“Grim News From NASA: West Antarctica’s Entire Flank Collapsing Toward Southern Ocean, At Least 15 Feet of Sea Level Rise Already Locked-in Worldwide”
Grim News From NASA: West Antarctica’s Entire Flank Collapsing Toward Southern Ocean
Author: Rob Mielcarski
By Steve Keen: Credit Money: How it Works and Why it Fails
I need to get a small rant off my chest. I promised myself no finger-pointing on this site but I have to make an exception for Economists. With a total disregard for physical laws, the scientific method, and insufficient calculus skills to create a model that reflects reality, the embarrassing discipline of Economics makes it possible for anyone to prove anything. And they do. All the time. Not one economist in a hundred has a clue. And these people are the most important advisors to our governments. Perhaps it is the fact that economists can generate any answer to any question that makes them popular with politicians, who to get elected, must tell voters what they want to hear.
The only economist I listen to is Steve Keen. He has a lot of important things to say. What distinguishes him from the crowd, and you are really not going to believe this, is that he includes debt in his models. Do yah think debt might be important? Duh. He’s also well grounded in thermodynamics which is vital to understanding the economy.
Credit Money: How it Works and Why it Fails, Part 1
Credit Money: How it Works and Why it Fails, Part 2
Credit Money: How it Works and Why it Fails, Part 3
Why Are We Printing Money?
It’s a simple question.
You’ll hear different simple answers depending on the politics of the speaker. Talking heads on the news will usually say it’s to stimulate growth or to create jobs.
It’s also a big clue.
Large scale money printing has been tried many times in history and it never ends well. We can expect modest inflation at best, high inflation, social unrest, and war at worst. We’ve been printing full steam for 5 years. They must know it’s risky. They must have a good reason. What’s the real reason?
Could it be?
1) The government is unable to borrow sufficient funds to cover their large deficit without causing interest rates to rise, which would force large cuts in services, and so makes up the shortfall with printed money.
2) The government is worried that if they stop printing the stock market will fall because it has become dependent on easy money. And they don’t want the stock market to fall because then people feel less wealthy and spend less.
3) The government wants to encourage retirement accounts to switch from low risk interest bearing investments to high risk equities, thus stimulating the stock market and increasing investment in companies that might create growth.
4) The big banks are in trouble and are dependent on money printing from which they skim fees and carry trades to rebuilt their reserves.
5) The government wishes to debase the currency to improve export competitiveness.
6) The government seeks to cause inflation as a means of reducing real levels of public and private debt because they know the underlying economy is struggling to service its high debt level.
7) There is little or no real growth which means the money supply is not growing fast enough to cover interest owed on existing debts, and given high debt levels, a large deflationary collapse would occur without a continual injection of new printed money.
There may be some truth in all 7 possibilities, but I discount the first 5 because we’ve had government cutbacks, high interest rates, stock market crashes, bank failures, and competitiveness problems in the past, and we recovered just fine.
I also discount 6) because inflation will cause interest rates to rise which will be a very big problem for governments with high debt.
That leaves 7) which I think is the main reason.
We’ve bumped up against limits to growth.
By Steven Kopits: Global Oil Market Forecasting: Main Approaches & Key Drivers
One of the best talks I’ve seen by an oil industry analyst.
The Center on Global Energy Policy hosted a presentation and discussion with Steven Kopits, Managing Director, Douglas-Westwood, on the different approaches to global oil market forecasting. Mr. Kopits’ remarks focused on both supply and demand-based methodologies, including how these models result in different assumptions and implications for oil supply (OPEC and non-OPEC), total oil demand and oil price. He also reviewed other key drivers such as changes in the transport sector and overall economic growth and discussed how these variables can further impact oil demand and supply.
The Big Picture on One Page
- our incomes are not rising…
- which prevents us from increasing our already high debt…
- which prevents us from affording higher oil prices…
- which prevents an increase in oil production…
- which prevents an increase in productivity…
- which prevents an increase in wealth creation…
- which prevents our incomes from rising (see above)…
- which prevents the money supply from increasing…
- which threatens our ability to pay interest on existing debts…
- which threatens the value of debts…
- which threatens a deflationary collapse…
- which threatens social unrest…
- which threatens politician’s jobs…
- which guarantees money printing will continue until it can’t…
- which erodes the value of our retirement savings…
- and someday (probably after a crash) will cause fierce inflation…
- which will make food and other necessities very expensive…
- which will create social unrest…
- which will threaten politician’s jobs…
- which will encourage despots…
- and thanks to geology…
- it will cost more next year to produce the same quantity of oil…
- and the year after…
- and so on until it costs 1 barrel of oil to produce 1 barrel of oil…
- and then we will use 100% renewable energy…
- just like the Romans…
- except we have to feed 7 billion instead of 100 million…
- and producing food will be a challenge…
- with most of the good soil, fish, and forests gone…
- and an unstable climate…
- and rising sea levels…
- and scarce fertilizer…
- and wars between tribes over remaining resources.
What Might Force an End to Money Printing?
What might force an end to money printing?
It’s an important question because that event, whatever it is, will probably trigger a deflationary crash. I don’t mean to suggest that this will be the final crash, or even the main crash, but rather the first big crash we will experience.
I’ve read a lot of smart people and asked a lot of questions but it seems no one knows the answer to this question. Which makes sense because the system is very complex and what will happen is heavily dependent on what the majority of the public believes, and on what politicians do, both of which are unknowable and unpredictable.
Following are some scenarios that seem plausible. In all cases I envision something happening that is too large for central banks to offset with more money printing which then exposes the fact that they are not as powerful as many people think and are forced to curtail printing or risk losing credibility.
- The majority stops believing that growth will restart and a panic selling of assets begins that becomes too large for central banks to put a bid under.
- Bond markets become concerned about inflation and force the interest rate up.
- An external shock, such as a foreign country or bank defaulting, sets off a chain reaction in our interconnected economies.
- War or terrorism disrupts the energy sector of an exporting country.
The best early warning signal for the first three scenarios will be rising interest rates.
I Told Me So…
Last year the Federal Reserve announced they were going to taper QE (reduce money printing). For those of you new to the party they are printing about 3 billion dollars a day (about $10 per day per person).
Most people interpreted this as good news that the economy was recovering and assumed the taper would happen as announced.
I said to myself, no chance. They can’t slow QE because the physics and mathematics of our predicament will not permit it.
Yesterday the new head of the Federal Reserve announced that their plans to taper are now flexible which is code speak for “we will not taper if doing so would cause GDP and/or asset prices to fall”.
Does Intelligence Require Denial?
In 2011 I wrote:
I wonder if intelligence requires denial to survive?
With intelligence we are capable of understanding:
- the universe will eventually go dark
- the sun will age and engulf the earth
- we will die
- there is no god
- the only purpose to life is for genes to reproduce
- political beliefs and leaders have no influence on anything important
- technology is just a flattering word for new ways to consume non-renewable resources
- climate change will ruin the lives of our grandchildren and it’s too late to do anything about it
- depletion of non-renewable energy will eliminate 9 out of 10 people within 50 years
- more than 50% of our paper wealth will vaporize in the coming global depression
I know that I would be more motivated if I was ignorant and optimistic.
In 2013 a new book titled Denial by Ajit Varki and Danny Brower was published in which they make the case that human intelligence does in fact require denial.
This book provides a plausible explanation for some of the most perplexing human mysteries.
Party-on or Not?
When a person learns that over-population, over-consumption, and resource depletion are leading to collapse of civilization and extinction of many species, what should they do?
One response is to work hard to maximize income and to invest as much as possible to increase the probability of a comfortable life after the collapse.
Another response is to voluntarily reduce income and consumption and to have fewer or no children.
The problem with the latter response is similar to why efficiency alone cannot solve our energy or climate problems. If total consumption is to be reduced through frugality and/or efficiency then there must be a mechanism to prevent the newly freed resources from being consumed by someone else.
No such mechanism exists today.
In today’s global world if I choose not to consume a liter of gasoline it almost certainly will be consumed by someone else.
Despite this pessimistic view of the impact an individual can make, I have concluded that frugality is still the correct strategy.
It is probable that much wealth will be lost in the coming collapse as paper claims (money and investments) on future wealth vaporize. Any wealth that escapes the initial deflation will be threatened by the inflation that is likely to follow and/or governments in desperate need of taxes and/or angry mobs.
By voluntarily reducing consumption one builds material resiliency to coming shocks because less is needed to maintain your lifestyle, and builds emotional resiliency because less pain is associated with voluntarily doing something than being forced to do the same thing.
A modest lifestyle also sets a good example for family and friends. If enough people admire and emulate your actions then a meaningful positive impact might emerge.
You might also sleep better knowing that you did what you could.
What to Expect as We Collapse
What are we likely to experience as we collapse?
- unemployment will rise
- incomes will fall
- interest rates will rise
- stock and bond prices will fall
- real estate prices will fall
- credit availability will decline
- trade will decline and may become sporadic due to credit system problems
- fewer imported goods will be available — think about how few durable items are manufactured in Canada
- food prices will increase due to less availability of imported food and consequent higher demand for local food
- large-scale industrial food production may be disrupted due to rising interest rates and supply chain problems however governments will probably make it a priority to keep big agriculture going
- energy prices and consumption will fall as fewer consumers are able to afford it
- the upper bound on energy flow rates will decline because lower prices will not support expensive extraction like tar sands and fracking
- total economic activity will shrink in parallel with declining energy consumption
- air travel will decline or stop for all but the rich
- many cars will be abandoned as operating costs becomes unaffordable and resale value approaches zero
- roads and infrastructure will fall into disrepair
- electricity may become intermittent in some regions
- social unrest and crime will increase
- tax rates will increase, tax revenues will decline, demand for social programs will increase, and governments will be forced to choose between more social unrest now due to deflation, or more social unrest in the future due to inflation — most will chose inflation
- the severity of the pressure on governments will result in collapse or hyper-inflation for some countries, especially those will no indigenous energy or goods to trade for energy
- war between countries competing for scarce resources and/or seeking scapegoats is probable
- everyone will experience hardship but farmers without debt will probably do best
The collapse will likely occur in steps and will continue for about 100 years until all affordable fossil fuels have been extracted at which point civilization will resemble medieval life, assuming we have not gone extinct through famine, disease, or wars.
Layered on top of this economic and social chaos will be a rapidly changing and violent climate that will disrupt food production and cause economic damage. We can expect a warming impulse with unknown but likely negative consequences when aerosol particulates drop with declining industrial activity and air travel.