Author: Rob Mielcarski

On Boneheads

You Bonehead

Yesterday, the leader of the world’s largest and strongest economy called his central banker a “bonehead” for not lowering interest rates below zero.

Today, the European Central bank (ECB), which according to Trump is not led by a bonehead, reduced interest rates and increased money printing:

https://www.bloomberg.com/news/articles/2019-09-12/ecb-cuts-rates-restarts-qe-to-fight-slowdown-as-draghi-era-ends?srnd=markets-vp

The ECB reduced the deposit rate to minus 0.5% from minus 0.4%, and said it’ll buy debt from Nov. 1 at a pace of 20 billion euros ($22 billion) a month for as long as necessary to hit its inflation goal.

Trump and the ECB correctly understand that lower interest rates are required to stimulate growth, and yet rates are already near zero, which suggests real growth is no longer possible.

A non-bonehead would seek to understand the underlying reason growth is constrained. They might begin by reading today’s essay by Gail Tverberg in which she makes 11 important points:

https://ourfiniteworld.com/2019/09/12/our-energy-and-debt-predicament-in-2019/

[1] Our problem is not just that oil prices that are too low. Prices are too low for practically every type of energy producer, and in many parts of the globe.

[2] The general trend in oil prices has been down since 2008. In fact, a similar trend applies for many other fuels.

[3] The situation of prices being too low for many types of energy producers simultaneously is precisely the problem I found back in December 2008 when I wrote the article Impact of the Credit Crisis on the Energy Industry – Where Are We Now?

[4] In the right circumstances, a rapidly growing supply of cheap energy products can help the world economy grow.

[5] It is striking that the period of rapid energy consumption growth between World War II and 1980 corresponds closely to the long-term rise in US interest rates between the 1940s and 1980 (Figure 6).

[6] Starting about 1980, the US economy began substituting rapidly growing debt for rapidly growing energy supplies. For a while, this substitution seemed to pull the economy forward. Now growth in debt is failing as well.

[7] Since 2001, world economic growth has been pulled forward by China with its growing coal supply and its growing debt. In the future, this stimulus seems likely to disappear.

[8] The world economy needs much more rapidly growing debt if energy prices are to rise to a level that is acceptable to energy producers.

[9] The world economy seems to be running out of truly productive uses for debt. There are investments available, but the rate of return is very low. The lack of investments with adequate return is a significant part of what is preventing the economy from being able to support higher interest rates.

[10] Since 1981, regulators have been able to prop up the economy by reducing interest rates whenever economic growth was faltering. Now we have pretty much run out of this built-in source stimulus.

[11] The total return of the economy seems to be too low now. This seems to be why we have problems of many types, ranging from (a) low interest rates to (b) low profitability for energy producers to (c) too much wage disparity.

Having now learned that economic growth is constrained by the depletion of low cost non-renewable fossil energy, a non-bonehead would then focus on renewable energy to determine what is or is not physically possible, and the implications of trying to substitute fossil with solar and wind energy.

They might begin with this week’s essay by Tim Watkins and would quickly learn that the environmental costs of “green” energy are very high, that “renewable” energy is totally dependent on non-renewable fossil energy, and in any case only produces electricity which does not address the other 80% of fossil energy we depend on.

http://consciousnessofsheep.co.uk/2019/09/09/facing-our-inconvenient-truths/

Having now attained an understanding that there is no possible way to resume economic growth, a non-bonehead would then ask what’s the consequence of attempting to force growth with printed money and negative interest rates? A quick review of history would show there is no free lunch and that monetary shenanigans ultimately destroy currencies which leads to wars and revolutions.

Finally, a non-bonehead would integrate all of the above with an understanding of the ongoing collapse of our planetary ecosystem, including the loss of a climate compatible with civilization. They might begin with this week’s interview with Phillise Todd, who has a good grasp of the big picture, despite her occasional and understandable (as explained by Varki’s MORT theory) lapses into denial.

 

Understanding now the intractable nature of our predicament, and comparing reality with what our culture believes, a non-bonehead would conclude they are a genetic mutant and that most of our species are boneheads.

When challenged with the criticism that all they do is discuss problems without offering solutions, a non-bonehead would respond with a clear plan:

What would a wise society do?

And the boneheads would ignore it.

Cape Scott Trail Hike

Three nights and 55 km with 50 lb packs on the northern tip of Vancouver Island. We got lucky with no rain, mud, or mosquitoes.

Click here for more photos.

By Nate Hagens: Reality 101 Short Courses

 

Reality Check Ahead

Today Nate Hagens released a new series of short courses on the human predicament created for the University of Minnesota NEXUS ONE freshman program.

More information on Nate’s educational initiatives can be found at the Institute for the Study of Energy and Our Future (ISEOF).

You can also find another excellent Reality 101 course by Nate here.

 

Reality 101 Short Course #1: Metacognition in the Anthropocene

 

Reality 101 Short Course #2: The Fossils that Power the Global Economy

 

Reality 101 Short Course #3: The Real Stock Market

 

Reality 101 Short Course #4: Finding Resilience in an Age of Turbulence

Endgame

Interest Rate Response

I don’t read ZeroHedge much anymore because they don’t understand and/or deny the relationships between energy, overshoot, and the economy.

Today the US Fed lowered the interest rate so I had a peak at ZeroHedge to see what the knuckleheads were saying. It seems we’re approaching a Minsky Moment.

https://www.zerohedge.com/news/2019-07-31/endgame-starting-2024-all-us-debt-issuance-will-be-used-pay-only-interest-debt

Endgame: Starting In 2024, All US Debt Issuance Will Be Used To Pay Only For Interest On Debt

As we first pointed out back in March, when looking at the US ‘income statement’, most concerning by far is that for the first four months of fiscal year 2019, interest payments on the U.S. national debt hit $221 billion, 9% more than in the same five-month period last year, with the rate of increase breathtaking (see chart below). As a reminder, according to the Treasury’s conservative budget estimates, interest on the U.S. public debt is on track to reach a record $591 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to almost 3% of estimated GDP, the highest percentage since 2011. In fact, as of June 30, US interest had already surpassed $600 billion.

In short: in the stylized cycle of the US “Minsky Moment”, the US will enter the penultimate, Ponzi Finance,phase – the one in which all the new debt issuance is used to fund only interest on the debt – some time around in 2024.

From that point on, every incremental increase in interest rates, which will eventually happen simply due to rising inflation expectations, will merely accelerate the ponzi process, whereby even more debt is sold just to fund the rising interest on the debt, requiring even more debt issuance, and so on, until finally the “Minsky Moment” arrives.

At that point, while we don’t know yet what the next reserve currency – either fiat, hard or digital – after the US dollar will be, we urge readers to own a whole lot of it.

In case you don’t understand any of this, let me simplify:

We are using more debt to fix too much debt, and not one of our leaders understands that fossil energy depletion is why we have to borrow $3 $4 of debt to generate $1 of growth, nor that doing so is a really bad idea.

By Tad Patzek: On the Green Queen’s Race

red-queen.jpg

I wrote about the Red Queen’s race for diesel fuel here.

Tad Patzek today wrote about the Green Queen’s race for electricity.

http://patzek-lifeitself.blogspot.com/2019/07/green-new-deal-iv-any-other-paths.html

Tad begins by pointing out that a recently update climate model is predicting more than 1 degree of additional warming than the previous model for our current CO2 levels. That’s bad news but seems consistent with what we observe every day in the news.

Then Tad gets to his main point:

…since 2004, the annual increases of total electricity consumption in the world have outpaced all electricity production by all PV arrays in the world…

This means that the Green Queen is not only not keeping up, she’s not even in the race. Except for one year, 2009, when the economy crashed.

Annual Electricity Change vs. Total PV Electricity

And we haven’t even begun to replace the other 84% of fossil energy that we use for non-electricity applications like heating, fertilizer, tractors, trucks, trains, ships, planes, mining, steel, cement, glass, etc..

Thus, there are no other paths but to shrink, shrink more and transit away from fossil fuels.

Once again I observe that facts don’t matter and denial defines our species.

By Geoffrey Chia: Open Letter to Extinction Rebellion

Who Wants Change

Extinction Rebellion is the most promising new global organization dedicated to forcing action on our ecological and climate emergency.

Their #1 demand is for governments to stop denying reality:

Government must tell the truth by declaring a climate and ecological emergency, working with other institutions to communicate the urgency for change.

Dr. Geoffrey Chia, in an open letter to Extinction Rebellion, commends them on their good intentions but points out that they are as deeply in denial as the governments they criticize.

http://www.doomsteaddiner.net/blog/2019/06/29/open-letter-to-extinction-rebellion/

h/t James

One of your demands is that official bodies tell the Truth and declare a climate emergency. You were told by the IPCC last year that humanity had 12 years before it would be too late to do anything. That was a LIE. The fact is that it was and is already far too late to prevent global catastrophe. There is NO carbon budget left. These realities were apparent even back in 2013 following the IPCC fifth assessment report, when the only scenarios the IPCC could imagine where disaster could be avoided required time travel into the past or technologies which did not exist and certainly could not be scaled up even if they did exist (as expressed by climate scientists Dr Kevin Anderson and Dr Hugh Hunt). The science based facts behind these assertions are summarised here: 6.

Truth is determined by careful and comprehensive collection of accurate data, by hard objective scientific scrutiny using the principles of Physics, Chemistry and Biology, including mathematical analyses, which must not be polluted by political or economic vested interests. The IPCC processes had long been watered down by political interference, which seriously underestimated the magnitude and speed of global warming, in order to justify foot dragging by national so-called “leaders”.

The reason we have not yet experienced the full horrific consequences of 415ppm CO2 (in reality, there is a much higher CO2 equivalent, around 500ppm) is because of time lag due to thermal inertia. Atmospheric temperature rises have been buffered by the cool oceans and the melting ice masses. Those buffers are being exceeded, they are being overwhelmed, as every second passes. If you think the unprecedented shocking weather extremes over the past 15 years were disastrous at barely 1 degree Celsius atmospheric global average temperature rise, there is far more and far worse to come. More than 4 degrees rise is irreversibly baked into the cake based on EXISTING greenhouse gas concentrations. That is as certain as the law of gravity. Hell is coming no matter what. The best thing you can do is get ready for it. But time is short and you must act NOW before the imminent global economic collapse steals away all your options.

Let us consider the absolute best imaginable outcomes for your group. What will happen if you are immediately 100% effective today in achieving all your social and policy goals?

  • Even if all carbon emissions cease today, the world is still committed to more than 4 degrees Celsius eventual global average temperature rise which will render large scale agriculture impossible. This means civilisation, the hallmark of which is the existence of cities, will no longer be possible. Small scale agriculture in a few selected climate resilient pockets may still be possible.
  • Large scale carbon sequestration is a fantasy and will never be undertaken because our bogus economic system will not allow for it and even if we can develop those technologies, we will not have the energy resources to do it. Geoengineering insanity will cause more problems than they address.
  • Immediate cessation of emissions will also mean immediate curtailment of global food production which is almost entirely dependent on fossil fuels. This will cause billions to starve. In the medical management of patients, knowingly inflicting harm is not an option. However allowing nature to take its course (in some cases – such as untreatable terminal cancer) is acceptable, indeed unavoidable. As a matter of course, billions will die this century due to oil/resource depletion, ecosystem collapse and climate catastrophe and the consequences thereof (warfare, epidemics etc). Inevitable near term economic collapse is also absolutely certain due to institutional fraud and impending energy collapse.  It is those events which will most effectively and drastically curtail carbon emissions, not your activism.

There is absolutely nothing you can do about the looming general die-off. You can however take steps to reduce the likelihood that you and your family and friends will die horribly in the next few decades. Please note that nobody’s survival is guaranteed. All anyone can do is increase the probability of their survival.

The remainder of Chia’s letter is a little too over the top with hyperbole for my taste but the gist of his advice to extinction rebellion members is probably correct: It’s too late to save civilization, focus on saving your members.

Here is another post by Geoffrey Chia that I thought was pretty good.

By Geoffrey Chia: What you should not say in public…

 

By Gail Zawacki: On Themism and Seeking Scapegoats for Reality

Themis

Gail Zawacki in her latest excellent essay introduces “Themist”, a new name for doomers, that tiny group of mutants with defective denial genes, that I belong to.

Gail succinctly summarizes why we Themists believe know what we believe know, and discusses a new trend to blame Themists for causing civilization’s imminent collapse.

I’m a Themist and proud of it. Come and get me you denying idiots, I’m right here.

http://witsendnj.blogspot.com/2019/07/in-praise-of-themis.html

1. Consciousness and Denial

In tandem with consciousness, humanity developed a deeply embedded penchant for denial. It’s a terrific survival strategy that evolved to help blind us to the pain of animals we hunt and eat, the terror of the victims of wars we wage on our neighbors, the monstrosity of slavery, the injustice of male chauvinism, the senselessness of death, and ultimately the fearsome gaping maw of meaninglessness in the vast unfeeling universe.

Our denial, entrenched in our genes, also enables – even requires – us to believe fantasies, to embrace spirits, to shun truth, to subscribe to the illusion of free will, to follow charlatans, and to pretend our hopes and prayers can shape reality.

 

2. WASF

Fact: there exists no natural mechanism that will slow the acceleration of anthropogenic global heating in any timeframe useful to life on earth. It is only reasonable to expect that it’s going to get hotter and hotter, faster and faster, for at least hundreds of years. Even if anthropogenic emissions cease today or in a decade, heating will still increase at an accelerating rate. Amplifying feedbacks such as albedo and forest die off and methane release from melting permafrost combined with the longevity of CO2 already released assure an uninhabitable climate in the fairly near future.

Once you understand that greenhouse gases will continue to trap energy from the sun as long as they persist, everything else – climate sensitivity and latent ocean warming and inertia in the system – is so much hoohah. The idea that technology yet to be invented will remove CO2 is no better than a religious tenet, and it will never be deployed at a scale that matters given the vast quantities that have already been released (and continue to be released).

 

3. Humans are incapable of change

As convincing as the physical effects documented by science are, it’s also and crucially ever more irrefutable that humans are simply not equipped to behave any other way than to grow without voluntary restraint, until we deplete the resources we need to survive, and overwhelm the environment with pollution until it is so toxic that it is poisonous to virtually all forms of life. We are basically an invasive species with no more self restraint than yeast.

This is where even the most dire voices about climate change often err.  It’s not libertarianism, or capitalism, or western civilization that has led us to this predicament – rather it is humanity’s exponential growth, in numbers and complexity, in technological capability, medical advances, and consumption.  The imperative to grow and consume is primordial and we cannot eliminate that biological trait despite our desire to believe in free will.

 

4. Apocaloptimists attacking doomers – as worse than deniers 

Overwhelming evidence – that impacts are faster and sooner than predicted, that tipping points have been irrevocably crossed, that amplifying feedbacks are beyond human influence, that global warming is run amuk with no natural mechanisms or magic technology to ameliorate inexorable heating – is leading more people to conclude that civilization (if not our species and most others) is doomed. Right now, there is an increasingly vocal contingent who are vigorously attacking the nebulous doomer community.

Much of the sniping and scapegoating begins with the hostile accusation that doomers, merely by existing, are encouraging inaction. This is patently absurd, since inaction has been and remains the default position ever since humans first noticed that burning fuel has consequences. No contribution by doomers towards defeatism accounts for the ever-increasing Keeling curve that measures CO2 concentrations, or the refusal of governments to meet climate treaty goals.

 

5. No fun

An especially pernicious assertion by this “shoot the messenger” crowd is the common claim that doomers are secretly desirous of a catastrophic end for humanity. I doubt there is a single doomer who finds any comfort whatsoever in either the inevitability of extinction or their own individual role in it. Every doomer I’ve ever interacted with, and there have been many, has agonized and mourned – and some have even gone crazy with grief and guilt and committed suicide. It’s not fun being a doomer, which is why there are so few of us.

Many doomers began as former devoted progressives, who fought long and hard before awakening with enormous ambivalence to the sad verity that humanity is not going to change. I personally learned about the tenacity of denial the hard way, first from trying to alert the world to the death of trees (a massacre that seemed perfectly obvious to me over a decade ago but invited unending ridicule) and second, from encountering so many “light” doomers – who will forever remain convinced, no matter how much archeological evidence refutes it, that the noble primitive and peaceful and sustainable indigenous savage was ever really a thing.

Removing the Safety Valves

Pressure Cooker

Something big has recently changed in our culture.

We no longer accept any unpleasant reality, no matter the costs of denying it, nor the benefits it might return in the long run.

For example, parents who do not permit their children to play unsupervised for fear of a scuff. And school teachers who no longer fail anyone and mark all students as above average. And high schools that fly their students to Europe rather than make them sweat on the West Coast trail. And universities that have dumbed-down their curriculums. And citizens who refuse to accept election results and blame fictional demons rather than questioning their own beliefs. And environmentalists who promote green growth rather than austerity and population reduction.

Recessions function like the safety valves on a pressure cooker that prevent a dangerous explosion. Recessions used to be viewed as a normal event that purged malinvestments and poor performers thus allowing healthy re-growth in the next cycle.

Today we are unwilling to accept any downturn. As soon as the markets start to drop the central banks step in to prop them up. Extraordinary measures have become ordinary. The absurd has become normal.

We’ve removed most of the safety valves and the pressure is building. Soon the pressure will be so high that we’ll be forced to remove the last safety valve and start handing out printed money to citizens, thus risking a repeat of the Weimar event and its terrible consequences.

It’s not like we need to abandon capitalism and free markets. To the contrary, all we need to do is let markets function the way we pretend they function.

I understand all the thermodynamic reasons that we might not want to let a recession take root, but I ask you, how is delaying the inevitable going to make things better? It’s not. It’s going to make things much worse.

Our only choices are do we want to fall from a higher elevation later, or climb down from a lower elevation sooner?

Where are the adults?

The Fed Stops Pretending by Peter D. Schiff

The elephant in the room that no one wants to acknowledge is that the “unconventional” policies that were introduced to fight a “once in a century” crisis are now the conventional policies of choice to combat the normal fluctuations of the business cycle. But zero percent interest rates and quantitative easing only worked a decade ago because people thought they were temporary. If they knew that the policies were permanent, the dollar may have plummeted and the resulting inflation may well have overwhelmed any benefits the stimulation delivered. But the naïve belief that the Fed could reverse course, unwind its bloated balance sheet and normalize interest rates, kept the game going and kept the dollar strong. Now that the illusion may about to be shattered, the dollar may not survive the next round of enhanced QE and ZIRP.

QE4 will have to be larger than the three earlier rounds combined, as the annual Federal budget deficits could exceed 3 trillion. However, while China, Russia, and many emerging market nations were eager buyers of Treasuries during those initial rounds, they may likely be sellers of Treasuries during the next round. That means none of the inflation created to finance QE would be exported. So the big price increases next time may take place in the supermarket rather than the stock market. Americans would finally be forced to deal with the adverse effects of inflation that we have been spared for the past 10 years. It’s not going to be pretty.

https://www.fxstreet.com/analysis/the-fed-stops-pretending-201906100556

Hat tip to Panopticon for his excellent daily posts on the economy and climate.

https://climateandeconomy.com/2019/06/10/10th-june-2019-todays-round-up-of-economic-news/

Saving the World by Recycling My Garbage

 

Recylcing

A year ago I wrote an essay that tried to capture the depth and breadth of our predicament, and that offered a simple idea for increasing awareness, gratefulness, and temperance.

If you’re not an engineer the essay may be a painful read because my goal was to communicate maximum content with minimum words in a single sentence, and it thus reads like a computer program.

Nevertheless I like the essay because it touches on, and integrates, every topic that citizens should understand, but almost none do.

The essay did not get much traction when it was published, so I’m recycling it today for the pleasure and enlightenment of the millions of new readers that now follow this blog.

I make the bold claim that this essay holds the all-time world’s record for the highest number of important ideas in a single sentence, and the highest ratio of important ideas to words in any essay, with 86 important ideas and 1290 words it’s ratio is 6.6%.

I’m confident that readers will not be able to find another essay that unseats my world record, however if I’m proven wrong, I will publicly admit that I have the same denial genes as the rest of you monkeys.

Here’s the link to my world record essay….

On Burning Carbon: The Case for Renaming GDP to GDB