Why stimulus can’t fix our energy problems

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:

  1. How much growth in energy consumption is required to keep up with growing population?
  2. 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.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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880 Responses to Why stimulus can’t fix our energy problems

  1. Harry McGibbs says:

    “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

  2. Harry McGibbs says:

    “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/

  3. MG says:

    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

  4. Neil says:

    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

    • Harry McGibbs says:

      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:

        One way to get the economy moving again is to send a strong message that this is not the time to save, but to invest and spend. And nothing sends that message better than negative rates, which punish savers and reward those who borrow money to purchase goods or build new ventures.

        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.

        • Harry McGibbs says:

          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.

          • ssincoski says:

            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.

          • Harry McGibbs says:

            This is a good point, Neil. 😀

            • Chrome Mags says:

              “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.

    • Panda Bear says:

      $ 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”.

  5. 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 validity of the green growth discourse relies on the assumption of an absolute, permanent, global, large and fast enough decoupling of economic growth from all critical environmental pressures. The literature reviewed clearly shows that there is no empirical evidence for such a decoupling currently happening. This is the case for materials, energy, water, greenhouse gases, land, water pollutants, and biodiversity loss for which decoupling is either only relative, and/or observed only temporarily, and/or only locally. In most cases, decoupling is relative. When absolute decoupling occurs, it is observed only during rather short periods of time, concerning only certain resources or forms of impact, for specific locations, and with very small rates of mitigation.

    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)

    • ssincoski says:

      Sounds like a topic for a future post. Or perhaps, you have already done one on the subject?

    • Panda Bear says:

      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?

        • Chrome Mags says:

          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.

  6. milan says:

    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:

      Imperialism is getting something for nothing. It is a strategy to obtain other countries’ surplus without playing a productive role, but by creating an extractive rentier system. An imperialist power obliges other countries to pay tribute. Of course, America doesn’t come right out and tell other countries, “You have to pay us tribute,” like Roman emperors told the provinces they governed. U.S. diplomats simply insist that other countries invest their balance-of-payments inflows and official central-bank savings in US dollars, especially U.S. Treasury IOUs. This Treasury-bill standard turns the global monetary and financial system into a tributary system. That is what pays the costs of U.S. military spending, including its 800 military bases throughout the world.

      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.

      • MR. Bongo says:

        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.

        • Aubrey Enoch says:

          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.

        • Tim Groves says:

          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.

      • Sven Røgeberg says:

        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.

          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:

          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.

          • Sven Røgeberg says:

            «their need to buy US Securities, allowing the US to export more than it imports, year after years.«
            ? Other way around or?

        • Panda Bear says:

          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.

  7. Sergey says:

    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.

  8. This time it's different...NO says:

    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!

    • Harry McGibbs says:

      “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:

        In the UK, an intensive care unit had to shut down after they found 72 people there were infected with C. auris, and in Spain,a hospital found 372 patients had the fungus. Some 41 percent of the Spanish hospital patients affected died within 30 days of being diagnosed.

        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.

  9. 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..

  10. Harry McGibbs says:

    “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

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