By Tim Watkins: The Three Vortices of Doom (energy, debt, state)

The Net Energy Cliff

 

Tim Watkins today published a superb big picture essay explaining the troubling trends in our economy that everyone sees but few understand.

It’s a great primer for anyone curious why the stories they hear from their leaders and news media don’t make sense.

If you’re the kind of person that needs hope, Watkins advises to pray for a very large discovery of low-cost oil or a breakthrough in nuclear energy.

Or, if you’re the kind of person that likes to know the most probable outcome they should prepare for, Watkins advises to get used to living with less in a more local economy.

http://consciousnessofsheep.co.uk/2018/09/13/the-three-vortices-of-doom/

Despite the cheerleading efforts of the legacy media, the economic storm clouds are growing on the horizon.  Oil – the economic “master resource” – passed $80 per barrel yesterday.  Meanwhile, central banks around the world have begun to unwind the stimulus packages used to bail out the economy in the aftermath of the 2008 crash.  And all the while, governments are struggling to balance the need to manage their borrowing while maintaining the value of their currencies.  Add to that the politics of the new nationalism and you have a recipe for turbulent economic times in the very near future.

By far the biggest blind spot in economics, however, is its treatment of energy as just another cheap resource to be exploited.  In fact, energy should be treated as a separate category alongside capital, labour and resources in any model that seeks to explain the way the real world works.  This is because energy is the transformative force that allows us to (temporarily) defy the second law of thermodynamics, which says that things move from order to chaos; they break down not up.  As Steve Keen puts it:

“Capital without energy is a statue; labour without energy is a corpse.”

Another way of understanding this is to see that for a mere $80 dollars we get more than $350,000 worth of work (if we had to pay a human the average wage to do it).  This also explains why relatively small changes in the price of energy (particularly oil because its use is ubiquitous) have such a dramatic impact on the monetary economy.  Just three years ago, for every $40 spent on oil, companies were returning $350,000 worth of productive work.  Today, the same $40 is returning just $175,000 of productive work; something that largely explains the so-called “productivity puzzle,” as well accounting for why ten of last eleven recessions were preceded by a spike in the price of oil.

Without the net energy to allow for genuine economic growth, sovereign debt becomes as unpayable as consumer and corporate debt.  It can be defaulted or it can be inflated away; but it can never be repaid in real terms.  States, however, are unlikely to concede this point until it is too late. To put it another way, states will use all of the power at their disposal to maintain the exchange rate of their currencies even if this results in economic ruin for their national economies and their citizens.

These, then are the three vortices which (in the absence of some new high-EROEI energy source) are gradually choking the life out of our global industrial civilisation.  As the net energy remaining to us declines, an ever greater proportion of our currency and useable energy will be sucked into them until such time as our economy consists of nothing else but the growing of food and the generation of energy in the service of an ever more capricious state.  This process will inevitably involve the acceleration of the decline in living standards that those at the bottom of the income ladder have been experiencing since the 1970s.  It will also result in a re-localising of economies as the energy required to maintain global supply chains disappears.  In this respect, the conservative nationalism of Brexit and Trump may simply be the relatively benign early manifestation of the politics of our energy-starved future.

By Tom Murphy: The Energy Trap (we all scream for ice cream)

The Energy Trap

A friend reminded me of this 2011 essay written by the brilliant physicist Tom Murphy.

I read it when Murphy first published it but I had forgotten how good it was so I’ve dusted it off in the hope that it sees more daylight.

https://dothemath.ucsd.edu/2011/10/the-energy-trap/

Many Do the Math posts have touched on the inevitable cessation of growth and on the challenge we will face in developing a replacement energy infrastructure once our fossil fuel inheritance is spent. The focus has been on long-term physical constraints, and not on the messy details of our response in the short-term. But our reaction to a diminishing flow of fossil fuel energy in the short-term will determine whether we transition to a sustainable but technological existence or allow ourselves to collapse. One stumbling block in particular has me worried. I call it The Energy Trap.

In brief, the idea is that once we enter a decline phase in fossil fuel availability—first in petroleum—our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but…energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term—effectively steepening the decline—for a long-term energy plan? It’s a trap!

 

In the parallel world of economics, an energy decline likely spells deep recession. The substantial financial investment needed to carry out an energy replacement crash program will be hard to scrape together in tough times, especially given that we are unlikely to converge on the “right” solution into which we sink our bucks.

Politically, the Energy Trap is a killer. In my lifetime, I have not witnessed in our political system the adult behavior that would be needed to buckle down for a long-term goal involving short-term sacrifice.  Or at least any brief bouts of such maturity have not been politically rewarded.  I’m not blaming the politicians. We all scream for ice cream. Politicians simply cater to our demands. We tend to vote for the candidate who promises a bigger, better tomorrow—even if such a path is untenable.

The only way out of the political trap is for a substantial fraction of our population to understand the dimensions of the problem: to understand that we’ve been spoiled by the surplus energy available through fossil fuels, and that we will have to make decade-level sacrifices to put ourselves on a new track. The only way to accomplish this is through sober education, which is what Do the Math is all about. It’s a trap! Spread the word!

 

Tom Murphy stopped writing in 2013 after (I think) he realized that no amount of education will change the behavior of the majority.

On Famous Polymaths

See No Evil

There are two and only two topics required to understand the basis of every success and problem in our civilization: thermodynamics and genetic behavior.

By thermodynamics I mean:

  • the laws of thermodynamics that govern our universe
  • the relationships between energy, economy, wealth, population, and pollution
  • the relationship between debt and surplus energy
  • the maximum power principle of biology
  • the history of energy use
  • the types, sources, qualities, density, scalability, and applications of energy
  • the discovery rate, consumption rate, and reserves of non-renewable energy
  • what is and is not feasible with, and the dependencies of, non-fossil energy

By genetic behavior I mean:

  • human behaviors that are mostly hard-wired
  • genetic behaviors that contributed to our unique success and predicament
  • why those genetic behaviors evolved

Why is it that every famous intellectual understands many topics except the only two topics that really matter: thermodynamics and genetic behavior?

  • Steven Pinker
  • Sam Harris
  • Jordan Peterson
  • Noam Chomsky
  • Sean Carroll
  • Yuval Noah Harari
  • David Suzuki
  • David Attenborough
  • Neil deGrasse Tyson
  • Stephen Hawking
  • Lawrence Krauss
  • Elon Musk
  • Stewart Brand
  • James Hansen
  • Matt Ridley
  • Richard Dawkins
  • Frans de Waal
  • James Lovelock
  • Jared Diamond
  • Joe Rogan
  • Michael Pollan
  • Ken Burns
  • Chris Hedges
  • Vaclav Smil
  • Niall Ferguson
  • Alan Greenspan
  • Thomas Sowell
  • John Kenneth Galbraith
  • David Stockman
  • Joseph Stiglitz
  • Paul Krugman
  • and many others

Why is it that there is no famous intellectual (nor political or business leader) who understands thermodynamics and genetic behavior?

  • ???

Why is it that the few intellectuals who do understand thermodynamics and genetic behavior are distinctly not famous?

  • Dennis Meadows
  • Tom Murphy
  • William Catton
  • William Rees
  • Charles Hall
  • Nate Hagens
  • Jay Hanson
  • David Korowicz
  • Paul Chefurka
  • Reg Morrison
  • Jack Alpert
  • Richard Heinberg
  • Joseph Tainter
  • George Mobus
  • Dave Cohen
  • Gail Zawacki
  • Jason Bradford
  • Nicole Foss
  • Steve Ludlum
  • James @ Megacancer
  • xraymike79
  • and very few others

This can’t be an accidental coincidence because famous polymaths are fluent in many topics.

I suspect the answer is that famous polymaths deny everything they don’t want to know, and they wouldn’t be famous if they didn’t, because their audience doesn’t want to understand those topics either.

It’s a fascinating phenomenon to observe once you see it.

P. S.

Why is there only one person in the world, a cranky old retired electrical engineer, who writes about genetic reality denial?

I suspect because denial is the reality that must be most aggressively denied to avoid collapsing the house of cards that keeps us functioning.

On Oil

Oil

JTRoberts recently made an important and insightful observation which I paraphrase and elaborate here.

Oil is a non-renewable resource that we extract from the earth. Oil companies are motivated by profit so they start with low-cost reservoirs and as those deplete they move to increasingly higher cost sources like water injection, offshore, tar sands, and fracking.

All economic activity depends on energy, as the laws of thermodynamics explain, and as the near perfect correlation between wealth and energy consumption confirms.

Oil is the keystone energy because oil is required to extract or capture all other forms of energy including food, coal, natural gas, wood, solar, wind, nuclear, and hydroelectric energy.

The cost of oil can be viewed as a tax on economic activity. Our economy is configured to operate profitably on about $20 per barrel oil. We have already captured most feasible energy efficiency gains making it difficult for our economy to operate profitably on oil over $20.

Thus, as the cost of extraction due to depletion of low-cost reserves pushes the price of oil above $20, the difference must be made up with debt.

At today’s $70 oil, which we burn about 96 million barrels per day, that works out to 96 * 365 * ($70-$20) = $1.8 trillion, which as predicted, is about the rate that global debt is increasing.

If you believe we have many years of oil left, then you must also believe that debt can continue to increase much faster than our income for many years without consequence on the value of money.

Money has value because we have confidence that the debt which creates our money will be repaid with interest, which can only occur when the economy grows, which can only occur when the quantity of energy we burn grows, which due to continually increasing extraction costs, can only occur when debt grows faster than the economy, which at some point will erode our confidence, which will reduce the value of money, which will reduce the amount of energy we can afford to burn, which will reduce economic activity, which will further erode our confidence in the value of money.

Do you see our energy and climate predicament?

Do you see why our leaders deny we have a problem?

Do you see why the longer we deny the problem the worse the outcome will be?

Additional Thoughts (30-Jul-2018)

Most people do not think we have an imminent oil problem because they’ve read in the news that there is 50 years or more of unconventional oil left to extract. While probably true, this fact is misleading.

What does it mean to say oil is depleted?

Depleted does not mean that all the oil is gone. Depleted means that all the oil we can afford to extract and purchase is gone. Big difference.

To be a little more precise, depleted is the point at which the cost to extract oil exceeds the price that our economy can pay and still grow.

Today we are paying the price and achieving a little growth, but it is taking a lot of debt at a very low interest rate to do so, and each year it takes more debt.

The ability of our global debt-backed fractional reserve monetary system to function (i.e. not collapse), and the high standard of living we enjoy, and the high capital things we invest in like modern infrastructure and technology, all fundamentally depend on economic growth. If growth stops our system will collapse, and our monetary system will have to be replaced with a different design, such as an asset-backed full reserve system, which will mean much lower standards of living, and much less availability of many things we currently take for granted.

I wrote an essay on economic growth which I recommend you read because many people think they know why we want economic growth but in fact don’t know the main and much more important reason.

So what evidence exists that oil is getting close to being depleted?

  1. Our economy in aggregate is losing money. Debt is growing much faster than the economy. It now takes over $3 of debt to generate $1 of growth. This is not sustainable. A sustainable economy invests $1 of debt to create more than $1 of growth, as we did prior to 1970.  It’s important to note that this state of affairs exists despite the interest rate (i.e. the cost of money) being historically low (in some cases zero). It’s also important to note that this is a global phenomenon. So we can’t blame bad leaders, or the political system, or the culture. Every country in the world is growing their debt in an unsustainable manner, or wants to. The common denominator is energy which is the most important thing that drives every economy in the world. And the price of energy has been trending up for 5 decades simultaneous with our debt.
  2. The US central bank is starting to increase interest rates for their money that the world uses to buy oil. There are many different ways to interpret this action. My own speculation is they are worried about confidence in their money and want to maintain or strengthen its purchasing power for oil. Looking through the other side of the lens, this is the same as saying the Fed wants to lower the price of oil because they are worried about inflation since oil is required to make almost everything. If the price of oil drops, the supply of oil will drop.
  3. Most companies that extract high-cost oil are struggling. For example, the majority of US fracking companies are losing money.
  4. Countries that are highly dependent on profits from their high-cost oil reserves are struggling. For example, Venezuela with the largest unconventional oil reserves in the word seems to be collapsing.
  5. Countries with large low-cost reserves are behaving oddly for countries that used to be fantastically wealthy. For example, Saudi Arabia has implemented aggressive austerity and wanted to sell a portion of their state oil company to raise money. They’ve recently backed off from this sale, possibly because it would have required them to submit to an independent audit of their remaining reserves, which some smart people speculate are much lower than stated.
  6. War-like behavior is increasing towards countries that have large low-cost oil reserves and that are not viewed as close friends. For example, Russia and Iran.
  7. Weak countries that lack the ability to borrow US$ needed to buy oil are struggling.
  8. Our central banks, economists, and politicians appear to have no clue about what is causing our persistent global economic problems. I speculate this is a combination of the fact that they’ve never needed to understand thermodynamics until now, and the fact that they deny unpleasant realities as explained by Varki’s MORT theory. I do find it very telling that not one senior leader anywhere in the world has spoken publicly about this issue. A few must understand our predicament and they must be terrified.

 

I Remember…

Orcas

This article on the decline of Orcas is close to home and painful.

https://www.nytimes.com/2018/07/09/science/orcas-whales-endangered.html

Orcas of the Pacific Northwest Are Starving and Disappearing

For the last three years, not one calf has been born to the dwindling pods of black-and-white killer whales spouting geysers of mist off the coast in the Pacific Northwest.

Normally four or five calves would be born each year among this fairly unique urban population of whales — pods named J, K and L. But most recently, the number of orcas here has dwindled to just 75, a 30-year-low in what seems to be an inexorable, perplexing decline.

The biggest contributing factor may be the disappearance of big king salmon — fish more than 40 inches long. “They are Chinook salmon specialists,” said Brad Hanson, team leader for research at the Northwest Fisheries Science Center here, part of NOAA. “If they could, they would eat Chinook salmon 24/7.” Orcas gobble 30 a day. Hunting enough smaller prey requires a lot more energy.

 

I live on a beach with a reef at Kye Bay on the east coast of Vancouver Island. I began regular visits here as a child in 1960 and have witnessed a steady decline of its ecosystem.

I remember abundant kelp, seagrass, barnacles, oysters, clams, geoducks, dungeness crabs, kelp crabs, hermit crabs, shore crabs, shrimp, sand dollars, sand collars, snails, starfish, flatfish, bullheads, dogfish, and more. Every single species on that list is mostly gone. Like a desert, sand and rocks remain.

I remember many small fish and crabs being trapped in pools waiting for the tide to come back in. Now there is only sand.

I remember after a summer storm seaweed and kelp would wash in and fill the bay to a depth of several feet, then rot and stink keeping the damn tourists away for a few weeks. Now it is uncommon to see a few inches of seaweed washing in.

I remember picking oysters from the reef with everyone else which no doubt contributed to their decline.

I remember large flocks of shorebirds. For several years I assisted someone who has conducted shorebird counts here for over 40 years. She showed me her notebooks with clear evidence that almost every species of shorebird is in severe decline.

I remember sitting out at dusk and watching the bats fly overhead. The bats are gone.

I remember abundant grasshoppers, June beetles, butterflies, moths, sand wasps, and other insects. Most are gone.

I remember when the dwellings that line the bay were small summer cabins set in amongst large fir trees. Now most of the trees have been felled and the cabins razed to build large year-round homes.

I remember my hometown Campbell River 50km north of here being called the salmon capital of the world because anyone with a boat could easily catch their limit of salmon. And they did until they couldn’t. Now fisherman must drive 2 hours and boat another 1 hour to the west coast of Vancouver Island for fishing that is still decent but in rapid decline.

I remember when fish were bigger. Much bigger.

I remember when dogfish were treated like a pest species. Now you never see them.

I remember when it was common to have a killer whale surface next to the boat you were fishing in.

I remember abundant sea lions on the rocks of the west coast. The sea lions are mostly gone now because fisherman shoot them because they compete for dwindling salmon stocks.

I remember political parties that promised to close the fish farming industry because of harm they do to wild fish stocks and when elected change their mind because the economy is more important than ecology.

I remember being optimistic. I visited the local fisheries office to ask if there was anything residents could do to restore the keystone kelp beds. They were not helpful and more or less said it was a waste of time because human pressure and climate change will continue to degrade ocean health.

I remember when we used to discuss over-population. The population of this valley has grown by more than 3 times (300%) since we had those conversations.

I remember being in denial like most people.

By Ajit Varki: Did Human Reality Denial Breach the Evolutionary Psychological Barrier of Mortality Salience?

Here is the latest talk by Dr. Ajit Varki on his MORT theory given April 18, 2018 at a conference on The Evolutionary Perspectives on Death held at Oakland University.

This talk repeats some content presented in previous talks, but also adds some important new ideas. There is evidence here that Varki, despite a large important unrelated day job, is still thinking about and developing his theory. That’s great news because, as I’ve said many times, MORT is the most important new idea since Darwin.

This slide depicts the emergence of the unique behaviorally modern human mind.

Mind Over Reality Transition (MORT)

 

This slide shows that most behaviors unique to humans no longer exist (grayed out) if you remove the adaptations for an extended theory of mind and reality denial.

Unique Human Cognittive Features

 

This slide explains the implications of the Mind Over Reality Transition theory.

Mind Over Reality Transition (MORT) Implications

Varki introduces a new idea that incomplete suppression of mortality salience may explain the need for Terror Management.  I wonder if Varki might be trying to get Sheldon Solomon, who has to date been juveniley dismissive of MORT, on board?

Mortality Salience Incomplete Supression

I found this slide on ontogeny recapitulating phylogeny interesting because I’m reading Michael Pollan’s new book on psychedelics in which the human brain’s Default Mode Network is explained to be the seat of self and theory of mind, and which is suppressed by psychedelic drugs thus re-creating what may be the tripping mind of a baby. I wonder if our adaptations for an extended theory of mind and reality denial somehow affected or created the Default Mode Network? I’m hoping a neuroscience expert will weigh in here.

Ontogeny Recapitulates Phylogeny

 

This new idea from Varki on sex differences resulting from MORT is, I suspect, important, but I need to digest it more before commenting.

MORT Gender Phenotype

 

At the 23 minute mark Varki addresses climate change with a quote from his co-author Danny Brower which is a very nice summary of why I created this blog. If we do not acknowledge and manage our tendency to deny reality we are doomed as a species.

Brower on Denial of Climate Change

Aside 1: The video at 15:15 that Varki took on traffic from the window of his hotel room in India is hilarious.

Aside 2: The Q&A begins at 25:00 and I observe that, as with previous talks, no one in the audience seems to get the profundity of his theory.

Aside 3: I observe that the most important new idea in science, and the idea whose broad awareness may offer the only hope for our species, has 12 views on YouTube. Apparently, the only topic more unpleasant than human overshoot is our genetic tendency to deny unpleasant realities.

 

 

 

By Jean-Marc Jancovici: Can we save energy, jobs and growth at the same time?

Thanks to Mike Stasse for finding this excellent presentation by Jean-Marc Jancovici on the relationship between energy, employment, and income.

I am not yet familiar with other work by Jancovici, but he seems to be a French version of Tom Murphy and Tim Garrett, which is a very good thing, because their quality of intellect, on the issues that really matter to civilization, are scarce.

Jancovici, an engineer, in 90 minutes, crisply demolishes 100 years of theories cherished by the “profession” of economics.

Idiots, all of them.

The depletion of natural resources, with oil to start with, and the need for a stable climate, will make it harder and harder to pursue economic growth as we know it. It has now become urgent to develop a new branch of economics which does not rely on the unrealistic assumption of a perpetual GDP increase. In this Colloquium, I will discuss a “physical” approach to economics which aims at understanding and managing the scaling back of our world economy.

Biography : Jean-Marc Jancovici, is a French engineer who graduated from École Polytechnique and Télécom, and who specializes in energy-climate subjects. He is a consultant, teacher, lecturer, author of books and columnist. He is known for his outreach work on climate change and the energy crisis. He is co-founder of the organization “Carbone 4” and president of the think tank “The Shift Project”.