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. Tsubion says:

    https://www.reuters.com/article/us-britain-steel/british-steel-risks-collapse-with-25000-jobs-threatened-idUSKCN1SR0N2

    Customer service automation is coming and that’s a much bigger number of employees worldwide.

    Retail automation next and that’s the biggest sector.

    • Tsubion says:

      https://www.zerohedge.com/news/2019-05-21/americas-busiest-port-prepares-full-automation-stay-competitive

      A new wave of investments in automation could stimulate the economy after the next recession. By 2030, automation may eliminate 20% to 25% of current jobs (equivalent to 40 million displaced workers), crushing the bottom 90% of Americans the hardest. Some of these investments include the automation of shipping terminals, reported Bloomberg.

      At Pier 400 in Los Angeles, North America’s largest shipping terminal, about 1,700 diesel vehicles pass through the facility daily. The terminal is managed by APM Terminals, a segment of A.P. Moller-Maersk A/S, is expected to replace diesel and gasoline engines with electric, and use autonomous software to replace the workforce.

      … Not only would the human element be eliminated from the equation, but also 65,000 miles driven by diesel motors would be replaced with electric engines.

      • Where would the electricity come from, by the way? I presume someone would keep paving all of the roads and building electric transmission lines. Also adding recharging stations.

        • Tsubion says:

          I have no idea how all these global corporations intend to provide sufficient electrical energy for all these changes that they expect to make.

          I am assuming that they all have very smart people in high places that know what they are doing and have researched everything sufficiently to make these claims.

          Otherwise, something is very wrong with the whole picture.

          It may be that all of these companies have been promised better batteries etc. and they are all making plans based on these developments. Do you really think that they are all wrong?

          Gail, you don’t need that much oil to maintain roads etc compared to the amount of oil that is burned every day in vehicles. Surely you can understand this? This is a non problem.

          Electric transmission lines don’t require much maintenance once they are built. And maintenenace vehicles would be electric if that’s what you are referring to.

          I am also assuming that all of these corporations intend to make use of whatever energy mix makes sense going forward. I would think that to be obvious. But it looks to be mostly electric. Again, argue with the engineers. They seem to think it’s possible.

          I honestly don’t know who is right or wrong about all of this. I prefer to wait and see how things pan out.

          If nukes are mentioned, then nukes are trashed. Noone wants them.

          If renewables are mentioned, then they are trashed. No way they can work.

          If natural gas is mentioned, then it’s trashed. No way it can replace other sources.

          Coal is dirty but got us this far. Oil is practical but reaching peak.

          What are we supposed to do? Twiddle our thumbs while Rome burns?

          I don’t mind people trying anything and everything to keep things going in any way possible. I commend them and wish them the best.

          • Actually, coal and oil are about equally problems, as far as I can see. The Peak Oil people just talk louder. The whole system seems to go down, pretty much simultaneously, so all the talk of shifting to electric makes no sense to me.

            The problem is wage disparity, and it affects energy supply of all kinds, including both coal and oil.

            There is a lot of very misleading modeling being done in the world.

          • It has been discussed here few months ago, that the whole battery industry is moving into next generation of production model with just fraction of the machines needed per capacity (kWh of storage) produced. This will make production of few millions of EVs per year plus some renewables battery storage possible. That’s happening now. Is there any new leapfrogging on the horizon beyond that like true solid state cheap batteries and such, the answer is perhaps yes (tech lab talk), but given the upcoming investments in retooling the currently available latest generation the production of such promising next gen tech is at least a decade away.. And the ‘best doomer intel’ tells us this sucker is going down in ~2025-35 anyways at least in some core hubs of IC, so that’s likely too bad too late for any meaningful retooling in terms of today’s civilization footprint.

            • Tsubion says:

              Agree. If conditions allowed for tech to do its thing and evolve as it always has done then there wouldn’t be too much of a problem.

              Solid state batteries are about three to five years off but intermediate improvements are fine until then. Cheap mass produced graphene is also likely which helps change the materials space.

              The problem appears to be that our current model of banking and consumption requires consumers to be able to consume beyond basic necessities. This model is unsustainable due to resource depletion and saturation. Once people have enough they don’t tend to want more unless they are filthy rich.

              Population growth has slowed down since the 1970s so I would expect that to continue and become a non issue if everything else could pootle along.

              Everything has reached peak and we are entering stagnation phase. If humans are unable to change the way they live and reorganise their power structure then we will just hit a brick wall and all the fancy new stuff will have the plug literally pulled.

              You could say, we are reaching peak frustration too.

      • Rodster says:

        Eventually all of this automation will make many human jobs redundant What would happen if those good paying UPS or FedEx delivery.jobs were made extinct? Here’s what Ford Motor Company is working on: With all of the forthcoming automation and robotics and drones in the coming decades will there be any jobs left for humans to pay their bills and keep the economy functioning?

        “Ford Is Working on Package-Delivering Robots That Fold Up Inside Self-Driving Cars”
        https://jalopnik.com/ford-is-working-on-package-delivering-robots-that-fold-1834960235

        • Rodster says:

          I agreed with Fast Eddy on most everything except Robotics and AI. That is the real threat going forward.

        • Tsubion says:

          It really makes you wonder what kind of world these people think they’re building. A reduced unemployed unsociable population of recluses that have everything delivered to their front door. If they have a front door.

          The question is what is it we are trying to achieve? And do we really have any choice in the matter? It is evident that a preplanned agenda is unfolding. But why is it unfolding? What does it achieve? Rise of the Machines? Population control? Noe of it really makes any sense.

          At one point people didn’t know what smartphones were and now everyone has one and can’t imagine living without it. People have become addicted to devices and programs. What is the programming attempting to achieve?

          And how are people going to earn a living to afford even the basics if whole swathes of jobs are being automated, offshored, or made obsolete?

          • Rodster says:

            “It really makes you wonder what kind of world these people think they’re building.”

            IMO, I don’t think they care, really. It’s all about corporate profits, patents and selling those ideas to whoever wants to use it. Humans tend to think “short term” because we don’t live very long but that usually and invariably gets one painted into a corner. Elon Musk, Stephan Hawking and others have warned about the grave dangers of “Robotics and Artificial Intelligence. But Man can’t stop there. No, they are now working on General Artificial Intelligence (GAI) which is what humans use and they are developing Super Artificial Intelligence (SAI) where a Robot can learn the entire history of man within a few days. Then it can to develop ways to think for itself which will lead it to seek survival with the end result being able to realize that humans are blocking it from gaining “immortality” so it decides man must be eliminated.

            The Robot “Petman” developed by Google and Boston Dynamics was one example where the Robot Petman began to teach himself how to avoid obstacles. Then the same two companies developed robotic dogs that learned as a team to solve a puzzle.

            If this sounds too much like X-Files, it’s not because that’s what many of the opponents such as Musk and Hawking have been warning us about.

            • All we need to do is figure out how to make all of the machines buy and sell from each other. Humans will be totally unnecessary. But so will food, clothes, homes, and a lot of other things.

            • Rodster says:

              “All we need to do is figure out how to make all of the machines buy and sell from each other.”

              Exactly but those running the BIG companies just see profits and progress without realizing it could lead to the demise of humans !

            • Chrome Mags says:

              They don’t care is right, roadster. There is no consensus about the future.

            • Tsubion says:

              All I know is I can’t do what this guy does…

            • Rodster says:

              “All I know is I can’t do what this guy does…”

              Just wait till ‘THAT GUY’ is packing weapons and has learned Super Artificial Intelligence (SAI) and decides you are a threat to him. It will become like the movie, Terminator 2.

        • Tsubion says:

          I just read the link. That’s one of the problems I thought they wouldn’t be able to solve with home delivery autonomous vehicles.

          Oh well. It appears there’s a solution for everything.

          How would it handle opening gates and doors? Not every property is open at the front.

          How would it handle dogs? Seriously.

          How would it handle stupid kids messing around with it? Kicking, shoving, trapping, tripping, spraying the sensors, etc etc?

          • Slow Paul says:

            Yep, it would be a favorite past time of disenfranchised youth, messing with autonomous units. And since all this automation leads to more of the former via fewer non-elite jobs, it’s a non-starter really.

            There is no grand scheme at work here. It is just that every business unit is looking after ways to increase their profits in the short run. But for every employee a company replaces with a robot, several other companies lose a customer each. It is the tragedy of the commons, just with A.I.

            • Tsubion says:

              Yes. I like that way of seeing it.

              All the individual increases in profit – the profit seekers – are doing their own thing but collectively lead to a paradigm shift which can be observed from the global perspective.

              Like a field of flowers.

              Every individual flower is seeking “profit” and attracting insects without knowledge of the other flowers doing the same. Each in their own little bubble of existence.

              Then the field collectively dies off and there’s nothing left for the insects to harvest and they die off too.

              Still… as the observer… it’s ok to appreciate the field when it’s in full bloom knowing that it may never come back.

  2. Tim says:

    I’ve read some very interesting comments here this morning. It’s really all about entropy. The intelligent people who post here know what’s happening. The gov. and the economy have died, but the reality has not set in for most. How long “they” can delay our fate is the question. There’s a decent chance to survive the wipeout, but it won’t be easy, or inexpensive. Most will perish. It’s just a cycle folks.

  3. Xabier says:

    Don’t worry: the ever-loyal Drogon will pick the – stabbed-in-the-heart – economy up in his gentle claws and carry it off to Volantis, where Kinvara, the Red High Priestess of the God of Light, will revive it, only improved and wiser.

    Quite as likely as Techno-Utopia,or ‘renewed real growth’, or the Green New Deal, or whatever tripe they are trying to sell us (and themselves); so you only have to believe…… 🙂

    • The US stock market has been down about 400 points today, and WTI is a little above 58. Things don’t look to be doing too well!

    • Tsubion says:

      The symbolism is certainly all there in tv shows and recent movies – sometimes blatantly so – if one has their eyes open.

      Game of Thrones – The wheelchair bound end up ruling the world. The male hero cries a lot and is banished to the wilderness. The Big Bad Zombie Threat ends up being a nothing burger that a teenage girl can single handedly eliminate with a few gymnastics.

      The Walking Dead – zombie apocalypse (collapse of BAU and industrial civ) – very accurate in some ways – ends up shifting to medieval fanstasy land. Survivors farm, shoot bows and arrows and ride horses again etc etc. No mention of spent fuel ponds.

      Avengers Endgame – Big Bad Guy Thanos wipes out half of population. Then threatens to wipe out everything and start again. We are saved by quantum time travel blah blah.

      Themes upon themes upon recurring themes. End times. People want it because they believe the messiah will come or return depending which team you back. The more you promote The End the more it becomes a self fulfilling prophecy.

      Dissipation is a biatch!

      • Xabier says:

        How true: the emotionless cripple boy as the best – AI? – ruler; uploaded consciousness, ‘the memory of mankind’……

        It may be that the World Soul knows what is coming to us.

        • Tsubion says:

          Interesting take. AI – all seeing, all knowing boss? Could be, could be.

          To be fair… the other contenders were all a bit pint sized. But that never stopped a tyrant I suppose. In fact it could be the cause of all our problems.

  4. SUPERTRAMP says:

    Tesla taking a bath in the Trade War….
    Bloomberg) — Tesla Inc. dropped 4.4% in U.S. pre-market trading as analysts at Loup Ventures and Morgan Stanley gave increasingly bearish commentary on the U.S. electric-car maker.
    Loup Ventures co-founder Gene Munster wrote in a note that Tesla will probably miss its 2019 delivery target range as sales shrink in China amid a trade war between the two countries. The analyst cut his estimate for Tesla’s full-year global car sales by about 10% to 310,000 vehicles, versus the minimum 360,000-unit target the manufacturer set in March. The shares are poised for their seventh day of losses and are down 27% over the past month.
    “We are lowering our numbers as a precautionary measure related to two unknowns,” including China’s probable imposition of tariffs on Tesla car imports as well as other impediments such as new regulations on sales or a potential consumer boycott of U.S. goods, Munster said. Loup’s pessimism on the import fees is a “minority view,” discounting most investors’ expectation that Tesla will remain exempt because of its investment in a Chinese battery factory, he said.
    Elon best fly to outer space with Bezo and start a New Age of Living with Keith.

  5. Tsubion says:

    https://www.zerohedge.com/news/2019-05-22/rand-corp-how-destroy-russia

    The conclusions of the latest confidential report by the Rand Corporation were recently made public in a « Brief ». They explain how to wage a new Cold War against Russia. Certain recommendations have already been implemented, but this systemic exposure enables us to understand their true objective.

    Force the adversary to expand recklessly in order to unbalance him, and then destroy him. This is not the description of a judo hold, but a plan against Russia elaborated by the Rand Corporation, the most influential think tank in the USA. With a staff of thousands of experts, Rand presents itself as the world’s most reliable source for Intelligence and political analysis for the leaders of the United States and their allies.

    Rand analysts estimate that Russia’s greatest vulnerability is that of its economy, due to its heavy dependency on oil and gas exports. The income from these exports can be reduced by strengthening sanctions and increasing the energy exports of the United States. The goal is to oblige Europe to diminish its importation of Russian natural gas, and replace it by liquefied natural gas transported by sea from other countries.

    This is the future that is planned out for us by the Rand Corporation, the most influential think tank of the Deep State – in other words the underground centre of real power gripped by the economic, financial, and military oligarchies – which determines the strategic choices not only of the USA, but all of the Western world.

    • Yoshua says:

      Europe scewed both the RAND and the U.S.

      We do have sanctions imposed on Russia…but not the ones you expected us to have. We are in energy business with Russia…even tighter than before…after we got the U.S out from Russia through U.S sanctions on Russia.

      The U.S knows though and is about to impose sanctions on Europe over Nord Stream II.

      • Tsubion says:

        Someone is going to lose bigly!

        I can see China imploding. Probably the worst inorganic growth and management possible. EU will fall apart. Russia could dominate if US backs off and manages its own affairs. Requires revolution in america towards common sense solutions.

        Looking forward to watching it all unfold.

        • Xabier says:

          It’s fascinating: much to be reflected upon when pruning the roses….

        • Yoshua says:

          The U.S has no competition. You have the the military force, technology, the multinationals, the banks and the dollar.

          We Europeans will do what ever we can to stay alive…

          Russia is a third world nation…with nukes…

          • Tsubion says:

            And the nukes are not real!!

            Jusk kidding. There’s a lot of that going around online.

            The idea is that nuke missiles don’t actually work. Just a fraud set up to use fear to maintain semblance of world peace.

            There are claims that hiroshima and nagasaki were fire bombed much like dresden and korea.

            Who knows what the truth is.

          • Tsubion says:

            But what is a military force without a constant supply of energy?

            What is an army without a constant supply of food and clean water?

            I’ve read reports that china’s national water supply could be sabotaged.

            https://www.reuters.com/investigates/special-report/huawei-usa-campaign/

            Mike Burgess, the head of the signals directorate, recently explained why the security of fifth generation, or 5G, technology was so important: It will be integral to the communications at the heart of a country’s critical infrastructure – everything from electric power to water supplies to sewage, he said in a March speech at a Sydney research institute.

            • Read this speech from 1957 if you haven’t already. It points out from a military point of view how important energy was considered back in 1957, and how much was known about the issue back then.

              https://ourfiniteworld.com/2007/07/02/speech-from-1957-predicting-peak-oil/

            • Can never figure out why people need speeches from ”experts” to state the obvious

              The battle of Waterloo in 1815 and lasted a day

              The battle of the Somme. in 1915 lasted about 5 months

              Both battles took place in the same region, why the difference in extent?

              The colossal difference in energy availability and input

              I’m amazed that someone has to give a lecture on the critical importance of energy input in warfare

              In ww2, the Germans and Japanese had no indigenous oil, the Americans were awash with the stuff.

              WW2 was decided by who ran out of fuel first.

            • Good point. Also Germans and Japanese were short on coal, as well. It was the coal/oil double problem that was an issue. The US had both coal and oil.

            • the germans had plenty of coal—they turned it into gasoline.
              The South Africans did the same thing later

              but it wasnt enough to fight a sustained war with.

            • Germany’s quantity of coal (at least the black coal) was going downhill pretty badly.

              As I look at the coal production for South Africa, it appears that South Africa has recently reached peak coal. There is lots of coal left; the problem is that the price won’t rise high enough to allow its extraction.

              This is a chart of South African coal production. It is made by CEIC using BP data. I could have plotted the data myself. I note that coal production has not rising for several years and is now lower. We have been seeing lots of reports about how expensive their electricity made from coal is, and how this is a huge problem. This article from March 2019 is headlined, No end in sight for South African power cuts.

            • John Doyle says:

              This election gave of the erswdf stark origin reminder.

    • Xabier says:

      Sounds plausible: just by watching developments over the last few years one could have worked that out as the plan. The drive to humble and fragment the somewhat resurgent Russian Federation is remorseless.

      • Tsubion says:

        Ageed.

        Russia appears to be playing a good game but everyone has an achiles heel and the game is about to get real dirty. Lots of hair pulling and scratching.

    • MM says:

      The new (German) leader of the European people’s Party “Weber” will try to cancel North Stream II when elected. Oh my god, the germans are so brave stupid to the USA.
      https://www.bloomberg.com/news/articles/2019-05-20/russian-oil-sales-to-u-s-on-steroids-amid-venezuela-sanctions

      • Usually pipeline gas is a whole lot cheaper than LNG, especially if the pipeline doesn’t need to go too far. This is why North Stream II would seem to have an advantage. Of course, it may be hard to get the price of US LNG to stay high enough for exporters to make a profit.

  6. Dennis L says:

    Any time someone gets this excited it would seem you are winning.
    https://www.zerohedge.com/news/2019-05-23/china-responds-bannon-turning-us-economic-fascist-country
    Somewhere I read a hedge fund operator make a comment, “Trump’s ideas just might work.”
    Some are concerned they may sell their US bonds, to whom?

    Dennis L.

  7. Neil says:

    It’s interesting that nuclear power makes up such a small (almost negligible) input into China’s energy mix, although things are meant to change
    http://www.world-nuclear.org/information-library/country-profiles/countries-a-f/china-nuclear-power.aspx

    One very interesting quote

    “2015 electricity demand growth was only 0.5%, corresponding with a 6.9% growth in GDP, showing a marked decoupling of the two metrics, though this is partly due to subdued economic conditions.”

    Can you REALLY have REAL 6.9% economic growth with ONLY 0.5% growth in electricity demand?

    • 2015 was a low year for electricity consumption growth in China. BP puts it at 2.9%, however. Most other years are a whole lot higher. I agree that 0.5% would be ridiculously low. I do not go to the World Nuclear Organization for second hand information about other types of generation. They may or may not be right.

      I think that China’s published growth rates are highly manipulated. We don’t really know what they are.

  8. Carlos Leiro says:

    Hello Gail. At the beginning you talk about the cooperation of the countries, but that cooperation is very unequal. The employees of third world countries have very poor salaries.

    • Part of what is such a mess with the current level of cooperation is the fact that the low wages of third world countries are tending to hold down the wages of many workers in so-called Advanced Economies. Also, these low-wage workers cannot really afford to buy many of the products that they collectively are making, holding down “demand” for these items.

    • Grant says:

      It is very difficult to attempt a realistic comparison of ‘wealth’ values between people in the same country let alone in different countries.

      Many people discuss the concept of ‘social mobility’ with the implication that everyone’s life can be enhanced although no one ever indicates the direction of travel they are really talking about.

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  10. Rodster says:

    Well, well it looks like Chris Martenson is finally coming around towards reality. Can’t say he wasn’t warned.

    “Collapse is in the cards” https://www.peakprosperity.com/theyve-stolen-our-future-2/

    • Lastcall says:

      Thanks for link.
      In the comments I found this;
      How to enjoy the end of the World, a speech by a mathematician talking about how easily complexity is disrupted.

      • He is a reader of OFW, I understand. He wants to do a write-up of his talk, but it isn’t done yet.

        • Lastcall says:

          He does a nice job of condensing stuff (that OFW has been unpacking in depth) into a one hour seminar.
          Brutal summary is that the financialisation of the economy is a sure sign of collapse as the real economy can’t absorb the funny money being created.
          Like a Jenga game we see the wobbling of our financial system, and know it is unsustainable, but can’t be sure of the when or how of collapse. He dismisses any other way that BAU can be unwound.
          We have a climate action strike by school students here in NZ today. No doubt they all have smartphones, hope to have an overseas holiday, and believe that solar panels, windmills, and 5G/high tech will save the world. I drove past in my 30 yr old 4WD which I consider a very eco-friendly due to its simplicity and recycling potential, but try telling that story ha!

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