—particularly roads, bridges and tunnels—would be too expensive even to maintain in the future and so it would be smarter to build less and maintain more. At first, nobody could understand what I was saying, but these days it has dawned on most people that new infrastructure eventually ages and has to be repaired. So I am feeling vindicated on this particular issue, although I am often wrong when predicting the future.

          However, these things tend to be decided top-down. Central government lets the local and prefectural levels how much they can spend and provides most of the budget through the miracle of Chihokofuzei (state subsidies to municipalities). My local city gets 80% of its funding from the central government and only raises 20% through local taxes and bonds.

          • 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.
            Gail Tverberg says:

            Japan was one place where we saw little-used roads (and fancy bridges, from island to island), when we visited. High tolls to use the little-used roads, as well.

            China (particularly Inner Mongolia) was another place where we saw little used roads. This was in an area that China had thought would be developed for more coal extraction, but really wasn’t. I believe that the cost of transporting the coal by truck made the total cost of extraction + shipment too high, relative to the cost of imported coal from other places. We traveled from a little-used new airport as well. This was in an area near ghost cities.

            Cuba was another place where we saw little-used roads. I suppose when the state decides when/where to build, and hires people to do the building, overbuilding can be the result–especially if the main reason for the building is to give people jobs. This is a photo I took when my husband and I visited Cuba a few years ago. The people in the area could not really afford cars.

            https://gailtheactuary.files.wordpress.com/2015/05/example-of-road-2.jpg

        • MickN says:

          Xabier -I think that came in an interview on the Today programme- I’m pleased someone else remembers it because for me it was a real “what did he just say moment?” and people think I’m mad when I bring it up. Was it 10 years ago? He was of course completely right. I’d love to find a reference to it but like you I have been unsuccesful- probably deleted from the archives as an inconvenient truth moment.

      • 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.
        Gail Tverberg says:

        It is hard to imagine, today, how much resources went into producing the rich world’s infrastructure. Now we have a hard time with even simple things, like keeping water and sewer lines repaired. They really should be replaced after some point, but we can no longer afford this.

  23. “…just 34 years before D-Day, Britain and Germany were such close trading partners that war between the two was almost unthinkable. World War I happened shortly thereafter, and out of the ashes of that nightmare grew the Nazis and World War II.

    “Today the relevant players are the U.S. and China, seen as so close economically they could never go to actual war. But the current trade conflict could be the start of a long process driving the two countries into separate economic spheres… making armed conflict likelier.”

    https://www.bloomberg.com/opinion/articles/2019-06-06/china-trade-war-d-day-anniversary-s-lessons

    • “China has “tremendous” room to adjust monetary policy if the trade war with the U.S. deepens, People’s Bank of China Governor Yi Gang said. “We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” said Yi in an exclusive interview in Beijing.”

      https://www.bloomberg.com/news/articles/2019-06-07/china-has-lots-of-policy-room-if-trade-war-worsens-yi-gang-says

      • 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.
        Gail Tverberg says:

        Over the years, I have noticed that in some cases, regulators can simply look the other way, if a company seems to be in trouble. Or change laws, in a way that benefits an industry in trouble. The pension industry has been bailed out by changes to the way funding calculations are done. Insurance laws that look permanent get changed.

    • 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.
      Gail Tverberg says:

      Both situations seem to me to be situations of prices not rising high enough to get energy resources that seem to be available, out of the ground. This puts a lid on production, and indirectly raises wage disparity. Countries fight when there is not enough to go around.

      • hkeithhenson
        hkeithhenson says:

        “Countries fight when there is not enough to go around.’

        Overpopulation in relation to resources is not new. It looks like we evolved (by selection of course) a psychological response to looming privation or a bleak future. Among the effects is a rise of xenophobia. In tribal times, the tribe’s warriors synched up for a do or die attack in the neighbors.

        Agriculture made this situation more common since a farming population could grow much faster than hunter-gatherers. Men killed off other men to the point we can see it in genes (Y chromosome) today.

      • Chrome Mags says:

        “Countries fight when there is not enough to go around.”

        Wait until we hit another really hard recession like the one associated with the mortgage meltdown. People won’t be whining about minorities taking their jobs as much as they will point a finger at some other country as the culprit for their difficult lives. That’s when things will really get tense. If there isn’t another big war in our future, someone would have to explain how that happens as this situation decays into the Seneca Cliff abyss. The idea that won’t happen puts way too much faith in people’s willingness to suffer harsh privation, but not blame, then attack.

        Humans are humans. Certain stuff goes with the territory. Given sufficient surplus energy it will get used for growth as fast as possible until something stops it against the will of determined people, (no different than yeast). And when things go wrong, people find someone to blame. What happens just in a family when something goes wrong? They all argue about who is to blame, and once blame is labeled on that individual, that person holds all the blame and some form of punishment is then determined and administered by the person with the most power. Nothing is different on the international stage.

        What’s unfortunate is it’s not anyone’s fault, or it’s everyone’s fault for growing as fast as possible without consideration of what would happen, especially after we were warned about peak oil in 1956 by King Hubbert. He wasn’t right about the exact timing, but certainly was correct it would happen, sooner or later.

        • Xabier says:

          The fall guys to blame for everything going wrong being set up by the propaganda machine are Russia and China.

          And tens, maybe hundreds, of millions are stupid enough to believe it.

          Oh, and Brexiters…

    • Xabier says:

      On the other hand, it might be an attempt by the US long-term planners to gravely weaken China now, so that she can’t possibly contemplate war with the US for a decade or two.

      Just as Germany launched a world war in 1914 so as to crush Russia before she became too powerful as a result of industrialisation, population growth and the decline of the Austrian Empire.

      China has been far too assertive recently, trying to carve out a sphere of influence with development and trade deals, and also expanding her military – above all the navy – and this would be quite logical on the part of the US which will admit of no regional or global challengers.

      The war between Britain and Imperial German was long foreseen and no surprise to anyone, nor is conflict for supremacy between the US and China a novel idea. Russians will also talk about one day having to fight China or concede territory to her.

  24. “Little did anyone know a year back that it would get this bad with missed debt deadlines in India’s credit markets. But twelve months after infrastructure financier IL&FS Group defaulted for the first time in June last year, investor confidence has again been shaken this week by signs that the crisis is spreading among shadow banks.

    “Stock investors to policy makers are taking notice, given the importance of the non-bank financing companies to the nation’s economy.”

    https://economictimes.indiatimes.com/markets/stocks/news/shadow-bank-risk-roars-back-in-india-with-dewan-liquidity-crunch/articleshow/69675188.cms

    • 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.
      Gail Tverberg says:

      IL&FS is the organization that finances essentially governmental type projects of many types – water, roads and energy related. A person would think it should be a governmental agency. If it fails, it would seem like many governmental projects will need to be taken back by the government. Either that, or these projects stop.

      I do not understand bankruptcy law in India. It seems to vary a lot by country. This article indicates that IL&FS is at the mercy of its shareholders. These include Life Insurance Corporation of India, Housing Development Finance Corp, Japan’s Orix Corp and Abu Dhabi Investment Authority.

  25. “Futures markets in the eurozone are flashing the most serious deflation warning since the creation of the single currency, dismissing stimulus measures and dovish rhetoric from the European Central Bank as thin gruel in the face of mounting recession risks.

    “A closely watched gauge of inflation expectations – 5-year/5-year forward swap contracts – crashed to a record low of 1.23pc on Thursday despite pledges from the ECB that it would hold interest rates at deeply negative levels far into 2020…”

    https://www.telegraph.co.uk/business/2019/06/06/deflation-alert-europe-markets-lose-faith-powerless-ecb/

    • “Both German industrial output and exports fell more than expected in April, data showed on Friday… Industrial output declined by 1.9% on the month, data from the Statistics Office showed…

      “Economists had forecast a 0.4% fall. Separate data showed exports dropping by 3.7 percent in April, also the biggest drop since August 2015.”

      https://www.reuters.com/article/us-german-economy/german-industry-output-exports-fall-sharply-in-april-idUSKCN1T80FX

      • 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.
        Gail Tverberg says:

        Ouch!

  26. “Global trade is on course for its worst year since the financial crisis, with only 0.3% growth anticipated in 2019, according to Dutch bank ING.”

    https://www.cnbc.com/2019/06/06/world-trade-is-heading-for-its-worst-year-since-the-crisis-ing-says.html

    • “The reason why the [global manufacturing] slowdown should be a concern for investors is because of the manufacturing sector’s outsized role in the broader U.S. economy.”

      https://safehaven.com/news/Breaking-News/Global-Manufacturing-Slowdown-Is-Bad-News-For-The-Stock-Market.html

      • “AAR Senior Vice President of Policy and Economics John Gray attributed the [US rail] traffic decline to several factors, including flooding in the Midwest that has hindered railroads’ operations and that of their customers for months. “More important is heightened economic uncertainty that’s being made worse by increased trade-related tensions; higher tariffs leading to reductions or disruptions of international trade, and lower industrial output,” said Gray in a press release.”

        https://www.progressiverailroading.com/rail_industry_trends/news/US-rail-traffic-slump-continued-in-May–57748

        • “”Fundamentals are slowing,” Miskin said, adding that even if the United States can come to an agreement with China, Mexico and others on trade, that might not be enough to avoid the inevitable. We’re still late in the cycle,” he said. “Add tariffs and the slowdown accelerates. Take tariffs away and it’s just more gradual.””

          https://edition.cnn.com/2019/06/06/investing/economy-slowdown-recession-signs/index.html

        • 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.
          Gail Tverberg says:

          Peak railroad use also? Trucking seems to be down.

      • 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.
        Gail Tverberg says:

        Yes, manufacturing has a multiplier effect. According to the article,

        The reason why the slowdown should be a concern for investors is because of the manufacturing sector’s outsized role in the broader U.S. economy. In the fourth quarter, manufacturers contributed some $2.38 trillion to the U.S. economy, accounting for nearly 12 percent of gross domestic product (GDP). The sector also has a huge multiplier effect. For every $1 that’s spent in manufacturing, another $1.82 is created, according to the National Association of Manufacturers (NAM).

        Needless to say, this leverage works on the downside, as well as the upside.

  27. hkeithhenson
    hkeithhenson says:

    That’s a long but fascinating read. I have long been interested in Kashagan since the investment scale is similar to power satellites. But it’s also an example of how badly things can go with corruption.

    For more doom and gloom,

    https://news.slashdot.org/story/19/06/05/1554201/new-report-suggests-high-likelihood-of-human-civilization-coming-to-an-end-starting-in-2050

    https://www.vice.com/en_us/article/597kpd/new-report-suggests-high-likelihood-of-human-civilization-coming-to-an-end-in-2050

  28. 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.
    Gail Tverberg says:

    Some of you have followed the oil industry long enough to have read about the enormous oil project Kashagan in Kazakhstan that was started over 20 years ago, and has gone close to nowhere. Its nickname is “Cash Is Gone.” This is a report on what went wrong.

    http://crudeaccountability.org/wp-content/uploads/ENG_Kashagan_report_Final1-1.pdf

    A few pieces of the problem:

    1. Greedy, unknowledgeable leaders of Kazkhstan, who were convinced that it would be possible to make a huge amount of money developing the offshore oil in the Caspian Sea, even though Russia had earlier evaluated the resource and not seen huge potential in it, relative to the cost of development.

    2. Belief that oil prices would only go up, making any oil project a money maker.

    3. Not realizing what a challenge a reservoir that is under high pressure, offshore, and heavily polluted with sulfur and source gas can be.

    4. Paying a large consortium of oil companies on essentially a cost-plus basis, under a Profit Sharing Agreement designed by the IMF. If the project goes well, a country can come out well with this arrangement. It is goes badly, as in this case, the country gets stuck with the losses. PSA participants have no incentive to point out problems early on, or to hold down costs.

  29. SUPERTRAMP says:

    Surprise, surprise…
    The poll found that workers under the age of 50 were significantly more likely to view America’s aging workforce as a negative development when compared with their older counterparts. About 4 in 10 respondents ages 18 to 49 and 44% of the youngest respondents ages 18 to 29 said they consider the trend to be a bad thing for American workers. Just 14% of those age 60 and over said the same
    An aging population, elevated health care costs and lingering financial uncertainty following the Great Recession all are believed to be contributing to America’s steadily graying workforce. Nearly 20% of Americans over the age of 65 were employed or actively looking for work last year, up from less than 12% two decades prior, according to the Bureau of Labor Statistics.
    In anxious times, we look for scapegoats. And old people are a ready scapegoat, especially if you are forced out of having a public presence or are forced (out of a job),” says Ashton Applewhite, a New York-based writer and ageism activist.

    The idea that older workers are keeping jobs away from younger Americans, preventing them from moving up the corporate ladder into higher ranking, higher paying positions, is not a new one. But economists say it doesn’t have much basis in economic reality
    https://news.yahoo.com/poll-younger-workers-not-happy-120050357.html

    Wait till the SHTF…..if you have gray hail Papa, best get some dye to cover it up!
    The younger folks will be kicking us all out the door….

  30. “Training a single AI model can emit as much carbon as five cars
    “Deep learning has a terrible carbon footprint, writes Karen Hao.
    “The impact: AI researchers have long suspected that deep learning has a sizeable environmental impact, but new research quantifies just how bad it is. Training a single common, large AI model can emit over 626,000 pounds of carbon dioxide equivalent.
    “How? Advances in AI require ever larger models on sprawling data sets. This approach is computationally expensive—and highly energy intensive.
    “The significance: It’s colossal, especially when considering the current trends in AI research. Read the full story here. ”
    https://www.technologyreview.com/s/613630/training-a-single-ai-model-can-emit-as-much-carbon-as-five-cars-in-their-lifetimes/?utm_campaign=the_download.unpaid.engagement&utm_source=hs_email&utm_medium=email&utm_content=73419330&_hsenc=p2ANqtz-8y6aWYnPwvF14kZTuyd2RxrgWOeZSSlL43iC-PUYWv_8fCpV4KFuiC9NpHlg4igKjKFTIqAyB3t2A9rNGDDvWSvyL1Kg&_hsmi=73419330

    Note, “and highly energy intensive” — I work in a place (in Fremont, CA, south of Oakland — “Silicon Valley”) where they make equipment that puts 9 billion transistors on a microchip — “energy intensive” it sure is.

    • 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.
      Gail Tverberg says:

      AI is only as good as the modelers who make the model.

      A big problem is not seeing the forest for the trees. It is very easy to “drill down” in data, but much harder to make judgments across multiple, diverse systems. Instead of finding “overall maxima,” analyses tend to find “local maxima.” For example, AI may somehow design the most optimal wind turbine possible, but it still won’t save the world.

      • Denial says:

        Yes or maybe it will; speculating is like sitting outside the barbershop talking about the future in 1950 .

        • in 1950, reasonably intelligent persons could have had that conversation, and wondered if the world had limits to its resources, and could have concluded that there should be definite limits, given that they would have known that the world in which they were conversing was a finite one…

          surely they would have had no clue about when such limits would begin to be hit…

          but I think the data has been discovered and we NOW KNOW about when the energy resource limits will begin to put the brakes on economic progress…

          that time is…

          this decade and the next…

      • hkeithhenson
        hkeithhenson says:

        “AI is only as good as the modelers who make the model.”

        If that were widely seen as reality, then there would be no AI work going on.

        We have examples going far back where computers were able to do thing better or faster. than people. Also, you should not be too concerned about the cost or energy needed to build AIs. Not only should it come down, but the AIs should be able to tell us how to get more energy.

        • Grant says:

          One would have thought that a worthwhile use of AI would be to define the best approach to the complex societal problems related to population, energy use and availability and what is for some reason thought to be the biggest threat to the planet – proposed to be climate change.

          What better challenge could there be?

          Is anyone aware of any activity on the front? Or do we lack the data that AI would require before it would even consider taking on the challenge?

          • beidawei
            beidawei says:

            And then the AI’s conclude that the best way to solve the problem is to kill most of the human population.

            • Grant says:

              Since there seems to be little evidence that any other creature on the planet is likely to be collectively thinking in terms of attempting to control the climate or making extensive use of its energy and resources in deep storage AI might well conclude that the problem only exists for the creatures like those we know as ‘humans’. Thus in the absence of humans creating labels for actions, events and outcomes the problem(s) would be eliminated.

              However that would require the AI support system to have no sense of long term self preservation.

              Perhaps when it looks likely that ants, cockroaches and similar (creatures that have survived in more or less the same form, generation by generation, for an extremely long time) are the most worthy examples of life that should inherit the earth, AI could arrange for the removal of any creatures that are non-essential to their lifestyles and then turn off its own existence.

            • hkeithhenson
              hkeithhenson says:

              “best way to solve the problem”

              That’s possible. But given very advanced technology perhaps other approaches are possible. I wrote about one of them in a story called “The Clinic Seed.”

            • MM says:

              I do not think that the resaerchers that create a strong ai will connet it to the internet or a waepons system. But you never know for employees..
              If an AI yould tell the humans that they should act as to the limits to growth, no one would listen.
              The current world is in a state where knowledge does not lead any advance or as “a guy” says: “more humans won’t solve any problems”

            • Country Joe says:

              Yeah. The Inner Party already did that and it’s in progress.

          • Tim Groves – Japan
            Tim Groves says:

            As far as I understand it, AI doesn’t define things. Human operators do the defining and then AI sets about discovering possible approaches to get us to the defined objectives or destinations.

            • Grant says:

              Tim,
              That’s not AI. That’s modelling.

              The objective of AI, eventually, would be self learning that is very rapid and barely influenced by humans. By that they mean that a human sets the overview for a challenge and AI discovers all of the possible angles and makes recommendations or, in some versions of the objectives proposed for it, takes actions.

              One recent example would be in the area of Chess playing ‘engines’.

              Human programmed rules based software for playing chess has been around more or less since computers were invented. Improving computational speed has made them almost invincible when played by the best chess playing humans and given time to calculate a number of possible options per move.

              Deep Mind took an AI engine it has created, fed it a stack of information about chess rules and previously played games and gave it a few hours to work out how to play chess.

              It was then pitched into a battle, self learning as it went, with the best chess engines currently developed. It won quite comprehensively.

              It was then cleared of the chess data and sent off on some other exercise.

              This is the basis of the concept of self learning that the primary AI developers and proponents seek to develop. To ‘discover’ things that humans or their models driven by extreme computational power are unable to do.

              Humans can create models that are fundamentally flawed but are not able to recognise that fact. AI might improve that – or might result in even more complex calculations with greater flaws. Whether humans would spot the flaws would probably be a matter of chance.

              The future could become ‘very interesting’.

            • Slow Paul says:

              Grant, AI is just a gimmick. It is a computer program trying to solve problems. But it will never ever go on a journey of its own. A human operator must give the “AI” a task and push the start button. A computer cannot start itself, it is not alive, it lacks the will to life that all living things have.

            • hkeithhenson
              hkeithhenson says:

              What you say is more or less true today. But given 25 or 50 years . . . . I think most of these limits will be gone.

            • Grant says:

              Paul,
              It doesn’t really matter what AI is and can or cannot achieve.

              The challenge for humans is to understand its limitations for both development and ability to actually do what those investigating the potential seem to wish it could do.

              We are very capable of ‘making’ stuff that is almost to complex to understand and prone to failure due to some small and insignificant component that fails and makes all of the complex stuff unusable.

              The key to not allowing thinkers and influencers to develop some poor product that people THINK is AI (but isn’t) and then unleash it on the world in an uncontrolled way.

              After all, people are probably far more likely to develop artificial stupidity than artificial intelligence.

            • DJ says:

              What will change in 25-50 years?

              What today passes for AI was solved in the 60s, it just took 50 years for processor capacity to catch up.

        • “… the AIs should be able to tell us how to get more energy.”

          that’s one scenario… and given what intelligent humans know about the world’s finite resources (which are now in the perpetual grip of diminishing returns), that scenario is highly unlikely…

          what is much more likely is that AIs will tell humans that AIs are actually a net loss to economic activity…

          unless they have learned to be liarrs, in which case they will tell humans how great they are and how they will save IC…

          • hkeithhenson
            hkeithhenson says:

            “world’s finite resources”

            I would hope the AIs are not as blind as humans are to the (still finite) but vastly large resource of the solar system.

            • Tim Groves – Japan
              Tim Groves says:

              Not to mention the galaxy beyond… Space, the final frontier, etc., etc.

            • hkeithhenson
              hkeithhenson says:

              “the galaxy beyond”

              That may happen, but it will require either new physics (FTL) or a new kind of discount economics.

            • Tsubion says:

              With my interdimensional portal gun – available soon at your nearest Walmart – I can just pull all the resources I want (and I want a lot) through the wormhole directly into my living room. Thing is where to put all this new stuff?

            • 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.
              Gail Tverberg says:

              Also, the energy required to get the resources from other planets, moons, and the like back to the earth.

            • hkeithhenson
              hkeithhenson says:

              “back to the earth.”

              I would expect that humans will go to the resources rather than the resources move to humans. But it is hard to say. Humans societies could shrink to a few hundred meters to keep the information delay down for uploaded and sped up human emulations.

            • DJ says:

              Today we don’t recycle much because it is not economic. Would it be more economic mining from space than recycling something we don’t recycle today?

            • 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.
              Gail Tverberg says:

              Some of the recycling using 5 to 7 times as much energy as mining new, here on earth. (IIRC, those are the figure I remember for recycling lithium, compared to mining new.) The purpose of recycling can be to prevent pollution.

              The recycling cost needs to be considered a cost of pollution control, in quite a few cases.

              Adding more pollution from outer space would not be helpful.

            • hkeithhenson
              hkeithhenson says:

              “mining from space”

              Difficult question. Given current technology, the only thing I think is worth mining in space is energy. Given the technology behind building 2000 times the area of the Earth in space colonies out in the asteroid belt, different answer.

              I have given a very rough look at mining the gold out of a couple of cubic km of nickel-iron asteroid (1982 DA). Given a large enough bootstrapping factor, the project would make sense.

              The problem is that a great fog bank lies across the future. If technology continues to advance, then AI and nanotechnology should come about. Does anything we would consider human come out of the far side of the “singularity”?

              I have thought about this since Drexler introduced me to nanotechnology and talked to many of the other people who have been thinking about it. I have very little confidence in thoughts about life beyond the singularity. It’s hard enough to get an idea of what humans might do, it’s damn near impossible to predict what AIs or people updated to near god status might do.

            • DJ says:

              “the only thing I think is worth mining in space is energy”
              My thought also.

              Gold being money more than a material would lose value quickly if mined from space. Perhaps to close to zero since you can no longer assume a limit .

          • 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.
            Gail Tverberg says:

            If they have been programmed by humans, they likely will learn to be liars. They will assume infinite growth in all their models, the way climate change models do today.

      • Tsubion says:

        What if you use AI plus a fairly accurate (as possible) model of global energy consumption and economic activity to “design” the most efficient system of energy and resource use and then test it? Will that do?

        Oh… wait a minute… we already have a tried and tested model… it’s called The Real World.

        And that model includes thousands of years of historical experience with data on all kinds of factors including human nature – something that is not usually factored in at the computer model level.

        What a lot of these people don’t get is that yes you can build a bigger better wind turbine or a more efficient solar panel but you can’t secure resources and supply lines as well as you thought you could. Just one line gets blocked and everything relying on it grinds to a halt.

      • Ed – I am interested in energy issues.
        Ed says:

        Currently AIs learn what you teach them. They do not form new ideas and expand thheir understanding YET.

    • Greg Machala says:

      We seem to be reaching peak complexity. It seems the impact of “solutions” creates ever increasing numbers of other problems. To make matters worse, when we add complexity we tend to compartmentalize too much and thus no one sees the bigger picture until it is too late.

      • Tsubion says:

        Good comment. I think the compartmentalisation, hyper specialisation, overcomplexity, is what brings us down. We’ve already shot way past any reasonable level of understanding of what is happening. No individual can wrap their head around everything. Something somewhere is right now undermining the whole system. Gail appears to have a deep understanding of what might go wrong but it might be something else entirely, something noone could forsee. It’s good enough to understand that the current global system is shaking apart at the seams. It won’t be long before we suffer a major rupture and many hopes and dreams (fancy tech) will evaporate like they never existed.

        • Tim Groves – Japan
          Tim Groves says:

          It won’t be long before we suffer a major rupture and many hopes and dreams (fancy tech) will evaporate like they never existed.

          That might be a relief. I found switching over to a smartphone linked to all sorts of e-money systems to be traumatic to say the least. And I’ll be damned if I’m going to sit back and take it when the IoT-linked fridge tells me I’ve already had my daily ration of eggs, butter and beer.

          • Tsubion says:

            The IoT linked fridge will call the police.

          • 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.
            Gail Tverberg says:

            Recent article have said that the smartphones linked to e-money have been sending receipts to the wrong person. This has especially been a problem, when the nature of the visit is sensitive, such as visiting a divorce lawyer or an obstetrician.

    • Grant says:

      No doubt at some point in the future all of this AI investment will be paid for by Bitcoin and similar. Equally energy intensive in what appears to be an eternal and logarithmic way.

      Or is there much misinformation about the concept?

      • Tsubion says:

        Most of our energy goes on heating and cooling and getting from a to b. Lets worry about that first. It’s fun to imagine how info, nano, bio technologies could change the way things operate but in the meantime I see people worrying about whether there will be food in the stores next month and whether they will still have a job.

        • 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.
          Gail Tverberg says:

          A huge piece of our energy consumption is invisible to us. It is the energy used in the industrial processes to make all of the stuff we use every day and to grow and process the food we eat. There is energy used to make the pixels on our computers display in the way they do.

  31. “Global semiconductor sales dropped 14.6% in April from April last year… The three-month moving average in April has plunged 24% from the peak last October, thus continuing the deepest plunge in semiconductor sales since the Financial Crisis…

    “The global decline in demand for smartphones and PCs – both now mature markets – would have been enough to turn chip sales down. But the China trade issues, the frontrunning of tariffs and export controls, the stockpiling of chips, now topped off by actual tariffs and export controls did much of the rest.”

    http://www.marketexpress.in/2019/06/global-semiconductor-sales-plunge-24-from-peak-deepest-plunge-since-financial-crisis-deepest-plunge-ever-heres-why.html

    • “An influential Chinese auto-industry trade group has asked authorities to unleash stimulus measures to counter the sector’s worst slump in a generation.”

      https://www.bloomberg.com/news/articles/2019-06-05/chinese-car-group-calls-for-stimulus-to-revive-auto-sales-slump

      • “New bank loans in China likely picked up modestly in May after slowing the previous month as the central bank tries to spur faster credit growth in the wake of a sharp escalation in the U.S.-Sino trade war. Contrary to market expectations, China’s economy has yet to bottom out despite a flurry of stimulus measures since last year, and Beijing is expected to ease policy further in coming months to bolster business confidence.”

        https://uk.reuters.com/article/uk-china-economy-loans/china-may-bank-lending-seen-up-more-stimulus-expected-as-trade-war-risks-rise-reuters-poll-idUKKCN1T70C5

      • 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.
        Gail Tverberg says:

        There is a limit to what can be done, however. If citizens are already overextended with home loans, how can they afford car loans, too?

        • Xabier says:

          Always calls for ‘stimulus’, as if the economy were a bit tired and old -but willing – and a kind of ‘blue pill’ will do the trick and work a miracle….

          Offering yet more credit to the already over-extended -and nervous seeing all the poor economic data -can’t possibly result in the desired consumption boom.

          Who else feels that we are on the edge of this all falling to pieces now, and rather quickly now?

          Can the facade really be maintained, as it has been since 2008, while, everything behind it is simply rotten?

          • John Doyle – Seeker of truth in a world of falsehoods
            John Doyle says:

            Credit is not the answer. All credit does is force wealth up the ladder to the 1%. The government needs to “Jubilee” the debts, so that when working the people will spend into the community, Otherwise one is just throwing good money after bad.

          • “Who else feels that we are on the edge of this all falling to pieces now, and rather quickly now?”

            I’ve been fooled before. Early 2016 with WTI in the $20’s, the Baltic Dry Index hitting record lows and the Chinese stock market crashing felt very ominous… I will say though that there is more hard evidence this time around that the global economy is going into a tailspin.

          • Artleads says:

            I would have said no. Please excuse the frivolity: Is the blue pill anything like the blue train? https://www.youtube.com/watch?v=UjNmUMbe6Mg

    • 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.
      Gail Tverberg says:

      I expect that even outside semiconductor chips, some of China’s production last year was for the purpose of front running tariffs. For this reason alone, a bit drop should be expected this year, with or without the actual tariffs.

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