It seems to me that the situation in China is far different from what most people think it is. Even if we would like to depend on China, we really cannot.
Reason 1. When we depend on goods from China, an amazingly large share of the world’s industrial activity gets concentrated in China.
The five largest users of energy in the world are China, the United States, India, Russia, and Japan. The International Energy Agency shows total energy consumption as follows for the year 2016:
Figure 1. IEA’s estimate of energy consumption (total fuel consumed, or TFC) by sector in 2016 for the top five energy consuming nations. Mtoe is million tons oil equivalent. Source: IEA. Non-energy use is the use of fossil fuels as a material to create end products that are not burned. Examples include medicines, plastics, fertilizers, asphalt, and fabrics.
When these countries are compared, restricting our analysis to the portion of energy used by industry, we find the rather disconcerting result shown in Figure 2:
Figure 2. Chart by the International Energy Agency showing total fuel consumed (TFC) by industry, for the top five fuel consuming nations of the world.
China consumes more fuel for industrial production than the next four countries listed (United States, India, Russia, and Japan) combined. Of course, we don’t know exactly the corresponding amounts for other countries of the world, but we can observe that if a country is concerned about its CO2 emissions, the easiest way to reduce these emissions is to send heavy industry elsewhere, such as to China or India. There are likely many countries that are primarily service economies, thanks to the option of outsourcing most industry to other countries.
Much of the discussion I have read regarding sending industry elsewhere has been in the direction of, “As advanced as our economy is, we don’t need heavy industry; service jobs will substitute. Industry can be developed at lower cost elsewhere. Everyone will be better off with this arrangement. The invisible hand will provide jobs and goods and services for everyone.” In addition, corporations saw the possibility of adding customers from around the world. Not too many thought about the real-world problems that might result.
Clearly there is a problem with the jobs being lost to China and other Emerging Markets. When new service jobs are added, they often do not pay as well the industrial jobs they replaced. In fact, there might not be enough jobs in total, if automation plays an important role as well.
Another issue is that the level of industrial concentration can be a problem. We are now depending on China and perhaps a few other countries to provide for a large share of the “stuff” we use. Even if China is not the only provider, it is often an important part of the supply chain. If something should go wrong (for example, widespread riots in China), we don’t have a Plan B.
Reason 2. China needs energy products to make the goods it uses for itself and for the goods it exports. China’s own energy supply is faltering. Because of China’s huge size, it is becoming increasingly difficult to keep China’s energy consumption rising sufficiently rapidly using imported energy.
China’s own energy production is shown in Figure 3. (Note: Hot off the press! New BP report released this week.)
Figure 3. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.
It is easy to see that China’s coal production hit its highest point in 2013 and has stayed at a lower level since that date. Also, China’s highest oil production occurred in 2015, with lower production since that date. China’s total energy production has been rising recently, but only with great effort. Total energy production is only 8.9% higher in 2018 than it was in 2012, implying an increase of less than 1.5% per year, relative to 2012 amounts.
A standard workaround for inadequate energy production growth is imported energy products. Even with these imports, it has been impossible to keep total energy consumption rising as rapidly as it rose in the 2002 to 2007 period. The cost with imports is greater, also.
Figure 4. China energy production by fuel, plus line showing its total energy consumption (including imports), based on BP 2019 Statistical Review of World Energy data.
In 2018, China imported 71% of its petroleum (either as crude or as products), and 43% of its natural gas. It was the largest importer in the world with respect to both of these fuels.
In 2018, China’s coal imports shrank as its own coal production surged. This was almost certainly a change planned by China. China would much prefer producing its own coal (and keeping the jobs within the country) to importing coal from elsewhere. China imported 4% of its coal from elsewhere in 2018.
Reason 3. The commodity demand from China is so huge that, to a significant extent, it determines world commodity price levels. Where regional energy prices exist, China’s choice regarding whether or not to import from a country can influence local price levels.
Chile is the largest copper producer in the world. A recent article regarding problems associated with lower copper prices notes that the demand for Chilean copper has been driven “almost entirely by the expanding Chinese economy over the last three decades.” For many commodities, China consumes over half of the world’s commodity supply. If China’s industrial demand is growing, prices will tend to rise, allowing more of the mineral to be extracted. Higher commodity prices tend to be needed over time because the ores of highest concentration (and otherwise easiest to extract ores) tend to be extracted first. Ores extracted later tend to be more expensive to extract, so higher prices are required for extraction to be profitable.
This situation of China playing an extremely large role in commodity prices holds for a very large number of commodities. If China is building widgets or any other product, using a particular commodity, China’s need to buy this commodity in the world market will tend to hold up world prices for the commodity. This situation holds even for fossil fuel prices.
Reason 4. Over the next few years, China’s coal supply is likely to fall significantly because of depletion. This lower fuel supply is likely to lead to a shrinkage of China’s industrial capability, and, indirectly, falling world commodity prices of all kinds.
The problem that China is encountering in Figure 3 is “peak coal.” This is a similar problem to that encountered by the United Kingdom immediately before World War I, and to that Germany encountered just before World War II.
Figure 5. The timing of the peaks is peculiar, relative to wars.
Coal tends to be the industrial fuel of choice because it is cheap. Goods made with coal tend to be inexpensive, especially if wages paid to workers are low and if the company making the goods does not spend much money on pollution prevention. Hydroelectric can be an adequate substitute for coal, if the water flow can be depended upon. Wind and solar are too intermittent and not sufficiently inexpensive to be adequate substitutes for coal. Wind and solar (included in “Other Ren” on Figure 3) are also far smaller in quantity than coal.
Outsourcing a large share of the world’s manufacturing to China seemed like a great idea back when it was started, often in the early 2000s. If, at some point, China cannot really handle the responsibility it has taken on, outsourcing gets to be a huge problem.
The reason why coal prices cannot rise very high is because if they do, the prices of finished goods will need to rise as well. Wages of workers around the world will not rise at the same time because the higher cost of production takes place due to something that is equivalent to “growing inefficiency.” The coal mined is of lower quality, or in thinner seams, or needs to be transported further. This means that more workers and more fuel is needed for each ton of coal extracted. This leaves fewer workers and less fuel for other industrial tasks, so that, in total, the economy can manufacture fewer goods and services. Because of these issues, countries experiencing peak coal are pushed toward contraction of their economies.
Unfortunately, rather than leading to high prices (to compensate for the higher extraction costs), running short of inexpensive-to-extract fuel tends to lead to war, or to tariff fights. Countries whose coal is depleting will try to maintain their own supply as long as possible. They will invent excuses to stop importing coal. Back in September 2018, the Financial Review reported, “China has introduced unofficial restrictions on coal imports in a bid to prop up domestic prices by slowing down customs approvals at key ports.” China needed higher internal prices to make it profitable to extract coal from its depleting coal mines.
Figure 6. Chart showing prices of Brent Oil, China Qinhuangdao Spot Coal price, and Asian Marker Coal, all in US$ of the day. Amounts from BP 2019 Statistical Review of World Energy. Note also that the units of coal (ton) are much larger than the units of oil (barrel) used on this chart. Thus, the same number of dollars of buys a much larger quantity of coal than of oil; coal is cheaper.
If higher coal prices really were possible over the long term, it would make it possible to open new mines in more distant locations. The location of coal mines is important because transport costs by rail or truck tend to be high. China built the large ghost city of Ordos, Inner Mongolia, on the expectation that coal prices would rise, making development of coal in the area profitable. Unfortunately, coal prices fell, making the project not economic. I visited the area in 2015, after teaching a short course on Energy Economics in Beijing. There was a large almost empty airport, and few vehicles were using nearby multi-lane roads.
Reason 5. All of the concern about future tariffs artificially raised China’s 2018 industrial production and commodity prices. Because production was brought forward into 2018, China’s production and world commodity prices can be expected to be lower in 2019 and in future years.
Manufacturers wanted to front-run tariffs, so they tended to ramp up production in advance of the tariff implementation date. This higher production in turn tended to raise commodity production and prices around the world. Note on Figure 6, above, that coal and oil prices are both higher in 2018 than in 2017. Prices in 2019, not shown, are tending to trend downward again.
China badly needed higher coal prices in order to help its coal extraction. Thus, part of the reason that China was able to continue to function as well as it did in 2018 was because of all of the discussion about future tariffs. If this discussion had not taken place, employment in China would likely have been lower. With this lower employment, sales of automobiles and smartphones would have been lower as well.
Note, too, that even with the demand brought forward into 2018, China’s economy was not functioning very well in 2018. Private passenger automobile sales for the year fell by 4%. Smartphone sales fell by a worrisome 15.5%. Clearly, workers were having difficulty buying the kinds of goods a person would expect a growing economy to be selling. I would attribute these problems to the peak coal problem mentioned earlier, making it increasingly difficult to increase the amount of industrial operations provided by China’s economy.
Reason 6. The Chinese economy has been gradually changing and adapting to hide its energy problems. Even more changes will be needed in the future, potentially affecting the world economy, with or without tariffs.
The Chinese economy reports carefully massaged GDP numbers, which many analysts consider to be inflated in recent years. Its debt level keeps rising to try to keep all of its operations going.
We know that China discontinued one major industry at the beginning of 2018: recycling plastic and other types of low-valued recycling. With low oil and natural gas prices, this type of recycling cannot be profitable. Of course, discontinuing a major industry can be expected to lead to a loss of jobs within China. But, on the positive side, it frees up coal and other energy resources in China for other industries that can (perhaps) make more profitable use of them.
On a world basis, the loss of the plastic recycling industry becomes a problem. If rich countries are willing to subsidize the cost of sending plastic recycling to China, this subsidy allows containers that bring goods to rich countries to be sent back to China with a paid load inside. Thus, operating the plastic recycling industry helps keep the cost of shipment of goods from China to the US or Europe down because the shipping costs only need to cover the one-way cost of transit, rather than also covering the cost of shipping the empty container back. Without the subsidy to pay the freight of the plastic recycling, costs for the shipping industry rise, making international trade more expensive. Eliminating the subsidy that rich countries are paying to ship otherwise-empty containers back full of mixed trash is part of what pushes the world economy to contraction.
Other countries are not taking over very much of China’s role in recycling plastic, either. The net effect is that the loss of recycling is one of the things pushing the world toward contraction.
China has no doubt been cutting back in other ways as well. It is likely that it is not building as many uninhabited cities and roads that are really not needed. Ugo Bardi recently posted this chart showing global cement production.
Figure 7. World Cement Production by Ugo Bardi from a blog post on January 19, 2019.
China produces over half of the world’s cement; part of the reduction we are seeing relates to China’s falling use of concrete in new buildings and roads.
In some cases, China is moving in the direction of being a service economy. A recent video states that of the $237.45 cost of producing an iPhone in China, Chinese workers only provide assembly services, worth $8.46. The US contributes $68.69 of the cost, mostly in the design and distribution phases. The parts are generally outsourced from other parts of the world.
One way of looking at what is happening in China’s economy is to analyze the country’s oil consumption in terms of the relative amounts of diesel (used primarily by industry) and gasoline (often used by private passenger vehicles).
Figure 8. Gasoline and diesel consumption for China, based on data from 2019 BP Statistical Review of World Energy.
Based on Figure 8, it appears that China’s industrial growth suddenly leveled off about 2012. This, not by coincidence, is about the time that China’s coal problems were becoming apparent in China. China’s gasoline consumption has continued to rise, however. It appears that once it became apparent that its coal supplies were starting to seriously deplete, China began to “grow” China’s economy more as a service economy. After 2012, most growth seems to have come in the non-industrial sectors of China.
Reason 7. A major concern should be a financial collapse, far worse than 2008, both in China and for the world as a whole.
The world needs growing energy supply to support the world economy. China is increasingly having difficulty with its energy supply. When China has trouble with its energy supplies, the world as a whole has a problem with its growth in energy supplies.
A few months ago, I showed the role China has played in the world economy is this chart:
Figure 9. Ten year growth in world energy consumption, divided between the blue portion associated with rising population, and the red portion associated with higher energy consumption per capita, which I have called “Living Std.”, meaning “Higher Living Standards.”
China added a little bump in GDP growth at the end of the nearly 200-year time period shown, after it joined the World Trade Association in December 2001. The energy added by China (mostly in the form of coal) allowed the world economy to continue to grow, when it otherwise would have been up against limits.
Now we are reaching a situation where China’s energy production is likely to flatten or fall because of the depleted state of its coal mines, and the fact that coal prices can’t rise high enough, for long enough, to open new mines. The world economy, over the period shown, has always had rising energy consumption. In most cases, energy consumption rose faster than population growth, allowing some growth in the standard of living over time.
Changing to a situation of shrinking energy consumption per capita would likely be extraordinarily traumatic. Population would likely fall. Commodity prices would drop to low levels. Debt would tend to default; prices of shares of stock would fall. Many governments would fail. If shrinking energy consumption per capita starts in one country (whether China or elsewhere), it could easily spread to other countries around the world.
We don’t know what is ahead, but we know that the low points on Figure 9 were very bad times, even though energy consumption in total was not contracting. The decade of 1860 to 1870 was the decade of the US Civil War. The decade of the 1930s was the decade of the Great Depression. The decade of the 1990s was the decade of the collapse of the central government of the Soviet Union.
We also know that world energy consumption and GDP growth tend to be highly correlated.
Figure 10. World GDP Growth versus Energy Consumption Growth, based on data of 2018 BP Statistical Review of World Energy and GDP data in 2010$ amounts, from the World Bank.
This is as we would expect, because energy consumption is required for the many aspects of GDP growth. Transportation, heating and/or cooling, and electricity all require energy consumption, for example.
The recent divergence between GDP and energy consumption on Figure 10 may be the result of overstated GDP amounts by China, India, and other countries. If a country wants to appear inviting for new investment, there is a temptation to overstate GDP since other countries seem to be doing so, without penalty.
Back during the Great Recession of 2008-2009, our problem was with homeowners who took out loans that were far higher than they could really afford. Today, we have whole economies taking on more debt than properly stated GDP reports would suggest they are able to handle. We go from one version of optimism regarding debt levels to another.
Conclusion. If a person doesn’t understand how badly the energy situation is working out for China, or how important energy consumption is, it is easy to think that the problems China is facing are primarily tariff-related. In fact, China’s situation is a very worrisome one, with or without tariffs being added.
To fix the situation, China would need a very cheap, non-intermittent, locally produced, non-polluting additional energy source. This energy source would also need to be rapidly scalable. Such an energy resource doesn’t appear to be available.
“Beyond the US, the fragility of growth in debt-ridden China and some other emerging markets remains a concern, as do economic, policy, financial, and political risks in Europe. Worse, across the advanced economies, the policy toolbox for responding to a crisis remains limited. The monetary and fiscal interventions and private-sector backstops used after the 2008 financial crisis simply cannot be deployed to the same effect today…
“While trade wars and potential oil spikes constitute a supply-side risk, they also threaten aggregate demand and thus consumption growth, because tariffs and higher fuel prices reduce disposable income. With so much uncertainty, companies will likely opt to reduce capital spending and investment.
“Under these conditions, a severe enough shock could usher in a global recession, even if central banks respond rapidly. After all, in 2007-2009, the Fed and other central banks reacted aggressively to the shocks that triggered the global financial crisis, but they did not avert the “Great Recession”.
https://www.theguardian.com/business/2019/jun/14/the-risk-of-a-2020-recession-and-crisis-is-growing
The second paragraph is evidently [OFW-Surplus] universe leaning type of understanding, in Guardian? Hm, we are getting quite closer to some threshold, at least another severe recession indeed.
“A decade of ultra-low interest rates ought to have delivered a humdinger of a recovery but it has failed to do so. Central banks keep looking for inflationary pressure that simply isn’t there. As was the case in the late 1970s, there is a sense of fragility… At times like this policy errors can be extremely costly, which is why Donald Trump’s stance on Iran is fraught with economic as well as geopolitical risk.”
https://www.theguardian.com/business/2019/jun/16/is-global-economy-in-for-new-oil-shock-trump-iran
““I think it’s unlikely the Fed is going to actually make a cut in the near term unless we get worse data,” he said. “But here’s a quick data point for you: usually, the market does very well — up double digits — after the first rate cut, but the last two times, it hasn’t. But those were also the only times the Fed actually cut and then we went into recession afterwards. So, in 2001, 2007, the Fed tried to save the market, but they did so too late. So that’s what we want to be looking at.””
https://www.cnbc.com/2019/06/16/if-a-recession-hits-even-fed-rate-cuts-wont-be-enough-ned-davis.html
Maybe the surplus energy of the world economy is too low.
“A massive electrical failure has left all of Argentina and Uruguay without power, according to a major Argentine electricity provider.”
https://www.bbc.co.uk/news/world-latin-america-48652686?fbclid=IwAR00G3Ng3Sg1OGzSfNFBep9Jly0NuiyUq6C_AooQmXtPdWmi1ag67iulm3M
60% fossil, 36% hydro, should be easy restarting?
Yes, but lets not forget the country suffered decades of capital and human talent outflows, so that had to left imprint on the upkeep of infrastructural as well.. One day we will reach a threshold when some of these countries won’t be able to restart their national grid for weeks and months, or never in full actually. I’m not sure we are there yet, but getting close..
“… upkeep of infrastructural as well…”
this version has some very telling quotes:
https://apnews.com/a29b1da1a91542faa91d68cf8e97a34d
“Argentina’s power grid is generally known for being in a state of disrepair, with substations and cables that were insufficiently upgraded as power rates remained largely frozen for years.”
and this beauty:
“Since taking office, Argentine President Mauricio Macri has said that gradual austerity measures were needed to revive the country’s struggling economy. He has cut red tape and tried to reduce the government’s budget deficit by ordering job cuts and reducing utility subsidies, which he maintained was necessary to recuperate lost revenue due to years-long mismanagement of the electricity sector.
According to the Argentine Institute for Social Development, an average family in Argentina still pays 20 times less for electricity than similar households in neighboring countries.”
in other words: if you wanna dance, you gotta pay the piper…
Macri is a neo-liberal politician using all the neoliberal tools to govern. Unfortunately these tools are much criticised today as they just don’t work.Never have. What cutting spending will do is send the country into recession if it isn’t already and the evils of Austerity are now widely known. Argentine just got a large loan, but it’s in US Dollars a dead set No-No because it allows the wealthy ones to trade their overvalued currency for Dollars and expatriate them. This burdens the government for no benefit to the majority. Still, that’s one aim of neoliberalism along with privatising everything possible. Once again Argentina will bankrupt itself to repudiate the debt.
There is a solution, MMT. MMT will strip away the neo-liberal crust and show how the economy can actually work,as I have explained before.
Hardly a solution when we are chaffing against so many non-monetary limits to growth – a temporary stimulant at best; a terminally destabilising attempt to tinker with a complex system at worst.
It’s not a forever solution. But why needlessly make it worse? Is that OK by you?
Certainly not by me.
It seems like the electrical system is very east to go out, compared to oil. People who buy electrical powered cars seem to me to be dreamers.
Yes and no, as some types of non grid tied renewables are likely (‘guaranteed) to produce at least for next 10-15yrs with no or few spare parts. Which is not a lot, but it’s at least something. Obviously, the more pressing question is likely future situation in which fuel rationing, road blockades, or worse (expropriation) are established to some degree. Now, it could well happen before ~2025 or in ~15-20yrs, your particular area. So, again as always we are back to the pesky moving sand biz of sequencing, scenarios, and timelines.. of the future.
Location, location!
Best to visualize it like one of those exciting films were the hero jumps from ice floe to floe, with killer whales popping up here and there.
And, in the end, he’s lunch – quite unlike the films…..
Knowing that each day successfully negotiated is a reprieve from the axe simply adds to the zest of life, when seen in the right perspective.
Dear Leader, I’m obviously not trying hard enough to see the sword of damocles hanging over my head from the preferred perspective. Twenty lashes should set me straight. Then everything will be rosy. no /sarc whatsoever.
Battery backup for these resources is likely iffy, however. Intermittent resources aren’t worth very much. You can’t provide jobs based on intermittent energy, for example. You can’t run vehicle on intermittent energy, unless it has a working battery. You can’t bake a cake based on intermittent energy. About all you can have with intermittent energy is very intermittent activities, like watching television and surfing the Internet.
That’s not the way it works Gail. And I’m sure you know that.
In the end storage will be just enough to cover all the gaps from a mix of all energy producers.
And jobs? There are and will be plenty of jobs installing and maintaining equipment for many decades to come.
It’s the other sectors we need to worry about.
Energy is the essential sector. It needs to become a smaller and smaller percentage of the total, for other sectors to grow.
Storage might be just enough.
How much generating capacity is required to ensure that the storage can always be certain to be at the “just enough” level?
What is the cost effectiveness of that capacity?
“A massive electrical failure has left all of Argentina and Uruguay without power, according to a major Argentine electricity provider.”
https://www.bbc.co.uk/news/world-latin-america-48652686?fbclid=IwAR00G3Ng3Sg1OGzSfNFBep9Jly0NuiyUq6C_AooQmXtPdWmi1ag67iulm3M
“The head of Brazil’s powerful state development bank quit on Sunday, a day after far-right President Jair Bolsonaro threatened to sack him, fueling a political crisis engulfing the government.”
https://www.france24.com/en/20190616-brazil-development-bank-chief-quits-fueling-political-crisis-0
“Thousands of Venezuelans have rushed to Peru’s northern border on Friday in hopes of entering the Andean country before the introduction of tough immigration requirements at midnight. Venezuela’s economic collapse under President Nicolas Maduro has unleashed the biggest migratory crisis in recent Latin American history, forcing countries like Peru – a developing nation of 32 million people – to grapple with an unprecedented surge in immigration.”
https://www.aljazeera.com/news/2019/06/venezuelans-rush-enter-peru-rules-imposed-190615065449364.html
“Major landslides in central Colombia have destroyed the road that connects the eastern plains with the rest of the country.”
https://colombiareports.com/landslides-virtually-disconnect-one-third-of-colombia-from-civilization/
Bulldozers and fossil fuels can fix the problem. They can also help with rebuilding. Without fossil fuels, there is a major problem.
“According to data released by the Ecuadorian Central Bank on June 17, Ecuador’s economy is expected to contract by 0.2 percent in 2019, which would place it into recession, El Comercio reported…. The Ecuadorian economy continues to face significant headwinds — mainly in the form of its over-reliance on oil exports, slow growth in non-oil exports, and the country’s use of the U.S. dollar…”
https://worldview.stratfor.com/situation-report/ecuador-economy-expected-enter-recession-2019
More, MORE, More….How do we Like IT?
U.S. Oil Demand Was Scorching Hot Last Year — but Gas-Guzzling SUVs Aren’t to Blame
https://finance.yahoo.com/news/u-oil-demand-scorching-hot-220400786.html
The U.S. economy burned through an average of 20.46 million barrels of crude oil and related liquids each day last year, according to BP’s (NYSE: BP) latest annual Statistical Review of World Energy. That was about 500,000 barrels per day (BPD), or 2.5%, more than 2017’s total, and the largest demand increase in more than a decade. Overall, America accounted for 20.5% of the world’s oil and related liquid consumption last year. (That includes liquid derivatives of coal and natural gas, as well as biodiesel and biogasoline products such as ethanol
……Phillips 66 and Chevron invested $6 billion into three facilities, one of which will crack ethane to produce 1.5 million metric tons of ethylene a year. Ethylene is the most common building block for plastics, which is what the other two CP facilities will convert it into
https://m.youtube.com/watch?v=Dug-G9xVdVs
If life gives you lemons…make them out of plastic!
Actually, it was the threat of future tariffs that turned up the volume of all kinds of industry around the world. The threat encouraged everyone to stock up, before the tariffs started. Prices of all kinds of commodities, including fossil fuels, were higher. Plastics are some of the goods that were made. When we have uses for some parts of the barrel of oil, we need to find uses for other parts of the barrel. Plastics are one thing that helps use up the short hydrocarbon chains
Yes, when you scrap the bottom of the barrel, you need to figure out a way to utilize it all!
The average person eats at least 50,000 particles of microplastic a year and breathes in a similar quantity, according to the first study to estimate human ingestion of plastic pollution.
The true number is likely to be many times higher, as only a small number of foods and drinks have been analysed for plastic contamination. The scientists reported that drinking a lot of bottled water drastically increased the particles consumed.
The health impacts of ingesting microplastic are unknown, but they could release toxic substances. Some pieces are small enough to penetrate human tissues, where they could trigger immune reactions
They concluded: “Growing scientific evidence on the hazards of uncontrolled microplastic pollution, combined with its long-term persistence and irreversibility, suggests that reasonable and proportional measures should be taken to prevent the release of microplastics.”
Cox said his research had changed his own behaviour. “I definitely steer away from plastic packaging and try to avoid bottled water as much as possible,” he said.
“Removing single-use plastic from your life and supporting companies that are moving away from plastic packaging is going to have a non-trivial impact,” Cox said. “The facts are simple. We are producing a lot of plastic and it is ending up in the ecosystems, which we are a part of.
https://www.theguardian.com/environment/2019/jun/05/people-eat-at-least-50000-plastic-particles-a-year-study-finds
Humans consume the equivalent of a credit card worth of plastic every week: Report
Well, at least we won’t feel hungry after the real food is gone!
Humans consume the equivalent of a credit card worth of plastic every week
That’s a hard story to swallow.
This just in….the Party Line ….
China prepared for long trade fight with the US – party journal
SHANGHAI, June 16 (Reuters) – The United States has underestimated the Chinese people’s will to fight a trade war and Beijing is prepared for a long economic battle, an influential Chinese Communist Party journal said on Sunday.
China would not give way on major principles in its negotiations with the United States on ending the dispute, the commentary in the ideological journal Qiushi, or Seeking Truth, said
China will not be afraid of any threats or pressure the United States is making that may escalate economic and trade frictions. China has no choice, nor escape route, and will just have to fight it out till the end,” the commentary said.
“No one, no force should underestimate and belittle the steel will of the Chinese people and its strength and tenacity to fight a war.”
The commentary also accused the United States of trying to hamper Chinese technological innovation.
“We must keep the initiative of innovation and development firmly in our hands, increase investment and research in key, core technology areas, pool together more high-value talents, enhance innovation and get rid of the core technology plight,” it said.
https://news.yahoo.com/china-prepared-long-trade-fight-080410150.html
How DARE THEY, aren’t the happy just doing the grunt, slepping, low wage work we here in the West hate to do? Boy, some People…
Ahh, a dress rehearsal for the day we go unplugged!
https://finance.yahoo.com/news/target-outage-shoppers-reporting-registers-183827722.html
It was a tough afternoon to be at Target.
After a two-hour nationwide outage Saturday, Target’s registers are back online in the retailer’s 1,849 U.S. stores, spokesman Joe Poulos confirmed to USA TODAY.
“The temporary outage earlier today was the result of an internal technology issue that lasted for approximately two hours,” Poulos said in a statement. “Our technology team worked quickly to identify and fix the issue, and we apologize for the inconvenience and frustration this caused for our guests.”
The outage tried the patience of some, while others did their best to take it in stride. Shoppers posted to social media about long waits at the checkout line and then leaving stores empty-handed Saturday afternoon!
Coming sooner than we think….
Temporary outages may be what we see first. Also Deutsche Bank needing a bailout and other similar sort of local problems.
To the very last, the candle still burns brightly, but gutters and flickers before it is finally extinguished.
The super duper trumpie high rollers have so much dough why not invest it ?
Babe Ruth jersey auctioned for record $5.64 million
A jersey worn by Yankees icon Babe Ruth around 1928-30 sold for $5.64 million, a record price for sports memorabilia, during the Babe Ruth Collection auction at Yankee Stadium on Saturday, according to Hunt Auctions. The previous mark of $4.4 million was set by a 1920 Ruth jersey
https://nypost.com/2019/06/15/babe-ruth-jersey-auctioned-for-record-5-64-million/
Yes, it must be a different dimensional reality ….
https://m.youtube.com/watch?v=IcDjnYxzfss
See there is an explanation
Maybe a Babe Ruth jersey is an investment of sorts.
Yes, at least you have cloths on your back when the SHTF!
Another seeming well sourced article consistent with Gail’s thesis that most remaining oil will be left in the ground. The comment regarding expensive(read shale?) oil pricing out other segments of the economy and the issues of the young looking for solutions, e.g. AOC seems well thought out.
https://damnthematrix.wordpress.com/2019/05/16/ants-and-what-it-means/
Dennis L.
I don’t have nearly enough knowledge or expertise about the oil industry to be able to make a judgement on how long we can keep pumping the stuff up cheaply enough to keep the system operating. But what I take away from this article is that we are in for a very bumpy ride ahead.
from my seat here in the USA…
oil will continue to be too low in price for producers to make a profit, BUT nationalization of the domestic oil industry would take away the need for the industry to make a profit…
in that scenario, oil would in effect be subsidized by the government, and that would push the problem over to the national debt and the long term economic stability/instability of the government…
in a roundabout way then, the declining net (surplus) energy of the industry would eventually wreck the economy which would then cause the end of most oil production…
looks like everything is interconnected…
In general it seems like being profitable is no longer the end-all-be-all of industry. Now it comes down to getting sufficient investments to keep the lights on. Larger and larger shares of resources are directed towards keeping alive the energy business, i.e. less and less resources are available for the general population.
But we still have ways to go. Both in level of lifestyle and consumption but also less environmental considerations can help getting out more hydrocarbons. There are no “transitions” that’s just narrative for the masses, in the same vein that “green” energy will save the planet and space exploration will save humanity.
Turning away from the dollar: Russia & EU keen on switching to national currencies for mutual trade
https://www.rt.com/business/461933-russia-eu-ditch-dollar/
In 2014 I dumped all my Amazon stock because of doomer blogs…..Particularly this one and the the Automatic earth. The crash was just around the corner and still is for that matter. The above story was printed every other week…maybe Russia influence. I now take all this with a grain of salt. Gail on one day claims this is the year for collapse of biblical proportions and then the next day laments on her daughter getting student loans. If the collapse is the size and proportion of what she is talking about then nothing matters..student loans car loans etc……we will all go down the drain. I think we will have a depression but come out of it and move on as we have in the past….be careful what you read…might be “fake news”!
I increasingly think that everything goes down together, or very similar to together. Selling stock ahead of time doesn’t work the way a person would expect. About all one can do is diversify.
What’s the point of diversifying if collapse is always one or two years away?
What if we don’t get a systemic collapse?
Instead… a series of problems are allowed to manifest in a more or less controlled fashion and solutions are implemented.
I think World of Hanuman has been preaching along the lines of the most probable outcome. This process can indeed go on for decades. In which case… as Keith would say… ALL BETS ARE OFF!!
if you are homeless and living on a park bench somewhere, and you do not possess sufficient energy resources to pull yourself back up into conventional society, then for you—collapse has already happened.
you face a life of deprivation and early death.
if you are someone underwater on a mortgage, just lost your job and do not have the necessary energy resources to resurface, then for you collapse is about to happen. (borrowing money just delays the inevitable, the lender demands remaining energy resources as collateral))
if you happen to be wealthy, you imagine yourself proof against such calamity. It doesn’t apply to you.
Unfortunately, your wealth is entirely supported by the energy surpluses of the millions of people lower down on the prosperity ladder. You might own dozens of oilwells, or blocks of real estate—but both are worthless without people to use them. (think of Saudi).
You might be sitting on $1bn in gold bars—but you can’t eat it.
So for you collapse is at some time in the future. But it is as certain as the other two.
It is an accelerating process, none of us can judge the overall scenario as it plays out.
Maybe diversification gives one or two years. It also doesn’t hurt to have a little extra food and water, in case a temporary outage is a problem.
Having plenty of extra food is always good as a hedge against inflation. That’s why I stock up.
Mary Papenfuss
Mary Papenfuss
HuffPostJune 15, 2019, 11:49 PM EDT
Panicked farmers throughout the Midwest are facing the increasing probability that vast tracts of fields will remain unplanted or crops will fail this year as much of their land remains under water or too sodden for farm equipment and plants.
The crushing weather conditions come on top of President Donald Trump’s trade war with China that has already triggered a record number of farm bankruptcies.
It’s been the wettest 12 months ever in the U.S.
“The frequency of these disasters, I can’t say we’ve experienced anything like this since I’ve been working in agriculture,” John Newton, chief economist at the American Farm Bureau Federation, told The Washington Post.
It’s the slowest planting time in 39 years.
Sodden fields lie fallow, and corn and soy crops that have been planted are stunted in the mud. Hard-hit states include Ohio, Iowa, Illinois, Indiana, Kansas, Missouri, South Dakota, Oklahoma, Nebraska and Michigan. Waters began to recede in some areas in recent days but there’s more rain in the forecast.
Think that’s a fine course, stock up on beans and rice and canned goods.
https://news.yahoo.com/farm-armageddon-flooding-tariffs-climate-change-trump-034954667.html
This is sort of what happens when we try to us dams to dry out the flood plain. It works some years, but not others. We expect miracles.
My goal and preps are 2 yrs – How many do you know can say they can stand that long or can look out that far.
The name of the game is to beat the average
Although demonstrably in the collapse phase, the system is showing remarkable resilience in keeping running – far into the realms of irrationality and pretence now – and will do so, with the superficial appearance of prosperity and health, until……
As El Mar said: ‘Carpe Diem’.
I understand where Denial is coming from. Not good to spend the past ten or twenty years “prepping” and worrying about what might be. Always one or two years away.
But it is clearly undeniable now that we have been collectively propping up a fantasy for the past ten years if not more.
– far into the realms of irrationality and pretence now
I will say that rational thinkers have been wrong more times than right. They only claim the victories.
The real question is whether people like Gail and other doomers have been lead astray by their overly rational and analytical view of things. These analysts tend to focus on what is happening in the now and previous trends leading up to the now, but not a single one of them has the humility to say that they don’t really know what will happen next.
I say not a single one because Gail comes close but still prefers to shut down any possibility of a way forward when she feels challenged. This is an obvious tell that there is more to the story here. And I would suggest that there is some religious bias at hand.
On the other hand, our dear Keith and myself to some extent cling on to the idea that all is not lost. We are simply witnessing in real time a radical process of adaptation. The irrational propping up of the global economy allows for green shoots to take hold in terms of transitional science and technology.
You simply can’t rule out a restructuring of global society, manufacturing, money and energy. It’s a question of enough of industrial civilisation holding together for long enough for the restructuring process to complete. Not entirely impossible.
A little irrational behaviour could end up being our saving grace.
People generally don’t like to admit to themselves that they haven’t really got a clue what’s going on. And so they convince themselves that they know quite a bit more than they actually know. According to Plato, Socrates considered himself the wisest of men because he alone knew that he knew nothing. Very few of us share Socrates’s insight into the extent of our own ignorance and many of us are consummate know-it-alls.
When we try to form a general view of what’s going on with the world economy or any other really big system, we bring our particular lifetime of learning about the world, our particular expertise in relevant fields, and our common sense and general knowledge to bear on the subject, we attempt to model reality, and we also hunt around for relevant data on all kinds of things.
The problem with our learning, our common sense and our general knowledge is that they are not as reliable or as useful as we assume them to be. The biggest problem with models is that they ignore important factors that we are unaware of but which are bound to make the real world operate differently to how the models operate. And the problems with data are that it tends not be accurate and it may even be deceptive because in the political, social and economic realms, deception is the rule rather than the exception.
Given the above, trusting the players in this huge game of Monopoly to be completely honest would be the height of irrationality. So we also have to factor into our models the human tendency to deceive, and this factor is bound to make our models so fuzzy that our confidence in their accuracy must be low.
Gail is more Socratic than most in that she doesn’t try to claim that she knows what is going on or what is going to happen, but only that based on her analysis, this or that result seems probable or likely. And quite unlike the typical doomer, she is not ruling out the potential for acts of God, or for something else as yet unseen coming into play and changing the situation drastically.
Well said. The idea that irrational extend and pretend might make a new economy viable, bridging The Transition, is tempting.
Except, I don’t really see any far-sighted re-structuring.
Just more concrete being poured wherever practical, and as much fuel as possible being burned, creating proportionate pollution and waste. And heaps of shoddy, ugly building misnamed ‘development’. Oh, and yet more vital farmland being eliminated instead of restored and revived. And creeping totalitarianism.
I live bang in the centre of in a high-tech growth hub, Cambridge UK, drawing in global investment, and if the innovative future were taking shape it would be here, but it ain’t.
Same old same old, resulting in more environmental degradation and selling stale and implausible fantasies to people.
‘Megacancer’ James has it spot on;: his model is what I see under my nose every day.
One doesn’t need to be a seer or prophet, nor even a Doomer.
In similar vein, one can observe that the most ‘advanced’ – interesting development in low (energy) input agriculture and living arrangements takes place on the periphery now, which makes sense as such experimenting needs to have low barrier of entry for those few willing to try it against all the BAU distractions around. So, are the centers going to crumble and depop completely or some level of preserved cohabitation of cities and country-village we had enjoyed since middle ages will be eventually preserved?
Xabier, I share your sentiments regarding the ugliness. I have strong aesthetic and moral objections to many aspects of the modern world. However, for health reasons, I can no longer “go there.” Ten years ago I made myself ill by musing too much on the megacancer aspects of “development”. It got the point where i couldn’t pass by some particularly monstrous example of modern architecture or a waste dump or a graveyard of rusting construction machinery, and cars!—cars everywhere!, without getting debilitating emotional reactions and I would avoid taking certain roads and looking at certain views out of train windows.
For my own mental health, I had to change my mindset to one of not giving a damn about the progressive destruction of everything we once held sacred, from England’s green and pleasant land and Kyoto’s formerly iconic skyline to Africa’s remaining megafauna, Hinduism as a philosophy of life rather than a politic creed, to Confederate war memorials. Caring about these things (apart from the last one) is just too painful for me personally.
I try to keep my little corner of the world looking tidy and pretty, making what I think are improvements here and there and cleaning up other people’s messes, and I try to participate as little as possible in activities that feed the megacancer, without feeling smug about it, and in that way I live at peace with myself while waiting for the end of the world, the end of my world, or the end of BAU.
Old people are fragile and rigid. We are less flexible and don’t bounce very much like the youngsters do. Not physically, not mentally and not emotionally. I didn’t realize this when I was younger.
I have personally known two activists in Japan who went to early graves that were chalked up to cancer, but with hindsight could well have been due to dwelling overlong on subjects that were emotionally traumatic for them. One was a nuclear engineer who became a prominent campaigner for nuclear safety and the other spent their entire adult life as fighter for Ainu rights and animal welfare and who founded and ran the Japan Anti-Vivisection Association.
It would be simplistic to suggest that any one factor alone caused their cancers, but it is clear that obsessing about negative subjects can cause depression and suppress immune function, which can contribute to cancer, and these two wonderful, concerned and dedicated people were obsessed with negative subjects and reacted emotionally to them on a daily basis to the point that their concerns dominated their lives and they spoke of little else.
you need to be as safely far away from imploding cities as possible. don’t expect US FEMA to rescue you (if living in the USA) so avoid flooding areas, tornado alleys, and hurricane impact areas. that eliminates the entire gulf coast, Caribbean and the east coast south of Maine, most of the Mississippi watershed. there are a few areas on the west coast, away from the cities. maybe islands offshore that can be provisioned and more easily defended. these places just buy you some time, but maybe some time is all you’ll need. learn to sail a boat.
Get on a boat? And then what? I for one do not want to live in an imploded world. Live life now and have no worries. We all end up in the same place,
2014? You are such a youngster still..
Some of the regulars over here have been at it for decades already.. it’s a journey of learning and appreciating in a way. Simply, there is no proper ‘solution’ you could either join the ‘dark side’ and just gorge on the frivolous opulence in all its forms while it last, or attempt to diversify on the ‘material side’ as lite precautionary measure, or just go with the flow and not doing anything differently at all. All three approaches are sort of valid responses for such influential terra forming agent we humanoids represent in our (latest?) impact – forcing stage on the environment. It will likely end up just as another (forgotten) geological layer anyway to whoever inherits this place..
My advice to you would be, to enjoy life regardless. There’s no sense in worrying about the future because everyone and everything eventually dies. Me personally, I hope the banking magicians and the financial plate balancers on a stick can keep it altogether until i’m gone.
I’m starting to think that you’ll be pleasantly surprised.
Well, i’m 61 so I hope you’re right 🙂
My concerns are more local than some of the posters in as much as I look at what I can and cannot do to adjust as things change. Some of you have mentioned keeping cars running so I submit this video regarding a 29 year old truck being repaired by a fellow who seems pretty knowledgeable. Even with almost 20 year old technology, the main roadblock to keeping it running is electronics and sourcing replacement parts.
From what I can see as we go to less complexity, the big issue will be time, there are no 48 hour days, living overhead(food, clothing, maintaining transportation, etc) will require more and more time, much will need to be simplified.
I am an old man, expecting change, trying to prepare for it and taking considerable joy out of the weeks with dance lessons and the social environment it provides – it is a very expensive hobby but the costs are variable and the knowledge usable for the remainder of my life(thanks Gail for that one.)
Enjoy the video, Wes is a smart guy adjusting to a real world changing around him.
https://www.youtube.com/watch?v=4605S-0m2t4
Dennis L.
“Even with almost 20 year old technology, the main roadblock to keeping it running is electronics and sourcing replacement parts”
this is a much wider problem than with autos. it affects all things electronic. and, 20 years may not seem that long to us humans, but is like geologic time to the fast evolving electronics field. a lot of improvements today involve engineers sourcing new components to replace the older ones, working or not. the hope is the newer components will still have replacement parts available a few years out.
I think many builders, for instance, would be rather shocked to discover how different time is when working with hand-tools: I mostly avoid using power tools, as I hate the noise, and drilling, sawing etc are a very different matter by hand.
Nothing as beautiful as a well-balanced (wooden-handled) hammer though, or the rhythm of a keen saw cutting straight.
Another thing is that with hand-tools you can meditate a little, with power tools it would be far too dangerous.
Life and death are always ‘local’, speculate as we might about the fate of civilizations, just as local weather kills or favours a crop, whatever the global climate is doing.
I was just reading the latest BP energy outlook report and came across this on page 11..
.https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2019.pdf
“Expansion in global output and
prosperity drives growth in global
energy demand.”
No wonder we are in so much trouble and heading straight for collapse. To be real that statement should read …………
Expansion in energy output has allowed global output growth and driven increased prosperity.
Economists, bankers politicians, even those in ‘energy companies’ seem to have all their thinking backwards, they just don’t understand the way the system really works.
Energy drives the system of civilization, not the other way around.
You are right. The availability of an ever growing supply of cheap energy is what powers the economy.
But there is more to it as well. The economy operates on promises of many sorts. One of these promises is debt, and debt repayment with interest. Another is sale of shares of stock. A third is government promises, such as promises for unemployment insurance and old age benefits. These promises are needed to pull the economy forward. Especially, they are needed to keep commodity prices high enoug.
Somehow all of this growth powered by energy and promises must stay ahead of depletion of many types. There is of course fossil fuel and mineral depletion. Rising population is an issue that acts much like depletion, in the sense that there must always be more goods and services to keep up with rising population.
We are dealing with a very strange self organizing system. If something goes wrong, the system tends to collapse. People miss the possibility of collapse, if things don’t go right.
I was just rearranging their little totally incorrect statement. I agree with you on all the extras of promises, debt etc as additions of keeping the economy going up to a point.
Basically I see all the promises and debt as pulling forward the extraction of the lower net energy supplies, whether it is tight oil, deep sea oil, or renewables.
What we appear to be doing, in a simplified form is guaranteeing we go from a Hubbert gentle curve after peak energy, to a sharp seneca cliff. We are dragging forward today all the slightly harder to get energy by a mountain of debt and promises.
We were all warned in the ’70’s by the limits to growth team, yet humanity chose to go the BAU path, perhaps the book Extraordinary Delusions and the Madness of Crowds should be read in the context of civilization itself instead of individual fads. Maybe it was the ultimate warning of collective thinking.
https://vantagepointtrading.com/wp-content/uploads/2010/05/Charles_Mackay-Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds.pdf
On page 135 …..THE LOVE OF THE MARVELLOUS AND THE DISBELIEF OF THE TRUE.
It seems that disbelief in the truth is still rife in the world. It does beg the question of who will get the blame for the collapse of civilization at some point in the future. Will it be the messengers as per usual?? Hence my nic………
The Ones That Cannot Be Named will be blamed. Again. And again. And again. Until they achieve Worshipful Master of Victimhood status. And we’ll be reminded of this for All Eternity. Forever and ever, aaaamen.
While some of us a focusing our imaginations on post-collapse scenarios involving starvation, cannibals and cooking pots and the mass media is focusing on suicide, homicide, and most of all terrorism, up to now most of us have been dying from more prosaic and distinctly unfashionable causes such as cancer, strokes and heart disease.
Not mentioned in this chart is the fact unearthed in a Johns Hopkins study that medical errors are the third-leading cause of death after heart disease and cancer, or that deficiencies in vitamins and magnesium are the cause of most of what ails us and most of us are blissfully unaware of these things because we are too busy worrying about suicide, homicide, and most of all terrorism.
https://static.boredpanda.com/blog/wp-content/uploads/2019/06/media-coverage-16.jpg
Yes, I am sure that mineral deficiencies are common due to eating food grown in poor soil.
A suggested ameliorative is to take boron. Boron helps the body to retain and regulate the distribution of magnesium and calcium in the body. It can be very cheaply obtained by making a drink out of borax (search it), which can be found in the cleaning aisle of supermarkets in Anglo countries. It is banned in Europe (as a poison, although it is only as toxic as table salt). Boron can be great for people with chronic muscle pain, which can be deficiency-related.
Or you can just buy the more expensive boron pills.
Magnesium compounds can also be easily bought very cheaply in bulk in crystal form and made into a drink but magnesium can also be absorbed through the skin. One can put it in one’s bath like the traditional Radox bath, or even spray it directly onto the skin. Or one could simply go for a swim in the sea, which athletes in pro body contact sports in Australia often do after a game because magnesium has a role in relaxing muscle cells.
Yes, I am sure that mineral deficiencies are common due to eating food grown in poor soil.
Boron helps the body to retain and regulate the distribution of magnesium and calcium in the body. It can be very cheaply obtained by making a drink out of borax (search it), which can be found in the cleaning aisle of supermarkets in Anglo countries. It is banned in Europe (as a poison, although it is only as toxic as table salt). Boron can be great for people with chronic muscle pain, which can be deficiency-related.
Or you can just buy the more expensive boron pills.
Magnesium compounds can also be easily bought very cheaply in bulk in crystal form and made into a drink but magnesium can also be absorbed through the skin. One can put it in one’s bath like the traditional Radox bath, or even spray it directly onto the skin. Or one could simply go for a swim in the sea, which athletes in pro body contact sports in Australia often do after a game because magnesium has a role in relaxing muscle cells.
Thanks Kim. I hadn’t heard about the functions of boron, and I will definitely look into that.
Interesting!
Yep, that’s basically part of what the 90+ yrs tri/billionaires have been doing for quite a while.. Eating moderately (lot of veggies vs. meat), but more importantly ‘starving’ 1/2 – 2/3 of the day for keeping the bodily fluids and self correcting (auto immune) flows operational, additional intake of magnesium etc. And obviously add some of the more extra unobtanium treatments for us like blood infusions, organ transplants and so on, voila, you become sharp as Mr. Burns way into your 100th birthday.. so you can easily preside over your subordinated, exhausted ant worker bees in their 50s..
Don’t forget: bathing in virgin blood
personal experience?
Is Branson marketing that now?
Many Americans say their financial situation is worse since the Great Recession
https://www.cnbc.com/amp/2019/06/14/many-americans-say-their-finances-are-worse-since-the-great-recession.html
The Great Recession has been over for a decade.
Yet many people’s finances haven’t recovered from the recession’s blows, according to a new survey by personal finance website Bankrate.com.
“Even a modest downturn is going to cause further harm to Americans personal finances,” said Mark Hamrick, senior economic analyst at Bankrate.com.
More than half of Americans who were adults amid the Great Recession said they endured some type of negative financial impact, Bankrate found. And half of those people say they’re doing worse now than before the crisis.
There is less surplus energy per capita. Also, more wage disparity. Young people aren’t doing as well as their parents did. They are getting married later. Fewer are buying homes. Jobs are less stable. Sometimes they are unavailable.
Hi Gail,
I found this paper on other blog, showing energy flows in global trade:
https://www.sciencedirect.com/science/article/pii/S0301421517305839?via%3Dihub
link to PDF:
https://www.researchgate.net/profile/Xiaofang_Wu7/publication/320445428_Global_primary_energy_use_associated_with_production_consumption_and_international_trade/links/5a0eb6a2a6fdcc2b5b5e09d0/Global-primary-energy-use-associated-with-production-consumption-and-international-trade.pdf?origin=publication_detail
I am curious of your opinion on this paper and how do you assess further development / transition of these processes.
Thanks, always pleasure to read your blog,
kesar
I only read the abstract, not the whole paper, but it does sound like a step in the right direction. There is an awfully lot of intermediate energy use. In fact, I expect there is more intermediate energy use all the time. Adding pollution control, or digging from deeper wells, will add more intermediate steps.
I therefore don’t think the answer is a single percentage share of intermediate energy. I think the share varies with the product, and it varies over time. It is very easy to underestimate the portion of intermediate energy, because the share is rising.
I do not know if it’s my impression, I’m from another country. But from 2004 to 30 U $ per barrel until 2008 to 130 U $.
Why was not it transferred to inflation? Was this so?
No, the big change in oil prices was not translated into general inflation. Instead, what has happened is wealthy people have benefited and the rest have ended up worse off financially.
Lower interest rates and longer term loans (for example, on automobiles) have been used. The wealthy have found asset prices rising on homes, shares of stock, and many things. Poorer people have found the cost of healthcare and education skyrocketing, but jobs paying enough to justify the high cost of education often lacking. Poorer people have found inflation acts to their disadvantage. But the type of inflation for rich people makes the even richer.
This difference in wage and wealth disparity is getting to be an increasing problem.
A pure fiat currency system allows the moneychangers, i.e., those who do no useful, productive, value-added, wealth creating work, to instead focus entirely on gaming the system (financialization) by redistributing and concentrating existing wealth, resulting in wage disparity, rentier behavior, etc.
From here, corruption, fascism, corporatism and misallocation of resources follow. This forms one prong of the pincer.
The other prong of the pincer, (since you can’t pinch unless you have two prongs) is the need for a growing supply of cheap energy. This is being undermined by the current fiat system, debt binge, and misallocation of resources.
The much maligned moneychangers do much useful and productive work, although rather less since most of Europe switched to the Euro. Sitting in a little booth for eight hours a day converting dong, baht and rupees to dollars, pounds or krona for passing tourists helps make the wheels of commerce go around.
And forex traders have been known to work up quite a sweat and ruin their nerves in their attempts to keep the money going around. Heroes of capitalism, I salute them all. Because for all its faults, a pure fiat currency system beats barter hands down.
I think all you need to do is have some market maker convert everything to a common unit, say bushels of wheat equivalent. Then, at the market, every thing can trade in units of bushels of wheat equivalent. You don’t really need currency to get away from barter.
A person can bring something to the market to sell. He can even be paid before his goods sell, if it is agreed how many bushels of wheat equivalent of goods he will get in return. David Graeber claims credit preceded currency.
I was thinking more about things within the economy but not inside an actual physical market. For instance, take overseas travel. Is it practical to pay for your air travel and hotel accommodation in bushels of wheat? Even if the bushel of wheat was excepted in place of a currency, it would become the unit of currency. You would still probably prefer to carry tokens or coins representing X bushels of wheat, or to use payment cards or system that digitally credited and debited so many bushels of wheat for each transaction you engaged in.
Our local vegetable market prices are published daily in the newspaper, and they vary greatly in yen terms according to how much growers and dealers bring to the market, how much sellers by, and to the quality of the produce. A rainstorm or a drought can also send prices of cabbages and onions soaring overnight. Bushels of wheat vary less from day to day but they can considerably from year to year. I guess it’s doable, but if it was an efficient method, I expect the buyers and sellers would prefer it to cash.
On the other hand, I do engage in quite a bit of “barter” in the form of reciprocal gifts. For instance, several times a year I send my brother-in-law in Shikoku boxes of rice, and he sends me boxes of oranges, lemons and loquat—so much fruit in fact that I give some of this to friends locally and they give me various things including beer in return. There is no formal exchange mechanism or accounting involved, and no hard feelings if gifts are not reciprocated, but both sides understand the need for some kind of reciprocation, and if no reciprocation is forthcoming, then the exchanges are likely to cease.
Among country people, a lot of small-scale barter, gift exchange, and giving away of surplus produce is always going on below the radar and doesn’t get monitored by the authorities or captured by the formal economic data.
But if you have a kind of apples=oranges economy, doesn’t that get too complex? Or might an equivalent group to money changers be likely to figure how to do it?
My take from fiat currency is that it allows traders, hedge fund managers, banks to borrow, naked short, leverage to astronomical levels, etc.which destabilize the financial system beyond what ordinary normal reasonable asset-backed currency exchange would allow. The FED epitomizes this by the creation of currency from nothingness., but which they can use effectively in the first pass to buy up things before they turn over the stepped on and inflated currency to the public. Yes, being a trader can be “stressful” but it is still for the most part non-productive! In the opposite end of the spectrum, barter makes it very difficult to expand trade, and hence a medium of exchange (which also had a store of value,) naturally emerged.
You talk about a “store of value.” I talk about a “promise of future goods and services.”
Our economy runs on promises of future goods and services. The point to note is that those future promises can be broken. So the “store of value” remains a store of value, only as long as the promises can really be paid. In the case of debt, it needs to be paid back with interest. In the case of government promises, governments need to make good on their promise to pay benefits to the elderly and unemployed. Shares of stock need to behave as expected. In other words, they need to pay dividends and the value of a share must generally rise over time. Derivatives need to pay off as expected, without bankrupting banks. All of these promises look like they may be broken.
There is also a sort of inter generational promise. There is a promise that the next generation will do at least as well as their parents. And that children will take care of their parents in their old age, if parents took care of their children. This promise is increasingly being broken.
Our economic system including all currencies should be directly tied to the amount of energy each country or region can physically produce.
Everything else is pie in the sky wish-making.
I think “at what cost, relative to the value to the end user is of huge importance as well. Intermittent electricity is worth very little. The cost of producing it must be virtually zero, to make it worthwhile..
All I’m saying is that money should be backed by something physical in the real world. Gold is impractical. People don’t usually think of energy as something physical but it is the only tangible quantifiable foundational measure backing all human activity. Gold doesn’t come anywhere close to that definition.
Instead of Facebook starting a new currency it should be General Electric. In fact, I don’t know why the utilities have not already commisioned some type of crypto currency development. Maybe they have.
The point is that if you have ten units of energy available and you print one million units worth of coin… you’ve already left the reservation. You are now officially in cuckoo land. In fact, where we are right now as a civilisation is as far off the reservation as one can get.
But it’s not impossible to bring things back in line.
I know you will say that we need oodles of fantasy debt to pull the future into the here and now.
That is a reaction to what you are witnessing at present. And yes, it helps us extend and pretend while the mechanics get to work behind the scenes.
Everyone needs to learn to live within their means. Be that a mud hut with a satelite dish or a mcmansion with a solar heated pool. Each according to their ability.
China would never have poured so much concrete and wasted so much time overbuilding ghost cities and railways to nowhere had they based their development on energy tokens alone and the financial reality of most of their population.
I witnessed the same behaviour here in spain during the construction boom. We have our own version of ghostly wastelands, projects that were never meant to be, but went ahead anyway making some scammers rich and many many others bankrupt.
The ones that did well and still do to this day stayed within their means, doing up a small property and renting it out to tourists etc etc.
A recurrent theme on this blog is that (fossil fuel) energy supply is not just dependent on resource availability but also the relationship between the cost of extraction of the resource and the price of the resource to consumers. I get that the price of energy to consumers must stay below a certain threshold to support economic activity. I get that the price rises too much (and too fast) it can make more and more economic activity unviable, and the resulting disruption can be much greater than one might think at first glance given the relatively low cost share of energy as a percentage of GDP. I also get that producers need a price level sufficient to support the cost of extraction, which is rising because of depletion. I see that this causes a big problem – consumers need low price point to support economic activity, while producers need a high price point to remain viable as businesses.
What I am not clear about is if this is really a fundamental limitation in the same way that resource availability is. It seems as if in principle there is a relatively simple fix for this problem, and that is to subsidize energy producers so that they can remain profitable. Energy’s cost share of GDP is around 8% or so. It seems like it should be possible to systematically tax less critical economic activity (for example, most of the end consumption that the very wealthy engage in) and use those funds to subsidize producers. An tax that amounts to 2-3% of GDP might ensure producer profitability for quite a while. As depletion continues that number can always be raised, making resource availability, and not producer profitability, the limiting factor after all.
The politics of such a strategy is another issue, but if any place can do this relatively easily it might be a command economy like China that is managed by (seemingly) rational actors. Other than the political obstacles (which granted are substantial), is their something I’m missing that is blocking this possibility? If not, it seems like their is a decent chance that the political landscape can shift in a direction that could support such a strategy, especially if there is some kind of energy crunch crisis that opens up the possibilities.
The big problem is that energy supply is foundational to the economy. Its cost share must actually fall, if the rest of the economy is to grow. Even within this falling cost share, the combination of growing extraction and efficiency improvements must at least keep up with population growth, and have a margin for interest payments, depletion, and everything else that is needed in a growing economy.
A subsidy for the energy industry normally is not needed. If it is cheap enough to produce (in resources and in people’s time) it is what provides the ability of the economy to provide the goods and services the rest of the economy needs.
The rest of the economy is in some sense depends on the “energy surplus” that inexpensive to produce energy supplies produce. As the cost of production rises, there is less and less energy surplus. There is nothing the rest of the economy can to fix this problem. Printed money is not the issue. The issue is depletion.
If a so-called source of energy needs a subsidy, it is not really producing the surplus energy the economy needs to support the overall system. The fact that wind and solar need subsidies are a sign to me that they are net energy sinks. If an energy source is behaving as expected, it should be possible to tax it heavily, to help support the rest of the economy.
You are right and I think that is going to happen soon. Subsidies or less tax could help the profitabilty of oil companies, there are other similar ways thinkable. The point is that these costs or less tax revenue are missing somewhere else in the national economy and thus will reduce living standard. I think it will not reduce GDP. If we invest more work into extracting energy it might look like economic growth. But that is a growth without growing living standard. Our measuring system cannot indicate this problem. We should take that into consideration.
So…subsidies to produce more affordable energy = loss to high paying jobs = loss to consumption = lower living standards? Won’t there be over all job loss within that formula?
I think that is the way it works out. For a while, it helps keep Chinese workers employed and commodity prices up.
Hello again to all of my favourite Collapsologists! It’s been a while since I posted here because, well, collapse has gotten boring for me of late, mostly because it’s taking too damn long to actually start happening. The number of ways one can express and demonstrate the reality of Our Finite World, are finite. No one’s going to want to listen either way!
Still, I thank Gail and other collapse bloggers for continuing to write about these issues. Just because a true thing is unacceptable to virtually everyone who isn’t stark raving mad or terminally depressed, doesn’t mean it isn’t worth writing about.
unless you keep up your OFW posts you’ll be back of the queue (line) when collapse actually arrives.
then you’ll be sorry
Oh god you’re right. I shall start spam-posting photos of Russian cannibals and spent fuel rods tout de suite!
O how we miss FE
who?
don’t forget to take some shots at gloooobal worming while you’re at it.
Having followed these ideas for many years(I read “Limits to Growth” in 1974-1975) it is my observation that being an optimist is a good strategy. If the world ends, most likely most of us end with it, if it does not, then we have lived a good life which is not to imply excess. It is a beautiful world and most likely it will continue to be such.
Regarding nutrition, many years ago I saw a cartoon with a caveman and cavewoman sitting around a fire, roasting dinner and the caption, “If we eat all natural, how come we only live 37 years?” Things have gotten better, not worse.
Dennis L.
Agreed, no point in being depressed about the inevitable. People who claim they are depressed because of impending collapse are probably trying to ignore the actual causes of their depression.
Still, a lot of things seem to be coming to a head. We probably won’t manage kick the can this time, at least not without major upheaval. My guess for what its worth: global economy breaks water around October this year; full blown recession by mid-2020.
A very plausible timeline if there is no temporary reprieve from these trade conflicts. Among other pointers, global trade and manufacturing data suggest that we are teetering on the brink right now.
You may be right on the timing. So far, things haven’t fallen apart. But the situation is trending badly.
The point is collapse can be cancelled or at least delayed with intelligence and creativity. Peter Turchin proves that impressively. A proper preparation, like cleaning up atomic waste or supporting gardens or access to clean water, might ease the change to a new system. To analyze a problem and to find its rules and causes is different to mere prophecy. The problem is that most people are not strong enough mentally and run away from reality and thus enlarge the challenge.
Optimism alert!
You lose 10 doomie points.
Like you, I am all for preparing for economic and social turbulence. Indeed, if I hadn’t had some foresight I would have collapsed long ago. Instead, like Spike Milligan, I’ve managed to work my way up from nothing to a state of extreme poverty. 🙂
We have a world today in which some of the biggest problems we as a society are facing are going unacknowledged and unaddressed. At the same time, some the problems we are putting our biggest efforts into fixing are not real problems at all and some of the solutions being implemented are not real solutions at all. On top of that, a lot of our productive efforts and resources are going into inherently wasteful or at best marginally useful activities. We as a society—the general we— are not living in the sort of perceptual world that gardeners, farmers and growers such as you or I inhabit.
It’s all a humbug I tell you! ASd now, I’ll have my cocoa, listen to the shipping forecast*, and retire to Bedlam.
*Although it’s never been the same since they changed from Finisterre to FitzRoy.
https://youtu.be/CxHa5KaMBcM
Before the collapse? When we look at the times of Jesus Christ, there was a lot of neurological and orthopedic health issues. Today, when I visit a healthcare center here in Slovakia, I can see the same picture: the waiting rooms of neurological and orthopedic specialist physicians are overcrowded like no other clinics.
Meaning people are stressed and under nourished?
I would say yes: the food quality goes down and the life is stressful.
Plus the fact that the population is ageing: missing substances in the ageing bodies.
Well, slovakia is an outsource country for Europe, yes? Lots of plants for low-priced labor? I now work at a plant and it’s very tough work that may result in trips to orthopedists as the norm – you don’t age gracefully if you work long enough.
The life in the mountains has never been easy. The declinig food quality, the insufficient nutririon seems to be the last straw in the collapse od the human societies.
Well I never knew!
Narco-trafficking and petrol: a quarter of Colombia’s fuel goes to make cocaine
Petrol is a key ingredient in the first stage of cocaine processing, when psychoactive agents are extracted from coca leaves: around 75 gallons of fuel are needed for each kilogram of coca paste, which is then refined into cocaine.
https://www.theguardian.com/world/2019/jun/14/quarter-of-colombias-fuel-cocaine-industry
I guess this means cocaine production might be under threat as well!
I wonder what the figure is for cannabis, all those heat lamps?
“…while traditional media narratives about drugs have centered on violence, they’ve often ignored another pitfall of the illegal drug trade: the environmental impact of a massive, underground, unregulated industry operating around the world.”
https://www.vice.com/en_us/article/j5wjwp/your-drug-habit-is-destroying-the-planet
“Industrial output in the euro zone dropped in April, hit particularly by falling car production, adding to concerns of a prolonged slowdown in the region that may in turn apply pressure on the central bank. Monthly output dropped 0.5 per cent, compared with March, the regional statistics office said on Thursday.”
https://www.irishtimes.com/business/economy/industrial-production-in-euro-zone-drops-1.3924486
“According to the Financial Times, cross-border data shows capital entering the U.K. has fallen by 30% since the Brexit referendum, while investment into the E.U.’s other 27 countries in the three years since the referendum has surged 43% up to the first quarter of 2019.”
https://seekingalpha.com/article/4270146-brexit-looms-large-autos-lead-u-k-s-gdp-slowdown
“German Federal Ministry of Economy and Energy said the economy will “remain subdued for the time being”… “Unemployment increased in May, not just because of special factors.””
https://www.actionforex.com/live-comments/207255-german-government-subdued-economy-with-first-signs-of-labor-market-slowdown/
“The European Union’s push to bring Italy into line with the bloc’s fiscal rules intensified on Thursday as top officials called for new measures to address budget shortfalls and raised concerns for the euro zone’s stability from Rome’s high debt.”
https://uk.reuters.com/article/us-eurozone-italy-debt/eu-sees-fall-of-italy-debt-crucial-to-euro-zone-stability-idUKKCN1TE126
And the UK economy largely lives, as Tim Morgan puts it, ‘by the kindness of strangers’…..
…and on the fumes of bygone glories, which make our sovereign borrowing costs much lower than they really should be.
For example, isn’t it rich (crazy) when Indian capital hires British talent to design for them luxury cars ending up on global market, yet assembled by cheap labor in a protectorate on the outskirts of the EU..
I am traveling today. I may be off line a lot.
That’s weird.
“Chinese Ministry of Commerce spokesman Gao Feng told a Beijing press conference on Thursday that “there will be no winner in the trade war, which could cause a recession in the United States and global economies.”
“The ministry did not disclose US investment growth in China for the month of May alone, but the plunge seems to have coincided with the collapse of trade talks between Beijing and Washington.”
https://www.scmp.com/economy/china-economy/article/3014407/trade-war-could-cause-global-recession-beijing-official-warns
“China’s industrial economy continued to sag in May, data released on Friday showed, as the trade war with the United States continued to hang heavy on the world’s second largest economy. A new batch of data from the National Bureau of Statistics showed further deterioration on April’s numbers, and pointed to an ongoing slump across key manufacturing and production sectors, many of which are reliant on strong exports.”
https://www.scmp.com/economy/china-economy/article/3014521/china-economy-slump-goes-may-industrial-growth-lowest-17
“Competitive currency devaluation does not benefit any country and could cause chaos to global financial order, former China central bank governor Zhou Xiaochuan said on Friday. Zhou did not specifically mention the Chinese yuan in his remarks to a financial forum in Shanghai on Friday. But global investors are closely watching the weakening currency as the U.S.-China trade war escalates.”
https://www.euronews.com/2019/06/14/competitive-currency-devaluation-could-prompt-global-financial-chaos-ex-pboc-chief
“The US-China trade war, industrial strife and political deadlock all threaten to overwhelm the World Trade Organization, putting the future of the institution and the system of free trade in mortal danger, Liam Fox has warned… He criticised the G20 for failing to address the “scale [and] urgency of the challenges facing the global trading system” and warned “the WTO could be facing an existential crisis”.”
https://www.telegraph.co.uk/business/2019/06/14/liam-fox-warns-wto-crisis-businesses-told-brace-no-deal-brexit/
Let’s not worry: Chinese Ancient Wisdom will get them, and us, out of all of this.
It feels genuinely good to read your daily collapse nuggets again. As always, much appreciated good sir!
Thank you, Jupiviv – you are welcome.
Peak coal is handmade thing, the primary reason why it’s peaked – climate change, not because it’s become too expensive to produce. Coal still abundant and cheap to produce, but it is being replaced by natural gas. Could you comment on that? It this correct?
Similarly to oil (deep water, tight, shelf, ..) there are also many varieties and grades of coal, usually it’s not easy, sometime even impossible to suddenly make existing plant burning something else. There are also logistic (rail to deposits, dwellings nearby, watershed, ..) and other intervening considerations affecting the operation of existing or new coal plant.
Natgas is a bit more straightforward in this, but you have to pay for it (dearly).
For example the Euros are getting empty as of lately and all options are not that good: North Sea and North Africa already depleted, Turkey hosting TWO pipeline projects – not exactly European historical ally.. (why feed and empower them), Russia reliable biz partner but questionable for some factions in terms of geopolitics, and so on.. Not mentioning US and their most expensive gas offering, currently selling in bulk only to Poland, lolz..
Natural gas is very expensive to ship, especially as LNG. As a result, it tends to be either too high priced for the consumer or too low priced for the producer. With this conflict in pricing, prices are not very stable. Prices now tend to be too low for the producer. The situation is not very different for oil, coal, or natural gas. In fact, uranium prices are now low compared to spikes in the 2008 period, as well.
Prices seem to depend on the ability of factories and other big users of the products to raise prices to the consumer to cover higher costs of depletion. If wage disparity is becoming an increasing problem, then it is hard to raise prices.
Fake News: Telsa kills again!
Real News: Someone killed themselves again and tried to make Telsa Motors take the rap.
https://www.usatoday.com/story/tech/2019/05/17/teslas-autopilot-active-during-fatal-model-3-crash-report-finds/3706981002/
Telsa stands by their standard explanation for these crashes and repeated once more that
“the crash was due to user error. Another driver misunderstood the autopilot function. The autopilot feature is not really autonomous but not completely un-autonomus.The driver should make all major decisions on navigating the car to avoid crashes.”
But don’t fret, true believers, you can play Atari video games at the driver’s wheel with all the free time
https://www.businessinsider.com/tesla-car-games-full-list-2019-6
Telsa Motors’ cars allow by taking the boring , arduous task of driving a little bit off your hands while your hands are on the wheel.
You know, it’s funny because if you listen to Zerohedge you get the impression that every Tesla has doors falling off or they are about to catch fire. Every Tesla I have seen in my area and there are quite a few, look in pristine condition on the road.
The Zerohedge comments section is truly one of the mysteries of the universe. On the one hand they used to be quite informative and a useful source of alternative views. On the other hand… it has mostly descended into a scrap between dumb and his racist brother dumber to see who can make the funniest, dumbest comment of the day.
What is truly revealing is that the same commenters manage to comment on every single article posted throughout the day… every single day for years on end!!
Now that’s some serious dedication or what we’re witness to is “professional” commenters, trolls, agents etc.
What’s also intrigueing is the way Zerohedge as a controversial platform manages to survive the purge going on with other far less controversial purveyers of alternative news.
They are hosted in Canada and may have changed hands since the early days but still.
Their rabid anti Tesla ravings appear to be mostly aligned with shorting the stock and little else. The shift to electric cars is not really possible until we see a revolutionary breakthrough iin battery development. And even then, you’re still lumbered with the ramping up of materials and battery manufacturing on a global scale to meet these ambitious requirements.
It doesn’t look very good right now for any kind of new car manufacturing. There appears to be a very pronounced slowdown in sales many of which were based on cheap loans. And at the moment EVs are by far the pricier option.
The idea of requiring breakthroughs for further expansion and growth applies across the board. But even if they arrived, the inertia of decades in the direction of collapse will be very hard to avoid for the majority of world markets. As Gail often reminds us, it has more to do with the ability of consumers to consume new products than any magical achievements on the production side.
The cheap energy breakthrough simply hasnt arrived.
That must explain why they are selling so many cars.
“Every Tesla I have seen in my area and there are quite a few, look in pristine condition on the road”
That’s funny.
Most of the first-world economies seen in the world, and there are quite a few, look in sustainable condition on the world stage. And I suspect they will continue to look that way… until their doors fall off and they catch fire (metaphorically speaking).
Cheers,
-GBV
Does Tesla pay for online shills or what?
The new German EV platform (for number of different models), now on the roads in final road test tuning and msm previews, due in consumer – public hands by ~2020 is ~3% more efficient (manuf’s claim not completely independent tests) and it’s a hatchback in comparison to Model 3 Tesla. But it is very ugly so far..
Another question is when TSLA starts to mass produce their new cheaper (non cobalt) batteries, sooner than next recession or GFC_vXY .. ? This stuff is chiefly aimed at their upcoming pickup, semis, and sports car lineup.. obviously it’s bound to eventually trickle charge into batt storage application as well..
What baffles me is why these manufacturers, even startups like Tesla, don’t start at the other end. That is… with the most affordable runaround for the largest number of consumers.
Everything Tesla so far has targeted the high end luxury buyer. Why is it so difficult for a company today to design and market from scratch an affordable runaround – that would sell like hot cakes and in huge volume (a bit like affordable smartphones)?
It doesn’t make sense. The designers are there. The engineers are there. The entrepreneurs are there. And the market is certainly there for cheap, good looking EVs. And yet we always hear the excuse that one must start by producing a sportscar and then trickle down before actually being able to break even and make a profit. It doesn’t make sense!
The reason is the battery technology is not ready yet. Even with subsidies the cars are beyond the reach of most buyers. And with no real benefit for the extra cost other than vapid pride.
The more you look at it, the more renewables, EVs, and Fusion etc look like ways of keeping Hopium alive so that things don’t fall apart even more quickly than they are.
I guess the advanced game at this point in time means that each of the global IC mega hubs is producing in tens of millions of cars. So, the entry point ticket price is huge, you have to plan at least for millions of copies produced each year at certain not distant stage of the newly established car company.. which is insane condition by any means.
Some of TSLAs in house development are clearly leapfrogging the car industry standards: power train electronics is space-defense level marvel, batteries are/will be soon done very differently in comparison to competitors, which usually outsource this core tech dev stuff etc.
Tesla is 100% responsible for the “mistakes” of their “users”. They perpetuate the culture of full autonomy when it hasn’t yet been achieved. They allow their “users” to engage autopilot – which of course is not an autopilot at all but gives the impression that it is – and then makes the recommendation to “users” that they should keep hands at the ready and attention alert so as to take over when the semi-autonomous car advises the “user” to do so.
This is truly ludicrous! And unlike activating the Ludicrous Speed setting – which again encourages dangerous driving by the way – drivers are distracted the minute they activate autopilot.
This is one of the most irresponsible deployments of technology I have ever seen. The “users” are essentially paying hefty fees to act as live crash test dummies.
At the moment, it’s difficult to see how we can reach level five autonomy where a passenger can ride comfortably in the back seat of one of these cars and not fear for their lives.
A Morgan Stanley economic indicator just suffered a record collapse
https://www.cnbc.com/2019/06/13/a-morgan-stanley-reading-on-the-economy-collapses-by-the-most-ever.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboard
Probably not an issue– we need to bomb Iran and stop all those dangerous illegal aliens from taking away those jobs.
Wow! That is really a drop. The manufacturing sub-index dropped to 0, because of the drop in oil prices, if I read the article correctly.
I saw this article (https://www.bloomberg.com/opinion/articles/2019-06-13/climate-change-greener-energy-might-mean-a-slower-economy) today. It seems that conventional economic is slowly changing.
Gail Tverberg > If shrinking energy consumption per capita starts in one country (whether China or elsewhere), it could easily spread to other countries around the world.
It’s already the case for Europe: Per capita, it uses about 20% less oil than it did in 2005, because it depends heavily on imports and has to increasingly share world production with emerging heavy weights like China and India.
https://i.postimg.cc/T2nDqfb4/image.png
https://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE?locations=EU
Europe is one of the big areas that has sent its manufacturing to China, so the real decline isn’t quite as bad as indicated by the line shown. But standards of living have been falling. Young people are having trouble finding jobs, especially ones that pay well. The UK is well known for its Brexit problems. And Ugo Bardi in Italy has been writing about the fact that he cannot keep up with the standard of living his parents had.
Thank you, Gail, your article is a brilliant eye-opener regarding Chinas economical situation.
This state can never, ever continue till 2030. China and the whole interconected world-economie is a dead man walking who can fall every day.
Carpe diem
Saludos
el mar
Thanks! We all need to “seize the day.”
I hope we don’t fall every day.
One will suffice, thanks.
Until then… may we keep kicking that can down the road with all our might, before the dying of the light, and John Wick’s last fight, only then will we face our plight!
By the way, in case anyone is interested, here is Godfree’s latest article about how China is going to lead the world.
http://www.unz.com/article/when-china-leads-the-world/
All that talk of ‘humane authority’ in the article just feels so… false. Foreign Minister Wang Yi is virtually trying to tell everyone that we Chinese are all angels and have been for millennia. Hard sell, mate, I think you might as well try making an intelligent adult believe in Santa Claus. I love and treasure China’s philosophical and spiritual traditions, but face it, down to the present day those who rule China have proven themselves as willing as anyone else to resort to acts of blatant immorality and extreme brutality in exercising their power — in plain contradiction to what the said traditions stood for.
And at the end of the day, sorry, but the finitude of our resources ensures nobody’s going to lead the world. Not China, not America, not anyone. So relax, the white man’s not going to have to learn Chinese — though the reason is not a pleasant one at all.
So relax, the white man’s not going to have to learn Chinese
Every cloud has a silver lining!
Or, as the Chinese say, shan qiong shui jin yi wu lu, liu an hua ming you yi cun.
The mountains are steep and forbidding, the rivers deep and ferocious, will I ever get out of here?
Suddenly, there are calm willows swaying in the breeze and myriad flowers blooming in fine fields.
And look!, there is after all another village.
And the village’s name was… Google!
Looking at the sorry state of affairs towards which we’re all headed, I prefer to quote the following couplet:
天長地久有時盡
此恨绵绵無絶期
Let me know if you need a translation. 😉
China = world financial capital, after 2032 anyway…
“Where’s the proof GBV” you say? Well, go pay Martin Armstrong to find out for yourself:
https://www.armstrongeconomics.com/international-news/china/chine-the-financial-capital-of-the-world-after-2032/
I’m too broke to afford any of his reports (though not too humble to beg for those who do have access to them to share them with my broke-ass for free…) 🙁
Cheers,
-GBV
Not sure if this was meant as pulling our leg or indeed serious post, no offense.
In my humble opinion there are much higher chances that TSLA would double, triple (for a brief exalted euphoric moment) before ~2025, than any recommendation issued by that newsletter analyst ever coming through..
Pretty serious, actually.
I try not to put faith in “gurus” these days, but Armstrong has been proved to be prescient in the past and may be proven to be right on many of his predictions for the future. Of course, he could just be another snake-oil salesman like so many individuals in the financial services world… but given his notoriety, I haven’t been able to find many criticisms of the man suggesting he is a shill / fraud / etc. (like, say, James Rickards for example), which I find intriguing.
It would be nice to actually speak with someone who has purchased one of his reports to get an idea of how valuable his analysis proved to be.
Specifically on China, however, I suspect he will be right, as it appears that there is a cycle driving the migration of the world’s financial capital. It seems to move from the heart of the current empire to said empire’s current manufacturing “sweatshop” as said empire begins to collapse.
So China, having become the manufacturing sweatshop of the West (gaining access / insight not only to our industrial processes, but to our ways of governance and diplomacy), will become the “empire ascendant” after the death of Western hegemony (i.e. between now and 2032), as the West continues to fall into decadence / madness / civil unrest.
Of course, the end of the Age of Hydrocarbons means that the coming Chinese hegemony will pale in comparison to what the West achieved, as their ability to project power will likely be stymied by severe energy constraints.
Cheers,
-GBV
China is 15 to 20 years behind Japan and Korea on the road to old-fartdom. It’s baked into the demographic cake,. With or without shifting economic sands, tariffs and unaffordable energy inputs, those demographic factors are going to force China to be a good deal less active and aggressive in the decades ahead.
Europe and America are escaping the East Asians’ fate by allowing in millions of immigrants from the Third World to provide the extra young people they don’t provide for themselves. This is going to produce a demographic cake of a very different flavor.
Demographics don’t necessarily dictate market confidence, which in turn dictates capital flows.
I believe Armstrong’s argument is that, eventually, China will “open itself up” and allow the free flow of goods/services, while the West will become more corrupt and impeded by its own insane laws. Smart money will flee the West in search of freedom/safety/security, at which point (or perhaps even before then) I suspect those young immigrants who break their backs to support our high living standards won’t be as interested in coming to the West any longer…
Cheers,
-GBV
GBV,
A bit like the users of MySpace fled in search of pastures new and came across a little town known as FaceBook.
Now the users fo FartBook are looking for pastures new and end up in the loving embrace of Instagram and Whatsapp.
Little did the users know that Instagram and Whatsapp were also owned by the evil Fartbook and therefore did not really constitute pastures new but the same old same old.
At some point, the users gave up looking for pastures new. Some of them even returned to MySpace for the nostalgia, nostalgia being one of the largest contributors to GDP and mental wellbeing.
The rest came to the realisation that they were being led by the nose round and round in a silly game just so the Masters of Coin could extract from them the means to build a breakaway civilisation.
The users were never more than sheep to be fleeced.
We need to stop pretending that there was ever anything else going on.
This fleece the sheep angle reminds me of something I read about a Chinese general’s speech made in 2015 in which he spoke of the Americans harvesting from other countries:
If we acknowledge that there is a U.S. dollar index cycle and the Americans use this cycle to harvest from other countries, then we can conclude that it was time for the Americans to harvest China. Why? Because China had obtained the largest amount of investment from the world. The size of China’s economy was no longer the size of a single county; it was even bigger than the whole of Latin America and about the same size as East Asia’s economy….
… The Americans need to create a regional crisis for China, to get the money back to the U.S.
Why does the U.S. economy rely so desperately on capital flowing back to its market? It is because, since 1971, the U.S. has given up producing real products. They called the real economy’s low-end or low-value-creating manufacturing industries garbage industries or sunset industries and transferred them to developing countries, especially China. Besides the high-end industries, such as IBM and Microsoft, that it kept, 70% of its people moved to finance and financial services industries. The U.S. has completely become a hollow state which has little real economy to offer investors a big return.
The Americans have no choice but to open the door of the virtual economy, which is its three big markets. It wants to get the money from the world into these three markets so that it can make money. Then it can use that money to harvest other countries.
The Americans only have this one way to survive now. We call it the U.S.’s national survival strategy. The U.S. needs a large amount of capital flowing back to sustain its daily life and its economy. If any country blocks that capital flow, it is the enemy of the U.S.
https://fabiusmaximus.com/2015/10/21/qiao-liang-sees-china-vs-america-90041/
Very interesting! It adds up sure enough. Umair Haque, who writes in Medium says the USA is the world’s richest poor country. Most Americans are blissfully unaware of what is going in in their name. Propaganda has the narrative all sewn up.
A note of possible interest. This morning Alice Friedemann’s Energy Skeptic website has been blocked under the category of Hate and Racism. I checked a few more collapse subject websites, collapseofindustrialcivilization.com could not be reached. Well, probably just the result of a complaint from a troll, or the inadvertent result of one of the hate web site purges sweeps by Google et.al. Still, I have wondered if at some point if on-line discussion of less than rosy futures might get censored. It is after all important for everyone to believe that the future will be better…..
Oh dear!
When I looked, the site seemed to be fine.
I found it on a second try. The most recent post is March 29.
Interesting. Recently, Alice published an excellent piece on the enslavement and rape of girls by ISIS,(pointing out that this is what the Tribes of Israel routinely did, too), her point being that such behaviour is likely to return generally. and also to be the fate of defenceless migrants feeling collapsing regions.
A commenter never seen before laid into her at great length for publishing obvious ‘Islamophobic’ propaganda, and for being by implication a racist imperialist, etc. They said the same to me when I defended Alice. A real nut.
Might be the root of the problem? She could have been reported for both ‘Islamophobia’and ‘anti-Semitism’.
Of course, eventually any talk of Collapse may itself be banned as ‘economic subversion/ defeatism.’
In this context, its helpful that FE is long gone with his diatribes.
Good points, lone nut or real one, be well advised that “the internets” will get heavily censored beyond China style level way before the final cascading JITs disrupting collapse onset, and or larger war commencing..
As the basic rule would be rediscovered that plunging the societies few centuries back (optimistic scenario) is best achieved by extending the leverage between ruled and oppressed classes as far as possible. In other words lets plunge them into that dark abyss uninformed and helpless, so they can find the only help with us again..
Yes, they are starting to narrow the channels of communication and restrict what can be said and who is allowed to say it.
It began with banning people who refer to certain protected classes of others by using “unacceptable” language, or denied validity of certain historical interpretations, but this was was always going to be the thin end of the wedge. Jon Rappaport had his website shut down by Word Press last month for being “an anti-vaxer” and I read that YouTube just shut down Black Pigeon’s channel, probably because he is so effective at deconstructing the illogic of what passes for left-wing ideology these days.
It is only a matter of time before they (the controllers)get around to closing down all serious dissent on the major online platforms. Intelligent people like us 🙂 who want to chat about things we think are important will eventually have to invest in our own platforms, and even then we can expect a war of attrition against us. We could well be doomed digitally before we’re doomed literally..
It’s my fond hope, however, that YouTube will continue to allow gardening videos up until the moment the Big Plug is pulled.
That’s was my aim, not as much as the political angle, and unfortunately I don’t share your optimism there, as gardening channels might go down pretty soon, especially those dealing with quasi autarky practices (e.g. low/no outside input)..
Hmmmm… You don’t like FE, do you?
Liking or not has nothing to do with it: but diatribes and aggressive rants are not helpful, and may be used as evidence to endanger a site for ‘hate speech’ and close it down, and those were his speciality.
He was much better when in calmer mode., as on other sites where he didn’t feel so free to let rip. That’s all.
“…but diatribes and aggressive rants are not helpful, and may be used as evidence to endanger a site for ‘hate speech’ and close it down…”
I suppose, Brother-Comrade, we should all self-censor ourselves and talk about how Chinese stats are always correct, how the Party knows what is best for us, and how we’ve always been at war with Eastasia (not Eurasia)?
I wouldn’t bother coming to a place like this if I (and others) couldn’t say what they believe is true or how they feel, the delicate sensibilities of everyone else be damned. If it’s a choice between OFW being shut down or having to “self-moderate” and post niceties / half-truths, it’s really not much of a choice at all.
Cheers,
-GBV
PS – I hate you Xabier (not really, but I felt the urge to post some hate speech today) 🙂
To make his points, Xabier prefers to use a light saber than a blaster.
He’s an elegant gentleman from a more civilized age.
https://youtu.be/ZjO5a__JPLM
Xavier has fallen victim to classifying free speech as hate speech. The mere use of the term hate speech is a modern liberal fascist term used to censor unwanted points of view.
Xavier has fallen victim to classifying free speech as hate speech.
Read his comment again. He is not classifying anything. He’s merely pointing out that in our increasingly totalitarian society, certain speech may be classified as “hate speech” and this classification used as a pretext for closing down websites.
His heavy use of disgusting imagery didn’t help.
And calling everyone not himself a mooor…on didn’t help either.
But he was entertaining and had a way with words.
We can all resort to fear mongering because… lets face it… most of these sites have been peddling doom and gloom for the past twenty years or so.
And we’re still here… hanging on by a thread… but still here.
Apart from humor – amusement, his biggest contribution was the humbling side effect of realization, you don’t mess with ‘uncle true billionaires league’ if you are not up to them (NZ relocation was a bad plan with his relative low funds/pecking order).
Most finite critical resource exports have reached this same conclusion some time ago – regarding the global economy and its most critical resource – energy. China being the worlds largest manufacturer only focuses global energy short falls in a more visible way – creating a rather large “canary” in the global economy “mine.”
On the other hand, whether manufacturing energy consumption is focused in China or spread out – it will change energy depletion economics and timelines very little more or less. That significant shortfalls in global energy and individual nation energy shortfalls are coming is basic math. Two conclusions should be drawn from the data in your graphics:
1. A national finite critical resource independence strategy- even while participating in the current global economy is the best insurance against coming chaos from energy depletion.
2. The priority to develop a near “free” (compared to current energy economics) and long term sustainable energy resource should be one of highest for the world. Fusion research should be accelerated to point where viability can be determined and implemented if successful – while maintaining advancement in other energy technologies. Because once we enter serious energy shortfalls economic and resource conflict chaos will limit technological breakthroughs.
3. Additionally, as we deplete the last of the economically viable petroluem resources in the next two decades, economist need to focus on the impacts of absolutely dependent industries such as petrochemical and the cost increases on critical areas such as NPK food production – which the 95% of the global human and domestic animal bio-masses are dependent upon.
4. Understanding and preparing for shortfalls in energy and related finite critical resources a softer landing and chance to avert a global disaster can be achieved. Without understanding and strategically preparing for what energy shortfalls mean to the global economy and its politics – only implosion and collapse can result.
Energy depletion economics says that the economy either:
(1) Grows enough to keep up with depletion, interest payments, rising population, and all the other things that push energy needs up, or
(2) Collapses.
There is no middle ground. The amount by which depleting but still operational oil wells can theoretically produce oil is mostly irrelevant, as far as I can see, because the whole system needs to be operational for it to work. If the water separation from the oil system doesn’t work, there will be no more oil produced, for example. People do not see overall system needs, and put together wrong models.
Thus, the date of collapse is important. It seems unlikely that we will be able to produce much fossil fuel of any kind after collapse. I have a hard time seeing very much happening in the two decades after collapse, unless part of the world economy can collapse more slowly than the rest.
Agreed – mostly. A real collapse will end civilization as we know – including technical problem solving and many necessary economy-of-scales that support the current economy.
Trying to predict a collapse date may be impossible more than five to ten years in advance (and likely too late) – other than knowing that it comes before we run out of petroleum energy economic viability (two decades at the most based on well known reservoir volumes in what I read) – unless there is some timely implementable near “free” energy breakthrough – which necessarily means very, very soon. Fusion seems to be the only thing in our theoretical “hope” chest – but there seems to be little push to determine its physical and then economic reality. If the energy breakthrough (if there is one) isn’t cheap enough – it still won’t matter, the collapse will happen anyway and the human population will decline back to level where energy availability isn’t population limiting.
People don’t see the extended finite critical resource economic dependencies (most sensitive being petrochemicals relationship to global food production) to the current economies-of-scale of the current scale of the transportation/energy sectors (85% of oil consumption) of the oil market. Petrochemicals (5% oil consumption) will become disproportionately expensive to petroleum as it ‘s economies-of-scales decline beyond the current optimums. These sensitivities will derail the global economies through food shortages and internal economic strife and chaos with even larger resource wars than what we have seen in recent decades in the ME- when there is a major energy short fall and well before we use all the oil.
you are quite right of course
except for the bit about energy availability
population of any species always grows to the limit of energy availability
Perhaps I wasn’t clear enough – that is exactly what I said. Humans are different from other species – our energy is fungible in to many things – especially food production in that we have the technology to use non-renewable energy and use it until it is no longer economically possible – but the out come is the same as lower animals when our energy resources can no longer provide adequate food supplies. Population collapse.
One of the most interesting pieces of information you present is the sudden decline of cement production – couple that with copper/electronics, housing and autos and it looks ominous.
Figure 9. appears to be mislabeled or mistaken. “Population” is apparently Population Growth Rate, because both the global and Chinese populations continue to increase – not decline.
The whole exhibit is labeled “Growth Rate in Energy Consumption divided between population and living standards.”
I thought about labeling this “Growth Rate in Energy Consumption divided between growth in population and increase in living standards,” but I ran out of room. I was hoping readers would figure this out for themselves. What I am showing is China’s contribution to world energy consumption growth.
One of the near constant errors I see in the media coverage of the global economy regarding population – confused declining population growth rate with increasing population growth (1%/yr) – which the avg. reader absorbs without understanding or objecting. I see a lot of comments (especially from millenials) who actually believe the world population is declining – as a result of this confusion between population growth rate and growth. You make lots of good points in your articles – clarity only makes them that much better.
The Federal Gov’t always does that when talking about spending. Decreasing military spending or decreasing deficit spending….NOT. It is a decrease in the rate of acceleration.
very interresting reading gail..thank you for your work..
Thanks for the new article.
That -fig9- red graph of living standard per capita is a clincher in terms of depicting past ~40yrs of borrowed or extended time.. I guess many people still can’t wrap their heads around it, as the so-called technological progress supposedly brought more toys/stimuli per the same token of energy burned-transformed, so everything should be much better today (for the people inside IC hubs at least).. but it is not on many/most levels.
Thanks for the new article, Gail. Your first two figures are jaw droppers. It seems the USA expends a lot of energy “commuting”. Maybe this is due to Jim Kunstler’s curse of suburbia, the biggest misappropriation of resources in the history of the world.
I thought those figures were jaw droppers too. In the US, we spend an awfully lot of energy on getting around. People seem to think that as long as their personal transportation continues, there will be no problem, not realizing how much energy is used elsewhere in the economy.
For what it is worth, based on the new BP report, US oil consumption was divided as follows in 2018:
Gasoline: 45.5%
Diesel: 20.8%
Other Uses: 33.7%
Gasoline use isn’t all personal, because some smaller vehicles like police cars and salespeople’s cars are used for business purposes. Even if we all stopped all personal driving tomorrow, business uses would likely account for over half of oil consumption.
Of course, it doesn’t work to stop using just one part of the barrel. The situation is like anything else–all of the costs must be divided among a large number of users. Just as the internet depends on the video game players to pay part of the cost, the oil system depends on personal drivers to pay part of the cost.
And of course, the parts of the barrel aren’t very interchangeable. Diesel can be changed to gasoline by cracking, but gasoline cannot be changed to diesel. We can make shorter hydrocarbon chains by cracking, but not longer ones.
Using the just published data from the BP Statistical Review I did this graph on CO2 emissions:
https://pbs.twimg.com/media/D85S6kgU8AUJSne.jpg
The graph shows that oil price changes and spikes resulted in annual CO2 emissions going flat or declining – for a short period:
https://pbs.twimg.com/media/D85S6kgU8AUJSne.jpg
1973 1st oil crisis following the US peak
1979 2nd oil crisis with Iran oil peak mid 70s
2008/09 Oil price shock and financial crisis as explained here:
World crude production outside US and Iraq is flat since 2005
http://crudeoilpeak.info/world-crude-production-outside-us-and-iraq-is-flat-since-2005
Therefore, I work under the assumption that only an enduring oil and financial crisis will bring down annual CO2 emissions – provided oil is not replaced by coal (which will be hard and not efficient)
I agree that an enduring financial crisis is what will bring down CO2 emissions.
The higher the price, the higher the demand, and the greater the increase in emissions. Low prices tend to lead to lower CO2 emissions. It will be a price collapse that brings down the system. A price collapse for oil will likely be a price collapse for coal within a year or two, because of the way the system is connected together.
Who gives a flying fark about CO2 emissions… except for the ones you’ll be putting out when your machete wielding neighbor is chasing you down the road the day after BAU goes bye byes.
Two tankers hit in the Gulf of Oman
https://www.reuters.com/article/us-mideast-tanker/two-oil-tankers-struck-in-suspected-attacks-in-gulf-of-oman-shipping-firms-idUSKCN1TE0OI
…and oil prices rise…
China has been supporting oil prices, not only through consumption, but also by hording crude. China imports almost 10 mmbpd and domestic production is almost 4 mmbpd, but their refineries only process 10 mmbpd. So…their inventories grow by 4 mmbpd?
China doesn’t release official crude inventory data.
This just has “false flag” written all over it. The USSA is just itching for a war with Iran.
Attacking tankers would be just about the dumbest move possible on the part of Iran, so we may draw our own conclusions as to the veracity of this claim and just who the authors might be……
Not so sure about that “itching”. Iran is known to the warmongers in Washington as a “nightmare” scenario, No explanation but elsewhere I read that Iran if it closed the straits of Hormuz [i assume they think they can] it would be a catastrophe for the oil business. since so much oil is shipped through it.[80%?] It’s easy to guess the fallout!
On a similar note to China’s energy woes is this statistic from Art Berman saying that the USA now produces 50,000 barrels per month more than during the 1970 peak, but it still has to import 7 million barrels/ day on top of the 11 Million barrels/day production plus taking oil out of storage as well, to sustain itself, He says we are nowhere near self sufficiency. and “We are in deep trouble”
The Houties in Yemen are attacking Saudi oil infrastructure with drones. The Houties are backed and armed by Iran and China.
The U.S has imposed sanctions on Iran and is in a trade war with China.
The U.S is the guarantor of safety in the region…but obviously falling.
Russia has joined the war in the region.
Things are heating up in the region.
I don’t know who’s behind the attacks on the tankers…I just know that everybody is lying.
the “end of oil” will not come through lack of it, but by fighting over what’s left of it
That much is being made obvious by what been happening in the Gulf region for the last 20 years or so
Iran could reduce SA to a flaming mess in 30 minutes.
What no one talks about is they hold the trump card.
That is a good point about China’s big inventories being part of demand. This is true for metals as well as for oil. China tends to buy when prices are low, so this has helped prices not to fluctuate as badly as they might otherwise.
With respect to oil inventories in China, there is (or was?) a company that does aerial surveys of China, and estimate oil inventories by looking at storage tanks and seeing how high the lids are floating, to see how full they are. I haven’t seen any recent estimates, however.
The wessels were headed for Asia. claim “make Asie small agein” becaus sending ships there is dangerous…
“Euro-area inflation expectations slid to a record low, adding pressure on the European Central Bank to step up policy support for the region’s economy. Five-year forward five-year inflation swaps, a gauge of investor estimates of price increases in coming years, dropped Wednesday to 1.1830%, well below the ECB’s target of close to, but below 2%.
“That suggests the central bank may have to take further steps to revive inflation, such as restarting bond buying, or potentially even cutting interest rates deeper into negative territory.”
https://www.bloomberg.com/news/articles/2019-06-12/europe-inflation-expectations-at-record-low-worsens-ecb-headache
“A closely watched measure of U.S. inflation trailed forecasts in May, reinforcing the case among investors for the Federal Reserve to cut interest rates.”
https://www.bloomberg.com/news/articles/2019-06-12/u-s-core-inflation-cools-bolstering-case-for-fed-rate-cut
“Data released over the next few months will show that the current US economic expansion is the longest on record. But while the US continues to outperform other advanced economies, this success has yet to dispel many Americans’ persistent sense of economic insecurity and frustration; nor does it alleviate concerns about the lack of policy space to respond to the next economic downturn or financial shock.”
https://www.theguardian.com/business/2019/jun/12/the-unusual-us-economic-recovery-is-now-its-longest
I recommend the BP report. 2018 was a great energy year.
The push to increase output ahead of tariffs really increased output and commodity prices during 2018, at least up until October 2018.
Now we are seeing the reverse of this situation.
Once producers saw that the $80+ prices of Brent would not hold, they decided to withhold production. OPEC decided to cut back production. US drillers decided to complete previously drilled wells that had not yet been completed, rather than drill so many new wells. I see 2018 as the peak in oil production for this reason.
World coal production has been on a bumpy plateau since 2011, according to the new BP report. The highest single production year was 2013, which was China’s peak in coal production. I expect lower coal prices will send world coal production down, as well. The timing could be a little different, say 2020.
Peak oil and peak coal will occur at roughly the same time. In fact, we will likely see peak resources, as these energy sources peak in supply.
If you are correct about peak oil production being near, expect a major financial crisis whenever the global oil supply begins to actually fall, after some period of oil output stability, because the global economy will contract if forced to use less transportation services which oil provides. That is physics which we can’t change. Less movement of goods will mean the globalized economy must shrink. That is known as a recession.
With debt so high in virtually every sector and location, and with interest rates already so low, a recession could rapidly spiral out of control. It will be like 2008-9, only on a far larger scale.
Expect governments to try some rather radical ‘solutions’ which might work for some limited period. But since the problem is the physics that it takes energy to do work, no government or central banking solution can work for long. But they will try.
I expect that governments will eventually start sending people money created out of thin air. That might lead to eventual hyperinflation. But nobody can predict what will happen with any degree of certainty.
Whatever happens, the billionaires will force some US government action. They won’t just sit around and watch their huge fortunes disappear as civilization melts down around them. They know the collapse will eventually spread even to New Zealand, where a surprising number of the super rich have purchased refuges of last resort. I’ve read some articles about that tread in major publications. They aren’t buying farms down there because they want to work on the farm and raise sheep to sell to China, Indonesia, and the Middle East. It is too far away for a weekend trip. Vegas, Hawaii, Florida, and the Bahamas are a lot closer to New York, Silicon Valley, and Los Angeles, than New Zealand is. They can experience all the nature they need at their homes on ‘billionaires row’ near Yellowstone, in Wyoming. Self made billionaires didn’t get rich by being stupid. They know how dangerous the financial situation has become after witnessing the 2008-9 Financial Crisis. Lehman Brothers’ bankruptcy was a big wake up call for folks with real money.
I hope I’m wrong about what is coming after peak oil production occurs, but I don’t see how I am.
You’re doing important work. Thanks.
I expect that the financial crash will occur, and then all types of energy consumption will decline, even wind and solar. Oil plays a role in the story, but coal is probably more important. All energy prices collapsed in the Great Recession, and I expect that will happen again.
The peak oil story is someone’s conception of how things will happen. It is not particularly correct. It was put together by people who don’t understand how the economy works.
In the energy world, “cheap” seems to trump “high quality” or “energy dense” or “non-polluting.”
Coal is more important than oil. Here’s why:
https://lhcrazyworld.wordpress.com/2016/06/09/green-stupidity/
“Steel is an alloy of iron and carbon in which the carbon content ranges up to 2%.
By far the most widely used material for building the world’s infrastructure and industries, it is used to fabricate everything from sewing needles to oil tankers. In addition, the tools required to build and manufacture such articles are also made of steel. As an indication of the relative importance of this material, in 2013 the world’s raw steel production was about 1.6 billion tons, while production of the next most important engineering metal, aluminum, was about 47 million tons. (For a list of steel production by country, see below World steel production.) The main reasons for the popularity of steel are the relatively low cost of making, forming, and processing it, the abundance of its two raw materials (iron ore and scrap), and its unparalleled range of mechanical properties.
Kill King Coal and you will kill industry. Period.”
– – – – – – – – –
https://lhcrazyworld.wordpress.com/2016/06/10/more-green-stupidity/
“Steel Metallurgy – a complex topic if there ever was one. So what are the basic chemical reactions associated with manufacturing steel? Iron ore, coke (carbon, coal) and limestone are fed into the blast furnace.
But if you kill off coal mining, and also reduce emission of CO2, then you would need to also close iron ore mining and downstream steel/iron manufacturing process to remain consistent in reducing CO2 emissions.
Reducing CO2 emissions thus entails not only killing off coal mining but also iron mining and terminating the iron age.”
I think you may be very close to right. This is a publication from the World Steel Organization, April 2019. https://www.worldsteel.org/en/dam/jcr:f07b864c-908e-4229-9f92-669f1c3abf4c/fact_energy_2019.pdf
If the blast furnace route to making steel is made (using iron ore), this publication says, “About 89% of the energy comes form coal, 7% from electricity, 3% from natural gas, and 1% from other gases and sources.” If the electric arc route to making steel is used, the article says, “The energy input from coal accounts for 11%, from electricity 50%, from natural gas 38% and 1% from other sources.”
It is my understanding that the electric arc method uses some combination of pig iron and scrap steel as input, so part of the “work” has already been done. I am guessing that quite a bit of the steelmaking in the US is of the electric arc furnace type.
It is hard for me to believe that we could get along solely with steel from electric arc furnaces, but maybe we could, for a while. If we go the blast furnace route, natural gas can perhaps be substituted for coal, if it is cheap enough. But if natural gas is transported very far, it quickly becomes too expensive for this purpose.
The issue with all of this is affordability. In theory, a person could burn oil, but that would be horribly expensive.
Well, it depends on the perspective (lets zoom out a bit), but the “iron age” ends not with the debacle of IC and gigantic machine operated coal mines, but when people can’t make tools (e.g. axes, knives, shovels, ..) with iron/steel tip blades anymore.. And that’s not very probable within next decades since it’s a known ~low tech process, well perfected through many centuries.. And this knowledge as well as practice is distributed.
“Global trade flows are flat or falling in all major regions as the world economy flirts with recession for the first time since 2008/09…
“Freight volumes handled through major ports such as Long Beach and Singapore as well as air cargo handled through hubs such as Hong Kong, Memphis, London and Frankfurt are either flat or down compared with 2018…
“Forward-looking freight indicators suggest the slowdown is likely to continue for the rest of the year and could turn into an outright recession.
“Global manufacturers report new export orders have been falling for nine months and are now declining at the fastest rate since 2015/16, according to the JPMorgan global purchasing managers’ index…
“At the moment, however, the global economy appears to be on the leading edge of a recession, and it seems more likely than not the downturn will deepen in the next six months unless action is taken to turn it around.”
https://www.reuters.com/article/us-global-economy-kemp/column-global-economy-on-leading-edge-of-recession-kemp-idUSKCN1TD29J
“World oil markets have undergone a U-turn, switching from supply-side risks like OPEC’s production cuts or U.S. sanctions against producers Iran and Venezuela, analysts said, to concerns of slowing consumption amid fears of a global recession.”
https://uk.reuters.com/article/uk-global-oil-demand-graphic/oil-demand-growth-grinding-to-lowest-in-years-as-global-economy-stalls-idUKKCN1TD2VU
“Global foreign direct investment (FDI) flows slid by 13% in 2018, to US$1.3 trillion from $1.5 trillion the previous year – the third consecutive annual decline, according to UNCTAD’s World Investment Report 2019… Hardest hit by the earnings repatriation were developed countries, where flows fell by a quarter to $557 billion – levels last seen in 2004.”
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2118
According to the report:
In some sense, the surplus energy of the world economic system has been falling in such a way that smaller and smaller amounts are available for foreign direct investment. Implied rates of return are lower. This is why interest rates have to be falling farther and farther.
The same falling returns lead to more and more wage disparity and lower profits for companies. Government have trouble collecting enough taxes. The whole system tends toward collapse, because the surplus energy is too low.
It is amazing how many stocks of loss making companies are valued on a future that simply won’t arrive. Hype, hope and conjecture seem to influence stock valuations far more than so called old fashioned ‘fundamentals’.
The music is still playing, and the deckchairs keep moving. So its going to be a bull ‘market’ based on Bullsh*te until the very last breath; then it isn’t.
How long has shale got now? I am so impressed with how much ‘good’ money has followed bad, but whose was it?
https://www.zerohedge.com/news/2019-06-11/can-shale-survive-low-oil-prices
It is almost impossible to think or write usefully about China or its economy if one’s information comes from Western media, as this article’s does. China is not just a bigger, Asian version of us, bound to the fate we have created for ourselves. It is utterly different and requires years of obsessive, sympathetic study to comprehend.
Statements like “The Chinese economy reports carefully massaged GDP numbers, which many analysts consider to be inflated in recent years” and “Its debt level keeps rising to try to keep all of its operations going” are both silly and flat out wrong. China’s stats are rock solid and its debt burden is one-third of America’s, while its absolute levels are the same as the US and the EU, as BIS data makes abundantly clear.
And saying airily that, “China would need a very cheap, non-intermittent, locally produced, non-polluting additional energy source” shows the author is utterly unfamiliar with China’s immense investment in developing very cheap, non-intermittent, locally produced, non-polluting additional energy sources.
Don’t write about China unless you really STUDY China. It’s a different world.
It seems we have different views.
Please enlighten us about the coming breakthrough that China (or any other country, for that matter) will achieve with a “very cheap, non-intermittent, locally produced, non-polluting additional energy source.” Gail also noted that “this energy source would also need to be rapidly scalable.”
Based on qi!
When I skimmed the hot off the presses BP report China has great growth of nuclear and (intermittent) renewable, from low level.
But maybe this is more kind of breakthrough right around the corner thing?
Nuclear? I think they are rapidly moving on that front.
Yes 10% per year, still low level.
Sorry 14.9%, confused with renewables.
“Don’t write about China unless you really STUDY China. It’s a different world.”
Gail has visited China on several occasions and has given lectures there as well as traveling to parts of the country with Chinese professors.
With articles like this, perhaps Gail won’t be permitted to travel to China in the near-future…
🙁
But hey, at least Gail isn’t a Canadian. They seem to be handing out death sentences like candy to us over there! A shame too, as I would have loved to have visited China… heard they’ve got a wall over there that’s pretty, uh… great!
😀
Cheers,
-GBV
ah the BIS stats are their information coming from the chinese without a lie-detector test how can we tell it is the truth ithink godfree
you are in delusinastini land
So what you’re trying to say is: “it goes to show how figures lie and liars figure”. To the OP who obviously is pro China, maybe he missed out on Chinese analyst and economist in the past who have called out China for fudging their numbers.
“For many who have long believed that China’s economic growth figures seemed too good—and tidy—to be true, they now have official confirmation of that skepticism…
““Officials produce the numbers, and the numbers produce officials,” Chen added, referring to the idea that massaging data can help one get ahead in Chinese officialdom.”
https://qz.com/887709/chinas-liaoning-province-admitted-that-it-inflated-gdp-figures-from-2011-to-2014/
Respect for the “truth” and the “right way of doing things” seems to be lower in China than in the US.
Back when I first went to China in 2011, it became clear to me that the whole system revolved around bribes and payoffs of officials. Part of my first trip involved a commercial tour. Our tour guide would repeatedly tell us things like, “Don’t worry if your luggage is too heavy to fly on China’s internal airplanes. I have cousins everywhere. The situation will be fixed on your behalf.” Manipulating data a little would fit into this whole operation as well.
I found out through my correspondence with Chinese researchers (and my visits to China) that the individual regions have quite a bit of autonomy. Promotions and prestige depend on each particular area meeting or exceeding their 5-year targets. So local officials would do whatever was needed to exceed their goals, even if it was not really permitted by the plan. They would build more coal fired power plants than required, for example. And of course, missing goals, for subregions, was hidden.
There have been allegations that part of China’s solar panel purchases occurred because of bribery, and the fact that they could not dump them anywhere else. There were limitations on new solar panel installation added in 2018. Net solar panel additions dropped by 17% in 2018, compared to 2017, according to the new BP report.
BP shows that added wind capacity in 2015 was close to double that that was added in 2016. 2017 and 2018 have stayed relatively lower as well. I wonder if bribery was behind its big increase in wind turbine installations in 2015, as well.
With this kind of “wheeling and dealing,” a person wonders about debt arrangements. A person reads about one company guaranteeing another company’s debt. This can strengthen the system, but it can also lead to a whole chain of simultaneous failures.
“Data disappears when it becomes negative,” said Anne Stevenson-Yang, co-founder of J Capital Research, which analyzes the Chinese economy. “When you go around and meet state-owned industry people, everybody laughs at the national statistics, so I don’t know why foreigners believe them.”
https://www.nytimes.com/2016/02/26/business/international/china-data-slowing-economy.html
Thanks for the quote!
This is a reference to a New York Times article. I don’t know why it disappeared.
https://www.nytimes.com/2016/02/26/business/international/china-data-slowing-economy.html
Oh, quite so: how foolish of us to believe that the demonstrable laws which govern the rise and fall of civilisations do not apply to China in the 21st century!
They did in the past – universally – but now it seems, according to you, they do not.
Please do enlighten us as to China’s novel energy plans. It all sounds very exciting; above all for the Chinese miners, whose labour and deaths have kept the show on the road until now.
And by the way, in studying China in such depth, you seem to have lost your basic good manners along the way. An insulting tone when addressing our host, Gail, is not appreciated here.
Good point, Xabier. Godfreed seems to have totally forgotten his etiquette in his haste to trample this spark of dissent. My guess is that his panic-stricken Mandarin-speaking handlers must be giving him hell. If Gail’s analysis goes viral and gets read by enough people who matter, the whole world could be viewing China in a new light.
Godfreed, I was expecting you to pay a visit here. I enjoy reading your articles on The Unz Review as they are informative, entertaining and provide an excellent contrast with the run-of-the-mill hit jobs that are the staple of the Western media. But I can’t take anything you say about China at face value because your 110% pro-Beijing line stretches credulity well past breaking point and takes you into Lord Haw Haw territory. Propaganda aimed at the cognoscenti is only effective if it’s subtle. And yours recently has been about as subtle as as a Red Guard reactionary counter-revolutionary denunciation session. If I might venture a tip, try to aim for the appearance of even-handed balance. That way you will influence a lot more people to take a more positive attitude to China than you currently do.
++++++++++++++ here, here!
«Everything About the BBC/CNN Account of Tiananmen Square Is a Lie». This i a quote from you ( G.Roberts) on Twitter, if i understand it right?
So would you say that what the official China are telling about the incident is as «rock solid» as their statistic regarding the economy?
Gail authors another great piece of work. However, if you think China is off course…. read “China’s Vision of Victory”, by Johnathon Ward. Very eye opening.
Thanks! I need a few more hours in the day to look at everything. Ward’s book does get very good reviews.
The thing that I think very few US people realize is how important China’s coal supply for the continued operation of its country. I have co-authored four academic papers with Chinese authors over the years. These academic papers were on energy issues, so I got their insights into how they saw the system operating in China. It would be interesting to read what Ward has to say about China’s coal situation.
I find one of the most interesting arguments made in these last few articles to be that falling energy production will not necessarily result in corresponding energy price rises. The energy prices will be high by historical measures, but “demand destruction” so that increasingly only the most valuable economic activities will be undertaken.
Another way of thinking about this I like is to look at the “Energy Return on Energy Invested” or “EROEI”. It is a pure physical measure that looks at the amount of energy required to bring a new unit of energy to the market. In the early days of the oil boom in Texas this number was as high as 100 (100 barrels of available oil for every barrel of oil consumed to produce it). Now the number for new wells including shale is a low as 20 and is destined to continue dropping. This is a clear indication that is is not just China but the whole world that is facing significant energy related problems going forward.
It makes economic sense in any extractive industry to produce the easiest and cheapest materials first and then move on to more difficult and expensive resources. This has been going on now for a long time. So it makes sense that prices continue to rise until at some point in the future certain activities are no longer worth the effort. For example at some price point it becomes impossible for people to fly to the beach once a year, so air traffic drops.
In 2000, offshoring to China was probably the only way to keep world energy prices low by developing China’s coal potential. But if that is now at a peak then some other energy source must be found that can scale cheaply.
Gail, what do you think of the potential of so-called Gen-IV nuclear? And what do you think of the proposition that the energy situation in China may be the real reason behind Trump’s tariffs? My thinking would be that if China is going to manufacture widgets using imported energy instead of their own, there is no longer a compelling reason to locate manufacturing there as the energy can just as easily be imported to the US or Europe.
I would not be at all surprised if the energy situation is behind the tariffs for China. I expect that Trump’s advisors know more than they let on to the public. Energy problems tend to be things that are kept hidden from view. I would agree with you that if China no longer has an adequate energy supply of its own, there is no compelling reason to locate manufacturing there. But the fact that many factories are already there is an issue. The fact that labor is cheap there is an issue. And so is China’s history of looking the other way regarding pollution.
I am very well aware of EROEI, and of what it does and does not do. I have spoken at most of Charlie Hall’s Biophysical Economics conferences, relating to EROEI. I do not agree with Charlie Hall on a lot of topics, however. There is a lot he doesn’t understand about how the economy operates.
The economy is a networked system that operates under the laws of physics. EROEI has essentially nothing to do with price. It (sort of) has to do with the cost of production. The selling price is determined by what consumers in the aggregate can afford. This in turn is determined by levels of debt, interest rates, and generally how well the economy is functioning. Everything I can see says that Peak Oil, Peak Coal, and Peak Resources of all kinds come because the selling price for these commodities falls below the cost of production.
Many, many, many economies have collapsed over the years. Most people who follow EROEI consider Peak Oil to be something totally different from collapse, but they have not studied history. Peak Oil (and Peak Coal) leads to just another version of collapse, as far as I can see. We know that when Babylon collapsed, its prices fell very low. See Revelation 18:11-13, warning of a similar fate to Babylon’s.
11 “The merchants of the earth will weep and mourn over her because no one buys their cargoes anymore— 12 cargoes of gold, silver, precious stones and pearls; fine linen, purple, silk and scarlet cloth; every sort of citron wood, and articles of every kind made of ivory, costly wood, bronze, iron and marble; 13 cargoes of cinnamon and spice, of incense, myrrh and frankincense, of wine and olive oil, of fine flour and wheat; cattle and sheep; horses and carriages; and human beings sold as slaves.
I have written many, many posts on topics related to these issues over the years.
Perhaps what I should say about EROEI is that China’s big problem is that its “Delivered EROEI” of coal has been dropping badly, making it non-economic to sell. I have seen an academic report from some of the Chinese professors working on this subject to this effect.
One of the big issues with EROEI research is that there has not been a proper “floor” set for required EROEI. It is not really 10:1 or 3:1. I think it is much higher than this. Also, it is the average EROEI of the overall system that matters, not the individual pieces. The “surplus energy” of the system comes from the excess energy over this floor. It turns out that coal is the energy source that has been providing most of the world’s surplus energy. Hydroelectric has been adding some as well, especially in cold, wet areas where it is fairly reliable. Natural gas has huge delivery energy costs, so it tends not to provide much net energy. Oil’s overall system is quite expensive in terms of energy use as well, so it doesn’t add much surplus energy.
Wind and solar have not been measured properly on an EROEI basis. There need to be at least two adjustments made:
(1) They need to have sufficient storage capacity, so that the rest of the electrical system does not need to subsidize their operation.
(2) The calculation of EROEI needs to be done on a year by year (or month by month) energy in vs. energy out basis. In other words, hoped-for future energy production from wind and solar cannot be counted in the calculation, because the physics of the real world economy does not work that way.
When these adjustments are made, wind and solar seem to be energy sinks. They simply pull forward demand for resources needed to make these devices. Wind turbines tends to be very polluting when they are made and installed; solar panels leave materials in place that degrade over time and are likely to damage the water supply. Calling wind and solar helpful is a huge stretch. They are not particularly clean. They represent part of the production sent to China. Entire solar panels are imported from China. For wind turbines, it is essential parts that are imported from China.
Gail,
Have read your criticisms of solar power several times in the past, but never thought to ask you if those criticisms are specific to solar photo-voltaic (PV) power. Curious if you have any insight into solar hot water systems and how they compare to solar PV, at least in terms of your EROEI and pollution criticisms?
Obviously the electricity created by a solar PV system can heat water just as a solar hot water system, but can be used for a multitude of other purposes… which is why I suspect so many commercial / industry websites suggest that solar hot water is “dead” and that solar PV is the way to go. But I’m guessing that they’re probably not looking at both systems from a social collapse / energy crisis / sustainability / systems analysis point of view, though perhaps you have an in previous article?
Cheers,
-GBV
In the tropics, all you need are two oil drums on the roof—one painted black and kept in full sun, the other painted white and shaded from the sun—connected up to a water source with enough pressure to keep both drums filled and connected to two taps in the kitchen or shower room below.
The black drum will get so hot on a sunny day that you can almost make tea with it. The white tank is there in order to mix water from both tanks on the way down to get a comfortable temperature. Basically, it’s free hot water forever apart from the cost of the materials, installation and very occasional maintenance.
Away from the tropics things aren’t as hot year round, but you can still get a lot of free hot water out of an oil barrel and it’s something to talk about when friends or neighbors pay you a visit.
http://preparednessadvice.com/wp-content/uploads/2012/10/shower-257×300.jpg
Too bad I live in Ontario 🙁
On the plus side, I only have to put up with mosquitoes for 4-5 months of the year!
Oh, and frigid-cold weather for 3-4 months of the year too… ugh…
Cheers,
-GBV
As Tim already hinted, solar hot water is site specific / restricted.
But the advantages are obvious, not preferred, but could be completely done non electronics or electric pump dependent, e.g. hybrid of passive and hand/animal power pump system, very low tech construction. Something which is impossible via the PV route..
On the other hand we can’t predict the sequencing of the future, so perhaps “the injustice wins again”, i.e. people loaded now on fraudulent debt won’t have to pay it back, and their PVs, EVs will merrily work for them over few next decades..
The new reactors are basically just bigger pot cookers (volume) with slapped upon adage of very expensive extra tail risk protection. Apart from some obvious real advancement in material quality, precision manufacturing, and digital control which all appeared in past few decades.
The problem is that older smaller “dangerous” gen reactors say <.5GW could be theoretically manufactured if committed by any of the few dozens industrial hub countries, in reality and practice lets say by at least ten such top countries and their industries.
However, today's NPP behemoths attacking almost two GW per unit, it seems can't be reliably finished on schedule and budget or at all even by US or France (not mentioning UK), which were part of the top core of such exclusive list of countries previously.
It's about cross-complexity intersecting on many levels: gov's long term commitment despite energy market volatility, labor market, education system, wider political-social consensus in given country (forced upon or implied), .. apart from the various technology -safety aspects, ..
Seems like EROEI of 20 very optimistic. Wikipedia article states 16, 13, 8, etc. https://en.m.wikipedia.org/wiki/Oil_shale_economics
No doubt local petrogeology has huge impact.
This wiki has to do with a totally different product than tight oil from shale deposits. The fact that it is talking about “in situ deposits” should tip you off. You should not pay any attention to it. It has to do with a high heat process. There has been a great deal of confusion because the name “shale oil” was already in use for something else, when all of the fracking began. I believe that is why the name “tight oil” was picked, to try to distinguish it from shale oil baked out of rocks. But in practice, you see shale oil used to refer to both products.
The EROEI of tight oil from shale seems to be quite high. In this paper, it is called “Net Energy Ratio.”
https://econpapers.repec.org/article/eeeenergy/v_3a93_3ay_3a2015_3ai_3ap2_3ap_3a2191-2198.htm
Net energy analysis of Bakken crude oil production using a well-level engineering-based model
Adam R. Brandt, Tim Yeskoo and Kourosh Vafi
Energy, 2015, vol. 93, issue P2, 2191-2198
The median NER is 29.3 MJ/MJ. The interquartile range is 24.3–35.7 MJ/MJ, while the 5%–95% range is 13.3–52.0 MJ/MJ. NERs have declined in recent years, with a decline in median NER of 23% between 2010 and 2014. Results are most sensitive to modeled estimated ultimate recovery, and embodied energy.
I think the high EROEI of tight oil from shale is somewhat of an embarrassment to those writing about the issue. Most references you see are to the old Cutler Cleveland paper relating to the heat process. It says, ”EROI is approximately 2:1 for shale oil.” This process was never used commercially because it was simply too expensive.
What path does electricity travel? The path of least resistance.
What path do products make it to marketplace? The path of least resistance, which in most cases is china. They have become the worlds manuf., assembler.
Now, on the surface it would seem China isn’t because of distances involved, but so much stuff can put on to a container ship the cost of shipping becomes smaller than more important cost considerations such as labor. Those people are working for slave wages, and I mean slave. There are apartment complexes with nets at the bottom to catch people trying to escape the hopelessness of their existence.
If you drive down the highway, lanes with fewer cars fill up with vehicles changing lanes. Again path of least resistance. Humans are like ants in a colony acting with the hell bent determination of yeast.
But that doesn’t mean we can’t meet limits along the path of least resistance.
Clearly the US war machine heavily relies on cheap energy
US military is world’s ‘single largest producer’ of greenhouse gases – report
https://www.rt.com/usa/461715-us-military-greenhouse-gases-report/
If you haven’t read this speech by Rear Admiral Hyman Rickover from 1957, you should read it now.
https://ourfiniteworld.com/2007/07/02/speech-from-1957-predicting-peak-oil/
“Such an energy resource doesn’t appear to be available.”
If you limit the resource being available to the next month or year, that’s the case. If you start taking a longer look, like 10-2030 years out it is possible that power satellites could be providing most of the energy.
In a sense and at the current level of technology, China and the US compliment each other.
The US can export food and the Chinese export manufactured products. The question gets to be where economy of scale loses out to transport costs.
Good point. But, economies of scale in agriculture are not necessarily an advantage. Epidemics are a problem for animals, just as they are for humans. China especially is having a problem with this. Also, insect pests and crop disease proliferate, if farmers aren’t careful. It takes a lot of fossil fuel products to keep the problems in check. The US is ahead with use of the fossil fuel products.
So to some extent, the US is shipping fossil fuel to China incorporated into the food we ship.
It’s always been a problem to keep insects and crop diseases at bay. One of the costs of farming instead of being hunter-gatherers.
But farming on a global scale has the advantage of keeping crop failures local. This requires transportation. I read somewhere that the railroad was the key to ending famine in Europe.
Railroad. Also, some way of providing of a lower bound on income. I think famines often occur because low wage people cannot afford the food that is available. The food is shipped elsewhere, where richer people are willing to pay more for it.
“The food is shipped elsewhere”
Yes, like the “famines” in Ireland and in Scandinavia (in the 1860s).
It seems to be very common. There was certainly one famine in medieval England, I think the 14th century, where the harvest was totally ruined in the South, so the merchants brought down grain from the North, only to find that no one had the money to pay for it.
And I’ve just been reading something similar about Bengal in the 18th century.
We simply can’t comprehend how fortunate we have been living without the menace of famine – imaginatively impossible to grasp.
Come back, famine!
Come baaaaaaack!!!
Could be worse… could be a world without zinc!
https://www.youtube.com/watch?v=U1iCZpFMYd0
Cheers,
-GBV
I think Britain was one of the first countries to escape famine in the late 18th century, due to increased food production and the new canal network/ improved roads and harbours, etc.
Although people later starved to death from sheer lack of money, of course.
Italy was one of the last to experience famine, being so mountainous, without coal, canals, and industrialising so late.
Even if they didn’t starve to death, being ‘always hungry’ was more common in Europe than we might think,until after WW2. It was certainly still the case in the Pyrenees when my grandmother was growing up there in the 1920’s: ‘miseria’.
We learned that in China, the traditional greeting (instead of “How are you?”) is, “Have you eaten?” This seems to have grown out of a history of chronic lack of adequate food supply. Now, it is interpreted to mean something more like, “Have you had the most recent expected meal?”
I have assumed that China could not maintain a leading role in the world and that environmental degradation and population pressures would be their undoing. Industrialization and the large role of coal has to be putting severe strain on water, air and soil, not to mention impacting public health.
China has its population pressure under control. Also, with its large population, if it loses a few percent of its population to environmental degradation, in some sense it still has enough population to carry on as before. In the US, we would get hysterical about 5% of 10% population loss to pollution, but with a much larger population, the economy could carry on fine with the lower population.
Some issues get a lot of “play” in the US, because we have high standards for how things should be. It doesn’t necessarily make them very important, at this point, in the real world.
US life expectancies are absolutely dreadful, compared to most developed countries. We don’t hear about this in the US. I believe the problem is the food we eat. Lack of exercise plays a role as well. We don’t hear about this though, just how terrible coal is.
https://gailtheactuary.files.wordpress.com/2014/09/figure-1-6-female-life-expectancy-at-birth.png
https://gailtheactuary.files.wordpress.com/2018/08/recent-life-expectancy-for-women-and-men-from-2018-bmj-study.png
Life expectancy at birth strikes me as a funny measure. Who does the expecting?
Average age at death would be a more transparent measure.
Live expectancies at birth are based on models, I believe, looking at what percentage of the population dies in each year of its life. Thus, they are trying to figure out what the life expectancy at birth would be if death patterns that held during a particular period continued to hold.
Averge age at death would depend more on the age distribution of the population that you are looking at. If you are looking at a number of rural Japanese, they are likely nearly all very old. Their average age at death would be high. If you are looking at a very young population (perhaps people in sub-Saharan Africa), then the average age at death would likely to be quite low.
Height is another measure of how well fed the population was. The US never had a famine by the European or Chinese definition, but in the decades preceding the civil war the height of men decreased by a substantial amount. The only thing this could have been was children not getting enough to eat.
After three decades of discussion, the historians decided it was the indirect outcome of too much income being spent on housing and not enough on food for the children.
https://epub.ub.uni-muenchen.de/12758/1/Komlos-A_Three-Decade_Kuhnian_History_of_the_Antebellum_Puzzle.pdf
I notice this does not load today. I captured a copy of it so if anyone really wants to read it, ask hkeithhenson@gmail.com
The article loaded today. I read parts of it, but not all of it. I think that growing wage disparity likely had a lot to do with the falling heights, because wage disparity tends to be involved in issues such as this.
One thing I didn’t focus on as I read parts of the article was the extent to which the article considered the North vs the South. The North was where most of the factories and there railroads were. The South had a lot of poor people, including many farmers who were not slave owners. https://www.historycentral.com/CivilWar/AMERICA/Economics.html
One thing about the invention of the cotton gin (or any other invention) is that the economy gets to be more and more segregated into the “haves” and the have nots.” Those without the cotton gin were definitely behind those who have the cotton gin.
I would have to spend more time on this to figure out what was going on.
https://en.wikipedia.org/wiki/Smoking_in_China
Smoking in China is prevalent, as the People’s Republic of China is the world’s largest consumer and producer of tobacco
there are 350 million Chinese smokers
China produces 42% of the world’s cigarettes
The China National Tobacco Corporation is by sales the largest single manufacturer of tobacco products in the world and boasts a monopoly in Mainland China generating between 7 and 10% of government revenue
Yang Gonghuan, deputy director of the National Center of Disease Control of China, said that progress on tobacco control is not moving quickly because the government derives large tax revenues from tobacco sales, and the industry employs a large workforce
Nearly 60% of male Chinese doctors are smokers, which is the highest proportion in the world
Smoking is a social custom in the PRC and giving cigarettes at any social interaction is a sign of respect and friendliness
I discovered that open windows are also a custom in China. People sit in business meetings, smoking with the windows wide open, when it is barely above freezing. Interesting!
I did not have students smoking in the classroom at Petroleum University, however. In fact, I do not remember much smoking at the university at all.
Thanks for such a strong article Gail; put together with Tim Morgan’s examination of the financial details -as far as they are available – it provides a fully-rounded view of this emerging debacle.
The feeling that every day of apparent normality we have to enjoy is precious just grows…..
A terrific and comprehensive bit of analysis, for which many thanks, Gail.
A couple of bits of relevant news:
China’s car sales declined for a 12th consecutive month, a historic slump that’s left manufacturers reeling as trade tensions and economic worries weigh on consumer sentiment.”
https://www.caixinglobal.com/2019-06-12/chinas-car-slump-extends-to-a-year-without-signs-of-reprieve-101425676.html
“After a decade-long real estate boom, home prices in many Chinese cities are unnaturally high. In Beijing and Shanghai, buying a home costs about what the average family would earn in 23 years if it spent none of its income.”
https://qz.com/1615596/chinas-debt-disease-is-infecting-its-housing-market/
“China’s factory inflation slowed in May as faltering manufacturing hit demand, reinforcing worries about cooling growth in the world’s second-largest economy, while a surge in food prices could add to consumer grievances about living costs.”
https://uk.reuters.com/article/us-china-economy-inflation/chinas-factory-inflation-slows-as-manufacturing-stumbles-food-prices-soar-idUKKCN1TD08M
Something is clearly wrong, with falling auto sales. It is easy to understand the falling car sales in Europe, where governments have mandated big changes away from diesel.
A similar situation in India:
“Passenger vehicles sales in India recorded the worst monthly slump in 18 years in May, as a prolonged slowdown gripped the automobile industry amidst a credit crunch.
“Automotive demand in India has been cooling since July as the country faced a credit crunch and distress in rural markets.”
https://asia.nikkei.com/Business/Business-trends/India-car-sales-post-worst-slump-in-18-years-in-May-amid-weak-economic-growth
“The world car market is about to take its biggest hit since the financial crisis of 2008, according to a report from Germany’s Center for Automotive Research (CAR), with sales diving more than 4 million in 2019.”
https://www.forbes.com/sites/neilwinton/2019/06/12/world-car-sales-will-fall-more-than-4-million-in-2019-report/#63b610aa2263
Credit crunches will cut off automobile purchases!
The real culprit are the large US Corporations looking for cheaper labor so they can sell their goods for more profit like Apple. Walmart was another large corporation which put a stranglehold on small local businesses (my first job was at a small family business) went to China to buy their cheap trinkets to sell at their stores. So really, China was just a willing accomplice thanks to large US corps selling out their economy for a bigger buck.
IBM was using Lenovo to build their IBM personal computers since at least the early to mid 90’s which they eventually sold to Lenovo.
The communist government of China has managed (with much help from the West) to control their population by continually raising the living standard. This has occurred contrary to the Wests beliefs that over time the rising living standard would result in the over throw of the Red Chinese government and adoption of democracy. Now that the proverbial rug has been pulled out from under the communists let us see just how well they can continue their dominance.
I think that the Chinese government picked out a higher standard of living for its people than the system could really support. Now the system is hiding the problems this creates with more and more debt.
Democracy is a high energy form of government, because it requires a large number of elected representatives (or the people themselves) to gather at a single location to make decisions. A dictatorship by a single ruler is the cheapest form of government. There seems to be quite a large staff involved with the current Chinese government.
I wonder if any of today’s governments can last for the long term, if energy supplies are much lower.
I am afraid that your last sentence pretty much defines one of the main causes of war.
the Chinese seem determined to make themselves the go-to source for everything the world needs.
And we, of course, will go along with that, because we cannot imagine any situation other than the outpouring of cheap consumer goods.
It is in some respects an inflated version of the ”cargo cult” mentality when we see a source of desirable goods pouring out of a seemingly inexhaustible storehouse.
So we hang about waiting for the next container ship to arrive, while we unconsciously outsource our toxicity to those Asian people making all we need.
So they enjoy the myth of 8% growth while having no air to breathe, denying the simple arithmetic that *8% growth will require energy consumption to double by late 2020s. As will 8% growth in India and Africa.
So we are back to that late 2020s date again. Somehow whenever I write on that subject. it is a date that flags itself up without any help from me
It is just there.
It keeps flagging up as a road block ahead, whichever route you take.
It flags up because if China doesnt sustain its growth rate, their entire house of cards will come down, and they know it. Already I think they have to find a million new jobs a year at least.
By 2030, if China has sucked in enough energy to double its current production output, there will be no surplus energy levels in the commercial infrastructure of the world by which the rest of us will have any surplus left which we might use to buy Chinese goods at all.
So in theory, Chinese goods will stack up with nowhere to go.
Chinese wages will collapse, and so will the Chinese notion of ”economic systems”
still it was a good idea at the time.
People have lived in much fancier homes, for quite a while.
At one point, housing was mostly provided free by employers. This housing was simple, generally with a shared outhouse for bathroom facilities, and (in the early days, especially) no electricity. Heating (to the extent it was provided) was surplus heat, available from co-generation from nearby power plants. Coal-fired power plants were built in the middle of cities, for the purpose of being able to use the waste heat. Horrible from an air pollution point of view, but easy for workers to get to work, and lots of free heating for homes.
the housing arrangements you describe were the same here, cheap housing supplied almost free by the mine owners (they even had the collective term of ‘barracks’), shared outhouses, free coal and so on, basic hospitals schools. This was in the 1870s
So do the smokestacks supply heat? If not, what aspect of a generating plant supplies the heat?
I’m liking Derrek Jenson more these days because of his brevity. I remember him saying something to the effect of ‘the only sustainable way for humans to live is in the stone age.’
Well, at least we won’t be surprised when this does end.
I am still amazed as to why the America hasn’t ramped up their population to 1.3 billion souls over the years. It has obviously been working exceptionally well for China and India.
In fact, America seems to be heading in the opposite direction. They appear to think they have too many people with a paltry 320 million. They are even turning newcomers away. What on earth are they thinking?
So in theory, Chinese goods will stack up with nowhere to go.
Chinese wages will collapse, and so will the Chinese notion of ”economic systems”
———————————————————————————————————————
Sounds to me like it’s China who’s got a 1930’s “Great Depression” heading their way, not North Americans. But I should probably find (and read) some history books (with minimal Western propaganda) on what things were like in Europe in the the 1930’s, as perhaps we’re in store for whatever they endured the last time around…
Cheers,
-GBV
You should also understand that the US is 17% of the Chinese export economy. On the other hand Chinese imports represent 54% of US manufacturers raw materials and intermediate components. While the Trump tariffs on China are inconvenient – US imports from China continue to rise and its the US manufacturers and consumers that pay for the tariffs. Meanwhile, China still has 83% of the rest of its export economy intact. I’m not saying China is bullet proof, but it’s economic demise will be long after Trump’s Presidency ends – and will have little to do with anything Trump has done.
“Meanwhile, China still has 83% of the rest of its export economy intact”
Uhhh… I’m not sure that will be the case.
The US is the “prettiest horse in the glue factory” – not to say it won’t or isn’t imploding economically, but the rest of the world seems to be sliding downwards just as quickly – or quicker – than the US. That rest of the world is the recipient of those 83% of Chinese exports, and as their fortunes fall so too does China’s.
I’d also suggest that everything Trump does can potentially affect everyone – not because Trump is amazing or a disaster, or because I’m a Trump lover or hater, but because the world economy is so interconnected that virtually any meaningful action by someone as influential as the POTUS is likely to reverberate across the system.
Cheers,
-GBV
I have read that China’s manufacturing is still around 5% growth annualized for last month. US manufacturing growth was less than 1%. The price of imports from China to the US fell. What causes the fall in import prices? Even with tariffs added? Could it be perhaps a devaluation in the yuan and/or the strengthening of the FRN? This could make imports cheaper, no? If so, this is not the outcome the president wants to bring jobs back.