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. Harry McGibbs says:

    “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

    • Harry McGibbs says:

      “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

      • Harry McGibbs says:

        “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

      • 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 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.

          • Harry McGibbs says:

            “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

    • 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.

  2. Rodster says:

    Crapper is back on PP and I still think it’s Fast Eddy 😀

    https://www.peakprosperity.com/turd-ferguson-the-highs-in-gold-are-ahead-of-us/#comments

  3. “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.

    • 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 .

        • Davidin100millionbilliontrillionzillionyears says:

          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 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 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 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 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 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.

        • Davidin100millionbilliontrillionzillionyears says:

          “… 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 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 says:

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

            • 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?

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

            • 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?

            • 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 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 .

          • 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.

            • Mark says:

              Lol, yes
              “and you never bother to wonder why
              things are going so well
              you want to know why?”

      • 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 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 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.

          • 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.

        • 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.

  4. 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….

  5. 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.

    • beidawei says:

      The “offshore” problem may be easiest to solve, given that the Caspian Sea has been shrinking.

  6. 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

  7. Harry McGibbs says:

    “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

  8. Harry McGibbs says:

    “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/

  9. Harry McGibbs says:

    “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

    • 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.

  10. Harry McGibbs says:

    “…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

    • Harry McGibbs says:

      “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

      • 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.

    • 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 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.

      • Tsubion says:

        China needs lebensraum.

        Siberia too cold.

        Africa looks good.

        • Xabier says:

          It does, until the machetes come out……

        • hkeithhenson says:

          “Africa looks good.”

          Africa is where we evolved, along with our parasites. With current technology, it is hard to impossible to stay healthy there.

          • Tsubion says:

            I thought we were eradicating all disease as we approach the Singular Rarity?

            Genetics, nanotech? What’s it all for if you can’t stave off a little Ebola?

            • hkeithhenson says:

              “eradicating all disease”

              You have the right idea. It is just that we are not there yet. Neither is it clear how long this will take.

            • Grant says:

              Or even keep the lid on measles.

              Machines don’t suffer from either.

              Just thought that should be mentioned.

            • Tsubion says:

              Latest News… Machine Infections on the Rise

              Machines start reading Our Finite World…

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