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 James Kunstler: The Uncomfortable Hiatus

The Next Financial Crisis Lurks Underground

I haven’t posted anything by Kunstler for a while. When he’s occasionally good, he’s really good, like today.

http://kunstler.com/clusterfuck-nation/the-uncomfortable-hiatus/

And so the sun seems to stand still this last day before the resumption of business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in the ominous late summer heat, and the people across this land marinate in anxious uncertainty. What can be done?

Some kind of epic national restructuring is in the works. It will either happen consciously and deliberately or it will be forced on us by circumstance. One side wants to magically reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible outcome. Most of the arguments ranging around them are what Jordan Peterson calls “pseudo issues.” Let’s try to take stock of what the real issues might be.

Energy: The shale oil “miracle” was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday (The Next Financial Crisis Lurks Underground). For all that, the shale oil producers still couldn’t make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course —say, to rescue the stock and bond markets — then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we’re out of tricks. It will affect everything.

The perceived solution is to run all our stuff on electricity, with the electricity produced by other means than fossil fuels, so-called alt energy. This will only happen on the most limited basis and perhaps not at all. (And it is apart from the question of the decrepit electric grid itself.) What’s required is a political conversation about how we inhabit the landscape, how we do business, and what kind of business we do. The prospect of dismantling suburbia — or at least moving out of it — is evidently unthinkable. But it’s going to happen whether we make plans and policies, or we’re dragged kicking and screaming away from it.

Corporate tyranny: The nation is groaning under despotic corporate rule. The fragility of these operations is moving toward criticality. As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale.

Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods. The implosion of national chain retail is already underway. Amazon is not the answer, because each Amazon sales item requires a separate truck trip to its destination, and that just doesn’t square with our energy predicament. We’ve got to rebuild main street economies and the layers of local and regional distribution that support them. That’s where many jobs and careers are.

Climate change is most immediately affecting farming. 2018 will be a year of bad harvests in many parts of the world. Agri-biz style farming, based on oil-and-gas plus bank loans is a ruinous practice, and will not continue in any case. Can we make choices and policies to promote a return to smaller scale farming with intelligent methods rather than just brute industrial force plus debt? If we don’t, a lot of people will starve to death. By the way, here is the useful work for a large number of citizens currently regarded as unemployable for one reason or another.

Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. Both are destined to be severely downscaled. A lot of colleges will go out of business. Most college loans will never be paid back (and the derivatives based on them will blow up). We need millions of small farmers more than we need millions of communications majors with a public relations minor. It may be too late for a single-payer medical system. A collapsing oil-based industrial economy means a lack of capital, and fiscal hocus-pocus is just another form of racketeering. Medicine will have to get smaller and less complex and that means local clinic-based health care. Lots of careers there, and that is where things are going, so get ready.

Government over-reach: the leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens. It will resist at all costs being dismantled or even reigned in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries.

As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. It’s happening already, whether we like it or not, as geopolitical relations shift drastically and the other nations on the planet scramble for survival in a post-industrial world that will be a good deal harsher than the robotic paradise of digitally “creative” economies that the credulous expect. This country has enough to do within its own boundaries to prepare for survival without making extra trouble for itself and other people around the world. As a practical matter, this means close as many overseas bases as possible, as soon as possible.

As we get back to business tomorrow, ask yourself where you stand in the blather-storm of false issues and foolish ideas, in contrast to the things that actually matter.

By Bodhi Paul Chefurka: I’d rather light a candle than curse the darkness

Approaching the Limits to Growth

 

Paul Chefurka was an early thinker about overshoot and has a large body of excellent work.

He’s also an inspiration for many people wondering how to live with their knowledge of reality.

This 2013 Facebook post by Chefurka provides a nice summary of his journey.

https://www.facebook.com/Bodhisantra

The last six months have seen the most wrenching shift for me since the day I discovered the potential for collapse lurking behind Peak Oil. Moving from a profoundly humanist perspective to a deeply impersonal thermodynamic understanding of the world and its creatures has completely upended my philosophical applecart.

I’ve been steeped for my whole life in the traditions of the Age of Enlightenment, complete with the notions of human agency, reason, free will, morality and the perfectibility of man. My political background was the 1960’s socialist, social-justice movement where concepts of fairness and equality reigned supreme. All that has now crumbled to dust.

My journey to this strange new land began with a simple question. I wanted to know why we couldn’t seem to do anything to stop climate change despite everything we know about its causes and effects.

I first looked outward – “Who is to blame?” Then I looked inward – “What is it that makes us so eager to accept activities that many of us know are dangerous and wrong-headed?”

In the search for answers I kept pulling on the various threads I found, then going over to whatever wiggled in response, finding the threads connected to that, and pulling them in turn.

When the fabric finally unraveled I found myself staring at the Second Law of Thermodynamics, with nobody to blame and precious little to be done about our predicament.

In a way I feel betrayed. Everything I’ve been told about how the world works appears to be wrong. The traditional explanations don’t truly explain what I see happening in either the outer or the inner world. Very few people realize that our precious “Story of the People” – our scientifically derived, culturally grounded, explanatory narrative of the world and our place in it – is little but a comforting, self-deluding fabrication. It’s a fantasy borne more out of wish fulfillment than out of any realistic assessment of what’s actually going on. It may be the greatest piece of confirmation bias that we have ever perpetrated on ourselves.

I feel betrayed by the scientists, the politicians, the activists, the philosophers and engineers. It’s enormously frustrating to have come to this realization about the world, in my limited capacity as a single private citizen. It feels incredibly disempowering, which is not surprising – the very concept of “power” has always been defined by those same scientists, politicians, activists etc. As that worldview falls away I even have to realign my inner definitions of power and relationship.

But while I feel a huge rupture of dislocation, I also feel a soaring sense of freedom and liberation. No longer shackled to shame, blame and guilt, I can see people and events through a less reactive, emotionally filtered eye. The world seems clearer. What people do and why they do it is suddenly obvious. What’s going on in the world has begun to make sense for the first time in my 62 years.

For me the trade-off between clarity and comfort has been worthwhile. As difficult as this journey has become, I’d rather light a candle than curse the darkness.

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.

 

Reunion Faux Pas

Carihi Class of 76

I’m the handsome guy circled in red wearing a green polyester suit.

Born at the peak of what may be possible in the universe, we enjoyed amazing lives made possible by a one-time windfall of abundant cheap fossil energy.

Since graduating in 1976 we chose to celebrate our good fortune like yeast in sugar by doubling our population from 4 to 8 billion and increasing our total consumption and excretions by over 500%.

To our grandchildren we will leave depleted oil wells, mines, aquifers, and soils, a dangerous climate, forests displaced by agriculture and sickened by ozone, many fewer species, oceans filled with plastic instead of fish, epidemics of opioids and obesity, and over $300,000,000,000,000 of debt not counting unfunded liabilities like pensions.

1976 graduation motto: “You are a child of the universe.”

2018 reunion motto: “Mission accomplished: We had a great time and left nothing of value for future generations.”

Some old friends from my high school class of ’76 are having a reunion to celebrate turning 60 this year.

I offered to give a talk at the dinner party on how climate change is spinning out of control and may kill our grandchildren, but my offer was not warmly received.

I clearly made a faux pas because climate change has become a little too sensitive to discuss in polite company given how obvious the trends are.

In hindsight, I should have offered to speak on our denial of the collapse of civilization that is underway due to human overshoot and fossil energy depletion, and how our genetic tendency to deny unpleasant realities is intimately linked to our uniquely powerful brain, and its wacky belief in gods and life after death.

That would have been a much more interesting after-dinner topic that most people haven’t seen in the news, and I could imagine a lively Q&A when I explained that the only “solution” is a global one-child policy, severe government austerity, and a forced contraction of the economy.

Despite the depressing subject, I’m sure there would have been some genuine happiness in the room as old girlfriends breathed a sigh of relief that they didn’t marry me.

Rob Mielcarski

On Sexual Selection and Extinction

Peacock

Here is a very interesting interview of biologist and Pulitzer Prize finalist Richard Prum by Rob Reid on sexual selection and the evolution of beauty.

One of the fundamental reasons birds are so beautiful is that most of them do not have penises and this creates an opportunity for female freedom of choice.

After-On Podcast Episode 33: Richard Prum – The Evolution of Beauty

Bird of Paradise

Sexual selection is not a form of natural selection as most biologists currently believe.

Sexual selection and natural selection are distinct evolutionary forces, as originally envisioned by Charles Darwin.

It’s possible for sexual selection to work in the opposite direction of natural selection which can lead to the extinction of a species. Some interesting examples are given for birds.

I’m thinking about how human females tend to be indifferent to male IQ, but strongly prefer high status males that contribute the most to overshoot and CO2 via mansions, yachts, long distance vacations, and Veblan goods.

Human male preferences tend to be benign as it’s unlikely extinction will be caused by big boobs, which Prum points out, are not an honest signal of fertility.

Donald and Melania Trump

By Alice Friedemann – On Fake Peak Oil Demand

oil pump

Friedemann here argues that leaders understand the threat and intractability of peak oil and thus actively mislead their citizens.

She might be right but I think it more probable that our leaders are as deeply in denial as their citizens about our predicament. After all, the inherited behaviors of leaders are the same as the inherited behaviors of their citizens.

While it’s true that leaders have more access to peak oil data and analysis, I know from many years of close observations that data and analysis do not shift the beliefs of most people, especially when it involves unpleasant realities their genes wish to deny like mortality, climate change, peak oil, and overshoot.

I see evidence everywhere that our leaders are in denial.

How is it possible that not one leader anywhere in the world speaks frankly about peak oil, even after leaving office? Jimmy Carter, the one leader that tried to prepare society, is silent in his latest book in which he frankly discusses most big problems except peak oil.

If leaders understand peak oil and its implications, how is it possible that not one leader anywhere advocates population reduction, degrowth, or Colin Campbell’s depletion protocol. These policies would help with all of our overshoot issues and thus could be sold without even mentioning peak oil.

How is it possible that (aware) leaders continue to invest in projects like airports, highways, and pipelines? It would be easy to impede these wasteful projects that will strand precious resources without publicly acknowledging peak oil.

How is it possible that political parties with an environmental and sustainability foundation, like the Green Party, and that have no chance of winning and thus nothing to lose, do not address the implications of peak oil in their platforms?

How is it possible that (aware) leaders of countries that still have some surplus oil to export, like Canada and Saudi Arabia, do not quietly implement policies to reduce exports to buffer the future for their own citizens?

 

Since the goal of fake peak oil news is to prevent panic and social disorder, and there’s little governments or businesses can do to prevent a die-off during the transition from fossils back to biomass and muscle power (extreme overshoot of carrying capacity), I can’t help but wonder if I were in charge if I might also put out stories like this to keep fossil fueled civilization going as long as possible. Offering hope, such as renewables, carbon sequestration, and so on, is one way to hold things together as long as possible. Why crash civilization before it will happen anyhow? And why bother to tell people the truth since they won’t believe it anyway (best books on this: Fantasyland: How America Went Haywire: A 500-Year History, Too Much Magic: Wishful Thinking, Technology, and the Fate of the Nation)

As an observer of the biggest and most tragic event in human history, past or future (until the sun expands and swallows the Earth anyhow), I am just one of many journalists following the story as it unfolds, and hope that future historians will find articles debunking peak oil demand of interest.

There have been dozens of articles about Peak Oil Demand and the end of Peak Oil lately, often due to electric cars or other technology saving us. Here are just a few from 2017:

No, peak demand will happen because of peak oil when we’re forced to cut our demand as it declines exponentially at 6% a year. In capitalist countries, it will be the poor first (already happening since the financial crash), then middle class, and finally upper middle class. Even the rich won’t be able to continue driving whenever they want because social unrest will be so high they won’t dare leave the gates of their armed compounds. Only the military will have oil to the very end…

The idea that electric cars are lowering demand is ridiculous. Electric cars haven’t made a dent, just a small scratch in oil demand. Electric cars are only 0.2% of light-duty vehicles, and cost so much only the upper 5% can afford them, even with subsidies.

Meanwhile, consumption of oil in developing countries is increasing at a fast pace. There’s no sign of peak demand. And they’re not buying electric cars in India, Brazil, and other nations where the electric grid comes down a lot.

Only in Europe is demand slightly dropping, but that’s because their governments are so much more far-sighted, less corrupt, and peak oil aware than nation’s elsewhere. Europe began planning for oil decline decades ago, especially since they don’t have much oil of their own or a giant military to grab it from oil producing nations. Mass transit is so fantastic and cheap in many European cities that people don’t drive. For example, in Munich, Germany, the rail, tram, and bus systems run very often, and we spent just 6 euros a day to ride their quiet and modern trains, trams, and buses. When I came back to San Francisco, BART and other mass transit here looked like they were from a third world country, with their very infrequent service, filthiness, and on BART, enough decibels to harm hearing.

I suspect the peak oil demand idea is one more attempt by the wealthy and powerful to hide peak oil, because peak oil studies have shown that if peak oil were acknowledged, stock markets all over the world would crash since the economy would be shrinking from then on and debts couldn’t be repaid. Credit would freeze and dry up. Panic and social disorder would follow. Michael Lynch and other analysts have been trying for years to quench the idea of peak oil and Lynch even used to float his peak-oil denial theories on peak oil yahoo groups to learn what the counter-arguments might be.

http://energyskeptic.com/2018/robert-rapier-oil-demand-is-growing-not-shrinking-there-is-no-peak-oil-demand-in-sight/