Reaching the End of Early Stimulus – What’s Ahead?

Many people thought that COVID-19 would be gone with a short shutdown. They also thought that the world’s economic problems could be cured with a six month “dose” of stimulus.

It is increasingly clear that neither of these assumptions is correct. Despite the claims of epidemiologists, our best efforts have never been able to reduce the number of newly reported COVID-19 cases for the world as a whole for any significant period of time. In fact, the latest week seems to be the highest week so far.

Figure 1. Chart of worldwide COVID-19 new cases, in chart prepared by Worldometer with data through September 20, 2020.

At the same time, the economy, despite all of the stimulus, is not doing very well. Airlines are doing very poorly. The parts of the economy that are dependent upon tourism are having huge problems. This reduces the “upside” of economic recovery, pretty much everywhere, until it can be corrected.

Another part of the world economy doing poorly is clothing sales. For example, many fewer people are attending concerts, weddings, funerals, out-of-town business meetings and conventions, leading to a need for fewer “dressy” clothes. Also, with air travel greatly reduced, people don’t need new clothing for visiting places with different climates, either. Most clothing is bought by people from rich countries but made by people in poor countries. This cutback in clothing purchases disproportionately affects people who are already very poor. The loss of jobs in these countries may lead to an inability to afford food, for those who are laid off.

Besides these difficult to solve problems, initial programs set up to help mitigate job losses are running out. What kinds of things might governments do, if they are running short of borrowing capacity, and medical solutions still seem to be far away?

In Section A of this post, I outline what I see as some approaches that governments might take to try to “kick the can down the road” a while longer, as well as some general trends regarding near term outcomes.

In Section B, I explain how our current problems seem to be related to the more general “overshoot and collapse” problems of many prior economies. I show that historically, these overshoot and collapse situations seem to have played out over a number of years. In many ways, the outcome might look more like “overshoot and decline” than “overshoot and collapse” from the point of view of an observer at the time.

In Section C, I explain two different types of “breakage” we can expect going forward, if we are really dealing with an overshoot and collapse situation. In the first, oil production is likely to fall because of the collapse of some of the governments of oil exporters. In the second, the international trade system breaks down because of problems with the financial system and countries no longer trusting each other’s currencies.

[A] Ideas for “Sort of” Addressing the Economic Problems at Hand 

The following are a few ideas regarding possible mitigation approaches, and the expected results of these attempted solutions:

[1] Programs to keep citizens in their homes will likely be extended. Mortgage repayment programs will be extended. Renters will be allowed to stay where they are, even if they cannot afford the rent.

[2] New programs may be added, allowing those without adequate income to pay for electricity, heat, water and sewer connections. These programs may be debt-based. For example, homeowners and renters may be given loans to pay for these programs, with the hope that eventually the economy will bounce back, and the loans can be repaid.

[3] More food bank programs will be added, with governments buying food from farmers and donating it to food banks. There is even an outside chance that people will be given loans so that they can “buy” food from the food bank, with the hope that they can someday repay the loans. All of these loan-based programs will appear to be “cost free” to the government, since “certainly” the crisis will go away, and borrowers will be able to repay the loans.

[4] Loans to students will increasingly be put in forbearance, to be repaid when the crisis is over. Auto loans and credit card debt may be also be put into forbearance, if the person with the debt has inadequate income.

[5] Even with all of these actions, families will tend to move back together into a smaller total number of residences. This will happen partly because citizens won’t want to be burdened with even more debt, if they can avoid it. Also, older citizens won’t want to move into facilities offering care for the elderly because they know that COVID restrictions may limit with whom they can have contact. They will much prefer moving in with a relative, if anyone will take them in return for a suitable monthly payment.

[6] As extended families move in together, the total number of housing units required will tend to fall. Prices of homes will tend to fall, especially in areas where citizens no longer want to live. Governments will encourage banks and other mortgage holders to look the other way as prices fall, but as homes are sold, this will be increasingly difficult to do. In many cases, when homes are sold, the selling prices will fall below the balance of the debt outstanding. Governments will pass laws not allowing financial institutions to try to obtain the shortfall from citizens, at least until the crisis is over.

[7] Some businesses, such as restaurants without enough patrons and colleges without enough students, will need to close. Clothing stores without enough sales will also need to close, as will retirement homes without enough residents. All of these closures will lead to a huge amount of excess commercial space. It will also lead to the loss of more jobs, raising the number of unemployed people.

With these closed businesses, the price of commercial real estate will tend to fall. Lenders will be encouraged to “extend the loans” and “pretend that asset prices will soon recover,” when renewing loans. Even this approach won’t be enough in many cases, as businesses file for bankruptcy.

[8] With fewer residences and business properties occupied, the amount of electricity required will fall. Wholesale prices for electricity will tend to fall, pushing ever more fossil fuel and nuclear electricity providers out of business. Electricity outages will become an increasing problem, as renewables become a larger share of the electricity mix and are unable to increase supply when needed. Rolling outages will become more common.

[9] Pensions of all kinds will become more difficult to pay. Government programs, such as Social Security in the US, will have less revenue to pay pensions. There are funds set aside in the Social Security Trust Fund to cover a shortfall in funding, but these funds are simply non-marketable US government debt. In theory, the US government could add more debt to the Trust Fund and make payments on the basis of this added debt. Otherwise, the US will likely need to either raise taxes or increase the “regular” government debt level, in order to continue to pay Social Security pensions as planned.

Private pensions, backed by bonds and shares of stock (and perhaps other assets), will find the values of their available assets are falling. Governments, if they are able to, will try to hide this problem. For example, regulators may develop a new way to value assets, so as to make pension funding shortfalls mostly disappear.

In the case of pension bankruptcy, government insurance is often theoretically available. In the US, Pension Benefit Guaranty Corporation provides coverage; other countries may have similar programs. Unfortunately, this program is not set up to handle a large influx of new bankrupt plans, without raising taxes. The problem then will be raising taxes enough so that one year’s pension benefits can be paid, pushing the problem down the road a bit longer.

Bank accounts have similar guarantees, with similar funding problems. The guarantee organization has very little funds available, without raising taxes or somehow increasing debt.

[10] Stock market prices will tend to fall, leading those who have purchased shares using debt to want to sell quickly, pushing the stock market down further. Currency relativities will fluctuate wildly. Derivatives of many kinds will encounter payment problems. Many ETFs likely won’t work as planned. Governments will try to figure out ways to somehow mitigate these problems to the extent possible. For example, stock markets may be closed for a time to hide the problems. Or, additional time may be given to settle purchases, so that perhaps the deficiencies can be corrected. Eventually, some banks may be taken over by governments, to assure the operation of the parts deemed essential.

[11] Eventually, governments may find it necessary to nationalize a wide range of essential businesses. These could range from trucking companies to banks to oil companies to electricity transmission repair companies. If the balance sheets of these companies are too bad, governments may simply stop publishing them.

[12] These types of actions will mostly be available to “rich” countries. Poor countries can tap their “rainy day” funds, but these will soon be exhausted. In this case, poor countries will find that there is little they can do unless international organizations bail them out. Because of cutbacks in tourism and in orders of finished goods, such as clothing, these countries are likely to encounter high levels of unemployment. Without aid, the poorer citizens of these countries will find it impossible to afford an adequate diet. With inadequate nutrition, the health of low income citizens will decline, and they will easily succumb to communicable diseases, such as tuberculosis and malaria. Death rates are likely to skyrocket.

[B] What Happens When an Economy Outgrows Its Resources? 

Most people think that the issue we are dealing with is a temporary problem associated with a new coronavirus. I think that we are dealing with a much worse problem: The world’s population has outgrown the world’s resource limits. This is why our current problems look so difficult to solve from a financial point of view. This is part of the reason many people feel that shutting down the economy for COVID-19 is a good choice. There are really many reasons for the shutdowns, besides preventing the spread of COVID-19: Keeping people inside stops the many protests related to low wages. The shutdowns appear to restore order to a troubled system. Broken supply lines from shutdowns elsewhere reduce raw materials availability, making it more difficult to keep production in one part of the world operating, when others are closed.

Overshoot and collapse is a problem that many smaller economies have encountered over the years. If I am right that we are now encountering a similar situation, there is a big change ahead. The change will not be instantaneous, however. The big question that arises is, “Over what time scale does such a collapse take place?” If it takes place over a number of years, it may look more like “overshoot and decline” than “overshoot and collapse” to those who are living through the era.

A recent partial collapse was that of the Soviet Union in 1991. The Soviet Union was an oil exporter. Oil prices had hit a high in 1981 and had been declining for 10 years when the Soviet Union collapsed. With low oil prices, it had been difficult to earn enough revenue to reinvest in new oil fields to replace the production that naturally declines as oil is extracted. Oil, directly and indirectly, had provided many jobs for the Soviet Union. After ten years of stress, the central government of the Soviet Union collapsed in 1991.

Low oil prices first slowed production growth between 1982 and 1987 (Figure 2). Oil production began to decline in 1988, three years before the government collapsed. Production gradually rose again in the early 2000s, as oil prices rose again.

Figure 2. Oil production and price of the former Soviet Union (FSU), based on BP’s Statistical Review of World Energy 2015.

What was surprising to me was the fact that consumption of all types of energy by the Soviet Union fell at the time of the central government collapse in 1991, even hydroelectric. The overall level of energy consumption never bounced back to its previous level.

Figure 3. Former Soviet Union energy consumption by fuel, based on data of BP’s Statistical Review of World Energy 2018.

What happened was that many inefficient industries were forced to close. Some of these industries were in the Ukraine; others were in Russia and elsewhere. As they closed, less electricity and less oil and gas were used.

The loss in energy consumption was pretty much permanent. The manufacturing that left the Soviet Union was replaced by other, more efficient, manufacturing elsewhere. Also, without their previous manufacturing jobs, the people of the former Soviet Union were poorer. They could not afford to buy cars and homes, keeping fuel consumption lower.

Another indicator regarding the speed of collapses is the analysis done by researchers Peter Turchin and Sergey Nefedov, regarding collapses of eight agricultural economies from earlier periods. I compiled the information they provided in the book Secular Cycles in the chart shown in Figure 4. In the cycles they analyzed, the “crisis period” seemed to last 20 to 50 years. One thing that is striking in their analysis is that epidemics often played a major role in the declines. As wage disparity grew, poorer workers ate less well. They became more vulnerable to epidemics and often died.

Figure 4. Chart by author based on information provided in Turchin and Nefedov’s book, Secular Cycles.

In these early cycles, the major industry was farming. These collapses were in the days before electricity use. In these situations, collapses tended to play out over 20 to 50 years. Our more modern economy, with its just-in-time supply lines, would seem likely to collapse more quickly, but we can’t know for certain. This analysis is thus another data point that suggests that what may be ahead could be closer to “overshoot and decline” than “overshoot and collapse.”

[C] What May Be Ahead

[1] We are likely to experience the collapse of central governments of several of the oil exporting nations, in a manner not entirely different from the collapse of the Soviet Union in 1991.

Oil prices have been low for a very long time, since 2008, or at least since 2014.

Figure 5. Weekly average spot oil prices for Brent, based on data of the US Energy Information Administration.

Most OPEC oil producers seem to require prices in the $100+ per barrel range in order to be able to fund the programs their people expect (Figure 6). One important program provides subsidies for imported food; other programs provide jobs. Without these programs, revolutions to overthrow the current leaders seem much more likely.

Figure 6. Estimate of OPEC break-even oil prices, including tax requirements by parent countries, from APICORP. Figure is from 2014.

At this point, oil prices have been below $100 per barrel since 2014, a period of 6 years (Figure 5). Stress is increasing; OPEC producers have cut production in an attempt to try to get prices up. Prices are now in the low $40s.

We should not be surprised if, over the next few years, oil production starts to fall in several areas around the world because of internal problems. Another possible impetus for the drop in production may be wars with other nations. Some such wars might be started simply to try to get the price of oil up to a more acceptable level.

We have been falsely led to believe that oil is not important; renewables can handle our needs in the future. In fact, oil is essential for today’s farming. It is essential for transportation of goods and services of all kinds. It is essential for the construction industry and for mining. Researchers in academic institutions have received grants, encouraging them to put together models regarding what could be ahead. These models tend to be extremely unrealistic.

One of the most absurd models is by Mark Jacobson. He claims that by 2050, the world economy can operate almost entirely using wind, solar, and hydroelectric. Unfortunately, we don’t have until 2050; world oil, coal, and natural gas supplies look likely to decline in the 2020 to 2025 timeframe because of low prices. Another problem with this approach is that there is not very much fossil fuel to extract, because most of what appears to be available from resource studies cannot really be extracted at the low prices set by physics. 

The underlying problem is confusion about which direction prices go, as an economy reaches limits. Economists assume that scarcity will cause prices to rise; the real story is that fossil fuel prices are set by the laws for physics because the economy is a dissipative structure. As the economy approaches limits, prices tend to fall too low for producers, rather than rise too high for consumers.The sad truth is that we can’t even count on the continued extraction of the small amount of fossil fuels that Jacobson assumes will exist after 2050.

[2] We are likely to see a huge change in the international financial system and in the international trade system in the next few years. 

As long as there were plenty of resources, relative to the world population, the optimal approach was to do as much international trade as possible. This approach would maximize world GDP. It would also add jobs in developing areas of the world without too huge an impact on job availability in the countries moving their manufacturing to lower-cost areas.

In the last few years, it has become increasingly evident that there aren’t enough jobs that pay well to go around. This is really the underlying problem with respect to the increased hostility among nations, such as between the US and China. Tariffs are being used to try to bring jobs that pay well back to those who need them. Strange as it may seem, it takes fossil fuels to create jobs that pay well.

Figure 7. World Trade as a percentage of GDP, based on data of the World Bank.

Figure 7 shows that international trade was rising as a percentage of GDP for many years, and it hit a high point in 2008. Since then it has bounced around a little below that high point. In 2020, it will clearly take a big step down because of all of the cancellation of trade related to COVID-19 restrictions.

We saw earlier that commodity prices tend to fall too low for producers. Indirectly, this means that profits tend to fall too low. Interest rates tend to follow these low profits down, since businesses cannot afford to pay high interest rates.

With these low profits and low wages, the financial system gets strained. “Debt and more debt” seems to be the way to fix the system. Growing debt at ever-lower interest rates is encouraged. These low interest rates tend to raise asset prices because monthly payments to buy these assets fall with the falling interest rates. Stock markets tend to rise, even when the economy is doing poorly.

If the many strange approaches I outlined in Section A are used to add even more debt to keep the system afloat, eventually some part of the system is going to “break.” For example, banks will stop issuing letters of credit with respect to purchases made by buyers that don’t seem sufficiently creditworthy. Banks may stop trusting other banks, especially if the banks do not really seem to be solvent. At some point, the international financial system seems likely to start “coming apart.” Eventually, the US dollar will stop being the world’s reserve currency.

My guess is that a new two currency system will develop. Governments will issue a lot of currency for local use. It will not be useful for buying goods from other countries. Much of it will be used for buying locally produced food and other locally produced goods.

Very little international trade will be done. Any international trade that will be done will occur between trusted partners, at agreed upon exchange rates. Perhaps a special currency will be used for this purpose.

In this new world, individual countries will be very much on their own. With very little fossil fuel, countries will tend to lose electricity availability very quickly. Transmission lines will go unrepaired. It will become impossible to fix existing wind turbines. Road repair will become impossible. Electric cars will likely be as unusable as gasoline powered ones.

There will likely be fighting about resources that are available, leading to countries subdividing into smaller and smaller units, hoarding what little resources they have available.

Note:

1Energy prices tend to fall too low because, as the economy gets more complex, wage and wealth disparity tend to grow, reflecting differences in training and responsibility. The problem occurs because low-paid workers cannot afford to buy very large quantities of goods and services produced by the economy. For example, many cannot afford a car or a home of their own. The spending of high-paid workers does not offset the loss of demand by low-paid workers because high-paid workers tend to spend their wages more on services, such as advanced education, which require proportionately less energy consumption. Ultimately, the lack of demand by low-paid workers tends to pull down the prices of oil and other commodities below the level required by producers.

This entry was posted in Financial Implications and tagged , , , , by Gail Tverberg. Bookmark the permalink.

About Gail Tverberg

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

2,450 thoughts on “Reaching the End of Early Stimulus – What’s Ahead?

        • Governments, like pimps, whores, mafias. warlords and tax collectors, are always around in some form: the question is which looms most in one’s life?

          The most dysfunctional states one can think of still have governments, but just one parasite among many.

          • Xabier, in any advanced civilisation it is the government, not the citizenry, that is the top predator. That is why all such civilisations fall.

            The Roman Republic survived partly because of the tribuni plebis, who acted on behalf of the common people and had the power to veto senatorial decrees and nullify punishments they considered to be unjust. The system worked for 500 years, until Augustus abolished the institution. For the ordinary people, it was downhill from there politically, although they could be distracted for a while as surplus energy (surprise) allowed for a distracting diet of bread and circuses.

    • “The European Central Bank could be about to tweak its main policy objective as it combats the economic fallout from the coronavirus crisis…

      ““In the current environment of lower inflation, the concerns we face are different (than in 2003) and this needs to be reflected in our inflation aim,” ECB President Christine Lagarde said at a press conference on Wednesday.”

      https://www.cnbc.com/2020/09/30/ecb-lagarde-inflation-target-could-change-amid-policy-review.html

      • “Germany expects its debt servicing costs to more than halve this year and reach their lowest level despite the government’s decision to take on record new borrowing in the COVID-19 pandemic, two officials told Reuters on Tuesday.

        “The lower-than-expected borrowing costs, partly enabled by the European Central Bank’s loose monetary policy, could create a windfall of several billion euros…”

        https://uk.reuters.com/article/uk-germany-budget-debt-idUKKBN26K2BN

          • This is the problem:

            “The bulk of the pain of the second quarter’s slump in GDP had been borne by the government rather than households and businesses,” said Capital Economics’ Ruth Gregory.

            “But with the recovery already flattening off, fiscal support fading and the full scale of the fallout in unemployment yet to be felt, that will change in the second half of 2020,” she added.

            The problems to date have been hidden, but this cannot continue for very long.

        • Gail,

          As always, no argument, a question, where is deflation?
          Groceries – No
          Healthcare – No
          Dental – No
          Taxes – No – employment taxes keep going up, they are the major tax for most people if they are wage earners
          Insurance – No
          Housing -No, in Rochester it seems like a house is on the market for maybe a week around me, middle class neighborhood
          Education – No, the ;package has shrunk and in ;public schools the cry is over the increased costs..
          Services- No Accountants are up, lawyers are up – if you want one that can win. .
          Building materials-No, some materials are up close to 100% since spring, when they can be purchased, houses are sitting half finished, shortages
          Electrical supplies – No, just purchased some flexible conduit, 8 feet plus two connectors, just under $60.
          Gasolilne- as far as I can see it has been virtually unchanged over the last year
          Tires – Uncertain, Sam;s has a great deal of vacant space on their tire racks, that has not been the case until recently, and it seems to be getting worse.
          Military equipment – No,priced an F35 lately?

          Hotels – Yes, no one is travelilng
          Restaurants – No My little place has raised prices, not lowered them, I purchase the same thing, tip the same percent and looking in Quicken the cost is going up.
          Pickup trucks – No for Toyota, large Am trucks have every toy imaginable on them, hard to say.
          Farm land – No, latest auction around me was $6,700/acre, auction not done yet, farm incomes are down, land is steady to up.
          Farm inputs – No Up, Up, Up.
          Farm equipment service -No Up, Up and away. $500 to change oil on the Bobcat, $500 to service a large, diesel lawn tractor – oil, filters, sharpen blades – Deere dealership of course.
          Supplemental Medicare ins – No, goes up 5%/year.
          Part D Medicare ins – No, goes up 5% per year.
          College text books – No, mostly rented to students, decreases the used market I suppose, the prices are obscene, fewer and fewer companies control the market AND the problems are on line, require an access code which generally doesn’t come with used books..There is tuition and at the school there are additional charges of say $100+ per course by the college for online costs, in addition to the online access charged by the text book companies. The books are mostly loose leaf which means they fall apart as used, no used value.

          My guess is hedging inflation buy purchasing land may be the best game around.

          There is economist deflation/inflation which never did make sense to me, there is government CPI which is a joke.

          Stocks and bonds? Inflation to the moon. Purchase a government bond and they charge you for the privilege of using your money.

          Inflation is in my world.

          Dennis L.

          • If everything “sticks together,” then a purchasing an annuity might work as well because it will invest stocks and bonds, and perhaps some other things. There is also the possibility that the government will bail out the insurance company selling the annuity, if things “go south.”

            Buying land, or holding on to existing land, might be a strategy if the taxes aren’t too high.

            • That was my plan, but I am pessimistic as taxes are also going nowhere but up. Our town manager hired two extra full-time positions on his watch: a “finance manager” and an “economic development” consultant. This is for a town of 5.000. The town’s recreation budget tripled, and when I questioned it at town meeting I was scorned.

              I have never heard very good things about annuities.. How can the annuity stay afloat if the underlying components falter?

              ==
              On the lumber front, I happened upon this video (from July):

              This could be interesting, as it describes a situation in which log prices are abnormally low, yet retail lumber prices are extraordinarily high. He thinks the situation is being artificially gamed. Maybe others can describe what’s going on behind the dynamic to which he’s referring..?

            • My parents really lucked out with an annuity, because they lived long lives and they bought when interest rates were high.

              If the financial system stays together, they can guarantee an income for a long as the person is alive. The income may vary with the return of the underlying investments, but there is likely an minimum guarantee (as long as the company is solvent, of course).

              If a person is worried about outliving his assets, and the overall financial system isn’t failing, an annuity can prevent a person from outliving his assets thought a longer than expected lifetime. But if the financial system goes down, it has the same problems as other financial assets.

      • The best thing the ECB can do is abolish itself. And perhaps Pearls Lagarde could help the process along by retiring to a nunnery.

        I note in another story that Poland is seeking the permission of the EU to close a coal mine. In other words, it is no longer a country, but a satrapy.

        • Agree, the overall degree and detail of EU power over national and local councils is unreal and beyond intrusive, but the case of Poland is a bit more nuanced. Actually, they are one of the *few net beneficiaries of the EU, they received lot of investments and direct subsidies, yet prolonged-expanded their coal based energy supply to do it without severe penalties, now in economic downturn, they might agree to some token level of coal energy closure, also hoping to receive US freedom natgas ..


          *it’s a schizophrenic leaning nation oscillating on imaginable past greatness (very brief period) and usual underdog status vs bigger continental powers, moreover Soviets picked them up from certain death row during WWII at great cost, but still there is only perennial hate for Russians

  1. “Turmoil in money market mutual funds sparked by the coronavirus pandemic shows that decade-old reforms to the $4.4 trillion (£3.42 trillion) industry may not be enough to avert major outflows during a future crisis, Deputy U.S. Treasury Secretary Justin Muzinich said on Tuesday.

    “The remarks were the latest to raise expectations a new round of rulemaking may be on the way for money funds…”

    https://uk.reuters.com/article/usa-treasury-moneymarkets/update-2-money-market-turmoil-in-march-shows-past-reforms-may-be-insufficient-u-s-treasury-official-idUKL1N2GQ1A2

        • Quite right, Gail, we could call COVID the Great Accelerator: we could see what was looming in 2019 -since 2014 in fact – but the reaction to the virus has both deepened and brought forward the catastrophe.

          • People on this site, including Gail, have been hinting at immanent collapse of civil order (say, within a year or so) all this time, but even with a pandemic it hasn’t happened. I suppose it’s still a year or so away?

            • Opening the jails and eliminating bail is also helping:

              Last year, Demetrius was arrested because he picked up a metal trash can and tossed it at a mobile phone store’s sign, breaking it (after threatening the store employees with a metal pipe). Breaking a store sign was only a few thousand $ worth of GDP improvement so the judge released him without bail so that Demetrius could continue his vital GDP improvement work.

              Demetrius continued to improve our GDP on Sept. 5 when he struck a bus with a metal street barricade, shattering two windows. The police temporarily delayed him when they arrested him, but another judge promptly let him out again so he could go about his important GDP enrichment work.

              Then on Sunday morning, Demetrius REALLY hit his stride. He threw metal debris onto the subway tracks and caused a derailment. This enriched our GDP by MILLIONS of $ since the train car was damaged, the station was damaged, medical expenses were incurred, etc. Those injured will probably sue the city so even more money will be made thanks to Demetrius.

              So far, they are still holding Demetrius so he will only be able to contribute a small trickle for the time being – holding someone in jail in NYC only adds a few hundred $ per day to our GDP. They really must let Demetrius go so he can continue his vital mission. NY is facing a Covid-caused recession and people could really use the work.

              https://www.unz.com/isteve/3rd-dead-body-found-in-a-central-park-lake-this-month/#comment-4185130

    • More debt means more money to pay its military and rebels. More “jobs” created to send funds back to the families. Probably use US armaments as well, to benefit US manufacturers.

      Is the ultimate goal “jobs” or “winning”? If it is jobs, then perhaps this strategy works.

    • From her base in Sevastopol (in *Russian* Crimea, thanks be) Putin could destroy Turkey’s ability to project power in 30 minutes. What would NATO do then? My guess is, collapse.

      • Or more realistically, Putin could attack Azerbaijan and maybe even annex it, or part of it. It’s interesting that he doesn’t seem to want that. I’ve been watching Putin over the years, and still don’t quite understand what kind of game he’s playing.

    • There seems to be a hint of a will to religious sectarian violence in this.

      Perhaps they should ‘believe’ in Jesus and ‘turn the other cheek’, ‘love your enemies’.

      Show the world their witness like ‘a city set on a hill’.

      I no longer see how it is possible to ‘believe’ in Jesus unless they accept the historical Jesus and the things that he said.

      People seem to make up their own Jesus to fit their own ideas and intentions and that is not ‘belief’ in him.

      ‘Hey, that was not me that you ‘believed’ in, that was yourself.’

      • Neither country is interested in converting the other to their religion. Armenians are fighting to protect their land, homes, and lives. Azeris are fighting because Aliyev (like Erdogan) finds war a good way to distract his people from his own corruption and incompetence, but in general, they hate the Armenians for being Armenians. A lot of older people remember the Soviet days, though, when there were friendships across ethnic lines.

        Jesus said many things which are obviously impractical / unrealistic. (Do you “give to all who ask”? Can you pray to a mountain, and make it go away?)

    • I haven’t had a chance to listen to all of this, but I know that Simon Michaux has worked in the areas of minerals extraction and declining ore quality before. I worked with him a little on a prior energy report. I would expect this report to be pretty good.

      • While it is a good presentation and attempts the show the problem ahead, the topic is so complex that he misses many important aspects by trying to justify his numbers to an ‘audit’ standard.
        The biggest misses are both agriculture and mining, both left out in discussing replacing oil and the tonnage of Li-on batteries.

        Another overlooked aspect and one not often thought about, is the feedback loops of extra energy needed in mining. We are constantly mining lower grade resources in metals like copper, nickel, tin, zinc and lead. It takes more energy to mine a tonne of copper from 1% ore than 2% ore, because twice the amount of waste has to be separated from the copper.
        The study in the link below shows that the last 30% increase in copper production came with a 46% increase in energy used.
        https://www.mdpi.com/2079-9276/5/4/36/htm

        For any type of electrical future the use to replace oil, and it has to happen because we are running out of the easy to get cheap stuff, is multiples of any current electrical energy use, not just a doubling or whatever his final answer was.

        A curious thing about all the metal resources is that with enough energy, we have plenty of all of them, by using increasing energy to mine lower grades. Talking about economic minable resources is really a nonsense because the quantity changes over time, always has.

        With enough energy, we could get the copper out of seawater, which has around .09 ppm which equals about 121 Billion tonnes in the 1.35Bkm3 volume of seawater on this planet.

        Quantity of minerals is not a problem, the energy to get them is.

        As everyone that has been following the energy debate knows, energy use and GDP growth are directly correlated for the whole world, so the only possibility of changing to a ‘renewable’ future must also factor in ‘growth’ over the next few decades to get there. Growth of current primary energy use would be from today’s ~175,000Twh per year, to something like 437,000Twh of primary energy use by 2050 assuming a 3% increase per year. Any type of number crunching about the future seems to miss out on this type of hard reality.

        The overall type of numbers needed to get to a renewable future in terms of mining ever lower grades of ore bodies, and building huge interconnected grids (to lessen battery needs), to have huge stored seawater hydro storages, etc, would mean an increase in FF use of around 20-30% per annum for several decades, just to build what was needed., on top of the growing civilization use of energy.

        The numbers clearly show that we have the needed FF energy resources available to make the necessary changes, but the odds of it happening are remote because current civilization prefers to waste so much energy on today instead of planning for the future.
        The here and now is always more important than the future of generations to come, according to everything involving ‘economic theory’.

        • Thank you; a most helpful post. It pressed one of my buttons by talking about extracting copper from the ocean. In principle, we could extract almost any mineral from the ocean; the key ingredients are (a) genetically engineered microorganisms to sequester the mineral, and (b) acres and acres of floating mats holding the organisms. The energy needed is still enormous, but it can come from acres and acres of sunlight. Work with Nature, not against her.

        • Hide away,

          I think Michaux is perfectly aware of all the valid points you raised. The purpose of his presentation (in my opinion) is mostly to demonstrate how unfeasible it is to pursue the goal of a 100% electrified fleet, even without considering diminishing gains as resources depletes.

          It’s a very complex and vast subject indeed, impossible to cover everything in a 1 hour video. At the beginning he mentions future presentations of his works on agriculture and mining.

          One more proof that BAU can not continue. Not that OFW readers needed it, but the majority of people still don’t understand and his video is excellent in that regard.

  2. So, I came across an article posted by CNN featuring “experts” that claim things will never get back to normal and we best get used to it.
    George Gammon just posted a video on “You are being Manipulated”
    Seems to be those in control definitely have an agenda and implementing it …

    There is no getting ‘back to normal,’ experts say. The sooner we accept that, the better
    Analysis by Nick Paton Walsh, CNN
    Updated 5:19 AM EDT, Wed September 30, 2020

    https://amp.cnn.com/cnn/2020/09/30/health/back-to-normal-bias-wellness/index.html

    • At the end, this fellow says his goal is to help you build wealth and help you thrive. He tells you to turn off your television, to prevent the media from deceiving you.

      I doubt that he understands the real underlying problem, which is why we have so many versions of what the problem is and what can be done.

    • The fed and powell are now the darling of the political left. A precursor for fed issuance of currency without the treasury?

  3. After watching the debate last night it became apparent to me our American friends are in for a dark period. With the country so polarized I now believe election turmoil is a given after listening to trump. Interestingly in Canada your president is reviled by over 95% (my guess) yet in the US it’s far closer to 50/50. I think tanks on Pennsylvania avenue is a real possibility?

    • That ‘debate’ was an appalling spectacle. I managed to sit through an hour of it on the BBC before I switched it off and berated myself, ‘how on earth did you sit through that for an hour?’

      The two of them just swapped contrary ‘facts’ with no attempt to establish any common reality to discuss. The bottom line seemed to be Trump spinning Biden as a ‘socialist’ and vice versa as a ‘racist’.

      Is that really all that USA ‘politics’ has left, to reduce everything to caricatures of two spent extreme movements? Where was the sensible discussion of centre ground politics? It seems to be completely exhausted, and there is nothing left now but to project spectres of the extremes.

      USA politics looked totally exhausted in my opinion. Likely it reflects the exhaustion of the ‘American dream’ and the collapse of social mobility since 1970. USA capitalism is no longer able to improve the living standards of its citizens. Its economic base is exhausted and so is its politics.

      Anyway, that is how it looked to me.

      • What’s happened here is Trump’s followers are no different than the followers of Hitler or any other despot leader that became a dictator. We are in the midst of Trump making the final moves to become a full fledged dictator, so in the debate he refused to allow any contrary comments before he interrupted and began to talk while Biden did. The moderator allowed this behavior because he works for Fox News a news station in support of the Republican Party.

        What happens now is a couple more worthless debates and then an election, which Trump will challenge to force a decision through the courts where he’s put in place 2,000 Federal appelate judges that will decide in his favor or the Supreme Court will with his latest appointment. Then the US as a whole will have to decide if they’re willing to accept Trump as President for the rest of his life as a dictator.

        It’s hard to know how it will go, but so far Trump has been able to do just about anything he wants to do (as evidenced by the hundreds of millions he’s made with foreign countries for himself – supposedly not allowed under the emoluments clause), so I guess he’ll be able to pull this off too, but I’m hoping not. Then it just may be a case of the American people having to accept the situation. We’ll lose social security, medicare, Obamacare (the only healthcare ever for people under 65 that are lower income), a woman’s right to choose, and likely there will be 10’s of thousands of people that have been in this country for decades, deported. There will be roadblocks to ck. people’s papers, there will be Dem politicians jailed on false charges. There will be huge tax cuts for the top .01%. Racism will become like it was earlier in US history, i.e. out in the open like it’s becoming, but worse and anyone saying anything about it will be insulted and jailed if they get in the way. The power of the senate and house will be eroded through Supreme Court decisions until they are powerless.

        It’s all a matter of how much the country is willing to take. So far they are acting like an abused woman in a violent relationship, too scared to do anything about it.

        • Its interesting. I see the exact opposite. I see the last gasps of the deep state trying to stop Trump from exposing it all. The Democrats are actively trying to confuse the election results with the mail-in ballot fiasco, while Trump just wants people to go to the polls and vote.

          I guess that is one reason this country is so divided. We can see the same thing have the complete opposite opinion. But I used to live in a Blue City in a Democrat bubble too, so I understand.

        • the woman in an abusive relationship is the correct analogy

          except that the woman in this instance is too tired and worn out to care anymore.

          Ultimately the abusive spouse will cease his violence for no better reason than the means to be violent will become exhausted. (or the object of his violence will be dead)

          (energy depletion)

          then he will retreat to his bunker and blame everyone else for betraying him

          Exactly what state the country will be in by then is anybody’s guess. But Germany in 1945 will bear comparison, only this time the destruction will be brought about by internal conflict.

          Not flattened cities, but unlivable cities, made so by an unlivable mixture of denial-politics, greed, jesus-freakery, increasing disease and the law of the gun.

          (make of that mixture what you will)

          The madness of King Donald the first was made all too clear last night.

          Biden means well, but doesn’t posess the knowledge or means to stop the rot.

          (and I do not exclude King Boris here from this madness either)

          All their subjects remain convinced that prosperity is something you vote for.

          • The main thing thats rendering the cities into abandoned anarchy zones right now is the decision to let violent protest go on without order. Insurance companies are not going to issue policies there. Who wants to live in a place with no order or justice?

        • The main thing preventing Trump from becoming dictator is that the man is incapable of organizing himself out of a paper bag. Maybe other Republican leaders will try to throw the election, but that’s hard to do when they’re not even assured of winning Texas.

      • I watched a few minutes of the debate and decided I had seen enough.

        There are many underlying problems.

        One is that our health care system is incredibly expensive and dysfunctional. Our system of specialists and sub-specialists is impossible to navigate. The costs are astronomical. The incentives for doctors are in the direction of providing extra surgery and additional prescription medications for those whose insurance might pay. People who buy Obamacare policies have such high deductibles that they don’t dare use the coverage.

        Education costs far too much, and there are rarely jobs that pay enough to pay for all of these costs.

        Now, there are a large number of people without jobs, with little hope of getting one that pays a livable wage.

        • I turned it on during class (East Asian time zone), thinking my English students might appreciate hearing a formal debate. But no, they were just shouting eat each other. I turned it off after a minute of that, and said something about how this represents the decline of the USA.

          • My take is that presidential debates are the equivalent of pro wrestling matches. It’s been that way since as far back as I can remember. Hasn’t pro wrestling been going downhill since forever too?

        • @Gail

          The USA Medical System might as well die at this point. So that a better healthcare system can replace it.

      • “USA capitalism is no longer able to improve the living standards of its citizens. Its economic base is exhausted and so is its politics.”

        If you’re correct and the USA is this far gone, then an important question for the American voter is: which candidate is less likely to decrease your current standard of living?
        In my opinion, based on last night’s debate, an accelerated decrease in standard of living would occur under a Biden administration. Biden wants to reengage the USA with the Paris Climate Agreement, retrofit existing homes to be more energy efficient (not necessarily a bad idea) and supports the view that climate change is largely anthropogenic.
        If the “original sin” of anthropogenic climate change can be accepted widely enough, and guilt be internalized successfully enough, then a Biden administration could “justify” decreases in standard of living as being necessary sacrifices for the greater good of planet Earth. Conversely, it was interesting to witness Trump emphasize the importance of clean air and clean water – highlighting the problem of pollution – while resisting the challenge from both Biden and moderator Chris Wallace to agree that climate change is largely manmade.

        I agree with you that the “debate” was an appalling spectacle. I didn’t expect much from it going in, however. What is there to debate when each side has such wildly different views on just about everything?

      • Trump wouldn’t let Biden get a word in edgewise, and wouldn’t take a hint from Wallace to shut up when it’s not his turn to talk. Trump treated the debate like a pro wrestling match,and moderator like one of the referees.

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