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?

  1. ““Believe me, if I get a visa to any country in the world, I’d be out of here in a heartbeat,” said Hussein Termos, 36, from Marjeyoun in south Lebanon, now living in the Beirut suburb of Dahiyeh. “All I care about is being able to provide for everyday necessities: food, my water and my cigarettes.”

    “For many like Termos, facing an ongoing collapse in the value of the Lebanese currency, hyperinflation on the shelves, and mass unemployment, just scraping by is no longer an option. “The issue is there is no hope of a turnaround,’’ said Rabiah Khaireddine, a musician from the Druze community. “The weeks since the explosion have made that clear. Everyone I know wants to leave.””

    https://www.theguardian.com/world/2020/oct/11/there-is-no-hope-the-slow-disintegration-of-lebanon

    • “The Gulf Arabs Weary of Protesting for Palestine… The United Arab Emirates and Bahrain’s drive for normal ties with Israel suggests a shifting mood across the region…

      “The normalization drive with Israel comes as countries such as Saudi Arabia and the UAE, the Arab world’s two largest economies, confront the growing ambitions of the region’s non-Arab powerhouses, Turkey and Iran.”

      https://www.wsj.com/articles/the-gulf-arabs-weary-of-protesting-for-palestine-11602251852

      • My time for commenting will be somewhat limited today. I am giving two different talks today, both over Zoom. One of them is live, today. The other is for a recorded Chris Martenson panel discussion with Art Berman and Richard Heinberg.

        I asked Martenson’s assistant if I get permission to show panel discussion on Our Finite World, after their conference is over (end of October) and was told that that would be fine.

          • I thought that both went reasonably well.

            I did have a minor problem, though. During Martenson’s panel discussion, the sun was shining in on me and my computer is a way that I couldn’t block the sunlight out. I expect that I will look a little odd in the video as a result. This problem only happens at a certain time of day, at this time of year.

            I work in my high-ceilinged dining room. It has rectangular window with shutters plus a half-circle (palladian) window on top. The sun was coming in through the top part, even though the shutters were closed on the bottom. My computer is a desk computer with an extra monitor, so it wasn’t convenient to pick the computer up and move it to a better location when the problem was discovered.

        • day 20 has arrived so we are near the end of replies.

          “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.”

          I am more convinced than ever that this is the case.

          we are living through it, and perhaps by 2040 or so, maybe 2030, survivors will look back and feel that it happened very quickly.

    • But Tim, the Green New Deal is for the little itty bitty babies. Kamala the iron fist will return respect to the US. The new wars against Iran and Venezuela will bring freedom. Mandatory service in the Green Works Corp (age 19-24) will instill hope and discipline, president Kamala knows discipline.

      • Sanders seemed to be too close to the top of the pack in the D primaries early this year, then all of a sudden Biden surged to victory.

        powerful Ds behind the scenes made this happen. To them, Biden appeared to be the safest bet for a winning D who could be their puppet.

        Then they staged Biden holding his notes for VP with Harris at the top and the notes saying something like “don’t hold grudges”.

        staged by the powerful Ds who told Biden who to pick.

        conclusion: Biden and then Harris, when they push Biden out with the 25th amendment, both will do whatever they are “advised” to do.

    • A movie on having the benefit of freedom of choice in the economy versus government control of the economy.

      When there is lots of energy available, it is possible to have 10 million companies, each following their own plan. In fact, we could do this back in 1950.

      Moving to controlled economy can look attractive, when most people are doing poorly. We seem to be getting to that point very quickly.

      • Perhaps we already live in a controlled economy, not by governments, but by multinational corporations, and banks.

        • That’s my feeling too. Oligarchs rule the earth, while the economic environment looks very tough for small businesses who can’t afford to buy congress members.

          • the earth has altered its weather patterns to make human life more difficult

            then unleashed a virus to shut down human over-activity

            but oligarchs run the earth?

            hmmmm

            • How do you know the oligarchs haven’t altered the weather patterns to make human life more difficult, then unleashed a virus to shut down human over-activity, Norman? Gaia is indifferent to the activities of her children. She doesn’t run anything.

              Oligarchs may not run the earth either, but they rule it as absolutely as dinosaurs used to rule it when our ancestors were rodents.

            • It is a question of which of the oligarchs run the earth. Is it the set that derive their income from vaccines, cloud technologies, subsidized wind and solar, and those selling things over the Internet? Or is it oligarchs representing main street businesses, the fossil fuel industry, and electric utilities that are trying to keep the lights on, despite all the problems intermittent renewables bring?

  2. October 12, Columbus day

    What I find very interesting, and have no seen considered anywhere, is that lithic civilization seems to have reached a very higher development in the Americas than in the Old World. It is estimated (but who relly knows?) that the Aztech and Inca empires had more than 10 million subjetcs each, and their monumental stone constructions were quite impressive. Same for the Mayans, who also used script. Nothing of this is to be found in Eurasia’s Stone Age. Have to wait to the Achemeid empire to find one so big, and no remnants of big structures pre copper age. Did they existed and were absolutely lost, or didn’t were at all?

    It would be the best achievement for mankind to drive something like the Incas in the future, but obviously not likely

    • Fascinating, they were still in the Stone Age in the 15 c., 5000 years after Eurasia had metal ages and farming technologies. Still they had some stone temples and maintained a few million people, even without the wheel – not bad going.

      > The Incas lacked the use of wheeled vehicles. They lacked animals to ride and draft animals that could pull wagons and plows… [They] lacked the knowledge of iron and steel… Above all, they lacked a system of writing… Despite these supposed handicaps, the Incas were still able to construct one of the greatest imperial states in human history.

      — Gordon McEwan, The Incas: New Perspectives

      • A couple of comments. First, the Inca were not in the stone age; they had discovered the use of obsidian, which made tools sharper and more durable than any other, until the age of stainless steel. Secondly, the Inca quipu have been analysed using modern information theory, and they are as complex as many writing systems. Finally, (as I saw for myself on the Peruvian Altiplano) the Inca communicated with heliograph towers. That is how they could administer an empire that spanned 40 degrees of latitude.

    • Achemeid??? If that is the same as Achaemenid, that was in the iron age. Egypt and Sumer started in the Neolithic, but most of their advances seem to have been after the discovery of bronze making, so you may well be right about the Maya, Aztecs, and Inca being the most advanced stone age civilizations.

  3. A song for the times

    The tv says you hate them
    burn them, kill them, they kill you

    He says bring a miracle
    accept whatever meal they give you

    now is the time for war
    now is the end of days, days of plague and death
    be afraid

    He says beggar, prisoner, child
    we are the kingdom

    now is the time for masters of needles and the thugs
    be meek go to the cross of gold

    We are the kingdom
    the dark days are over
    we serve our family our friends our lives

    Copyright 2020 by Edwin Pell

      • every other group it the current “consensus” we are feed by the pols and media and the others are a Jesus position with a small mix of “Cross of Gold” speech.

    • I tried my hand at something ‘relevant’

      trump trumpets his trumpet
      he has got a long one

      the future is orange

      biden bids his biddies
      he has got a shrivelled one

      the future is grey

      the seventh trumpet sounds
      dizzy gillespie dizzies his dazed

      the angels have fallen silent

      sssssssshhhhhhhhhhh
      loud voices fell the statues

      peak statuary

      peak usa, peak democracy
      abraham lincoln takes a peak from the gutter

      someone leaks on him

      • Oh dear!

        some LOL and some profound.

        ahem…

        Ds and violets are blue
        Rs and roses are the red
        the POTUS no matter who
        in the long run we’re all dead

          • the thing about hope for the future of humanity is that it is guaranteed.

            human extinction guarantees no more suffering, no more pain, no more crime, no more greed, no more lying politicians, no more abuse of power.

            a brighter future!

        • In Tenebris

          “Percussus sum sicut foenum, et aruit cor meum.” (Psalm ci:5)

          Wintertime nighs;
          But my bereavement-pain
          It cannot bring again:
          Twice no one dies.

          Flower-petals flee;
          But, since it once hath been,
          No more that severing scene
          Can harrow me.

          Birds faint in dread:
          I shall not lose old strength
          In the lone frost’s black length:
          Strength long since fled!

          Leaves freeze to dun;
          But friends can not turn cold
          This season as of old
          For him with none.

          Tempests may scath;
          But love can not make smart
          Again this year his heart
          Who no heart hath.

          Black is night’s cope;
          But death will not appal
          One who, past doubtings all,
          Waits in unhope.

          (Thomas Hardy 1840 to 1928)

      • The End

        For Gail Tverberg

        While we were confusing the beautiful
        with the easy and the easy with the good,
        in a sociopathy of narcissus
        addicted to dopamine shots,
        our natural house rotted away
        like the belly of the bees when
        the glyphosate of liberal greed passes by.

        While we were banking promises
        to grow up eternally, in a disreputable
        myopia of experts on financial
        witchcraft, we adorned with ribbons
        of success the extermination of cultures
        or species competing with our own
        and destroyed the world for money.

        While we harvested the tree
        of scientific life, to sell its fruits
        to the canning elite, we grew
        fatness in the cortical noddle,
        the trade of crutches increased
        and no one could see the umbilical
        connection between knowing and destroying.

        While we were omitting limits,
        Travestied of unbridled titans,
        And celebrating the stain of progress
        And eating oil (thinking we were
        eating cozido à portuguesa!),
        entropy stepped in and announced,
        categorical: “The party is over”.

        As we were building statues to hubris
        or to irony’s mother, the carbon
        was building up in jellyfishes
        of marine dioxide, and scribbling
        “cataclysm” in the blue of festivals,
        as methane, released from Siberia,
        was preparing his victory speech.

        While in the movie theater the curtains
        were in smoke, and the apocalyptic
        movie was shifting to the streets,
        the rational species was rejecting
        the evidence of catastrophe, brandishing
        his ticket as a title of nobility, proclaiming
        their right to have fun until the end:

        “We don´t leave!” And in fact they didnt leave
        nor could they – led by lemming
        impulses, by chimeras of industrial
        warmth, by the biblical precept
        to surf the waves of decreasing
        energy, we could only follow
        the genome’s planogram and expire.

        (translated, badly, from the portuguese)

  4. I find it ironic that a fair skinned Brahman Kamala will be voted in to “help blacks”. Where Brahman’s have institutionalized racism for centuries.

  5. Winston Sterzel posts videos on YT about China. He lived in China for about 14 years, originally teaching English as a foreign language. Then latterly started making videos on his travels around China with a friend and colleague called Matthew Tye for fun, a hobby that became sufficiently successful that the YT videos became their fulltime jobs, and still is. Winston and Matthew both had to leave China at very short notice (immediately) about a year ago, the CCP did not like the content of some of their videos. I have been watching Winston and Matthew’s videos for about 4 months. Their videos are usually insightful because they both lived in China for 10+ years, are both fluent in Mandarin, and both married local Chinese women so still have family ties there.

    Recent news items have stated that China has about 100,000 fishing vessels that are sent out all over the world, and strip the local fisheries clean. In this video Winston explains why they do this.

    How China is slowly KILLING us all

    In a nutshell, Winston says the Chinese still remember the post-WW2 famine where officially about 30 M died from starvation, and they live, eat and fish for today, with no concept of sustainability, or living for tomorrow.

    • The standard greeting in a least some parts of China, instead of, “How are you?”, is the equivalent of “Have you eaten?” This is another indication of the extent to which fear of famine is part of the culture. Population has stayed close to the edge of the sustainable level.

  6. Bloomberg
    The Fed Still Has a Powder Keg at Its Disposal
    Brian Chappatta
    Mon, October 12, 2020, 6:00 AM EDT·8
    https://www.yahoo.com/news/fed-still-powder-keg-disposal-100005963.html
    Bloomberg Opinion) — The Wall Street Journal’s editorial board published a column last week titled “The Fiscal Federal Reserve,” which admonished Chair Jerome Powell for imploring the U.S. Congress to do more to aid out-of-work Americans, struggling small businesses and strapped state and local governments. “Powell signs up to monetize trillions of dollars in more spending,” they wrote.
    In many ways, Powell and his colleagues have actually been relatively restrained in their messaging. They could be much more forceful — the only question is whether they want to open that potential Pandora’s box.
    Since June, the Fed has explicitly been buying $80 billion of U.S. Treasuries each month. That was initially under the guise of ensuring smooth “market functioning,” but minutes of the central bank’s September meeting revealed that officials now see purchases as “contributing to accommodative financial conditions in a way that supported economic recovery.” This is the central bank’s way of saying the stock market is up, credit spreads on investment-grade corporate bonds are tight and risky companies can easily find willing lenders. In other words, the Fed is supporting asset prices, which indeed helps keep a recovery on track but also disproportionately benefits the wealthiest Americans who own the vast majority of stocks and bonds.
    …….rather long article….
    The risk, of course, is that such obvious coordination would call into question the value of fiat currency. Lacy Hunt at Hoisington Investment Management, who has been a bond bull for more than three decades, told me in August that the one significant risk he sees on the horizon is that the Fed directly funds government expenditures. “If that happens, then the inflation rate would take off. However, in very short order, everyone would be totally miserable because no one would want to hold money,” he said.

    Well, thats the gist of it…will the Fed Print to Infinity and fiat will not be worth anything…??? If History is any indication ….yes they will

    • I would not be shocked if there is somehow a great deal more money created, to try to keep all of the things from crashing that seem to be crashing.

    • Fed does not print. Only the Treasury has a printing press, and they may use it very little without Congressional authorization. All the Fed does is swap “bank reserves” for bonds, and the banks are severely limited in what they are allowed to do with those reserves. Only if there is strong private demand for bank loans do those reserves (which back deposits created when the loans are made) indirectly result in new money creation. Japan has been doing this off and on for 20 years and their economy can barely stay out of deflation.

      • PLEEEEEEEEEEEZE. Those “bank reserves dont exist until created to take junk debt onto the fed balance sheet. Thats called “printing” And the 5 new fed organizations created this year to directly buy corporate bonds and mbs and all the rest of the junk that fall to low because they are collateral for debt that will never be paid? Just lending others $ under Repo with zero interest to buy the toxic was not working. Between the fed balance sheet and US government debt 7 trillion more dollars exist than 12 months ago but no new real things exist. That is called “printing”.

      • Yes, we had series of great links to material on this topic lately, also thanks to you and Rune’s article. Basically, the biggest drivers are (lack of) credit impulse into the economy from banking sector and worsening ECoE/PO situation, also some of the stalling-negative demography trends etc. In aggregate this is massively deflationary environment. People often get confused because of that perceived fall in level of living standard, which is driven mostly by the inner ECoE/PO component, while real inflation is subdued. Also, the large tech-productivity gains (in money terms) of past decades were simply offloaded from the lower/mid income pop, the user-consumer value component of the productivity is often overlooked (as if not good enough) or taken as granted for them. That impoverishment seemingly smells like inflation, but it is not.

  7. https://www.usatoday.com/story/news/health/2020/10/12/us-covid-deaths-75-k-more-americans-died-than-previously-recorded-excess-deaths/5935813002/

    “Researchers at Virginia Commonwealth University in Richmond found nearly 75,000 more people may have died from the pandemic than what was recorded in March to July, according to the report published Monday in the peer-reviewed journal JAMA.”

    That would bring the grand total to nearly 300,000. OUCH!!!

    • It is doubtful that these are more COVID deaths. They are deaths, indirectly caused by all of the attention given to COVID, at the expense of treating other diseases. They also would include deaths related to depression. Elderly people who could no longer see their relatives would be especially prone to dying earlier, I would thing. According to the article:

      Woolf says the deaths indirectly caused by the pandemic came from illnesses such as Alzheimer’s disease, diabetes and heart disease, which sharply increased in the same five states that recorded the most COVID-19 deaths.

      Delayed care, fear of seeking care or emotional crises stemming from the pandemic could have also contributed to these deaths, he says, as well as inaccurate death certificates that may have misidentified a COVID-19 death.

      • ” deaths, indirectly caused by all of the attention given to COVID, at the expense of treating other diseases” — probably not. We have quite a bit of historical data that when access to routine medical care is temporarily unavailable, that the total death rate FALLS. I repeat, falls, not rises, falls. (People never seem to believe me about this unless I repeat it.) This is because standard medical care actually kills more people than it saves. Likewise, except for suicides, depression rarely kills people, although it may make them miserable. Elderly in old folks’ homes at least have each other to keep them company. Those living alone may suffer a bit, but they spend most of their time alone any way, plus people tend to become more emotionally stable as they age. The total death rate also falls during recessions when their is no pandemic. It even fell during the Great Depression.

        I know this virus only kills 1 in 200 working age people (most reliable stats I have seen), and of course more elderly people, but people need to stop dismissing that low case fatality rate is trivial. That is still a very large number of deaths if a highly contagious virus infects large enough numbers of persons.

        I am also skeptical of that estimate of 1 million deaths world wide. If we have 200,000 deaths in the US, that means roughly 5% of the world’s population, with the world’s most advanced health care system, accounts for 20% of global covid deaths, not poor third world countries with underfunded health care systems where most of the human race lives. I find that highly implausible. One million dead worldwide is probably a gross underestimate.

        • >>but people need to stop dismissing that low case fatality rate is trivial.

          Covid19 deaths on the one hand, economic Armageddon from lockdowns etc. on the other. For what purpose, to prevent more deaths?

          Last week the UN estimated 500 M out of work, as a result of lockdowns which are supposed to be to reduce deaths from Covid19. Assuming this is reasonably correct, most of these 500 M are in third world countries where if you don’t work, you don’t get paid, and you and your family don’t eat.

          in the longer term, the number of dead from Covid19 looks like it might be pretty small compared to those who will die from starvation, and diseases brought on from malnutrition and hunger, resulting from the lockdowns and economic chaos.

          Add to that China’s disastrous crop failures this past few weeks.

          Officially, about 1 M have died from Covid19 so far this year.
          About 55 M die globally each year from other causes. Many from preventable diseases such as TB (1.5 -2 M a year).

        • I have read the opposite. That an increase in unemployment leads to an increase in the death rate.

          I searched and found studys that support both position. I don’t have time to dig into it too much.

      • On the other hand, my parents seem quite happy, even serene, about being cut off from me: I expect their life expectancy will have been correspondingly enhanced….. 🙂

    • “That would bring the grand total to nearly 300,000. OUCH!!!”

      no big deal, nothing tragic about 90+% of the deaths.

      in most cases, these were very old people with comorbidities and with very few years to live.

      the small minority of younger deaths were mostly fattties, and covid is just an extra penalty for being obese.

      • Most of these “comorbidities” are fairly minor, and most of those people had a quite number of fully functional years remaining under normal circumstances. Nor do I want to kill off working age people as a punishment for being overweight. And there is also a substantial number of people who suffer for weeks or even months even if they survive, and others who suffer organ damage the duration of which is as yet unknown. While I agree that long term, nation wide lockdowns is not the wisest way to deal with this outbreak, people who want to dismiss it as a trivial affliction no more serious than routine seasonal flu outbreaks are misguided.

        • Please give some data. Give an example of a minor comorbidity that has resulted in a statistically significant number of deaths.

          Dennis L.

        • Things could be a lot worse. We could be dealing with a worldwide pandemic of something really nasty like Ebola. That disease has a case fatality rate of up to 50%. So let’s look on the bright side.

  8. First, the initiatives taken so far are temporary by design. The G20 Debt Service Suspension Initiative, which was a highly welcome response to a call by the IMF and World Bank, expires at the end of this year. Yessiree looks like collapse in 2021 unless someone gives, that gives me to the end of the year to prep.

      • Banks need to continue to receive income from loans, both interest payments and repayment of the amount borrowed, if the banks are to function as intended. If nothing else, their ability to make new loans will be severely hampered, if debt repayments stop.

        I am sure that governments will want to hide this problem. I am not certain how successful they can be. If governments take over banks completely and change the rules, perhaps the problem can be hidden. This might happen if governments simultaneously start issuing new funny money that has absolutely nothing backing it.

    • The economy was already turning down in February. Based on the date of the 3 mo./10 yr. yield curve inversion in 2018, I expected the next recession to begin between July 2020 and Dec 2021. The virus just sped up the timetable a bit. US demographics are very unfavorable right now, and there are some serious financial imbalances, so the next recovery might not begin until 2023, when US demographics turn favorable again. Excesses need to be wrung out of the economy. However, recovery may be anemic even when the demography turns given this huge national debt. On the plus side, savings have risen and energy prices remain moderate. I am hoping for a few fair to middling years in the middle of the 2020’s. By the time we get to 2029, every metric looks miserable for as far as the eye can see. I feel sorry for the kids who will hit the job market about that year.

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