Gail Tverberg on what to expect…

Hope for the Best, Plan for the Worst

Gail Tverberg is one of my favorite thinkers and has been writing about our overshoot predicament for years. In today’s essay she makes the most specific predictions I’ve seen on the probable outcomes of the economic deceleration caused by the Wuhan virus.

I suspect most of her predictions will happen, but I’m not confident on the timeline. It’s possible money printing will buy us a few more years, or maybe not.

I think we should hope for the best, and plan for the worst.

Regardless, time is running out to make preparations.

https://ourfiniteworld.com/2020/04/21/covid-19-and-oil-at-1-is-there-a-way-forward/

Here are a few excerpts from her full essay.

COVID-19 and oil at $1: Is there a way forward?

Our basic problem is a finite world problem. World population has outgrown its resource base.

In this post, I suggest the possibility that some core parts of the world economy might temporarily be saved if they can be made to operate fairly independently of each other.

The COVID-19 actions taken to date, together with the poor condition the economy was in previously, lead me to believe that the world economy is headed for a major reset.

A reset world economy will likely end up with “pieces” of today’s economy surviving, but within a very different framework.

There are clearly parts of the world economy that are not working:

  • The financial system is way too large. There is too much debt, and asset prices are inflated based on very low interest rates.
  • World population is way too high, relative to resources.
  • Wage and wealth disparity is too great.
  • Too much of income is going to the financial system, healthcare, education, entertainment, and travel.
  • All of the connectivity of today’s world is leading to epidemics of many kinds traveling around the world.

Even with these problems, there may still be some core parts of the world economy that perhaps can be made to work. Each would have a smaller population than today. They would function much more independently than today, like mostly separate economic pumps. The nature of these economies will be different in different parts of the world.

In a less connected world, what we think of today as assets will likely have much less value. High rise buildings will be worth next to nothing, for example, because of their ability to transfer pathogens around. Public transportation will lose value for the same reason. Manufacturing that depends upon supply lines around the world will no longer work either. This means that manufacturing of computers, phones and today’s cars will likely no longer be possible. Products built locally will need to depend almost exclusively on local resources.

Pretty much everything that is debt today can be expected to default. Shares of stock will have little value. To try to save parts of the system, governments will need to take over assets that seem to have value such as farm land, mines, oil and gas wells, and electricity transmission lines. They will also likely need to take over banks, insurance companies and pension plans.

If oil products are available, governments may also need to make certain that farms, trucking companies and other essential users are able to get the fuel they need so that people can be fed. Water and sanitation are other systems that may need assistance so that they can continue to operate.

I expect that eventually, each separate economy will have its own currency. In nearly all cases, the currency will not be the same as today’s currency. The currency will be paid only to current workers in the economy, and it will only be usable for purchasing a limited range of goods made by the local economy.

These are a few of my ideas regarding what might be ahead:

(a) There will be a shake-out of governmental organizations and intergovernmental organizations. Most intergovernmental organizations, such as the United Nations and European Union, will disappear. Many governments of countries may disappear, as well. Some may be overthrown. Others may collapse, in a manner similar to the collapse of the central government of the Soviet Union in 1991. Governmental organizations take energy; if energy is scarce, they are dispensable.

(b) Some countries seem to have a sufficient range of resources that at least the core portion of them may be able to go forward, for a while, in a fairly modern state:

  • United States
  • Canada
  • Russia
  • China
  • Iran

Big cities will likely become problematic in each of these locations, and populations will fall. Alaska and other very cold places may not be able to continue as part of the core, either.

(c) Countries, or even smaller units, will want to continue to limit trade and travel to other areas, for fear of contracting illnesses.

(d) Europe, especially, looks ripe for a big step back. Its fossil fuel resources tend to be depleted. There may be parts that can continue with the use of animal labor, if such animal labor can be found. Big protests and failing debt are likely by this summer in some areas, including Italy.

(e) Governments of the Middle Eastern countries and of Venezuela cannot continue long with very low oil prices. These countries are likely to see their governments overthrown, with a concurrent reduction in exports. Population will also fall, perhaps to the level before oil exploration.

(f) The making of physical goods will experience a major setback, starting immediately. Many supply chains are already broken. Medicines made in India and China are likely to start disappearing. Automobile manufacturing will depend on individual countries setting up their own manufacturing supply chains if the making of automobiles is to continue.

(g) The medical system will suffer a major setback from COVID-19 because no one will want to come to see their regular physician any more, for fear of catching the disease. Education will likely become primarily the responsibility of families, with television or the internet perhaps providing some support. Universities will wither away. Music may continue, but drama (on television or elsewhere) will tend to disappear. Restaurants will never regain their popularity.

(h) It is possible that Quantitative Easing by many countries can temporarily prop up the prices of shares of stock and homes for several months, but eventually physical shortages of many goods can be expected. Food in particular is likely to be in short supply by spring a year from now. India and Africa may start seeing starvation much sooner, perhaps within weeks.

(i) History shows that when energy resources are not growing rapidly (see discussion of Figure 3), there tend to be wars and other conflicts. We should not be surprised if this happens again.

Conclusion

We seem to be reaching the limit of making our current global economic system work any longer. The only hope of partial salvation would seem to be if core parts of the world economy can be made to work in a more separate fashion for at least a few more years. In fact, oil and other fossil fuel production may continue, but for each country’s own use, with very limited trade.

There are likely to be big differences among economies around the world. For example, hunter-gathering may work for a few people, with the right skills, in some parts of the world. At the same time, more modern economies may exist elsewhere.

The new economy will have far fewer people and far less complexity. Each country can be expected to have its own currency, but this currency will likely be used only on a limited range of locally produced goods. Speculation in asset prices will no longer be a source of wealth.

It will be a very different world!

133 thoughts on “Gail Tverberg on what to expect…”

  1. Nobody rants about reality denial better than Mac10. His tirade today made me laugh. And he’s mostly right despite not understanding MORT and the other science behind what we observes.

    https://zensecondlife.blogspot.com/2020/05/nature-won.html

    Nature Won. Thank God.

    The Trump carbon tax is due. Payable in denialistic dumbfucks. The ONLY thing I’ve enjoyed about this failed gambit over the past decade, is that the stakes kept getting raised. And now, it all makes perfect sense.

    There’s no audience for reality anymore. Because there never was one, in the history of humanity. Which is how we ended up with 8,000 religions but who’s counting. Everyone smoking their own brand of bullshit, while enjoying extreme conviction in what won’t happen.

    Now however these idiots have a right to be worried. Their entire way of life is circling the toilet, like a massive turd, while they watch, mesmerized.

    Fortunately, for us realists i.e. all five of us, the world is not ending – far from it, only a failed way of life is ending. And those who cling to it will go down with the ship. So it can come as no surprise that today’s geezers are living in fear – after all, this disaster that was supposed to blow up on future generations is blowing up on THEM.

    Just when you think everyone else is about to get fucked over, come to find out, you ARE everyone else.

    For her part, Mother Nature could not be happier. The birds are singing, the sun is shining, and the world is still turning. Everything else is a minor detail. A self-inflicted crisis fabricated by hairless monkeys.

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  2. Rob, are you familiar with Pentti Linkola’s work? He was a Finnish fisherman, essayist and deep ecologist. Georg Henrik von Wright, the successor of Ludwig Wittgenstein, regarded him as the most profound Finnish philosopher. Linkola died in April. I hope these links work and are good enough, if not, maybe you can find better ones. His last book is available in English. He considered his previous book his magnum opus but it hasn’t been translated.
    https://www.tellerreport.com/news/2020-04-05—pentti-linkola-s-last-interview-was-published-on-thursday-on-kulttuuritoimitus—he-talked-about-the-coronavirus–%E2%80%9Cit-helps-something%E2%80%9D-.BJx6UCDPwU.html
    https://www.tellerreport.com/news/2020-04-05—pentti-linkola-snapped-hard-text-in-his-last-interview—and-praised-greta-thunberg-.Sye6BQEPDI.html

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  4. I watched the new BBC Horizon episode on the virus.

    https://www.bbc.co.uk/programmes/m000jbhj

    1) No mention of preventative measures like vitamin D etc.
    2) No mention that everyone should wear masks.
    3) No mention that we’ve never successfully created a vaccine for a similar virus.
    4) No mention of gain of function research in Wuhan that may have leaked.

    Quite sad. BBC used to be a news source you could trust.

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    1. Negative interest – Negative growth – Negative emissions = Negative reality. I’m wondering just how comical (to me) theses expert ‘solutions’ can get? They’re like the keystone cops running around with a big box of magic band-aids trying to patch up a critically wounded & dying system.

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      1. Negative interest rates are the quintessential example of how we lack free will and are governed by the Maximum Power Principle. The people in charge know negative rates are a bad idea but will implement them regardless rather than preparing for our inevitable smaller future.

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        1. Promise the chimps more, throw in a touch of pseudo science razzel dazzel & they will follow you anywhere including over the cliff. Humans are a universal joke.

          The new astrology

          By fetishising mathematical models, economists turned economics into a highly paid pseudoscience

          “In 2000, USA Today quoted Robin Griffiths, the chief technical analyst at HSBC, the world’s third largest bank, saying that ‘most astrology stuff doesn’t check out, but some of it does’.”

          “The notion that an entire culture – not just a few eccentric financiers – could be bewitched by empty, extravagant theories might seem absurd. How could all those people, all that math, be mistaken? This was my own feeling as I began investigating mathiness and the shaky foundations of modern economic science. Yet, as a scholar of Chinese religion, it struck me that I’d seen this kind of mistake before, in ancient Chinese attitudes towards the astral sciences. Back then, governments invested incredible amounts of money in mathematical models of the stars. To evaluate those models, government officials had to rely on a small cadre of experts who actually understood the mathematics – experts riven by ideological differences, who couldn’t even agree on how to test their models. And, of course, despite collective faith that these models would improve the fate of the Chinese people, they did not.”

          https://aeon.co/essays/how-economists-rode-maths-to-become-our-era-s-astrologers

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  7. Even with the highest unemployment rate in more than 80 years, the U.S. Stock Market continues higher regardless of the lousy economic data and fundamentals. However, without the massive money printing and liquidity injections by the Federal Reserve, the stock market indexes would be substantially lower.

    Unfortunately, the Fed is now forced to prop up the markets because stock markets have now become the economy, instead of the other way around. With the total U.S. Equity Market Cap to GDP Ratio now nearly 140%, it is more than double the 68% mean average for the past 70 years 1950. And, if we look at the markets back in the 1950s, it took 24 years for the Dow Jones Index to double from 500 to 1,000.

    Thus, from 1958 to 1982, the Dow Jones Index traded in that 500-1,000 range. So, the real driver of the economy before the 1990s was the “Physical economy,” not the stock market. Well, that’s all changed today because the Stock Market is now the most important part of the economy. Interestingly, it only took seven years for the Dow Jones Index to double from the 14,000’s to 29,500 (Oct 2019).

    https://srsroccoreport.com/chart-of-the-week-the-unemployment-rate-signals-the-dow-jones-index-to-crash-to-this-level/

    Put another way, limits to growth, specifically net per capita energy, has forced us to rely on growth in paper assets rather than physical assets to keep our debt backed fraction reserve monetary system from collapsing on itself.

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    1. 15 years ago the cocky chimps were gleefully chanting, “drill baby drill”. Today they are terrified & pleading, “print daddy print”.

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    1. Some 3 billion people lost or had their jobs/income cut in the last few months, yet the stock market keeps rising. What better indicator is there that the stock market is disconnected from the real world & has little to no effect on most folks day to day lives? Let it crash & burn. The sooner the better. The system is beyond reform – it’s terminal. The sooner it dies, the sooner a new arrangement can be had. People fear change almost as much as death, which is funny because change is what the universe is all about.

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  9. Oil production appears to have peaked just before the Wuhan virus arrived. I continue to believe we are experiencing a brief calm before the storm thanks to unprecedented ($5,000,000,000,000+) money printing and many citizens with hope that growth will resume. When the majority wake up and realize growth will not resume, hope will be replaced with fear and anger, and money printing will no longer work. Then all hell will break loose.

    Get prepared while it’s still possible to do so.

    https://resourceinsights.blogspot.com/2020/05/the-stealth-peak-in-world-oil-production.html

    We who have been suggesting that a peak in world oil production was nigh almost from the beginning of this century looked like we might be right when oil prices reached their all-time high in 2008. But since then, we have taken it on the chin for more than a decade as the U.S. shale oil boom kept adding to world supplies—even as production in the rest of the world mostly stagnated or declined.

    But then world oil production turned down—not when the recent coronavirus pandemic and associated economic shutdowns hit—but more than a year before while few people were noticing. Monthly fluctuations will make it difficult to pinpoint a peak until long after it occurs. But, let’s note the difference between world output in November 2018 which was 84.5 million barrels per day (mbpd) versus December 2019 which was 83.2 mbpd when the world economy was supposedly still in high gear. (These numbers are for crude plus lease condensate which is the definition of oil on major oil exchanges.) Between these two dates monthly oil production was occasionally lower than December 2019, but never higher than November 2018.

    Does this mean oil production has reached an all-time peak?

    Recent developments tend to suggest an affirmative answer. With the dramatic drop in both oil consumption and oil prices since the onset of the pandemic, the oil industry is now flat on its back. Capital spending on new projects has been slashed drastically in the wake of these developments. Revenues are dropping as oil production is being shut in awaiting higher prices and as many firms file for bankruptcy.

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    1. Super informative and articulate podcast, Rob, thanks.

      I don’t comment enough on your posts, but I read, appreciate, and get something useful out of every one of them. And thanks for occasionally tossing in a bit of comedy to lighten things up!

      I’m really bummed today about how hostile so many people (particularly in the United States, where I live) are about wearing masks to reduce the spread of this disease. And I’m far from certain that common sense and scientific evidence will sway them. But this podcast gave me a few great tips to cope and manage the stress involved in our current predicament that I’ll put to use.

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      1. Thank you for the kind words.

        I am very grateful that I had the good fortune to be born in Canada. We seem to be less polarized and hostile to each other than what I observe in the US. In the US most issues seem to have a red team and a blue team belief, and what the science says has no influence on those beliefs. Quite sad.

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        1. I’ve visited Canada once, during March of 2015, when I drove from my home in the Midwest to Ottawa. The people I met and observed there were marvelously kind and reasonable, both to me and to one another. I noticed they had an ease of presence that I rarely experience in the United States anymore. I attribute much of that ease to a reduced overall stress burden as compared to US citizens. Upon my return home, I immediately sensed a heightened level of agitation and aggression from many members of my community as compared to my (admittedly brief) time in Canada.

          There’s long been a deep sickness within a significant portion of the collective American (US) mindset. A combination of individual/national narcissism, the belief that freedom doesn’t require responsibility, general paranoia, rugged individualism at all costs, a pathological disregard for the welfare of others, and (more recently) a contempt for science. I struggle to see how this country can mend its ways, and thereby stop terrorizing itself and others.

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          1. Well said. I too see dark clouds over the US, and by extension due to its influence, everywhere else. It seems the only way to unite the American people is to go to war. Unfortunately the next war will have a bad outcome because we’ve already burned all the good booty so war will simply accelerate the depletion of key resources.

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  11. I’ve visited Canada once, during March of 2015, when I drove from my home in the Midwest to Ottawa. The people I met and observed there were marvelously kind and reasonable, both to me and to one another. I noticed they had an ease of presence that I rarely experience in the United States anymore. I attribute much of that ease to a reduced overall stress burden as compared to US citizens. Upon my return home, I immediately sensed a heightened level of agitation and aggression from many members of my community as compared to my (admittedly brief) time in Canada.

    There’s long been a deep sickness within a significant portion of the collective American (US) mindset. A combination of individual/national narcissism, the belief that freedom doesn’t require responsibility, general paranoia, rugged individualism at all costs, a pathological disregard for the welfare of others, and (more recently) a contempt for science. I struggle to see how this country can mend its ways, and thereby stop terrorizing itself and others.

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    1. Amazing. We’d have reason to question the validity of the MPP if just once we heard a leader say “we need to constrain growth and leave some oil in the ground so our grandchildren can at least enjoy a small fraction of the comforts we take for granted”.

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  13. It Hit 80 Degrees in the Arctic This Week

    “This story will provide important context for the headline, and I encourage you to read it—but really, the headline tells you what you need to know: It was 80 degrees Fahrenheit above the Arctic Circle this week.

    A little farther south, in Siberia—you know, the region of world we reference when we want to connote something cold—it was 86 degrees Fahrenheit. Arctic sea ice in the neighboring Kara Sea took the deepest May nose dive ever recorded. Oh, and random swaths of the region are on fire. Things are extremely wrong.”

    https://earther.gizmodo.com/it-hit-80-degrees-in-the-arctic-this-week-1843606717

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    1. We know from everyday life that bad things happen when the gradient between high and low energy is reduced. Doing it at the planetary scale and not making any changes whatsoever that might inconvenience our privileged lifestyles is insanity and more proof that we are governed by reality denial and the MPP.

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  14. {From emergency ICU health-care worker Kristen Martins.}

    “My message to those protesting the stay-at-home orders in Minnesota, Tennessee, Washington, Colorado, Florida, Illinois, California, Arizona, Montana, and any other state & to Trump:

    Come take a step into my daily hell.

    Come tell me to my face that “fear is worse than the virus!”

    Come walk into the trailer full of dead, rotting humans, and I will pick out a spot for your body, since it is “your body, your right”.

    If “Jesus is your vaccine”, tell me why I am taking the rosary off my patient’s lifeless body?

    Anyone protesting should forfeit their rights to receive any medical care. NONE. You are putting the lives of anyone you come into contact with because of your boredom and selfishness. You are putting every single healthcare worker’s life not only at an increased risk, but your disrespect for humankind because of your ignorance and stupidity is beyond appalling. You are a disgrace.”

    https://kristenfmartins.wordpress.com/2020/04/21/running-out-of-outlets/

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    2. Thanks, Apneaman. Heartbreaking, powerful stuff. It sickens me that anyone reading this, or a similar narrative, could minimize or deny the grimness of this disease and not engage ridiculously simple actions to help protect one another from it. But it’s a certainty that there are many who will do just that.

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  15. Out of 8 billion reality denying fire apes there are less than a hundred that are capable of explaining in a few sentences what’s actually going on with the economy. Tim Watkins is one of them. I’m pretty sure his denial genes are defective. Seriously. Except when he whines about austerity which he avoids in this essay.

    https://consciousnessofsheep.co.uk/2020/05/26/two-money-tricks/

    The contradiction at the heart of this money trick is that the only “value” behind the central bank currency which has been used to purchase all of these bonds and to maintain artificially low interest rates is the state’s ability to tax the wealth of the future population sufficiently to repay the debt with interest. This, in turn, requires that we somehow learn how to have infinite growth on a finite planet.

    In the immediate aftermath of the 2008 crash, few serious analysts would have believed that the global system would have survived more or less intact for more than a decade. Conventional oil extraction had peaked in 2005 – triggering the chain of events which brought the banks down three years later. What nobody could have foreseen was the way that central bank manipulation would force investors who were seeking higher yields to invest in a hydraulic fracturing industry which borrowed billions of dollars from investors to extract millions of dollars’ worth of oil from the source rock. As Nicole Foss once put it – if conventional oil was like drinking draught beer from a glass, fracking was the equivalent of sucking the spilled dregs from the carpet.

    Nevertheless, the spurt of oil from the US shale plays – which flooded the market and crashed the price – was just enough to prevent the western economies from collapsing while two Asian economies – India and especially China – turned to the last of the planet’s coal reserves to generate the final spurt of growth to an industrial economy that has now passed its peak.

    While many will eventually blame the SARS-CoV-2 pandemic and the actions taken to mitigate its impact for the collapse of the global economy, the warning signs had already been apparent in 2019. Consumer spending had slumped and most consumer-facing businesses were being engulfed by a retail apocalypse which had only spared essentials like food together with a handful of online outlets which used gig-economy labour to keep costs down. Meanwhile, parking lots around the planet have been steadily filling up with new cars which can neither be sold nor leased to businesses and consumers who are already loaded up with debt and see little prospect of income/profit growth anytime soon.

    The majority of economist and politicians – entirely ignorant of the role of energy in the economy – will assume that one or other means of reflating the currency supply in the aftermath of the pandemic – either through some equivalent of a long-term war bond to hold the pandemic debt or via government currency printing and public spending – will be sufficient to restore the economy to some version of “normal” (by which they usually mean the abnormal period of growth between 1953 and 1973). In the absence of an energy-dense alternative to depleting supplies of economically extractable oil, however, the trend away from automation toward manual labour which began after 2008 is likely to accelerate.

    As real terms wages decline in response to this process of simplification, it will eventually become apparent to all concerned that the debt we have been running up on the assumption that growth will last forever is, in fact, never going to be repaid. When that happens, there will likely be a huge crash in the value of any “asset” that exists as mere bits on a bank computer. Hard assets like land and precious metals may experience a big rise in prices as those who manage to sell financial assets before the crash seek somewhere safe to park their wealth. But even these may be of little value – in the short-term at least – in the event that the value of currency itself collapses.

    It has always been in the gift of governments to mitigate the coming downturn. A period of managed de-growth is far more preferable than a sudden anarchic collapse. Unfortunately, this would involve the ruling elite to acknowledge that a large part of its supposed wealth is going to disappear in any case. But no ruling elite has ever accepted this proposition at a point at which it might – just – save itself from its own folly. Instead, most failed civilisations spent their final years in a vain struggle to restore their fortunes long after the material bases had disappeared. The current media push for even more austerity and even more spending cuts at a time when both households and businesses are curbing their spending suggests that our civilisation will be no different.

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    1. Yes I saw that. The correct response from environmentalists should have been to shift their focus from green energy to population reduction. Instead they attacked the messenger and denied the message. Genetic reality denial in plain view for all to see.

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    2. It was a photographer who’d documented rare earth mining but apparently doesn’t mind its impact unless it’s for something not officially “green” or “clean.” See: https://www.tobysmith.com/project/rare-earthenware-2/

      One of the first images I found of Smith shows objects he seems to respect more than nature itself: https://cdn.tobysmith.com/wp-content/uploads/2014/04/mug_shot_12.jpg

      It was a smug act but I think Moore will override it soon enough. One assumes all footage was obtained with permission. Eco-posers are just giving the film more publicity.

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          1. FYI, I noticed Gibbs has kept a copy on Vimeo for 2 months; could have sworn it didn’t show up earlier. He may have just de-privatized it. I’ll leave the link to be found in a search.

            I’m thinking smug/flaky Google management is a big factor in censorship. YouTube allows all sorts of crass material like trophy hunting porn as educational or recreational. “Don’t Be Evil” is a joke.

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