Our Energy and Debt Predicament in 2019

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.

[1] 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.

Figure 1. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.

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.

[2] 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 2. Inflation adjusted weekly average Brent Oil price, based on EIA oil spot prices and US CPI-urban inflation.

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.

Figure 3. 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. They are annual averages, so smooth out quite a few smaller bumps.

[3] 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.

[4] 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.

Figure 4. Average growth in energy consumption for 10 year periods, based Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent.

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).

Figure 5. Energy growth amounts shown in Figure 4, divided between amount that supported population growth (based on 2019 world population estimates and earlier estimates by Angus Maddison) and all other, which I have called “living standards.”

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.

[5] 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).

Figure 6. Three-month and ten-year interest rates through July 2019, in chart by Federal Reserve of St. Louis.

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.

Figure 7. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.

[6] 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.

Figure 8. Ten-year average increase in US debt relative to GDP. Debt is “All Sectors, Liability Level” from FRED; GDP is in dollars of the day.

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.

Figure 9. Promises of future goods and services tend to rise much more rapidly than actual goods and services. Chart by Gail Tverberg.

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.

[7] 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. 

Figure 10. Figure similar to Figure 5, with bump that is primarily the result of China’s accelerated growth circled.

China has been financing its rapid economic growth since 2001 with growing debt.

Figure 11. China Debt to GDP Ratio, in figure by the IIF.

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 [6].

[8] 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.

Figure 12. IIF figure showing total world debt and the ratio of total world debt to GDP.

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.

[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.

[10] 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.

Figure 13. Chart from the Financial Times showing historic interest rates and periods during which interest rates fell.

According to Figure 13, there have been three periods of falling interest rates in the last 200 years:

  • 1817-1854
  • 1873-1909
  • 1985-2019

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.

[11] 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 [10], 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?


About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,325 Responses to Our Energy and Debt Predicament in 2019

    • They have to find something to write about.

      • Duncan Idaho says:

        Extinction is a good topic— especially when it is happening to you.
        Most want to ignore it at all costs.

    • It's different this time around....YES says:

      Still waiting to put a solar water heater on the roof here in South Florida….like most all Floridians…..
      Solar water heaters bloom on China’s rooftops but not in the U.S.
      Annually, China installs 6 million solar water units. “The U.S. market is relatively small, with 8 million water heaters sold every year and only about 30,000 being solar water heaters,” explained Merrigan of NREL. “There has been some increase in recent years from before, when only 6,000 or 7,000 were sold.
      Got to use the natural gas for something!
      Yeah, the trend is going in the right direction…sarcasm

    • JMS says:

      What else is new?

    • It does look awfully suspicious. The article seems to make the assertion that these are natural gas tanks. Another article I read suggested that they could store liquids, such as those awaiting processing. The damage certainly looks minor, and not something that a long-range drone could do.

  1. John Doyle says:

    I find it very difficult to comprehend all the info here and its consequences. I was wondering how to express the shortfall in renewable compared to consumption using a metric we can imagine. We
    have often used the Wiki article “Cubic Mile of Oil” as a yardstick. Using a similar metric renewables can be compared with a similar scale. Are you able to do that, Gail?
    Hardly any renewable protagonist gets the scale of our use.
    Thanks John

    • The thing about intermittent electricity is that it really doesn’t substitute for much of anything, other than somewhat reducing the need for fuel for power plants of various types, including natural gas and coal. So any image of it replacing oil doesn’t really make sense. And even if it were scaled up to theoretically 100% of the cubic mile of oil (and beyond), it would still do very little for the economy.

      BP computes “barrel of oil equivalent” for wind, solar and hydro, making the very generous assumption that the value of this electricity is equal to the oil that would have burned to create this electricity. Using this generous approach, in the year 2018,

      Wind amounted to 2.1% of world energy supply.
      Solar amounted to 1.0% of world energy supply.
      Wind plus solar amounted to 3.0% of world energy supply.

      The International Energy Association does not give as much credit for electricity as BP does. It would count wind and solar (total) as something between 1% and 2% of world energy supply. No matter what numbers a person uses, the percentages are tiny. Anyone should be able to figure that if we have been subsidizing these things for over 20 years, we should be a whole lot farther along than this.

      Hydroelectric for 2018 amounted to 9.9% of world energy supply.

      Wind and solar require the mining of huge amounts of materials, processing these materials using fossil fuels, and transporting these materials long distances. Calculations of EROEI usually miss the long-distance transport, because this can vary, depending on the location of the solar panels or wind turbines. They likely also miss a lot of the mining costs. There are many other reasons that they tend to give hopelessly optimistic indications.

  2. Harry McGibbs says:

    “Further evidence was on full display Thursday that top central banks are doing little more than pushing on a string in an attempt to spark their economies by flooding the financial system with ever more cash. The European Central Bank’s offer to provide money to lenders free resulted in it handing out just $3.4 billion euros ($3.8 billion), far less than estimates of 20 billion to 100 billion euros, according to Bloomberg News.

    “The result is a clear message from banks that there’s just no real demand for loans from their customers, no matter the cost.”


  3. Harry McGibbs says:

    “World economic growth is “fragile” and “under threat,” former International Monetary Fund director Christine Lagarde says, and is over-reliant on the actions of central banks.”


  4. Harry McGibbs says:

    “Brazil’s Central Bank has slashed interest rates to a record low for the second time in less than two months, as Latin America’s biggest economy struggles to grow.

    “The bank cut its main rate to 5.5 percent from the previous historic low of six percent, citing risks of a “more intense slowdown in the global economy.””


    • Harry McGibbs says:

      “Buenos Aires, Argentina – More than 100,000 Venezuelans now live in Argentina. They have left one country in crisis only to find themselves in another mire…

      “A persistent recession with high inflation, growing Argentine unemployment – and a 25-percent currency collapse in a single day last August – make finding a job incredibly difficult for most people who live in the South American country.”


      • Harry McGibbs says:

        “Shuttered schools, hospital services pared back to a minimum, officials on strike — Argentina’s southern oil-producing province of Chubut is a microcosm of the country’s crippling economic crisis.

        “The debt-burdened Patagonian province is suffering the same explosive cocktail of galloping inflation, a plummeting peso and colossal debt.”


        • These are examples of organizations whose demand for fossil fuels is lower because of the way the system is working now. The oil price isn’t high enough to keep the whole system going, and Argentina is not in a position to borrow more, to make up for the deficit. Someone needs to print some money and give it to Argentina. I suppose more quantitative easing might work in this direction, because it might lower the dollar relative to other currencies including Argentina’s. This would raise the price of oil.

          • Harry McGibbs says:

            “A coastal Alaska fishing town will soon be cut off from vehicles with the closure of its ferry service because of state budget cuts, officials said.”


            • I am sure that the ferry needs a subsidy and this is why it is being cut. According to the article:

              Alaska’s coastal residents have warned of possible effects of ferry budget reduction including the loss of businesses and jobs. There is also a danger of the permanent departure of residents who cannot afford to pay for regular plane tickets of at least $150 instead of $70 ferry rides, officials said.

              So the result is more than the loss of the oil use to power the ferry. There are likely to be a lot of businesses closing and residents leaving.

            • Harry McGibbs says:

              Residents of Islay get subsidised flights to Glasgow and our ferry operator, the state-run company Caledonian MacBrayne, was subsidised by the Scottish Government to the tune of £136.8m last year, up from £128.3m the year before.

              One wonders how long that can go on, given that Scotland depends for a third of its government revenues on North Sea oil, which is barely profitable now.

            • Buses and commuter trains are generally subsidized as well, I understand. If there are cutbacks, these could see service eliminated.

            • How much of the food for Islay comes by ferry? Or are there shipping companies that make deliveries to Islay?

            • Harry McGibbs says:

              Gail, there is some locally produced meat but there is no longer a slaughterhouse on the island. Islay had a creamery but that was shut down in 2000 due to a UK-wide price slump in milk and dairy products. A bit of fruit and veg is grown locally and there is some excellent locally caught seafood.

              But almost all of our food is brought in by ferry and sold in stores on the island, the largest of which is the Co-op in Bowmore. We call it a supermarket but it is tiny compared to most on the mainland. The ferries are cancelled when the the winds are gusting over 40mph and if you have consecutive days without ferries, the shelves start emptying pretty quickly. You get a strong sense of supply-chain vulnerabilities here, that’s for sure.

            • Dan says:

              I lived in Cordova for several years. Beautiful place. It was the epicenter of the Exxon Valdez oil spill in 1989 and they are still suffering from the effects to this day. The herring fishery has collapsed – there is none. The ferry runs to Valdez and Whittier from which you can drive to Anchorage. Factoring the driving and parking fees into the equation I would just fly and load up (coffee, booze, ammo, etc.).
              Cordova is where the prized Copper River salmon come from.

  5. Harry McGibbs says:

    “Iranians have been forced to sell their organs for up to $50,000 with the country’s economy in freefall, an opposition group has claimed.

    “The National Council of Resistance of Iran (NCRI), which is based in Paris, says the organ trade is a ‘booming business’ as the economy struggles under the weight of U.S .sanctions.

    “According to their report, one street in Tehran is so covered in scrawled offers of organ sales that the alley has become known as ‘Kidney Street’.”


    • Sounds sad! At one time, I know that people low on funds used to sell their blood to get funds. This didn’t work well, because the people selling their blood had too many things wrong with their blood.

      • Robert Firth says:

        Gail, I was a regular blood donor for many years, until I hit the age limit. Being O negative, I thought it an easy way to help my fellow men. No doubt a capitalist would condemn me, for depriving some HIV positive prisoners of extra pocket money. But there are some things too valuable to be monetised. A lesson many have forgotten, but that in the Long Emergency we are destined to relearn.

        • I don’t think that there is an upper age for blood donation in the US. I know that I was surprised at the age of some donors, when I worked as a volunteer, way back when I was a teenager, helping check donors in. One site says that hasn’t changed. [Oops! Another link says that some centers have an upper limit, so check locally.]

          There is an upper age limit in Europe and other parts of the world, according to Wikipedia.

          • Robert Firth says:

            Sorry for not being clearer. The age limit in Singapore is 60, which I think absurdly low, but that’s the way it is.

  6. psile says:

    Texas Is Drowning Under One of the Wettest Storms in US History

    The last of these monster 1,000-year-storms was just two years ago…

    • I remember early in my actuarial career seeing a lot of architect and engineer claims, in which buildings or other structures failed very quickly, even though they were supposed to withstand one in 100 year events or even greater odds. For example, the roof on a large building would collapse, after a somewhat larger than normal snowfall. I quickly came to the understanding that the models underlying these analyses were not really correct. Perhaps they assumed a normal distribution of outcomes, because that distribution is easy to work with, rather than a much “fatter tailed” distribution. Or they left out important variables, such as wind speed. The nuclear plant at Fukushima was build to withstand very unusual events, supposedly. But in practice, these models often don’t work very well.

      • Robert Firth says:

        Hi Gail. I saw this in action myself at the Carnegie Mellon School of Architecture (I was their tame IT guy for a few years). In former times, architects and engineers studied the science of materials (for what to build) and the science of meteorology and seismology (for what might go wrong).

        Then came CAD, which used algorithms crafted by computer nerds who knew none of these subjects. For example, probabilistic events were usually simulated by a Normal (Gaussian) distribution, which was wrong. Weather events, for example, usually follow a negative binomial distribution, which more accurately estimates the probability of rare events. And CAD stress analyses could not cope with torsional forces, and so ignored them.

        The latter deficiency has been the cause of several major roof collapses, for example the Hartford Civic Center collapse in 1978. the former was one of the contributing factprs to Fukushima: the builders knew that four tectonic plates almost came together just offshore, but their bad models of earthquakes made them overconfident.

        • Bad models are very distinctly worse than no model at all. People depend on these models. They assume that they tell them more than they really do. By the time the model gets passed on through three or four levels of reports (official and lay reports, plus newspaper reports), enough people have heard the story that people assume the computer results must simulate everything that is important. This is definitely not true.

        • Kowalainen says:

          Lets compare the raw computational power of the 70’s and with todays:

          In the 70’s we basically had no computational power to speak of. Thus the software and models used back then were severely limited by the available compute.

          The FEA software of today is vastly superior in every aspect, which is why a car and a building of today can withstand everything up to and exceeding its design specification.

          Then on top of that comes the mass dampers and suspension systems of modern buildings. 9+ on the Richter scale, no problems.

          • But the people doing the programming are no smarter. In some ways, they are less smart. Those who worked on problems early on had learned to observe carefully and not be overconfident of what they were doing. They added a large margin for error. With more computational power, it is easier to make mistakes.

            • Kowalainen says:

              The mathematicians and scientists of today is no smarter than those of yesteryear, yet new science and math sees the light every single day because there are vastly more people working with this than ever before in the history of mankind. And just like that modern day software is engineered and refactored from older programs into new more accurate, optimal and expressive software systems.

              The same is true of the (CAD/CAM/FEA) software used for constructing and simulating structures. They are built and improved upon every day, and then validated using real-world test benches. Basically all modern engineering is driven by software. This software encodes much of the former complexities of engineering into a computational representation.

              Thus the complexity of maintaining modern civilisation is shifted from people and organizations to computational structures. It is a groundbreaking paradigm shift where irrelevance looms at every level for the keepers of societal structure (nomenclature) which is specially prone to this transformation.

          • Robert Firth says:

            Sigh. Another believer in the creed of “wrong answers faster”. The computers may be faster, but they are still being programmed by humans, who in my 50 years’ experience in this discipline, display every year more ignorance and more hubris.

            Remember the prophetic words of Alfred Korzybski: “The map is not the territory”

            • Kowalainen says:

              Times move on, so does tech, science and the validation methods of which they are made to be grounded in reality.

            • Therefore, most people believe any kind of nonsense they hear about science and technology solving all of their problems.

            • JesseJames says:

              An idiotic essay by K on how computers have made us smarter. This is nonsense …since dumbed down engineers now believe anything a computer program tells them, even if it is wrong.

            • Tim Groves says:

              Computers have definitely made us dumber. But they have become part of the landscape because they allow us dumb bunnies to get lots of things done far cheaper, faster and more productively and efficiently than our smarter ancestors could manage—not necessarily any better, though.

            • Kowalainen says:

              Tim: except for the little problem that IQ is rising continuously. Younger generations score higher on IQ tests than their predecessors.

              “The Flynn effect is the substantial and long-sustained increase in both fluid and crystallized intelligence test scores that were measured in many parts of the world over the 20th century. When intelligence quotient (IQ) tests are initially standardized using a sample of test-takers, by convention the average of the test results is set to 100 and their standard deviation is set to 15 or 16 IQ points. When IQ tests are revised, they are again standardized using a new sample of test-takers, usually born more recently than the first. Again, the average result is set to 100. However, when the new test subjects take the older tests, in almost every case their average scores are significantly above 100.”


              It is quite obvious that the crowd here is quite, uhm, how should I put this. Cough. Cough. Never mind.

      • Rodster says:

        You’d figure they would at least factor in an earthquake followed by a Tsunami. That said there are now a total of “6” active tropical storms in the tropics, supposedly a new record.


        • Robert Firth says:

          Indeed they did “figure it out”. Build strong enough to withstand the shock of an earthquake: if earthquake has force X, build resistance of 1.1X. Problem solved.

          Except they got the equations wrong, because they forgot about resonance effects. The same effects, as it happens, that took down the Tacoma Narrows Bridge in 1940. Of course, with today’s amazingly fast computers, they could have computed the wrong answer a million times faster. Such is what today we call progress.

  7. psile says:

    The Fed pumps another $75 billion into markets — its 3rd straight daily injection

    The Federal Reserve jumped into financial markets for a third straight day on Thursday in another attempt to keep interest rates from moving higher.
    The central bank has injected a total of $203 billion into markets this week — $75 billion on both Wednesday and Thursday, and $53 billion on Tuesday.
    This week marked the first time the central bank has taken such steps since the global financial crisis 10 years ago.

  8. “Secret Notes From Iran: Diary Of An Undercover Journalist
    By Nadim Siraj
    “… Siraj argues that the US hostility arises from Iran’s refusal to join the ‘petro dollar’ system. “Another reason is Iran’s fortuitous success in the Iranian Oil Bourse.
    The book contains strategic analysis on Iran and West Asia, including a sweep of history from the 1953 “Oil related coup” to the present US abrogation of the P5+1 “Iran Nuclear Deal” of July 14, 2015. He sets the tone of analysis by quoting Noam Chomsky, his inspiration, to whom he has dedicated his book: “Iran is a highly independent nation and surely not a proxy of any other country”. He argues that the reason for American hostility is Iran’s refusal to join the “petro-dollar” system through which oil revenue has to be stashed in American banks. Another reason is Iran’s fortuitous success in starting the Iranian Oil Bourse (IOB) in Kish Island. America’s traditional policy was to put down countries defying its diktat. He quotes Gen.Wesley Clark’s 2007 interview in Democracy Now on a Pentagon plan “for taking out seven countries in five years”, including Iran.”


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