Economists tell us that within the economy there is a lot of substitutability, and they are correct. However, there are a couple of not-so-minor details that they overlook:
- There is no substitute for energy. It is possible to harness energy from another source, or to make a particular object run more efficiently, but the laws of physics prevent us from substituting something else for energy. Energy is required whenever physical changes are made, such as when an object is moved, or a material is heated, or electricity is produced.
- Supplemental energy leverages human energy. The reason why the human population is as high as it is today is because pre-humans long ago started learning how to leverage their human energy (available from digesting food) with energy from other sources. Energy from burning biomass was first used over one million years ago. Other types of energy, such as harnessing the energy of animals and capturing wind energy with sails of boats, began to be used later. If we cut back on our total energy consumption in any material way, humans will lose their advantage over other species. Population will likely plummet because of epidemics and fighting over scarce resources.
Many people appear to believe that stimulus programs by governments and central banks can substitute for growth in energy consumption. Others are convinced that efficiency gains can substitute for growing energy consumption. My analysis indicates that workarounds, in the aggregate, don’t keep energy prices high enough for energy producers. Oil prices are at risk, but so are coal and natural gas prices. We end up with a different energy problem than most have expected: energy prices that remain too low for producers. Such a problem can have severe consequences.
Let’s look at a few of the issues involved:
[1] Despite all of the progress being made in reducing birth rates around the globe, the world’s population continues to grow, year after year.
Figure 1. 2019 World Population Estimates of the United Nations. Source: https://population.un.org/wpp/Download/Standard/Population/
Advanced economies in particular have been reducing birth rates for many years. But despite these lower birth rates, world population continues to rise because of the offsetting impact of increasing life expectancy. The UN estimates that in 2018, world population grew by 1.1%.
[2] This growing world population leads to a growing use of natural resources of every kind.
There are three reasons we might expect growing use of material resources:
(a) The growing world population in Figure 1 needs food, clothing, homes, schools, roads and other goods and services. All of these needs lead to the use of more resources of many different types.
(b) The world economy needs to work around the problems of an increasingly resource-constrained world. Deeper wells and more desalination are required to handle the water needs of a rising population. More intensive agriculture (with more irrigation, fertilization, and pest control) is needed to harvest more food from essentially the same number of arable acres. Metal ores are increasingly depleted, requiring more soil to be moved to extract the ore needed to maintain the use of metals and other minerals. All of these workarounds to accommodate a higher population relative to base resources are likely to add to the economy’s material resource requirements.
(c) Energy products themselves are also subject to limits. Greater energy use is required to extract, process, and transport energy products, leading to higher costs and lower net available quantities.
Somewhat offsetting these rising resource requirements is the inventiveness of humans and the resulting gradual improvements in technology over time.
What does actual resource use look like? UN data summarized by MaterialFlows.net shows that extraction of world material resources does indeed increase most years.
Figure 2. World total extraction of physical materials used by the world economy, calculated using weight in metric tons. Chart is by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel. Non-metallic minerals include many types of materials including sand, gravel and stone, as well as minerals such as salt, gypsum and lithium.
[3] The years during which the quantities of material resources cease to grow correspond almost precisely to recessionary years.
If we examine Figure 2, we see flat periods or periods of actual decline at the following points: 1974-75, 1980-1982, 1991, and 2008-2009. These points match up almost exactly with US recessionary periods since 1970:
Figure 3. Dates of US recessions since 1970, as graphed by the Federal Reserve of St. Louis.
The one recessionary period that is missed by the Figure 2 flat periods is the brief recession that occurred about 2001.
[4] World energy consumption (Figure 4) follows a very similar pattern to world resource extraction (Figure 2).
Figure 4. World Energy Consumption by fuel through 2018, based on 2019 BP Statistical Review of World Energy. Quantities are measured in energy equivalence. “Other Renew” includes a number of kinds of renewables, including wind, solar, geothermal, and sawdust burned to provide electricity. Biofuels such as ethanol are included in “Oil.”
Note that the flat periods are almost identical to the flat periods in the extraction of material resources in Figure 2. This is what we would expect, if it takes material resources to make goods and services, and the laws of physics require that energy consumption be used to enable the physical transformations required for these goods and services.
[5] The world economy seems to need an annual growth in world energy consumption of at least 2% per year, to stay away from recession.
There are really two parts to projecting how much energy consumption is needed:
- How much growth in energy consumption is required to keep up with growing population?
- How much growth in energy consumption is required to keep up with the other needs of a growing economy?
Regarding the first item, if the population growth rate continues at a rate similar to the recent past (or slightly lower), about 1% growth in energy consumption is needed to match population growth.
To estimate how much growth in energy supply is needed to keep up with the other needs of a growing economy, we can look at per capita historical relationships:
Figure 5. Three-year average growth rates of energy consumption and GDP. Energy consumption growth per capita uses amounts provided in BP 2019 Statistical Review of World Energy. World per capita GDP amounts are from the World Bank, using GDP on a 2010 US$ basis.
The average world per capita energy consumption growth rate in non-recessionary periods varies as follows:
- All years: 1.5% per year
- 1970 to present: 1.3% per year
- 1983 to present: 1.0% per year
Let’s take 1.0% per year as the minimum growth in energy consumption per capita required to keep the economy functioning normally.
If we add this 1% to the 1% per year expected to support continued population growth, the total growth in energy consumption required to keep the economy growing normally is about 2% per year.
Actual reported GDP growth would be expected to be higher than 2%. This occurs because the red line (GDP) is higher than the blue line (energy consumption) on Figure 5. We might estimate the difference to be about 1%. Adding this 1% to the 2% above, total reported world GDP would be expected to be about 3% in a non-recessionary environment.
There are several reasons why reported GDP might be higher than energy consumption growth in Figure 5:
- A shift to more of a service economy, using less energy in proportion to GDP growth
- Efficiency gains, based on technological changes
- Possible intentional overstatement of reported GDP amounts by some countries to help their countries qualify for loans or to otherwise enhance their status
- Intentional or unintentional understatement of inflation rates by reporting countries
[6] In the years subsequent to 2011, growth in world energy consumption has fallen behind the 2% per year growth rate required to avoid recession.
Figure 7 shows the extent to which energy consumption growth has fallen behind a target growth rate of 2% since 2011.
Figure 6. Indicated amounts to provide 2% annual growth in energy consumption, as well as actual increases in world energy consumption since 2011. Deficit is calculated as Actual minus Required at 2%. Historical amounts from BP 2019 Statistical Review of World Energy.
[7] The growth rates of oil, coal and nuclear have all slowed to below 2% per year since 2011. While the consumption of natural gas, hydroelectric and other renewables is still growing faster than 2% per year, their surplus growth is less than the deficit of oil, coal and nuclear.
Oil, coal, and nuclear are the types of energy whose growth has lagged below 2% since 2011.
Figure 7. Oil, coal, and nuclear growth rates have lagged behind the target 2% growth rate. Amounts based on data from BP’s 2019 Statistical Review of World Energy.
The situations behind these lagging growth rates vary:
- Oil. The slowdown in world oil consumption began in 2005, when the price of oil spiked to the equivalent of $70 per barrel (in 2018$). The relatively higher cost of oil compared with other fuels since 2005 has encouraged conservation and the switching to other fuels.
- Coal. China, especially, has experienced lagging coal production since 2012. Production costs have risen because of depleted mines and more distant sources, but coal prices have not risen to match these higher costs. Worldwide, coal has pollution issues, encouraging a switch to other fuels.
- Nuclear. Growth has been low or negative since the Fukushima accident in 2011.
Figure 8 shows the types of world energy consumption that have been growing more rapidly than 2% per year since 2011.
Figure 8. Natural gas, hydroelectric, and other renewables (including wind and solar) have been growing more rapidly than 2% since 2011. Amounts based on data from BP’s 2019 Statistical Review of World Energy.
While these types of energy produce some surplus relative to an overall 2% growth rate, their total quantity is not high enough to offset the significant deficit generated by oil, coal, and nuclear.
Also, it is not certain how long the high growth rates for natural gas, hydroelectric, and other renewables can persist. The growth in natural gas may slow because transport costs are high, and consumers are not willing/able to pay for the high delivered cost of natural gas, when distant sources are used. Hydroelectric encounters limits because most of the good sites for dams are already taken. Other renewables also encounter limits, partly because many of the best sites are already taken, and partly because batteries are needed for wind and solar, and there is a limit to how fast battery makers can expand production.
Putting the two groupings together, we obtain the same deficit found in Figure 6.
Figure 9. Comparison of extra energy over targeted 2% growth from natural gas, hydroelectric and other renewables with energy growth deficit from oil, coal and nuclear combined. Amounts based on data from BP’s 2019 Statistical Review of World Energy.
Based on the above discussion, it seems likely that energy consumption growth will tend to lag behind 2% per year for the foreseeable future.
[8] The economy needs to produce its own “demand” for energy products, in order to keep prices high enough for producers. When energy consumption growth is below 2% per year, the danger is that energy prices will fall below the level needed by energy producers.
Workers play a double role in the economy:
- They earn wages, based on their jobs, and
- They are the purchasers of goods and services.
In fact, low-wage workers (the workers that I sometimes call “non-elite workers”) are especially important, because of their large numbers and their role in buying many items that use significant amounts of energy. If these workers aren’t earning enough, they tend to cut back on their discretionary buying of homes, cars, air conditioners, and even meat. All of these require considerable energy in their production and in their use.
High-wage workers tend to spend their money differently. Most of them have already purchased as many homes and vehicles as they can use. They tend to spend their extra money differently–on services such as private education for their children, or on investments such as shares of stock.
An economy can be configured with “increased complexity” in order to save energy consumption and costs. Such increased complexity can be expected to include larger companies, more specialization and more globalization. Such increased complexity is especially likely if energy prices rise, increasing the benefit of substitution away from the energy products. Increased complexity is also likely if stimulus programs provide inexpensive funds that can be used to buy out other firms and for the purchase of new equipment to replace workers.
The catch is that increased complexity tends to reduce demand for energy products because the new way the economy is configured tends to increase wage disparity. An increasing share of workers are replaced by machines or find themselves needing to compete with workers in low-wage countries, lowering their wages. These lower wages tend to lower the demand of non-elite workers.
If there is no increase in complexity, then the wages of non-elite workers can stay high. The use of growing energy supplies can lead to the use of more and better machines to help non-elite workers, and the benefit of those machines can flow back to non-elite workers in the form of higher wages, reflecting “higher worker productivity.” With the benefit of higher wages, non-elite workers can buy the energy-consuming items that they prefer. Demand stays high for finished goods and services. Indirectly, it also stays high for commodities used in the process of making these finished goods and services. Thus, prices of energy products can be as high as needed, so as to encourage production.
In fact, if we look at average annual inflation-adjusted oil prices, we find that 2011 (the base year in Sections [6] and [7]) had the single highest average price for oil.1 This is what we would expect, if energy consumption growth had been adequate immediately preceding 2011.
Figure 10. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.
If we think about the situation, it is not surprising that the peak in average annual oil prices took place in 2011, and the decline in oil prices has coincided with the growing net deficit shown in Figures 6 and 9. There was really a double loss of demand, as growth in energy use slowed (reducing direct demand for energy products) and as complexity increased (shifting more of the demand to high-wage earners and away from the non-elite workers).
What is even more surprising is the fact that the prices of fuels in general tend to follow a similar pattern (Figure 11). This strongly suggests that demand is an important part of price setting for energy products of all kinds. People cannot buy more goods and services (made and transported with energy products) than they can afford over the long term.
Figure 11. Comparison of changes in oil prices with changes in other energy prices, based on time series of historical energy prices shown in BP’s 2019 Statistical Review of World Energy. The prices in this chart are not inflation-adjusted.
If a person looks at all of these charts (deficits in Figures 6 and 9 and oil and energy prices in general from Figures 10 and 11) for the period 2011 onward, there is a very distinct pattern. There is at first a slow slide down, then a fast slide down, followed (at the end) by an uptick. This is what we should expect, if low energy growth is leading to low prices for energy products in general.
[9] There are two different ways that oil and other energy prices can damage the economy: (a) by rising too high for consumers or (b) by falling too low for producers to have funds for reinvestment, taxes and other needs. The danger at this point is from (b), energy prices falling too low for producers.
Many people believe that the only energy problem that an economy can have is prices that are too high for consumers. In fact, energy prices seemed to be very high in the lead-ups to the 1974-1975 recession, the 1980-1982 recession, and the 2008-2009 recession. Figure 5 shows that the worldwide growth in energy consumption was very high in the lead-up to all three of these recessions. In the two earlier time periods, the US, Europe, and the Soviet Union were all growing their economies, leading to high demand. Preceding the 2008-2009 Great Recession, China was growing its economy very rapidly at the same time the US was providing low interest rates for home purchases, some of them to subprime borrowers. Thus, demand was very high at that time.
The 1974-75 recession and the 1980-1982 recession were fixed by raising interest rates. The world economy was overheating with all of the increased leveraging of human energy with energy products. Higher short-term interest rates helped bring growth in energy prices (as well as food prices, which are very dependent on energy consumption) down to a more manageable level.
Figure 12. Three-month and ten-year interest rates through May 2019, in chart by Federal Reserve of St. Louis.
There was really a two-way interest rate fix related to the Great Recession of 2008-2009. First, when oil and other energy prices started to spike, the US Federal Reserve raised short term interest rates in the mid 2000s. This, by itself, was almost enough to cause recession. When recession started to set in, short-term interest rates were brought back down. Also, in late 2008, when oil prices were very low, the US began using Quantitative Easing to bring longer-term interest rates down, and the price of oil back up.
Figure 13. Monthly Brent oil prices with dates of US beginning and ending Quantitative Easing.
There is one recession that seems to have been the result of low oil prices, perhaps combined with other factors. That is the recession that was associated with the collapse of the central government of the Soviet Union in 1991.
[10] The recession that comes closest to the situation we seem to be heading into is the one that affected the world economy in 1991 and shortly thereafter.
If we look at Figures 2 and 5, we can see that the recession that occurred in 1991 had a moderately severe effect on the world economy. Looking back at what happened, this situation occurred when the central government of the Soviet Union collapsed after 10 years of low oil prices (1982-1991). With these low prices, the Soviet Union had not been earning enough to reinvest in new oil fields. Also, communism had proven to be a fairly inefficient method of operating the economy. The world’s self-organizing economy produced a situation in which the central government of the Soviet Union collapsed. The effect on resource consumption was very severe for the countries most involved with this collapse.
Figure 14. Total extraction of physical materials Eastern Europe, Caucasus and Central Asia, in chart by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel.
World oil prices have been falling too low, at least since 2012. The biggest decreases in prices have come since 2014. With energy prices already very low compared to what producers need, there is a need right now for some type of stimulus. With interest rates as low as they are today, it will be very difficult to lower interest rates much further.
Also, as we have seen, debt-related stimulus is not very effective at raising energy prices unless it actually raises energy consumption. What works much better is energy supply that is cheap and abundant enough that supply can be ramped up at a rate well in excess of 2% per year, to help support the growth of the economy. Suitable energy supply should be inexpensive enough to produce that it can be taxed heavily, in order to help support the rest of the economy.
Unfortunately, we cannot just walk away from economic growth because we have an economy that needs to continue to expand. One part of this need is related to the world’s population, which continues to grow. Another part of this need relates to the large amount of debt that needs to be repaid with interest. We know from recent history (as well as common sense) that when economic growth slows too much, repayment of debt with interest becomes a problem, especially for the most vulnerable borrowers. Economic growth is also needed if businesses are to receive the benefit of economies of scale. Ultimately, an expanding economy can be expected to benefit the price of a company’s stock.
Observations and Conclusions
Perhaps the best way of summing up how my model of the world economy differs from other ones is to compare it to other popular models.
The Peak Oil model says that our energy problem will be an oil supply problem. Some people believe that oil demand will rise endlessly, allowing prices to rise in a pattern following the ever-rising cost of extraction. In the view of Peak Oilers, a particular point of interest is the date when the supply of oil “peaks” and starts to decline. In the view of many, the price of oil will start to skyrocket at that point because of inadequate supply.
To their credit, Peak Oilers did understand that there was an energy bottleneck ahead, but they didn’t understand how it would work. While oil supply is an important issue, and in fact, the first issue that starts affecting the economy, total energy supply is an even more important issue. The turning point that is important is when energy consumption stops growing rapidly enough–that is, greater than the 2% per year needed to support adequate economic growth.
The growth in oil consumption first fell below the 2% level in 2005, which is the year that some observers have claimed that “conventional” (that is, free flowing, low-cost) oil production peaked. If we look at all types of energy consumption combined, growth fell below the critical 2% level in 2012. Both of these issues have made the world economy more vulnerable to recession. We experienced a recession based on prices that were too high for consumers in 2008-2009. It appears that the next bottleneck may be caused by energy prices that are too low for producers.
Recessions that are based on prices that are too low for the producer are the more severe type. For one thing, such recessions cannot be fixed by a simple interest rate fix. For another, the timing is unpredictable because a problem with low prices for the producer can linger for quite a few years before it actually leads to a major collapse. In fact, individual countries affected by low energy prices, such as Venezuela, can collapse before the overall system collapses.
While the Peak Oil model got some things right and some things wrong, the models used by most conventional economists, including those included in the various IPCC reports, are far more deficient. They assume that energy resources that seem to be in the ground can actually be extracted. They see no limitations caused by prices that are too high for consumers or too low for producers. They do not realize that affordable energy prices can actually fall over time, as the economy weakens.
Conventional economists assume that it is possible for politicians to direct the economy along lines that they prefer, even if doing so contradicts the laws of physics. In particular, they assume that the economy can be made to operate with much less energy consumption than is used today. They assume that we collectively can decide to move away from coal consumption, without having another fuel available that can adequately replace coal in quantity and uses.
History shows that the collapse of economies is very common. Collectively, we have closed our eyes to this possibility ever happening to the world economy in the modern era. If the issue with collapsing demand causing ever-lower energy prices is as severe as my analysis indicates, perhaps we should be examining this scenario more closely.
Note:
[1] There was a higher spike in oil prices in 2008, but averaged over the whole year, the 2008 price was lower than the continued high prices of 2011.
CIO of Finnish pulp paper company Stora Enso is wondering about reported growth numbers for Chinese economy. Export of cellulose to China has usually followed The growth of GDP. In May the exports dropped by 7% from the year before, and at The same time Chinese have dropped the import of recycled paper.
https://www.hs.fi/talous/art-2000006178766.html
Thanks for that metrics!
Interesting!
https://oilprice.com/Energy/Energy-General/US-Shale-Is-Doomed-No-Matter-What-They-Do.html
‘U.S. Shale Is Doomed No Matter What They Do’
“With financial stress setting in for U.S. shale companies, some are trying to drill their way out of the problem, while others are hoping to boost profitability by cutting costs and implementing spending restraint. Both approaches are riddled with risk.”
“Turbulence and desperation are roiling the struggling fracking industry,” Kathy Hipple and Tom Sanzillo wrote in a note for the Institute for Energy Economics and Financial Analysis (IEEFA).
“They point to the example of EQT, the largest natural gas producer in the United States. A corporate struggle over control of the company reached a conclusion recently, with the Toby and Derek Rice seizing power. The Rice brothers sold their company, Rice Energy, to EQT in 2017. But they launched a bid to take over EQT last year, arguing that the company’s leadership had failed investors. The Rice brothers convinced shareholders that they could steer the company in a better direction promising $500 million in free cash flow within two years.”
If you’re interested in this article you’ll need to go to the link. The site has multiple pop ups interfering with my attempts to copy and paste more from that article.
There is a link within the article to another article, this one about about statements by the former CEO of EQT about what about what a disaster shale technology had been from the point of view of investors who owned the stock in 2008.
https://www.desmogblog.com/2019/06/23/former-shale-gas-ceo-says-shale-revolution-has-been-disaster-drillers-investors
It’s interesting how on the one hand people point to fracking as a way of suggesting there’s no such thing as peak oil, yet the failure to profit sufficiently for investors points out all too clearly we’re at or past peak oil. That’s the whole point, that on the way down harder to get oil costs more to produce leaving less profit, less surplus energy to do everything a growing economy requires.
The fracking industry is the clearest possible testament to the near-desperation of our energy situation.
“…a report from S&P Global Ratings released earlier this month is a sobering document. It’s especially notable given that it is coming from a company that rates the quality of debt for corporate America.The U.S. shale explosion has been fueled by debt.
“What S&P sees is not encouraging. This year alone, 10 oil and gas companies rated by S&P Global Ratings have seen their debt ratings cut to D or SD. The D stands for default; SD is selective default, a rating that is handed down when a company voluntarily restructures their debt with their creditors.”
https://www.freightwaves.com/news/freightwaves-oil-report-the-debt-burdens-of-the-shale-companies-may-throttle-output-growth
This seems to be the S&P article that the FreightWaves in talking about. Surging Distress In Oil & Gas Sector May Foreshadow A Second Reckoning (I am not sure that this link will work-use Google)
The article says
The article lists the individual companies with problems.
Angus Deaton on inequalities
http://evonomics.com/nobel-economist-angus-deaton-capitalism-democratic/
Increased complexity is (of course) most of what is causing the inequality. It is impossible to fix, because there basically isn’t enough to go around, if the poor people get a large enough share of the total, because there are so many poor people.
Fluff. Anyone not living in the third world is the 1percent by any metric. Thats inequality. Not enough resources in the world to bring them up to first world consumption. How interesting that arbitrary boundaries are created when this sort of matter is discussed always leading to the idea that a stockpile of resources exists in the hands of the “oligarchs” that if only released would solve our problems. The truth that our species has depleted the resources of the planet that no magical stockpile of resources exists. Not very hopeful so fantasies are created. Sven are you happy about your countries immigration policy? It truly does reflect an attempt to share resources. The mean standard of living falls. Your OK with that?
My main motive for posting the article from Angus Deaton was to show that economics is the theology of our time. It denies however that there is a remnant of suffering that can`t be eliminated.
Thank you for your reply. I see economy as basically a word that has a lot of falsehood inherent to the paradigm implicit to its meaning. A better word/ paradigm would be something that had a meaning of a consumption metric. Economy has a lot of different paradigms involved in it. Earning. Owning. Above all a belief that there are a set of action that effect consumption that are seperate from the physical world. Magic. Thats why people are so upset. If you believe that your consumption is dependant on magic and that magic is arbitrarily being withheld.
Nope, ~1% by whatever broader definition (say even ~5-15% in some circumstances) just means that your physical existence is not dependent on externally forced work upon you as individual, so no daily-hourly bossing etc.. basically it means receiving reliable rent for very low effort (ratio), it could be anything on the receiving end from state subsidies (gov-state capture), to rental income, IP, dividends or various other schemes.. It usually also included important component to it of not having directly – daily defend your premier position in terms of this social-political status, simply you belong – have structures around you to perform this daily task on your behalf..
Well the definition certainly is contentious isnt it? Because it defines haves and haves nots. I certainly wouldn’t define it terms of the state. I believe i have a high standard of living . I eat well. I have housing. I have water coming from the faucet and a flush toilet. That feces is processed in a way that has minimal impact on the environment. I have been homeless lived on the street. In the country I live in USA you are more well off being homeless than a laborer in a third world country. That’s what I have observed living in the third world. As the practice of using housing as a financial instrument proceeds to make housing less and less affordable it does detract from first world standards but there is really no comparison. I dont live under a piece of plastic get up and go down to the docks and haul grain on my head. I see the resources and consumption i have as a 100 times better than that. That makes me the 1%. If I hadn’t worked the system and made choices that looked to the future I would still be homeless. If I had lived in say sub saharan africa i would not have the lifestyle i do regardless of my actions. However those in Sub saharan africa may well have a more established “socio political status” than I do however. Whatever that is. That makes them the 1%? You cant eat socio political status. Doesn’t the use of fossil fuels effect”your physical existence is not dependent on externally forced work upon you as individual”. To my mind the use of fossil fuels are the sole way work is reduced and comfort is increased. Its a resource in the physical world. It has physical reality its not a idea. It is a finite resource. I consume a lot more of it various way than the majority of people in the world as its inherent to everything. Does that not make me the 1% by nature of my first world lifestyle when 99% of the worlds population does not live that good?
Thanks for your view of the situation. You are right that we are using housing as a financial instrument, and that is a big part of what is making unaffordable for young couples.
I briefly visited India, and saw at least a bit of a very different world. I was told that some workers in an Indian slum I visited sleep on the floor of the shop where they work, and use a field outside as a toilet facility. The housing that was available was very high-priced relative to wages, and tiny. Homes for a family consisted of one small room, with fold down shelves for sleeping, as I recall. Cooking was done outside.
I’m afraid you still don’t get my point, I simply tried to describe, albeit in condensed way, perhaps not in the most reader friendly way, how the people as social animals in every historical time (!even before the age of fossil fuels!) try to enter the proverbial ~1% group of the rent seeking class, i.e. live of others work and the environment’s surplus. I tried to list the most important factors-drives-motives which are basically the same since antiquity, medieval times, and across various late stages to out industrial presence of today.
Your argument seems to default into mere affluence level comparisons and focus only on fossil fuel era exalted injustices, which self evidently do exist, but are more or less driven by the same social forces as in other times, not by fossil fuels as such, which are only a stimulant, multiplier if you will.. of past few centuries..
OK, lets digest it to the bone: ~1% exist on burning wood-charcoal only as well !
I guess I’m rather simplistic. I am grateful for my fate. I don’t see why we are approaching Balkanization here in the USA when we all have it so good. The flat I lived in India would fill with smoke about 6am everyday from the family below cooking there breakfast with cow dung. Nothing… Nothing was thrown away. About 20 families shared a toilet. A hole in the ground and a trough of water. It made a truck stop bathroom look like the Ritz. That was a relatively nice place. You didn’t poop in the street. When people talk about the 1% typically the metric cited is lavish consumption. Perhaps your view is more philosophical. Class differentiation is being represented as injustice. Yet the boundaries are always artificially constructed to exclude third world which is the true mean. The result is real anger and polarization. It is a destructive force. Why? We have great lives. That’s the truth IMO. Its less theoretical and philosophical to me as I see real effects in communities torn apart by what is IMO utter BS.
Well, attempted systematic observation could be eventually called a philosophical..
On the other item, the term – process of possible – probable balkanization in the US, refers to emerging groups of the same or compatible political and social values vs. the existing overall fed state umbrella. Simply prevailing mindset in California doesn’t want to have anything in common with the ‘redneck states’ attitudes and policies. Similarly in opposite guard.. and at one point one of them refuses pay taxes or render services for the commons of the other, that’s when it starts to visibly break apart, the violence-war component is only another step it could be ‘single event’ not necessarily prolonged conflict.
When the Effective Federal Funds rate rise 20 bases points from the lower range, then the markets start to break down.
If true then things are really tight.
The Fed is forced to cut the rate by 25 bases points?
https://pbs.twimg.com/media/D_7aoqbXoAIhjg7?format=jpg&name=large
I am trying to understand this chart.
I am not really certain what rate this chart is plotting. These are a couple of perhaps related charts I found:
The Effective Funds Rate (EFFR) is that actual market interest rate that banks charge each other for overnight loans:
https://gailtheactuary.files.wordpress.com/2019/07/us-effective-federal-funds-rate.png
Interest rate on excess reserves (IOER) is the rate paid to banks for deposits that they hold with the Federal Reserve above those required by banking regulation:
https://gailtheactuary.files.wordpress.com/2019/07/fed-interest-rate-on-excess-reserve-of-banks.png
This is another chart called “Interest rates relative to Fed target range”. It is by J. P Morgan, and was published in December 2018. I think that this may be an earlier version of what your chart is analyzing.
https://gailtheactuary.files.wordpress.com/2019/07/j.-p.-morgan-interest-rates-relative-to-target-funds-rate-dec-2018.png
When your charts says, “Collapse of the Emerging Markets” in 2015, it is referring to a credit crunch with high interest rates that hit emerging markets about that time. One article says, “From Turkey to Malaysia to Russia, emerging market currencies are diving.” I think of this as being related to the end of the US Quantitative Easing program in 2014.
I thought about the chart I showed recently, showing the Foreign Direct investment in various emerging market countries. But the foreign direct investment started sliding a whole lot sooner than 2015. The high year seems to be way back in 2008.
https://gailtheactuary.files.wordpress.com/2019/07/foreign-direct-investment-in-flagging.png
If you can provide more information, such as where the chart you show is from originally, that would be helpful.
A scientist lives and dies by statistics. When they are manipulated mostly dies. Sifting for the true paradigm is hard enough with accurate stats. When stats have to be verified even if they can be…. Statistics can and are tweaked for profit. Its a lot easier than having to actually change reality that they are supposedly based on. https://www.investopedia.com/terms/l/libor-scandal.asp
“…seems to be way back in 2018”. you mean 2008?
Right! I will fix it.
US Stock Market: Direction Hinges Upon Whether Investors Keep 50bps Rate Cut Hopes Alive
Stocks could continue to drift sideways to lower this week with the price action driven by low volume as many of the major players begin moving to the sidelines ahead of the European Central Bank policy meeting on July 25 and the Fed’s interest rate announcement a few days later.
Expectations of a 50-basis point rate cut by the Fed will probably drop below 20% at the start of the week. This is based on a Wall Street Journal report released on Friday that said the Fed will cut rates by 25-basis point and cut rates later in the year as needed.
If there is volatility, then it will likely remain centered around whether the Fed cuts 25 or 50-basis points. Some investors continue to say that the Fed must take the aggressive route because policymakers have to convince Wall Street that they are truly serious about providing the firepower needed to continue the current 10-year economic expansion.
This article was originally posted on FX Empire
More MoRe More…10 year expansion, trillions more in debt, consumers tapped out, and low growth
We’ll be all right….stay calm, carry on and all is fine….they said so
Borat is to blame…very nice…
An entire nation just got hacked
By Ivana Kottasová, CNN
(CNN) Asen Genov is pretty furious. His personal data was made public this week after records of more than 5 million Bulgarians got stolen by hackers from the country’s tax revenue office.
In a country of just 7 million people, the scale of the hack means that just about every working adult has been affected.
“We should all be angry. … The information is now freely available to anyone. Many, many people in Bulgaria already have this file, and I believe that it’s not only in Bulgaria,” said Genov, a blogger and political analyst. He knows his data was compromised because, though he’s not an IT expert, he managed to find the stolen files online
https://amp.cnn.com/cnn/2019/07/21/europe/bulgaria-hack-tax-intl/index.html
https://m.youtube.com/watch?v=f5xLNypFrV4
Security is something that we really have no fix for. Sharing everything online really doesn’t work. I can’t imagine that putting things in the cloud helps any either.
when i first was told about securely storing your data in “the cloud”, i laughed out loud in the face of the person explaining it to me.
one of my JPL colleagues would pull the hard drive from his lab PC before leaving the site. it was the only way he felt his data were secure. now we use flash drives, which are much more convenient.
Cocaine and Crude
OY, and you thought you had problems!
https://finance.yahoo.com/news/even-more-bad-news-boeing-182937641.html
“Boeing announced yesterday that the fall-out from its 737 Max crashes will cost the company at least $7.3 billion, and possibly more. Grounded In the wake of the crashes of two different 737 Max models, which lead to more than 400 deaths, Boeing had to take the plane out of the air and halt production of the popular model, which may not fly again this year. Rectify Airlines that flew the 737 Max have been pushing for compensation, and Boeing estimates that this will cost $5.6 billion. Furthermore, the company expects the production slowdown to cost an additional $1.7 billion. This is all in addition to the $100-million dollar fund the aviation giant pledged to create for the family of victims of the crash, which many critics feel just isn’t enough, as well as possible further litigation down the line”
What about the Stock price on Wall Street UP UP UP
Max assumptions could still be optimistic,”
Boeing stock is up 16% this year, compared with gains of 17% for the Dow Jones Industrial in the same period. Earlier this week, United Airlines UAL, -1.52% and American Airlines AAL, -1.96% announced more flight cancellations due to the grounding.
https://finance.yahoo.com/news/even-more-bad-news-boeing-182937641.html
When you have no choice you do it, whatever it takes to keep BAU flying!
Click FARMS…..a new growth Industry……
In China, the world’s largest smartphone market with over 800 million users, a unique type of farm springs up in urban areas.
The only crops there are smartphones.
The operations, known as click farms, can house hundreds or thousands of iPhones and Android phones on the shelves. They are plugged in and programmed to search, click, and download a certain app over and over again. The goal is to manipulate the system of app store rankings and search results.
“The business of fake views is so widespread,” the South China Morning Post reported in 2018, “that Chinese state media CCTV reported that 90 per cent of views generated by many popular shows on video sites are fake.”
App developers buy the service to boost their products’ visibility in an effort to win a bigger slice of the $50 billion dollar online advertising market in China.
https://finance.yahoo.com/news/click-farms-internet-china-154440209.html
All show and glitz….what till folks see that BAU has no cloths!
It is amazing all the strange things energy is used to support.
We use energy to make bitcoin as well.
And to make bottled water, to ship to places that have perfectly acceptable tap water.
I’ve lived in two locations in the US that gave me headaches from drinking the tap water. Sterling, Colorado and Oklahoma City, Oklahoma. In both locations I was forced to get bottled water and as soon as I started to drink it the headaches went away. My father gave me a hard time about it in Oklahoma City, railing on about how water was water and staring at me like something was wrong with me. He was new to that area but at 80 years of age started having strokes, small and big and became wheel chair bound thereafter living in a nursing home. I have no idea if something in the tap water contributed to his quick descent, but the question is an interesting one.
If you get a print out of what exactly is in tap water (often provided by the local water company) you’ll quickly see there are numerous trace elements including a tiny percentage of fecal matter. I suppose additives such as chlorine are suppose to kill off microbes, but I don’t take any chances. Think about how much water a person actually drinks a day and its not that much. We get Crystal Geyser gallons, the taste is great and the cost barely impacts a grocery bill.
So I personally think tap water is highly risky, particularly over the long haul. It depends on local sources. Best to all of you that roll the dice and drink from the tap.
Part of the issue is what isn’t in the tap water, as well. Our bodies need magnesium. There may may be other minerals as well, that are needed that are often in tap water. Drinking desalinated water “straight” is not good for us. Even filtration systems can remove too much of necessary minerals.
We have a whole house filter that we change every six months. It gets filled with red clay during that period. Evidently, red clay is one of the things included in our drinking water. The filter also removes chlorine and some unknown list of other things. It removes much less than reverse osmosis filters, however.
Usually, these water treatment facilities for tap water (at least in serious IC hub countries-regions) run within their loop a fish tank with trouts and similar so any short term as well long term problematic effects (+samples) are self evident or to be analyzed.
If you are concerned about feces, rather immediately stop visiting any public baths-pools, hotels/motels, cruise ships etc.. that’s where it is the worst situation with utmost proven record – apart from cases of sewage entering the well/water table directly obviously.
(Bloomberg) — Editors Note: There are few places as chaotic or dangerous as Venezuela. “Life in Caracas” is a series of short stories that seeks to capture the surreal quality of living in a land in total disarray
As a friend puts it, Venezuela has two seasons: one without mangoes and one with them.
https://finance.yahoo.com/news/mangoes-ripe-caracas-gone-100001516.html
“People lucky enough to have the trees on their their property used to stuff shopping bags full and press them on friends, neighbors, co-workers, anyone, trying to get rid of the distant peach cousins before they went bad. With so many mango trees in Caracas, these were futile efforts. Mounds upon mounds would end up rotting, emitting a sweet, pungent odor. We miss it”
Without BAU…coming soon to a neighborhood near you
“People used to select the juiciest, and least dented, leaving the dregs behind. No more. Hunger is so rampant that Caraquenos have made mad dashes to grab all they can this year, with some trees ripped clean before the fruits are ripe. Streets are littered with peels and pits; rich in vitamins A and C and loaded with fiber, mangoes are food and food can’t go to waste for a second.”
I live in South Florida and BAU is still in play, though cracks are being felt, namely, very high rents, car and home insurance, real estate bubble, and overdevelopment with ever escalating taxes and crime in certain fringe disenfranchised communities. Everyday another gun shooting.
Neighbors gladly share in their bounty of Fruit trees when in Season. Go for a walk and on the sidewalk may pick up ripe fruit, free. Of course, BAU provides an illusion all is well. I know better
I happen to live in SW Florida so hi there neighbor. I’ve lived in FL since the late 70’s and while rents are high now, they have pretty much been since i’ve been here. In the late 70’s I rented a 2 bedroom apt in Hialeah for close to $400. With today’s inflation that same apt probably goes for $1200. The difference now is that wages have not kept up with the Gov’t BS 2% inflation rate. What we are dealing with today is the late stages of Capitalism where the “snake is beginning to eat it’s own tail”.
Back in the early 80’s we were dealing with the Liberty City and Overtown riots and there were many areas in Miami that you just did not go to unless you were looking for trouble. Today is no different than it was 30-40+ yrs ago. I think an individual becomes more aware of what’s happening currently when they become awake to what a mess we have created for ourselves and what we’ll be having to deal with in the future.
A person who is not awake will see things no different today than they were many years in the past. At least that’s just how I see it.
Disagree totally, sorry..came here back in 1972 and much more affordable and less crowded .
I live in South East Miami Dade, Broward and all I read in the local papers are articles such as,
https://www.wlrn.org/post/report-south-floridas-housing-affordability-crisis-among-worst-nation
A new report has found that six in 10 employed adults in South Florida are spending more than 30 percent of their income on rent. That’s the highest of any metro area in the country.
Researchers Richard Florida and Steven Pedigo, who co-authored “Miami’s Housing Affordability Crisis” for the Miami Urban Future Initiative, also found that housing affordability is worse for minority populations. The report shows that black families in South Florida have less money left over after paying for housing costs than anywhere else
Moved here from North Carolina about 3 years ago, rents are half and so is car insurance and housing.
If I didn’t have to I would have stayed there!
But you and I do agree on one thing wages have not kept up with inflation for the working class….the investor class made out real well…thank you Feds!
The price for rent in major cities or on the outskirts is always going to be higher. I rent and live three blocks from the beach in a large 1 bd rm apt and pay $700. I’ve been here for 10 yrs and the rent started out at $575. It depends on where you live but places like Miami, San Francisco, NY, Boston or any major city will typically have higher rent than a rural area. Putting things in perspective, I was offered a six figure job in 2001 to work in SF and I couldn’t afford it. A 380 sg ft studio apt was $1100 in Millbrae. When it gets to the point that rent is unaffordable everywhere is when it’s time to start worrying.
In 1984 I moved from Broward to Ft. Myers and was renting a 2 bd/2 bath apt for $350 and was less than 10 minutes from Sanibel Island.
Just look at the coverage for Homeowners insurance
Your flood insurance premium is going up again, and that’s only the beginning
FEMA confirmed to the Miami Herald that it is looking into switching to risk-based pricing in 2020, which would end the subsidies most coastal communities enjoy on their flood insurance premiums and show the true dollar cost of living in areas repeatedly pounded by hurricanes and drenched with floods — like South Florida
Premiums through the National Flood Insurance Policy are already rising an average of eight percent this year; the first wave of pricier policies started in April. That brings the average annual price (including surcharges) for a policy holder to $1,062.
It’s all part of a strategy to make the NFIP financially stable. The program is $20 billion in debt (and that’s after the government forgave $16 billion of that debt last year) because it pays out much more each year than it takes in.
There are a couple of reasons for this, the most important of which is that the NFIP doesn’t charge homeowners like regular insurers do, by analyzing the property’s specific risks. Instead, the NFIP charges premiums based on average historical losses in the area and flood maps that are often outdated and incorrect.
https://www.miamiherald.com/news/state/florida/article215162440.html
OK, ball is your Court, Rodster
Remember the Five and Dime Store….Well it’s now
https://amp.cnn.com/cnn/2019/07/19/business/dollar-general-opposition/index.html
Dollar stores are everywhere. That’s a problem for poor Americans
By Nathaniel Meyersohn, CNN Business
Although the US economy has strengthened in recent years, dollar stores’ popularity has endured. Wages for a vast number of Americans have grown only modestly. People living paycheck to paycheck have been a boon for dollar stores, and the chains have also reached higher-income shoppers looking for discounts.
“While the economy is doing very well, our core customer continues to struggle,” Dollar General chief executive Todd Vasos told analysts last year. The company’s core customers earn around $40,000 a year or below, $20,000 below the median income.
Dollar General caters mainly to low-and-middle-income customers in rural and suburban areas. Dollar Tree targets suburban, middle-income shoppers, while Family Dollar focuses on lower-incoe urban and rural customers.
Dollar General looks to build stores in rural areas where a big box retailer or grocery store is not within 15 or 20 miles. Around 75% of Dollar General stores are in towns with 20,000 or fewer people, and the chain has its biggest footprint in southern states. (Dollar General has more stores in Texas alone than Costco and Whole Foods do combined nationwide.)
Dollar stores can open quickly in new areas because they are small and have lower operating costs than grocery stores. Dollar General stores are 7,400 square feet on average, compared to 40,000 square-foot supermarkets. And stores, which employ just a handful of workers to stock aisles, are cheap to run
Family Dollar has gone downhill in recent years and hate to go there.
Without a doubt, a lot of hidden inflation with shinkflation of products.
This is not going to end well….
We got to get our $$$ someway, somehow….Oh, here’s an idea
https://finance.yahoo.com/news/florida-woman-fined-100-000-101646606.html
The Supreme Court ruled in February that local governments can’t impose excessive fines. The decision is among the first constraints by the federal government on how much money cities and states can charge people for everything from speeding to overgrown lawns. But the court did not say what should be considered excessive, leaving local governments and residents with a question: How much is too much?
Fines are a reliable source of revenue for cash-starved cities, and have become a big – and rapidly growing – business for local governments. States, cities and counties collected a total of $15.3 billion in fines and forfeitures in 2016, according to the most recent financial records collected by the U.S. Census Bureau. That’s a 44% jump from a decade earlier
The Supreme Court’s decision should be a wake-up call for local governments that trap people in a never-ending cycle of debt, said Lisa Foster, a former Justice Department official who runs the Fines and Fees Justice Center, a New York-based advocacy group. But the ruling has not reined in some of the most aggressive practices, in Dunedin and elsewhere.Dunedin officials declined to be interviewed but insisted through a spokesman that the fines they impose were neither excessive nor abusive. Dunedin’s code enforcement policies are meant to “protect the integrity of neighborhoods and the quality of the community,” spokesman Ron Sachs said.
City and county records show that at least 33 homeowners owed the city $20,000 or more in fines as of May. That tally does not include dozens of bank- and company-owned houses with hundreds of thousands of dollars worth of code violations. In some cases, the fines seem to have more to do with aesthetics than public safety.
The city fined a man nearly $30,000 because of a “chronic” overgrown yard.
It fined a couple $31,000 for fixing their roof without a permit after a tree fell on it during a hurricane.
“They’re using a shotgun to kill a mouse,” said Bill Prescott, who was fined $43,000 because of an inoperative car and a pile of dried leaves in his front yard and plants that grew over the street. Prescott, who lives with his wife in Tallahassee, said he became ill last year and couldn’t make the long drive to Dunedin to maintain their second home. Fines of $250 a day piled up without his knowledge, Prescott said.
“It just leaves me scratching,” he said.
No, it’s gonna leave you BROKE…this is just the start of fleecing the average citizen to support a bloated government.
Here in Japan, the Land of the Free and the Home of the Samurai, we can let the front lawn grow as long as we like, or even cultivate pumpkins on the driveway. The landowner has the right to create an eyesore on their land that upsets the entire neighborhood if they so desire. And the neighbors have a wide array of options: get upset about it, put up with it in a spirit of maintaining social harmony, or ignore it.
It’s just those pesky divergent shadows from multiple light sources on the set that they forgot to airbrush out of the pictures for decades
Should we be celebrating the 50th anniversary -or mourning the dawning of the age of the mega conspiracy?
Funny how once the Soviet Empire collapsed there was no more need or desire to “revisit” the moon or to figure out how to deal with the deadly lethal Van Allen radiation belt.
It just demonstrates fully the social gullibility-conformity of the human ape species, it had to be aussie/nz ‘teenager’ out of all science buffs to dig out from the archives the gems like those mere orbital flight ‘heroes’ fixing long distance Earth appearance picture transparencies on the inside of the module cabin and at the same time shading the strong sun on the rest of them.. ground control adjusting commands of the camera scene in the audio etc.
I don’t blame ‘I want to believe my daddy and childhood dreams’ individuals anymore, simply each of us has got his defense filters on, some could grasp the OFW message to some degree, others partially or not at all, .. it’s quite similar.
then how do you suppose they got all those Moon rocks? or do you think that they faked those, as well?
as Norm would say, the problem with going to the Moon is all it has to offer is rocks. no gold, or slaves to exploit. it’s all about hubris and hopium, which sells for awhile.
LOL!
Well, I’m glad you mentioned that!
In 1967, Two years before the first moon mission, Von Braun made a trip to Antarctica, allegedly to collect lunar meteorites that could pass for lunar rocks. Although I prefer the theory that he went there in order to visit the Fuhrer at the secret Antarctic N*z* base to inform him in detail that the clandestine N*z* takeover of the USA was proceeding according to plan.
But in any case, Von Braun was a N*z*! And I say, never trust a N*z*!
http://www.angelfire.com/moon2/xpascal/MoonHoax/MoonRocks/MoonRocks.HTM
It’s fifty years since Buzz Aldrin went to the moon, and anyone who says different had better watch out for that famous right hook. This is a musical tribute of sorts.
https://youtu.be/hX0v7_excvU
“A cash crunch at one of China’s best known conglomerates is getting worse as the company said it will not be able to pay its upcoming dollar notes. China Minsheng Investment Group Corp.’s offshore unit said in a filing that it won’t be able to repay the principal, as well as the interest on the 3.8% $500 million bond due August, after considering its liquidity and performance.”
https://www.bloomberg.com/news/articles/2019-07-19/chinese-conglomerate-debt-woes-deepen-amid-repayment-uncertainty?utm_source=google&utm_medium=bd&cmpId=google
This is a default of a big conglomerate in the private investment sector of the economy. If the chart I showed yesterday from the WSJ is half-way correct, the default should not be surprising.
https://gailtheactuary.files.wordpress.com/2019/07/total-china-sales-wsj-july-17-2019.png
The actual numbers behind the chart were available by hovering over the online version of the WSJ article (available at China’s State-Driven Growth Model Is Running Out of Gas, WSJ, July 18, 2019 https://www.wsj.com/articles/chinas-state-driven-growth-model-is-running-out-of-gas-11563372006). The indications seem to be that sales in the Private Investment Sector are down 25%, between 2016 and 2018. There have been earlier articles about the Chinese government not lending to the private investment sector, leading to a need for this sector to scrounge for loans wherever they can find them. Instead, the Chinese government in recent years has lent only to its inefficient group of government-owned companies. Defaults on loans to Chinese government owned banks are a whole lot easier to hide that defaults elsewhere.
According to a cryptic footnote that went with three different WSJ charts, the source of the private sector investment numbers seems to be either Goldman Sacks or CEIC data. I wrote to the author of the WSJ article yesterday, questioning the numbers. He said,
“Hi Gail, apparently there are occasional sampling problems with the Chinese data used to form a basis for the sales the chart cites. So in all likelihood nominal sales did not fall; but it’s probably still the case that private have lost share to state firms.
Greg”
My guess is that the Private investment Sales numbers came off of the data that can be purchased from CEIC data. They are as right or wrong as the database is. They certainly are frightening, however.
Very unnerving. A Chinese slowdown has so many knock-on effects and a hard landing is unthinkably awful.
“…the Chinese were the biggest foreign buyers of American homes. Chinese buyers accounted for $13.4 billion in real-estate purchases, or roughly 17% of all sales to foreign buyers… [But] despite representing nearly a fifth of all real-estate sales to foreign buyers, Chinese demand shrank dramatically from the previous year. In 2018, Chinese buyers accounted for $30.4 billion in home sales.”
https://www.marketwatch.com/story/led-by-the-chinese-foreigners-are-buying-31-fewer-american-homes-2019-07-17
China has been restricting the amount of funds that can be taken out of the country for years, so at some point we should expect the share of homes bought by the Chinese to fall. Trump’s tariffs are not helping the situation either.
The fewer buyers, the less demand for homes. We should not be surprised if prices for homes fall on the West Coast and other areas where Chinese buyers have recently made up a substantial share of buyers of homes.
“…there is one crucial detail that is overlooked: the slowdown in trade started well before the recent eruption of protectionism. That suggests we cannot blame our current woes on the trade wars alone…
“Companies need hefty amounts of working capital to run their supply chains, and about two-thirds of this typically comes from their own resources, with the other third coming from bank and non-bank finance.
“During the pre-2007 credit boom it was easy for companies to find working capital and trade finance. But, since then, the crisis banks have reined this in. This is partly because post-crisis regulations have made it more costly for western banks to supply such funding, but also because banks’ resources have been hit by the debilitating impact of ultra-low interest rates and the flattening yield curve.
“Currency swings also hurt. About 80 per cent of trade finance is supplied in dollars, and trade invoicing tends to be dollar-based, too. This means that dollar strength tends to affect the ability of companies in emerging markets to finance supply chains…
“…the research suggests that the pre-2007 credit bubble not only created a house price boom, but also helped create a trade and GVC bubble, too.
“Third, insofar as this bubble has now burst, it seems unrealistic to expect that the world will recreate that global trade surge anytime soon — even if, by some miracle, the US and China suddenly end the trade war. This is not a comforting message. But it is the new reality to which the G7 has to adapt.”
https://www.ft.com/content/f44093f0-a934-11e9-b6ee-3cdf3174eb89
“Central banks in Asia and South Africa lowered their interest rates Thursday, joining a global easing bandwagon that started earlier this year in the Asia-Pacific region and is expected to include the U.S. and Europe within weeks.
“The latest moves, by central banks in South Korea, Indonesia and South Africa, underscore the global nature of the brewing rate-cutting cycle, as policy makers attempt to ward off signs of weaker economic growth. With economies and financial markets interconnected, expectations of lower interest rates by the Federal Reserve and European Central Bank have given central banks in emerging markets scope to lower rates and prop up their economies.
““I think this will provide further impetus for Asian central banks in their easing cycle ahead,” said Prakash Sakpal, an economist at ING Bank.
“Since April, New Zealand, India, Malaysia and the Philippines have lowered rates. China’s central bank has taken a number of measures to encourage lending to small businesses, and investors expect it to reduce benchmark rates if the Fed lowers its rates.
https://www.wsj.com/articles/global-easing-cycle-gains-momentum-as-central-banks-cut-rates-11563460048
“The MSCI Emerging Markets Index of equities fell even though central banks in South Korea, Indonesia and South Africa all cut interest rates on Thursday. On top of that, their foreign-exchange rates all strengthened along with the broader market for currencies of countries with developing economies, which is not what one would expect in an easing cycle…
“The truth is, it’s getting harder to ignore the big-picture risks facing the global economy.”
https://www.bloomberg.com/opinion/articles/2019-07-18/another-notch-for-central-banks-have-no-ammo
“Freight volumes are falling precipitously within the US and across much of the world as economic slowdown spreads, hitting levels that typically mark the onset of recession. The US rail transport group CSX Corp suffered its biggest share price drop since the Lehman crisis after slashing its outlook on Wednesday. The stock has fallen 12pc over the past two days.”
https://www.telegraph.co.uk/business/2019/07/18/global-freight-slide-nears-recession-levels-trade-war-damage/
The situation overseas is very bad as well, according to the Telegraph article
I also looked at the report from Cass itself, with respect to the poor shipping results. Among other things, it says:
So, to recap:
In the first half of 2019:
Global car sales were down 6.6%.
Global device shipments were down 3.3%.
Freight volumes are indicating the onset of recession.
Global manufacturing PMI was 49.4 in June, down from 49.8 in May (sub-50 indicates contraction).
Most unsettling. Let us hope the easing we are now seeing from central banks around the world proves at least somewhat effective, and these various trade disputes don’t ramp up too nastily or we could find ourselves in Fast Eddie territory.
Speaking of trade disputes, even Islay is not immune. Whisky (along with tourism) is the backbone of the local economy and it looks as if Trump is about to slap tariffs on it:
“A spokesperson for the Scotch Whisky Association told the BBC: “Exports of Scotch whisky to the US have been zero tariff for 20 years, so it is disappointing that Scotch whisky has been drawn into this dispute.”
https://www.bbc.co.uk/news/business-48837360
Good luck with the tariff dispute!
I suppose that it saves fuel if US citizens buy our own locally made whiskey. Also, in theory, it slightly helps US jobs.
Apparently, GVC or “Global Value Chain” is a new buzzword.
The World Trade Organization has a report out called:
“Global Value Chain Development Report 2019: Technological innovation, supply chain trade, and workers in a globalized world.”
The Foreward starts out:
“There are different ways to analyze the global economy. One is to view it through the lens of growth and structural change in individual economies, developed and developing. A second is to use the lens of global value chains (GVCs), the complex network structure of of flows of goods, services, capital and technology across national borders. Both are useful, and they are complementary to each other.”
Thus, when the article quoted in the Financial Times article says, “the research suggests that the pre-2007 credit bubble not only created a house price boom, but also helped create a trade and GVC bubble, too,” he is saying that when commodity prices were high, it looked like more value was being added in Emerging Markets and elsewhere around the world than when commodity prices dropped.
DOW to 35,000?
https://www.peakprosperity.com/martin-armstrong-dow-35000-by-2021/
Hmmmm…
Cheers,
-GBV
Ya know, in this “nutty” world where everything is manipulated to keep the Ponzi Scheme from collapsing, I don’t doubt the Dow could hit 35,000. I wouldn’t even discount that a 35,000 Dow is being on the conservative side.
When you have negative news come out and the Dow keeps pushing higher and higher. It just makes you put things in perspective what a joke our globalized financial, monetary and banking system are. The only way to really make money today is via the illusionary Stock Market.
I’ve followed Armstrong for some time, and am always puzzled by his wandering explanations. He seems like an idiot savant that stumbled onto some deep truth or cosmic answer that even he cannot fully understand nor explain…
Yet, I appreciate his analysis (which he always insists is not just his opinion) – if you can decipher it from his sometimes-incoherent ramblings and excessive use of “you have to understand”, “people don’t understand”, “it’s a complete joke”, “et cetera” – as it is different from most of the other “analysis” proffered by “analysts” in the mainstream news and online blogosphere. Focusing on capital flows (i.e. flow rates) as opposed to actual market events is actually intriguing, and for whatever reason it is a concept that seems to make sense to my collapse-addled brain (i.e. understanding flow rates is of more predictive value, as they directly contribute to the occurrence of the very economic/societal events most of us seem to try to predict… perhaps a better predictive model than using those very same economic/societal events to predict future economic/societal events?).
In the end I’m sure the long-time collapseniks like Gail, Nicole Foss, Orlov, JMG, etc. will end up being proven in the long run (most of them being pretty “macro” in their views, with Gail probably being the most analysis / detail-oriented of the bunch). But I think the “long run” might be longer than I first assumed, and the DOW might make it’s way up to 35,000 before said “long run” is completely realized…
(Side note: Armstrong predicts that hegemonic power will shift away from the West in 2032, which may be a prediction that is analogous to the idea of -somewhat-immanent societal collapse that so many have come to believe here on OFW).
Cheers,
-GBV
If I recall – interpret it correctly, Dr. Tim at Surplus mentioned ~2024 onwards as window opening for Emerging Markets (aka China) finally facing full frontal nudity, ehm full spectrum end of any growth, hence in effect throwing the whole global into the abyss..
This peculiar twilight zone of ~2025-2030 has been pinpointed as serious threshold by several authors already.
Indeed. But to be fair to Mr.Armstrong, I’m pretty sure I’ve seen copies of his Economics Confidence Model (ECM) dating back to the late 90’s / early 2000’s that were identifying those timelines, and he has been consistent about them since then. Perhaps some of those authors have done the same, but I’m not sure to be honest…
Cheers,
-GBV
“In the end I’m sure the long-time collapseniks like Gail, Nicole Foss, Orlov, JMG, etc. will end up being proven in the long run ”
Well a doomster only has to be right once.
The dysfunction is palatable on so many systems. Political. Economy. Environment. Social. Not to forget the pandora’s box that all of them are dependant on. ENERGY. I hope your right and this side freak show keeps on until after I am gone.
I finally got around to reading this. I found reading the transcript more interesting than I expected. I haven’t been a person who has tried to forecast the stock market, and I haven’t followed people in that business. So, I had never heard of Martin Armstrong. He has a lot of recollections about past stock market ins and outs that I had not been aware of.
I thought it was interesting that Armstrong considers private debt safer than government debt, because private debt actually has assets associated with it. Of course, there has to continue to be a use for those assets, for them to continue to have value. But I agree that government debt is quite iffy. In fact, Armstrong says,
I am wondering whether if Federal Treasuries are no good, other securities will really hold their value? Isn’t there a problem with this assumption. We need a lot of government services to continue, I would think.
I can almost see the idea of the Dow escalating to a very high point. All of the various money managers around the world need a place to get a decent return. If bonds aren’t yielding much, and are providing negative yield in Europe and Japan, then the available money will head toward whatever is available. If the financial system will stick together, perhaps this kind of thing could happen.
I think of being able to determine the value of a stock as a/i, where “a” is some measure of its yearly future after-tax earnings or dividends, and “i” is the available interest rate. Of course, if “i” is 0 or negative, this makes no sense. If 1/0 is undefined, then 35,000 is as good a value for the Dow as any, in a few years.
For one thing, if the balkanization proper comes to the US, mind you it could be this very next deeper recession/GFC II round, yes it’s ~lower but nevertheless existing probability (or rather postponed later) then this train of thought is correct. As nobody would be interested in FUSA treasuries in situation of ‘democratic socialism’ (lukewarm communism) faction of Democrats taking over several USA states-regions (and taking with them part of federal allocated resources locally available), and other members of the union wanting to continue and upscale their ‘conservative – private property’ way instead..
Not sure if this video will be helpful or not:
https://www.youtube.com/watch?v=AFrNf5VSfPs
Armstrong basically covers everything he discussed in the Chris Martenson interview, but he seems a bit more clear this time around.
Cheers,
-GBV
Whoops, also wanted to add to something you wrote, Gail:
I thought it was interesting that Armstrong considers private debt safer than government debt, because private debt actually has assets associated with it.
I think in previous videos or articles I’ve read from Armstrong, he elaborates about his views on public vs private debt, pointing out that when a private firm defaults at least you have a grievance/resolution mechanism in place within the system (i.e. the law, which is maintained/enforced by the government/public sector). But even if public sector debts were associated with assets, when a massive default occurs the mechanisms in place to grieve/resolve the issue tend to go out the window (or are corrupted in favour of government/public sector interests).
And who is going to compel the government/public sector to give you what you’re “legally” entitled to? Or, as the old saying goes:
You and what army?
Cheers,
-GBV
Good point!
Governments have no assets? Since when?
Are roads, bridges, buildings, sanitation systems, reservoirs, parks, museums, government land, parking lots, schools, universities, prisons, defense equipment, etc…not assets?
Yes, governments have assets. In recent years, governments have increasingly been trying to sell off some of these assets to others (for example, college dorms owned by outside organizations, rented directly to students) to reduce their need to borrow to build and maintain these systems. They also collect money on an ongoing basis for the use of these assets (examples: toll roads; museum charges; park charges; college tuition).
There is a clear limit to how much of the services that governments perform that they can outsource. The contractors that they hire to perform these services seem to go bankrupt. Carillion, a major UK contractor hired for this purpose, has had serious financial problems. I believe that there are other examples elsewhere. The contractors can’t charge enough for their services (because of wage disparity, too low wages for many) to perform the services that are being outsourced to pay for their costs. Because of this problem, the sale of these assets becomes a huge problem. The assets really have no value to an outside owner unless the owner can at least at least cover the cost of operation, plus the owners monthly debt payments.
Of course, there is also the issue of ongoing maintenance of the assets and building more similar assets. These problems may be left with governments.
Mein Fuhrer…I’ve got a Plan….HAHAHA..Trump will like this one
“There is no alternative to reducing carbon emissions to zero and keeping the Paris Climate Agreement, but even if without further warming the planet we have already caused serious damage,” Anders Levermann, a climate scientist at the Potsdam Institute for Climate Impact Research who worked on the study, told Earther. “One process that is currently unfolding in West Antarctica caused by a warming of the ocean, is that all of the marine ice of West Antarctica will discharge into the ocean
PS the so called Paris Agreement INCREASES CO2 concentrations! Small oversight detail sarcasm
Sure…this will work….making snow will add to the GWP and maintain BAU forever..snicker, snicker
https://earther.gizmodo.com/scientists-propose-pumping-74-trillion-tons-of-artifici-1836455589/amp
Boy are we fcked
The wife and I watched The Blob from 1958 with Steve McQueen last night, and it turns out the blob doesn’t like cold temps. So near the end of the movie they capture it and send in on a military transport plane to the Arctic, and Steve McQueen says, “We’re safe as long as the Arctic remains cold.” and then a big question mark comes up on the screen, and movie over.
Now obviously we don’t have to worry about a blob from outer space consuming people, but when the plan is to try and replace natural weather with artificial weather, snow in the Antarctic, you know we’re in trouble because it ain’t gonna happen. Just not economically viable especially on the downside from peak oil.
we’ve seen the Blob…. And it’s a green one!
http://www.thegwpf.com/content/uploads/2018/07/green-climate-fund.png
The geo-engineering experiment to make snow for Antarctica has a few problems, according to the article:
just because you can, doesn’t mean you should.
And yet Dane Wigington from the popular website http://geoengineeringwatch.org has substantial government data and evidence to support that these programs are currently deployed and have been for many decades.
Perhaps it is the scale that this group is considering changing. We know that China wants nice weather for popular events. It can use cloud seeding to change when and where the rain falls, for example.
Dane Wigington posted an article awhile back on his website that yes, China is also manipulating the weather. In fact they took credit for creating a snowstorm in Beijing back in the mid 90’s, seeral people died.
He also notes the wacky weather taking place with perfectly spherical baseball or grapefruit sized hale. Iran has accused the US of weather warfare and the UN has issued a ban on climate engineering and weather warfare. So yes, i’m in agreement with Dane Wigington and he has posted those Gov’t reports on his website along with the several hundred US Patents pertaining to climate and weather modification and guess who he found owns most of those patents? US Government Defense Contractors like Raytheon, Lockheed Martin and a few others.
A small fleet of 107 power satellites with a an output of 14.7 giga newtons squared would produce the power for this project easily.
“Global device shipments, including PCs, tablets and mobile phones, will fall this year by 3.3 percent to 2.2 billion units, pulled down by the mobile phone market, according to the latest study from Gartner. The smartphone market alone is expected to decline by 2.5 percent this year, its worst fall ever.”
https://www.telecompaper.com/news/smartphone-shipments-to-fall-25-in-2019-markets-worst-decline-ever-study–1301137
Car sales falling in the US, China, India, emerging markets and Europe:
“European car sales look set for a second annual decline after new car registrations fell sharply last month. Sales dropped 7.8% to 1.49 million cars, according to the European Automobile Manufacturers’ Association (ACEA), the worst drop since December.”
https://markets.businessinsider.com/news/stocks/european-car-sales-drop-in-june-daimler-bmw-profit-warning-2019-7-1028359837
French Renault and PSA sales for the six first months fell by 6.7 and 12.8%.
Only Japan and Brazil are not in recession.
https://www.lemonde.fr/economie/article/2019/07/16/le-marche-automobile-entre-en-recession_5489957_3234.html
“The number of new cars sold worldwide fell 6.6% in the first half.”
Wow.
Incredible!
“The number of new cars sold worldwide fell 6.6% in the first half.”
People just don’t have the money to buy stuff anymore. It’s food, shelter and healthcare. This is what happens when inflation continues to rise and wages continue to stagnate. What we are witnessing around the world especially in the West is “the snake eating it’s own tail”. Then you have Robots which are coming online at a furious pace taking jobs away from humans and eventually no one will have money to buy anything.
What a mess !
If we started giving robots mortgages and a decent wage, maybe we could kick this can a bit further down the road…
Wow! No wonder that there are conflicts regarding which country should be able to supply the needed parts for these phones. Businesses that don’t shrink are in hugely better positions than those that are forced to shrink.
Right. The Japan vs. South Korea spat looks like it’s heating up:
“Dozens of South Korean small-business owners rallied in South Korea’s capital on Monday calling for boycotts of Japanese consumer goods to protest against Tokyo’s move to tighten hi-tech exports to its neighbour.”
https://www.aljazeera.com/ajimpact/190715084409813.html
Increased conflict everywhere, when the overall sales of goods isn’t going up sufficiently.
Preschool children fight over a toy that they want. Here, the stakes are higher. Each country wants its country to a big enough share of the output so that workers don’t have to be laid off and factories closed.
“In response to the escalating economic conflict between South Korea and Japan, financial authorities here are establishing a contingency plan in case Tokyo expands its trade restrictions to the financial sector, officials said Monday.
“The preemptive gesture came out of concern about the apparent dependency of local financial companies on Japanese lenders, which have been offering a low interest rate for years.”
http://www.koreaherald.com/view.php?ud=20190722000705
The conflict escalates!
“With the stimulus from the late 2017 tax cuts fading, the direct impact of the global economy has shown up in slowing U.S. growth.
““This downdraft and trade tensions are now dampening U.S. growth, especially in the more internationally exposed segments of trade and manufacturing, while weighing on corporate sentiment and business investment as well,” the analysts say. International developments, they point out, are not encouraging.”
https://www.marketwatch.com/story/with-us-stimulus-fading-fed-cant-ignore-stagnant-global-growth-morgan-stanley-argues-2019-07-17
“Americans burned through a lot less gasoline and diesel fuel than expected last week, feeding into investor angst over oil demand…
““We’re at the heart of summer driving season, so you would expect demand to be at it’s highest right now,” said Brian Kessens, a portfolio manager and managing director at Tortoise in Leawood, Kansas. The big build in fuel supplies is “a little bit concerning, especially if we see this continue in future reports.””
https://finance.yahoo.com/news/oil-holds-losses-trump-trade-063052328.html
A person can look at the weekly product supplied numbers near the bottom of this chart: https://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm
You can also click on the link at the end to get more historical data.
The last week definitely does look light, especially in terms of motor gasoline consumed. But these weekly numbers do bounce around quite a bit; I am not certain that they are terribly reliable. The prior “Fourth of July” week was high. If this latest week is averaged with the Fourth of July week, then we would have four weeks at a more or less similar level. But that level isn’t very high either. It appears to be down from 2016, 2017, and 2018 levels at this same time. Distillate fuel use (diesel) is also low compared to prior years.
“Turkey’s economy is expected to contract in 2019 for the first time in a decade and to see only modest growth in the following two years, a Reuters poll showed on Wednesday… The poll of more than 40 economists showed the Turkish economy shrinking 1.5% this year, according to the median forecast.”
https://uk.reuters.com/article/us-turkey-economy-poll/turkeys-economy-to-contract-in-2019-limited-growth-ahead-reuters-poll-idUKKCN1UC0Z6
“Turkish authorities have begun to remove Arabic shop signs across the country in a bid to quiet popular resentment over Syrian refugees. This measure — stoked by Turkey’s economic crisis — has raised the political costs for the government.”
https://www.al-monitor.com/pulse/originals/2019/07/turkey-syria-refugees-government-removes-arabic-shop-signs.html
“…most consultancy firms and economists agree that if there is a “run to the dollar” or another sharp devaluation of [Argentina’s] peso, inflation will come in even higher than 40 percent.”
http://www.batimes.com.ar/news/economy/inflation-continues-to-decelerate-as-interannual-price-hits-558-percent.phtml
“The plunge in dollar bonds of two Indonesian speculative-grade issuers is raising the risk of contagion for other lower-rated borrowers from the nation.”
https://www.bloomberg.com/news/articles/2019-07-18/indonesian-dollar-junk-bonds-slump-as-contagion-risks-emerge
“…overall, the world is borrowing more than it is producing. It is living beyond its means, so to speak. Such a massive pile of it puts the world — and emerging markets in particular — at risk to sudden shifts in market conditions. If conditions change quickly, it could be harder for countries with lesser credit quality to refinance outstanding debt.”
https://edition.cnn.com/2019/07/17/investing/united-states-debt-risks/index.html
““Debt is the crux of the matter. If you want to understand what makes the world vulnerable to a global recession or, possibly, something much worse, you’ve got to come to grips with the worldwide debt buildup. It’s not the only candidate for calamity, but it ranks first among the possibilities.”
https://www.washingtonpost.com/opinions/will-the-global-debt-bomb-explode-again/2019/07/17/e8756d5c-a89e-11e9-a3a6-ab670962db05_story.html
No kidding! You need to keep the world economy growing rapidly, to stay away from the debt that has built up collapsing. Continued government promises (such as for retirement or unemployment insurance) add to this impact as well.
Seems like something that has happened before!
Devaluation is a huge problem for countries experiencing it. Of course, if these countries were able to source all of their inputs internally, there would be no such problem. In theory, countries experiencing devaluation can sell their exports cheaply, though.
If there are major fluctuation in currencies, especially major world currencies, I expect that derivative defaults will become an issue as well.
Recently there was a brief discussion about PV systems as potential mid/long term enviro hazard, for example a hale storm can scratch or even brake the surface and leakage of Cadmium commences. Well, from my early look into the matter it seems this mostly concerns thin film Cadmimum Telluride type of panels, which are popular in some countries (US-China) as of lately while not that much in others. Most of the residential settings tend to have PV array just above rain gutters, so this potential hazard seems nuts, it can spoil your rain water tank easily; on the other hand such deposits quickly sediment – reach the bottom so water should be pumped from a bit little elevated depth anyways..
If anybody can share more info about potential hazardous elements leaching from damaged classic panels – silicon based, pls. let us know..
Good question.
These are some links I found:
https://www.who.int/water_sanitation_health/dwq/chemicals/cadmium.pdf
https://www.epa.gov/privatewells/potential-well-water-contaminants-and-their-impacts
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5607867/
https://www.theverge.com/2018/10/25/18018820/solar-panel-waste-chemicals-energy-environment-recycling
Cadmium is bad news. Its a near perfect fastener coating but no one coats with cadmium anymore just too toxic.
Wow, been reading numerous accounts of this lately…
Virginia woman infected with flesh-eating bacteria after just 10 minutes in water
Virginia woman who contracted a flesh-eating staph infection that spread through her leg after just 10 minutes in the water, had to have emergency surgery days later, according to reports.
“I was just like, ‘Oh, my goodness my leg is gonna fall off,’” Amanda Edwards told WTKR. “That’s the only thing I could keep thinking.”
Edwards had been at Norfolk’s Ocean View Beach last week with friends when she noticed the infection spreading. She told WTKR she ignored it for a couple of days until she couldn’t walk anymore
https://nypost.com/2019/07/17/virginia-woman-infected-with-flesh-eating-bacteria-after-just-10-minutes-in-water/amp/
Seems a high bacteria count in the water ….preppers beware….the microscopic universe has one goal in mind…..and you are on the menu!
“Every year, an estimated 23,000 Americans die from antibiotic-resistant superbugs – germs that evolve so quickly, existing treatment options can’t eradicate them.
“But it’s not just deadly drug-resistant bacterial infections that are spreading. We also have to worry about drug-resistant fungal infections, too.”
https://www.sciencealert.com/a-deadly-fungus-is-spreading-across-the-world-and-we-don-t-know-how-to-stop-it
According to the article:
It is hard to keep hospitals operating, when there is this problem with super bugs.
No wonder hospitals and HMOs want as few patients to stay as short a period as possible in the hospital. They are likely to catch something.
What’s happening now in Russia is unique – never was in such a scale. Just a few weeks ago – massive bees deaths along all country, 90% bees are dead because of new type of pesticides, it will cost Russia 1 trillion rubles (15 billion $). Massive fishes deaths this spring. Nobody counted but it made huge ecological and economical impact. We are going to extinction. Most of russian agricultural fields production goes for export. Guess the quality.
Yep, it’s a mad schizo world. They use herbi-pesticides on boosting grain output and then om state subsidy and favorable biz deals invite German ecofarmers to overhaul their mega farms in milk, poultry, etc.. using as inputs these tainted grains.
On the other hand ‘mother Russia’ is gigantic, few millions of affluent consumer reside there, so to serve this market in ‘safe food’ is not that hard, but relocation in adult life to that culture is surely not for everybody.
Thanks for letting us know that alarming news. Surprisingly, here in Eastern England I have never seen so many bees.
“Beekeepers across the US lost four in 10 of their honeybee colonies over the past year, as the worst winter on record for tracked bee populations raised fresh concerns over the plight of the crucial pollinators.”
https://www.theguardian.com/environment/2019/jun/19/us-beekeepers-lost-40-of-honeybee-colonies-over-past-year-survey-finds
“The Trump administration is approving the pesticide sulfoxaflor – thought by some experts to harm bees – for use on a wide variety of crops.”
https://www.theguardian.com/environment/2019/jul/12/bees-pesticide-trump-epa-approves-sulfoxaflor
I’ve had to watch my step when walking as the bees have been so dense on the flowering wild flowers, and in each ornamental poppy in the garden I’ve seen up to 3 bees at a time – very cheering! But yes, some kind of anomaly and globally it looks ominous.
I’ve seen a healthy number up here on Islay, too, Xavier. No idea why. Looks like there are plenty around the UK generally:
“Huge swarms of bees have been causing havoc as they invade towns and cities across the UK. People have been complaining of the flying insects in large numbers in many places including Plymouth, Devon and north Wales.”
https://www.mirror.co.uk/news/uk-news/huge-swarms-bees-causing-havoc-17148156
I’m also seeing lots of bees (and also lots of wasps) this summer.
Could it be that these bees in the UK and in Japan are refugee bees from Russia and America that finally got tired of being pesticided?
https://image.cagle.com/164972/750/164972.png
Thanks for pointing this out. We seem to get our own versions of epidemics now. Sometimes they are caused by pesticides. Other times, they are caused my microbes. Terrible for parts of the ecosystem, in either case.
Michael Hudson:
“So Trump’s view is a fantasy. It’s like saying, “If we had some ham, we could have some ham and eggs, if we had some eggs.” It leaves the causes of America’s de-industrialization out of account.”
Gotta love it!
Go here for the entire transcript….
https://thesaker.is/bonnie-faulkner-interviews-michael-hudson/
This Michael Hudson interview is very interesting. It starts out with a quote from Michael Hudson, but given by the interviewer, Bonnie Hudson:
I have heard Michael Hudson make a similar assertion before. It makes sense, to me.
At one point, Michael Hudson points out that the 3% cap on deficit spending that the Eurozone has put in place effectively puts a straight jacket on these countries. It forces them into involuntary austerity programs, when things don’t go well. I agree.
He also speaks out in favor of governments being the source of lending to companies, rather than banks and the private market. His argument is that if the government is the lender, it can simply forgive one class of debt (say, student loans), and keep others in place. This prevents the loans from causing a problem. Private lenders would be outraged by this approach.
I would argue that if the government is the lender (as it is in China), it favors Chinese owned companies, rather than private companies, even though these companies tend to be quite inefficient. It leads to a system where the private companies starve, and the inefficient government owned companies continue. Ultimately, this leads to less productive investment.
If Michel Hudson would put his views together with an understanding of how the economy operates as a self-organized system, powered by energy supplies, he would be really outstanding.
Humans take period. You can call it imperialism like its a bad habit you can wean off of but thats fantasy. The alternative paradigms take also. When we run out of stuff in our vicinity to take we take it from elsewhere. If you stop taking you lose the ability to take. https://en.wikipedia.org/wiki/Maximum_power_principle. Then you whine about the morals of the new alpha wolf. We are one of the most effective predators the world has ever seen. We may not like it but when push comes to shove we do what we do. Those that do not take are prey. If they had power they would be predators. Do I like it or exult in it? No. Is our path sane? No. Do i wish for a better way? Yes. Is there one? No. It is the way we are and the way the world is. Species take and consume. Trees compete for sunlight. One tree flourishes and one tree perishes. Our world has sadness.
Lynn Margulis said plants produce, animals acquire, and fungus absorbs
You are right. The only time we can have cooperation, is when there is an adequate per capita energy supply to make this a reasonable strategy. But even with cooperation, there is a tendency toward selfishness.
Very eloquently put, MR. Bongo.
Human beings evolved into apex predators not because our ancestors developed stronger muscles, faster reflexes, or sharper teeth, fangs and claws, but because they developed intelligence and dexterity to levels far beyond those of their fellow creatures.
Eventually this led to an ongoing tsunami of cultural and technological developments that may yet prove to be our undoing, and at the very will least show us up as having been too clever by half.
I agree, the interview with Michael Hudson was indeed very interesting. About the trade war with China he says:
«The irony is that Trump is breaking up America’s financial free ride – its policy of monetary imperialism – by telling counties to stop recycling their dollar inflows. They’ve got to de-dollarize their economies.
The effect is to make these economies independent of the United States. Trump already has announced that we won’t hire Chinese in our IT sectors or let Chinese study subjects at university that might enable them to rival us. So our economies are going to separate.
In effect, Trump has said that if we can’t win in a trade deal, if we can’t make other countries lose and become more dependent on U.S. suppliers and monopoly pricing, then we’re not going to sign an agreement. This stance is driving not only China but Russia and even Europe and other countries all out of the U.S. orbit. The end result is going to be that the United States is going to be isolated, without being able to manufacture like it used to do. It’s dismantled its manufacturing. So how willit get by?
Some population figures were released a week ago showing the middle of America is emptying out. The population is moving from the Midwestern and mountain states to the East and the West coasts and the Gulf Coast. So Trump’s policies are accelerating the de-industrialization of the United States without doing anything to put new productive powers in place, and not even wanting other countries to invest here. The German car companies see Trump putting tariffs on the imported steel they need to build cars in the United States. It built them here to get around America’s tariff barriers against German and other automobiles. But now Trump is not even letting them import the parts that they need to assemble these cars in the non-unionized plants they’ve built in the South.
What can they do? Perhaps they’ll propose a trade with General Motors and Chrysler. The Europeans will get the factories that American companies own in Europe, and give them their American factories in exchange.
This kind of split is occurring without any attempt to make American labor more competitive by lowering its cost of housing, or the price of its health insurance and medical care, or its transportation costs or the infrastructure costs. So America is being left high and dry as a high-priced economy in a nationalistic world, while running a huge balance-of-payments deficit to support its military spending all over the globe.»
How does this understanding compare with what you wrote in one of your recent posts – Why it (sort of) makes sense for the US to impose tariffs:
«By putting tariffs on some goods, Trump is providing a substitute for the missing high oil prices needed to slow the growth of globalization, if the issue of ever-increasing wage disparity is to be solved. The tariffs tend to raise the value of the US dollar relative to other currencies, making the cost of commodities (including fossil fuels) cheaper for US consumers than for other consumers around the world. The tariffs tend to encourage new investment in US production of many types, at the same time that they make investment in other countries, such as China, less appealing.
All of these changes indirectly give the US an advantage if there should be a partial collapse of the world economy. With the benefit of the tariffs, perhaps the partial collapse would leave some combination of countries, including the US and Canada, mostly unaffected. There might be other groups remaining as well. Weak economies, such as Venezuela, Cuba, and Haiti, would likely be pushed aside. Even Europe and Japan would likely have major problems.»
I think the difference between the view I expressed and the one Hudson expressed is that Hudson is coming from the view that the US is coming from a point of view of being able to collect something like a tariff or tax on other countries, by their need to buy US Securities, allowing the US to export more than it imports, year after years. In his view, the changes Trump will make will cause a loss of this benefit, and the new system with Trump’s tariffs will not really work for the world as a whole.
My post was written from the point of view that the world economy was already coming apart before Trump’s tariffs were put in place. China, in particular, is doing much worse than its GDP reports suggest. It has serious coal production problems. Trump’t tariffs are an attempt to keep something for the US, in a disintegrating world economy.
I agree with Hudson that the US currently has a huge advantage, because of other countries needing to buy US Treasuries. It acts like a tax on other countries. I expect that this advantage will disappear, as the world economy disintegrates. In fact, it is possible that there will be a sudden change away from the US$.
But I see gold as being a lot worse basis for world currencies than the US$. It doesn’t inflate much at all, and we need a constantly increasing base.
I also don’t see the government being the major lender to everyone working out well either. The approach doesn’t seem to be working out all that well for China. China only lends to government-owned entities, and these are very inefficient. This encourages the wrong sector of the economy.
By the way, I ran across this chart in the WSJ today, in the article China’s State-Led Growth is Stalling.
https://gailtheactuary.files.wordpress.com/2019/07/total-china-sales-wsj-july-17-2019.png
First of all, I can’t really believe that this chart is correct. There is a reference saying, “State and Private Sales are from Goldman Sachs and CEIC,” but that is about all. I cannot believe that aggregate sales are down this much, at the same time that the economy is supposedly growing as fast as it is.
I am not sure I quite understand the breakdown. “State” is clearly from state operated organizations. I know that these have been growing, because the states has been lending them money. “Private” seems to be Chinese firms that are privately owned. The state has not been funding them, leading them to shrink. “Foreign” must be foreign investment. That seems to be shrinking, based on the chart I showed yesterday:
https://gailtheactuary.files.wordpress.com/2019/07/foreign-direct-investment-in-flagging.png
The only thing I can think of for “Other” would be individuals and family groups that are not clearly private or public. I am not sure how educational institutions and not for profit institutions would be counted.
«their need to buy US Securities, allowing the US to export more than it imports, year after years.«
? Other way around or?
You are right. Of course, we import a whole lot more than we export. This keeps our standard of living higher than it would otherwise be.
I agree with you Sven. I worked in electronics. USA has been outsourcing for 30 years. Before China it was puerto Rico or Ireland. Both tax free for corporations. I watched as the job description grew. Skills in electronics wasn’t enough. Programing, documentation, parts sourcing. You had to do that too. And we did it. We kicked ass. We were competitive. We made money. In the end it wasn’t enough. Shareholders want the stock price to go up. Outsourcing does that. Nowadays a corporation wants a engineer to broker work from overseas. It doesn’t work. Look at Boeing.
My job went to China four times. I picked up went back in at entry level four times. Now I am too old. Most people don’t realize the sheer volume of technology that has left. It took 30 years to get it over there. It isn’t coming back. Especially in four or eight years.
Trump plays to people like me. The trouble is its too far gone. He is shaking the boat. The deal of trading our manufacturing and technology for extending our lifestyle and military via debt was becoming tenuous without sanctions. Why? Well its all gone now manufacturing technology all gone. We are putting nothing in to the pot. Shenzen is the worlds tech center now. Why shake the boat? We are putting nothing into the pot. The $ we are spending belongs to China anyway because of bonds. It doesnt count. We are giving China a out of a deal they want out of anyway.
We can kick ass here in the USA. We can work hard we can innovate and we can compete. We cant do it without facilities technology and energy.
People know what happened isn’t right. Bill Clinton sold us out. Just like sleepy Joe and his crooked son will if he gets in. Both in China’s pockets. People want to work. People want to kick ass. The situation is viewed as solvable politically so Trump gets votes. Just like a lot of problems the physical facts don’t support a political solution. Will I vote for Trump? Yes. Just because the Ponzi is acknowledged by him. Would we be better sucking up more debt. Yes. It might postpone the war a few more years. A lot of the debt went for weapons systems. Yes they were way overpriced but they will work very well. When the deal goes south thats all that will be left. Do you think they wont get used?
You understand the situation. My two sons have had trouble with outsourcing of the tech work as well. It makes the situation very difficult for workers with jobs that are here today, and overseas tomorrow. Boeing has shown us the kind of think that can go wrong. In fact, it could go wrong even with the programming here, when we try to do the engineering too close to the limits of what is possible. We use too much complexity, and something get overlooked.
You are right that people view the problem as politically solvable, so vote for Trump. More promises (debt, derivatives, shares of stock, government guarantees) are what seem to work, at least for a while.
I ran across a report called “
Decoupling Debunked: Evidence and arguments against green growth as a sole strategy for sustainability.”
This is a report published by the European Environmental Bureau. One of the authors is Christian Kerschner, who has been involved with Peak Oil and degrowth.
One of the conclusions in the overall summary is
The reasons to be skeptical of sufficient decoupling in the future are summarized as follows:
1. Rising energy expenditures (easiest to extract resources removed first)
2. Rebound effects (Jevons paradox etc)
3. Problem shifting (move shortages/overuse of resources from one material to another)
4. The underestimated impact of services (services go on top of goods economy, not instead)
5. Limited potential of recycling
6. Insufficient and inappropriate technological change (changes aimed at cost, not ecological sustainability)
7. Cost shifting (move problems from high energy consumption to low energy consumption countries)
Sounds like a topic for a future post. Or perhaps, you have already done one on the subject?
Back in 2011, I did a couple of posts regarding decoupling of energy consumption and GDP. Also Carbon Emissions the problem of carbon emissions continuing continuing to rise as fast as GDP (as China was added to the world economy, with lots of coal production).
https://ourfiniteworld.com/2011/11/15/is-it-really-possible-to-decouple-gdp-growth-from-energy-growth/
https://ourfiniteworld.com/2011/11/30/thoughts-on-why-energy-use-and-co2-emissions-are-rising-as-fast-as-gdp/
Of course, my current post shows that growing material consumption goes with a growing economy. When there are flat periods, they are caused by recessions or collapses in one part of the world.
I was kind of hoping that if someone else could write something to cover decoupling, it would save me from having to point it out. But you are right. The reasons why decoupling don’t take place need to be understood, so writing a post might be a good idea.
I don’t think I got as far as the end part, about our problem being “a crisis of political imagination.” It makes it a lot harder to recommend this document to others.
Impressive work. I cant help but note that most of the primary issues discussed were all discussed by Gail a long time ago… Nevertheless the piece is well put together. The crazy thing is after outlining very well why resource consumption IS the economy so decoupling can not they have a save the children moment at the end.
“This work highlights the need for a new conceptual toolbox to inform environmental
policies. In this perspective, it appears urgent for policy makers to pay more attention to
and support the existing diversity of alternatives to green growth. Drawing lessons from
the diversity of people and frameworks engaged in imagining and enacting alternative ways
of life is a promising way to solve what we perceive as a crisis of political imagination. The
success of that initiative matters for what is at stake is nothing short of the future of our
children and grandchildren if not to say the human civilisation as such. ”
Yes, the degrowth movement and Christian Kerschner have been ones who have been preaching that the economy can continue with a few tweaks, despite these problems. It makes it easier to sell their work to the funding groups that support them. Here, they somehow they perceive the problem as “a crisis of political imagination.” Perhaps politicians are magicians?
Yeah, magicians at conning us into thinking we should vote them into powerful positions where they can curry favor with deal makers to make mo money for themselves.
Coming to a country near you
Enabling Deep Negative Rates to Fight Recessions: A Guide
https://www.imf.org/en/Publications/WP/Issues/2019/04/29/Enabling-Deep-Negative-Rates-A-Guide-46598
It’s behind a paywall but you can get the gist here (Andy Haldane, Chief Economist at the Bank of England has suggested something similar, I recall):
“Miles Kimball, a professor of economics at the University of Colorado at Boulder…
pictures a world where the widespread use of electronic money would make it relatively easy for banks to impose negative rates on savers during times of economic stagnation – in other words, to charge depositors for holding their money.
“Why would this be a good thing? Central banks chop rates in a recession to discourage the hoarding of money and encourage borrowing and spending. This has been standard practice for decades.
“The problem comes when interest rates are already at zero, as they were in much of the world in the years immediately after the financial crisis. At this point, known as the zero bound, policy-makers cannot cut rates further because savers can evade the sting of negative rates by withdrawing their money from the bank and holding it in paper bills.
“However, if electronic money becomes the norm, that option will no longer be available…”
https://www.theglobeandmail.com/investing/article-proponents-of-a-cashless-future-beware-negative-interest-rates/
Doesn’t this lead to ever more debt defaults and an ever-shrinking economy? How do energy prices rise, to match higher cost of production, with cutbacks in what citizens have available to spend?
Also, I presume this plan affects businesses and government accounts, as well as individual citizens.
If businesses are generally suffering from a lack of profitable investment opportunities, this doesn’t really help the situation. Buying government securities is clearly a no-win situation as well.
The article claims:
But I don’t think that there is any evidence that things have ever worked this way. I think that this is all wishful thinking. People tend to hoard more, if they think that what little they have will be taken away.
Right. It is hoping to force people into spending freely in circumstances much more likely to induce the psychology of contraction.
I don’t think Deutsche Bank would enjoy deeply negative rates.
If they want people to spend freely to keep things moving why don’t they just give everyone $1000 that must be spent by the end of the month. Use it or lose it. That would seem a better solution than giving boatloads of money to banks and expecting it to trickle down.
I agree, ssincoski – ‘free’ money with an expiration date seems far more likely to boost consumption.
Yes, $1000 of expiring money will be spent very quickly when a loaf of bread is $500
That’s a few hours of hookers and blow 🙂
All counts towards GDP, Mark, so you’d only be doing your patriotic duty.
https://www.google.com/amp/s/amp.theguardian.com/business/2014/jun/10/accounting-drugs-prostitution-uk-economy-gdp-eu-rules
This is a good point, Neil. 😀
“Yes, $1000 of expiring money will be spent very quickly when a loaf of bread is $500”
Well put, Neil. If and when we reach the point in which helicopter money for the masses becomes a fiscal strategy to ignite the economy into higher growth, inflation will go exponential and fast. Whenever hyper inflation occurs, it only takes two weeks. It’s really easy to see that’s an end game strategy and has to be avoided until other desperate CB strategies already in play are exhausted to the point of no longer achieving results.
$ will move into the markets or real estate with negative interest rates. You cant make old people like me spend all their savings. Well you can but people with no income stream die. Like me. Try getting a job at 60+. No one wants you. The idea that the problem lies with stored caches of wealth is fundamentally flawed. It views paper assets as real entities when the true wealth is and always has been resources. We are already witnessing supply shortages. Try giving money away or force the stock market into financial assets that are consumed ala money and we shall see extreme supply shortages. This is one of the ways money becomes worthless no products to buy with it. In the end money will become worthless. There is no safe haven. There is no “ownership” that will survive a energy unavailability. There is no way to tuck away the energy and resource rich environment we live in now for the future “rainy day”.
The villages in Northwest Slovakia fought with huge amounts of snow duiring the last winter. But the money from the state to compensate their higher expenditures still do not come…
https://myorava.sme.sk/c/22163152/na-boj-so-snehom-minuli-obce-tisice-eur-peniaze-im-stat-stale-nedal.html?ref=trz
One more reason for future depopulation… If drinking water is the problem, too:
https://myorava.sme.sk/c/7989889/najvacsia-oravska-dedina-ma-problemy-s-vodou.html
Everyone wants “greener pastures.” So people move to where prospects seem to be brighter, if the new area will let them in.
“Get ready for a humdinger of an economic shock. That in any case is what policymakers at the Bank of England and the Treasury are doing. The chances of a no-deal Brexit have increased markedly over the past couple of weeks.
“In the course of the Tory leadership race, positions have hardened; Boris Johnson, who is virtually certain to win, has left himself no ladder down which to climb. Come Oct 31, it’s “do or die”. Unequivocally, he is committed to a no-deal exit should agreement on new terms prove impossible…
“…the short-term impact of a sudden death rupture with Europe is completely unknowable… it is virtually impossible to believe, as some Brexiteers still seem to, that you can fundamentally upend 45 years of progressively more integrated trade with no economic harm at all…
“Large scale closures and layoffs would undermine consumption, potentially triggering a self-reinforcing spiral of economic contraction…”
https://www.telegraph.co.uk/business/2019/07/16/britain-braces-economic-shock-no-deal-brexit-draws-closer/
“Britain’s weak wage growth and rising prices have delivered a hit to living standards of a severity normally only seen during a deep recession, a leading thinktank has said… In the past 40 years, the thinktank said, only the recession of the early 1980s and the slump during and after the financial crisis had brought a weaker performance.”
https://www.theguardian.com/business/2019/jul/17/uk-living-standards-hit-by-rising-prices-and-weak-wage-growth
It is the self-reinforcing spirals that are a problem!
Uk got on just fine for a long time without the EEU. The people there have decided they dont want another queen Merkel. They are being punished for leaving pure and simple.
https://i.guim.co.uk/img/media/013823c0bb82693d0c05dde08eeb4762f0a4327c/0_0_6348_2676/master/6348.jpg?width=620&quality=45&auto=format&fit=max&dpr=2&s=d6497fdab9e8e10004dfa2a80cd2b041
“Exports from India and Indonesia slumped more than economists forecast in June, cementing fears that nations beyond China and the U.S. are suffering from tariff battles. The fresh numbers followed China’s weak trade report on Friday. The bad news from Asia this week may not be over: Manufacturing hubs Singapore and Japan are also likely to report declines in exports.
“With Asia accounting for more than 60% of world economic growth, there’s little doubt the global outlook is getting gloomier:
“Shipments from India fell the most in more than three years in June, dropping 9.7% from a year earlier, while imports declined 9.1%.
“In Indonesia, exports dropped 9%, with officials saying a recovery will be challenging given all the uncertainty.
“Data last week showed shipments from China fell 1.3% and imports shrank a more-than-expected 7.3%, weighing on an economy that’s already growing at its slowest pace in almost three decades.”
https://www.bloomberg.com/news/articles/2019-07-16/trade-war-latest-trump-asia-exports-india-china-slowdown
“Singapore’s Non-oil domestic exports in June fell 17.3%, the fourth month of year-on-year decline, data from the trade agency Enterprise Singapore showed on Wednesday, slowing from the revised 16.3% decline the month before… The grim trade numbers add to a slew of weak economic data and reinforce economists’ expectations the central bank could ease monetary policy at its October meeting.”
https://www.reuters.com/article/us-singapore-economy-tradefigures/singapore-exports-drop-most-in-six-years-as-electronics-slump-idUSKCN1UC03Q
Hyperinflation and hunger: Turkmenistan on ‘edge of catastrophe’
Gas-rich Turkmenistan facing worst economic crisis in 30 years, coupled with rights concerns, UK think-tank reports.
https://www.aljazeera.com/news/2019/07/hyperinflation-hunger-turkmenistan-edge-catastrophe-190715200641553.html
The population goes up… and the catastrophe comes.
https://www.google.com/search?q=turkmenistan+population&oq=turkmenistan+population&aqs=chrome..69i57j0l5.8978j1j7&sourceid=chrome&ie=UTF-8
The price of natural gas has been awfully low, recently. This has to be contributing to the situation as well.
It is all of the energy exporters that are starting to have problems. In fact, a lot of metal prices are low as well.
UN population estimates show the population increasing by 1.6% between 2017 and 2018. This is higher than the worldwide average of 1.1% increase. The average number of children per mother, based on recent fertility patterns, is 2.79, based on UN estimates.
Uh Oh ! “Bank Run: Deutsche Bank Clients Are Pulling $1 Billion A Day”
https://www.zerohedge.com/news/2019-07-16/bank-run-deutsche-bank-clients-are-pulling-1-billion-day
Wow!
As the article suggest, can you say Lehman Brothers?
Sing it with me!
“Haben Sie gehört die Deutche Bank?
“Badda boom. Badda boom. Badda bing bang bing bang bong…”
yes, let’s sing!
Deutsche Bank Deutsche Bank uber alles
Biggest bank run in der Welt
https://z3news.com/w/bank-run-begun-deutsche-bank-germany-largest-bank/
That’s another linked source for the Deutsche bank run.
“A crash of Deutsche Bank has serious implications for the world’s financial system because they have over $50 trillion in derivatives (45 trillion euros), which is far more than their assets, so the losses would immediately impact many other financial institutions.”
From my own linked article is the above; ouch, look at the 50T in derivatives they hold. Is this how the 2019 Lehman Bros. Minsky moment begins?
…..LEHMAN BROTHERS
Late stage capitalism–
One of the many signs.
I can’t mention others, as it would not be appropriate.
I know Karl Marx is loathed in the West but maybe he was right about capitalism because it sure looks like the “snake has begun eating it’s own tail”.
US Debt hit 22.5 trillion dollars today – here’s the link; https://www.usdebtclock.org/
On February 13, 2019 it hit 22 trillion, confirmed by the following link;
https://www.npr.org/2019/02/13/694199256/u-s-national-debt-hits-22-trillion-a-new-record-thats-predicted-to-fall
That took 153 days. At that rate a trillion is added to US Debt every 306 days, 59 days less than a calendar year.
That should help keep the system going a little longer. Japan has shown the way, in terms of government borrowing. How long this lasts is another question.
Yeah, I suppose the only strategy at this point is to do what works, borrow ever more, even if it means end game is being played out. Keep that steam roller going anyway possible…until it sputters to a stop under a mountain of debt.
Who is the govt. borrowing from?
As I understand the situation, Japan has a very large amount of government debt, but buys back something like half of it through Quantitative Easing by the Bank of Japan (its central bank). Most of the rest of the debt is owned by Japan’s citizens, its insurance companies, and its pension plans. There is some overseas ownership as well.
Japan’s very aggressive Quantitative Easing program uses money (essentially created out of nothing) to buy back its debt as well as some shares of stock. Somehow, the value of the Yen has not suffered too badly, perhaps because other countries have been doing the same thing (but not to the same extent). The US stopped its QE program; the US dollar has been floating higher because it stopped its program.
This are some articles I found on the subject:
https://www.marketwatch.com/story/heres-a-lesson-from-japan-about-the-threat-of-a-us-debt-crisis-2018-05-14
https://www.reuters.com/article/us-japan-economy-boj/bojs-government-debt-holdings-hit-record-in-fourth-quarter-idUSKBN1GV06E
https://www.truthdig.com/articles/japan-is-writing-off-nearly-half-its-national-debt-without-creating-inflation-we-could-too/
https://fred.stlouisfed.org/series/JPNASSETS
Oh, man, this is getting good….
Southwest and Boeing had a ‘reckless, greedy conspiracy’ to keep the 737 Max flying despite knowing about its flaws, a new lawsuit alleges
https://news.yahoo.com/southwest-boeing-had-reckless-greedy-112002180.html?bcmt=1
A lawsuit alleges that Boeing and Southwest Airlines conspired to cover up issues with the 737 Max from customers, pilots, and regulators.
The lawsuit, from 11 passengers, said that Southwest and Boeing knew about “a fatal design defect” with the plane, but covered it up and insisted the plane was safe.
It alleges that Southwest profited from a “collusive relationship” with Boeing, and that the two companies had a “reckless greedy conspiracy” to keep the plane flying despite knowing about defects.
“We strongly believe that the allegations made are completely without merit” Southwest said, while Boeing, which faces other lawsuits about the Max, declined to comment.
The reason I post this is simple….Southwest is the number one DOMESTIC carrier in the United States. Of course, Boeing is the number one manufacturer in the United States.
Yes, Boeing is like the General Motors of the 1950s/60s era!
If this is true, what a scandalous Public Relations mess….like the Chevy Corvair or Ford Pinto gas tanks.
Nah, it can’t be true….Boeing and Southwest wouldn’t be dumb enough…after all Southwest Airlines logo is a Heart!
When we put this with Boeing paying $9 hour for programming help because this project was not very complex, it really makes the participants look bad.
Southwest are terrible. We landed at SFO and because they hadn’t paid the airport for terminal service, we were bussed across the tarmac (which took an hour for loading luggage on to the bus, slowly driving all over the place, unloading). We were disgusted that for whatever price we’d paid it didn’t include terminal offloading. Geez what a bunch of cheapskates and your linked article adds to that opinion.
Tit for tat…
Boy, this is getting out of hand, folks…
The European Union may be about to get slapped with up to $7 billion in Trump tariffs over EU aid to Airbus.
Reuters
Europe is preparing itself for the WTO to give America the go-ahead and hit the EU with $5 billion to $7 billion in tariffs, Bloomberg reported.
In addition to aircraft parts tariffs could be placed on cheese, olives and pasta coming into the US as well as some types of whiskey.
The European Union is expecting the Trump administration to receive the go-ahead to slap the bloc with up to $7 billion in tariffs on EU goods.
Bloomberg, citing unnamed European government officials, reported that the EU is bracing for a nod from the World Trade Organization. The dispute has been simmering since the Bush administration over European aid to Airbus, Bloomberg said.
The tariffs, which could come into effect this summer, will raise the costs of aircraft and helicopter parts, and also consumable goods like cheese, pasta, and olives as well as whiskey coming from the EU for European producers.
https://news.yahoo.com/european-union-may-slapped-7-092846815.html
The EU has also threatened a $20 billion tariff if Trump threatened to impose duties on European cars and car parts
This ain’t going to end well….
When overall sales are going down (airplanes or whatever), the plan again is to move the reduction to some other country. This has happened before when energy consumption per capita was close to flat. It represents a crisis period for an economy.
Posted this about the Roman Empire lead pollution levels detected by Greenland Ice Core samples
The authors expanded their study with a newly published paper
https://www.heritagedaily.com/2019/07/news-release-8-jul-2019-lead-pollution-in-arctic-ice-shows-economic-impact-of-wars-and-plagues-for-past-1500-years/124175
Lead pollution in Arctic ice shows economic impact of wars and plagues for past 1,500 years
How did events like the Black Death plague impact the economy of Medieval Europe? Particles of lead trapped deep in Arctic ice can tell us
“The research team found that increases in lead concentration in the ice cores track closely with periods of expansion in Europe, the advent of new technologies, and economic prosperity. Decreases in lead, on the other hand, paralleled climate disruptions, wars, plagues, and famines.
“Sustained increases in lead pollution during the Early and High Middle Ages (about 800 to 1300 CE), for example, indicate widespread economic growth, particularly in central Europe as new mining areas were discovered in places like the German Harz and Erzgebirge Mountains, “McConnell noted. “Lead pollution in the ice core records declined during the Late Middle Ages and Early Modern Period (about 1300 to 1680 Ce) when plague devastated those regions, however, indicating that economic activity stalled.”
Even with ups and downs over time due to events such as plagues, the study shows that increases in lead pollution in the Arctic during the past 1500 years have been exponential.
“We found an overall 250 to 300-fold increase in Arctic lead pollution from the start of the Middle Ages in 500 CE to 1970s,” explained Nathan Chellman, a doctoral student at DRI and coauthor on the study. “Since the passage of pollution abatement policies, including the 1970 Clean Air Act in the United States, lead pollution in Arctic ice has declined more than 80 percent.”
“Still, lead levels are about 60 times higher today than they were at the beginning of the Middle Ages,” Chellman added.”
Being an advanced civilization has a price to pay, there is no free lunch…but a lot of waste
Interesting, perhaps valid observation for a brief specific period. However, the argument for 1300-1680 period as stalling economy is laughable (yes there were few interludes – decades of disruption like 30yrs war etc). For one thing the upper classes went for non lead based products, e.g. purer smelts of metal or ceramic plates and glassware, which were previously even more unobtainable. Perhaps more importantly and in general the ore deposits varied greatly throughout Europe incl. its %lead content.. The major technologists of that era were German, they dispersed as hired specialist or in whole settlements as far as Eastern Baltic, Russia and parts of the Balkans in the south, not mentioning N Italy, E France etc.. Also Swedes probed their wider region before running into a brick wall (over pop vs climate spike) and then rampaged war weakened Europe in mid 17th century..
Does investing in emerging markets still make sense?
https://www.ft.com/content/0bd159f2-937b-11e9-aea1-2b1d33ac3271
This is an excellent article. You can reach it by Googling “Does investing in emerging markets still make sense?”
It points out that the prices of shares of stock in the MSCI Emerging Markets were rising much faster than the S&P 500 prior to 2008, but recently the S&P 500 has been doing better.
It is mostly talking about Emerging Markets other than China and India. It shows these charts, among others:
https://gailtheactuary.files.wordpress.com/2019/07/developed-economies-grew-faster-than-emerging-ones-in-recent-years.png
https://gailtheactuary.files.wordpress.com/2019/07/foreign-direct-investment-in-flagging.png
I expect that there are two reasons why these emerging economies are having difficulty:
1. China and India were almost unique in having huge coal resources. Other countries either don’t have them, or they (by now) are badly depleting. Other energy sources I expect are not growing fast enough and are not cheap enough.
2. The foreign direct investment numbers show that there is not enough growing debt (or sale of shares of stock, which is very similar in its effect) to support growing output from these economies. No doubt, this is because the return on such investment is judged to be too low. A big issue is likely that the cost of energy inputs are too high, relative to what finished goods and services can be sold for.
The author concludes by saying that he thinks that the period of rapid growth was a one-time occurrence, which cannot be counted on again.
Another trade dispute:
“Tokyo and Seoul have long had political disagreements stemming from Japan’s conduct during the second World War. The dispute between the neighbors spilled into the economic arena when Japan earlier this month restricted exports of materials critical to South Korea’s high-tech industry, citing national security concerns.”
https://www.cnbc.com/2019/07/16/japan-south-korea-dispute-disturbing-and-unhelpful-for-economy-dbs.html
When the world economy is growing, and all of the major pieces are growing, it is easy for different supplier of finished goods to get along.
When there is a major contraction, there is a question of which supplier should be the one to produce the finished goods. This is when the trade dispute happens. Here, the situation is with chips and smartphone displays, and the materials needed to make these items.
“India’s policy makers are hailed for slaying the inflation dragon. But there’s a dark side to that success. After posting double-digit inflation rates at the start of the decade, consumer-price growth has steadily declined over time to hover around 3% now.
“While much of the recent slowdown was due to a slump in food prices, businesses are starting to worry that the data is signaling a worsening in the economy’s growth outlook.”
https://www.bloomberg.com/news/articles/2019-07-15/low-inflation-in-india-may-be-a-sign-of-something-far-worse
“Consumer staples and automobiles — the two sectors [of the Indian economy] worst hit by the slowdown — are unlikely to do well in the first quarter of the current fiscal. Analysts expect a muted performance from both these industries.”
https://www.telegraphindia.com/business/slowdown-cloud-darkens/cid/1694494
“[India’s] merchandise exports shrank 9.7% year-on-year in June to $25 billion, the first contraction in nine months and the worst since January 2016…
“…[underlining] the strong external headwinds the country faces due to a worsening global trade war, growing tussle between Washington and New Delhi over the latter’s “high tariff” and the recent US withdrawal of the zero-duty trade benefits for annual Indian exports of around $5.6 billion under the so-called generalised system of preference.”
https://www.financialexpress.com/economy/indias-export-contract-9-7-in-june-worst-since-january-2016/1645251/
“Dewan Housing Finance Ltd. plunged after the Indian shadow lender posted a quarterly loss and flagged doubt about its ability to continue as a going concern amid a funding crunch in the country’s credit market… The embattled lender has seen its market value erode 75% this year…”
https://www.bloomberg.com/news/articles/2019-07-15/dewan-shares-slump-to-six-year-low-as-lending-grinds-to-a-halt
Yes, lending is the area that is likely to be hit with defaults in a slowdown.
“India’s state governments also run their own fiscal deficits and need to borrow money in order to make up for the difference. Then there are state-owned companies which also borrow heavily. Meanwhile, the household savings – bank deposits, insurance funds, mutual funds, currency – which finance these borrowings have been declining over the years.”
https://www.bbc.co.uk/news/world-asia-india-48960315
“Economists went into 2019 forecasting a slowdown in global growth. That slowdown has come faster than expected. Alarmed by the speed of the downturn, the US Federal Reserve and European Central Bank have switched from tightening monetary policy to easing.
“The combination of slower growth and easier policy have elicited very different responses from business and financial markets.
“Business confidence has fallen from last year’s peaks across most of the West. Companies have become more cautious.
“Faced with the prospect of still-lower interest rates, equities have soared, hitting new highs in the US. The calculation for markets is that with inflationary pressures subdued there is nothing to prevent central banks from boosting growth with more cheap money…
“So can easier monetary policy offset all these risks?
“The short answer is no. Easier policy would reduce, but not eliminate, the risk of a hard landing for the global economy. Looser policy anyway comes too late to prevent a slowdown in global growth this year…
“Last week a survey of global fund managers by Absolute Strategy Research found that on average respondents see a 45% probability of a global recession occurring in the next 12 months…”
https://reaction.life/a-slowdown-in-global-growth-this-year-seems-inevitable/
“The world has descended into global growth anaemia. It has become pandemic: you can see it at the national level among the major economies and it is sweeping into regional spheres through trade transmission effects. Global economic confidence is becoming increasingly unresponsive and needs a major reboot as soon as possible…
“The Fed must press ahead with rate cuts not only for its own sake, but also to help jump-start the rest of the global economy.”
https://www.scmp.com/comment/opinion/article/3018587/economic-slowdowns-spread-asia-highlights-need-global-policy
“Global central bankers are again in the driving seat when it comes to propping up the world economy, but many are demanding governments join them in the rescue effort. Amid slowing global growth, the Federal Reserve, European Central Bank and perhaps even the Bank of Japan are all set to ease monetary policy in coming months.
“But with less room to act than in the past, their leaders are telling politicians they will need to act if a downturn takes hold.”
https://www.bloomberg.com/news/articles/2019-07-16/central-bankers-are-sick-of-rescuing-the-world-economy-alone
To the contrary, there is a lot of room left to act (or to be expanded).
For instance the nominees for heading the EU in next cycle demand 2050 as the goal date of achieving carbon neutrality. That could be either explained as phase in of mandatory austerity or more likely borrowing to spend on that goal few dozens trillions.. or some combination of these tow along the line.
Mandatory austerity collapses the economy. If debt can be raised, it tend to keep the system going.
We left the normal behind we are into paranormal already, hence mandatory austerity within authoritarian – command style economy under huge debt umbrella can work together for a while (yrs, few decades).
If there is no room to reduce interest rates further, the other option is to grow deficits by big government spending/tax cut combinations. But neither of these really replace growth in cheap energy consumption.
Enabling Deep Negative Rates to Fight Recessions: A Guide
https://www.imf.org/en/Publications/WP/Issues/2019/04/29/Enabling-Deep-Negative-Rates-A-Guide-46598
the central banks are looking at cryptocurrency now http://webcache.googleusercontent.com/search?q=cache:jgHnh7ad5pgJ:https://www.technologyreview.com/f/613909/facebooks-digital-currency-may-force-central-banks-to-create-their-own/+central%20banks%20cryptocurrency&hl=en&ct=clnk
This sounds like a major waste of electricity!
Ouch!
Truck drivers are suffering in 2019 — especially those who own or work at small businesses.
Rates in the spot market, in which retailers and manufacturers buy trucking capacity as they need it rather than through a contract, sank by about 18% year-over-year in June. That has caused truckers like Demetrius Wilburn, a Georgia-based driver, to find themselves unemployed.
Wilburn bought his semitruck four years ago after years of working as a company truck driver. But amid rock-bottom rates, Wilburn wasn’t able to make a payment one month — and his truck was repossessed
Six trucking companies have folded in 2019.
That has left more than 2,500 truck drivers unemployed.
After a hugely profitable year in 2018, this year has seen retailers and manufacturers moving less, according to the Cass Freight Index.
Truck drivers are suffering in 2019 — especially those who own or work at small businesses
https://news.yahoo.com/least-2-500-truck-drivers-152550919.html
I don’t know, but if it’s true, looks like a downturn for SURE
I think I made a comment about this yesterday, somewhere. At the recent uptick in demand for trucking came from rules that required the use of monitoring truck drivers, to see that they were not driving too many hours per day to be safe. The use of these monitoring devices led to a need for more truck drivers and more trucks to transport the same amount of goods. This was, thus, a step toward inefficiency.
Needless to say, this change led to higher needed shipping charges, besides more trucks and drivers. But the market responds to this change, by substituting away toward other shipping modes. If there is a slowdown worldwide in shipping (because less plastic is recycled, for example), this affects the system too.
The WSJ has an article up titled, “Investors Aren’t Buying This Oil Rebound.
Current stock prices are said to be lagging behind. Also, the article reports:
Of course, if oil prices go down, as oil and other energy production falls, we shouldn’t be too surprised at this.
https://www.10tv.com/article/first-time-us-got-more-electricity-renewables-coal-2019-jun
For the first time, the U.S. has generated more energy from renewables than from coal, marking a landmark for non-polluting energy.
A full 22% of the electricity generated in the U.S. in April came from renewable sources like wind, solar, hydroelectric and geothermal power, according to the U.S. Energy Information Administration, which released the official figures this week after early projections emerged in May. Just 20% of power production in April came from coal.
April was a wet month, so there was a lot of hydroelectric power. Total electricity required in April is pretty low, because people are neither heating nor cooling their homes. So it is not surprising that renewables are a relatively large share of the total, for April.
My concern is what these (mostly subsidized) fuels are doing for electricity prices. In many places, wholesale prices for electricity become negative when an excessive amount of renewables are added to the grid. This is a major hardship for other producers. We end up with many of the backup producers going out of business, including nuclear, coal, the more efficient natural gas producers. All we end up with is a non-sustainable group of supposedly renewable generation that can never stand on its own, plus some inefficient natural gas “peaking plants.” The electricity system fails for a different reason than “running out of fuel,” or “too high prices for consumers.” It fails because of “too low prices for producers,” which is one of the issues I was writing about in this post.
“For the first time, the U.S. has generated more energy from renewables than from coal, marking a landmark for non-polluting energy.”
Very nice milestone.
I think someone is confusing energy and electricity.
For the first time, the U.S. has generated more energy from renewables than from coal, marking a landmark for non-polluting energy.
Non-polluting?
Just type “Solar panels” and “pollution” into a search engine and all sorts of stuff comes up, for example:
The International Renewable Energy Agency (IRENA) in 2016 estimated there was about 250,000 metric tonnes of solar panel waste in the world at the end of that year. IRENA projected that this amount could reach 78 million metric tonnes by 2050.
Solar panels often contain lead, cadmium, and other toxic chemicals that cannot be removed without breaking apart the entire panel. “Approximately 90% of most PV modules are made up of glass,” notes San Jose State environmental studies professor Dustin Mulvaney. “However, this glass often cannot be recycled as float glass due to impurities. Common problematic impurities in glass include plastics, lead, cadmium and antimony.”
The fact that cadmium can be washed out of solar modules by rainwater is increasingly a concern for local environmentalists like the Concerned Citizens of Fawn Lake in Virginia, where a 6,350 acre solar farm to partly power Microsoft data centers is being proposed.
“We estimate there are 100,000 pounds of cadmium contained in the 1.8 million panels,” Sean Fogarty of the group told me. “Leaching from broken panels damaged during natural events — hail storms, tornadoes, hurricanes, earthquakes, etc. — and at decommissioning is a big concern.”
https://www.forbes.com/sites/michaelshellenberger/2018/05/23/if-solar-panels-are-so-clean-why-do-they-produce-so-much-toxic-waste/#4daa4568121c
Thanks! Good reference to have at hand!
S&P 500
The top is in?
https://pbs.twimg.com/media/D_hTb65XYAEBPis?format=jpg&name=large
Peak global debt?
https://pbs.twimg.com/media/D_hhEh8X4AYNXAR?format=jpg&name=medium
This does look ominous. I haven’t been using global debt data recently because it seems to be difficult to use. For example, it is possible to get a long history or the summation of many kinds of debt-like instruments, but not both.
Does anyone know where specifically this chart was put together? I presume it is from an article/paper written by someone.
“Global debt levels jumped in the first quarter of 2019, outpacing the world economy and closing in on last year’s record, the Institute of International Finance said.
“Debt rose by $3 trillion in the period to $246.5 trillion, almost 320% of global economic output, the Washington-based IIF said in a report published on Tuesday. That’s the second-highest dollar number on record after the first three months of 2018, though debt was higher in 2016 and 2017 as a share of world GDP. New borrowing by the U.S. federal government and by global non-financial business led the increase.”
https://www.bloomberg.com/news/articles/2019-07-15/global-debt-accelerated-in-1st-quarter-outpacing-world-economy
It seems to me that debt has to grow (or promises of some type), especially if energy supply is not growing adequately.
Could be. Besides the technical analysis, companies are reporting their earnings for the second quarter of 2019. No one is expecting the comparison to look very good, but purchasers of stock have not seen the actual numbers. A big part of the problem is that the one-time benefit of the US tax cut has gone away.
“The top is in?”
I thought the S&P was supposed to crash after it went below 2800 in late May early June…
now it has rocketed nearly vertical to above 3000…
the top?
no… there is no such thing in this world where the economy is perpetually manipulated in favor of the 1% owner class whose wealth is largely in fake paper which of course includes stock markets…
Yep, there are two basic approaches how to live in the insane world of today:
#1 Gorge on debt (personal / biz) as much as possible, enjoy as many frivolous activities and energy opulent lifestyles like <<20mpg pickups with sofas and blasting aircon, fly-in vacations, malls, gadget-electronics short cycle manias, ..
#2 Live frugally, avoid material pleasures, don't over extend on all things financial and material, become serial worrier about every turn of the evolving saga, yet always on the receiving side of schemes pushed upon lower 95-99% strata of the pop trying to live a bit 'responsibly' ..
In the final outcome nobody is a winner (materially nor morally), both such ends of the spectrum will get eventually steam rolled hard by the events of reality living on way smaller resource footprint and falling society all around you on top of it..
So, the overall drive for can kicking (and overextending) the BAU to the fullest possible boundary seems as absolutely predictable outcome irrespective of our individual value judgement.
Someone suggested this article on the website the Automatic Earth and it is a good read…
Excerpt from the interview of Michael Hudson….
De-Dollarizing the American Financial Empire
“China now realizes that the U.S. Treasury isn’t going to repay. Even if it wanted to recycle its export earnings into Treasury bonds or U.S. stocks and bonds or real estate, Donald Trump now is saying that he doesn’t want China to support the dollar’s exchange rate (and keep its own exchange rate down) by buying U.S. assets. We’re telling China not to do what we’ve told other countries to do for the past forty years: to buy U.S. securities. Trump accuses countries of artificial currency manipulation if they keep their foreign reserves in dollars. So he’s telling them, and specifically China, to get rid of their dollar holdings, not to buy dollars with their export earnings anymore.
So China is buying gold. Russia also is buying gold and much of the world is now in the process of reverting to the gold-exchange standard (meaning that gold is used to settle international payments imbalances, but is not connected to domestic money creation). Countries realize that there’s a great advantage of the gold-exchange standard: There’s only a limited amount of gold in the world’s central banks. This means that any country that wages war is going to run such a large balance-of-payments deficit that it’s going to lose its gold reserves. So reviving the role of gold may prevent any country, including the United States, from going to war and suffering a military deficit.
The irony is that Trump is breaking up America’s financial free ride – its policy of monetary imperialism – by telling counties to stop recycling their dollar inflows. They’ve got to de-dollarize their economies.
The effect is to make these economies independent of the United States. Trump already has announced that we won’t hire Chinese in our IT sectors or let Chinese study subjects at university that might enable them to rival us. So our economies are going to separate.”
The link for the article
https://michael-hudson.com/2019/07/de-dollarizing-the-american-financial-empire/
All good things must come to an end….and Uncle Sam’s free ride looks like it will be sooner than later. I suspect Gail may be correct in her assessment a functional financial sector may come to an end.
And I was planning my nice retirement….ouch!
That’s a bit misleading, because in reality ‘Uncle Sam’s free ride’ (essentially smaller bubble) within host entity for the all encompassing global system, where the US proper entity is just a mere subsystem of it.. People of ‘wealth and power’ of int-global pedigree are not going to jump ship prematurely (e.g. political-social instability in China could happen first as their rich panic differently vs. chines gov’s preferred mode of panic/crisi mitigation).. Further steps towards de-globalization and balkanization processes (during ~OFW scenario) most likely do indeed materialize at some point further ahead, but that will take decades to unravel..
Thanks for your take. Let’s be honest, though, the actions by the current US Administration provide good reason for the backlash of the status qou of the Bretton Woods financial system that was later modified by the petrodollar creation.
Dollar Diplomacy has overreached it’s bounds in the World today.
This is just one example of the discord
37 countries rally around China at top UN human rights body
GENEVA — More than three dozen countries have defended China’s “remarkable achievements” in human rights, challenging Western countries that have raised concerns about Beijing’s treatment of Uighur Muslims.
Thirty-seven countries including Russia, Saudi Arabia and others, mostly from southeast Asia, Africa and the Middle East, expressed their opposition to “politicizing human rights” in a letter Friday to the Human Rights Council office.
It was a show of the growing diplomatic clout that China can muster. The letter, obtained by The Associated Press, echoed China’s repeated defense of its “vocation education and training centers” for Uighurs, which critics call detention centers.
From the Washington Post.
This ain’t the Cold War era any more and the US can’t proclaim by no means it’s the leader of the “Free World”.
There will be a Dollar Crisis, no doubt, it’s set up and ready to unfold
“So China is buying gold. Russia also is buying gold and much of the world is now in the process of reverting to the gold-exchange standard..”
Why isn’t this reflected in the gold rice?
It has been by a rise of $200 an ounce. It’s @$1415.00 ounce…it was hovering around $1200 ounce not too long ago
An article I just noticed for you all from Wells Fargo….
Going Back To The Gold Standard ‘Could Crush U.S. Economy’ — Wells Fargo
Fargo has issued a note directed at U.S. President Donald Trump, advising not to forget why America has dropped the gold standard.
What the U.S. bank is referring to is Trump’s pro-gold Federal Reserve nominees, one of them being Judy Shelton, who supports the return to a gold standard.
“We consider [Judy Shelton] to be a surprising choice for a pro-growth president. Ms. Shelton has the rare view that the U.S. should return to the gold standard—a restrictive monetary system, last seen during the Great Depression in the 1930s,” Wells Fargo head of real asset strategy John LaForge wrote on Monday.
…..The gold standard did help to contain inflation, but it had the unfortunate side-effect of making the tough times tougher, by fueling deflation,” LaForge said. “President Roosevelt nixed the gold standard in 1933 because it was making the Great Depression worse.”
The gold standard tied all of the U.S.’ credit creation potential to how much gold the country owned.
https://www.kitco.com/news/2019-07-15/Going-Back-To-The-Gold-Standard-Could-Crush-U-S-Economy-Wells-Fargo.html
Seems to me we people to a learn a good lesson again….
Man, Hope we don’t crash into an Economic Depression …
At my age that would not be a good thing!
Exactly! With gold as a base, there is no growth in debt. The system cannot continue on this basis. It pushes the economy toward extraction.
This is gold demand, compared to gold price, from gold.org:
https://gailtheactuary.files.wordpress.com/2019/07/gold-demand-vs-gold-price-from-gold.org_.jpeg
This is gold supply, compared to gold price, from gold.org:
https://gailtheactuary.files.wordpress.com/2019/07/gold-supply-vs-price-from-gold.org_.jpeg
There are three things to notice:
(1) Gold supply is not growing by anything approaching 2% per year. It is not clear that it is growing much at all. It cannot work, without the same 2% growth rate.
(2) The gold price pattern is the same as the oil price pattern, and is similar to the price pattern of all of the energy products I showed in Figure 11. Thus, it depends on how fast energy consumption is growing. It is not a function of scarcity, regardless of how much people would like to believe that this would be the case. There might be a brief price spike because of some security concern, but counting on prices to rise is probably a general waste of time.
(3) I suppose a huge amount of buying of gold by countries could somewhat affect this situation. But if it is going to disrupt the price, I would expect it to disrupt the price early on, such as the $200 recent rise that the article talks about. I doubt that it will go to 10 times the price, unless somehow people can benefit directly from selling their gold at the price that governments seem to have the price pegged at.
Well, If you are correct on your view that there will be a collapse of the financial system first, Gail, more likely a revision of a primitive economy. The setup of barter and/or precious metals exchange will be resorted to after the bottleneck and any intact community survivors. Primitive does not mean inferior, only first applied.
We recognize by your writing that this cyberspace exchange is only possible with an every growing supply of cheap and available/affordable energy/resources.
The cracks, of which, are glaring us in the eyes!
https://m.youtube.com/watch?v=lndICo6_XOY
Yep, the door will close on us all too!
“China released second-quarter figures on Monday showing that its economy slowed to 6.2% — the weakest rate in at least 27 years, as the country’s trade war with the U.S. took its toll…”
https://www.cnbc.com/2019/07/15/china-economy-beijing-posts-q2-gdp-amid-trade-war-with-us.html
More cooking of the books:
“Shanghai-listed Fushun Special Steel, a “penny stock” company controlled by Dongbei Special Steel, was found to have fabricated its financial numbers on multiple fronts including its inventory, earnings and fixed-asset investments between 2010 and the first three quarters of 2017.”
https://www.scmp.com/economy/china-economy/article/3018534/chinese-steelmaker-cooked-books-shows-struggle-revive-rust
“With pig stocks still tumbling from an outbreak of African swine fever, pork inflation has risen to a three-year high in China and could soon accelerate to the fastest pace in a decade, driving the country’s consumer price index above the central bank’s target rate in the process.”
https://www.ft.com/content/1d561e32-a3b2-11e9-a282-2df48f366f7d
What is the role of auditing in China?
From the China GDP article,
““In our view, the Chinese government will not allow the quarterly growth to fall below 6.0%,” they added.”
That is easy, if those reporting the numbers are picking numbers they like, rather than reporting what is really happens.
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“The [freight] slowdown within the United States is part of a broader global downturn in freight which has spread across Europe and Asia.
“At Hong Kong’s International Airport, the busiest air cargo hub in the world, reported volumes shrank by 8% in the second quarter compared with 2018.
“London Heathrow’s cargo was down by 6% in the second quarter, the worst performance since the recession in 2009.
“California’s Port of Long Beach, one of the major entry points for trans-Pacific cargo, reported container volumes down almost 11% year-on-year in April-June…
“More recent data for individual ports and airports suggests growth will slow further and turn negative in May and June…
“The slowdown in global trade and manufacturing is weighing on oil consumption growth, especially for middle distillates such as diesel.
“In a sign of how concerned investors are about the outlook, trade and manufacturing proxies remain under pressure even though markets are now factoring in a very high probability the Federal Reserve will cut interest rates.
“The slackening global economy is now rebounding on the United States through a combination of weak export growth, heightened competition from cheap imports, and a strong dollar…”
https://www.hellenicshippingnews.com/freight-volumes-shrink-as-world-economy-stalls/
“Hot-rolled steel coil, used in cars and industrial machinery, now hovers at $550 per ton for East Asia-bound shipments, down 10% over a year. The price declined sharply last fall as the trade war intensified. ABS plastic, used in exteriors for consumer electronics, has fared even worse, dropping nearly 30% from a year earlier.”
https://asia.nikkei.com/Business/Markets/Commodities/Asia-s-steel-and-plastic-prices-slump-as-trade-war-takes-toll
I expect that part of the slowdown in shipping is the reduction in trash being shipped for recycling. Quite a bit of this recycling cannot be done economically, unless oil and gas prices are a whole lot higher than they are today. Back in the day when more countries were accepting poorly sorted recycling, the shipping costs for this recycling (which were often subsidized, by people paying higher costs for recycling, or by governments) helped subsidize the cost of shipping. If containers must be shipped back empty, or with ballast, shippers need higher rates to stay even.
The mandated changes to shipping fuels to reduce air pollution starting in 2020 can’t be helping either. This is a type of mandated higher costs. Long-distance shipping becomes less and less feasible, because shipping companies cannot keep shipping rate low enough to encourage buyers of goods to purchase goods from a distance.
“Refining margins for diesel and gasoil delivered next year are wilting as concerns about a recession-driven drop in consumption replace earlier fears about a shortage in fuel availability caused by new maritime regulations.”
https://uk.reuters.com/article/uk-oil-prices-kemp/column-freight-fuel-prices-subdued-as-economy-outweighs-imo-idUKKCN1UB1GL
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