Many people have the impression that recessions come from financial missteps, such as the US subprime loan fiasco. If energy is involved at all, the problem comes from high oil prices as supply becomes inadequate to meet demand.
The real situation is different. We already seem to be on the road toward a new crisis; this crisis is likely to be much worse than the Great Recession of 2008-2009. This time, a major problem is likely to be energy prices that are too low for producers. Last time, a major problem was oil prices that were too high for consumers. The problem is different, but it is in some ways symmetric.
Last time, the United States seemed to be the epicenter; this time, my analysis indicates China is likely to be the epicenter. Last time, the world economy was coming off a high growth period; this time, the world economy is already somewhat depressed, even before hitting headwinds. These differences, plus the strange physics-based way that the world economy is organized, explain why the outcome seems likely to be worse this time than in 2008-2009.
I recently explained what I see as happening in a presentation for actuaries: Recession Likely: Expect a Bend in Trend Lines. This post is based on this presentation, omitting the strictly insurance-related portions.
The big thing that the vast majority of people do not understand is how important energy is to the economy. Because of this issue, I started my presentation with this slide:
After an opportunity for discussion, I offered the explanation that the role of food for humans is very much parallel to the need for energy of various types for the world economy. Food provides people with the energy required if they are to have the ability to think, move and speak. Energy products of many kinds enable the activities that we associate with GDP. For example, energy consumption enables machinery to operate and goods to be transported.
Using data from Smil, as well as more recent BP data, we can estimate how fast energy consumption has been growing over a very long period–nearly 200 years. We can see that the highest energy consumption growth occurred in the 1961 to 1970 period; the second highest growth occurred in the 1951 to 1960 period. These are periods we associate with rapid GDP growth and prosperity.
On the next slide, I show the same data displayed in a different way.
On this slide, I make two changes in the way the data are displayed:
- The increases in energy consumption are split into two components: (a) energy used to support population growth and (b) all other, which I describe as energy used to support improvement in “living standards.”
- A different graphing approach is used.
Note that when population growth corresponds to the full amount of energy consumption growth (in other words, at times when there is no red area above the blue area), energy consumption per capita is flat. High growth in energy consumption per capita seems to correspond to rising living standards, as occurred in the 1950s and 1960s.
While I label the “all other” category as if it is simply changes in living standards, there are other components, as well. One breakdown might be the following:
- True improvement in living standards.
- Additional energy investments required to offset diminishing returns.
- Increasing use of energy for overhead items that don’t get back to individuals, such as energy used to fight pollution or to allow globalization.
- Efficiency improvements allowing available energy to be more productive.
Efficiency improvements (Item 4) will allow more energy to be available for improvement in living standards, while Items 2 and 3 in the above list act in the opposite direction. We do not know to what extent these items really offset each other. Thus, “All other” = “Improvement in Living Standards” is only a rough approximation.
We can see from Slide 6 that whenever there is no red area above the blue area (flat living standards or flat energy per capita), adverse events seem to happen.
For example, the US Civil War (1861-1865) came at a time of low energy consumption growth. The Great Depression of the 1930s came during another period of low energy consumption per capita growth. World War I came at the beginning of this period, and World War II came at the end. The collapse of the central government of the Soviet Union in 1991 ushered in a decade of low world energy consumption growth, in part because of the loss of the central currency of the Soviet Union.
The “China Coal” note at the end pertains to the way that China and its coal supply has helped pull the world economy forward since 2001. This benefit seems to be already declining.
Slide 7 shows China’s energy production by fuel. Coal production (in red) soared after China was added to the World Trade Organization in December 2001. Beginning about 2012, China’s coal production began to plateau. Depleting mines and low prices for coal have kept production flat. Imports can be used as substitutes, to some extent, but it is difficult to keep costs low enough and provide adequate total supply.
With the loss of growth in China’s coal production, its economy has had to cut back. Each year, we read about coal mine closures and miners needing to find new jobs. We know that China discontinued its paper and plastic recycling business as of January 1, 2018. China has also been cutting back on solar subsidies, leading to fewer jobs installing solar panels. All of these types of changes reduce the number of people who can afford to buy high-priced goods, such as new homes, vehicles and smart phones.
It is becoming increasingly clear that China is being forced to cut back on heavy industrialization because of its coal difficulties. Slide 8 shows automobile purchases for six large economies. China is by far the largest of these economies in terms of auto sales. China’s auto sales began to slide in 2018 and are sliding further in 2019 (about -11%).
If we look back at the time of the 2008-2009 recession, we see that auto sales of the US dropped precipitously. The United States was the country that led the world into recession. The inability of US citizens to buy cars was a sign that something was seriously wrong. Now we are seeing a similar pattern in China.
China has reported that its GDP growth rate has been slightly lower during 2019, but we really don’t know how much lower. The amounts it publishes are too “smooth” to be believed. The actual GDP growth rate is believed to be lower than the recently reported 6.0%, but no one knows by precisely how much.
Figure 8b gives a little more information about recent car sales by country. We can see from this chart that based on data through October 2019, world automobile sales are expected to fall by about the same percentage (3%) in 2019 as during the recession year of 2008. I find this disturbing.
We can also see the huge impact that China has had on keeping world private passenger auto sales rising. The world economy looked like it was headed into recession in January, 2016, when world oil prices were very low, but a spike in China’s automobile sales at that time helped keep total world automobile sales rising and allowed world oil prices to rise from their low point.
In the next sections, I provide some background regarding this story.
Slide 10 shows the way that I visualize the world economy self-organizing and growing. The economy grows by adding new “layers” of businesses, products, consumers and laws. Unneeded products, such as buggy whips, are dropped from the bottom. Unprofitable businesses close. In some sense, the economy is hollow because of these deletions. It cannot easily go backward because, for example, the support services for widespread use of transport using horses are lacking.
Energy is used to operate all aspects of the system. One part of the system is a self-organizing financial system that helps decide, through wage levels, who gets the benefit of the goods and services that are made. This financial system includes self-organizing interest rates and self-organizing commodity prices.
The most important connection within the economy is the one I show at the center as “Consumers = Employees.” Consumers are very dependent on their wages as employees. If the economy is to continue to operate, workers must receive high enough wages to purchase the goods and services the economy produces. Even the lower-paid workers need to be able to afford food, housing and transportation, or the economy will tend to collapse.
When we look back through the history on Slides 4, 5 and 6, we see that the growth of energy consumption is very important in how economies operate. The theories of Ilya Prigogine explain why this is the case; when adequate flows of energy are available, self-organizing systems are able to grow.
Few economists today include energy consumption in their models, however. Economic theory has grown over time in its own “ivory tower.” Like other academic subjects, it depends on early theories and the process of peer review. The views expressed must also be pleasing to those in power, who would like everyone to believe that politicians, rather than the laws of physics, are in charge.
There are many types of self-organizing systems that grow. They all, directly or indirectly, require energy. Plants and animals of all types are self-organizing systems that grow. Hurricanes grow using the energy that they get from warm water.
Governments grow from the tax revenue that they are able to collect; they use the revenue to buy energy products such as electricity to operate governmental offices, oil to build roads and operate police cars, and natural gas to heat buildings.
The Internet grows through the revenue collected to provide its services. The Internet uses revenue to buy computers (made with energy products) and electricity to operate those computers.
Nearly all 0f the energy we use is hidden. For example, modern food production is very much dependent on energy consumption. Agricultural machines are made using energy products. Soil amendments, including organic soil amendments, are transported using fossil fuel energy. Refrigeration is possible through the use of energy. Hybrid seeds are only possible through energy consumption. Planting seeds by digging with a stick would only use human energy, but such a process would be terribly inefficient.
Most of us can easily recognize today’s goods and services, such as those listed.
Promises of future goods and services act like promises of future energy supplies. This happens because creating goods and services that people can actually use requires energy supplies of the appropriate type.
When people get cash or a check, they expect to use it to buy goods and services. Creating these goods and services requires energy consumption. If there is no energy of the right type available, the goods and services won’t be available to fulfill the promises.
Promises of future goods and services tend to grow faster than actual goods and services because it is these promises that, in some sense, “pull the economy along.” For example, if a young person gets a loan, (s)he can often buy a new car. The fact that a new car is being purchased leads to more jobs in the supply line leading up to new car production. Or, if a business takes out a loan or sells shares of stock, it can use the proceeds to hire employees. It is these growing wages that keep the system operating.
As long as the economy is growing rapidly, the mismatch between growing debt and actual output doesn’t become apparent. As the economy slows, some workers find themselves working fewer hours. Some businesses become less profitable and lay off workers to try to restore profitability. The catch is, with fewer workers, the economy slows even more. It usually takes more debt, at lower interest rates, to get out of such an economic slowdown.
There is a lot of confusion about prices. “Demand” is what people, through their wages and debt, can afford. As economists tell us, price depends on supply and demand.
In the short term, prices tend to bounce around a lot. The short term buyers of oil are oil refineries. They need to keep their employees busy. If they see a shortage of oil, they may bid up the price of oil to allow their workers to continue to be employed.
Over the longer term, prices of all energy products tend to depend on consumers’ ability to afford finished products, like cars, homes and cell phones. Producing these objects and shipping them takes energy. They also use energy as they operate.
The various energy prices shown here are simply a few of the many, many energy prices that we see around the world. Strangely enough, prices of all energy products tend to fluctuate together, over the longer term. Prices depend on affordability of end products, such as cars, homes, computers, food and clothing. Our problem since about 2012 has been lack of affordability of end products.
The primary way of raising affordability is by increasing productivity. Increased productivity is made possible by increasingly leveraging human labor with devices that are built with energy and are operated using energy. For example, a worker with a ditch digging machine is much more productive than a ditch digger with only a shovel. An analyst is more productive with a computer and Internet access than with only pencil and paper.
With higher productivity, more goods are produced in total. As long as not too much of this productive output is skimmed off the top (by governments, or by business hierarchy, or to pay for the devices and their fuel), it is possible for each worker to afford more goods and services, raising total demand.
An alternative way of raising affordability is by adding more debt at ever-lower interest rates. This approach tends to make goods such as cars, homes, and factories appear more affordable because their monthly payments are lower. This added-debt approach only works as long as the economy is growing quickly enough. If the economy slows too much, the added debt leads to financial crashes of many types.
Many people think that they know the amount of oil that can be extracted based on the current technology and the assumption that prices will eventually rise high enough to extract all of the fossil fuels that seem to be available. For example, the International Energy Agency has prepared reports in which it shows expected oil availability if oil prices rise to $300 per barrel.
The catch is that even if oil prices can bounce high, it is not clear that they can stay very high. The current price of oil is only in the $55 to $65 per barrel range. A price of $300 per barrel will allow oil extraction using very advanced technology. We don’t have any evidence that oil prices can stay this high because demand comes primarily from wages. Prices cannot stay high without adequate support from wage levels.
Of course, the issue is not just oil prices staying sufficiently high. Natural gas, coal, uranium and electricity prices all have difficulty rising high enough and staying high enough. Commodity prices such as copper and steel have the same issue.
There are many people who say, “Of course, oil prices will rise. Oil is a necessity.” They forget that it is really a two way tug of war between producers getting a high enough price to be profitable and consumers getting a low enough price to be affordable. There will be a winner and a loser.
People also forget that most commodity use is hidden. We see the fuel we buy for our personal vehicles, but there are a huge quantity of oil products required for shipping goods, paving roads, growing food, and for many other uses that we are not aware of. While we might be able to pay a little more to fill our gasoline tank, most of us would not be able to simultaneously pay more for food, transported goods of all kinds and road maintenance.
Economists often assume that if energy prices rise, wages will rise, as well. If we look at the data historically, however, it doesn’t work that way at all. What happens is the opposite: average wages tend to rise as long as oil prices stay low. Once oil prices spike, average wages tend to flatten out.
The amounts shown on Slide 24 are average wages, computed by taking the total inflation-adjusted wages for the population in total and dividing by population. When oil prices spike, recession soon sets in. The reason why average wages fall is partly because more people become unemployed. Other workers find it necessary to accept lower-paying jobs.
Many people focus on the run-up in oil prices to July 2008. An equally important point is the fact that the world economy has not been able to maintain these high prices since July 2008. The general price trend has been downward. The cuts by OPEC have not had a material impact.
Citizens of the United States, Europe, and Japan are used to thinking of high energy prices as being a problem because they are from countries that require substantial imported energy to maintain their GDP. For example, Greece will sell fewer trips on its tour boats, if oil prices are high. This will have an adverse impact on employment and the ability to repay debt with interest.
If a country is an oil exporting country, low oil prices are an even worse problem. This happens because oil exporting countries tend to earn a large share of their revenue from taxes on the sale of oil. These taxes can be much higher if oil is selling for, say, $120 per barrel than if it is selling for $60 per barrel. These tax dollars are used to provide subsidies to offset the high cost of imported food. They are also used to build industry and infrastructure to provide employment to the population.
If oil prices are too low, oil exporting countries will tend to cut back on oil production. In fact, this has been happening for OPEC for the entire year of 2019.
Similar problems occur if commodity prices of any kind (coal, natural gas, uranium, steel, copper, etc.) stay too low for an extended period. Producers go bankrupt, or they stop production, or they pay their employees so poorly that the employees go on strike. Sometimes, they may even start rioting. Many of the riots around the world today are related to low commodity prices.
The world experienced spiking oil prices in the period leading up to mid-2008. These high prices caused a recession and much lower prices followed. The chart on Slide 28 gives a somewhat exaggerated view of what goes wrong with high oil prices.
If the price of oil suddenly spikes to two or three times its previous price, both the price of food and gasoline are likely to increase. This change tends to lead to a big shift in a family’s budget. Debt payments, such as for a home and car, are pretty much fixed, so the big increase in food and gasoline prices must be taken out of the budget earmarked for everything else. This leads to cutbacks in discretionary spending such as vacations, restaurant meals, and charitable contributions.
In a short time, there are layoffs in discretionary sectors. Those who are laid off are more prone to defaults on loan payments. The problem soon escalates to a recession, with high unemployment and low oil prices.
Strangely enough, central banks push back against high oil prices as well. They know that high oil prices lead to high food prices. Citizens of energy-importing countries will be unhappy with elected officials if oil and food prices rise. Thus, central banks tend to raise short-term interest rates, as soon as they become concerned about high oil and food prices.
The recession that follows will quickly bring food and energy prices back down. If food and energy prices fall, the low prices will be the problem of the energy producers. Oil exporters will find their tax revenue too low, but the high-price problem of oil importers will be gone.
You will recall that the rapid energy consumption growth periods were 1961 to 1970 and 1951 to 1960. During these periods, the economy was growing almost too quickly. The Federal Reserve was able to keep raising interest rates, as a way of holding down economic growth. It was not until 1981 that the pattern changed from raising interest rates to falling interest rates.
Since 1981, the US Federal Reserve and other central banks have been reducing interest rates. Lowering interest rates and rising debt levels, as mentioned previously, makes goods appear more affordable because of lower monthly payments. The concern now is that interest rates are about as low as they can go. Central banks no longer have room to offset recessionary tendencies (because of slow growth in energy consumption) by lowering short-term interest rates.
Most people never consider the possibility of low energy prices leading to collapse. It looks to me like this is the danger facing us today. Let’s start by looking back at what happened in 1991.
When the central government of the Soviet Union collapsed in 1991, the individual republics making up the Soviet Union were left on their own to find new currencies and new trading partners. Satellite countries of the Soviet Union were affected as well. Slide 31 shows that the consumption of many types of resources dropped for many years for the whole area. The low point was not reached until 1998.
If we look back to see what had happened previously, the Soviet Union was an oil producer and exporter. When oil prices were high in the 1973 to 1980 period, the Soviet Union prospered. But then low prices came along, at least partly because the US Federal Reserve raised interest rates to almost 20% in the 1980-1981 period. (See Figure 29b.)
The long-term low oil prices, in some sense, indicated that the world economy was producing too much oil; some inefficient area(s) of production needed to leave. The Soviet Union may have been singled out by the self-organizing economy because it used energy products in a less efficient manner than other economies. Its adverse outcome may also have reflected the fact that its cost of production was higher, leaving less of the sale price for reinvestment and taxes.
The Soviet Union is an example of what can happen if oil prices stay too low for several years. The central government of such an economy can collapse.
When commodity prices are too low, the economies of countries exporting those commodities are stressed. This is why we see so many uprisings in commodity-producing countries right now. Iraq with its oil has been having protests. Chile, with its copper and lithium exports, has been seeing protests. South Africa with its exports of coal, precious metals and gems has been having riots. With some escalation, any of these low-price situations could lead to an overturned government.
In Slide 36, I give an example of two different kinds of ingredients in a cake:
- Ones that are substitutable: the flavoring, which can be vanilla, almond, or something else
- Ones that are not substitutable: the flour, which is the energy product
With too small a quantity of flour, all we can do is make a smaller cake. Perhaps we can substitute a different energy product, but electricity most certainly will not do! Some bacteria eat electricity, but humans do not. Substitutability is limited, even within energy products/carriers.
Economists make models focusing on the special case when a material is not essential for the economy. This gives a misleading impression. If they had looked back at what happened when energy supplies were low relative to population growth, as we saw on Slide 6, they could make much better models.
We seem to be sitting on the edge of some form of collapse for at least parts of the world economy, right now.
Without enough energy consumption growth, top-level organizations, such as the European Union, the United Nations and the World Trade Organization, are especially at risk of collapse.
One of our big problems today is excessive wage disparity. High-wage workers rarely have trouble being able to afford homes, cars, vacations, and air conditioning. It is non-elite workers, the ones who have not been able to find high-paying jobs, who have an affordability problem.
The wage disparity problem is an outgrowth of how the physics of the economy works. If there are not enough goods and services to go around, the physics of the economy effectively “freezes out” some of the workers. Under this arrangement, there will be some survivors even if there is not quite enough for everyone. In some sense, the “best adapted” are able to survive. If the inadequate supply of finished goods and services were spread around evenly, there might be no survivors at all.
The thing that is key is that workers need to be able to afford finished goods and services produced by the economy. If too large a share of wages goes to high paid workers, or to owners of robots, there is not enough left over for the “regular” employees.
Many workers have seen their jobs disappear as their employers moved production to another country where wages were lower. Or, jobs can remain, but the wages will fall from the low-wage competition.
US income disparity seems to be as great as it was in about 1930, at the time of the Great Depression.
If we look at historical world energy consumption by fuel, we observe that it has been rising the vast majority of the time. The little dip that we see about 2008-2009 occurred at the time of the Great Recession. It doesn’t take much of a cutback in energy consumption to cause a major problem.
Back at Slide 20, I remarked,
The primary way of raising affordability is by increasing productivity. Increased productivity is made possible by increasingly leveraging human labor with devices that are built with energy and are operated using energy.
The world economy requires growing energy supply, of suitable kinds, to operate. If the quantity of energy available is reduced, productivity is likely to nosedive. This is true even if the reduction is intentional and seems to be for a good cause, such as reducing CO2 emissions.
We seem to be heading for a contraction in energy supplies now because of continued low energy prices. Fossil fuels are, in some sense, leaving us, whether we like it or not. World coal production has been flat to falling since 2012. IPCC scenarios assume a very different pattern: Fossil fuel use, especially coal, will grow indefinitely, presumably because of high prices and improved technology.
Many people are hoping that wind, solar, and hydroelectric will someday replace fossil fuels. I consider this highly unlikely because all three are made using fossil fuels. Furthermore, these “renewables” in total represented only 10% of world energy supply in 2018. The 10% is divided as follows: wind, 2%; solar, 1% and hydroelectric 7%.
There clearly is a correlation between GDP growth and energy consumption growth. China with its growing coal use was pulling the world economy along, especially in the 2002 to 2012 period. Recently, it has lost much of this ability.
In my opinion, Trump’s tariffs are not the cause of our current trade problems. Tariffs seem to be enacted whenever growth in energy consumption per capita is very low. Tariffs were enacted both immediately before the US Civil War and at the time of the Great Depression. The problem is that jobs that pay well indirectly require significant energy consumption. When growth in energy consumption per capita is low, it becomes impossible to find enough jobs that pay well for everyone. Tariffs are used in an attempt to keep jobs that pay well at home.
We don’t know quite what will happen. The closest analogy is the Great Depression of the 1930s. More financial problems seem likely. In fact, they could escalate quite quickly. More strikes, such as those currently going on in France, seem likely. The situation is likely to play out a little differently in various countries.
The physics of the situation seems to try to keep some parts of the system operating, if at all possible. But, as mentioned at Slide 10, the self-organizing system deletes parts of the economy that are no longer needed. We no longer have an economy that can operate with horse and buggy, for example. We can’t just “go backwards” to an economy of an earlier era.
We are already seeing changes in this direction. Hong Kong’s protests are in the news practically daily. Germany is experiencing job layoffs. We know that in an interconnected world, a recession that starts in one large country is likely to eventually affect much of the rest of the world.
Now we are in a waiting period, waiting to see what happens next. Major changes seem likely over the next five years, but they could happen much sooner.
Do I send a TREND here?
(Bloomberg) — The world’s youngest prime minister needs to act quickly to tackle one of Europe’s fastest-aging populations.
Finland’s central bank said on Tuesday that the burden on public finances, as more people head for retirement, is unsustainable and requires a political response. The warning comes just days after 34-year-old Prime Minister Sanna Marin took office.
The so-called sustainability gap — which measures the difference between spending and income — has widened to 4.7% relative to gross domestic product, from about 3% a year ago, the Bank of Finland said in a report on Tuesday. The biggest contributors to the increase are cooling growth, higher government borrowing and political stalling over health and welfare reform.
According to the European Commission, the sustainability gap poses a significant risk to the long-term health of public finances when it exceeds 6%, while a reading of under 2% denotes low risk.
“One factor currently weighing on the long-term outlook for the public finances is the fact that the baby-boom generation has reached retirement age,” the central bank said. “This has increased public pension expenditure, and over the next few years it will also lead to a more rapid increase in expenditure on health care and long-term care of the elderly.
OK BOOMER…keep feeling until you drop…..and no unlimited health care for you!
There will be a lot of countries in this position, I am afraid.
“…thousands rallied at the weekend in [Thailand’s] biggest demonstration since a 2014 coup… Saturday’s peaceful rally was a reminder of the tension that is building again rapidly between the establishment and those seeking change.”
“…the [Thai] central bank is happy. But there are clear signs of production market struggles as the sector keeps producing fewer goods and services. Manufacturers aren’t happy.
“All three markets — financial, product and labour — are interconnected to form the economic cycle. When one market breaks down, the whole economy collapses.”
“Domestic car sales contracted for a sixth straight month in November, slumping 16.2% from a year earlier to 79,299 vehicles, hit by stricter lending by banks, the Federation of Thai Industries said on Wednesday. In October, sales were down 11.3% from a year earlier.”
I didn’t realize that Thailand was doing poorly as well. Stricter lending by banks creates a problem.
“The biggest television broadcaster in Hong Kong is cutting staff as the city plunges into recession and its political crisis continues with “no sign of abating,” the company’s CEO told workers this week.”
“Hong Kong‘s economy ends the year wounded, with the chances for stabilization in 2020 hanging on whether future protests are peaceful or lapse back into violence.”
“A Bank of England committee for financial policy underlined global risks linked to Hong Kong’s political tensions which led to about $5 billion in capital outflows from investment funds. The figure amounts to around 1.25 percent of Hong Kong’s GDP, the BoE said.”
“Protests in Uzbekistan are a rare event given the country’s authoritarian history… [but] small public protests are emerging.
“The majority of public protests so far have been tied to temperature drops. As the temperature dropped, so did the patience of people unable to satisfy their basic needs for electricity and natural gas…
“In 2019, Uzbekistan’s energy and natural gas systems yet again were put to the test as winter set in. The protests reveal that the government is unable to deliver basic utility services or handle normal complaints to satisfaction. Taking to the streets is a last resort.”
“At least 304 people were killed and thousands more injured during anti-government protests across Iran last month, according to Amnesty International…
“Nationwide protests broke in dozens of cities across Iran last month after the government suddenly hiked the price of fuel overnight.”
“The United States is urging Iraq to take steps to help prevent bases where U.S. troops are stationed from being shelled amid the country’s mass anti-government protests…
“Last week, Secretary of Defense, Mark Esper warned that attacks by Iran-backed groups on bases hosting U.S. forces in Iraq were pushing all sides closer to an uncontrollable escalation.”
“Young Shia Muslim men clashed with police in Lebanon’s capital overnight, after a video emerged that purportedly insults religious figures they revere… the third consecutive night of violence in Beirut.”
“As the Middle East ushers in 2020, experts say a new kind of uprising is unfolding. While the 2011 Arab Spring uprisings… were directed at long-ruling autocrats, the current economically driven uprisings are directed at an entire class of politicians and a system they say is broken and has failed to provide a decent life.”
It seems to me that the party most able to take such steps is the US itself. Remove the bases, and their chance of being shelled becomes zero.
I associate protests with hot weather. Going outside when it is cold out, to protest lack of natural gas, indicates a real problem. Uzbekistan produces more natural gas than it consumes. Theoretically, it should not have a problem.
The RACE is ON…faster, faster
Mexico Boosts Minimum Wage by Seven Times Rate of Inflation
BloombergDecember 16, 2019, 8:51 PM EST
(Bloomberg) — Mexico will raise its minimum wage by 20% as President Andres Manuel Lopez Obrador doubles down on redistribution policies even at the risk of spurring inflation and limiting the room for interest rate cuts.
The minimum wage will rise to 123.22 pesos ($6.50) a day next year, Labor Minister Luisa Alcalde announced at an event in Mexico City. While that’s less than the most aggressive pay hike proposal of 29% discussed by the head of the nation’s minimum wage commission, known as Conasami, it’s seven times the current rate of inflation, which slowed to 2.85% in late November.
Minimum wage increases have accelerated under Lopez Obrador, a leftist who has promised to boost income and well-being for the nation’s poorest who had lost purchasing power due to stagnant salaries amid inflation. The 20% raise announced Monday follows a 16% hike during his first year in power, at the time the biggest jump in two decades.
“This is going to help the economy of course because it strengthens the internal market,” Lopez Obrador said at an event at the National Palace in the nation’s capital, thanking union leaders and business representatives. “If there’s more revenue, it helps reactivate the economy, there are more sales for merchants.
What could possibly go WRONG!?
Sigh. Another forgotten truth of classical monetary theory, as explained by Adam Smith and Samuel Smiles: you cannot make poor people richer by giving them money. You give them education, vocational training, opportunity, and the moral courage to put their hand to the plough instead of holding it out.
Take it to the Streets…Occupy Wall Street the French Way….that should help your pension/retirement plans….
PARIS (AP) — Teachers, doctors, Eiffel Tower employees and workers across the French labor force walked off the job Tuesday to resist a higher retirement age and to preserve a welfare system they fear their business-friendly president wants to dismantle.
Lighting red flares and marching beneath a blanket of multi-colored union flags, thousands of angry workers snaked through French cities from Brittany on the Atlantic to the Pyrenees in the south to oppose President Emmanuel Macron’s overhaul of the French pension system.
Commuters and tourists faced a 13th straight day of traffic headaches as train drivers kept up their protest of changes to a system that allows them and other workers under special pension regimes to retire as early as their 50s.
But I PAID into it and it was PROMISED to me….I’m entitled and DEMAND MY MONEY!
Across the French capital, union leaders demanded that Macron drop the retirement reform.
“They should open their eyes,” Philippe Martinez, the head of hard-left union CGT, said at the head of the Paris march.
Nationwide, the number of striking workers Tuesday was up from a similar cross-sector walkout last week., adding pressure to Macron, The president was already on the back foot after the key architect of his pension overhaul resigned Monday over alleged conflicts of interest.
So far, his government is sticking to plans to raise the retirement age to 64, though it made concessions last week by delaying the roll-out of the change and opened the door for new negotiations.
Government spokeswoman Sibeth Ndiaye said on BFM television: “The reform remains.…We will not withdraw it.”
Several European countries have raised the retirement age or cut pensions in recent years to keep up with lengthening life expectancy and slowing economic growth. Macron argues that France needs to do the same.
Well, the answer is NEGATIVE interest rates to spur Economic Growth…..sarcasm…Gail already debunked that solution for us! Thank you
PS This ain’t gonna end well…..
“But I PAID into it and it was PROMISED to me….I’m entitled and DEMAND MY MONEY!”
Dear stupid persons of French persuasion. Dear me, your government lied to you, made promises that it knew it could not keep, and is now giving you the shaft. Cry me a river.
“Put not your trust in princes” (Ps cxlvi:3) Or, if you prefer the version that at one time you heard read in your churches, when you still had churches: “Nolite confidere in principibus, in filiis hominum, in quibus non est salus.”
These government pension plans are all pay as you go plans, I am afraid. That is the only way the system can work. It can’t work with very many retirees relative to workers.
From last June:
Saskatoon senior amassed $20K in doomsday prep food before her death
There’s so much of it,’ says the executor of Iris Sparrow’s estate.
Her stash included eggs, rice, beans, lentil burgers, pasta, cheesy broccoli, strawberries, vanilla pudding — all in vacuum-sealed bags in boxes and plastic pails. Some packages have hundreds of servings.
Iris Sparrow died two days shy of her 80th birthday. RIP
Donate it to the Fast Eddy Rescue League of Gardeners and wanna be Farmers!
“An economist has warned that India’s slowdown is now directly affecting households in a big way, with 40,000 to 50,000 persons having forced to surrender their commercial vehicles till now due to non-payment of dues.
““The situation is very grim. Our data says that the number is around 40,000 to 50,000 across the country,” said SP Singh, senior fellow at Indian Foundation of Transport Research and Training.”
“India’s economy, it seems, has entered the stagflation phase with the key macro-economic data showing dwindling manufacturing activity as the subdued demand conditions contracted the October factory output by 3.8 per cent.
“The worsening trend has also been spotted in the Consumer Price Index (CPI) as an increase in food prices lifted the November retail inflation to 5.54 per cent from 4.62 per cent in October.”
I wonder to what extent that cut back in recycling has adversely affected India’s economy.
In the years immediately after the 2008 price spike, recycling seemed to be very important in the Indian economy. Many poor people made a living by picking up used plastic bottles and aluminum cans, and bringing them in for recycling.
When the US started to send more materials to India, it was at first helpful, I expect. But then the amount of recycling overwhelmed the system. Oil prices dropped in 2014, making recycling non-economic. The many people who make their living in the recycling industry were hurt, first through the lower prices paid for recycled materials and second when the recycling had to be discontinued, because it was not economic at current oil prices.
“A massive protest has broken out in India’s capital Delhi – as anger at a citizenship law spreads across the country.”
I wonder if part of the problem (besides religious differences) is simply that there are not enough good jobs to go around. Offering citizenship to some new people, whoever they are, cuts back on job opportunities.
Ouch! Fewer commercial vehicles are likely to be a big problem.
“Conventional monetary policy stimulation works through lower policy interest rates, which help boost demand by lowering the cost of borrowing. Given today’s low policy rates, if a recession were to occur in the near term and G4 central banks were to lower rates by their average recessionary cuts since 1960, policy rates would become deeply negative.”
“It’s becoming increasingly apparent that the negative interest rates introduced in several countries in the wake of the global financial crisis are trashing bank profitability. Less obvious, though perhaps more crucial for society as a whole, are their debilitating impact on pension plans.”
“Struggling to revive profits as low yields persist, a handful of troubled Japanese regional banks are wading deeper into riskier credits such as near-junk rated overseas bonds, according to a Bloomberg survey.”
Maybe they can help out US energy companies!
Lol, good point! Perhaps there should be an OFW consultancy service matchmaking increasingly reckless lenders with increasingly desperate borrowers.
Right! Pension plans were hoping for big positive returns. Assumptions by actuaries are proving to be very much incorrect.
Interesting that a comparison is being made to the 1930s:
Another comment is
In the US, debt of many kinds has not been growing as rapidly as GDP. I am fairly certain that this is true in Europe as well. It seems to me that this lack of debt growth becomes too big a problem for the government to make up for with additional printed money.
In the US, the big debt areas that have been lagging behind since 2008-2009 are (1) Financial sector debt and (2) Mortgage debt.
Household debt is closely related to mortgage debt. It also includes student loans and credit card debt, among other things. Only a short time series is available.
This article shows that there has been a spike in rejections of auto loans:
It doesn’t look like the change has affected US motor vehicle loans outstanding yet, however. This chart is through September 30, 2019. The amounts seem to be the same as household automobile loans, so I don’t think that they include commercial auto loans.
The actual press release, if interested.
About the same length as the market watch article.
A good point, Henry, except for that word “conventional”. Classical monetary theory says that you improve the economy by raising interest rates, which encourages more thrift, providing more capital for investment, and then helps direct that investment into the more profitable enterprises, the ones able to repay their borrowing out of profit generated.
Modern monetary theory, by contrast, leads to the creation of zombie organisations that eat debt until it is all consumed in negative return ventures.
Manufacturing recession is already here in the Eurozone.
Manufacturing in the Eurozone has now fallen to euro crisis levels. But there’s no crisis.
The ECB is already doing ZIRP and QE.
Can the central banks deal with a slowdown…and for how long?
45.9 not good.
“The manufacturing slowdown since the summer of 2018 has become a slump, the labour market shows first tentative bruises and, even worse, disruption in one of Germany’s key industries, automotives, do not bode well for the imminent future.
“In fact, there is a risk that the German economy is almost seamlessly moving from a golden decade into a lost decade.”
“The euro zone’s second-biggest economy will slow next year to 1.1% from an estimated 1.3% this year, the Bank of France said in its quarterly economic outlook…
“Although the French economy has proven more resilient in the current slowdown than countries like export-dependent Germany and Italy, it too is feeling the pinch from a down-shift in global growth..”
“The UK private-sector economy is shrinking at the fastest pace since July 2016, with manufacturing output tumbling and services activity recording consecutive monthly falls for the first time since 2009 amid Brexit uncertainty, a key reading shows.”
Your chart is worrying! Germany, as Europe’s center of manufacturing, seems to be most affected. Automobile manufacture is especially important, I expect.
Gail, you may be right, but the car makers evidently don’t think so. For years, they have not even tried to make cars cheaper, more affordable, more in keeping with Henry Ford’s vision. Instead, they have continually made them more expensive, and not with useful features, but for added frills such as power windows, air bags, FM radios and cassette decks, … all of which can be built in at a heavy markup. And they are now reaping the consequences of their greed and folly.
(Oh, sorry, air bags are not a frill, they are an addition lethal to smaller women and invalids, as well as being propelled by poisonous chemicals)
And have saved plenty of lives. Let’s not forget that. The problem isn’t technology per se, but the decadence which it enables. Cars have been too cheap for too long.
If you ask for the price – then you can not afford it.
I respectfully disagree. Airbags save the lives of riders who do not use seatbelts. For those who do, they put lives at risk. In other words, they differentially preserve the stupid, and kill the intelligent. Enough said: you can guess my view of this situation.
I don’t care about viewpoints. I care about the actual statistics of life saving active and passive safety devices in modern cars.
There is little doubt that they do indeed save lives and serious injuries. Do some googling around and put aside the “ok d00mer” narrative for a moment.
“Chinese corporate debt is the “biggest threat” to the global economy, warned a Moody’s Analytics economist, who described such risks as a “very significant fault line.”
“That followed similar comments by Fitch Ratings last week, which said that private companies in China have defaulted on their debts at a record pace this year.”
“Six privately owned companies in one of China’s wealthiest provinces have defaulted on their debt or come perilously close in the last three months.
“With 68.1 billion yuan ($9.7 billion) in outstanding debt among those six companies alone, the distress in Shandong has rattled even seasoned investors.”
I looked up Shandong. It is China’s second most populous province. It is south of Beijing north of Shanghai, along the coast. The debt defaults in a rich province are concerning.
I would agree that China’s debt problem is a top threat to the global economy. It doesn’t matter with a deleveraging plan is one that is initiated to help the system. In fact, it is very detrimental to economic growth.
President of Pakistan is one of the world’s more dangerous occupations along with Prime Minister of India.
Now comes news that the knives are out for the country’s former President Pervez Musharraf, who I personally thought, in my naivety, was one of the more decent holders of the title.
According to a bulletin from the Telegraph:
Pakistan’s anti-terrorism court sentenced on Tuesday former military ruler Pervez Musharraf to death on charges of high treason and subverting the constitution, a senior government official said.
“Pervez Musharraf has been found guilty of Article 6 for violation of the constitution of Pakistan,” government law officer Salman Nadeem said.
Musharraf has been on trial for high treason for imposing a state of emergency in 2007.
Musharraf, who seized power in a 1999 coup and later ruled as president, has been living outside of Pakistan. He was not immediately available for comment.
On second thought, the record shows Prime Minister of Pakistan to be a far more dangerous job than President.
How propaganda works
I would like to return to the recent video in the campaign for the parliamentary elections 2020 in Slovakia, as there is an interesting clash of the two white males:
There are two dominant white males as party leaders presented in the video:
1. Robert Fico:
He is presented as an adult who comes to the kindergarten where children (representing the leaders of the competing parties) are doing mischiefs and quarrelling.
2. Boris Kollar:
He is a famous celebrity, a bussinesmen known as a polygamist, having multiple children with multiple women. The video represents him with his characteristic blue eyeglasses as a girl!!!
Boris Kollar made one of his women a party member and a member of the parliament thanks to the previous election results.
Polygamy is a male dominancy destroying element. The highest god is always single. The new perspective leader of the SMER SD party (which was solely dominated by Robert Fico until recently) is Peter Pellegrini, a single man, without publicly known relationships with women.
Shall we meet again….???
The latest UN climate conference by the numbers: $100 million, 27,000 attendees, 1 prominent Swedish teenager, and 0 tangible outcomes
email@example.com (Aylin Woodward,Morgan McFall-Johnsen)
Business InsiderDecember 16, 2019, 8:35 PM EST
The 25th iteration of the United Nations’ biggest annual conference on climate change, COP25, came to an end on Sunday in Madrid, Spain.
But despite a year of increased climate cognizance worldwide — led in part by Swedish activist Greta Thunberg — the 13 days of negotiations yielded few tangible outcomes.
“I am disappointed with the results of COP25,” António Guterres, UN secretary general, tweeted as talks closed. “The international community lost an important opportunity to show increased ambition on mitigation, adaptation, and finance to tackle the climate crisis. But we must not give up, and I will not give up
By no means, don’t give up….BAU says thank you so much!
Greta is Alia from dune! “meet my gom jabber grandfather”
top of the OFW home page:
that’s kinda cool…
here’s hoping for 10 million more… 🙂
I had noticed earlier that the site was close, but not that the site had actually exceeded that 10 million hits. Thanks for pointing this out.
Another statistic that I see is the number of approved comments. This recently exceeded 200,000.
The optimism of doom and gloom is spreading wide and far. How I laugh at the optimists deluding themselves with hopes and dreams of a green and sustainable tomorrow.
Coal Endures as World’s Favorite Fuel for Electricity Generation
BloombergDecember 16, 2019, 7:00 PM EST
Coal Endures as World’s Favorite Fuel for Electricity Generation
(Bloomberg) — Coal consumption is set to rise in the coming years as growing demand for electricity in developing countries outpaces a shift to cleaner sources of electricity in industrialized nations.
While use of the most polluting fossil fuel had a historic dip in 2019, the International Energy Agency anticipates steady increases in the next five years. That means the world will face a significant challenge in meeting pledges to reduce greenhouse gas emissions that cause global warming.
“There are few signs of change,” the agency wrote in its annual coal report released in Paris on Tuesday. “Despite all the policy changes and announcements, our forecast is very similar to those we have made over the past few years.”
While this year is on track for biggest decline ever for coal power, that’s mostly due to high growth in hydroelectricity and relatively low electricity demand in India and China, said Carlos Fernandez Alvarez, senior energy analyst at the Paris-based IEA.
Despite the drop, global coal consumption is likely to rise over the coming years, driven by demand in India, China and Southeast Asia. Power generation from coal rose almost 2% in 2018 to reach an all-time high, remaining the world’s largest source of electricity.
Well. Let’s have another Climate Conference….Sally Field can fly in…
After her arrest..Sally Field arrested during Jane Fonda’s weekly climate change protest
BY SOPHIE LEWIS
DECEMBER 14, 2019 / 10:49 AM / CBS NEWS
Maybe and maybe not. There are too many countries that seem to be past peak coal. It is very hard to keep prices high enough to make extraction profitable.
“China’s small rural banks are scrambling to raise new capital as they struggle to contain a rapidly rising number of overdue loans… 29 rural banks this year have applied to the China Securities Regulatory Commission (CSRC) to raise capital by selling new shares…”
“China injected liquidity into the financial system by offering medium-term loans to banks, in the government’s latest effort to support economic growth…
“The People’s Bank of China (PBOC) added 300 billion yuan ($43 billion) through the medium-term lending facility, with 286 billion yuan being used to roll over loans coming due on Monday.”
“China’s central bank warned property speculators that “homes are for living in” as the regulator pledged to properly regulate the real estate market…
“The central bank also said it will further expand an opening up of the financial sector, replenish the capital of small and medium-sized banks and improve their ability to offer credit. It pledged to properly handle risky issues in the financial industry to avoid major risks in 2020.”
It doesn’t matter how well-intentioned regulators are. Cutting back on the growth of debt tends to make the economy grow less rapidly. The jobs building unneeded homes are (unfortunately) an important part of China’s economy. These folks need to find employment elsewhere. Otherwise, they need to cut way back on their spending. This is part of what makes commodity prices fall.
Yes! Keep the system going.
I still don’t see how deflation happens….. I mean I do in some countries….the ones that can’t and won’t print money. But in the U.S when they promise everything to the voters? You will see bi partisan spending at the next recession and massive printing of U.S dollars….so how will that cause deflation? Deflation of the Dollar? All countries will be in the same boat and where are they going to put their money?
The problem is the debt defaults. People can’t afford the houses they live in and the cars they drive. Businesses cannot afford to pay the workers they have hired. There are lots of layoffs. Governments can print more currency, but this doesn’t provide more underlying goods and services. As with Venezuela or Zimbabwe, the extra currency is likely simply to push the value of the currency down on the world market. It can, in theory, buy more goods in the local market, but the shelves of stores will still be empty, so the currency has virtually no buying power. In a sense, this is inflation.
When it comes to the raw materials needed to make the goods and services, these will increasingly suffer from customers being unable to buy the end products made from them, as the real cost of extraction rises. Thus, the prices of raw materials will tend to deflate. This is where the deflation comes in. It will continue to be non-economic to produce them, so production will slow and stop. The world market will not provide the goods for the currency to buy. It is the inability to combine the resources from countries around the world that brings the process to a halt. The world was using resources from around the world at the time of Jesus’ birth–think of the Wise Men bearing gold, frankincense, and myrrh. Long before that, Greece, Italy and Egypt were importing tin to make bronze. The fact that printed money is local makes it inadequate to solve the problem.
What needs to change is the relationship between wages of common workers and the true cost of extraction of resources, including the higher cost required as a result of depletion. Once the cost of extraction is too high relative to these wages, there is a major problem.
Big auto mfg push coming in China according to reliable sources. The stimulus will be of epic proportions.
“The Ministry of Industry and Information Technology’s draft proposal said China should seek to ensure one in four of all vehicles sold in 2025 were either hybrids or fully-electric vehicles.”
«The measures are partly to ensure the country meets its air pollution targets, and to reduce Beijing’s dependence on imported oil«
The measure could perhaps also stimulate their own coalproduction, as i presume the EV run on electricity from coal-fired power plants? Or am i wrong?
Sven, regarding your question about whether the EVs are to run on electricity from coal-fired plants: Yes, a major purpose of EVs is to switch demand from oil to coal, and thus hopefully raise the price of coal. Another major purpose is to move pollution outside of major cities. A third purpose is to have a salable product for the world export market.
This is just wishful thinking:
China doesn’t have the money to subsidize electric automobiles sales now. This is one (of several) reasons way electric automobile sales are falling. Expecting China to have the money in the future to subsidize electric automobile sales is simply wishful thinking. It is sort of like wishing for water to run uphill. Unless electric automobiles are truly less expensive for the buyer, it is impossible to increase sales.
The point is not to provide vehicles for the people. They already got the basic transportation needs mostly covered by electric scooters and public transport.
It is stimulus for the economy. After building the n’th airport and concrete ghetto stops working – then it’s time to sink some money into building up the high-tech auto supply chain becoming a player there as well. The vehicles you might ask, to which I answer: so what? Nobody wants to be stuck in traffic in Beijing.
How about everyone rides a bicycle…..like in the old days
Somehow, we need sort of paved roads for the bicycles to ride upon. These are the problem. Also, bicycles are not suitable for carrying multi-ton replacement parts for wind turbines and other large objects needed by our industrial economy. They also don’t work for carrying water for fracking.
Dirt roads and trails in the forest is no problems for modern cross country bicycles. Actually, unpaved surfaces it is a feature and not a bug.
that’s how the Japanese invaded Burma
Don’t count on modern cross country bicycles. Think of home made bicycles, made with local materials.
Bicycles and trains will be a part of IC, a long, long time after we drop petroleum enabled transportation.
I wonder if we again will listen to the pounding of steam locos powering along the last stretches of rail in IC with boilers glowing red like coal in he11?
Industrial civilization will fail if energy consumption doesn’t stay high enough. In fact, a cutback in debt levels may be sufficient to bring the system down.
have you ever taken a long hard look at a bike
then tried to figure out how to make one in a non-industrial environment?
Just use one that you build from salvaging parts from the billion already made.
IC will survive, you however will most likely not. So why not enjoy that hitl3rmobile of yours pretending that your wastrel consumerism is what makes BAU tick.
Just light up the desert and call it growth. Because burning energy is good for ya’ “economy”.
This could be the future, but it also means something different from industrial civilization as we know it.
“China injected liquidity into the financial system by offering medium-term loans to banks, in the government’s latest effort to support economic growth…
“The People’s Bank of China (PBOC) added 300 billion yuan ($43 billion) through the medium-term lending facility, with 286 billion yuan being used to roll over loans coming due on Monday.”
wow, now China is imitating the Fed and doing massive quasi-repurchase operations…
what liquidity problem?
let’s all do the Repo…
“So much for the great divergence between economic systems led by the U.S. and China. In the monetary arena, they look more alike than at any point in recent years.”
With all the activity, perhaps world markets will make it through year end!
The optimism will quickly wear off and of course the underlying issues you write about can only worsen, but sentiment does count for something.
The UK election result, which all but removes the feared no-deal scenario from the table, and the “phase one” trade deal between China and the US are temporarily relieving geopolitical anxiety and I can see us coasting through into the not-so-roaring 20’s without too much drama. Unless of course the repo issue snowballs or some black swan swoops down upon us.
Harry, I’m not so sure about “no deal”. I think it is firmly back on the table. First, because it is now a matter o law that the UK will leave on 31 January, and without an officially signed and sealed deal. Secondly, there is supposed to be an acceptable “trade deal” by the end on 2020, which will absolutely not happen because, as usual, the EU will not keep its promises. And finally, as the election showed, most of the adult population are sick, tired and disgusted with EU interference is what they would still like to be a sovereign country.
Low commodity prices are part of the problem:
“Many countries are facing structural uncertainties that could have far-reaching, systemic implications for markets and the global economy… questions [will be raised] about the functioning and resilience of the global economy and markets…
“The main worry – one that too few market participants have spotted – is that over the next five years, global economic and market conditions may need to deteriorate nearer to crisis levels before national, regional, and multilateral political systems muster an adequate response.”
History says that at some point, our luck runs out.
Yes, it was a good run while it lasted. I still recall great care-free days in the mid 70’s and my parents were basic middle class in Northern Virginia. My father did the 1 hour commute to his military job in Arlington/DC area. I had a motorcycle, a guitar, 3 square meals a day, ROTC scholarships for college. It was a great time to be alive even for regular people. My mother didn’t start to work even part-time until I was in high-school. And that wasn’t even because it was needed.
As it stands now, my mother still has premium level health insurance, can travel wherever and whenever she wishes, sends money to her kids and grandkids (they need it) and she still thinks the world is a great place and always will be. I have to bit my tongue when I visit. Timing is everything isn’t is? Sure, she had a tough childhood, but she did everything right and has a nice quality of life in her retirement.
I had it easy, even going into middle age, but won’t have the retirement she has. Her grandkids had it easy , but are struggling in their early adult years. I don’t even want to think about what kind of life the grandkids will have to face.
2019 is looking more and more like 1929 every day.
It depends on the mental disposition of the people. A slight shift toward autism seems to be evolutionary preferable as the technological advancement progresses at an ever increasing rate.
Yes, person of the year is doing fine!
Yup, she’s raking in the money.
My son with mild autism (Asperger’s Syndrome) is doing surprisingly well in the job market. He can do a great job reading computer programs and finding bugs in them. This is not a skill everyone has.
I would say that most people with an obscure obsession of something, like, let’s say, people who find finite world issues fascinating.
Yes people, it is time to admit that you all belong to the club of mild autism.
Put the books aside and show us the code.
Yep all the future generations have to pay for all that ……just keep adding it up…it was never really “earned” income…
Having had a reprieve of over a decade, we can only ask if we, personally, used it well.
I feel that I did, but, ‘Please, sir, may I have (another ten years) more?!’
Hmm, most unlikely I fear…….
Don’t despair just yet. Almighty God may yet grant us another decade of decadence.
“The lights are back on, yet it feels like no-one is home. The end of load shedding this week may have provided light relief, but its overall impact has been draining. Eskom are likely to sink even further into their black-hole of debt – currently estimated to be worth R450 billion – and it’s threatening to take South Africa with it.”
“Zimbabwe’s fuel shortages have reached critical levels just less than two weeks before the Christmas holiday. Long winding queues are visible at most fuel stations while most are completely empty. Frustrated and desperate motorists are spending long hours parked at fuel stations.”
“Zambia risks having to switch off power production completely at the Kariba hydropower dam for the first time as water levels already at the lowest in more than two decades continue to drop, according to the state-owned electricity utility…
“Zambia and Zimbabwe depend on hydropower plants at Kariba, the world’s biggest man-made freshwater reservoir, for nearly half of their generating capacity.”
create a population by unsupportable means
supply it with energy from an unsustainable source
govern it with people with unproven intelligence
and there you have our world crisis writ small
It will soon be writ large
I am afraid you are correct.
Hydroelectric is very intermittent, especially when it is not fed by melting ice water. I wish that countries had been told that they could not really build industries around hydroelectric, without at least doubling the cost with fossil fuels for when hydroelectric is not available. People cannot expect to use this electricity except for the most optional activities, such as watching television and videos. It is mostly a big waste of money.
Hydroelectric is not intermittent. Let’s drop that narrative, please.
It is dispatchable. It is not intended to be used as a replacement for thermal power generation. Once the reservoir is empty. There is no further means to dispatch power to control surges and spikes in the grid.
Dispatchable, Gail, Dispatchable. 🙂
Hydroelectric is available at certain times of the year. This makes it intermittent. It doesn’t necessarily have to be intermittent during a 24 hour period.
These are a few charts from my file:
Hydroelectric is only dispatchable when it is available. Unfortunately, in parts of the world with rainy and dry seasons, this is a major problem. An economy with lot and lots of fossil fuels can use a little hydroelectric to help buffer intermittent wind and solar, at times.
Norway uses 100% dispatchable power for their electricity needs. 24/7/365
It is a matter of systems engineering and resource management. If there is an imminent drought, then perhaps spin up the thermals before the reservoirs are empty. Or run it to the last drop of water and act surprised.
That is if there are any spare capacity that can be brought online. If there is not, well, enjoy IC while it lasts.
New Zealand has done very well with hydroelectric dams. We have a lot of them, and they supply the bulk of our electricity all year round. Most of the rest of our electricity is supplied by geothermal and wind with a small percentage of solar. We also have fossil fuel fired generation, with coal being phased out in favour of gas and a move towards “renewables”.
The hydrodams are fed by either snowmelt from lakes in the Southern Alps or the Waikato River which flows from Lake Taupo (our largest lake, in a volcanic caldera).
As good as our hydrodams, geothermal, and wind are, however (and despite what everybody else likes to believe), they are not renewable.
New Zealand is sort of like Norway in that it is cold enough to get a lot of snowmelt to feed its hydroelectric. This seems to help. Countries in hot, dry climates do not do well with hydroelectric.
Generally intermittent sources of power is a good compliment to sufficient dispatchable power near by. Long transmission lines to population centers is a sign of bad systems engineering.
The energy needs in IC should never exceed the fully renewable capacity. The fossil fuels should be ear marked for its role as an absolutely fantastic raw material in the industrial processes which it plays a fundamental role in growing prosperity and technological advancement.
We do well with our hydro electric here in B.C. as well. Our small population (4.9 million) vs our huge mountains over a large area make it possible for us to have 93% of our electric power from hydro. We also have Site C which will provide us with lots of export power. Are you listening California?
“In a bid to boost its economy, Zambia legalized the production and exportation of cannabis on Monday which will serve only economic and medicinal purposes… the approval for the export of cannabis was granted at a special cabinet meeting earlier this month.”
A country that cannot depend on its electricity supply has huge problems!
South Africa’s problem is peak coal. It coal production has been flat since 2007. Its electricity production stopped rising in 2007 as well. Between 2007 and 2018, South Africa’s population has risen by 18% during that time, so electricity consumption per capita has been falling, year after year. The price for exported coal has been low, so the country could not work around its problems by selling its exported coal at a higher price.
There have been so many reports of massive corruption in South Africa, that I wonder how you would separate its impact from that of genuine resource depletion. Of course, they are not mutually exclusive, but enough corruption could overwhelm even abundance. They seem to be suffering a double whammy, as increasingly we will as well.
Corruption seems to one of the standard ways of trying to hide depletion. I think the basic issue is depletion. Also, the fact that world prices for coal and other fossil fuels have not risen, as needed to raise supply.
Yes, in a growing economy the corrupt have little leverage because the economic opportunity is by far the major driving force. Their shady dealings does not matter.
Once resource limits hit, theft becomes more attractive than fighting for scraps in a Darwinian fashion.
“Just when German factories appeared to be exiting a year-long slump that battered the country’s economy, the sector’s contraction has worsened again. IHS Markit’s Purchasing Managers’ Index for manufacturing unexpectedly fell to 43.4 in December, defying economists’ estimates that the number would pick up.”
“Italy’s government approved late on Sunday an emergency decree granting a lifeline of up to 900 million euros ($992 million) to cooperative bank Popolare di Bari, in the latest state bailout of an ailing lender.
“The bank, which said last week it needed an urgent injection of up to 1 billion euros, has struggled to cope with mounting loan losses during a slump that has devastated Italy’s economy…”
“Despite winter’s limited daylight and whiplash-heavy storms and rains, the number of asylum seekers landing on Greek shores shows no sign of abating. Not since Europe’s historic agreement with Turkey to curb migrant flows at the height of Syria’s civil war in March 2016 have arrivals been so high.
“In September alone 10,551 newcomers arrived, the highest in a single month since the deal.”
This sounds like a smallish bank, but it still is an indication of the problems the sector is facing.
‘I’m an economist, just estimating away, dreaming pretty pictures in the clouds…..’
because that’s what I’m paid to do…
perhaps too obvious, but it is what it is…
Germany is so heavily into auto production that it has a problem if world auto consumption is falling.
I can’t imagine electric cars ever being a solution to anything, any more than intermittent renewables are a solution to anything. Trying to convert to electric cars, when it is not really possible to operate an economy using electric cars, is folly. Germany has a difficult road ahead, I can see.
Recently, calcium l-threonate caught my attention:
“Recent studies show that threonate might have a physiological function. In the periphery, threonate has been linked to bone health. Threonate can prevent bone degradation by inhibiting osteoclast resorption from bone (He et al., 2005). Threonate also supports bone formation in two ways. One, it promotes calcium bioavailability, allowing for rapid absorption of calcium into the body (Wang et al., 2013). Two, threonate increases bone mineralization by inhibiting DHT-inducible dickkoppf-1 (DKK-1) expression. DKK-1 is an osteoblast inhibitory factor whose overexpression can negatively impact bone formation and density (Kwack et al., 2008, Kwack et al., 2010, Monroe et al., 2012).”
“The uniqueness of BioCalth Calcmium L-Threonate is that its absorption rate is as high as 95%, which means more calcium goes right where you need it……in your bones. *”
I hadn’t heard of calcium l-threonate before. It would be great if it does support bone formation, as osteoporosis is one of the biggest factors in ruining old people’s quality of life. Millions of seniors are literally one fall away from becoming bedridden.
I introduced a book here a few month’s ago called The Magnesium Miracle. The author, Carolyn Dean, is insistent that we all eat plenty of calcium in our diets already and there is no need to supplement it, BUT that what we really lack is sufficient intake of the miraculous mineral magnesium. I’m taking her advice on this. I think Gail is into supplementing with magnesium as well.
She is also not in favor of Vitamin D supplementation as it has some side affects. I’m ignoring her advice on this and gobbling down 400 IU of D a day, and even more in the winter.
When I die, I expect to go out like Linus Pauling, well into my nineties, choking to death on a multi-vitamin. 🙂
Low dose vitamin D supplementation should not be a problem. Moreover, some food is fortified with vitamin D.
“A daily dose of vitamin D 1000 IU should prevent very low vitamin D levels, and should be sufficient to help most aging adults get the benefit — whatever it may be — of vitamin D. Furthermore, vitamin D 1000 IU/day is highly unlikely to cause harm to most older adults.”
But some still advocate high dose vit. D supplementation with tests for vit. D levels being performed:
2 tablespoons cod liver oil year round, also two pills 1600IU between the equinoxes. I enjoy don’t having colds.
Look; there is no silver bullet. Do your daily routines forming the exercise baseline and eat what you can source locally and don’t indulge yourself.
Supplements: what a scam.
Running on the treadmill: what a waste of time.
“ They found that cyclists were 15 per cent less likely to die from any cause – and those who spent time on two wheels came off best, alongside swimmers, those who took part in racquet sports, and aerobics.
No significant reduction of risk was found amongst those who participated in running or football.”
So straddle your steed of metal and crank those pedals.
Interesting! Back when I lived in relatively flat country, I rode a bicycle quite a bit. Here, it is quite hilly, there are few bike lanes, and no one watches out for bicyclists. So riding a bicycle can be a life-threatening experience.
The Danes know a thing or two when it comes to organizing their society for accommodating bicycles.
Supplements: what a scam.
You’ve obviously never experienced the Niacin Flush.
Along with mortgages, life and property insurance, religion, and university education, there are an awful lot of supplement scams, certainly.
However, you can add decades to your life and, more importantly, to your healthy active life by making sure you are taking in adequate nutrition. Billions of people aren’t doing that and they are getting sick as a result.
A hundred years ago in the west people had a life expectancy in their fifties. Two hundred years ago it was in the forties. But now we can expect to live into our eighties. So we need all the nutritional help we can get, in addition to plenty of gentle exercise of course.
Indeed, all those things should be interwoven into your fabric of life.
Once it becomes clear, it is easy and obvious. A light discomfort out in the rice/potato fields and powering around yourself using a steed of carbon fiber reinforced plastic becomes second nature and quite enjoyable no matter the weather.
People seem to get calcium deposits in their arteries as well as their bone. One question I would have is whether this calcium really ends up in the right place. I am currently taking a small amount of calcium (as well as quite a bit of magnesium), so I could possibly substitute this variety of calcium for the current variety. But I don’t want much in total, because of artery issue.
Yes, one must be careful with calcium. The question is where this calcium deposits.
“The tissue distribution and excretion of calcium from the source was investigated in rats usinga 45Ca tracing technique. (…) Twenty-four hours after oral administration of 200 mg/kg bw, approximately 30% of the calcium was excreted in the urine, around 40% was eliminated in the faeces, and about 10 – 20% remained in the blood and bone, and about 10% was stored in organs.”
More can be found here:
It is also a part of some reputable brands of joint supplements:
– calcium L-threonate, 24% RHP
– L-treonát vápenatý, 24% RHP
No recession in sight for BAU….we can all rest easy now…..they all agreed to meet AGAIN!
UN climate talks unravelling, face failure
December 14, 2019 by Patrick Galey and Marlowe Hood
The push for a strengthening of voluntary carbon cutting plans is led by small-island and least-developed states, along with the European Union.
Ministers from this “high ambition coalition” have called out countries they see as blocking a consensus call for all countries to step up, notably the United States, Australia and Saudi Arabia.
China and India, the world’s No. 1 and No. 4 carbon emitters, meanwhile, have made it clear they see no need to improve on their current emissions reduction plans, which run to 2030.
These emerging giants have chosen instead to emphasise the historical responsibility of rich nations to lead the way and provide financing to poor countries.
The COP 25 summit was also meant to finalise a chapter on carbon markets in the Paris rulebook, which goes into effect next year.
But a complicated wrangle over how to structure markets, and deal with carbon credits left over from the Kyoto Protocol, which expires at the end of 2020, have remained deadlocked, and may be punted to further talks next year.
‘Prove it’s worth it’
The United States, which is leaving the landmark Paris climate deal next year, was accused of acting as a spoiler on a number of issues vital to climate-vulnerable nations.
This included so-called “loss and damage” funding to help disaster-hit countries repair and rebuild.
“The US has not come here in good faith,” said Harjeet Singh, climate lead with charity ActionAid.
‘Time for this process to prove that it is worth something’
“They continue to block the world’s efforts to help people whose lives have been turned upside down by climate change.”
Even if nations in Madrid snatch victory from the jaws of defeat and agree to implement their pledges, Earth is on course to warm more than 3C by 2100.
“It is time for this process to prove that it is worth something,” said the delegation of Colombia.
“If there was one time in the history when I would say governments fucked up, I would say today in Madrid, governments fucked up,” Adow said.
“People across the world must rise to save the planet.”
HAHAHa..SAVE the Planet!!! George Carlin laid it out best..
Glad Greta is taking some time off….hope she learned a lesson from all her activism…
The conference was a remarkable success. Rousing speeches were made. Angry fingers were waved. And a good time was had by all.
Indeed, the delegates enjoyed themselves so much that they reached a 100% consensus on one binding commitment: that they would all agree do another ten junkets in places all over the world before 2030 when, according to some of the grouchy one, the Big Party comes to an end.
Harrison Ford flew in to attend. I can’t think why. Does Hollywood have a rota system for this kind of thing or did he come along to check out the famed COP Burger King cheeseburgers?
Some celebs just seem to age poorly. I recall Harrison Ford in his heyday making it look easy. His performance in Blade Runner was fantastic. From that moment in he just went… Strange… Hollywood kind of strange.
If he just got his ego in check and kept on acting instead of going off on a tangent fueled by his greed and self-importance. Sign, I guess talent does not imply wisdom in the land of plenty and opportunity.
Two cheers for BAU, as the conference ended as every sane person knew it would, with nothing achieved except an agreement to spew yet more CO2 into the atmosphere flying in private jets to yet more conferences.
And Harjeet Singh accusing others of bad faith? One who has made a fat living out of climate change, funded by people a lot poorer than himself. And who lives in Delhi, capital of a country that has never done anything in good faith? It’s frightening what eco system lives under the “climate change” rock.
Add the energy cost of millions of household generators and there poor efficiency compared to a fossil fuel power plant to the denominator of the EROI fraction and to the numerator of the carbon in atmosphere in California.
I expect the big growth industry in California will be generator sales.
“America’s hottest oil-drilling regions—such as this one at the heart of the Permian Basin—are seeing their economies soften as shale producers slash spending, leading to emptier hotels, choosier employers and less overtime for workers.”
This is a story that I have been waiting to see….I am surprised that the permian did not crash sooner…..the debt levels there are very high….So many shifting stories hard to see through the b.s
I saw the WSJ article this morning on my phone, but I have pretty much been away from my computer since. We have all been wondering when this would happen. This is one chart the WSJ shows:
Hotel prices in the Permian have especially fallen off. They have stopped rising in the Bakken. Fixed investment is down for what I believe is US total oil-and-gas fixed investment.
It looks like the peak in private fixed investment was the 2nd quarter of 2018, and it has been drifting downward since. It is not nearly as far down as it was when oil price fell terribly low back in early 2016, however.
According to the article:
“The world’s oldest central bank stands to be the most significant this month as it pioneers a shift away from negative interest rates.
“Sweden was among the handful of economies that reduced key interest rates half a decade ago below zero. Now officials at the Riksbank — founded in 1668 — insist the policy has done its stimulus work, so their so-called repo rate can stop being negative.
“That puts the rich Nordic country in the spotlight of global monetary policy as counterparts watch nervously to see how easy it is for the experiment of subzero rates to be unwound.”
“Sweden’s central bank is planning plans to create a pilot platform for a digital currency known as the e-krona.”
The article also says:
Gail, of course it can’t, as any competent IT person would tell you in five minutes. Most crypto currencies use a technology called “blockchain”, which has the interesting property that all transactions must be serialised; that is, performed one at a time. This is, of course, impossible to scale. So you can’t use your local ATM until the 100 million Chinese ahead of you in the queue have been served.
I need to added crypto currencies to my mental list of things that are going wrong.
Rich Nordic country or “formerly rich Nordic country.”
A shift from -2% to 0% is still a rise in interest rates. It is hard to see how it can be done.
We’re still credit worthy, spending money like crazy.
“The nanoscale interface fundamentally changes the property of these materials,” he says. “Our results show the nickel-iron catalyst can be as active as the platinum one for hydrogen generation.
“At the moment in our fossil fuel economy, we have this huge incentive to move to a hydrogen economy so that we can be using hydrogen as a clean energy carrier which is abundant on Earth,” Prof Zhao says.
“We’ve been talking about the hydrogen economy for ages, but this time it looks as though it’s really coming.”
All of this “Eureka” science reminds me of the eternal search for Elvis.
Hydrogen is a fuel storage method that we need to find energy to produce it, it is not a fuel source. Luckily we have fusion reactors to do that.
We now return you to reality……………………………………….
Hydrogen is incredibly leaky stuff.
Plus, its isolation currently is a huge energy loser.
Might be time to move on——.
Either isolate it well, and spend money on insulation. Or pressurize it and spend money on pressure vessels.
It surely sounds like a loser compared with petroleum products. Actually, no, loser is too weak. It is utterly intractable to use as a cheap energy storage system.
Yes folks, it is time to face the music. The climax of this sh17-show was in the 70’s and now we are waiting for the end credits.
Pack your sh17 folks, the show is over.
Sigh. Hydrogen is not abundant on earth. Water is abundant. W are reaching limits on water without using it for hydrogen production. Breaking the covalant bonds to free hydrogen from water takes more power than what exists in the hydrogen produced. So just to start the raw energy needed for hydrogens use as a energy package makes it a energy sink not source. Thats before any of the infrastructure energy costs associated with it are added. Its a terrible energy package to invest in. “hydrogen economy” Is a lie begining to end.
you can join in the headbanging as much as you like
but you’ll never convince the hydrogen crowd that it is just a battery
only a couple a weeks ago I explained it in detail to someone who had been very senior in the oil business—it was like a lightbulb flashing over his head—I think he actually got it
Thank you, Norman and others, for so rapidly and effectively deconstructing this nonsense. So, hydrogen is “abundant” on earth? Hydrogen atoms, yes; molecular hydrogen, no: so this is a classic “bait and switch” play. And note that the researchers have not reduced the cost of producing hydrogen; they have merely made the electrodes cheaper. But the cost of hydrogen production is almost entirely the cost of the energy needed to separate it from water, so we are talking about at best a 5% reduction in production cost, and perhaps 2% in life cycle cost.
By the way, the problem of effectively containing hydrogen was solved a century ago: you enclose it in cattle intestines, “goldbeaters’ skin”. Which dries out and rots in about 2 years. The R101, for example, sacrificed over one million cows. So a hydrogen economy would need vast herds of them. Anyone for cheap sirloin steak?
Methanol is a liquid (1000 times denser than hydrogen gas). The Methanol Economy is a good book making the case foor methanol.
The video posted earlier regarding CA is sobering. They appear to have taken a reliable power source and converted it into an intermittent one using solar/renewables in a very indirect way. Additionally all the non technical staff who are now on board will want to remain to give “input” and all of that input is basically additional overhead in both time and money. This seems to be a good example of complex systems failing, the failure is at the policy level.
It would seem we have too many elites for the positions available, they really gum things up and removing them seems to be a challenge.
If all or many of the power lines are as bad as that pictured, failure might start cascading and finding people and material to repair them will be a huge challenge. A well intended policy could crash a substantial part of the CA economy as fixed, sunk expenses go on no matter what and as they increase relative to income it is a leverage effect and not a one to one loss.
Was the video one that I posted a link to, or was it another one? The story gets worse, every time I read about it.
I read a story a couple of days ago saying that one of the problems California is having with its transmission lines is annealing. WSJ: Northern California Power Outages Could Soar If Aging Lines Aren’t Replaced, PG&E Study Finds When they anneal, lines tend to stretch too much and cause fires. I earlier posted a link saying that annealing is the expected result if an area overloads its power lines, as seems likely with intermittent renewables. If the temperature rises above 200 degrees F., wires tend to anneal. In a hot area, that is not much room.
From the WSJ article:
It was a different one. The failure was secondary to a hook which attached the insulator to the supporting structure actually wearing through over the years and completely failing allowing the cable to crash down and touch the tower with resultant sparking. There are photographs included that show the damage as well as the area that sparked and caused a fire. Through constant movement, these hooks have worn out, towers move and the original design life is long gone. The transmission line shown is literally falling apart and the only solution would seem to be total replacement. Apparently PG&E through green influence allowed technical people to retire, and policy people were put in place, money for maintenance went to new Green projects. Replacement costs will be huge and the costs to the hydro power supplier not insignificant in revenue forgone during shut downs for windy conditions.
Based on past experience and if the photographs(I believe they were referenced as actual, investigative photos) are accurate, CA is looking at power blackouts into the foreseeable future with the only other solution being to try and put out fires physically while keeping the electricity going. This would seem to be a great deal of indeterminacy with no real and timely solution.
Video becomes interesting about 1/2 way in. Juan is a former Air Force transport pilot and prior to some recent medical issues was a second in command on a 777 airliner.
In New York State the electric utilities receive more profit from doing emergency repairs then from maintenance. The regulators are “supposed” to stop the utilities from maximizing their profits at the expense of harm to the public, but of course they are bought far more cheaply than doing the right thing.
Not terribly surprising! Companies maximize return to shareholders.
I recently received a note from my gas company pointing out that my husband and I are responsible for making certain the gas pipe from the road to where it enters my house is inspected on a regular basis. It will take hiring a technician to do this. If they really wanted this done, they would inspect all of the pipelines, all the way to where they enter houses. It is not at all efficient for each homeowner to separately contract with someone to come out and look at their gas pipeline.
Ed, the same was true of the Pennsylvania Department of Transportation. Regular maintenance had to be paid for by the State, but emergency repairs were subsidised by the federal Government. This is another major disadvantage of large political units: well meaning but ignorant initiatives at the top create perverse incentives further down the pyramid. China today provides another object lesson in this issue.
Decentralisation, localisation, decision making at the lowest feasible level, … well, we have heard all this before.
I once hired a woman who was having financial troubles to help take care of my children.
I discovered that one of the things she was doing was buying a new (maybe previously used) car when her existing car had problems. It was easier to get a loan for a replacement car than to get a loan for fixes to the existing car. I expect that some others were following the same path.
I remember hearing that at the time of the last recession, people found that they could easily get student loans to live on, even though they could not get jobs. As a result, people who had little aptitude for more education took out these loans, worsening their situation.
What Australia has done to cripple its energy supply system (despite literally swimming in cheap-to-extract coal, uranium and thorium) rivals the best efforts of the Californians and Germans, as Jo Nova explains this very witty and wise presentation..
Australia has more energy resources per capita than almost any place on Earth, yet despite that challenge has managed to take top spot for electricity prices.
Joanne Nova explains what it took to achieve state-wide blackouts, flying squads of diesel generators, and a tripling of wholesale electricity prices in just five years.
Perhaps Australia wants to take itself out of the contest to determine which countries can continue longest. Australia makes hardly anything for itself. It perhaps couldn’t survive on resource alone, anyhow.
The resources of Russia are closer to China, India, Korea or Japan, so Australia is in trouble, unless its neighbours are interested in them.
Australia seems to be giving up on making things.
The car industry has closed and the once thriving aluminum smelting industry is now on life support thanks to expensive electricity and the downturn in global demand.
Still, Aussie coal continues to sell briskly.
Also, when the Brits finally Brexit, the Aussies are hopping to sell the old country a lot more apples, beef and dairy products, just like in the good old days.
I looked at BP data. It seems to give one more year of indications than the link you give.
According to it, the last five years of production has been relatively flat. (Your chart shows the last four years to be relatively flat.) At current prices, either the price are too high for the consumers or they are too low for producers. One way or the other, Australia is looking like “Peak Coal” as well.
South Africa’s coal production has been flat since 2010; China’s coal production has been flat since 2012.
Russia’s coal production has been rising. So has Indonesia’s. Perhaps they can produce coal more cheaply than Australia, China, and South Africa.
I’m not sure how the price of extracting Australian coal competes with Russia, indonesia, or China,where labor costs are considerably lower. But Australia has very thick seams of high quality coal close to the surface that can be dug up and shipped off fairly easily and efficiently.
I read that China has been sending out mixed signals, including holding up Australian coal at ports of entry for up to 45 days and applying stricter “environmental” checks on it. This may be part of the fallout from the US-China trade confrontation. There are geopolitical considerations in play, and the Chinese are anxious to keep the domestic industry coal alive, which with the current downturn they can only do at the expense of curbing imports.
This article, from February 18, 2019 says:
This was what I thought was the problem: low coal prices in China.
PG&E in California, temporarily cripples its energy system by shutting down the grid in large regions when wind is forecast due to risk of being liable for more fire damage from downed lines, not from the addition of renewables.
In fact, we are in the process of having a Generac 20KW installed. The electrical goes in on Tuesday. We’re getting a 500 gallon propane tank so we’ll have power for about 7-10 days in the event of a long outage, but most outages are 2-3 days. We run our businesses out of our house we call an industrial complex, so it’s important for us to be able to keep operating.
Perhaps I misunderstood the video, it was my impression that maintenance money or money in general was shifted to a renewable strategy. The issue with CA appears to be policies that don’t work, that poorly allocate capital. The real capital is gone, that was in part the homes, businesses destroyed and also the economic output that was not done due to loss of energy delivery.
PG&E is now in its second bankruptcy, the first was secondary to trying to “trade” energy when there was a shortfall of renewable – as in rain and lack of hydro power. Some policy wonk decided Eron could solve the problems.
Technical is very hard and not very social, if someone is wrong on a technical point, there is no way to come to a consensus, the easier way is to rid the group of the technical people. The meetings will feel better.
Curious, 3 phase? That is a fairly substantial generator.
We don’t yet know what role renewable energy played in the fires. Certainly there was a budget item: renewable energy versus adequate maintenance of the grid.
But there likely was also an issue of not adding enough transmission lines to the grid to support the additional intermittent energy. These long distance transmission lines would need to be built for peak loads, not average roads. If California took the easiest and cheapest route–that is, just dumped the intermittent electricity onto the grid–it may be directly causing the fires by adding to the “annealing” of aluminum wiring. Aluminum wiring is very easily overloaded. If it is overloaded, the wiring anneals, or stretches. It tends to cause fires when it stretches. Anneal happens at temperatures about 200F.
Whether or not annealing caused this round of fires, it needs to be fixed before it causes fires in the future.
Let me get this straight. California adds a lot of “green” windmills, to feed renewable energy into the grid, and then finds it has to shut down the grid whenever the wind blows. Welcome to the Law of Unintended Consequences.
Systems engineering isn’t as sexy and lucrative as banding together with the cronies in the renewable racket.
What we need is Elon Musk to invent the windmills and hydro power. Solar is already done and one small resounding success of his. Indeed, this man and his ideas keep on delivering. Let’s not forget the epic hyper loop concept just keeps on keeping on churning out fast and cheap mass transportation to the masses. With another stroke of applying his genius for less than 10 minutes he singlehandedly invented underground rail transportation.
Yup, we need more Elon.
A Renewable Elon.
Actually, California adds much more solar than wind. The solar tends to cause grid problems about dinner time each evening because people want to eat when they get home from work, and the sun is already down.
This is a great presentation. Should be required listening for those working on wrecking the grid in California.
Shared the link and posted this elsewhere.
I skipped about and didn’t hear the entire presentation. But what I heard fits into a narrative that it’s taken me a long time to pursue (on OFW). I don’t need convincing to believe that shutting down fossil fuel resources without having a realistic alternative is unwise. I also cannot be swayed from the notion that current land use and land development patterns are more causes of climate disruption than fossil fuels (that get deployed only as and to the degree that land use and development patterns dictate).
Perhaps they will encounter the same setbacks California has had in the video Dennis posted. As Gail pointed out, renewable, “clean”, energy does not mean it doesn’t need to be REPLACED, REPAIRED, or have maintenance….all not possible without Fossil fuels
However, a city like San Francisco is the most efficient in the Nation (or #2, depending on source).
Less does count, and most of the electricity is hydro (long story, not all good).
Texas or Georgia stats are embarrassing, and eventually fatal.
But, as pointed out, fossil fuel dependent— just a fraction so.
Most efficient or most dependent on imported finished products, however you choose to see it.
Hawaii is very efficient; no one can drive anywhere. They fall off the edge of the island.
yet in Hawaii we can rack up 10,000+ miles per year commuting to-from home-work per year. those are “hard miles” as well, with more wear and tear than long distance driving.
I lived in Maui 9 years.
You can put some miles on.
Interesting that spain breaks the exponential growth until saturation, then only trickle.
On the other hand spain is probably not an isolated grid.
This part sounds like a fairy tale to me:
Solar is a very up and down technology. The chart shown indicates this:
Even with all of this growth, 2019 will only be Europe’s third highest year for solar.
Solar adds huge overhead expenses, as soon as a country (or other area, such as a US state) adds very much of it. It needs a lot more transmission lines. It needs batteries. The use of Norway’s hydroelectric for mitigating short-term energy needs quickly maxes out. Part of the problem everywhere is likely to be transmission problems. Bottlenecks develop in trying to access what backup electricity is available.
I would expect that part of the low cost has to do with China dumping solar PV on the world market at below cost. It is not really sustainable. Regarding China’s solar electricity, it is headed for a second year in a row of steep declines. PV Magazine writes:
China makes this stuff. If it cannot be sold locally, it must be dumped on the world market.
“has to do with China dumping solar PV on the world market at below cost”
Maybe also that european countries compete with each other about following Paris agreement most.
Maybe European countries are desperate, because they have essentially no sources of energy. What coal, oil and gas they have are leaving them.
Something, no matter how poor, is better than nothing.
The desperate situation of the white race in the regions with less sunshine: Donald Trump and Boris Johnson = both of them are the whites with blue eyes.
The influx of the dark skin races into the regions with less sunshine has its drawbacks: rising vitamin D deficiency which means compromised abilities of the population.
“Nutrients interact in a coordinated manner in the body; it has been reported that 1,25(OH)2D can stimulate intestinal magnesium absorption.14 The effects of vitamin D supplementation on circulating levels of magnesium were investigated in patients with type 2 diabetes mellitus.31 In 126 adult patients with controlled diabetes (55 men and 71 women; mean [SD] age, 53.6 [10.7] years), a significant increase in serum levels of magnesium was found after they consumed vitamin D3 supplements (2000 IU/d) for 6 months.31”
I, too, am a light-skinned person with blue eyes. Vitamin D levels can be a problem for us too, partly because of too much sunscreen. Also, wearing long-sleeved shirts and long pants and not spending enough time outside in the sunshine.
Vladimír Putin is also a kight-skinned person with blue eyes. The same was Boris Jeltsin. No wonder there seem to be hints that Trump was elected thanks to the intervention of Russians.
The dying out Russians still have the abilities that the dying out white race in the USA appreciate:
““The Committee found that the IRA sought to influence the 2016 US presidential election by harming Hillary Clinton’s chances of success and supporting Donald Trump at the direction of the Kremlin,” the report reads using an acronym for the Internet Research Agency, the name for the group of the Russian hackers.
They did this in multiple ways, according to the report. The IRA targeted African Americans more than any other group through Facebook pages, Instagram accounts, Twitter trends, and more. “By far, race and related issues were the preferred target of the information warfare campaign designed to divide the country in 2016,” the committee wrote. The IRA also got unwitting targets to hand over personal information, sign petitions, attend rallies, and even teach self-defense classes.”
The most successful polititian in Slovakia after 1989 – light skin and hair + blue eyes:
An actual video from the 2020 parliamentary election campaing in Slovakia: the dominant white male of the leading party (mentioned above) and the quarelling children in the kindegarten which represent other competing parties:
wow, that’s a real logic stretch, MG.
Disregarding the later laughable propaganda the initial 1:39am post is indeed interesting one. Actually fact tracked mixing of races in northern latitudes could be leveraged up problem say in case we really get little Ice Age in the near future. For example, consider the situation in France or southern Sweden, the hatred for the host nation / their legacy compatriots could be supercharged in adverse climate shift/natural conditions.. Or it cool things (hot heads) down paradoxically (well only in scenario of no other pressing OFW issues + next Little Ice Age)..
oops fast tracked..
One of my friends told me that he had an experience of the contempt of the English towards the Irish and the Scots when he worked in one of the warehouses in England. Britain seems to be disintegrating.
The human races seem to be adapted to their environments like animal species are. Even within the races, the people working e.g. as farmers or as clerks are different.
As the artificial systems created by the humans using energy implode, there is a tendency towards matching the race with the natural conditions, i.e. light skin is better suited for the life in the regions with less sunshine. This fact was misinterpreted by Hitler as supermacy of the white race and misused for the elimination of the minorities with characteristics that were different from his model. It seems that he, as the person with different race characteristics, wanted to save himself, that is why he promoted the idea of supermacy of the white race. Obviously, he missed the energy part of the story, i.e. that it was the additional energy in colder climates that created the ideal conditions for the white race to become dominant. The presence of the winter season which eliminates other species was crucial to this dominance. Hitler missed this fact too and was badly defeated when he tried to subdue Russia with its cruel winters.
Maybe better could be said “the winter (or the lack of energy) eliminates the species that do not have energy”.
The tropics are so hot and humid year round that people are hard pressed to do much more than secure and prepare their food, build simple shelters and spend the bulk of their waking hours engaged in craftwork and basic and chatting around the hearth. Nature nurtures them and also has endless ways of keeping their population in check, assuring sustainability beyond the dreams of Greta.
The frigid zones are so cold and bleak most of the year that people are, likewise hard pressed to do much more than secure and prepare their food, build simple shelters and spend the bulk of their waking hours engaged in craftwork and basic and chatting around the hearth, etc., etc.
It is only in the temperate zones that people have both the motivation and the potential to innovate. The four seasons moving from cold to hot to cold again force them to be very adaptable or die, and the changing weather and temperature as the seasons progress provide them with ample opportunities to work and play hard and to get all kinds of tasks done.
Hence that well known Biblical passage:
To every thing there is a season, and a time to every purpose under the heaven:
A time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted;
A time to kill, and a time to heal; a time to break down, and a time to build up;
A time to weep, and a time to laugh; a time to mourn, and a time to dance;
A time to cast away stones, and a time to gather stones together; a time to embrace, and a time to refrain from embracing;
A time to get, and a time to lose; a time to keep, and a time to cast away;
A time to rend, and a time to sew; a time to keep silence, and a time to speak;
A time to love, and a time to hate; a time of war, and a time of peace.
Life in the temperate zone has a wonderful season rhythm to it that keeps us on our toes. Living here was an essential condition allowing us tropical apes to develop what used to be called civilization. (And yes, I call the Indian subcontinent temperate although it’s on the warm side most of the time.) It was not the only condition by any means, but an essential one nonetheless.
Eskimos and vitamin D:
This seems relevant to your comments regarding renewable energy. A bit of deferred maintenance.
Good video presentation Dennis, he points out the misguided mindset of rushing to create a renewable energy base resulted in neglected the existing grid and thus, creating the conditions that resulted in the wildfires. He also pointed out at the present rate to replacing the parts that caused the wildfires would at the present rate over 200 years!
Lots of other eye opening statements in the talk.
Check it out …for me that began in the middle part.
Interesting video! A person might think that after word of the problems involved, the message might spread that the total cost, including transmission lines, is significantly higher than advertised.
Rising pork prices hide a far bigger problem for China’s economy Article from Nov. 17, 2017
The bigger picture is one of waning demand and slowing economic activity
I think that high pork prices in China and high onion prices in India add to deflationary pressures with respect to goods in general, because consumers can generally not spend more than their wages. Pork (or other meat substitute) is a necessity in China; onions are a necessity in India. The decision to buy a car or go to a restaurant depends on having enough funds left over after necessities are covered.
I found this (only somewhat related) chart in WSJ’s Daily Shot. The general idea seems right–people’s income determines the amount that they can spend. I am not sure the correlation is close as the chart suggests, because it is easy to manipulate how close the correlation looks by the choice of the scales on the two axes. Also, world demand is important, not just US demand, for many goods. Also, it seems like after tax income is important, including transfer payments.
Gail, as usual you are right and the central banks are dead wrong. An increase in the price of necessities reduces disposable income, so depressing the price, or the consumption, of other goods. Inflation of prices, with stagnant wages, therefore leads to economic contraction and a slow decline into a subsistence economy. This is happening all over the world, and the bankers are the proximate cause.
Keynes, and MMT, predicted with their usual arrogant confidence that inflation would spur consumption, because people would spend money today that would be worth less tomorrow. They were wrong; disastrously wrong.
As I think about it, inflation seems to occur primarily when there is a new economy, and there is a real chance for increased productivity by the application of debt and fossil fuels. But as the economy gets more and more built out, both GDP growth and inflation tend to decrease. Eventually, the debt bubble pops, and we will have full-fledged deflation, I fear. It is all part of a cycle as well.
If the FED starts printing money and flooding the market with it; is that deflation? Is what happened in Weimar republic deflation? It seems the way the governments are acting is that they will not let deflation happen….Bridges to nowhere…infrastructure, bridges to nowhere and at last resort…war…..they will borrow on future generations to keep that from happening. How long did deflation happen in 2008? Not very long….You take the government and the FED out of the equation and you are right on…
No, they are “wrong” over the very long haul but “correct” now and in the near/midterm, that’s how BAUs last – endure decades and generations..
At least in terms of the priorities and vested interests of the insiders (preferring insular policies to keep the overall social power structure intact).
Keynes was too wealthy, and disconnected from basic human psychology. living in very rarified circles.
Whereas some purchases might be made on the ‘use it before you lose it’ principle, most will, if they are able to save in some form, cling on to what they have for dear life – just as they once guarded dried meat in the corner of a cave.
If you wish people to spend everything they earn, thereby maintaining consumption, there must be no real room for saving in any form.
Cue, I suppose, banning of cash and significant negative rates?
Yes, something along these lines (combo) will very likely happen in certain IC hubs..
“Reports that the US and China have reached an initial trade deal were met with silence in Beijing where officials declined to confirm whether an agreement had been made.”
“A key economic conference presided over by Chinese President Xi Jinping has called for “contingency plans” to deal with the daunting economic slowdown of the world’s second largest economy accentuated by the 18-month long trade with war with the US.”
“A major Chinese commodities trader became the biggest dollar bond defaulter among the nation’s state-owned companies in two decades, in a moment of reckoning for Beijing as it struggles to contain credit risk in a weakening economy.”
Looks like the trade war ‘phase one’ deal is happening, for what that’s worth:
It seems like Trump is playing his cards very well:
As discussed above, the Chinese know very well that Trump needs quick scoring before the re-election campaign is in full swing, therefore they don”t treat it as long term trade negotiation deal, merely a tactical maneuver, which means quasi BAU extension..
By now they are completely convinced about the US unreliability, hence the energy and defense, also trade deals elsewhere..
In a changing world, nothing can be permanent. Perhaps they understand the obvious.
The process of decoupling from the Chinese economy is already in full swing. Changing the course of this behemoth takes time.
The capital basically just wants to GTFO from China, including the people who does not buy into the propaganda, which in reality means most Chinese worth their salt.
It is there implicit behind the lines, they want out. It is unspoken, but it is there and they know that moving to the west means more prosperity, better bread and circuses. And getting rid of that god awful Chinese firewall of oppression.
The company that defaulted is owned by the Tianjin government. The way I understand the situation, Tianjin is in the very old industrial area of the country. I might think of it being like Detroit or Pittsburg. I would expect that the city is by itself having financial difficulties.
I was surprised at how open Xi Jinping was about China’s problems.
Gulfies msm occasionally airs these “lite warnings” ..
yes but half of the people will turn off because they talk about Trumpy…..most people think we have a healthy strong economy and not looking at the deficit; I don’t see China giving in because that would mean collapse for them. Nicole Foss Got it right 10 years ago when she called the U.S the last best horse in the glue factory. I wish I was in the business of political advertising! Would be a billionaire in no time!
“World economy falling apart” is pretty explicit.
“U.S. business debt exceeded that of households for the first time since 1991, a potential warning sign for the economy as corporate investment softens. …“The Fed’s Powell has said corporate leverage ‘historically high’.”
I tried to look to see what was happening using Federal Reserve of St. Louis data, but I didn’t run find total US business debt. Instead, I found non-financial debt of businesses and computed the ratio to GDP. On that basis, businesses don’t come close to household debt. These are some ratios to GDP.
US mortgage debt looks like it went into a bubble between 2001 and 2009. It has come down a lot, relative to GDP. Total household debt (green line) includes credit card debt and student debt, among other things, besides mortgages. It is the non-mortgage part (difference between blue line and green line) that is growing.
If total debt of businesses is now equal to total household debt (blue line), the amount of financial debt of businesses must be very high. I would imagine that this would include all of the debt for buying back the company’s own shares.
“India’s economy continued to report deepening signs of a slowdown with October factory production figures contracting as much as 3.8%, dragged by manufacturing which shrank 2.1% as well as power and mining, which declined even more.
“Government data also showed retail inflation shot up to a 40-month high of 5.54% in November.”
“A a severe slump [has] taken hold in India’s gems and jewellery industry, a key sector of the economy employing almost 5 million workers and contributing about 7% of India’s gross domestic product.
“It’s the latest pillar of the economy to wobble, as a funding crisis hits everyone from carmakers to retailers.”
“Onion prices in [India] have soared tenfold this year, sparking a nationwide outcry, questions in parliament, a spate of bizarre onion-related crime and dozens of viral memes as the outraged citizens of the world’s second most populous nation find themselves unable to afford their staple food.”
IN ONE CHART
Here’s proof that 401(k) plans are not working for most Americans — can you guess who they ARE working for?
By Shawn Langlois
Published: Dec 12, 2019 2:17 pm ET
With almost half of all working-age families having ZERO in retirement savings, the fact that the median family had only $7,800 in these accounts shouldn’t come as a surprise. At the same time, the 90th percentile family had $320,000 and the top 1% of families (which isn’t shown on the chart) had $1,663,000 or more.
“These huge disparities reflect a growing gap between haves and have-nots since the Great Recession as accounts with smaller balances have stagnated while larger ones rebounded,” the EPI’s Monique Morrissey wrote
The big gap between the mean retirement savings of $120,809 and the median retirement savings is yet another example of how the rich are getting richer and the poor are getting poorer in this country.
“The retirement system does not work for most workers,” Morrissey explained in the note. “Decades after the number of active participants in 401(k)-style plans edged out those in traditional pensions, 401(k)s are not delivering substantial income in retirement, and that income is not equally shared
How about that! I am so shocked and surprised!
We’ve seen nothing yet…just as those in Paris France
Under the new plan, 62 would remain the legal retirement age. But there will be incentives to keep working until 64, which Philippe said will allow for a balanced pension budget by 2027.
He said the changes are necessary, with 1.7 people working to support each retiree instead of 4.5 when the system was created in 1945, NPR’s Eleanor Beardsley reports from Paris
It remains to be seen whether French people will accept the changes.
The largest rail workers’ union, the CGT, called for more strikes after the prime minister’s remarks.
“The government is taking everybody for fools,” said Philippe Martinez the head of the CGT, according to France24. “Everyone will work longer – it’s unacceptable
We will see how foolish we really are soon enough!
This is a complete mess:
More of a mess….horrible and what people do when their backs are against the wall
Sold to China as a Bride, She Came Home on Brink of Death
The suspicious death of a Pakistani woman adds to growing evidence of mistreatment and abuses inflicted on hundreds of women and girls from the country who have been trafficked to China as brides.
By Associated Press, Wire Service Content Dec. 12, 2019
In this April 14, 2019 photo. Pakistani Christian woman Samiya David shows her picture with Chinese husband, in Gujranwala, Pakistan. Samiya had been in China just two months when her brother got a phone call telling him to pick her up at the airport. When he arrived, he found Samiya in a wheelchair, malnourished and too weak to walk, said her cousin Pervaiz Masih. She died barely five weeks later. Masih was among the relatives who prepared Samiya’s grave and attended her burial in May. (AP Photo/K.M. Chaudary) THE ASSOCIATED PRESS
AP investigations have found that traffickers have increasingly targeted Pakistan’s impoverished Christian population over the past two years, paying desperate families to give their daughters and sisters, some of them teenagers, into marriage with Chinese men. Once in China, the women are often isolated, neglected, abused and sold into prostitution, frequently contacting home to plead to be brought back. Some women have told The Associated Press and activists that their husbands at times refused to feed them
‘The owl of wisdom’: from the orange-hued lady who brought us ‘2+1+4 = 7, so 2014 is going to be a great year in which we can make things happen!’. One of the oddest public speeches by a senior figure(head) ever.
What a hoot! It’s nice to be entertained a bit at the End of the World…..
This is a link to the 2+1+4 = 7 numerology video showing Christine Lagarde.
The owl (Athene noctua) is sacred to Athena, Goddess of Wisdom and patroness of Athens. I remember giving a Sikorsky crystal owl to the (lady) surgeon who performed my cataract surgery.
The Gods will punish one who abuses their holy icons.
Igor Sikorsky is generally credited with inventing the helicopter.
Thank you for the correction. Mea culpa.
Utter CHAOS…..Order ….Order…..
Madrid (AFP) – Swedish activist Greta Thunberg accused rich countries of “misleading” people over climate action at UN talks in Madrid on Wednesday hours before a veteran leader of the global environmental movement with whom she shared the podium was locked out of the conference.
The UN climate forum tasked with saving the world from runaway global warming has become an “opportunity for countries to negotiate loopholes and avoid raising their ambition” to act on climate, the 16-year-old told delegates and observers to vigorous applause.
“Countries are finding clever ways around having to take real action.”
Nations gathered in Spain’s capital are struggling to finalise the rulebook of the 2015 landmark Paris climate accord, which aims to limit global temperature rises to “well below” two degrees Celsius and to a safer cap of 1.5C if possible.
But the consensus-based talks are bogged down in politically charged wrangling over the architecture of carbon markets, timetables for the review of carbon-cutting pledges and a new fund to help poor countries already reeling from climate impacts.
Amid glacial progress in negotiations, more than 200 youth and indigenous rights activists were forcibly removed after protesting outside the plenary hall, chanting “climate justice now!” and “Shame! Shame! Shame!”.
Among those unable to access the talks was Greenpeace International executive director Jennifer Morgan, who had joined Thunberg in addressing plenary delegates hours earlier.
All accredited observers — researchers, scientists, NGOs who play a critical role in the talks — not already in the building were also denied entry after the fracas.
– ‘This is not leadership’ –
“We are the ones who can apply pressure and hold governments accountable,” Morgan told AFP outside the COP25 venue.
“I call on the Secretary General to intervene here to make sure that youth and citizens around the world can engage and have their voices heard in these negotiations.”
Several sticking points remain as the two-week marathon negotiations enter the final days.
Nations are at odds over how the fight against climate change should be funded and how carbon trading schemes should be regulated.
Meanwhile..in the actual REAL WORLD of Planet EAARTH…
The first is that the Arctic may have crossed an important climate threshold, causing the region’s vast expanses of permafrost (basically, frozen ground) to begin to thaw, releasing organic carbon that has until now been locked up in the soil. The report concludes that the melting permafrost is now releasing between 1.1 and 1.2 billion tons of CO2 each year, which is roughly the combined annual emissions of Russia and Japan. And if the warming continues, that could accelerate, with catastrophic consequences (hello “permafrost bomb”). Scientists estimate that approximately 1,460 billion to 1,600 billion metric tons of organic carbon is stored in frozen Arctic soils, almost twice the amount of greenhouse gases as are contained in the atmosphere.
The second bit of alarming news from the Arctic is that scientists have collected strong evidence from satellite data that the Greenland ice sheet is melting seven times faster than it did in the 1990s. The amount of ice lost nearly doubled each decade, from 33 billion tons per year in the 1990s to an average now of 254 billion tons annually. Since 1992, nearly 4 trillion tons of Greenland ice have flowed into the ocean, equivalent to roughly a centimeter of global sea-level rise
As the link says, this is politics. There is close to nothing we can do. Renewables don’t work, for example.
The poor countries would like the rich countries to fix this problem, but they can’t.
The poor countries would like the rich countries to send them more money that will be stolen by the rulers of those poor countries. And the United Nations will cheer them on, because they also are stealing from the rich countries. It seems that there is, after all, honour among thieves.
The United Nations seems to operate as if it is trying to attempt to protect the poor. Its funding is mostly from the rich, I expect. The question is how long the funding from the rich countries will keep up.
“Chevron’s $11 Billion Write Down Is A Warning For The Oil Industry”
With lower oil and gas prices, it is not surprising that reserves need to disappear, for virtually everyone.
This report tells us that a big share of the write-down was Appalachian natural gas. Part of the write-down related to “its LNG project in Canada.”
In other words, this write-down is pretty much entirely natural gas. None of it is in the Permian Basin.
There do need to be write-downs, but where?
“The U.S. budget deficit rose by 2% last month to $209 billion, another step in a journey back toward $1 trillion-a-year budget shortfalls… “November is the second month of the government’s 2020 budget year…
“The Congressional Budget Office is forecasting that the deficit for 2020 will hit $1 trillion and will stay above $1 trillion for the next decade. The country last ran annual $1 trillion annual deficits from 2009 through 2012 during and after the financial crisis…
“So far this budget year, the government is running a deficit of $343 billion, up 12% from a year earlier.”
“The Federal Reserve left borrowing costs unchanged at its last policy meeting of the year on Wednesday… Policymakers lowered the benchmark interest rate three times this year, to a target range of 1.5% to 1.75%, which appeared to help stabilize an outlook that had become increasingly uncertain.”
“Home Depot… cut its sales forecast for 2020, signaling to investors that there could be weakness in the housing market ahead… The disappointing 2020 forecast comes amid reports that the US housing market is poised to slow in 2020.”
The U.S. economy may be chugging along this holiday season, but according to a new survey of CFOs by the Duke University/CFO Global Business Outlook, 52% of CFOs of U.S. companies expect a recession next year. Another 24% predict that recession to hit by mid-2021.”
It is interesting to compare the US percentage expecting recession next year (52%) with the reported percentages from other countries:
Africa, Canada, and Latin America are all quite resource dependent. Low resource prices are a problem in these areas. It is not surprising that they expect recession.
Europe tends to be more service oriented, so it can hope that the low resource prices will continue to be a benefit to it. Its recession prediction percentage is 49%, which is below the US. It seems like several of the countries are already at the edge of recession, however. The sample size is not very high in Europe. It may make a difference where the CFOs are from.
That is interesting. I would have thought Europe CFO’s would be among the most pessimistic. I saw that Moody’s just downgraded Europe’s banks:
“Credit ratings agency Moody’s has downgraded its outlook for European banks to negative, predicting that weak economic growth will cause loan quality and profitability to suffer over the coming year.
“The agency has already downgraded its outlook for the UK, German and global banking systems, again citing weak growth and a highly uncertain 2020.”
Lagarde has had her first presser as President of the ECB and is sounding a bit bonkers, as usual:
“”Once and for all, I’m neither a dove nor a hawk, my ambition is to be this owl that is
often associated with a little bit of wisdom,” Lagarde said.”
Saying that comparable sales (in the same stores) will be up 3.5% to 4.0% doesn’t sound all that bad to me. Inflation is low. This still assumes a fair amount of growth. In theory, if there were a lot of growth, Home Depot would be adding stores.
US Population is reported by Federal Reserve of St. Louis to be up about 0.6% per year now. The US birth rate keeps falling. At the same time, the big growth is in the Over 65 age group. More of them will be downsizing–moving in with children, moving to smaller spaces, or even moving to assisted living. It is hard to believe that the number of people needing new residences is growing by much. Old residences need to be upgraded or replaced, of course.
At the same time, Credit Suisse’s research department is forecasting QE4 by yearend. The problem seems to reflect a combination of new banking rules, not enough Treasuries in circulation because of QT, and the high stock market/high bond market (due to low bond yields).
According to the newsletter linked above:
If carry makes the world go ‘round, and reserves make carry possible…
…the day we run out of reserves would be the day when the world would stop spinning.
In fact, an inadequate quantity of securities considered suitable for reserves is expected to be the problem at December 31, when banks all need to fix up their balance sheets to prepare for year end statements that meet regulatory rules that have become more and more onerous (my view, not Credit Suisse’s). If there is an inadequate quantity of securities to be used for reserves:
One of the problems is new Basel III rule, which are intended to provide wider margins to cushion banks, if they are in danger of falling into bankruptcy.
Another problem area is the reserves required under the Globally Systemically Important Bank (G-SIB) scores. When stock prices are high and interest rates are low (leading to high bond prices) the need for these reserves is especially high.
The problem is that there aren’t enough of these reserves available, especially because of US Quantitative Tightening.
If I were a regulator, I would be inclined to say, “We goofed with these regulations. While they sound good in theory, they are likely to be absolutely impossible to carry out in practice.” So, rather than QE (or maybe in addition to it), I would postpone/rethink the regulations. Basel III struck me as counterproductive, years ago, when it was still being proposed. G-SIB requirements sound pretty onerous too.
The note sounds reasonable to me. The financial markets may run into severe turbulence at yearend.
When you don’t regulate them enough, they gamble, engage in fraud, etc. requiring massive and ever growing bailouts to save the system. When you do, you get less economic activity. Which would you prefer?
We can’t win either way!
Because both ways are centralized and too big to succeed?
Advantages and disadvantages of decentralization:
You are right, Artleads! The way humans try to run our economies is on a centralized basis. The way nature operates is on a very decentralized basis, with random variations playing a major role. The natural approach is very much more efficient. Adding lots of overhead gets an economy nowhere!
Another article flagging up potential end of year problems in the repo market:
“The $2.2 trillion repurchase agreement market – part of the inner workings of the U.S. financial system – is facing what could be another strain as the year comes to a close. That could have wider implications than just Wall Street.
“Whether [the Fed’s intervention] will be enough to offset the traditional year-end strains will be tested next week, when companies will again face tax obligations while $78 billion in Treasury supply will also need to be settled. At the year-end there is also typically a reluctance by banks and fund managers to lend, which can leave borrowers struggling to raise cash.”
Zerohedge has an article out about the situation as well. “Massive… Huge… Largest Ever”: Fed Will Flood Market With Gargantuan $500 Billion In Liquidity To Avoid Year-End Repo Crisis
The article describes a whole list of extra repos to be offered, spanning the time over yearend. In total, they add up to $500 billion. One summary is this:
Whether this will be enough is a good question, in my opinion. The market could need a lot more than this.
This is a chart from the article, as well. In total, it does away with all of US Quantitative Tightening.
“The Daqin line, China’s busiest coal freight railway, saw shipments plunge by 7.95% year-on-year to 35.41 million tons in November amid weakening domestic demand for coal, according to a Tuesday report by its operator Daqin Railway Co. Ltd.”
“There was carload unit growth going into 2006 [US rail]. Then the pattern began to fall—into the Great Recession of 2007-2008. Since then, there have been only two brief growth periods—2009-2012 and 2014-2016… The biggest single decline in carloads took place in the coal sector.”
“The last coal-fired power plant in Wales [UK] will go dark on Friday afternoon with nearly 170 jobs expected to be lost in the following months… The UK plans to wean itself off coal by 2025.”
I looked up US coal production in the EIA data. On a volume basis, US coal production peaked in 2008. This was back when all energy prices were high.
On an energy basis, US coal production peaked back in 1998. Actually, there were a lot of years that were pretty close. It looks like 2008 was the last year that volume could sort of be kept up.
At least part of the declining coal production seems to be “Peak Coal” in the United States. Some of the “bad press” for coal may be sort of a sour grapes kind of reaction. Coal is leaving us; we really didn’t want it anyhow.
Let’s get EVERYONE on board….with lots of Cash….that always does the trick!🤑
Belfium EU Green Deal
European Commission President Ursula von der Leyen gives a press statement on the European Green Deal at the European Commission headquarters in Brussels, Wednesday, Dec. 11, 2019. In her bid to lead the EU toward climate neutrality, European Commission president Ursula von der Leyen wants to put up 100 billion euros (dollars 130 billion U.S.) to help member countries that still heavily rely on fossil fuels transition to lower emissions. (AP Photo/Francisco Seco)
To get everyone on board with her plan to combat global warming, European Commission President Ursula von der Leyen wants to put up 100 billion euros ($130 billion) to help EU nations that still heavily rely on fossil fuels transition to lower emissions.
Von der Leyen, who took office this month at the helm of the European Union’s powerful executive arm, has made the fight against climate change the top priority of her five-year mandate. The first woman ever to lead the commission, she has pledged to make the EU the world’s first carbon-neutral continent by 2050 as part of the “European Green Deal” she presented Wednesday.
The commission hopes the fund will help EU nations that stand to be hit the hardest financially by the transition to cleaner industries. Among them, Hungary, the Czech Republic and Poland, which rely heavily on coal-fired power plants, have yet to commit to the EU’s goal of having net zero emissions of CO2 by 2050
Sure, I Pledge also… where’s my cheque?
It seems to me the the principle of obliquity is being successfully pursued. For best results, don’t aim directly at your target, but instead aim at something else that will indirectly result in your target being achieved. T
his can be an effective strategy when you want to implement a policy, to effect a change, win a game of football, or in many instances simply to get from A to B.
In addition, letting on about what one’s actual targets are is often counterproductive.
Perhaps the idea is to substitute for fossil fuel which is leaving us.
If ever there was a lesson I need to learn…