Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates.
As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away.
The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.
Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.
In the following sections, I will explain some of the issues involved.
 Our problem is not just that oil prices are too low. Prices are too low for practically every type of energy producer, and in many parts of the globe.
Oil: OPEC oil producers have cut back production because they view oil prices as too low. OPEC reports a cutback in production of 2.7 million barrels per day between November 2018 and July 2019 (from 32.3 million bpd to 29.6 million bpd).
In the US, there has been an increase in bankruptcies of oil producers during 2019, relative to 2018. There has also been a reduction in the number of oil drilling rigs of 17% since the week of November 16, 2018, according to reports by Baker Hughes. These are signs of producer distress.
Natural gas: While recent US natural gas prices have bounced up off their recent lows, as recently as August 8, 2019, we were reading:
U.S. gas futures this week collapsed to a three-year low, while spot prices were on track to post their weakest summer in over 20 years. In other markets, such lackluster pricing would cause investment to retrench and supply to contract.
But gas production is at a record high and expected to keep growing. Demand is rising as power generators shut coal plants and burn more gas for electricity, and as rapidly expanding liquefied natural gas (LNG) terminals turn more of the fuel into super-cooled liquid for export.
Analysts believe the natural gas market is not trading on demand fundamentals because supply growth continues to far outpace rising consumption. Energy firms are pulling record amounts of oil from shale formations and with that oil comes associated gas that needs either to be shipped or burned off.
When we look worldwide, we see that the Wall Street Journal is reporting, “U.S. Glut in Natural Gas Supplies Goes Global.” A chart from that article shows falling natural gas prices in Europe and Asia, almost to the level of US natural gas prices.
Coal: The US Energy Information Administration writes, “More than half of US coal mines operating in 2008 have since closed.” USA Today writes, “Is President Trump losing his fight to save coal? Third major company since May files for bankruptcy.”
China has also been closing coal mines in response to low prices. Its coal production ramped up quickly after it joined the World Trade Organization in 2001, but since the 2012 to 2013 period, production has been close to level. An academic paper talks about a “de-capacity program” undertaken in China in 2016 in response to plunging coal prices and overall financial loss of coal enterprises.
Uranium: A recent article says, “Plummeting global uranium prices hit Namibia hard.” Another article talks about the huge amount of capacity that has been taken off-line because of continued low uranium prices. The article estimates that 25% to 35% of global uranium production had already been taken off-line by the time the article was published (May 20, 2019).
Ethanol: According to the Wall Street Journal, the ethanol industry has been losing money since at least 2015, and is now closing ethanol plants in three states. The trade war has exacerbated its problems, but clearly its problems began before the trade war.
 The general trend in oil prices has been down since 2008. In fact, a similar trend applies for many other fuels.
Figure 2 shows that oil prices since 2008 have been trending downward.
Figure 3 shows that other energy prices have been following a similar price trend to that of oil. This situation happens because energy products are primarily used in finished goods and services of many kinds, such as cars, homes, vacation travel, and air conditioning. If demand for finished goods and services is high, prices for all commodities can be expected to be high; if demand for finished goods and services is low, prices for all commodities can be expected to be low. Thus, it shouldn’t be too shocking that the problem of prices that are too low for energy producers is very widespread.
 The situation of prices being too low for many types of energy producers simultaneously is precisely the problem I found back in December 2008 when I wrote the article Impact of the Credit Crisis on the Energy Industry – Where Are We Now?
The article mentioned was written in December 2008. If we look back at Figure 2, this was a time when oil prices were very low. I had first noticed a cutback in credit of various kinds (including credit card debt and mortgage debt) in the middle of 2008, about the time oil prices crashed. Later in the year, additional financial problems emerged, including the collapse of Lehman Brothers. Banks became less willing to offer credit to buyers who were deemed insufficiently creditworthy.
In my December 2008 article, I wrote about suppliers in various supply chains not being able to get credit. Without credit, supply chains could not operate. Businesses depending on supply chains were forced to cut back on their purchases. In fact, some suppliers went bankrupt. Workers were laid off in this process; these layoffs added to the lack of buyers for finished goods and services. Energy prices of many types crashed simultaneously because of the lack of demand for commodities used to make finished products of many kinds.
The fix for the problem back in late 2008 was for the US to begin Quantitative Easing. Quantitative Easing lowered longer-term interest rates and allowed more credit to get back to supply chains. By 2011, oil prices had risen to a level that was more tolerable for producers. These higher prices slowly slipped away, especially disappearing when the US discontinued its Quantitative Easing program in 2014.
If a person looks at the late 2008 situation, it is clear that a lack of debt availability indirectly led to low commodity prices. Prices dropped almost vertically when the debt bubble popped. This time, the situation is a little different. We arrived at low prices through the long diagonal black dotted line on Figure 2; this time other factors besides an obvious lack of debt have been involved.
One issue that seems to be involved this time is a shift in relativities between the dollar and other currencies, making energy products more expensive for those outside the US.
A second contributing issue this time is growing wage disparities, as goods are increasingly manufactured in low-wage countries. Low-wage workers (both in developing countries and in advanced economies trying to compete with developing countries) are less able to buy finished goods and services. This contributes to the lack of demand for finished goods and services using commodities of all kinds, including energy products.
 In the right circumstances, a rapidly growing supply of cheap energy products can help the world economy grow.
If we look back, there was a period of rapid growth in the world’s energy consumption between World War II and 1980. This was a period of rapid growth in the world economy.
In fact, both population and energy consumption per capita were growing. This growing energy consumption per capita allowed living standards to grow as well (Figure 5).
Most people would agree that a major increase in living standards took place between World War II and 1980. New buildings were constructed to replace those destroyed or damaged during World War II. Many people were able to buy cars for the first time. Interstate highway systems were built. Electric transmission lines were built, and oil and gas pipelines were laid. In rural areas, homes were often electrified for the first time. With the aid of energy saving appliances and birth control pills, many women joined the workforce. The US, Europe, Japan, and the Soviet Union all saw their economies grow.
 It is striking that the period of rapid energy consumption growth between World War II and 1980 corresponds closely to the long-term rise in US interest rates between the 1940s and 1980 (Figure 6).
If interest rates rise, it becomes more expensive to borrow money. Monthly payments for homes, cars, and new factories all rise. Evidently, the US economy was growing robustly enough in the 1940 to 1980 timeframe that US short term interest rates could be raised without much economic harm. The big concern seemed to be an overheating economy as a result of too rapid growth.
The huge increase in interest rates in 1980-1981 put an end to any concern about an overheating economy (compare Figures 6 and 7). Oil prices came back down once the world economy was in recession from these high interest rates.
 Starting about 1980, the US economy began substituting rapidly growing debt for rapidly growing energy supplies. For a while, this substitution seemed to pull the economy forward. Now growth in debt is failing as well.
Figure 8 shows how the ratio of total US debt (including governmental, household, business and financial) has changed since 1946. It becomes clear that once the big “push” that the economy received from rising consumption of energy products began to fail about 1980, the US moved to the addition of debt as a substitute.
I think of debt as being one of many kinds of promises. Figure 9 illustrates that while the total amount of goods and services has been growing, debt levels and other kinds of promises have been growing even more rapidly.
Many things can go wrong with this system. If the growth in added debt slows too much, we can expect to start seeing financial problems similar to those we saw in 2008. Also, if the level of debt (such as student debt) gets too high, its payback interferes with the purchase of other needed goods, such as a home. If energy providers decide prices are too low and stop producing, then promised Future Goods and Services can’t really appear. Huge defaults on promises of all kinds can be expected. This happens because the laws of physics require the dissipation of energy for physical processes underlying GDP growth.
 Since 2001, world economic growth has been pulled forward by China with its growing coal supply and its growing debt. In the future, this stimulus seems likely to disappear.
China has been financing its rapid economic growth since 2001 with growing debt.
We know that low prices for coal have led to flattening production since the 2012 – 2013 period (Figure 1). In fact, part of the reason for the flattening of non-financial corporate debt in recent years in Figure 11 may reflect swaps of uncollectible coal mine debt for equity, removing part of coal mine debt from the chart.
The failure of coal production to grow rapidly puts China at an economic disadvantage because coal is a very low-cost energy source. Any substitution, even imported coal, is likely to raise its cost of making goods and services. This makes competition in a world economy more difficult. And China’s debt level is already very high, putting it at risk of the problems discussed in Section .
 The world economy needs much more rapidly growing debt if energy prices are to rise to a level that is acceptable to energy producers.
Debt acts like a promise of future goods and services. Growing debt, plus increases in other types of promises of future goods and services, helps to keep energy prices high enough for energy producers. There are at least three reasons that growing debt helps an economy:
First, increasing debt can be used to build factories, and these factories hire large numbers of people. The factories utilize various raw materials and energy products themselves, raising demand for goods and services. Furthermore, the workers hired by the factories, with their incomes from their jobs, also raise the demand for goods and services. These goods and services are made with commodities. Growing debt thus raises demand for commodities, and thus their prices.
Second, increasing debt levels by governments are often used to hire workers or to raise benefits for the unemployed or the elderly. This has a very similar effect to building new factories. These workers and these beneficiaries can afford more goods and services, and these goods and services are made using commodities. Governments also use some of their funds to build schools, pave roads and operate police cars. All of these things require energy consumption.
Third, consumers can afford to buy more of the output of the economy, if their debt levels are increased. If debt can be structured so that anyone who walks into a car dealership can afford a new car (such as longer durations, lower interest rates, and no down payment), this added debt allows increasing demand for new cars. It also allows increasing demand for the energy products used to make and operate these new vehicles. Furthermore, if new homes can be made more affordable for young people, this works in the direction of adding more mortgage debt.
The Institute of International Finance (IIF) reports that the ratio of world debt to GDP (red line on Figure 12) has been falling since 2016. This falling ratio of debt to GDP no doubt contributes to the low-priced energy problem with which energy producers are now struggling.
Non-debt promises of many types can also have an impact on energy prices, but it is beyond the scope of this article to discuss their impact. Some examples of non-debt promises are shown on Figure 9.
 The world economy seems to be running out of truly productive uses for debt. There are investments available, but the rate of return is very low. The lack of investments with adequate return is a significant part of what is preventing the economy from being able to support higher interest rates.
In a self-organizing networked economy, market interest rates (especially long-term interest rates) are determined by the laws of physics. Regulators do have some margin for action, however. They can raise or lower certain short-term interest rates. They can also use their central banks to purchase existing securities, thereby influencing both short- and long-term interest rates. In addition, they can indirectly affect the system by raising and lowering tax rates and by adopting stimulus programs.
Market interest rates, in some sense, tell us how productive investments truly are at a point in time. Years ago, investments that the economy was able to make were far more productive than the investments we are making today. For example, the first paved road in an area had a huge beneficial effect. New roads were able to open whole areas up to commerce. Once an area had been developed, later investments were much less beneficial. Fixing up a road that has many holes in it takes energy and materials of many types, but it doesn’t really add productivity to the system. It just keeps productivity from falling.
After a point, adding new roads or other infrastructure doesn’t add much of anything. This is especially the case if population is level or falling. If population is falling, it would likely make sense to reduce the number of roads, but this is difficult to do, once there are a few occupied homes along a road.
As another example, a car that gets a person from home to work is a great addition if the vehicle allows the person to take a job that he could not otherwise take. But added “bells and whistles” on cars, such as air conditioning, a musical system, sturdier bumpers, and devices to reduce emissions, are of more questionable value, viewed from the point of view of allowing the economy to function cheaply and efficiently.
Another type of investment is education. At one point, a high school education was sufficient for the vast majority of the population. Now additional years of schooling, paid for by the student himself, are increasingly expected. An investment in higher education can be “productive,” in the sense of helping to differentiate himself/herself from those with no post-secondary education. But the overall level of wages has not been rising enough to compensate for all of the extra education. It is the growing complexity of the system that is forcing the need for extra education upon us. In a sense, the extra education is a tax we are required to pay for having a more complex system.
The need for pollution control might be considered another kind of tax on the system.
Our hugely expensive health care system is another tax on the system. After paying the cost of health care, workers have less funding available for buying or renting a home, raising a family, food and transportation.
 Since 1981, regulators have been able to prop up the economy by reducing interest rates whenever economic growth was faltering. Now we have pretty much run out of this built-in source stimulus.
Many observers have noted that central bankers are running out of tools to fix our economic problems. The lack of room to take down interest rates can be seen in Figure 6.
Figure 13 shows that long-term patterns of reductions in interest rates (darker bands) have happened previously. These reductions in interest rates came to an end because they couldn’t go any lower, given inflation expectations and likely levels of defaults. We seem to be facing a similar situation today.
According to Figure 13, there have been three periods of falling interest rates in the last 200 years:
In the gap between the first two periods of falling interest rates (1854 to 1873), the US Civil War took place. This was a period of very poor return on investments. Somehow it ended in war.
Immediately after the second two periods of falling interest rates (after 1909), the world entered a very unstable period. First there was World War I, then the Great Depression, followed by World War II.
Now we are facing the possibility of yet another end-point for the take-down in interest rates.
 The total return of the economy seems to be too low now. This seems to be why we have problems of many types, ranging from (a) low interest rates to (b) low profitability for energy producers to (c) too much wage disparity.
All of the problems listed above are manifestations of an economy that is not producing sufficient total return. The laws of physics distribute the problem to many areas of the economy, simultaneously.
A person wonders what could be ahead. We seem to be reaching the end of the line regarding the takedown of interest rates, as shown in Figure 13. If a takedown in interest rates is possible, it acts as a relief valve for some of the other problems the economy is facing, including too much wage disparity and energy prices that are too low for producers.
In Section , we saw that when the relief valve of lower interest rates had disappeared, wars and depressions have taken place. We can’t know the precise outcome this time, but our current situation doesn’t look good. Will we encounter wars, or a serious depression, or financial problems worse than 2008? We can’t know for certain. Or will we somehow find a way around serious problems?
Impressive argumentation, why peakoil could happen in 1-3 months. When Saudi-Arabia peaks because they cant rebuilt their infrastructure the whole financial avalanche could come down as system theory predicts. The result would be a systemic order on a lower level.
I think, many events happening today resemble what happened 30 years ago in East Germany.
Kind of societal decay, economic stagnation/downturn, increasing uncertainty, growing questioning of official doctrine, but also denial what’s really happening, and people (still well-fed by the system) stubbornly (verbally) defending status quo, show parallels I’ve experienced as a teenager in summer/autumn of 1989 and in following months.
I see also parallels in resource (esp. energy) constraints — then and today — as a probable root cause. But in 1989 I did not think about it this way (I thought of the events as primarily political motivated).
Assuming that a major global societal/economic downturn is close to happening I want to point
out that there are also important differences to the situation 30 years ago.
1989/1990 the social/economic upheaval happened in “just some nations” — it was a strict subset of the world economy. From my perspective/perception at that time it even happened just in East
Germany (no Internet those days) — in reality the entire Eastern bloc was undergoing changes. Today we face rather a global upheaval. All economies affected. It is just the case that some core nations have/had some grace period before the fissures in their economic fundaments can’t be ignored any longer.
While in 1989 east Germans (living in a “throttled industrial nation”/economy of scarcity) had the prospect of getting soon access to all the shiny stuff that was available in Western Germany
(“un-throttled industrial nation”) today we don’t have another earth which could help us to prolong or even increase our current high-energy and -resource consuming lifestyle. (Or where young people could migrate to to find better economic conditions.)
In short: Since 1989 about 2.4 billion more people on earth. During all these years a significant amount of resources (of all kind) consumed and significant additional damage to ecosystems done (e.g. Fukushima disaster, Canada’s tar sand region).
“To be fair”: some ecosystems have recovered in East Germany, e.g. due to abandoning of obsolete industrial sites . And there also was dismantling of sites with hazardous waste — but this wasn’t done by the collapsing east German economy but by all-German economy in the
years following the reunification.
Conclusion? I think with certain probability the coming years will bring similar fall-outs and activities as observed in the early 90s in East Germany and other former Eastern bloc nations: e.g. many shutdowns of companies, much higher unemployment rate, implementation
of employment-creation measures, downward trend in birth rate, abandoning of settlements, increasing cases of social hardship and old age poverty. All of that and more on a much larger scale and some of those trends have already begun.
 I suppose similar effects are observable in other industrial nations. Esp. with dislocation of production to BRICS- or other nations the environmental pollution was also “relocated”.
I expect that there still will be some IC-hubs. But in general most nations will have to throttle more and more their IC mode of operation. In reminiscence of former Eastern bloc: Our global economy of scale will transform to local economies of scarcity over time.
On a personal note:
All this reminds me of Ursula K. Le Guin’s novel “The Dispossessed. An Ambiguous Utopia” (German title: Planet der Habenichtse). It’s like I came from Anarres (where the have-nots live), spent 30 years on Urras (in a capitalist society with all its BS attached), and my next step will be to go back to Anarres (going back to the have-nots).
“Emerging market policymakers slashed interest rates further in September, taking their lead from major central banks and joining in efforts to shore up their economies.”
“Heading into October, it was clear Federal Reserve officials would face a difficult decision at their meeting at the end of the month. Just one day into October, the challenges have already become even more intense.”
“The European Central Bank was dealt another blow in its battle to stop the eurozone economy sliding into deflation after the consumer price index sank below 1pc for the first time in three years.
“The huge task facing incoming ECB president Christine Lagarde to tackle the region’s inflation woes was highlighted by CPI unexpectedly dropping to 0.9pc.”
All of the countries need to move together on interest rates, or big shifts in currency relativities are likely to take place.
“Car loans that are increasingly stretched out are a pronounced sign that some American middle class buyers can’t afford a middle-class lifestyle. Incomes have risen at a sluggish pace in the past decade, but car prices have grown rapidly. New technological and safety features, such as larger and more sophisticated multimedia displays, have made even the most basic cars more expensive.”
I think of all of the new features being added as being similar to growing inefficiency in making personal transportation devices. If you look at vehicles in, for example, India, you will not find all of these added features. This is a photo I took of a vehicle similar to one I rode in, when I visited India in 2012. I had to hold onto the doorpost, for fear of falling out, because there were more people jammed into the vehicle than it could really hold.
Yes, I remember the buses in Nigeria. They had no doors, and sometimes no windows, and you had to share them with goats and chickens. But they ran quite fast, and ran almost on time, because they had right of way by virtue of being more robust than almost anything else.
But now we have MBA’s, who learn about “product differentiation”. Every car will get you from point A to point B, but our car will play grand opera along the way, or navigate you into a dead end with GPS and Google Maps. Or massage your passengers. The fact that the marginal benefit of these features is often less than the marginal cost is irrelevant, because the buyer doesn’t have to pay for them; he just takes on more debt.
Yes, Gail, inefficiency in the name of progress. A disease of our times.
I am afraid you are right!
we spoke about Jean Marc Jancovici speaking at OECD about collapse, in september
here are the two videos :
Thanks for the update, Jancovici has been mentioned here over the years occasionally.
I’ll look at this if there is some “new” development in his perspective on the subject.
I always maintained It’s kind of important because he is advising some of the political, economic factions at least in Europe (controlling %global share), so his public presentations must be to some extent mirrors of such discussions (and likely policies in the pipeline).
No new info, mostly re-polished older presentations, but more forcefully made conclusion. Two general outcomes available, either let the system rupture on its own a bit more later or act now, the suggested conclusion is mandated contraction, forced austerity (from today’s perspective).
My inferred addendum, for that you need political will, so if this project is given go, expect false flag GFC of very severe magnitude or similar, and the stabilizing austerity plan will be miraculously offered – phased in its wake as the solution.
as for timing – trigger, he also said look for US shale contraction, which according to Gail and others already happened.
Thanks! When I am not trying to get a new post up, I will want to look at them.
It started at the periphery. But now it will hit the core?
I don’t have a clear picture of this event. But I try to see through the lens of falling EROEI.
We need energy + infrastructure + machines to produce goods and services. As the EROEI declines, we first let the infrastructure decay and the stop building new machines, this gives us enough energy for goods and services…for a while…
Collapse is perhaps more like a civilization in the state of decay?
It depends on what parts of the system fail. If the financial system fails, international trade will go down quickly. This would be a deal-killer.
Asian auto producers sales in the U.S were down about 15 percent in September.
4 major airlines go bust in 4 weeks
Don’t buy tickets far in advance, any more?
Australian rate cut. Down to 0.75% Third cut since June
should go negative in 2020…
Voilä, all oil/energy/clima/malthus/qe/poverty related issues are solved. Peakoil is over! Presented by the great Varoufakis himself.
Why am I disappointed?
There is an old legend in German about the citizens of Schilda. Carrying sunlight in buckets into the mayors house with the forgotten windows. Is that known in the US?
I wonder if some citizens emigrated. Maybe to Greece?
One ton of cement = one ton CO/2.
A little short but just about. Or 100 gallons of gasoline. Footers for a modest house about ten tons of concrete. or 40,000 miles at 40mpg. At 12k miles a year a car that gets 40mpg emits the same carbon as footers for a modest house in 3.3 years. Well built house should last 150 years plus with maintenance.
Location is everything. It depends upon whether there are job opportunities, food and fresh water where the house is located. An unneeded 150 year old house will have no value.
There are other issues involved as well. In the US South, when homes are built with wood, termites are certain to attack the home, unless chemicals are used to deter the termites. Even with chemical termite protection, frequent termite-related repairs are needed.
Windstorms bring down trees; storms cause creeks to rise; earthquakes cause cracks in foundations. Asphalt roofs need to be frequently replaced. Broken windows need to be replaced. Without the current system, these repairs are impossible.
Admittedly, if we built US homes out of stone, they would last longer. But they would be harder to insulate. And if we built tightly sealed homes, they would require less heating and cooling, but they would be more prone to indoor pollution problems. If electricity is permanently lost, these homes may not have the option of opening enough windows for ventilation.
Round trip flight london new york equals over two tons of concrete.
Another Green New Deal solution.
The fashionable theory on the Left in Europe is that all that has to happen is that real Socialists take over the EU, making it a ‘Union for the People’, not a ‘Union for Capital’, institute the universal Green New Deal, and ‘Second Industrial Revolution’, and all will be well: work and housing for all, high pay, Social Justice and a saved planet! Oh yes, unlimited migration from Asia and Africa to Europe to meet the goal of ‘Global Justice’. It’s pitiful.
I am discovering that the Green New Deal seems to be highly sought after by my own immediate family members. I am getting more push-back from them on this issue than I can remember in a long time. When I have talked about oil prices or other topics that seemed unrelated to fixing our current economic problems, their reactions were more muted.
I generally try to stay out of political discussions with family members because I can see that the discussions will not go well. My usual response to their political discussions is “Politician Doe, who is he?” since I don’t keep up with the many players involved.
With peakoil our structures, states, law, defense, food, education, cities, technology, property protection, communication will come down. People will run to areas, where they are safe, have water and can grow food. We could prepare for it with the state giving land for free for small biological gardens, drill wells, raise small cattle and plant trees. We could train old technologies like knitting and cooking and wood work. We could think of security structures in a world where all structures have come down. We could use religion or community programs to get together and start mutual help in small societies. We could bury our radioactive inheritage before our capabilities to do so brake down.
QUOTE: ***People will run to areas, where they are safe, have water and can grow food.***
Those areas had better be very remote from the rest of humanity, lest they be overrun by hordes of starving and panicking people. And those who know what’s coming shouldn’t ‘run’ to those areas when the collapse comes, they should move there NOW.
QUOTE: ***We could prepare for it with the state giving land for free for small biological gardens, drill wells, raise small cattle and plant trees. We could train old technologies like knitting and cooking and wood work.***
Seriously, are there any places around where people are actually collectively anticipating what’s coming and therefore doing all this in preparation??
If you know of any such places, where people are seriously and earnestly prepping as a community, please let me know. I’d very seriously consider migrating to one of these places.
QUOTE: ***We could bury our radioactive inheritage before our capabilities to do so brake down.***
I don’t see how we’re going to be able to do so, if you mean dismantling all our nuclear reactors. Decommissioning and dismantling just one costs billions of dollars. Imagine where all the money and resources for taking down the reactors are going to come from once SHTF.
Haven’t been here for a while by the way, so I thought I’d just drop by. Hope all’s been well — though we really aren’t sure for how much longer (sigh)…
It is! For all my talk of non-reactivity, something about the dishonesty of the left’s position gets my goat. More so, in fact, than the transparent greed on the right. Somehow they have shoehorned wealth-distribution and social justice agendas into their delusional green manifesto (as if the planet cares about any of that), so that it is just another group of humans acting in their own self-interest.
But meanwhile they *think* the moral high ground is theirs and pat themselves on the back accordingly. Most galling.
And of course they are just as bad as the right when it comes to overlooking the impossibility of infinite growth on a finite planet. Just put up lots of wind-turbines and bribe everyone into electric cars quick smart, goes the reasoning, and voilà – prosperous greentopia for the happy socialist workers! No doubt all that cobalt, lithium, silver and copper grows on trees.
And point out to these people at your peril that swingeing cuts in fossil fuel use would necessarily mean less light, less warmth, less transport, less stuff, less comfort, less convenience, less novelty, ie, by any definition, less prosperity and a self-imposed austerity far more swingeing than anything implemented by right wing governments. They don’t like hearing that. 😀
Gail, if you can’t talk your family round on this issue, there probably isn’t much hope for the rest of us, lol. In the absence of any real solutions, perhaps it is wise just to keep one’s counsel.
U.S Manu PMI 47.4 (lowest since 2009)
U.S new export orders 41.0
Trump blamed the Fed and the strong dollar as maga dives into the abyss.
DEUTSCHE: “ISM at 47.8 is bad but new export orders at 41 is even worse, see chart below. There is no end in sight to this slowdown, the recession risk is real.”
Still, counter-intuitively, some of the core DE fin institutions have enjoyed falling long term (10yrs) CDS for 2018-9.. So, shorting this Frankenstein could be the gamble of the half century, although they would likely paper over it again in some controlled – intervention fashion again.. especially if this is only a slowdown or mild GFC_ver_xy, so I’m certainly not advising it.
For US too! Wow!
Global manufacturing PMI in its fifth month of contraction at 49.7 in September and global new export orders at 47.98.
““The sustained softness in the sector increases the risk of further negative spillovers to the consumer and service sectors of the economy” said Ben May, economist at Oxford Economics.”
“CNBC accessed a note from MUFG Bank’s Chris Rupkey that states, “Purchasing managers are telling stock market investors to get out. Run. Run for your life. Get out while you can. The outlook is darkening and the thunder is growing louder by the day.””
Doesn’t look good!
I guess the one silver lining in the contraction of US manufacturing is that it may force Trump to compromise with China. Of course he will still call it a victory…
I think that the tariffs and trade conflict with China are more of symptoms of our problems than the cause of them. China’s lack of cheap-to-produce coal is a big hidden problem, underlying the world slowdown.
Oilprice.com taking over Gails ideas. Congrats! Has that link been posted before?https://oilprice.com/Energy/Oil-Prices/Can-Oil-Survive-The-Looming-Economic-Ice-Age.html
This is a link to the Kurt Cobb article we saw back a couple of weeks ago, talking about my theory of oil prices not rising to encourage more production, as we reach limits.
I hope not being unfriendly to you Gail but imho you are too much looking at “correct accounting for oil producers” (in your stimulus article)
Stimulus money can be transferred for every barrel delivered by the oil producers in any amount required to keep it going. It is just digits in the World Bank or Fed or what have you. When you keep that in mind the end result is only a phisical limit and there we are back to the net energy, EROI or even the ETP model…
It would be easy to drop sanctions against Venezuela and Iran. This would raise oil production.
We could also print money and send it to them, but I doubt it would have the same impact.
We could print money and send it to Saudi Arabia, Iraq, and the other Middle Eastern countries, but I don’t expect that to happen either. If we produced only for our own country, the situation would be different.
Venezuela would need years to build up a sufficient infrastructure and. Iran has too little production to compensate the actual calculated losses, I read. Btw Iranian oil belongs to China.
Yes, lot of weird thing could happen, most notably combo of naked printing – debt sterilization ala Japan applied across all the IC global hubs, plus opening up last pockets of hydrocarbons, say in the Arctic. That would have the potential of another two decades+ of can kicking or more.. Obviously, depending on many other complex interactions. For now, I’ll give similar scenario nice ~20% chance.
Otherwise we just continue on major track for grand global round of triage of ~2023-35.
And how this is going to proceed is again unknown. Some predict universal lockstep collapse, others see more of a block concept and or attempted individual autarky at least in the early stages.
In terms of actionable scenarios, in essence a game who is going to be thrown overboard first. Predictably it must be the weaker parties and or he who gets trapped into very disadvantageous position vs others.
The most internaly destabilized major IC hubs currently are:
“The World Trade Organization cut its forecast for growth in global trade this year by more than half on Tuesday and said further rounds of tariffs and retaliation, a slowing economy and a disorderly Brexit could squeeze it even more.”
Of course, the WTO assumes that trade will bounce back in 2020.
An assumption which will be revised later in accordance with reality, as they always are….
GERMAN SEPT FINAL MANUFACTURING PMI 41.7
That is just terrible. \UK manufacturing is in its fifth month of contraction – PMI at 48.3.
“September saw the biggest monthly drop in Swedish manufacturing activity since 2008 [ to 46.3].
““Swedish manufacturers are simply going in the same direction as, for instance, in Germany,” Nordea economist Torbjorn Isaksson said.”
I wonder if they would do better with wind turbines and solar panels providing their energy supply? Not likely, I expect.
The UK may well find out if our political mayhem paves the way for a Labour government under Corbyn. The disconnect between the promised greentopia and the actual economic contraction will itself foment some interesting politics, I’m sure – a broader collapse allowing.
I’m praying that a prolonged UK/global crash causes the cancellation of the awful infrastructure projects here:
Phase 1 has been uglier than one ever imagined (and the new ‘town square, the hub of a thriving community’ is a bleak Kunstlerian wasteland, has only one occupant so far and all the other retail spaces boarded up),and Phase 2 is simply full rolling destruction of the Green Belt, spreading out form this cancerous core…
Being in a Collapse Hub, instead of a Growth Hub, would be just the ticket as far as I’m concerned!
It looks as if this is global. Everyone is going down. A synchronized slowdown.
This is what “Peak Oil” really looks like. Too little demand for all fuels at once. Too few buyers of energy products, like cars and smart phones.
Yes, everything is connected into one complex structure, and it all goes down together.
The question now is just: how bad is the situation and how fast will it collapse?
This time it is starting to look real.
Let’s cross our fingers. It doesn’t look very good to me either.
“Yes, everything is connected into one complex structure, and it all goes down together.”
that is questionable…
this reminds me of The Core/The Periphery circa 2018…
Venezuela, among other less notables, was suffering through massive economic decline…
that may or may not have been a consequence of The Core trying to wall itself off from the smaller weaker countries and perhaps intentionally letting some of The Periphery go ahead and collapse first so that The Core could have more resources for itself…
this time, circa 2020, there might be more of the same…
“The question now is just: how bad is the situation and how fast will it collapse?”
I’m not assuming it will collapse, though it might…
as a middle ground guess, there will be a massive global recession in 2020, perhaps into 2021 2022, and then a “recovery” which will not get back to the previous 2019 level… perhaps 5 or 10 % down followed by 1 or 2 % recovery, before perhaps more recessions throughout the 2020s…
“This time it is starting to look real.”
I’m getting pretty excited now!
ISM Manufacturing index Decreased to 47.8 in September