Global Financial System: On Life Support

171 thoughts to “Global Financial System: On Life Support”

1. This gives good support to the various ‘shark fin’ oil production predictions some of us have.

   1. Fuser…. BINGO.

      Ron…. great post. I haven’t had the opportunity to watch Steve Kopit’s video as I have the worst internet service on the planet. I have to wait until I go into town to watch long videos.

      Anyhow, I made reference to this in your prior post. Not only is the United States being propped up by the Fed’s EASY MONEY POLICY, but the massive derivatives market was designed (probably ignorantly) to siphon funds away from the physical-productive sector and into the FINANCIAL LEECH SYSTEM.

      Thus, we have to idea how much goods and services really cost in a free market… because derivatives destroyed the FREE MAKRET altogether.

      I know some pretty high up people in the precious metal industry and let me tell you, the end of 2014 looks to be quite explosive. I am not saying this as it pertains to gold and silver, but rather due to geopolitical and market events.

      I just had a three hour conversation with an individual who was right in the THICK OF IT when the derivatives credit default-interest rate swap market began. Let me tell you, things today are orders of magnitude worse than 2007-2009.

      The Ironic thing we both agreed on is the amazing ability for most people to SHUT THEM EARS when the discussion of gold and silver arises. Now, I can see someone saying that about me as I am just an independent researcher, but this chap GOTS THE WALL STREET KNOW-HOW.

      I will end this SOAP BOX diatribe by saying…. at some point in time the Financial System will CRACK, and when this occurs, it will be too late to GET OUT OF DODGE. Again, the irony of it all is watching it happen to friends and family.

      I won’t repeat this again… MARK ME WORDS.

      steve

      1. Ron….Jesus Christ, when are you going to get an EDIT FUNCTION…LOL. I would gladly throw in a few bucks.

         steve

      2. Aaaaha….the Angel of Doom appears on his red-eyed fire-breathing stead.

         Hi Steve. Actually I concur with the negative sentiments being expressed except ones purporting to predict how things will play out: Since I’m a fan of Chaos Theory and negative feedback loops.

         My sharp accountant insisted many years ago that economic stability is impossible without growth, endless never ending growth. Obviously that’s impossible, so the best (actually all) you can hope for is growth within your family’s lifespan; a forlorn hope I suppose.

         Trouble is, there are just so many things, really big things, going wrong (being done to) with our planet.

         1. Doug,

            Yeah, I realize I am a walking Encyclopedia of Contradictions. However, I believe the Financial System will probably collapse well before Mother Nature & Uncle Climate Change do us in.

            Which brings me to the silly conclusion:

            That either an individual has REAL ASSETS that can make better choices for his family in the future even as the climate system continues to worsen, or he will have to deal with all of this… WITH A HELL OF A LOT LESS.

            Maybe I am totally off base thinking this way, but there you have it.

            Straight from the HORSES MOUTH & ASS.

            steve

            1. You know, I’d take something from a horse’s mouth, but it’s ass? Eh, I think I’ll have to forgo that little gift. Sorry.

               1. You Say….”You know, I’d take something from a horse’s mouth, but it’s ass? Eh, I think I’ll have to forgo that little gift. Sorry.”

                  …coming from someone called “THE WET ONE”… I’ll take into consideration.. LOL.

                  steve

2. Hi Ron, This seems to be the very thing that Gail Tverberg and a few others have been trying to explain to folks for a very long time. This gentleman has done a great job of both simplifying and shortening what are complex and nuanced interactions between finance and energy. You mentioned something a few days ago about an X factor and I agree with you. It would seem to me that it could come from almost anything at any time at this point. In our culture perception is everything and can cause over exuberance or panic…..without prior notice. Perhaps the world truly is held together by nothing more than duct tape. Tic Toc?

3. Gail Tverberg writing at ‘Ourfiniteworld.com’ has focused on these principles in great and convincing detail. As I understand her thesis, excessive debt rather than geology will bring down the system.

   Quantitative Easing, deficit spending at Federal, state, and municipal level, and relaxed accounting rules are all that has prevented total economic collapse. These delaying strategies have exceeded their useful life. I do not know what the trigger (black swan) will be but we are truly on the financial precipice. Will the trigger be Russian invasion of Ukraine, fall of Baghdad to ISIS, ISIS invasion of Saudi Arabia, …

   The Mediterranean is rimmed with failed or failing states from Libya to Greece and Spain and Italy are not far behind. Since 1970 the population in the Middle Eastern countries has increased three to six fold depending on country resulting in severely strained resources which lead to civil (tribal) war. Neither Europe nor US are immune to tribalism. Tribalism can be restrained when resources are plentiful but when they become scarce nature will have its way.

   1. This is the first time i’ve seen these wars correctly identified as tribal wars, I have problems with them being called civil wars (you see civil war means war between citizens, citizens is an alternative name for nationals which requires a nation and a nation requires less than 20% of people to marry their first cousins and that describes practically no Muslim country) these countrys are tribal alliances with a tribal chieftain, wipe out (or undermine in the case of Syria) the chieftain and his immediate successors and you guarantee a tribal fight from top to bottom of the society to determine a new pecking order between the tribes, clans & families. As for Europe and America their susceptibility to tribalism is determined by cousin marriage rates, although civil wars or dictatorships are a distinct possibility, when resources run short.

4. ”The end of growth is the beginning of collapse.”

   Unfortunately I must agree.

   The questions then fall out more or less this way:

   How fast ?

   How deep?

   What can be done to mitigate the worst effects?

   How will the pain be distributed? Who aches but lives?Who bleeds to death?Who falls to their economic knees and then eventually recovers? Perhaps not to anything like current day conditions but nevertheless recovers in the sense of experiencing growth again?

   Money is necessary so long as we are playing by the current rule book but money and resources are not the same thing. The ancient Egyptians built the pyramids without central bankers and the help of Gold in Sacks. Nazi Germany although flat broke nevertheless built up the most formidable war machine the world had ever seen up until that time in well under a decade.

   Most of the debts that are owed by governments these days are never going to be repaid because the resources necessary to both repay them and support necessary current expenditures are do not exist in sufficient quantity.

   Governments do the same thing people do in a really bad pinch. They pay the most critical bills with the cash on hand. People in a bad enough bind quit paying the rent and then the electricity bill and water bill and the car payment and everything else until there is no money left for anything but the one truly and absolutely essential short term necessity- food.

   Governments are going to basically do the same thing- pay the bills that absolutely must be paid for the government to continue to exist and maintain control of the society which is after all the definition of government- the mechanism that controls a society.

   Things are going to get to be very very tough but collapse across the board within the easily foreseeable future is not inevitable in countries such as the US and Canada.Once the fecal matter is well and truly in the fan we Yankees will quit paying what we owe to other countries and if they don’t like they can send their navy to embargo us.There is nothing so far as I can see coming out of China that we can’t and did not formerly make for ourselves. If there is anything of that nature we can do without it.

   Ditto the oil we import. I understand we cannot conduct business as usual without the six or seven million barrels we import daily but I said things are going to get to be ”very very tough” and survival is not the same thing as business as usual.The naysayers will insist that we cannot build a fleet of cars that can get double the mileage of our current fleet in less than fifteen or twenty years and we can’t playing by the current rule book.

   If we get twice the utility out of a barrel of oil we can afford to pay twice as much and at twice current prices we can probably make a go of coal to liquids.We can divert the money we spend on new highways to renewed and reclaimed rail.We can spend what we spend on leisure travel on improving the energy efficiency of our homes and other buildings.The people employed in leisure travel are going to have to get by on the dole and it is not going to be easy for the ones who can’t handle employment building bike lanes or adding insulation to older houses or raising cabbage and beans on a small scale.Small scale farming is going to make a big comeback partly because we are going to need the food so produced locally without so much expense in transporting and packaging and processing it but more so because it will at least partly offset the expense of supporting the workers on these new small farms who otherwise would be unemployed and on the dole.

   We are going to quit building new houses in significant numbers and double and triple up as necessary.

   The current rule book is going out the window and a new one that most of us are not going to like very much is going to come out and it is going to be enforced by emergency federal powers at the point of guns as necessary.

   Some of the rules are going to be along lines like these. Your pension is halved or quartered. If you don’t have enough to eat you can get a ration card for beans and rice and cabbage and maybe a chicken leg once in a while.It is going to be against the law to drive your big old suv or 4×4 truck except in cases of actual need- if you have six passengers you can pass the roadblock. If you are alone and on personal business it will be confiscated.You will get a gasoline ration- a very small one – even if you don’t own a car because that is going to be fair to the people who don’t.They can use theirs to get that suv filled up for a community trip to the flea market and supermarket.

   GM and Ford will design and sell a hundred mpg minicar in twelve months. The engineers at the same companies built new military vehicles from scratch in less time than that in the forties without the aid of computers.

   I am still using some apple boxes on our farm ( although retired) that I helped my grandfather make when I was a kid back in the sixties.We logged the trees and milled the lumber with a seven and a half horsepower homemade mill and nailed the crates up with a hammer.These crates are now over fifty years old and about at the end of their usefulness due to decay and plain old wear and tear. But we still deliver in them to the one local supermarket that will buy from us while the big growers and big supermarket chains use throw away cardboard boxes. The throwaway boxes are mostly recycled once or twice on the second hand market and then some of them are returned as waste paper to paper mills but our resource usage for containers is probably less that five percent of that of the big boys.

   My point is that we waste a huge part of everything we use and when we no longer have it available to waste it- well then we will quit wasting it.

   We Yankees may not pull thru. Most of the world is headed for hell in a handbaskst within the foreseeable future but we are not going down without going on a war footing fight for our survival and we have more than enough resources here in North America at least to pull thru for the foreseeable future.

   I don’t think it is going to be easy- I have said before that I am personally prepared to fort up in case of things getting totally out of hand for a while. I am VERY glad that a lot of my relatives and neighbors are veterans and a whole bunch more are Old Testament Baptists who will give you the shirt off their back if you really need it and yet habitually go around with loaded rifles and shotguns in window racks in their pickup trucks.

   I have set aside an older full size Ford pickup with a granny gear four speed and real mccoy four wheel drive and I have a hard copy of the plans put out by the feds to convert her to run on wood gas.All the materials needed are on the place as I have been collecting such stuff for decades.Doing the conversion is going to be mostly for the fun of it – but if there comes a time there is simply no gasoline to be had it will get me and a sick neighbor the hospital and back in an emergency.

   The kids are mostly worthless these days when it comes to anything tougher than flipping burgers and playing video games but we old guys still remember how our own old folks got by and can teach them- and when their bellies start growling the kids will start listening.They will toughen up in a hurry when they have to.After that I won’t refer to them as worthless any more.

   1. “…but if there comes a time there is simply no gasoline to be had it will get me and a sick neighbor the hospital and back in an emergency…”

      -Ah my smart E-I-E-I-O farmer…the classic fault of most of the “bright” minds on this blog. You know endless details about how all this will play out and claim to be prepared for it…yet cannot (are not capable – is more accurate!) comprehend the whole picture!
      -Please, do allow me to help:
      there will be no hospital and emergency room if there is no gasoline available!
      -Oh, and please do spare me (and yourself, too!) the: “medical help and hospitals existed long before gasoline…” comment…it insults the intelligence of the blog! Indeed!
      Be well and take my advice to spend your time in a more rational way than building a “wood pickup” which will take you to the ER…you will thank me if you do.
      Petro

      1. Hi Petro,

         Perhaps you should read some history. I would not for any nameable treasure be caught in a place such as Egypt when the crash finally hits.

         But there will be a hospital in most places in the USA for the foreseeable future and whole it probably won’t be doing organ transplants or advanced chemo on patients that are going to die in a few weeks anyway it will still do appendectomies and set broken bones.

         And the doctors and nurses may sort of like me a little better than most patients since I may leave a homemade wooden box of green beans or a couple of quarts of honey in the nurses lounge.

         Those emergency powers I mentioned will ensure that the hospital staff can get to work easily- people living within walking distance will have leases revoked and the apartments given to nurses and doctors. A little later walking distance homeowners ditto.

         Leviathan is not helpless when it comes to dealing with catastrophic change unless the change comes too fast to react.

         With a little luck we will have time to react here. Oil production is not going to go to zero overnight and it is not going to stop raining all over the agricultural lands in a country the size of the US.

         We had an industrial civilization before we adopted the use of oil in preference to coal and we can- with great difficulty it is true- revert to a substantially more energy efficient coal powered society.

         I could get by just fine with intermittent solar power where I live with a modest amount of battery backup just using my mixed bag of tradesman’s skills to modify my home.Intermittent power is a hell of a resource compared to no power.

         It is easy to overlook the fact that three or four people can live in a two thousand square foot typical mini mcmansion on the same or less energy consumption for heating and only a little more for lighting. The only real per capita difference per house is water consumption in this case.

         Of course people at the far end of the last power line out into the boonies are sooner or later going to see the power go off and never come back on but that is no reason to assume that nearly all of the grid cannot and will not be kept functional.

         Apples will again be eaten near where they are grown rather than shipped across the country and across the world of course and airfreighted veggies are going to be a luxury no longer except maybe to a very few superrich folks who can arrange the shipment under the radar of public outrage.Airports will mostlybe converted back into cow pastures because five or ten percent of the jets flying today are at the most going to be flying in twenty or thirty years.If people want to see Grandma they will have to revert to doing what my family has always done-up until recently at least- stick together.The actual truth about air travel is that except for patrolling for a possible invasion by the Chinese ( sarcasm light on!) we don’t really need air travel.

         We don’t really need computers that are twice as fast every eighteen months either although they are handy to be sure. We do need Hollywood to help us temporarily forget our troubles but we can see what Hollywood produces on televisions at home and pick up the programming over the air or on little plastic disks locally. We don’t have to drive fifteen or twenty miles to the cinema any more.

         We need potatoes but we don’t need potato chips. We will have our beer but it will be brewed locally and served and sold in reusable containers instead of brewed a thousand miles away and shipped in aluminum cans.Hauling water around instead of hops and barley is energy insanity.

         An economy based on nuclear and renewable power plus coal can and will work and while it will contract like a toy baloon with a leak it will eventually stabilize and begin to put out some tendrils of new growth.

         I have always been and remain a big believer in the good Reverend Malthus and he is going to get the last laugh over most parts of the world for damned sure. But like Hubbert he could only see what could be seen from his own time in history.Both will be proven right in time but not as soon as they would have expected.

         The old cultural molds are broken and while some will be repaired many will be permanently discarded.Technology has provided us with some things virtually unimaginable a century ago including vascetomies and tubal ligations and dirt cheap birth control pills.Culture has changed too. In Brazil,one of the most Catholic countries in the world, the women are having hardly more than enough babies to maintain the population over the long run . In Italy there will be population shrinkage within the lifetime of a lot of readers of this blog today. Italy in case anyone has forgotten is the home of the Pope.

         In the event anybody reading this blog is interested in the possibilities open to them I have a little farm organized around an efficient low energy low cash low material input lifestyle that will be for sale within twenty years owner financed at the most.Within the next year there will be a decent thousand square foot rental place on it that comes with a couple of acres of fenced prime bottom land garden space with irrigation and a wood lot and storage sheds- the basic survival package. The rent will be about five hundred bucks.

         Any body really willing to work at it can grow ten thousand dollars worth of veggies on two acres if they don’t have anything else to consume their time.Another couple of acres can be had long term for another couple of hundred bucks a year. Land outside the fence can be had ten acres for five hundred a year.Water alongside the field.Plenty of it unless it stops raining in the Southeastern US.The stream heads up in a National Park and comes down a steep mountainside and there is no farm upstream of mine and no good farmland upstream of mine and only a half a dozen houses all with domestic water wells. A family willing to work at it could grow eighty percent of their own food including poultry and fruit and nuts.A dairy cow and a beef cow or hog is a distinct possibility. After the first year or two I would be glad to write a long term lease with an inflation clause in it.Also a deflation clause for those who believe prices may come down.I would be happy to teach my tenants how to operate farm machinery and castrate a pig and do rough carpentry and sex their medical marijuana plants once cultivation is legalized in Virginia.

         There are plenty of opportunities such as this one for individuals and families that are actually interested in improving the odds of getting thru the next few decades in a dignified and satisfying mode of living.

         I AM NOT ADVERTISING – although there are people commenting here who I would dearly love to meet personally and have come for a day or a week for a visit. Ron included!!

         Maybe next year I will be but not on Ron’s blog. I am mentioning this just to illustrate the possibilities open to people who are willing to act rather than just feel sorry for themselves.

         Now as it happens I remember when we didn’t have running water at our house as a kid and if we wanted to stay warm we chopped wood.I would have given my front teeth for a weenie sometimes but I seldom saw one. But we had plenty of homegrown range raised chickens and potatoes and plenty of corn bread as well as other meat raised on the place and milk from a family cow almost all the time by swapping with a neighbor when our cow was ”dry”. We had three channels on the tv only one of which came in well enough to see any detail but we had the whole outdoor universe to entertain us.My Dad built the farm house we live in yet without a mortgage while working a ”slave labor ” job in a small southern textile town.You can still buy ten acres of excellent land in my neighborhood for the price of just one nice new car and the tax bill is no more than the tax on the car.

         We were looked on by the kids in the one traffic light town – the county seat- as poor of course. But we actually lived as well or better in real terms as the kids in town although we had fewer toys and fewer new clothes.

         1. OFM, I have not been posting for a long time but have been reading posts on and off. I am working in the manufacturing line. Presently, our supply chain is way too long and too globalized. Everything is not done locally anymore, be it a tooth pick, surgeon’s scapel or any electronic parts. The machine has makes these rely on parts that are also made somewhere else. It is a very complex web of manufacturing system. Our high tech semiconductor company, which is based in South East Asia nearly went belly up in 2009 when banks did not trust each other and suppliers are demanding upfront payment. Our machines went down just because of a single part from Japan did not arrive. Our customers could not pay us as they could not give us money and we cannot our Japanese supplier cash as they never trusted our letter of credit issued by a bank. The entire chain froze. Were it not for the money printing, we would probably have collaped. Now, the effects of QE has diminished to a point where it is not useful anymore. Pray tell what will happen when 2008 repeats.

            A lot of people do not understand that unlike 1950s or even 1990s, everything is globalized. T-shirts, tooth picks and everything under the sun is not locally produced anymore. Your hospital’s flourescent tubes, alcohol, antiseptic, antibiotics, bed, sheets are not locally sourced. When the collapse happen, everything will go at the same time.

            Companies want to make money and whatever they make is proprietary. Different car manufacturer has different toolsets to open up their engine. Your Philips or fla screw driver is of no use. Tools for opening Toyata engines are different from BMWs. The machines used in the hospitals are not repairable anymore. If you send them back for repairs, those guys will just swap a circuit board out and plug in a new one. The circuit board is designed in US, drawn out by their Indian subsidiary, the layout was sent to China for manufacturing. The chips are made in China, Japan and US. The capacitors are made in Taiwan. The final product was sent to Singapore for testing.

            Your wind turbine and solar panel are too complex to be maintained. The controller board in the solar panel will not last long and the semiconductor chips inside will not last long as it was not made up to the quality standard that people used to call “military spec” that is suppose to last for years. The chips require exotic materials like Indium, Gallium that is probably unobtainable due to high extraction cost (for it is a very low quality ore). These are not available in an event of a collapse. The miners can only mine when there is enough financial capital. Without the capital, there will be no mining, there will no exotic materials; there will no seminconductors and there will be no turbines or solar panels. Neodynium is used in powerful magnets in wind turbines. These are not easily replace.
            Due to cost cutting (like it is observed in the semiconductor field), experts are scattered everywhere. The expert in your wind turbine or solar panel may be in India or Japan or UK or somewhere on the other side of the world. When you call in, you are connected to him via telephone. In an event of a collapse, his skills are not available anymore.

            Liebig’s Law of Mininum is very important in our modern civilization. One small item like a spoilt chip or a broken screw. Example: if your wind turbine requires a high vanadium high strength stainless steel nut/bolt, do you think you can get it easily? The manufacturer of the bolt/nut may be bankrupt and all the nuts/bolts are manufacturered in China. Is it easy to get a replacement? Globalized supply chain. If you find a substitute nut that is not high tensile, it will work, but probably for a short while only and the whole wind turbine will collapse. Similarly, a high performance cooling oil in a heavy duty transformer may be made in Japan. It is the best for the transformer and the manufacturer wants everyone to use it. When Japan goes down the drain (high debt), the company may collapse. It is a proprietary mixture and you cannot get it from someone else. Do you think you have a substitute?

            We are actually experiencing this in our factory and that is the reason why I feel that ultimately, it will be our supply chain that will bring down our civilization. I am “in” the supply chain and I know how fragile it is.

            Think about it, food and medicine needs to be transport into towns. If the trucks break down due to inavailability of parts, then you have a serious problem. If the water pumps fail or the power generating plants fail, then your grid is down and you are really really in deep trouble. Remember that there was report by the US government (I am not a US citizen) stating that if an EMP attack happens or if a Carrington event happens, a lot of electric transformers in US will be damaged. These transformers have long lead time and it is not possible to get them up within 1-2 years.

            Bottom line is that, when the supply chain goes, every one goes. It does not matter if you are in US or in Brazil or China. Just do a mental exercise, what product is made locally. Do you have a shoe factory or a fabric factory that can provide you with clothes or shoes? Is your cotton or leather imported? Even if the cotton is obtained in Georgia, are they planted organically and harvest by hand and transport to the weaver in horse cart? Fertilizers require refinery that require millions of parts(valves, meters, etc) that is sourced world wide. Combined harvesters and trucks is also assembled by parts sourced worldwide. Software is coded in India or Europe. Are all these available in an event of a collapse?

            Lastly, due to profit pressure, companies employ “just in time” inventory. So, your solar panel controller that is availabe in US may be stored in China and it is shipped over only when it is required in US. In a collapse, do you think you can get it. Food, shoes, car parts, etc are not stocked to the brim. They are only delivered when ordered. There is no buffer and this will accelerate any collapse.

            Just do a mental exercise and think about what I have written. I know that many people in this blog think that there will be uneven collapse with US, Canada, Australia and other advanced country having smaller collapse. This is true if we are in 1950s but definately not true in this extremely globalized 2014.

         2. A few more items : China controls >90% of the worlds rare earth that is required in all high tech electronic stuff. Asia (especiall Taiwan and China) makes practically all the seminconductors in the world. Bearings, nuts, bolts and fasteners are bascially monopolized by Asian countries. It also goes for fabric, fibers (natural and synthetic). Developed countries are more towards design (however, the software that they use are probably coded in India).

            List down all the things that are produced in your country and see what else you need in order for your country’s economy to continue.

            Fishing nets – the simplest form of harvesting food – can you make it in your country?

            1. “Bearings, nuts, bolts and fasteners are bascially monopolized by Asian countries”

               Man’s first mechanical invention was the wheel and the second was the bearing to support the wheel. Makes me think of all those classic WWII movies showing Allied bombers. Seems they were always targeting German ball-bearing factories. Making steel balls that are spherical to the micrometer level takes some real technology. Take out the bearings and you take out the most basic technological infrastructure. Our machines literally grind to a halt. Even bicycles won’t roll without ball bearings.

            2. CTG,

               Excellent comment. Excellent. I may not agree with everything you say, but I fear you are right. A slower event may alleviate the situation and allow adjustment time, though. I sure hope so.

               Paulo

         3. OFM, I fear that you have overlooked the social aspects of response to economic depression or more likely collapse. The vast majority of the US population will be surprised. Their great expectations will be disappointed. Most lack the experience and skills that come from a life of self reliance such as yours. A person can make small changes in response to events and over time adjust quite well to a new paradigm. However, a sudden drastic change is beyond most people’s ability. The government provided ‘social safety net’ programs have undoubtedly relieved much hard ship over the past sixty years but they have stolen much of the self reliance that is going to be needed in the near future.
            Surprise, disappointment and near helplessness in the new environment result in a ‘deer in the headlights’ response.

   2. Just on a point of history,

      I am fairy sure that the great pyramids were built with the aid of both money and (food) banks – the unreliable floods of the Nile resulted in feast or famine, and the Pharaoh won power by organising food taxes in the good years to build up huge reserves in state granaries, to tide over the bad years. The entire priest caste and the pharaoh as god on earth thing work well for a millenium. The pyramids required large numbers of skilled artisans, and a thriving economy with standardised rates of pay and rates of exchange for different goods. They even had a good sized middle class. This is money without the abstract tokens. Very few slaves involved, excepting captured foreigners.

      1. Yes-if you want to describe the process by which the Pyramids got built this way it is ok with me. Taxes can be collected in kind. Wages and salaries can be paid in kind. You can call resources money if you please.A middle class and an upper class is certainly possible without money as such .

         I have never claimed otherwise.

         I prefer to separate the concepts of money and actual physical resources since so many people think they are interchangeable and that money can be created by magic just by wishing it into existence.

         The magical creation by wishing part is true but the equivalency to resources part is unfortunately a generally fatal mistake sooner or later.

         Magical money can bring resources together in one place and enable the managers of the money and resources to do things that are hard to do otherwise of course. It would be damned hard to build a nuclear power plant on the barter system.

         But usable money in the here and now does not require the payment of past debts when the powers that be decree otherwise.

         When the time comes UNCLE SAM will renege on most of his debt but he will issue checks to pay for what he wants to pay for and the checks will be accepted and the money they represent will be spendable because anybody who refuses to take it will wind up as an example in the federal pokey.

         There will be chain gangs and prison farms as needed. Interment camps are such a waste of useful potential labor!!!!!

         I am very glad this is a country armed to the teeth but not so naive as to think anybody is going to defy the feds very long when the fecal matter hits the fan.

         Old cash green dollars in circulation may be collected and new ones issued in their place. This process has been repeated several times in countries that went bust.

         1. At different periods barter was refined to what would now be considered a fiat money system.

            http://www.touregypt.net/featurestories/prices.htm

            Money was counted in loaves of bread and jugs of beer, etc., but standard exchange rates were set to other commodities including copper and gold.
            A wage economy was widespread, with a basic wage being paid in food only. Weights and measures were closely controlled and ceramic loaf tokens have been discovered. Higher wages were paid in multiples of the basic, but these would have been delivered in more convenient forms. Written accounts of personal wealth have been found.

            It was not a debt economy based on interest and growth. You paid your taxes and the Pharoah would repay the debt in the famine years from the grain stores. Growth was only possible when the land was productive.

            1. Yes. Tokens are a precursor of fiat money. Tokens can be counterfeited just like cash incidentally.Nothing you have said disproves anything I have said. Values enabling the exchange of goods and services can be established in gold or gems or a standardized measure of coal or wheat or lumber.

               But money is only an abstract tool that enables governments to do all the things governments do with greater convenience. And when the abstract money we call a dollar eventually becomes worthless it will be discarded and a new currency put into its place.

               In the controlled economy that is coming your old cash and bank accounts will be either worthless or you will get a severe haircut as the saying goes these days. The new currency will enable you as an individual to function without resorting mostly to barter like a mediaeval peasant with maybe a couple of very small coins and a sack of turnips on market day.More important it will allow big business such as electric utilities to replace items such as trucks and generators and transformers and fertilizer companies to provide fertilizer to farmers and take care of other ESSENTIAL business.

               I have spent many a long evening reading and studying about such matters. There is plenty of history to examine.

               Now of course it is ( for now anyway) still a free country and we are each still entitled to our own interpretation of that history.

               I was once convinced that we have no real hope except maybe for a savage dog eat dog collapse back to a horrible preindustrial society and still believe that is going to be the fate of most of the world.

               But this is not necessarily the fate of well developed countries powerful enough to defend themselves and endowed with enough resources to make a go of it without the rest of the world economy.

               Now I readily admit that a bad enough and fast enough crash might mean mad max. I have often remarked that I am prepared to fort up and hope for the best.If it comes to that my chances of survival long term are not very good but a hell of a lot better than most peoples’.Some body will probably eventually murder me for my material goods if things go mad max but if it comes to that … Southern mountain hillbillies are famous for our violent tendencies and we just might collectively go proactive.

               But I just cannot see any reason to think the coming crash will NECESSARILY be that fast.

         2. Hi OFM,

            “What could be more superstitious than the idea that money brings forth food?” – Wendell Berry

            One of my favorite quotes. A lot more people would do well to read Berry’s work.

            If I wasn’t so dead set on staying in the Northwest–or if I knew for a fact that the next Cascadia subduction quake was going to hit in my lifetime–I’d be pretty tempted to come down and see your land. Sounds like a hell of a nice set up for $500/month. I could grow quite a bit of food there. And we could bicker over the details of collapse the next couple decades while it happens around us.

            But I like it up here too much. Though we’ll see what’s left of the north coast of Oregon once the tourism industry fully crashes. Of course, there are still a hell of a lot of dairy farms and old farmers around here, so it’ll be interesting to see what the next phase is.

            Hope you eventually find some good people for that land. Bet you’ll have a hell of a lot of takers within ten years.

   3. “If we get twice the utility out of a barrel of oil we can afford to pay twice as much…” Really? pay with what? Credit/debt?
      “We can divert the money we spend on new highways to renewed and reclaimed rail.” Really? We can divert money we no longer have?
      “We can spend what we spend on leisure travel on improving the energy efficiency of our homes and other buildings.” I don’t think what we spend on leisure will exist – unless you mean the debt people use in order to “spend.”
      If my renters can no longer pay, then I have no money to divert and no money to spend. Seems to me you are bargaining with make believe. All my real assets become useless the moment they stop producing. It’s so hard to imagine things changing without loss and pain.

      No man is an island and that will become quite evident going forward. There are too many people chasing too few [fill in the blank.] And when it becomes obvious to the masses – well, look out. You’ll soon discover that your island only existed in fantasy land along with retirement, pensions, insurance of any kind and good will.

      Knowing what we know, who can say they look forward to the future? I can’t. My entire “future” is based on BAU. My income from rental property is dependent on tenants being able to pay. Which means they must have some income too. Oh sure, we can all adjust. Until you can’t any more. Even with no mortgages on my properties, at the minimum I still owe property taxes. What happens when the tax bill doesn’t “adjust” to my ability to pay?

      When you start connecting the dots you quickly figure out that ALL dots are connected. And when a dot becomes disconnected, it disappears. There are +7billion dots (and the number is growing) that all exist because they are connected. Watching them disconnect will be hell.

      1. If you are absolutely determined to believe an utter and absolute crash is inevitable then there is nothing anybody will ever do to convince you and people like you otherwise.

         But that does not mean that all natural resources and all productive work are going to cease to exist overnight some day within the next few years unless maybe we get hit by an asteroid.

         I will point out one last time that this belief is based not on actual physical resources becoming unavailable in enough quantity for us to survive ok in countries such as the US but rather a belief that the current economic rule book is based on actual physical laws such as the laws of physics and geology.

         This is patently untrue.The current economic rule book is composed of arbitrary rules that have come to be accepted as gospel. Those of us who are scientifically literate know about how much truth is contained in ” the Gospels”.

         There is such a thing as a managed economy.

         It ain’t going to be any fun but it ain’t going to result in very many people starving in the USA any time within the foreseeable future. If you want to move up in the managed economy that is coming you better be really good at personal politics and a team player par excellence and lucky enough to get into one of the new bureaucracies that will control the distribution of resources ranging from gasoline to garbage.

         Garbage will be a resource instead of a problem in the future and there won’t be much of it anyway.The throwaway economy is a dead man walking.

         I have solid wood furniture made by my old ( dead ) folks that will last five hundred years if kept dry. It was never boxed and never shipped and never sold in a store and it has no nonrenewable components except nails and screws which are incidentally easily recycled.

         I am not predicting the end of stores and shipping but I am predicting the demise of throw away goods.

         When it is finally more or less worn out my furniture will go into somebody’s stove to keep them warm and cook their supper a few centuries down the road unless maybe a museum or collector wants it.

         I have rental property myself. Mine is decent with well and septic and ample garden space and located well outside of any major city and very close at a small town. It is near the bottom of the cost scale on a national basis.. People who are losing income can move down.Hardly anybody is going to be moving up very far and they are going to be in the most advantageous buyers market in history given all the upscale rentals built over the last few decades.

         Big old houses that are hard to heat and cool and located far from jobs are going to sell for pennies on the dollar if a buyer can be found at all.Tight little houses are going to be occupied especially if located near potential employment.

         If your property is upscale and dependent on finding and retaining tenants with plenty of income I suggest you sell it NOW.Upscale rentals are going to sit empty when the crash hits. People with nothing but a social security check can afford mine if absolutely necessary and if I am still around when the fecal matter hits the fan I will cut rents as necessary.Taxes here consume less than a months rent per year per unit.There are things to be said for living in the boonies.

         Taxes will not be collected except in relation to government expenditures and except for a bare bones safety net which will necessarily be hugely expanded expenditures will be cut to the bone and well into the bone. Half the jobs that exist today working for government will be eliminated. Maybe way more than half.Teachers who are making fifty or sixty grand with a dozen kids are going to be out of work and collecting ten grand in welfare or looking at forty kids and a fifty percent pay cut.

         The music program if one is retained will be taught by a volunteer. Ditto foreign languages.The student parking lot will cease to exist by decree or by legislation.

         But in the USA and Canada and other rich countries with remaining substantial endowments of natural resources the grid will stay up and the schools will stay open.There will be food in the supermarkets but no airfreighted grapes from Central America. There will still be bananas if the blight doesn’t’ wipe them out because there will still be banana boats.

         1. Property is going to be my pension and I take a very similar approach to you. In the UK there is a growing ‘but to let’ market where a property speculator buys houses with a large mortgage and uses the rental income to pay the mortgage and a bit extra. Save the extra to be the down payment on the next mortgage and in a decade you can own a dozen properties. The market is skewed in their favour right now as banks see the speculators as a better bet than people buying their own home with an insecure job. As the property bubble expands the speculator can cash out by selling some of the houses to pay the remaining debt on the rest. Of course they never do.

            My property is houses I have lived in, paid for, then bought the next one to live in whilst keeping the old one as rental income. Each house is bought and maintained as a home to live in. I cannot be caught out by collapsing house prices, and as people will always need somewhere to live (and I live in an academic city that has been prime real estate for 800 years) I do not expect rental income to collapse completely in my lifetime, although it may well decline sharply in line with the national economy.

            1. The UK has rental advantages the US does not.

               The UK renter is required to pay the property tax for the property they are renting, not the owner.

               The UK is much less litigious than the US. The US renter who climbs up on a roof and falls off will likely sue the landlord for not having railings on the rooftop. And if he is expected to mow the grass and gets hurt doing so, he will sue for medical expenses as performing paid labor for the landlord (perhaps a rent decrease).

               In the UK, your odds as a landlord are pretty good.

         2. I will point out one last time that this belief is based not on actual physical resources becoming unavailable in enough quantity for us to survive ok in countries such as the US but rather a belief that the current economic rule book is based on actual physical laws such as the laws of physics and geology.

            This is patently untrue.

            Yes it is untrue. But so is your belief that we doomers think the current rule book is based on laws of physics and geology. No it is not and never was. Current economics is a very complicated thing but it is based mostly of faith and emotions. Faith that fiat currency will always have value. (All currencies are fiat by the way, not just the dollar.) It is based on faith that the government will always be there to bail us out of trouble and keep sending us our bennies such as health care and Social Security.

            It is based on faith that law and order will always be there to protect us, faith that the grocery store will always be there and stocked with food, faith that anything we need to survive will be available with the money we earn from our jobs or from our retirement check.

            Our economy is based on faith, not on geology or any laws of physics.

            And faith is something you seem to have plenty of Mac.

            1. Hi Ron ,

               You generally read more carefully than you are today. lol. I am not saying that we ARE going to pull thru but rather that there is a strong possibility and maybe even a likelihood that we can and will.

               Your old handle is Darwinian and if you hadn’t had it first it would have been mine when I discovered TOD.

               The world is very much a Darwinian place. I have repeatedly said that I would not be caught in Egypt for example in a few years for all the treasure in the world.

               But you will remember the tale of Little Red Riding Hood and what she had to say : ”What big teeth you have Grandma!!” We have both the teeth and a resource base adequate for us to pull thru on a wartime footing planned economy for the easily foreseeable future- BARRING BAD LUCK.

               Bad luck can arrive from many directions of course. But Leviathan is not going to just lie down quietly and die without a struggle.

               And while I am as afraid of our UNCLE SAM as a naive backwoods Baptist is the Wrath of God I do not think our government is all powerful or even close to it.

               But it has the power to compel us to do what we will have to do to survive peak oil and over population within it’s own borders and will not hesitate to do so when it becomes necessary.The people will riot and strike at first and then when they have no choice they will cooperate.

               A wartime effort at maintaining a stable society may fail but it will absolutely be attempted.

               It seems to me that most of the people commenting here today are unable to grasp that idea. It seems so likely to me that I will just go ahead and call this response a fact to be rather than just a possibility.

               I have a good sound grasp of resource depletion and have posted many comments here and at the TOD predicting dire troubles and MAYBE the end of life as we know it.

               If we lose faith in all our institutions we will eventually evolve new ones. It won’t take more than a generation or maybe two at the most for things to settle down. Mad max scenarios burn themselves out like wild fires. There is only so much fuel and once the victims are all used up by roving gangs the gangs are used up too. After that stability. In between chaos.

               It is very easy to find examples of old soviet citizens who revered Stalin because he brought certainty to their lives even though they were very hard lives.IF you kept your mouth shut and were not a member of an ethnic or cultural group targeted by the state you got your beans and potatoes and cabbage.

               1. BTW tax revs for H1 2014 are sharply below estimates. The deficit will be above estimates.

                  Not even the Sequester could stop this.

5. Good writing Ron.
   -Sadly, most of the comments related to your articles (not just this one, all of them) show a feverish/anxious way in trying to detail as much as possible and as “accurately” as possible how all this will unfold… almost to the point in which the commentators seem to “bite their nails” waiting for “the future” to become “the present”, so that they can say: “I was right! I predicted the black swan and/or the X factor! It really did unfold exactly as I thought it would and I am prepared!”
   -I strongly suspect that when “the future” really becomes “the present”, it will so overwhelm all the commenting “smart ones” on this blog that, they (indeed,all of us!) wished they new nothing about it!
   When one is powerless and past the point of no return in changing the certain outcome with ALL its consequences, ignorance is indeed bliss…

   Be well,
   Petro

6. “We have a debt based economy and a debt based economy must grow or collapse. The end of growth is the beginning of collapse.”

   It’s unfortunate there isn’t a middle ground. It seems that if so much capitol and labor was expended developing a complex civilization it could just level off at some point or even slowly contract to some degree, but apparently that not being possible. One of the black swan factors Gail suggests is rising interest rates. The Fed has accumulated approx. 4.5 trillion in bonds but so far have not sold them. My understanding is once they begin selling them interest rates will rise. The Dow which breached 17,000 is now down to approx. 16,500 and some say it’s because investors are wary of getting too close to the point when interest rates begin rising. Stocks tend to move ahead of news, so we have most likely seen the zenith of this most recent rise in stocks. But it also begs the question of what will happen to the US economy when interest rates begin rising? Is there anything left in the fancy fiscal Fed bag?

   I’m perplexed by how the first qtr. could come in at -2.9% GDP but the 2nd qtr. at +4.0%. That’s a difference of +6.9% and suggests some part of our economy took off like a rocket. But what part was it? Real estate, autos, exports, manuf., tourism? In any case, regardless of miracle quarterly expansions it seems as if the writing is on the wall for another step down similar to 08/09.

   1. “I’m perplexed by how the first qtr. could come in at -2.9% GDP but the 2nd qtr. at +4.0%. That’s a difference of +6.9% and suggests some part of our economy took off like a rocket. But what part was it? ”

      … the lying sector …

      1. Ha….
         …you certainly do have my vote as the best answer/comment…gave me a laugh, thanks!
         Be well,
         Petro

      2. Steve, here’s a video link of someone emphatically saying the 4% GDP number is fake, no way possible. http://www.warriorforum.com/off-topic-forum/974548-us-economy-back-track-2nd-quarter.html

         He says the government is playing a high stakes game of poker, trying to fake people out about the real numbers. Gets real good at about the 4 min. 30 sec.

         1. Forgot to add, at that 4:30 mark he says one way we know it was fake is because when the news came out the stock market tanked 90 points on the Dow (so investors knew it was a lie), and if it really had been as much as 4%, then we would have seen a move into commodities, which did not happen.

      3. Heads up. CPI, inflation, has evolved or devolved into two categories — core and non core. Exclude food and energy and you get a ‘core measurement’. Food and energy are volatile so a resultant core CPI is more stable.

         In the GDP measurement the similar parameter is inventories. They were sharply down in Q1, and even more sharply up in Q2. Exclude them and core GDP was/is about 0.

         The one thing important about this is Fed QE didn’t help.

      4. I’m not sure you can add quarterly numbers like that..

7. Nice talk by Nicole Foss there.

   Just a few quibbles: central banks cannot ‘print money’ (because they are collateral constrained). What this means is they cannot create ‘new money’ that is, they cannot make unsecured loans. If they try (Argentina) they are instantly insolvent; this is non-negotiable but rather a condition, like gravity. All banks become insolvent by way of lending. Indeed, banks’ loans are their own losses distributed to others as ‘investment capital’ (the gains are kept by the banks). Quantitative Easing offers an market strategy to hold down interest rates (that are likely to be low, anyway). It IS likely that interest rate repression is a technique to contain energy extraction costs (that is already failing).

   Also, returns from fuel use are phantoms. Driving a car does not pay for the car. What provides returns are loans. What this means is that ‘investments’ in alternative energy can’t produce returns, rather it is the alt-energy customers borrowing in the place of the firms; that is what represents ‘cash flow’. The source of the funds for the customers is the same source for the firms! Of course, the firms have more borrowing capacity than do mere customers, particularly when these customers are saddled with repayment obligations, that is, ‘system’ debts amounting to hundreds of trillions of dollars.

   What is occurring now is the tapped out customers cannot borrow any more; this inability is starving the drillers for funds along with the alt-energy crew. Too bad, they could have been given some funding starting with the 1973 oil crisis but …

   http://www.economic-undertow.com/2014/07/25/the-great-question-mark/

   1. Steve, what does it mean for a Central Bank to become insolvent? Does overpaying for worthless collateral count?

      1. A central bank can’t be insolvent. By definition. It is the source of money.

         When a CB buys government securities, it does not do so as collateral. It’s not a loan. It’s a purchase.

         Look, folks, you have to understand this is the great evil of QE. Before QE people went through life thinking money was rationally created or destroyed (CBs can SELL their inventory of securities (draining money from The System), they don’t just buy (injecting money into the system).

         QE exists because interest rates globally are zero. CBs are in uncharted territory. Before they could pretend there was rationale to it all. Now, no. Even Richard Fischer of the Dallas Fed and a voting member of the Board has said this. The Fed, it’s econometric models, it’s staff of economists, do not know what happens with interest rates 0 for almost a decade and QE rampantly injecting “liquidity” aka money from nothingness.

         It Doesn’t Make Sense Anymore. It Has All Come Apart.

         And it’s no one’s “fault”. It just is, and probably . . . it’s oil scarcity dependent.

         1. Oil scarcity may have been part of the trigger but the ponzi debt pyramid has been 40 years in the making. Plenty of people in power have been well aware of where this would ultimately go. They were just to busy profiting from it personally to care about what would come after.

8. The point that I think summed up the whole presentation nicely was the definition of wealth around 9:30 into the presentation. It is all an illusion based on perceptions of future returns, when the perceptions change the wealth disappears.

9. Having read the first two paragraphs of the report and then crunched some numbers I am surprised not by how large the numbers are but how SMALL they are.

   The summary says that investment in energy has doubled since 2000 in real terms, i.e a 5% per annum increase but is going from $1.6T to $2T in 2035 which works out at exactly 1% compound.

   So they see the world slowing down the rate of increase in energy investment to what is basically a steady state.

   Even if you add in the numbers for energy efficiency $.13T to $.55T in 2035 the annual increase in total investment ( energy + energy efficiency) is only 1.75% compound.

   As I read through the report I’ll see if I can make some more sense out of this.

10. Demand for Sand Takes Off Thanks to Fracking (Google headline for a link to bypass paywall)

    [Excerpt from article]
    Frackers are expected to use nearly 95 billion pounds of sand this year, up nearly 30% from 2013 and up 50% from forecasts made by energy-consulting firm PacWest Consulting Partners a year ago….

    That’s great news for sand miners, but it’s heating up competition between energy buyers and other big industrial users.

    U.S. Silica Holdings Inc., one of the largest industrial-sand companies, has already raised prices for some frack sand, and it said recently that it would also start charging 10% to 20% more for the finer grades of sand typically used to make glass and various industrial products as it diverts some of this supply to oil producers….

    Preferred Sands…plans to increase sand production by next summer with new and expanded mines in places like Wisconsin and Minnesota, said Chief Executive Michael O’Neill, though he added that it’s becoming tough to find available railcars to move the sand from mines to oil fields….

    [There are also] growing restraints on sand supplies. By the end of this year, new and expanded mines capable of producing 10 million pounds of sand annually will be up and running, but future projects could face delays, Cowen & Co. analyst Marc Bianchi said.

    Dozens of new sand-mine permits were issued over the last three to four years in places like Wisconsin, Minnesota and Illinois, triggering a massive public backlash about the truck traffic, dust and breathing problems these operations can create. Now many state and county-level health officials are trying to slow the sector’s expansion.

    A few companies are skirting those efforts by teaming up with towns hungry for jobs and tax dollars, as well as more regulatory control. In Wisconsin, the cities of Independence and White Hall last year annexed land in Trempealeau County so that Hi-Crush could move ahead with its new mine. Those cities’ zoning rules governing sand operations supersede the county’s regulations, including its temporary ban on permits, so Hi- Crush’s site can go into service later this year. Local officials in Minnesota and Illinois are taking similar steps.

    As the good sand becomes increasingly difficult to find, one company is turning next door to South Dakota. Pat Galvin is chief executive of South Dakota Proppants LLC, which aims to resurrect a 1950s-era mine on federal lands about 40 miles from Mount Rushmore. Located in the Black Hills National Forest, the abandoned mine is filled with the same type of high-quality sand frackers have come to count on, and it could generate up to one million tons annually, he said.

    The company is getting ready to pull together an environmental-impact statement to present to the federal government, which controls the site. But oil companies are already asking about supply contracts, Mr. Galvin said. The proximity to fracking operations in North Dakota’s Bakken formation and Colorado’s Niobrara Shale could trim delivery costs by as much as $50 a ton, he said.

    The South Dakota site has another key advantage: no neighbors. And shipments can be routed to avoid tourists bustling around Mount Rushmore.

    “We’re in the middle of nowhere compared to Wisconsin, where you’ve got farming and everything else going on,” Mr. Galvin said.
    [End of excerpt]

    1. Proppant is everything, and this has constraints on oil output written all over it.

       Note, however, that ceramics would improve production a great deal over sand, but the price stops that. This means those oil wells are absolutely not producing optimally, and never will.

    2. Just going by the geologic map in my head, the sands mentioned are early-Palaeozoic in age and actually nearly-pure quartz sandstones. The grains are spherical and have been through two generations of erosion, transport, and deposition. They are often beautifully bedded, frequently cross-bedded (meaning that they were deposited as dune sand, either subaerial or subaqueous) and produce beautiful landscapes. It’s heartbreaking to think of what the quarries (“mines”) are doing to the areas where the quarrying is going on.

       When the Palaeozoic stuff runs out we can start on Zion Canyon in Utah, similar stuff of Jurassic age. There’s always some landscape of some sort to look at elsewhere, after all.

       1. Round is not good enough. Round and large diameter are required. Given how round happens, this is not ubiquitous stuff. The rounding mechanism is also a mechanism to make it smaller.

          1. Hi Watcher.

             That’s what’s found in the regions the article describes; Corning has used it for years for glass.

             Dune sands aren’t particularly fine-grained–that is, the grains aren’t very small. The grains have to be large enough so they aren’t carried away by wind, but hop instead; they’re very well sorted (by size) as a result, which I’d expect to be a bonus for a proppant.

             1. Cool.

11. Hi Ron,

    Chris Martenson also linked oil and money supply in his crash course. Of course it is a very long series of video to watch.
    I think the real link with global money supply is “global energy supply + energy efficiency” instead of crude oil supply or fossil fuel supply. If you increase energy efficiency and decrease fossil fuel (carbon, not nuclear) or replace it with other sources (nuclear, hydro, solar, wind, geothermal), you may still have growth.
    If you look to fossil fuel dependency of economies, you will note that EU has a dependency on fossil fuel of 76.7%, US 86.4%, China, 90.4%, Japan 93.4%, Russia 88.5%, Middle East 99.1%, Africa 92.5%, S& Central America 73.1%. Not all economies have the same fossil fuel dependency. EU and S&Central America seem better prepared against peak fossil fuel (but still highly dependent). EU have stressed on better energy efficiency since about 20 years now. They also increased renewable production dramatically albeit it is still marginal (11.5%) comparing to fossil fuel consumption. US is at 5.3% of renewable currently.
    New cars sold in EU have a better fuel efficiency than those sold in US. In top of regulation, the explanation is coming from higher gasoline price (due to tax): here in Belgium, gasoline price is above 8$/gallon, more than twice as much as in the US. This favors buying smaller cars and efficient cars. Motors above 2 liters are only found in luxury cars.

12. Here’S a few remarks.

    His chart showing the correlation between economic growth and energy consumption since 1980 proves nothing. I predict energy will decrease significantly as a percentage of the world economy in coming years.

    How does he know how high interest rates “should” be? The massive influx of Asian labor in global labor markets driving deflation. The only way to counter deflation is to cut interest rates. So maybe this is a sign of weak banks, but maybe it reflects the fact that manufactured good are getting so cheap.

    He complains that the money injected into the system in 2008/2009 is not being taken back out, but ignores the sudden disappearance of a similar amount of money in 2007/2008.

    1. His chart showing the correlation between economic growth and energy consumption since 1980 proves nothing.

       All it proves is that there is a correlation between energy consumption and economic growth. Economic growth has always been tied to energy. All forms of growth require more energy. If an employer hires more employees they require energy to drive to work. New products must be delivered. etc.

       I predict energy will decrease significantly as a percentage of the world economy in coming years.

       It is not enough just to make a prediction. All predictions should have some logic or reasoning behind it. So my question is just how are you going to pull this off? How are you going to produce more with less energy? Sure there is greater efficiency but that can only go so far. And people forget one very important thing about greater efficiency. Greater efficiency in manufacturing means less labor is needed. Greater efficiency, in many cases, means less employment. That’s what the Luddites were all upset about.

       It sounds great, growth without more energy being needed. But the world runs on energy. If energy stops growing then sooner or later the economy must also stop growing.

       1. >All it proves is that there is a correlation between energy consumption and economic growth.

          It proves there WAS a correlation in the time period he picked for to make his claim.

          I agree that the economy must stop growing sooner or later, but I seriously doubt we are anywhere close to an energy-driven limit now. The American economy, one of the world’s biggest, could increase by half without using more energy. You can tell by comparing it to Japan or Germany. And that doesn’t even include new things like LED lighting.

          Your example of driving to work illustrates this well. America’s transportation system is a joke. We’ve been importing a billion dollars a day of oil for a generation to support it. It has to change. It will be the end of civilization as Dick “The American way of life is non-negotiable” Cheney sees it, but not the end of civilization. And zero net energy housing is already feasible.

          I think doomsters tend to see the economy too much as things that come out of nowhere and get used, instead of a set of arrangements of atoms. A CPU built in 2014 is worth a lot more and cost a lot less energy to produce than a CPU built in 1994. Not only that, most of the consumer products they sold at Radio Shack in the 90s have been replace by apps. My son’s sound system consists of a smartphone that fits in his pocket and a thing about the size and shape of a coke can, but it sounds a lot better than the record player, receiver etc (and huge record collection) I had at that age.

          Of course arranging atoms costs energy as well. But keep in mind that all manufactured goods are absurdly crude and primitive compared to a potato. Smart phones won’t start growing on trees next week, but all manufacturing processes have vast room for improvement, and they are rapidly improving.

          In take the peak oil arguments very seriously. But I think there is a decent chance of a relatively soft landing, at least on a global scale. I think oil consumption should be heavily taxed now to soften the landing. But other ecological issues like global warming, and lack of topsoil and water seem more threatening.

          As to where the jobs will come from, that’s a tough question. Bill Gates claims there will be no poor countries by 2035. Productivity keeps going up. John Maynard Keynes suggested that mankind would solve its economic problem, meaning work would no longer be needed. That’s a stretch, but I do think that ecological problems will loom larger than economic problems in the coming decades.

          1. I’m a bit behind the curve on semiconductor production technology, but certainly up to 1994 the embedded energy of computer chips was rising exponentially, just less exponentially than the processing speed. Clearly chips consume dramatically less energy than they used to in operation, but purchase price is no direct indication of net energy content – hardware is now a loss leader for many manufacturers to sell their apps and in-app purchases. The technology is breath-taking , and without the internet and the GPS satellite system, telcomms satellites , etc, largely useless.

             At the same time it gets harder and harder to buy basic tools that are made of sufficient physical material to survive more than a few months of real world use without disintegrating beyond repair, because it is not economic to build in repairability when everybody just throws it away and buys a new one.

          2. Wait a minute. Ya can’t say stuff like the economy can grow 50% without knowing what the measurement is.

             GDP = C(onsumption) + I(nvestment, private) + G(ovt Spending) + (exports – imports)

             There is handwaving about income based GDP measures vs the above production/expenditure measure, but the above equation is the long term standard.

             (Inventories are embedded in the Consumption number btw)

             Now you’ll notice that CPU speed isn’t anywhere explicit in that equation.

             But oil burning is. It’s the purest form of Consumption. Taking your car out and driving in circles is economically stimulative. How cool is that?

             Building tanks is G. So is paying people to dig holes and then fill them up. All G.
             Foreign aid is usually military, with the obvious string attached that the recipient must buy American tanks. All part of G.

             Taxes reduce Investment. Destimulative. But where could the G come from if you don’t tax? Shrug. The Fed, of course. Or the public. This is why God gave us perpetual deficits.

             Want to really see why the measurements are insane? Think about software and “inventories”. Or digital movies and “inventories”.

             1. Actually I think the quickest way to grow the American economy would be to tax gas at the pump, because it would increase net exports.

                The problem with your idea about driving around in circles is that about half the money would flow out of the country, so the economy would grow less than expected.

             2. Also far from reducing investment, taxing gas at the pump would stimulate investment in gas saving technology.

                1. You don’t understand the equation. “Investment” is not buying stock or R&D. It’s buying machinery with which to make more widgets.

                   If you counted R&D or buying stock, you’d double count. The company takes that money and buys things — or in the new normal would do share buybacks.

                   Sorry, it just doesn’t work the utopian way. And never will. It can’t.

                2. I understand the equation quite well as a matter of fact. By investment I meant companies buying fuel efficient equipment, or governments taking the revenue from the gas tax and putting it into mass transit.

                3. No. I is private investment. Not government inves– spending. No such thing as government investment.

                4. >No such thing as government investment.

                   That’s just some bizarre ideology.

                   Be that as it may, there is one error in your equation — G should be net government outlays (outlays -tax take), not spending.

                5. Hi Watcher,

                   The government spending to build the mass transit is not investment spending.

                   The spending by all the companies who build the mass transit system on new factories and equipment is indeed private investment.

                   I assume you have heard of the multiplier effect.

                6. There’s no ideology in this. It’s definition. I don’t make the definitions.

                   Taxes are not in the GDP measurement. If they were there would be a T, not a subset of G.

                   “G (government spending) is the sum of government expenditures on final goods and services. ”

                   There is no mention of multiplier effect in the equation.

                7. Can’T seem to figure out how to reply to watcher but NET government spending is the number you are looking for and it is what the government gives out minus what it takes in, so it mentions taxes, because that is what it takes in.

                   Your equation is based on the circular flow model. Here are examples of what that looks like.

                   Basic (no gov or exports)

                   http://wiki.ubc.ca/File:Circular_Flow_Simple.jpg

                   More complicated

                   http://www.tutorsonnet.com/images/uses_of_prpbility_curve_1.jpg

                   These lump government expenditures but there is no reason not to split them into covering operating costs vs investment. Claiming this is somehow impossible is quasi-religious ideology.

                8. Hi Watcher,

                   I am not sure how much economics you have studied, but the multiplier effect is simply that an increase in government spending will increase GDP by more than the increase in government spending.

                   The basic idea is that when there is considerable unemployment the government spending creates jobs, leading to higher income and consumption. The higher consumption will lead to more jobs etc.

                   See http://en.wikipedia.org/wiki/Fiscal_multiplier

                   for a better explanation.

       2. Dear Ron, you are right. The world runs on energy, but not necessary energy coming from fossile energy. The share of renewable energy is increasing by 0.3% per year in the global energy supply since 2008. I guess this will at least continue with this trend in the coming years. Of course it is not sufficient, but it could slow slightly the arrival of peak fossil fuel. It could also be that renewable will increase at a higher rate.
          However, we should keep in mind that our world is finite and there is not enough material for having everybody at the level of developed countries.
          Another interesting chart from Chris Martenson is the linke between population, money and energy.
          Provided that we have a stabilized population in equilibrium with resources. Give them almost free energy (fossil fuel, food) and the population will grow. As a consequence money wich is also a measure of human work will increase. My view is that the world is currently in a huge dysequilibrium as we consume more than the earth can regenerate. At one point or the other, resources will reach their limit. Population will stabilize or decresase until it reaches the equilibrium between resources and consumption. If we still have “infinite energy” (nuclear, renewable), the rate of recycling will be a key to determine the population able to live on earth.
          Fossil fuel is just a small time period in human history. For the future everything depends on how we will handle energy transition from fossil fuel to somehting else. That should require large adaptation of human society.

13. Human civilization, although cancer-like in origin, has a growth pattern similar to that of a fungus. Mycelia spread into the environment following chemical cues of chemotaxis, enzymes are secreted into the environment surrounding the individual cells of the mycellial threads and nutritional substances are absorbed (reminds me of fracking). Growth on the periphery continues even as cells in old mycelia can no longer absorb nutrients from their once rich local environments. Transfer of nutrients from the periphery is inadequate. The dense areas of initial growth begin to die even as the periphery maintains just enough nutrition for its own growth. In some species under this kind of stress, a fruiting body such as a mushroom with millions or perhaps billions of spores sprouts above the soil surface to spread encapsulated and environmentally resistant cells to a much wider and perhaps more nutritious landscape (the let’s find a new planet strategy).

    To put this into the perspective of human civilization, the old easily attained fossil fuel deposits will soon be gone and the new finds on the periphery may support some local economy, but the large cities will turn gray and die, as the old deposits that brought them into existence and sustained them, become inadequate. Transfer from the periphery to the center will become impossible because the amount of net energy obtained on the periphery will only be great enough to build and sustain limited infrastructure and metabolism on the periphery, not transfer energy to the dense and dying center, full of cellular concrete and steel banking, insurance and medical buildings. Eventually the periphery goes bust too.

    So why is it we’ve grown right up to the end point, the point where if we were a fungus we would have to start building spores for massive distribution, hoping that one lands on a nutritious substrate? (Unfortunately for civilization there isn’t another nutritious substrate.) Is it because we choose to be unconscious of our biological nature while deluding ourselves with visions of bright futures in our technological surrounds to be followed by deliverance to an ethereal forever-after? It seems that technology only temporarily removed man from the ecosystem through the evolution of certain mental capacities that enabled technology while leaving our passions with little control. Many find themselves in prison for lack of self-control, or with families they cannot support, but is the premeditated rape and plunder of the planet to satisfy uncontrollable egotism any less of an offense or should it be a capital crime? Steve Ballmer buys the Clippers for two billion dollars. Hope he enjoys the mental masturbation, the fans will undoubtedly come to the arena to see Steve Ballmer first and the Clippers second. Welcome to billionaire showcase. The adrenaline release from pretend contests in the arena will soon give way to real contests in the streets of L.A. as “control” becomes an unaffordable luxury.

14. The crux is a vast amount of capital is needed to fund the fossil fuel industry

    Really. U.S. 2013 fixed investment in petroleum and natural gas wells was ~$130 billion, which represents ~13% of private fixed investment in structures and ~5% of total private fixed investment. Wake me up when the amount of capital is meaningful in a $17 trillion economy. Contextually, U.S. households spend more renovating their homes than the oil and gas biz spends upstream.

    Blah, blah about midstream and downstream rounding errors if you are so inclined.

    1. Marmico, it is just more than the amount invested, it is the returns they are receiving from those investments. The below chart depicts the combined capex of the largest publically traded oil companies along with their combined production.

       Incidentally 14 million barrels per day represents about 19% of world crude oil production.

       

       1. What’s the point of the chart? Major oilcos fixed investment increased 5x, the product price increased 5x (which is not on the chart) and production was flat since 2000.

          It takes more U.S. labor headcount in 2014 to extract the same volume of domestic oil/gas as in 1972. There is negative productivity in natural resource extraction whereas there is positive productivity in manufacturing and information technology. Households pay more for natural resource products and less for manufactured and information consumer goods and services. So what? It’s called relative prices, not the end of civilization.

          1. You, also, don’t understand the GDP equation. Investment is the I part of the equation. So your quote is not a % of 17T. Only a % of I. There’s no point in relating a subset of I to C or G, which your 17T grenade would do.

             1. Excuse me. I related oil/gas upstream fixed investment to structures (a subset of fixed investment) and total fixed investment with context to residential investment. Fuck off!

                1. What upstream structure is fixed? Those drill rigs come down in a few weeks and the well itself in a few years.

          2. What’s the point of the chart?

             I thought it was rather obvious.

             Major oilcos fixed investment increased 5x, the product price increased 5x (which is not on the chart) and production was flat since 2000.

             Production increased right along with capex right up until 2006. Then capex kept rising and production started falling. More capex, less to show for it. All production fell because there was not enough new production to make up for the decline in their old fields. So they are having to sell off assets to pay expenses and dividends.

             Big Oil Sheds Assets to Fix Balance Sheets

             The oil industry may be in the midst of entering a new phase of high costs and slower growth. New oil discoveries are harder to come by, and the scramble to replace depleting production is costing more and more. The days of the large discovery that is easy to tap into are gone. Now, the industry has to go to the ends of the earth to get more oil.

             What’s the point of the chart? Read the above paragraph and that should tell you all you need to know.

             1. Ron,

                Does this discussion about capex exclude the money the oil industry pays for the energy needed to do the drilling and all? shortonoil has been saying that the petroleum industry is itself now the world’s largest consumer of petroleum, or words to that effect.

                1. Capex is simply capital expenditures and of course it includes money paid out for drilling wells. Everything from exploration to pumping to marketing the oil is capital expenditures.

                   I have no idea whether the oil companies are the world’s largest consumer of petroleum or not. If you include the combined expenditures of all the world’s oil companies combined then perhaps. But in the USA I would bet that the military, or just the Air Force, consumes more oil than US oil companies do.

                2. Hi Ron.

                   Does it seem like we’re seeing something similar to the ELM going on within the oil industry? It’s using more and more of its own product in order to keep producing it?

    2. Contextually, U.S. households spend more renovating their homes than the oil and gas biz spends upstream.

       So you’re saying that the discretionary economy is much bigger than the oil and gas industry. But without the the oil and gas industry there would be very little discretionary economy. So yes it matters when the cost of extracting oil and gas continues to escalate.

       1. So you’re saying that the discretionary economy is much bigger than the oil and gas industry

          I’m saying that the upstream domestic oil and gas biz is 2.8% of value added to the U.S. economy. There is a ~2.5 multiplier for midstream and downstream at the gasoline/diesel/kerosene pump or natural gas/electric meter. No doubt, since the domestic shale oil/gas boom started, there has been an uptick in the midstream (truck, rail, pipeline) multiplier counterbalanced by a downtick in the downstream(final consumption) multiplier, ignoring a multiplier for increased trade exports of petroleum products.

          I have no idea what you mean by the discretionary economy. Elucidation yields calculations.

          My snooze alarm is set. 🙂

          1. I have no idea what you mean by the discretionary economy.

             Discretionary economy = restaurant meals, movies, smart phones, vacations, ski hills, recreational vehicles, recreational properties, SUVs, cosmetics, fashion, music, gyms, swimming pools, ….

15. It seems if I was texas, why should I export oil to somebody in New Jersey, while I look around and see locals getting poorer? Same as Russia cut off cuba and north Korea. Especially if china can pay me more. If Washington threatens me maybe pipeline pumping stations accidentally catch on fire and blow up.

    1. The day Dallas needs gasoline and doesn’t have enough is the day a shipment from Houston to NYC doesn’t happen.

16. Following is a chart showing key normalized values for the (2005) Top 33 net oil exporters (2005 values = 100%). I define combined net exports from the (2005) Top 33 as Global Net Exports of oil (GNE). Based on the seven year, 2005 to 2012 rate of decline in their combined ECI Ratio (ratio of production to consumption), estimated post-2005 Global CNE (Cumulative Net Exports) were about 540 Gb (total petroleum liquids + other liquids, EIA), and I estimate that remaining post-2005 Global CNE fell from 540 Gb in 2005 to about 427 Gb in 2012.

    Over the same 2005 to 2012 time frame the Economist Magazine shows that total global public debt (not counting private debt) increased from about $27 Trilllion to $49 Trillion:

    http://www.economist.com/content/global_debt_clock

    So, in 2005 I estimate that the ratio of total global public debt to estimated remaining post-2005 Global CNE was $50/barrel.

    In 2012 I estimate that the ratio of total global public debt to estimated remaining post-2005 Global CNE has risen to $115/barrel.

    Of course, if we look at in terms of estimated post-2005 Available CNE*, the data look far worse, with total global public debt per barrel of estimated remaining Available CNE rising from $156/barrel in 2005 to $533/barrel in 2012.

    *Total estimated volume of Global CNE available to importers other than China & India

    540 Gb & 27

    427 & 49

    

    1. Ratio of GNE (Global Net Exports of oil) to CNI (Chindia’s Net Imports) Vs. Total Global Public Debt:

       

17. PetroChina billions not paid yet, says Athabasca

    What’s happening here. Are the Chinese running low on cash?

18. Great post Ron. Haven’t read all the comments yet, but look forward to digging in to that. Just wanted to make one point regarding this:

    “US consumption has turned up in the last year and a half. Kopits cannot explain this but says the same upturn is not found in European nations. They are all still right on the red line on the chart above this one.”

    The US is pretty much the only OECD country with significant population growth, not only percentage-wise, but especially in gross numbers. The US is also more oil/auto dependent than other OECD countries. So US consumption staying flat or falling slightly means something different than in Europe or Japan. The US has millions more people each year driving to everything. The US also has pretty much the cheapest gasoline costs of any OECD country. All those things combined are going to keep the US more resistant to declining oil consumption than the rest of the OECD until things bite REALLY hard and we are tumbling hell bent down the slope of no hope.

    1. The US has also done a better job of increasing the amount of debt in the system than other OECD countries.

       1. One person’s debt is another person’s asset.
          Rgds
          WP

          1. And your point is?

             1. When the amount of debt in the system increases the amount of assets does as well. It’s a wash.
                Rgds
                WP

                1. That’s true if the borrowed funds are invested in productive assets. Unfortunately, much of the debt that has been incurred has been spent on consumption of one form or another.

                   Asset prices have been artificially increased through ZIRP but higher prices don’t necessarily reflect increased wealth or higher future returns. Eventually, a lot of the debt that is backed by assets will be worth less than the owner of the debt thinks. Debt that is not backed by tangible assets will likely be worth even less.

    2. There doesn’t have to be any consumption decline of everyone.

       Two things stop that. 1) Subsidies and 2) kill the other guy.

       Everyone doesn’t have to reduce oil consumption.

       1. Good summation of US oil policy. I would add that rather than having to kill the other guy, one just needs to destroy the other guys economy or purchasing power to accomplish the same goal.

          1. Well, that’s fuzzy stuff.

             Killing is much more direct and certain.

             1. And its 1, 2, 3 what are we fighting for?

                1. Fight?

                   There doesn’t ever have to be a fight. Just surrender.

             2. “Truth flows from the barrel of a gun”
                -Mao

19. Ebola Update

    WHO: Ebola death toll reaches 932; 1,700 cases
    http://hosted.ap.org/dynamic/stories/A/AP_AF_WEST_AFRICA_EBOLA?SITE=MYPSP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-08-06-06-34-14

    A Nigerian nurse who treated a man with Ebola is now dead and five others are now sick with one of the world’s most virulent diseases after coming into contact with him, the country’s health minister said Wednesday.

    The growing number of cases in Lagos, a megacity of some 21 million people, comes as authorities acknowledge they did not treat Patrick Sawyer as an Ebola patient and isolate him for the first 24 hours after his arrival in Nigeria last month. Sawyer, a 40-year-old American of Liberian descent with a wife and three young daughters in Minnesota, was traveling on a business flight to Nigeria when he fell ill.

    The death of the unidentified nurse marks the second Ebola death in Nigeria, and is a very worrisome development since it is the Africa’s most populous country and Lagos, where the deaths occurred, one of its biggest cities.

    Meanwhile, Saudi Arabia’s Health Ministry says a man who was being tested for the Ebola virus and has died. The 40-year-old returned on Sunday from Sierra Leone, where there has been an Ebola outbreak, and was then hospitalized in Jiddah after showing symptoms of the viral hemorrhagic fever.

    1. I posted this link yesterday but yesterday at the very tail end of things might as well be a century ago.

       The Washington Times is a rag of a paper but occasionally runs something worth mentioning.

       This commentary on the ebola news is worth reading. It is dead on with the actual facts. I know enough to know since this sort of thing is taught in agricultural colleges and nursing schools . Been to both but had to drop out of nursing to look after my aged parents or else put them in the old folks warehouse.

       http://www.washingtontimes.com/news/2014/aug/4/pruden-a-panic-more-lethal-than-a-virus/

    2. Looks like the death toll is rising by from 100 to 200 every day. And that is likely less than half the true total. I read another piece where the natives were burying their own people in secret, afraid of what the authorities would do if they found out.

       1. First time in a large, urban setting.
          We shall see, but it appears the genie is out of the bottle.
          Equilibrium is getting harder to maintain on this hot, crowded, diminished planet.

          1. This is the kind of news that gets snuffed quickly, like the occasional pipeline fire in eastern KSA, which are never, ever terrorist action.

    3. Ebola hits Saudi Arabia?

       A Saudi man who was being treated for Ebola-like symptoms has died at a hospital in Jeddah, Saudi Arabia’s health ministry says.

       The man recently visited Sierra Leone, one of four countries in the outbreak.
       

       http://www.bbc.co.uk/news/health-28678699

    4. NBC News just reported that the CDC has raised the Ebola alert to Level One, their highest level of alert, due to the spread of Ebola to Nigeria. NBC reported that they characterized the outbreak as out of control. Following is the only link I could find:

       http://www.breitbart.com/Big-Peace/2014/08/06/CDC-Issues-Level-1-Alert-Highest-Possible-on-Ebola-Virus

       Dr. Tom Frieden, the director of the United States Center for Disease Control, announced this afternoon that the agency has elevated its response to the Ebola virus to Level 1– the highest possible response level. The CDC heightened the level today in response to multiple new diagnoses and scares around the globe.

       This afternoon, Dr. Frieden announced that the alert had been raised to Level 1:

       “Ops Center moved to Level 1 response to #EbolaOutbreak given the extension to Nigeria & potential to affect many lives.”

       . . . . While the CDC issues precautions in the United States, the World Health Organization is currently conducting an emergency meeting to discuss, among other things, the ethics of providing patients in West Africa with a highly untested experimental serum that could cure the disease. WHO director general Margaret Chan warned of the disease, “This outbreak is moving faster than our efforts to control it.”

       1. CDC Raises Response to Highest Alert Amid Ebola Outbreak

          http://www.nbcnews.com/storyline/ebola-virus-outbreak/cdc-raises-response-highest-alert-amid-ebola-outbreak-n174496

    5. Ebola Virus Inflicts Deadly Toll on African Health Workers
       http://online.wsj.com/articles/nigerian-health-minister-says-nurse-died-of-ebola-1407325187?mod=WSJ_hppMIDDLENexttoWhatsNewsSecond

       My comments:

       Very interesting charts in this article showing the reported number of cases and fatalities for Liberia, Guinea and Sierra Leone.   Note that the outbreak started in Guinea and then spread to Liberia and Sierra Leone.  And it has spread to Nigeria via air travel and possibly to Saudi Arabia, via air travel.   

       These are just the known reported cases.  Given the incubation period (up to 21 days) and possible reluctance to report suspected cases, it’s possible (and probably likely) that there are active Ebola cases in many more countries.  

       Note that the exponential rate of increase in reported cases in Sierra Leone, based on the chart, is about 90%/month.  The CDC has elevated their Ebola Alert to Level One status, their highest level of alert.  The WHO is currently debating whether or not to declare a global health emergency. 

       1. This is a Wall Street Journal Story. The story is behind a pay wall but if you copy and paste this headline into the search bar of Google it will bring up the whole story.

          Ebola Virus Inflicts Deadly Toll on African Health Workers

          

       2. The NYT reported that there are eight reported cases of Ebola in Lagos, Nigeria tied directly to the man who flew from Liberia to Nigeria last week and became symptomatic on the plane. And of course, these are just the reported cases. The incubation period for Ebola is up to 21 days.

          Lagos, Nigeria is a city of 21 million people, and it is an international travel hub.

20. Two items in the Ronpost of this discussion are close together:

    “To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence “quantitative” easing. ” The Economist has this a little wrong, btw. There is no imperative that the created money increase PD bank reserves. They COULD lend it out rather than deposit it as Excess Reserves at the Fed, so QE should not be *defined* as an increase in reserves. That’s bank discretion.

    The more proper definition is that central banks create money by buying securities held by Primary Dealers (in the US) who bid on and took possession of new Treasury issuance. The securities bought are directly that issuance (the Fed is forbidden by law from directly buying the issuance at auction — meaning the Fed is not a PD) — OR they buy some other security from a member bank, PD or not, (like Mortgage Backed Securities). The bank takes the money received and does whatever it wants with it. It doesn’t have to be held as excess reserves. It can be loaned out, decreasing reserves, if they wish.

    The other item:
    Meeting the world’s growing need for energy will require more than $48 trillion in investment over the period to 2035

    See the dichotomy? So what if $48 Trillion is required. Just QE it into existence. (and don’t be surprised if we learn someday that was what Bernanke was doing. QE3 was absolutely enormous in magnitude, he chose to do it about 6 weeks before a close election (risking a GOP win and abrogation of any Fed independence — make no mistake on this, Bernanke WOULD have been punished for what he did) and there was really no clear evidence of an economic cataclysm looming. There was no great apparent reason for QE3, but . . . we got QE3)

21. Is the Peak Oil Myth Dead?
    http://www.fool.com/investing/general/2014/08/06/is-the-peak-oil-myth-dead.aspx

    The world’s remaining oil resources all told stand at 7 trillion to 10 trillion barrels, six to eight times what humanity has thus far pumped out of the ground. At today’s production levels it would take 220 to 300 years to deplete all that oil (assuming our resource estimates don’t rise over time, as they’ve been doing for decades). . . .

    Peak oil is inevitable in the sense that one day the world will find better alternatives to oil and voluntarily choose to stop using it as much. However, perpetrators of the supply side peak oil myth fail to take into consideration the innovative spirit of thousands of engineers, scientists, and industrialists who are constantly looking for solutions to our energy needs. In other words, it’s not inconceivable that your grandchildren might be driving gas-powered cars even 100 years from now.

     

    1. It is hard to tell the difference sometimes between carnival barkers and the business men who hawk business as usual to in order to keep Joe Sixpack oblivious to his own enlightened best interests.

       A good many of the people who write energy and other puff pieces for such outfits as the Fool are either utterly ignorant of the basics of geology or else brazen hypocrites.

       Some of the pieces on technology run by the Fool will turn out to be on the money. The problem is there is no way to know which ones will be winners and not over one out of a dozen touted as sure fire bets will ever be a big winner. Probably not even that many.

       1. I prefer to use the lens of Hanlon’s Razor for articles like these: Never attribute to malice that which is adequately explained by ignorance.

          Like most people, your average journalist has deep seeded biases that run counter to the ecological realities of overshoot, EROEI, limits, and such.

          Don’t get me wrong, they’re able to prod and question things and yield accurate conclusions on many topics; even on topics they have bias on. However, like what unfolds in Daniel Quinn’s philoso-fiction book Ishmael, the consequences of peak oil run directly counter to the progress paradigm. As we’ve all seen in our personal lives people, even highly intelligent people who usually demonstrate critical thinking skills, run mental gymnastics to avoid the very simple scenario lying before us.

          People look at hundreds of years of challenges we overcame; challenges that on the surface seem more daunting than switching from one energy source to another, and conclude that human ingenuity has always won. Even people I know with degrees in the STEM field are blind to why energy is a unique challenge.

          People first need to grasp how ubiquitous oil is in our lives (an easy task since everything from my toothpaste, walls, glasses, and windows are covered in it). That way they understand it is an especially large challenge, and it intrigues them by making it present instead of abstract.

          Then, they need to see why energy is a unique challenge. It is the master resource. This is a bit more difficult, but I find people get it when it’s explained by referencing the Sun, photosynthesis, asking “why do we starve when we don’t eat”, and again taking energy from an abstract to a very present reality. They see that an organism can have all the “technology” (ie enzymes) in the world, but without energy it dies, nothing happens without energy, regardless of technology, intelligence, or other resources.

          The last, and most difficult, thing for people to grasp is that global GDP grows because for 250 years growth in energy supplies allowed it to. Again making the abstract tangible is best – the connection between recessions and oil price spikes, oil prices in 2008 being higher than in the 1970s oil crises that caused severe recessions, the price NOW that is on average higher than 2008, and connecting that to slow global growth. A bit more difficult because people have already rationalized these events into ideology (it was the bankers, the politicians, OPEC/oil companies gouging on prices, etc).

          Once all of that is laid bare, then the final dot is the inseparable link between exponential GDP growth and exponential debt growth; the need for the future to be bigger than the present to pay off interest in all levels of society – consumer, commercial, and governmental. That just a few years, or even quarters, of negative growth can cause the failure of markets, governments, and the entire financial system. Once that system breaks, then transitioning to another energy source “smoothly” is over.

          We were so close in 2008. I find not many people grasp how truly dire the situation was in 2008. They rabble on about central banks flooding the system with money and TARP without realizing it is a far, far, far more preferable situation than what were on the cusp of. We are all truly lucky beyond any measure, and I wake up with gratitude every day. Yet, in explaining all this to others, they say it’s all so depressing. Difference in perspective I guess…

    2. Hi Jeffrey, It would seem such “foolishness” is never ending. You would think that by now anyone calling himself an investment adviser or economist would grasp the simple concept that the only oil that counts is that which can be extracted at a profit yet cheap enough to be affordable by ones customers. Under our current financial system it would matter little how much oil one had if it cost too much to produce.

    3. LOL. If you enjoyed that article, the author also wrote a classic called Click Here for How Breakthroughs in Food Science Can Feed 100 Billion People

       1. That author is a 27 year-old kid with no technical training or experience of any kind.

          1. Sadly, journalists have degrees based on the ideas of political science – that truth is a relative matter, dependent on how an argument is presented, when in reality truth is absolute and is based not on wording but on physics, chemistry, and thermodynamics.

             It’s not just that journalists don’t have the educational background, but that their educational background runs counter to how things actually work in the universe.

    4. “At today’s production levels it would take 220 to 300 years to deplete all that oil (assuming our resource estimates don’t rise over time, as they’ve been doing for decades). . . .”

       My hunch is that ‘Today’s Production Levels’ are highly unlikely to be maintained for another 20 to 30 years, let alone 200 to 300. And resource estimates have never been any guarantee of actual future production…

       As for innovative spirit getting us out of this predicament, seriously now what are these fools smoking?!

       Oh well, just another beautiful day here in fantasy land with lot’s of rainbows and herds of invisible pink unicorns peacefully grazing in the meadows beneath the gorgeous waterfalls. This is after all the land of milk and honey, right?

       Cheers,
       Fred

       1. Fred,

          If Americans actually believe “Everything Is Okay” in the Economy due to the Federal Reserve printing money out of THIN AIR.. then it only makes sense that we can produce oil for another 200-300 years.

          Lastly… while the United States was known as the “Land of Milk & Honey”, it has been replaced by the “Land of A Dozen Ponzi Schemes”.

          steve

          1. “Lastly… while the United States was known as the “Land of Milk & Honey”, it has been replaced by the “Land of A Dozen Ponzi Schemes”.”

             Close. It’s actually The Land of Bilkin’ Money.

             1. TonyinPDX,

                Nice touch… actually a much better phrase than mine.

                steve

       2. Hi Fred,

          If you will come for a visit we may be able to find some mushrooms in the cow pasture that will enable you to see the unicorns. I haven’t had any luck so far on that front but there are so many every time it rains in warm weather………

          And even if we don’t I have a few quarts of the most exclusively marketed liquid refreshments.The folks who make it won’t sell or give away even one sip to anybody except a life long friend or relative.

          The director of the FBI couldn’t get a sip for a thousand bucks- most especially not him or any of his minions or their buddies at ATF which should be a convenience store anyway lol.

          It will not enable you to see unicorns but I guarantee that after a few nips you will not remember NOT seeing them.It tastes very much like peaches with overtones of other fruits which might have been handy……….

          Seriously the problem with such cornucopian pipe dreams is that just about everybody who reads them is only literate in the technical sense.They learned to read but that was about all.

          It is easy to see why so many people have so much faith in technical progress. Life has been on an ever upward curve of ease and convenience and technical miracles for as far back as living memory extends. I have had many a conversation with family members who never saw a car until they were approaching adulthood.Dick Tracys radio and tv on the wrist are not realities for only one reason- such a small screen as would fit on a wrist watch is too small so we tote them instead in a pocket or pouch.

          A good many of us know people who have literally had their hearts ripped out and replaced with a used heart and even the ones of us who know our basic biology now must recognize that if bau survives the doctors may be growing us a brand new one to order from our own blueprints in another twenty years……………

          I personally know plenty of people who believe with near religious certainty that one day there really will be cars that run on water and flying carpets and garden plants that have tomatoes on top and potatoes underneath and the stems and leaves good in salads too.

          And from their perspective why should they believe anything different? The scientists about whom they know NOTHING ELSE have delivered miracle after miracle again and again and again for well over a century now.

          It is like Sunday school except you see actual concrete results no prayer necessary.

          And given that the last time I checked you can graduate from an Ivy League university with only ONE so called ”survey course ” in the real sciences … I can see no reason to expect either Joe Sixpack or his lawyer to ever know any better…. but of course the bricks of reality will soon be crashing upside their heads … but too late for the most part.

          1. Hi OFM, Your offer sounds tempting indeed! >;-)
             Cheers to you sir!
             Fred

    5. From the Motley Fool article:

       “Compare this to Ghawar’s roughly 70 billion barrels of remaining oil and then factor in that the Energy Information Administration (EIA) estimates the US’s technically recoverable shale oil and gas deposits stand at 223 billion barrels, and one can see there is little cause for alarm.”

       The USGS estimate of US LTO undiscovered Technically recoverable resources is 13 billion barrels, if we add to this all of the proved reserves in the US (33 billion barrels) we would be at 46 billion barrels, but clearly not all of the proved reserves are LTO so this would be an overestimate. Let’s guess that LTO proved reserves are 10 Gb (likely this is still too high, but may be close to proved plus probable in the US), on that case the TRR for LTO in the US would be about 23 Gb, about one tenth of the EIA estimate.

       Bottom line the EIA is where the bogus estimate for the Monterrey shale came from, if you want better estimates look at the USGS estimates, which are not perfect, just much better than EIA estimates.

       1. And note that the guy did not clarify that he was talking about barrels of oil equivalent.

          1. I don’t suspect a 27 year-old “investor” would know what the term abbreviated as, let alone what it meant.

       2. Realistically, all “undiscovered” numbers of any size don’t exist, especially in the US. That hypothesis calls for massive systemic incompetence by thousands of technical experts across multiple competing companies.

          If US super majors could produce more domestic oil, they would be. That they’re not – and actively cutting exploration – says all you need to know.

          1. As far as I know there has been an increase in US C+C output, not by the supermajors, but a 50% increase in output is significant, proved reserves have increased from 19 Gb to 30 Gb while 9 Gb were produced over the 2008 to 2012 period so a total of 20 Gb of crude was added to proved reserves over this 4 year period, some of this 20 Gb was oil that moved from the “probable” reserve category to “proved” reserves, but some of it was “undiscovered resources”, the data on proved reserves id easily found at the EIA, the probable and possible reserve data is harder to find. The USGS considers anything outside of the proved plus probable category of reserves as an undiscovered resource.

             1. The increase is all from shale, which the supermajors aren’t in because you can’t make money on most of it even at these prices. They knew about it, but as publicly traded companies, they can’t get away with the financing silliness.

                And shale was just written down tremendously with Monterrey. Where’s the undiscovered shale going forward?

                For undiscovered to be relevant, you are literally talking resources that no one knows about despite this being the most exhaustively surveyed, easiest to work in country on Earth. Again, presumes massive systemic incompetence.

                1. Sandridge Energy took a beating today, down 10% after their earnings for the last quarter dropped. They had a small drop in revenue due to slightly lower oil production but their profits were way down. Many of these oil producers in the shale plays and tight oil plays are barely making investment back on these new wells at $100 per barrel.
                   And now Bloomberg had a story about using fracking in deepwater applications, particularily GOM. The use of hydro fracturing in deep water requires, besides the drill ship, a separate equipment ship of 300′ length just for the pumps and sand storage. According to the story a fraced well in deep water cost over $100 million. Yes, we really are at the bottom of the barrel for oil exploration and production.

22. Gail has just added a new post which overlaps with much of what is being discussed in this thread:

    http://ourfiniteworld.com/2014/08/06/making-sense-of-the-us-oil-story/

    I notice there has been no recovery in the weekly US production stats for the latest week – I assume (as Ron pointed out last week) this is because the Alaska pipeline is still being worked on?

23. CNN is only a day behind the Washington Times in running some sober coverage of the ebola issue.

    http://www.cnn.com/2014/08/06/health/ebola-epidemic-fears/index.html?hpt=hp_t1

    I am afraid it might kill a few tens of thousands or maybe even hundreds of thousands in some very poor countries where it breaks out but the likelihood of more than a handful of people getting it in the US or Western Europe is very small indeed.

    But ebola is nevertheless a fascinating canary in the coal mine indicator of the perilous state of the world.There is a real chance that some entirely new or almost unknown disease that is often fatal and also much more contagious than ebola will eventually break out.

    If such a new disease were to have a long incubation period and spread thru the air we could be in really deep doodoo even here in the US or Western Europe because just a handful of travelers could spread it all over the place before showing symptoms.

    I will continue to follow the ebola news any time there is an outbreak big enough to make the news.

    (Just because I believe there is a good chance that the US and maybe a few more large rich and very powerful countries may weather peak oil and peak resources without suffering an outright collapse it does not mean I think the future is a rosy place.)

    1. Unless a contagion goes airborne, it is controllable by way of quarantine. This is what these affected African countries are currently undertaking. It is possible for mutation, but whether Ebola could combine with a cold or flu virus is unknown. If this disease had spread several centuries ago, very possibly many thousands or even millions could have met their demise.

       What I’m surprised by is terrorists so far have not gene spliced a fatal virus to an airborne virus. However it may difficult to accomplish or they are concerned about getting it themselves.

       1. It is impossible to quarantine the whole cities and the adjoining countryside. People move in and out of the city all the time. And since the incubation time is up to 21 days, there is no way to quarantine every possible person who just might have the virus but not yet the disease.

          What I’m surprised by is terrorists so far have not gene spliced a fatal virus to an airborne virus.

          That would be an extremely difficult task for even the experts at CDC to do. No terrorist organization would have anywhere near such expertise. And, it would be suicide mission that would likely wipe out their own people.

          1. I completely disagree and am really surprised you would fall for the hyperbole on this Ebola outbreak possibly being uncontrollable.

             And the blanket statement that terrorists would not have the expertise is unfounded. You have no idea who they may be able to recruit. You also do not have knowledge of what a terrorist organization may want to do. There could always be a lone very well educated person acting alone that doesn’t care if it gets him or her eventually.

             You tend to make absolute statements, Ron that are not necessarily correct. Better to hedge your statements a little.

             In any case, this outbreak will blow over in a few weeks. Remember it’s not airborne.

             1. Yes I do tend to occasionally make absolute statements but I also tend to use a little common sense. “Splicing” the ebola virus is a statement that defies common sense. Monsanto splices genes but they do not do it literally with a knife. Actually it is not splicing at all, grafting would be a far more correct term. The isolate a gene from one plant then paste it to another. How are genes spliced.

                But they have whole plants to work with. Getting their DNA is no problem. But viruses are different. Although they do have a single strand of DNA or RNA, or one double strand of DNA or RNA, grafting an airborne strand of DNA to a virus would be an impossible task.

                Viruses can mutate. That is they change over time to become more virulent. That might be a way to to assist that process in the laboratory. But it would take a very long time and you would have to kill hundreds of monkeys in the process.

                And I don’t give a damn who the terrorist recruit they will not do this in less than a number of years at the cost of millions of dollars hundreds of monkeys… And, very likely, cost the lives of most of those well educated doctors they recruited as well.

                The outbreak might blow over and it might not. The Sars outbreak lasted 8 months and there were 8,273 cases but only 775 deaths in those 8 months. As of yesterday there were 932 deaths from this few day old outbreak. And the death toll is rising by over 100 per day. And the death toll seems to be rising exponentially.

                Let’s don’t give it the short shift just yet.

             2. An article from 2012 follows. Reading additional articles, it seems that the prevailing school of thought is that there may be something unique about pig physiology that allows them to generate more infectious aerosols as a general rule, but three points: (1) This would be an example of airborne transmission of Ebola; (2) Pigs could presumably be a source of airborne transmission and (3) If pigs could generate an infectious Ebola aerosol, wouldn’t a slight mutation allow humans to do the same?

                Could Ebola now be airborne? New research shows lethal virus can be spread from pigs to monkeys without contact

                http://www.dailymail.co.uk/sciencetech/article-2233956/Could-Ebola-airborne-New-research-shows-lethal-virus-spread-pigs-monkeys-contact.html

                Fears are growing that the most lethal form of the Ebola virus can mutate into an airborne pathogen, making the spread of the terrifying disease more difficult to check.

                It was previously thought the untreatable virus, which causes massive internal bleeding and multiple organ failure, could only be transmitted through contact with infected blood.

                But now Canadian researchers have carried out experiments showing how monkeys can catch the deadly disease from infected pigs without coming into direct contact.

                1. The question is: Is there something about this strand of ebola that is different from previous strands? There seems to be. It sure seems to spread a lot easier and quicker than has ever happened before.

                2. It is airborne. In bats.

                3. Testimony by Ken Isaacs, VP of the Samaritan’s Purse charity, regarding the Ebola outbreak:

                   http://docs.house.gov/meetings/FA/FA16/20140807/102607/HHRG-113-FA16-Wstate-IsaacsK-20140807.pdf

                4. That has to be one of the scariest things I have ever read in my life! Especially the comment about credentialed and respected physicians and medical students mocking the existence of the virus.

                   One of those doctors was examining Ebola patients without taking any of the necessary precautions and he was dead within a week. What hope is there then for the illiterate masses?! If this thing gets loose in a city such as Lagos it could be a real game changer!

                   I guess I can stop worrying about human population growth now /sarc

                5. “8 of the 12 were community health workers”

                   The cat’s out of the bag.

                6. Possible Ebola case in Benin, between Ghana and Nigeria:

                   http://my.chicagotribune.com/#section/-1/article/p2p-81020897/

             3. The ” problem” with terrorists ( thank Skydaddy!! ) is that they are almost exclusively underachievers.

                Not many people who have some real understanding of biological warfare are interested in creating such a disease no matter how much they hate the Great Satan’s guts because they understand that once they create that demon- assuming they were to succeed in doing so- it would be just as dangerous to them as it would to their enemies.

                And while it might be theoretically possible for a government such as that of Iraq or some similarly fairly rich country to assemble a big enough and competent enough team to create a new airborne fatal disease in the lab…. the eye and the arm and the nose of the ” law” has grown so long that only a very few countries could ever hope to keep such a program secret.I guess the US , China, Russia , and maybe a couple of other large western countries could manage it.

                Any smaller and poorer country that tries it for the immediate future is going to get rained on- the rain will consist of cruise missiles and not many people caught on site will survive.

                But who knows how fast the biotech industry might progress?I have no real expertise but I would not be willing to bet that if bau survives creating such a disease a few decades down the road is going to be a much much easier job- maybe one within the capabilities of a small team of experts with only a few million bucks for all expenses combined.

                For now though Ron is right.

                I have a friend who is a microbiologist on staff at a nearby university. It is amazing how easy it is to make friends with such a person. All you have to do is call the department secretary and ask for an appointment and be good at interpersonal relationships and you have a new friend.It helps in my case that I can take along a small gift legally acceptable such as a single home grown apple and invite my hoped for new friend to go trout fishing on public but little known stream etc.

                1. Mac, while it might be able to breed an airborne bacteria that would infect the entire world, such a suicide mission would be the height of stupidity. You cannot create a bug that targets only one race or culture.

                   Creating such a virus would be a whole different matter however. Bacteria have, on average, about 1000 times the mass of the average virus. A virus has only one single strand or one double strand of DNA. And they do not accumulate in mass like bacteria do. The only way to alter the DNA or RNA of a virus would be to do it with mutation. That is selective breeding. (I know, viruses do not breed, they depend on the host for replication.) You would have to do it with animals, somehow selecting the virus from the animal that died first, or the ones that you were able to infect an aerosol application, or something like that.

                   Bottom line, it would be no easy task. And a very stupid and suicidal mission at that. And I would not worry about it. They are not going to try such a very stupid thing. So forget about it.

       2. Quarantine is further hampered by events. That area of Africa has hardly proved to be the most stable. Currently the infection seems limited to zones where there is stable government but imagine it entered some of the zones where there is ongoing conflict/terrorist activity such as Northern Nigeria, Northern Mali, Southern Niger.

          If the virus continues who knows, it may even spawn it’s own events such as migration away from infected areas, conflict where people try and prevent migration from infected areas, who knows? I don’t foresee the virus being particularly devastating in it’s own right but it’s social impact may be more so.

          1. I don’t foresee the virus being particularly devastating in it’s own right but it’s social impact may be more so.

             Well it scares the hell out of me. I was never scared during the Sars virus or during the H1N1 virus scare. It never even crossed my mind to be scared during those outbreaks. But now I am scared as hell.

             This thing is spreading so much faster and is much more lethal than anything that has ever came along in modern history. The 1918 flue pandemic had a mortality rate of only 2.5%. This thing has a mortality rte of from 55 to 90%. And it is spread much easier than most people seem to realize. “Bodily fluids” that contain the virus, in this particular case, includes perspiration. At least that’s what I just heard on TV. That means you could get it by just touching an infected person. Because it’s so hot in this part of Africa, people there sweat a lot.

             I know there have been outbreaks before but this thing mutates you know. This Ebola virus seems to be spreading far faster than any that came before it.

             1. All we can do is wait and see – I don’t think it will escape West Africa to a major degree and within a few months it will be in control there.

                Regarding the other line of this thread we’re doing our best to create super viruses – http://www.independent.co.uk/news/science/american-scientists-controversially-recreate-deadly-spanish-flu-virus-9529707.html.

                There is also a lab in London which houses all the nasty viruses for study. I don’t think a built up area is all that an advisable place to store them but what do I know. http://www.nimr.mrc.ac.uk/research-facilities/level-4-high-containment-virus-laboratory/

                I think an accident with the viruses we’re playing around with has a much higher potential to go wrong in the long run than Ebola currently poses.

          2. Evrnoyee would benefit from reading this post

24. ‘Agri-Terrorism’? Town’s Seed Library Shut Down

    Pennsylvania Department of Agriculture tells Mechanicsburg library its seed library is a violation</i?

    Andrea Germanos, staff writer, Published on Monday, August 04, 2014, Common Dreams

    A public library in small Pennsylvania town offered a new public resource for its patrons: a seed library. That is, until the state Department of Agriculture pulled the rug out from under the plan.

    Launched on April 26, the seed library at Mechanicsburg’s Joseph T. Simpson Public Library would have held all heirloom, and preferable organic, seed. Its first seed trove, with help from the Cumberland County Commission for Women, came from Seed Savers Exchange, a non-profit organization dedicated to preserving heirloom seeds.
    —
    According to reporting by the Carlisle Sentinel on July 31, the Pennsylvania Department of Agriculture sent a letter to the library stating that the seed library violated the state’s Seed Act of 2004.

    While the Act focuses on seeds that are sold, Cumberland County Library System Executive Director Jonelle Darr told The Sentinel that there could also be a problem with seeds being mislabeled and potentially invasive, and noted that the Department indicated it would “crack down” at other seed libraries within the state.

    Was talking with a dairy farmer friend who was a bit p.o’d with bill C-18 tabled in the Canadian parliament. The above article reminded me of our conversation.

    Here’s a bit of info on C-18…

    Save Our Seed! Stop Bill C-18!

    The rights of farmers and other Canadians to save, reuse, exchange, and sell seeds are under attack again.

    On November 13, 2013, Canada’s Agriculture Minister, Gerry Ritz, announced that Canada plans to sign on to UPOV ’91 by August 1 2014. On December 9, 2013 he introduced an omnibus agriculture bill in Parliament, called the “Agricultural Growth Act” which contains the required amendments to the Plant Breeders Rights Act to conform with UPOV ’91 among other measures.
    —
    Adopting UPOV ’91 will immediately:

    – reduce the freedom and independence of Canadian farmers by making it much more difficult to save and reuse seed forcing them to pay more for seed;
    – impinge on the autonomy of independent seed cleaners;
    – transfer millions of dollars every year from farmers to plant breeders’ rights (PBR) holders
    – consolidate the power and control of world’s largest agribusiness corporations over seed, and thus over the Canadian farming and food system.

    As well, if Canada adopts UPOV ’91:

    – Farmers will not be allowed to save, store or clean seed for replanting without the express permission of the PBR holder. UPOV allows governments to adopt an exemption called the farmers’ privilege. Bill C-18 includes a partial exemption, but also includes regulatory power that allows government to restrict the farmers privilege in a number of ways. Read Bill C-18 and Farmer’s Privilege to learn more.
    – Companies will have a ‘cascading right’ allowing them to demand payment of “end-point royalties” on the whole crop – including each cut of hay on forage crops – instead of just on newly purchased seed if or when the company has been unable to collect adequate royalties on seed alone.
    – Companies will be entitled to royalties for at least 20 years on each variety for which they hold PBRs (up from the current 18 years under Canada’s UPOV ’78 regime.)

    It is quite amazing the extent to which they have us by the short and curlies…

    BTW… this all followed from a wonderful video that Kay at BPA posted about saving the seeds of heirloom varieties.

    1. That is shocking, Agri-Terrorism? I have been a member of the Seed Savers here in Australia, that action is unbelievable. Government for the corporations and against the people.

       1. Yeah, that’s what Wiki says. It means exactly the opposite in the USA.

          In the United States, to table usually means the to lay [the topic] on the table or to move for postponement of consideration; a proposal to suspend consideration of a pending motion. Much less often, it means a motion to “put on the table”: a proposal to begin consideration (or reconsideration), a usage consistent with the rest of the English-speaking world.

    2. In case there’s any confusion: in the English-speaking world outside of the United States, to “table” legislation means to introduce or begin debate.

25. Newfound Threat to Oilsand Projects

    TYEE EXCLUSIVE: Researchers discover ancient salt formation key factor in Alberta steam fracking disasters.

    By Andrew Nikiforuk, 28 Jul 2014, TheTyee.ca

    A new study suggests that naturally occurring upward flow of groundwater in the oilsands region is creating fractures and weaknesses that may explain a series of catastrophic events for the controversial mining industry.

    The findings, first published in a PhD thesis last year and soon to appear in a paper for the American Association of Petroleum Geologists Bulletin, have significant implications for worker safety, groundwater protection, the security of massive industrial wastewater disposal in the region as well as the economics and placement of more than 100 steam plants and mines.

    Half of all bitumen now produced from the oilsands relies on a form of oil production that injects highly pressurized steam into deep deposits of cold bitumen.

    Recent eruptions of steam, bitumen and groundwater at oilsands operations may all represent an industrial collision with a natural process that drives salty groundwater into bitumen-bearing reservoirs where it fractures and weakens the rock near and above bitumen deposits.

    Image: Aftermath of blowout at Joslyn Creek Project which employed steam injection bitumen mining technique. Source: University of Alberta Geotechnical Centre.

    

26. Possibly the world’s largest tailings pond burst yesterday…

    Company’s Claims of Clean Tailings ‘Misleading’: Ex-Employee

    Imperial Metals describes substance spilled from dam as ‘very close to drinking water.’

    By David P. Ball, Today, TheTyee.ca

    

    1. Brutal news coverage of this pond disaster all week. I wanted to cry knowing the effect of heavy metals on fish stocks. A few ppm copper will basically sterilize a watershed. Here is a success story of reclaming a destroyed watershed after just 3 years of mining…(the company went broke and walked away from exposed low grade ore piles). What happened at Quesnel Lake (Likely BC ) is much much worse. Who knows how bad it will be?

       http://www.comoxvalleyrecord.com/community/190894391.html

       It took 20 years to partially reclaim a very small mining disturbed site. It cost millions!!

       Paulo

27. I am beginning to think that we are at Peak Earth.

    Which is of no real big surprise.

28. When Lucas No. 1 was drilled, the cost was too much, there were doubts that the oil was even there, but alas, there it was, 75,000 barrels per day. The value of land near Beaumont soared to one million dollars per acre while the land in and around Titusville swan dived to 25 cents per acre.

    Oil is the bread and butter for the financial markets and without it, its absence, the market plummets to less than 900.

    There is only one solution, to continue to dig for oil. Otherwise, it is teats up.

    The futures for oil, grains, all commodities, even silver and gold, tanks by ten times.

    1. I don’t think much of him in general since I regard him as a mouthpiece for business as usual but Yergin is a superb writer and a very good oil historian and there is a wonderful account of the first gusher at the Spindletop field.

       I very much doubt any other book about the history of the oil industry will ever come close to being as good as THE PRIZE although it is now dated of course.

       Everyone interested in energy should read Yergin for perspective and general historical background information.

    2. Ronald,

       While the futures of these items may fall considerably, I actually believe the physical commodity will rise in the opposite direction. There is this silly idea that the values of commodities will fall in a peak oil scenario…. however the real problem will be the loss of faith in fiat money, which also is made possible by a growing energy supply.

       Thus, the death of the U.S. Dollar will actually drive the values of physical commodities in the direction that most are not prepared.

       steve

       1. I believe SRSrocco is right about commodity prices at least in nominal terms and in practical terms for consumers in real terms.IN a REAL emergency, one that looks as if it is long term, a big old stash of cash is not going to be worth very much at all. People are going to look around and think about what that cash will buy later- little or nothing in the case of collapse of business as usual- and refuse to part with what they actually have on hand for paper and or electrons.

          Cash will still be good for a few days or weeks in the case of a sudden collapse though because it will take that long for most sellers to figure out that things are not going to return to normal.Such a collapse is in my opinion extremely unlikely in any given year but it could happen.A really big solar storm that hit us exactly right could do it for instance.

          In the event of a slow collapse cash will be king for a long time as demand falls and merchants and other sellers struggle to keep the doors open.Houses may fall to pennies on the dollar but if the collapse is the real Mc Coy and not a temporary one such as the last economic crash a few years back it would take a fool to put his cash into a typical McMansion.

          Profits cease to matter in the short term when business is operating in fire sale mode.It is better to sell Christmas trees for five bucks that cost twenty five than to haul them to the dump.Ditto many nonperishable goods that people will no longer be buying or not buying again for a very long time.

          Most people won’t have any cash and will be willing to sell like new stuff such as a big screen tv for peanuts.It doesn’t matter to such a person if they owe a couple of grand on that tv if the cable has already been turned off and they are getting evicted and have already made an appointment with a bankruptcy lawyer-bankruptcy lawyers are going to be in tall cotton for a while.

          And then there is the problem of keeping stores stocked as the distribution system shuts down.Bananas can be sold for sixty cents a pound at retail so long as they can be hauled and sold by the shipload and truckload and sold quickly before they rot.Once people are no longer able to afford ” bananas as usual” the cost per unit of handling them in small quantities will force the price at retail up substantially although the price at wholesale will fall below the cost of production for growers.

          But overall and over time prices for commodities are going to go up at least in nominal terms because it is far easier and far more politically palatable for a government to inflate it currency than to allow it to deflate.

          Inflating the money is not going to cure any problems any more than having another drink causes your wife to come home with the kids. But that next drink enables you to quit thinking about her and the kids for a few more minutes.

          And inflating the money enables a government to maintain some semblance of business as usual for at least a little while longer.It is even possible that a central bank that is well run by managers who are both good and lucky might manage to stave off a collapse for a long time by continuously inflating its currency.

          Many people believe that in effect this is what is enabling the US economy to continue operating on a more or less business as usual basis.Prices aren’t going up much because the people all over the world who are selling us stuff are taking our dollars and holding them rather than spending them in our domestic markets. This is equivalent to taking a check and forgetting to cash it.All those dollars that are squirreled away – and incidentally there are probably more inside this country than outside it- will come out of hiding someday and prices of some things will go up fast when they do- assuming that the owners of them can get them out of the banks where they are supposedly safely stashed away.

          Big old houses that are far from jobs and hard to heat and costly to maintain are not going to go up- not in real terms at least. But essentials that must be bought on a regular basis will go up as printed money eats away at the value of a dollar or a Euro or whatever.

          There are still plenty of people out there who just don’t understand that it IS well within the power of any sovereign government to inflate its money to any extent it pleases.

          It is true than doing so is a sure fired path to insolvency- but that matters not a whit in when the government is insolvent already.

          There is no reason at all to deny yourself one more drink and one more cigarette when you are already on your deathbed and plenty of reason to indulge.

          Deliberate inflation in the face of collapse will buy some time and prolong the slow death of business as usual- it might even prolong it by years or even decades under certain circumstances.

          The piling on of debts that can never be repaid without extreme inflation is essentially just a stealthy way go inflating the currency.Debt makes it possible to enjoy the alcohol high while postponing the hangover pain for however long you can keep piling on the debt- or downing shots.

          Sooner or later you MUST either sober up or simply die in the short term of the effects of drunkenness.Our little problem in terms of debt is that we dare not sober up. We are already in too deep and might as well stay drunk as long as we can.Sobering up just means facing the UNBEARABLE pain sooner than necessary.

          I am exaggerating my analogies and mixing my metaphors and whatever else to get my point across.

          1. Mac, you know your stuff. Can you give me your opinion on a sustainable location for the coming storm?

             My assumption is a gradual decline, with the poor being most affected and the upper class retreating into gated communities. Any unsustainable (water/heat) areas will become ghost cities. Fuel would be expensive so remote locations would collapse. That would mean a migration towards areas that are survivable. A few examples might be, Alaska, Washington, Canada, New Zealand, Tasmania, Chile etc.
             Under that scenario, I am thinking that the best place to be would be outside a city centre on a major shipping route? Far enough to escape the violence, close enough to produce and provide food. I know that NTErs might suggest that any effort is a waste of time, but I have kids so I cannot afford to buy into that.

             I have tried to evaluate the other risks (nuclear pollution, security, heat, water, pests etc). I probably have a simplistic view of the reality but I have tried to document the threats over at Prepping for Exile. I would appreciate your ideas on the way to position ourselves.

29. Exxon is pulling staff from Kurdistan. Jihadists are less than an hours drive from the oil fields and bombing Kirkuk (blew up Shi’a mosque).

    1. Anon,

       It doesn’t take BRAIN SURGEON to figure out that the level of geopolitical and economic events are increasing a rapid pace. A few years ago, we would hear about a major event maybe every month. Then it was once a week… now its several a day.

       Now that PUTIN is finally responding to the Sanctions by cutting off all food imports from European countries for a year, I believe the end of 2014 will be nothing like the beginning.

       I would like to remind you all that the Dollar suffered a FLASH CRASH yesterday that didn’t get much press coverage. In my experience, Flash Crashes in many instances are a warnings for what is to come in the future.

       If the Europeans are that stupid to continue standing behind the U.S. Sanctions, Putin has the wildcard this winter by cutting off natural gas when things really get cold. Also, as more countries get out of using the DOLLAR for trade, it wouldn’t surprise me if Putin decided to only take rubles or gold for NatGas or Oil this winter.

       TIMES ARE A CHANGING…

       steve

       1. Anybody interested in following currencies and the general state of the global economy should check out Chuck Butler.
          http://www.dailypfennig.com/
          Tells it how it is.

30. I almost belched reading this crap and disinformation especially about gas prices of LNG .
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11017413/Vladimir-Putins-pointless-conflict-with-Europe-leaves-it-a-vassal-of-China.html

    1. A lot of folks are living in the past and measuring success in old terms.

       I have seen no video of starving Russians (or starving Iranians for that matter). There are lots of articles around today of Russia being on the verge of collapse.

       I would think there would be starvation video, were there incipient collapse. Instead there is 10.xx million bpd coming out of the ground and 6+ of it or derivatives are exported, which, plus natgas, appears to add up to $500 Billion per year drained from its enemies, by selling liquid that gets burned immediately so that another order is placed.

       That’s $3400 per person.

       Personally, I can fund a year of food on that.

       1. We need more inhitsgs like this in this thread.

31. The 932 deaths reported represent only about 25 to 50% of the actual number.

    Ebola Experts Warn of an African ‘Apocalypse’

    The outbreak is getting worse.

    Already an unprecedented outbreak, CDC Director Dr. Tom Frieden says the number of infected and killed by Ebola will likely soon outnumber all other Ebola outbreaks in the past 32 years combined. According to the CDC, there have already been more than 1,700 suspected and confirmed cases of Ebola in West Africa, and more than 900 deaths—numbers which Frieden later called “too foggy” to be definitive. Ken Isaacs, the Vice President of Program and Government Relations for Samaritan’s Purse (SIM), painted an even bleaker picture. According to SIM, West Africa has counted 1,711 diagnoses and 932 deaths, already,< which could represent only a small fraction of the actual number. “We believe that these numbers represent just 25-50 percent of what is happening,” said Isaacs.

32. Getting back to cheap, shallow, easy-to-reach deposits of oil, and no restrictions on use of coal, and what that has resulted in: It has resulted in a lot of food production and harvesting, and a global population explosion.

    No cheap oil? No ever-growing food sources? Decline in global population.

33. please add me to your email list

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