How Renewable Energy Models Can Produce Misleading Indications

The energy needs of the world’s economy seem to be easy to model. Energy consumption is measured in a variety of different ways including kilowatt hours, barrels of oil equivalent, British thermal units, kilocalories and joules. Two types of energy are equivalent if they produce the same number of units of energy, right?

For example, xkcd’s modeler Randall Munroe explains the benefit of renewable energy in the video below. He tells us that based on his model, solar, if scaled up to ridiculous levels, can provide enough renewable energy for ourselves and a half-dozen of our neighbors. Wind, if scaled up to absurd levels, can provide enough renewable energy for ourselves and a dozen of our neighbors.

There is a major catch to this analysis, however. The kinds of energy produced by wind and solar are not the kinds of energy that the economy needs. Wind and solar produce intermittent electricity available only at specific times and places. What the world economy needs is a variety of different energy types that match the energy requirements of the many devices in place in the world today. This energy needs to be transported to the right place and saved for the right time of day and the right time of year. There may even be a need to store this energy from year to year, because of possible droughts.

I think of the situation as being analogous to researchers deciding that it would be helpful or more efficient if humans could change their diets to 100% grass in the next 20 years. Grass is a form of energy product, but it is not the energy product that humans normally consume. It doesn’t seem to be toxic to humans in small quantities. It seems to grow quite well. Switching to the use of grass for food would seem to be beneficial from a CO2 perspective. The fact that humans have not evolved to eat grass is similar to the fact that the manufacturing and transport sectors of today’s economy have not developed around the use of intermittent electricity from wind and solar.

Substituting Grass for Food Might “Work,” but It Would Require Whole New Systems 

If we consider other species, we find that animals with four stomachs can, in fact, live quite well on a diet of grass. These animals often have teeth that grow continuously because the silica in grass tends to wear down their teeth. If we could just get around these little details, we might be able to make the change. We would probably need to grow extra stomachs and add continuously growing teeth. Other adjustments might also be needed, such as a smaller brain. This would especially be the case if a grass-only diet is inadequate to support today’s brain growth and activity.

The problem with nearly all energy analyses today is that they use narrow boundaries. They look at only a small piece of the problem–generally the cost (or “energy cost”) of the devices themselves–and assume that this is the only cost involved in a change. In fact, researchers need to recognize that whole new systems may be required, analogous to the extra stomachs and ever-growing teeth. The issue is sometimes described as the need to have “wide boundaries” in analyses.

If the xkcd analysis netted out the indirect energy costs of the system, including energy related to all of the newly required systems, the results of the analysis would likely change considerably. The combined ability of wind and solar to power both one’s own home and those of a dozen and a half neighbors would likely disappear. Way too much of the output of the renewable system would be used to make the equivalent of extra stomachs and ever-growing teeth for the system to work. The world economy might not work as in the past, either, if the equivalent of the brain needs to be smaller.

Is “Energy Used by a Dozen of Our Neighbors” a Proper Metric?

Before I continue with my analysis of what goes wrong in modeling intermittent renewable energy, let me say a few words about the way Munroe quantifies the outcome of his energy analysis. He talks about “energy consumed by a household and a dozen of its neighbors.” We often hear news items about how many households can be served by a new electricity provider or how many households have been taken offline by a storm. The metric used by Munroe is similar. But, does it tell us what we need to know in this case?

Our economy requires energy consumption by many types of users, including governments to make roads and schools, farmers to plant crops and manufacturers to make devices of all kinds. Leaving non-residential energy consumption out of the calculation doesn’t make much sense. (Actually, we are not quite certain what Munroe has included in his calculation. His wording suggests that he included only residential energy consumption.) In the US, my analysis indicates that residential users consume only about a third of total energy.1 The rest is consumed by businesses and governments.

If we want to adjust Munroe’s indications to include energy consumed by businesses and governments, we need to divide the indicated number of residential households provided with energy by about three. Thus, instead of the units being “Energy Consumed by a Dozen of Our Neighbors,” the units would be “Energy Consumed by Four of Our Neighbors, Including Associated Energy Use by Governments and Businesses.” The apparently huge benefit provided by wind and solar becomes much smaller when we divide by three, even before any other adjustments are made.

What Might the Indirect Costs of Wind and Solar Be? 

There are a number of indirect costs:

(1) Transmission costs are much higher than those of other types of electricity, but they are not charged back to wind and solar in most studies.

A 2014 study by the International Energy Agency indicates that transmission costs for wind are approximately three times the cost of transmission costs for coal or nuclear. The amount of excess costs tends to increase as intermittent renewables become a larger share of the total. Some of the reason for higher transmission costs for both wind and solar are the following:

(a) Disproportionately more lines need to be built for wind and solar because transmission lines need to be scaled to the maximum output, rather than the average output. Wind output is typically available 25% to 35% of the time; solar is typically available 10% to 25% of the time.

(b) There tend to be longer distances between where renewable energy is captured and where it is consumed, compared to traditional generation.

(c) Renewable electricity is not created in a fossil fuel power plant, with the same controls over the many aspects of grid electricity. The transmission system must therefore make corrections which would not be needed for other types of electricity.

(2) With increased long distance electricity transmission, there is a need for increased maintenance of transmission lines. If this is not performed adequately, fires are likely, especially in dry, windy areas.

There is recent evidence that inadequate maintenance of transmission lines is a major fire hazard.

In California, inadequate electricity line maintenance has led to the bankruptcy of the Northern California utility PG&E. In recent weeks, PG&E has initiated two preventative cut-offs of power, one affecting as many as two million individuals.

The Texas Wildfire Mitigation Project reports, “Power lines have caused more than 4,000 wildfires in Texas in the past three and a half years.”

Venezuela has a long distance transmission line from its major hydroelectric plant to Caracas. One of the outages experienced in that country seems to be related to fires close to this transmission line.

There are things that can be done to prevent these fires, such as burying the lines underground. Even using insulated wire, instead of ordinary transmission wire, seems to help. But any solution has a cost involved. These costs need to be recognized in modeling the indirect cost of adding a huge amount of renewables.

(3) A huge investment in charging stations will be needed, if anyone other than the very wealthy are to use electric vehicles.

Clearly, the wealthy can afford electric vehicles. They generally have garages with connections to electrical power. With this arrangement, they can easily charge a vehicle that is powered by electricity when it is convenient.

The catch is that the less wealthy often do not have similar opportunities for charging electric vehicles. They also cannot afford to spend hours waiting for their vehicles to charge. They will need inexpensive rapid-charging stations, located in many, many places, if electric vehicles are to be a suitable choice. The cost of rapid-charging will likely need to include a fee for road maintenance, since this is one of the costs that today is included in fuel prices.

(4) Intermittency adds a very substantial layer of costs. 

A common belief is that intermittency can be handled by rather small changes, such as time-of-day pricing, smart grids and cutting off power to a few selected industrial customers if there isn’t enough electricity to go around. This belief is more or less true if the system is basically a fossil fuel and nuclear system, with a small percentage of renewables. The situation changes as more intermittent renewables are added.

Once more than a small percentage of solar is added to the electric grid, batteries are needed to smooth out the rapid transition that occurs at the end of the day when workers are returning home and would like to eat their dinners, even though the sun has set. There are also problems with electricity from wind cutting off during storms; batteries can help smooth out these transitions.

There are also longer-term problems. Major storms can disrupt electricity for several days, at any time of the year. For this reason, if a system is to run on renewables alone, it would be desirable to have battery backup for at least three days. In the short video below, Bill Gates expresses dismay at the idea of trying to provide a three-day battery backup for the quantity of electricity used by the city of Tokyo.

We do not at this point have nearly enough batteries to provide a three-day battery backup for the world’s electricity supply. If the world economy is to run on renewables, electricity consumption would need to rise from today’s level, making it even more difficult to store a three-day supply.

A much more difficult problem than three-day storage of electricity is the need for seasonal storage, if renewable energy is to be used to any significant extent. Figure 1 shows the seasonal pattern of energy consumption in the United States.

Figure 1. US energy consumption by month of year, based on data of the US Energy Information Administration. “All Other” is total energy, less electricity and transportation energy. It includes natural gas used for home heating. It also includes oil products used for farming, as well as fossil fuels of all kinds used for industrial purposes.

In contrast with this pattern, the production of solar energy tends to peak in June; it falls to a low level in December to February. Hydroelectric power tends to peak in spring, but its quantity is often quite variable from year to year. Wind power is quite variable, both from year to year and month to month.

Our economy cannot handle many starts and stops of electricity supply. For example, temperatures need to stay high for melting metals. Elevators should not stop between floors when the electricity stops. Refrigeration needs to continue when fresh meat is being kept cold.

There are two approaches that can be used to work around seasonal energy problems:

  1. Greatly overbuild the renewables-based energy system, to provide enough electricity when total energy is most needed, which tends to be in winter.
  2. Add a huge amount of storage, such as battery storage, to store electricity for months or even years, to mitigate the intermittency.

Either of these approaches is extremely high cost. These costs are like adding extra stomachs to the human system. They have not been included in any model to date, as far as I know. The cost of one of these approaches needs to be included in any model analyzing the costs and benefits of renewables, if there is any intention of using renewables as more than a tiny share of total energy consumption.

Figure 2 illustrates the high energy cost that can occur by adding substantial battery backup to an electrical system. In this example, the “net energy” that the system provides is essentially eliminated by the battery backup. In this analysis, Energy Return on Energy Invested (EROEI) compares energy output to energy input. It is one of many metrics used to estimate whether a device is providing adequate energy output to justify the front-end energy inputs.

Figure 2. Graham Palmer’s chart of Dynamic Energy Returned on Energy Invested from “Energy in Australia.”

The example in Figure 2 is based on the electricity usage pattern in Melbourne, Australia, which has a relatively mild climate. The example uses a combination of solar panels, batteries and diesel backup generation. Solar panels and backup batteries provide electricity for the 95% of annual electricity usage that is easiest to cover with these devices; diesel generation is used for the remaining 5%.

The Figure 2 example could be adjusted to be “renewable only” by adding significantly more batteries, a large number of solar panels, or some combination of these. These additional batteries and solar panels would be very lightly used, bringing the EROEI of the system down to an even lower level.

To date, a major reason that the electricity system has been able to avoid the costs of overbuilding or of adding major battery backup is the small share they represent of electricity production. In 2018, wind amounted to 5% of world electricity; solar amounted to 2%. As percentages of world energy supply, they represented 2% and 1% respectively.

A second reason that the electricity system has been able to avoid addressing the intermittency issue is because backup electricity providers (coal, natural gas, and nuclear) have been forced to provide backup services without adequate compensation for the value of services that they are providing. The way that this happens is by giving wind and solar the subsidy of “going first.” This practice creates a problem because backup providers have substantial fixed costs, and they often are not being adequately compensated for these fixed costs.

If there is any plan to cease using fossil fuels, all of these backup electricity providers, including nuclear, will disappear. (Nuclear also depends on fossil fuels.) Renewables will need to stand on their own. This is when the intermittency problem will become overwhelming. Fossil fuels can be stored relatively inexpensively; electricity storage costs are huge. They include both the cost of the storage system and the loss of energy that takes place when storage is used.

In fact, the underfunding issue associated with allowing intermittent renewables to go first is already becoming an overwhelming problem in a few places. Ohio has recently chosen to provide subsidies to coal and nuclear providers as a way of working around this issue. Ohio is also reducing funding for renewables.

 (5) The cost of recycling wind turbines, solar panels, and batteries needs to be reflected in cost estimates. 

A common assumption in energy analyses seems to be that somehow, at the end of the design lifetime of wind turbines, solar panels and batteries, all of these devices will somehow disappear at no cost. If recycling is done, the assumption is made that the cost of recycling will be less than the value of the materials made available from the recycling.

We are discovering now that recycling isn’t free. Very often, the energy cost of recycling materials is greater than the energy used in mining them fresh. This problem needs to be considered in analyzing the real cost of renewables.

 (6) Renewables don’t directly substitute for many of the devices/processes we have today. This could lead to a major step-down in how the economy operates and a much longer transition. 

There is a long list of things that renewables don’t substitute for. Today, we cannot make wind turbines, solar panels, or today’s hydroelectric dams without fossil fuels. This, by itself, makes it clear that the fossil fuel system will need to be maintained for at least the next twenty years.

There are many other things that we cannot make with renewables alone. Steel, fertilizer, cement and plastics are some examples that Bill Gates mentions in his video above. Asphalt and many of today’s drugs are other examples of goods that cannot be made with renewables alone. We would need to change how we live without these goods. We could not pave roads (except with stone) or build many of today’s buildings with renewables alone.

It seems likely that manufacturers would try to substitute wood for fossil fuels, but the quantity of wood available would be far too low for this purpose. The world would encounter deforestation issues within a few years.

(7) It is likely that the transition to renewables will take 50 or more years. During this time, wind and solar will act more like add-ons to the fossil fuel system than they will act like substitutes for it. This also increases costs.

In order for the fossil fuel industries to continue, a large share of their costs will need to continue. The people working in fossil fuel industries need to be paid year around, not just when electrical utilities need backup electrical power. Fossil fuels will need pipelines, refineries and trained people. Companies using fossil fuels will need to pay their debts related to existing facilities. If natural gas is used as backup for renewables, it will need reservoirs to hold natural gas for winter, besides pipelines. Even if natural gas usage is reduced by, say, 90%, its costs are likely to fall by a much smaller percentage, say 30%, because a large share of costs are fixed.

One reason that a very long transition will be needed is because there is not even a path to transition away from fossil fuels in many cases. If a change is to be made, inventions to facilitate these changes are a prerequisite. Then these inventions need to be tested in actual situations. Next, new factories are needed to make the new devices. It is likely that some way will be needed to pay existing owners for the loss of value of their existing fossil fuel powered devices; if not, there are likely to be huge debt defaults. It is only after all of these steps have taken place that the transition can actually take place.


These indirect costs lead to a huge question mark regarding whether it even makes sense to encourage the widespread use of wind and solar. Renewables can reduce CO2 emissions if they really substitute for fossil fuels in making electricity. If they are mostly high cost add-ons to the system, there is a real question: Does it even make sense to mandate a transition to wind and solar?

Do Wind and Solar Really Offer a Longer-Term Future than Fossil Fuels?

At the end of the xkcd video shown above, Munroe makes the observation that wind and solar are available indefinitely, but fossil fuel supplies are quite limited.

I agree with Munroe that fossil fuel supplies are quite limited. This occurs because energy prices do not rise high enough for us to extract very much of them. The prices of finished products made with fossil fuels need to be low enough for customers to be able to afford them. If this is not the case, purchases of discretionary goods (for example cars and smart phones) will fall. Since cars and smart phones are made with commodities, including fossil fuels, the lower “demand” for these finished goods will lead to falling prices of commodities, including oil. In fact, we seem to have experienced falling oil prices most of the time since 2008.

Figure 3. Inflation adjusted weekly average Brent Oil price, based on EIA oil spot prices and US CPI-urban inflation.

It is hard to see why renewables would last any longer than fossil fuels. If their unsubsidized cost is any higher than fossil fuels, this would be one strike against them. They are also very dependent on fossil fuels for making spare parts and for repairing transmission lines.

It is interesting that climate change modelers seem to be convinced that very high amounts of fossil fuels can be extracted in the future. The question of how much fossil fuels can really be extracted is another modeling issue that needs to be examined closely. The amount of future extraction seems to be highly dependent on how well the current economic system holds together, including the extent of globalization. Without globalization, fossil fuel extraction seems likely to decline quickly.

Do We Have Too Much Faith in Models? 

The idea of using renewables certainly sounds appealing, but the name is deceiving. Most renewables, except for wood and dung, aren’t very renewable. In fact, they depend on fossil fuels.

The whole issue of whether wind and solar are worthwhile needs to be carefully analyzed. The usual hallmark of an energy product that is of substantial benefit to the economy is that its production tends to be very profitable. With these high profits, governments can tax the owners heavily. Thus, the profits can be used to aid the rest of the economy. This is one of the physical manifestations of the “net energy” that the energy product provides.

If wind and solar were really providing substantial net energy, they would not need subsidies, not even the subsidy of going first. They would be casting off profits to benefit the rest of the economy. Perhaps renewables aren’t as beneficial as many people think they are. Perhaps researchers have put too much faith in distorted models.

Note:

[1] This is my estimate, based on EIA and BP data. With respect to electricity, EIA data shows that in the US, residential users consume about 38% of the total. With respect to fuels that are not used for transportation and not used for electricity, US residential users consume about 19% of these fuels. Combining these two categories, US households use about 31% of non-transportation fuels.

With respect to transportation fuels, the closest approximation we can get is by looking at petroleum use, divided between gasoline and other products. According to BP data, on a worldwide basis, 26% of petroleum is burned as gasoline. In the United States, about 46% of petroleum consumption is burned as gasoline. Of course, some of this gasoline usage is for non-residential use. For example, cars used by police and sales representatives are typically powered by gasoline, as are small trucks used by businesses.

Furthermore, the US is a major importer of manufactured goods from China and other parts of the world. The embodied energy in these imported goods never gets into US energy consumption statistics. In theory, we should add a little energy consumption by foreign manufacturers to supplement total reported US energy consumption.

The selection of “about a third” is based on these considerations.

 

 

 

 

 

 

 

 

 

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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1,505 Responses to How Renewable Energy Models Can Produce Misleading Indications

  1. Harry McGibbs says:

    Collateral economic damage from protests, which are themselves rooted in economic discontents:

    “Iraq’s massive protest movement is having its first direct effects on the country’s oil output, as production is now curtailed at the Qayarah field.”

    https://www.iraqoilreport.com/news/protests-force-first-oil-field-shut-in-42233/

    • Harry McGibbs says:

      “Whether they sell luxury watches from Switzerland or farm hens from Mississippi, a surprising concern is occupying a number of corporate executives this earnings season: Hong Kong’s protests…

      “The far-reaching impact of the protests speaks to the outsized role that Hong Kong has hitherto played as a thoroughfare for Chinese shoppers. Buyers have flocked to the city for its zero consumption tax and variety of global imports, whether luxury handbags or infant formula.”

      https://finance.yahoo.com/news/companies-around-world-hit-hong-210000877.html

      • Harry McGibbs says:

        “A million salmon are starving or rotting in abandoned farms and processing plants in Chile, the world’s second-largest producer of the fish, as protests prevent workers from accessing facilities.”

        https://www.bloomberg.com/news/articles/2019-11-05/a-million-salmon-starve-and-rot-as-protests-block-chile-farms

      • Yoshua says:

        India core 8 industries are tanking.

        https://pbs.twimg.com/media/EIqd_Y3X0AMCYn-?format=jpg&name=small

        Protests and riots across India would be too much for the global economy is the protests paralyzed India.

        Someone said that China allows posting of police violence against protesters in HK on social media as a warning to mainland Chinese of what to expect if they should protest.

        • I looked up the eight core industries in India. They are electricity, steel, refinery products, crude oil, coal, cement, natural gas, and fertilizers.

          I would agree. If these industries are tanking, there is a huge problem.

        • Duncan Idaho says:

          India is not remotely survivable, if one is even paying minor attention.
          But I believe Pakistan will be over the falls first.
          But I have been wrong before.

          • Robert Firth says:

            A lead news item from two days ago. India’s capital, Delhi, is experiencing unprecedented level of pollution. The level had climbed to 400, and that is not even the worst case: some cities have pollution levels of 450. And at that level, children who go outside will die.

            The government’s response? Not to tackle the polluting industries, nor even the major pollution caused by burning crop waste (some 35 million tons annually) No: they decree that cars can use the roads only on alternate days, based on their number plates. And how is that to be enforced? By a seriously undermanned and badly underpaid police force?

            I recall expressing the opinion a while ago that India’s most sensible economic action would be to shut down their car industry. Won’t happen, and people will continue to die. Duncan, I fear you are right; a combination of religion, greed, incompetence, and corruption will doom India. A sad end to the inheritor of one of the world’s great civilisations.

        • Neil says:

          Interesting graph, will they also blame this on the trade war?

      • The key thing is that Hong Kong’s economy was already slowing before the riots broke out. This is the kind of reaction that can be expected.

        • Yoshua says:

          China’s real GDP is perhaps close to Hong Kong’s?

          • My confidence in published GDP amounts keeps falling.

            • Harry McGibbs says:

              And indeed mine. Amazing how often nations escape technical recessions by posting 0.2% growth or similar in the Q after a negative reading (thinking of UK and Singapore recently).

              We *know* India’s and China’s GDP’s are dodgy because even some key officials have admitted as much, and, come on, is a nation like South Africa really growing at over 3% when they can barely keep the lights on?!

            • Xabier says:

              Didn’t some countries introduce estimated proceeds from crime, drug and hookers, etc, in their GDP?

              Even that now has to be viewed with reserve, as I see that, in Britain at least, the price of drugs has fallen significantly, leading to war between the gangs for a share of the shrinking pie.

              Falling demand yet again: all the signals are bad, it seems…..

            • Harry McGibbs says:

              Yes, indeed, Xabier. Apparently it is quite widespread:

              “A European Union (EU) policy mandating that member states take untaxed “shadow economies” into account when calculating economic output comes into effect this month [Sept. 2014]…

              “The average EU country was estimated to have a shadow economy equal to 18.8 percent of its GDP in 2013, according to the economist Friedrich Schneider. The EU country with the largest estimated shadow economy as a percentage of its GDP is Bulgaria, at 31.2 percent, followed by Romania and Croatia at 28.4 percent each. The United States, in comparison, is estimated to have a shadow economy equal to 6.6 percent of its GDP…

              “Adjustments for shadow economies are made by non-EU countries as well. The largest adjustment worldwide, according to the Institute of Economic Affairs, is a 24.3 percent adjustment made by Russia, whereas the smallest is that made by the United States, which only adjusts by 0.8 percent.”

              https://www.occrp.org/en/27-ccwatch/cc-watch-briefs/2616-eu-countries-to-begin-counting-drugs-prostitution-in-economic-growth

            • Then, of course, comes the “Purchasing Power Parity” PPP weighting scheme that is used in calculating published world GDP figures. The country with the highest PPP weighted GDP is China. These are 2018 GDP amounts in PPP$.

              China $22.5 trillion
              United States $18.2 trillion
              India $9.2 trillion
              Japan $5.0 trillion
              Germany $3.8 trillion
              Russia $3.8 trillion
              Indonesia $3.1 trillion
              Brazil $3.0 trillion

              The EU in total comes in at $19.5 trillion

              If the World Bank expects the least developed countries to grow most quickly, this is an approach that heavily weights these countries. I expect that quite a few of these GDP amounts are overstated as well.

        • hkeithhenson says:

          “slowing before the riots broke out”

          That’s to be expected. By the evolutionary psychology model, a poor economy is the cause of riots and related social disruption.

          I suspect the Chinese government understands this.

    • Denial says:

      not sure look at Midland texas…. Low unemployment even at $30 a barrel of oil. Maybe this can go on forever….https://www.cnn.com/2019/11/06/business/midland-texas-boomtown/index.html
      Maybe oil prices don’t have to go much higher after all…

      • I don’t know either. Midland is close to New Mexico. Perhaps that helps. New Mexico rig counts are doing well: 108 this week compared to 102 a year ago.

        Neither Texas rig counts nor Permian Basin rig counts are doing well. (Permian is in both Texas and New Mexico. Texas has other basins besides the Permian) Texas Rig counts are 416, compared to 533 a year ago. Permian Rig Counts are 416 compared to 487 a year ago.

        Of maybe the reduction of rig counts is still leaving a lot of other workers. I would expect that the rig operators move around a lot. They are hired from companies like Halliburton and Schlumberger. They may not affect the local unemployment rate.

  2. MG says:

    When the Slovak government needed more money in the last years, it introduced special taxes for the regulated monopolies and banks, insurance companies. E. g. it introduced a special contribution for banks to the state budget in the height of 0.2 % of the value of their liabilities shown on their balance sheets. For the next year, this special contribution is raised to 0.4 %.

    https://ekonomika.sme.sk/c/22253334/vlada-schvalila-dvojnasobny-odvod-pre-banky.html?ref=trz

    • They find organizations that have money and aren’t in a position to move away. The problem with taxing billionaires is that they pick up and leave.

      • Robert Firth says:

        Gail, once again spot on. When governments need to extract money, they target both those who can move, who do, weakening the economy, and those who cannot, who therefore pay the taxes, weakening the economy.

        I remember a meeting in Whitehall, where there was a discussion on how to deal with “abusive tax shelters”. I was a little guy in the back row, but got to make one comment: “Perhaps you should begin by getting rid of the abusive taxes.” This was not a popular comment.

  3. Harry McGibbs says:

    The sugar-high from Trump’s tax cuts wearing off?

    “American workers were unexpectedly less productive during the third quarter, with growth in their output failing to keep up with hours worked… nonfarm productivity, which measures hourly output per worker, fell at a 0.3% annualized rate between July and September, the biggest decline in almost four years…

    “The decline might set back the prospects of a pick-up expected by some economists in the trend growth rate for productivity following 2017 tax law changes partially aimed at fostering investment.”

    https://uk.reuters.com/article/us-usa-economy-productivity/u-s-productivity-drops-by-most-since-fourth-quarter-2015-idUKKBN1XG1ZM

    • Right! But workers need jobs too. The economy is staying afloat (to the extent this is happening) by the higher wages of workers and the fact that employment isn’t falling.

      It is not clear that adding investment in capital at this point really is really helpful. Too much of the gain goes to the top 1%. It acts too much like adding robots, pushing the buying power of the economy down, rather than up. The benefits of investments need to flow back to the wages of workers.

  4. Get HaPpY says:

    Notice empty store fronts on the city Boulevard where I live..?
    Though, the Kitty Shack, beyond my expectations, still holds on!
    So far in 2019, there have already been 48% more store closings announced than in all of 2018, according to a recent report from global marketing research firm Coresight Research.
    Based on Coresight Research’s figures, retailers’ earnings reports, bankruptcy filings and other records, more than 8,600 stores are slated to shutter this year and thousands of locations already gone.
    Dressbarn store closings: Liquidation starts Nov. 1 at all locations, new website planned

    Forever 21 store closings: 100-plus stores will close as part of bankruptcy. See the list
    Bankrupt footwear company Payless ShoeSource, which closed its remaining U.S. stores in late June, accounts for about 37% of the closings.
    The “going-out-of-business” sales and liquidation of other brands is expected to continue. Coresight estimates closures could reach 12,000 by the end of the year, the report said.
    Coresight, which has offices in Manhattan, London and Hong Kong, tracked the 5,864 closings in 2018, which included all Toys R Us stores and hundreds of Kmart and Sears locations.

    https://finance.yahoo.com/news/more-store-closings-coming-estimated-100014142.html

    When I was a young lad with my first real job managed a local Auto Parts Wholesale/Retail store.
    Not a bad gig, had a great sales staff and nice neighborhood customers that I knew by name.
    Went out of my way to be there when needed and get what they wanted, when put of stock.
    Don’t know about today with the internet and mega chain stores. It would be a tuff environment.
    My 10% discount to all regular repeat customers wouldn’t cut the mustard…..P.S. I kept what was left of the 90%…the home office never question that promotion!🤑

  5. Yoshua says:

    “WILLIAMS SAYS FED WOULD ADDRESS NEXT RECESSION BY CUTTING INTEREST RATES TO ZERO AND USING COMMUNICATION AND ASSET PURCHASES”

    They are already doing it.

    • Yoshua says:

      “WILLIAMS SAYS MONETARY POLICY DOES HAVE SOME LIMITATIONS SO IT WOULD BE NICE TO HAVE FISCAL POLICY ALIGNED WHEN ADDRESSING DOWNTURNS”

      One trillion dollar deficits are not enough?

      • Davidin100millionbilliontrillionzillionyearsd says:

        under Obama, the US deficit rose $8 trillion in 8 years…

        I think Trump has done 3+ in 3 years…

        so $1 trillion per year is just coasting along, nothing special, not out of the ordinary…

        QE (stealth or not) can add many trillions per year…

        who is kidding who?

  6. Harry McGibbs says:

    “Europe needs to come up with emergency plans, since monetary policy has all but exhausted its arsenal and risks spread, the IMF warned.

    “Given elevated downside risks, contingency plans should be at the ready for implementation,” the IMF said in its Regional Economic Outlook for Europe. “A synchronized fiscal response” may be necessary, the fund said in the report, highlighting the dangers from trade protectionism, a chaotic Brexit and geopolitics.”

    https://www.bloomberg.com/news/articles/2019-11-06/europe-warned-to-prepare-for-the-worst-as-imf-sees-clouds-darken

  7. Harry McGibbs says:

    “Cheapening money to incentivize economic activity is no longer working. European central banks in particular are out of ideas to jump-start economic activity. The near negative and declining interest rates in developed countries around the world have caused the dollar to soar, which has a knock-on effect in developing countries like Indonesia, Turkey and Nigeria that have borrowed heavily in dollars and must repay them from earnings in local currencies that have steadily devalued.

    “Negative rates have a mal-effect on consumers and savers, though “real rates,” which account for inflation, are what they ultimately feel. Cheaper money does not necessarily filter down to the consumer at a retail level. Banks with interest-rate shortfalls in a world of near or actual negative rates will charge their customers higher fees for any service, whether overdrafts or use of out-of-network ATMs.

    “Savers, in particular older people who rely on interest income receive nominal payments for saving, and struggle to make ends meet. About 25 percent of Europeans and 30 percent of Japanese are aged 60 or older. More alarming, pension funds – historically conservative investors – struggle to meet benchmarks of 7 to 8 percent returns, a common threshold for solvency, so shortfalls are emerging.

    “The big test may be if the United States as the world’s largest economy tries negative rates. Allianz Economist Mohamed El-rian said recently, negative yields in the world’ largest financial market would “break things.” By break, he means a systemic failure or bank collapse.”

    https://yaleglobal.yale.edu/content/global-economy-struggles-negative-rates

    • Harry McGibbs says:

      “This year’s flood of monetary easing is slowing to a trickle as the world’s central banks judge they’ve done enough to avoid a recession, giving investors cause to think sovereign bond yields have finally bottomed.

      “Federal Reserve Chairman Jerome Powell last week said policy had reached an “appropriate” level after three cuts in interest rates this year. Mounting criticism of the European Central Bank’s negative rates leaves its new president, Christine Lagarde, under pressure to hold fire on additional stimulus, and Bank of Japan Governor Haruhiko Kuroda may be even closer to the limits of monetary policy.”

      https://www.bloomberg.com/news/articles/2019-11-06/central-banks-hitting-peak-dovishness-prick-bond-market-bubble

    • Xabier says:

      A decade ago, retired people who had enjoyed even modest wages, but saved very hard over a lifetime of work -perhaps also having been wiped out in the 1970’s – were able to receive quite decent amounts of interest on their savings, and dividends on shareholdings; sounds rather like a fairy tale now, doesn’t it?

      This will feed through into smaller or zero inheritances for their children and grandchildren, further weakening financial resilience as we all decline into destitution or a precarious livelihood.

      • Davidin100millionbilliontrillionzillionyears says:

        another part of the economic endgame in which IC now finds itself…

        there’s a lose/lose scenario where the average person has no savings or has some savings that pays zero or close to zero interest…

        in this endgame, there seems to be no potential for higher interest rates… it’s going to be near zero or negative from here on out…

        companies, desperate to stay afloat, will be decreasing pension/retirement benefits to zero, and throwing the burden entirely onto the finances of workers, who will find that their wages will be stretched thinner and thinner as increasing numbers of workers will be living from paycheck to paycheck., and therefore will have no means to fund personal retirement accounts…

        younger adults are already finding that buying a house is more out of reach than previous generations, and the loss of equity in that home ownership will contribute to the downsizing of inheritances over the next decades…

        it’s all grinding down, slowly, very slowly…

        the only remedy for this creeping economic decay would be a fast collapse…

        take your pick…

        • Xabier says:

          A fair summary.

          A slow, but inexorable, general collapse, and some very quick personal ones, is what is in store – if we are lucky!

    • Xabier says:

      All companies will charge as much as they can, tie people in to nearly impossible to escape contracts, and cut the quality of mass goods to the bone.

      money does nothing for consumers, they will be squeezed all the more as conditions worsen.

      Expensive goods still seem to be maintaining quality, as far as I can see; but their customers would not tolerate any reduction in quality.

      A ‘crappified’ world, and therefore one which created even more land-fill waste.

  8. Harry McGibbs says:

    “Income inequality in America is the highest in decades, and the highest of all high-income countries. It’s also growing rapidly—meaning that, as the saying goes, the rich are becoming richer and the poor poorer…

    “…evidence highlighted by the study suggests that inflation is much higher for people at the lower end of the income scale.”

    https://qz.com/1742839/inflation-inequality-is-making-americas-poor-even-poorer/

    • Harry McGibbs says:

      “More millennials in the United States are suffering from chronic health problems, potentially restraining the lifetime economic potential of a generation.

      “A jump in conditions such as depression, hypertension and high cholesterol among younger people could increase healthcare costs and lower incomes in coming years…”

      https://www.latimes.com/business/story/2019-11-06/millennials-health-problems-raise-economic-concerns

      • Xabier says:

        Another example, perhaps, of self-limiting natural processes: poor prospects, you lose hope and die all the sooner.

        I rather suspect that other factors will be ‘limiting their economic potential’, though….

      • Listening to parents and health authorities doesn’t seem to come high on their agendas either, especially if things are generally going badly. Processed, ready to eat foods are cheap and take virtually no time to prepare.

    • I remember the issue of inflation affecting the poor more was raised at the time of the 2008-2009 recession. It was the subprime mortgages that failed early on. The people with these were disproportionately poor.

    • Chrome Mags says:

      “Income inequality in America is the highest in decades, and the highest of all high-income countries. It’s also growing rapidly…”

      All you have to do is look at incentive and ideology. The Republican party has an ideology the wealthy should not have to support through social programs or taxation the lower classes. They get their campaign money (incentive) from the rich and help them out, like the last tax cut which predominantly went to top earners. People with that ideology can argue that’s a good thing, but it increases inequality. McConnell & the R’s want to dramatically scale back social security and medicare, which is next if the R’s control all three houses after the 2020 election, or the world economy collapses, whichever comes first.

      I’m actually of the opinion now, that the sooner it all comes crashing down the better. Why, because human behavior is out of control. We just put our foot down on the accelerator of resource depletion and population increase and give lip service to conservation and population control. And those with the gold rule, i.e. the golden rule, meaning greed is also out of control. The current set up needs to be shut down, a die off occur and those making it through the bottleneck need to ascend to a higher consciousness level, more in tune with each other’s needs and in balance with the planet.

      • hkeithhenson says:

        “ascend to a higher consciousness level”

        As someone who has studied low technology people, I find this unlikely in the extreme.

        • Robert Firth says:

          Keith, I invite you to attend my online course on “Attaining Gaia Consciousness” at a 15% discount. That is a mere USD 25,500, or 51 cows if you happen to be Fulani. And you will not only achieve an exalted personal cosmic awareness, you will understand that mere money is inhibiting your spiritual evolution.

          Enlightenedly yours, Guru Robert. PS: we accept all major credit cards.

      • Dennis L. says:

        With regards to myself, personally, I prefer later; for you if sooner is your wish, be my guest.

        Just returned from the farm, it is cold out there, south of Rochester much corn is in the field, snow here which means corn has snow on it, that falls on the the silk, snow melts in the combine, plugs it up, very fast. How these guys are going to get that corn harvested is an issue. Now, try and feed your self on the land, even if you have the equipment. Looking at videos, observing my tenant, it takes a family of three men doing the heavy lifting along with casual laborers and one woman cooking meals; some hot, home cooked food served on a cart tread or farm office seems to make the day lighter. A few children to help out are useful as well if for nothing else there is hope that all the work will have a future as well as a present.

        That is a vastly different life from what most have now. It takes a group, you will have to form a group, and I think it might take a family; a family to survive has to learn to forgive other members, overlook the issues a see the positives. This is much different from our current public life.

        Bottleneck: men sacrifice themselves routinely, is it possible that the bottleneck was one of mankind’s greatest hours, the men sacrificed themselves, a new order arouse and here we are? Mother nature seems to be very male in how she does some things; not a lot of tolerance for what does not work.

        Chrome, the odds are this difficult period we are going to go through by probability alone will affect each of us; I grow to love the land, but it is cold now, much work was not done because the weather did not cooperate, next season the fields need to be planted again, they need preparation, the work will be continuous, the season shortened and if there is a crash, the food bin will be empty, filling it could be a challenge. Most will not go quietly but will wish to eat. We don’t live in the abstract world of OFW.

        Dennis L.

        • The plight of the contemporary farmer as you describe it is genuine.
          However, the model itself evolving up (malforming) to this sorry state of point is failed though. Part of biomes could/should be rearranged for no-till, animals feeding mostly on agroforestry patterns as much as possible, no-few offsite inputs etc..

          Is it going to feed with such leverage current level of pop (also the issue domestic vs. internationally), no way (plus the needed ~2decades transition period), but some form of mixed city-farmer tapestry kind of civ is indeed possible to achieve, we have been there in the past.

          • Xabier says:

            That would be a good model, and one able to weather better the storms which are coming. If we had any capacity for foresight and even mid-term planning, that is what we would be developing. Historically, in Europe, many cities had farms and orchards within the walls.

            It’s notable that plans for ‘Green’ new towns here are strong on solar panels, but do not address food supply and heavy transport issues at all.

            This city, Cambridge, could have been surrounded by new market gardens – fields come almost into the city centre on one side, where I live – and the exhausted farmland revived and restored, mixed farms started to replace mono-culture, with new hedgerows, copses, fishponds, orchards, etc.

            This would have provided both employment for the less -skilled, and a buffer against international food shortages.

            Instead we have ‘Eddington’, a new town with a phoney and empty ‘market square’, which is just the same old mass of concrete and steel, with a few panels on top and some bike racks.

            Its sole purpose is to enable the University to compete internationally for graduate students (read Chinese) and tech company investment, by providing high density accommodation. The rest is just Greenwashing, and it is very ugly indeed into the bargain!

            All central government seeks from new developments in a region is an increased tax yield, it is their sole yardstick for success.

            • Dennis L. says:

              Something seems to change as we “progress.”
              “This would have provided both employment for the less -skilled, and a buffer against international food shortages. ” There are not many people willing to do this job.
              It is commonly reported among those who have worked the land that the body gives out around fifty or so years, worn to the bone so to speak. It is hard to get people top go into the metaphorical coal mines now.

              Social note: Somewhere I picked up the idea that men routinely sacrifice themselves for their families, community, nations etc.; a corollary is you generally cannot pay a man enough to voluntarily give up his own life yet he will sacrifice it on a battlefield in return for a ribbon. Hard work wears out the body but then so does idleness.

              These are observations only, no solutions, no opinions; it is a time of change and we are passing through that time.

              Dennis L.

            • Xabier says:

              Good points: yes, generally the body was wrecked by farm work, but much of that was due to being out in all weathers with no adequate clothing – here in England, there was only a sack over your shoulders if it rained! And many lacked even that.

              A richer shepherd might save up to buy a raincoat and cloak, or be given one by a good master, but not a mere labourer. Rheumatism inevitable……

              I think market gardeners though would be quite well off, and the work not too heavy. However, the physical state of many is poor these days, and to do such work you have to be habituated to it. Even ‘gym-fit’ is not farm-fit: a very different use of the muscles.

              I read an interview with a stone mason who repairs the great cathedrals here: he was a mess physically, even with the use of power lifting machinery, etc. Back, knees, hands, all over-strained over 40 years of work.

            • Robert Firth says:

              Thanks for the pointer. I checked out Eddington online and yes, it is repulsive. I also found a house in the “Athena” complex, a three bedroom house at GBP 850,000. That is insane. But I suppose all those exorbitant fees the Chinese students pay must be spent on something.

    • Duncan Idaho says:

      yep, people in the US are getting shorter, fatter and dumber.
      https://www.newyorker.com/magazine/2004/04/05/the-height-gap

      • Chrome Mags says:

        Poor nutrition, TV, easily distracted with ADD.

        • Xabier says:

          I watched lots of TV as a kid, but ample books were on hand, too, and paper, paints and crayons, wood and cardboard, etc – real stuff to use.

          But this being glued to glowing screens is something of quite a different order in its psychological effects, and the way it influences mental, social and physical development.

      • Height gap started as early as 1955, according to the article.

  9. Yoshua says:

    At least something is growing exponentially in China: the number of bankruptcies.

    https://pbs.twimg.com/media/EIv4_PrWoAAiXr4?format=jpg&name=medium

  10. Jan says:

    In WWI the state failed to supply the population because the shortages underminded the reliability of the state officials. When the farmer would grow popatoes and the soldier control him the latter would offer to look apart when the farmer sells potatoes on the black market in order to get some potatoes for himself. This is a structural consequence of shortage. The consequence in WWI was, that the state lost its legitimacy which led to national independence.

    When shortages of energy occur weather from climate activism or production shortages or affordability it will activate the same consequence. The state will be seen as failed state and people will look for alternate boundaries. These will naturally be egoistic, people who know each other, who can accept some kind of narrative to form a social group will exclude outsiders and reduce their shortages on the account of others.

    This is why a Green New Deal can never work. Obviously energy reductions will lead to shortages. Shortages will lead to a disintegration of the state. This is a vicious cycle which will undermine the regulation suggested in all ideas of GND or New Large Transformation 2.0 or Energy modellings of UN and EU.

    The experience of WWI shows that shortages themselves will the state’s ability to accommodate needings of their society members and thus loose legitimation and stability.

    The consequence is that all technology depending on the state will be diminished. The failure of the states will also effect knowledge transfer, military, infrastructure and inner security.

    It may be discussed if the effect of shortage is also part of the dissolution of the Soviet Union and it may be a reason for the recent developments in the USA and the European Union and perhaps in the Middle East.

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