Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Will our economy survive continuous Oil/Energy decline?
Yes
13%
[ 36 ]
No
64%
[ 167 ]
maybe (see comments)
13%
[ 35 ]
I don't know
7%
[ 20 ]
Total Votes : 258
Author
Message
DoctorDoom Heavy Crude
Joined: Jun 20, 2004 Posts: 250 Location: California
Posted: Fri Jun 23, 2006 6:44 pm Post subject: Gold standard, debt versus investment
What's the difference between going on the gold standard and just going back to barter? Gold is just a commodity like any other. By making it a standard all you do is eliminate the complication of trying to calculate how many laptop computers your cow is worth. With everything measured in gold mass equivalents, converting anything to anything is easy. Gold-backed currency doesn't change this, it just eliminates the need to lug heavy masses of gold back and forth to effect exchanges. A gold standard wouldn't limit the supply of money. As soon as you can figure out how many gold masses something else is worth, it, too, could serve as a measure and/or medium of exchange. For example if you think a mass of platinum is worth 2x the same mass of gold, ouila, you can use platinum for money just as easily. Or cocca beans. But wait, you're thinking, cocca beans might fluctuate in value. Sure. So can gold. It gets worse. You have captial assets. Some are durable. Some are eternal. These may become abundant or scarce over time, thus their value as measured in gold masses can also fluctuate.
Re. debt, banning "lending at usury" won't eliminate debt. The moment you loan a shovel to a friend so he can dig a well, you have a debtor relationship. If the friend promises to give you the shovel back (a little worse for wear) and let you use the well (a mile closer than the one in the nearest village), that's "interest". Or suppose you dig the well with the shovel to save yourself the walk to the village. You have just made an "investment", expending resources now to reap greater rewards in the future. We've been doing that for 1000s of years simply by teaching our children.
Ultimately economic activities, as judged by a neutral observer looking only at actual physical activities and not at the bookkeeping, sees only a process of investment and return. The problem with growth is not in the "bookkeeping" wherein you make an arrangement with your friend for mutual benefit, or wherein you did something for yourself. This sort of activity will continue. The real problem is that you may run out of economically valuable activities to engage in. At this point, you have nothing further to "invest" in. You would then be at the point where real interest rates on risk-free debt would approach zero.
At this point, the only investment you can make is to save resources for your old age. Keeping with low-tech examples, you know that you won't be able to work the fields when you're 60, so you'd like to save up enough food to live on for 20 years during your 40 most productive years, then start consuming it afterwards. Since storing food for that long is not realistic, you make a deal with the next generation to provide you the food you need out of their expected surplus, in exchange for some of your surplus now. Is that debt? Is that bad?
Posted: Mon Jul 03, 2006 5:04 pm Post subject: No Oil No Economical Growth
Why almost all countries will
LIE
CHEAT
BULLY
MURDER
STEAL
at/to/from other countries.
Quote:
The price of crude oil rose steadily over the last few years for several reasons, the most important of which is the global demand for oil, according to Doug MacIntyre, senior oil market analyst at the U.S. Energy Information Administration.
"It's almost impossible for a country these days to grow substantially economically without dramatically increasing their oil demand," he said.
Posted: Tue Jul 04, 2006 3:37 am Post subject: Re: No Oil No Economical Growth
Given the fact that oil is the energy that is either a direct part of many of the things we produce, or indirectly facilitates their production and delivery, it only stands to reason that we will have less with the plateau and subsequent shrinkage of oil production. The economic pie will shrink in repsonse to less oil, just as it expanded before in response to more oil.
Depression is a time when, on average, we have less to consume. Prosperity is a time when, on average, we have more to consume. We are in for the mother of all depressions that will coorelate in depth and time with the oil depletion curve. When before has a depression lasted 30 years and wiped out 75% (or more) of what we have available to consume?
Posted: Tue Jul 04, 2006 11:29 am Post subject: Re: No Oil No Economical Growth
Doly wrote:
Where do you get that 75% figure from?
I figure the economy increased 15 times since 1900. Assuming a straight line it would have increased 4.5 times by 1930, and since we probably will go back to a 1930 economic level as oil depletes, I just divided 4.5 by 15 to get 30% and subtracted the 30% from 100%.
There are many variables, the population being the biggest unknown so I just picked out 75% as a rough number to highlight the magnitude of the decline in production. I am fairly sure we will suffer more than the 25% reduction of the 1929 depression since not only are we at the end of a huge monitary and debt expansion, but we face the permanent economic shock of loss of the energy from oil. The bigger they are, the harder they fall.
Posted: Wed Jul 05, 2006 2:21 am Post subject: Re: No Oil No Economical Growth
I do not disagree with your -75% number, as I certainly do not know and therefore do not have a better number to put forth as an alternative.
However, it will be physical availability of all forms of energy - crude oil, natural gas, coal, bio-diesel, ethanol, nuclear, hydrogen, hydro-electric, methane, geo-thermal, wind, solar, etc. - that will drive any growth, if any, in a world of declining access to traditional fossil fuels. And not price.
Price is always a relative term. Relative to what? Wages? A basket of goods? Given amount of energy? Etc.
The search for alternatives and the transition from the economy we have based on cheap energy to one of scarcity will itself generate a lot of economic activity, just as building transcontinental railroads, Hoover Dam/Three Gorges Dam, or in fact reclaiming parts of The Netherlands from the sea, or terracing mountain sides to grow crops produced economic activity and eventually a valuable asset. Where did the 'money' come from to build or create these assets? An agricultural surplus, land, labor and capital. The usual suspects.
Growth does not have to be one way either. It can go into reverse. We have ample historical evidence of declining empires and abandoned areas.
The physical availability of energy not its price is what is important to this activity. Cheap energy means you can build something quicker and with less labor perhaps, but aside from the human definition of investment time horizon and payback the transition to a post-peak oil world using other forms of energy is not only possible, but inevitable. All we know is that at the moment there is no replacement for fossil fuels that are as efficient for transport as gasoline, so the infrastructure and organization of society, and different societies, will look much different than the modern western economy based on easy motoring and a far flung expensive to maintain infrastructure.
Meauring such activities in today's money only distorts the picture. For example, if we generate methane from manure and convert it into electricity, we say it is inefficient because it costs 6 cents per kilowatt (or whatever) and traditional hydro-electric power still only costs 3 cents per kilowatt. So what? When one no longer has 3 cent power, one gladly pays 6 cents, if the alternative is no power. That doubling in cost may still be a small proportion of your wages, or a basket of goods, or whatever it is that you produce for your daily bread as compared to doing everything with manual labor and without electricity.
And if there is less energy available in total, then through the process of elimination you allocate energy based on its highest utility. Gone is just in time delivery, so you have to carry larger inventories. Gone is door to door delivery, so you have central warehousing. Gone is long distance trucking, so you wait while your container is delivered by rail. Economic efficiencies get lost. Standards of living may decline. Jobs will be lost. Some will not be able to live in their current, very large and energy intensive houses. But as sure as we are here today, life will go on post-peak oil as there is no alternative. Economic necessity will replace economic nicety. Sorry, no more seadoos and snowmobiles!
Will the western world look like America in the 1930's? I doubt it. We have long given up that infrastructure already. We do not even have enough breeding stock to quickly rebuild the draught power we once relied on, nevermind the bits of hardware to make use of it anymore. More likely a tractor running on bio-diesel or ethanol. It will not be as efficient, but more efficient than rearing animals to pull plows and thrash grain.
Thankfully, along with all our excesses and poor investment decisions, we have used the past 150-200 years as well to discover many useful inventions, so we are already ahead in terms of technology in comparison to 1800 or 1900.
Of course, wars are very expensive and can damage economies as well as disrupt economic output. That can exacerbate the problems associated with the post-peak oil transition to a lower energy intensive future. Even if someone has a partial solution to our energy problems, it won't help if there is no security of assets and means of production as may be the case if we (collectively) sink to the level of Zimbabwe or Rawanda or Congo in the meantime.
A dirty suitcase bomb can disrupt even the best laid plans and is one of the variables which makes prophecizing the future very inexact. We just have to assign likely probabilities to each outcome based on what we know now and admit to ourselves that we do not know what will be invented or perfected in five or ten years from now that will help ensure a better outcome or what resource wars, social disruptions or population displacements may occur over the same time horizon that will destroy any progress we may have made?
But again just to stress, it is availability of energy not price or its cost in today's money that will determine economic growth or the lack of it in the future post-peak oil. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Wed Jul 05, 2006 4:24 am Post subject: Re: No Oil No Economical Growth
MrBill wrote:
But again just to stress, it is availability of energy not price or its cost in today's money that will determine economic growth or the lack of it in the future post-peak oil.
Sounds reasonable. But then, aren't both variables related? Isn't anything more expensive the less available it is?
Posted: Wed Jul 05, 2006 6:13 am Post subject: Re: No Oil No Economical Growth
Doly wrote:
MrBill wrote:
But again just to stress, it is availability of energy not price or its cost in today's money that will determine economic growth or the lack of it in the future post-peak oil.
Sounds reasonable. But then, aren't both variables related? Isn't anything more expensive the less available it is?
It is not a linear correlation, but a non-linear one, Doly. Yes, relative scarcity makes the price go up at the margins, but once something is no longer available it no longer has a price related to its use or cost of production, but to its scarcity value alone. Think of a Van Gogh painting.
The last barrel of oil produced will not have much intrinsic value to its owner except perhaps as a keep-sake. It takes lots of barrels of oil to run something, so one barrel will not even be worthwhile to refine it. Check out Policy Pete's latest page where he shows Texas oil wells with 6 barrels per day of production. How high does the price have to be to make such fields economical to exploit?
On the otherhand we will still need energy. High volume transport over large distances, like freight trains, ocean going vessels, barges and lakers will still justify the costs in terms of energy as they move a lot of goods from where they are produced to where they are needed for the lowest possible amount of energy expended. At no price will you likely walk 100-miles to bring back a wheel-barrel of grain unless no other mode of transport is available. You would burn more calories to walk 100 miles than you could salvage from the grain in the wheel barrel.
Ditto for draught power. Even back before the advent of large scale mechanized farming, something like 25% of the arable land was dedicated to growing animal feed used for transport and farmyard use, not for food production. That was even before our population tripled. It is hard to justify taking land out of production to feed horses and oxen to pull plows and thresh grain when we can produce methane from cows, ethanol from bio-mass grown on marginal land or produce bio-diesel from oilseeds.
This will still reduce our agricultural surplus (dramatically), but it is the lesser of the evils (and yes, I am aware that corn is not a good feedstock for ethanol the way it is currently produced). Although on some marginal land, draught power may be more economical than even a bio-diesel powered tractor. But likely you will see a range of technologies in operation at the same time and not one solution. All we know is that it will not be the highly mechanized, energy & input hungry type of large scale commercial farming as is now practiced thanks to cheap energy and subsidies to farmers.
That almost by definition means that food will cost more in absolute terms and that the ag surplus will fall. I would not count of genetic engineering of plant species to offset all the loss in efficiency gains from declining energy and poorer substitutes as many have already pointed out in various PO threads on EROI.
But I can imagine hubs of economic activity centered around sources of stationary power as well as distribution centers close to ports, harbors and railheads. These will be the least energy intensive means to manufacture and distribute economic necessities and therefore have that highest utility in terms of energy rationalization. In this respect we would see a return to something similar to the beginnings of the era of steam and industrialization that started to compete with the age of sail and trade on major routes through central markets. Economic activity will radiate out from these centers until the cost of transport outweighs the benefits of trade, and then you will have smaller, self-contained communities with local and regional economies. Not likely either or. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Sep 06, 2004 Posts: 5315 Location: Smalltown New Zealand
Posted: Wed Jul 05, 2006 5:22 pm Post subject: Re: No Oil No Economical Growth
MrBill wrote:
Growth does not have to be one way either. It can go into reverse. We have ample historical evidence of declining empires and abandoned areas.
That is called contraction, not growth. Negative growth is a moronic term used to avoid using words like recession and depression. _________________ "Complex problems have simple, easy to understand, wrong answers." - Henry Louis Mencken
Posted: Wed Jul 05, 2006 6:14 pm Post subject: Re: No Oil No Economical Growth
MrBill wrote:
But again just to stress, it is availability of energy not price or its cost in today's money that will determine economic growth or the lack of it in the future post-peak oil.
No, it is access to available energy that will determine growth. And access is determined by price.
Energy is only available if you can afford to access it. And, in our modern world, that access if granted by money.
Peak oil is about the end of cheap, readily accessible energy. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Wed Jul 05, 2006 6:32 pm Post subject: Re: No Oil No Economical Growth
MrBill wrote:
In this respect we would see a return to something similar to the beginnings of the era of steam and industrialization that started to compete with the age of sail and trade on major routes through central markets. Economic activity will radiate out from these centers until the cost of transport outweighs the benefits of trade, and then you will have smaller, self-contained communities with local and regional economies. Not likely either or.
And what of the areas that have already radiated outside those centers where the cost of transport outweighs the benefits? We call those places suburbia. When it cost more to go to work than you get paid, things will come undone. I am constantly amazed to hear people posit solutions that assume smooth sailing to a new neat reality.
How are we going to re-decant suburbia back in to the cities or transform them to walkable communities? _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Thu Jul 06, 2006 5:48 am Post subject: Re: No Oil No Economical Growth
@ Montequest and Mr. Bill,
your arguments are both very good and convincing. I am still uncertain about my projection for the po future (hovering between your positions), but one thing is quite sure imho:
Our economic structures will have to adapt soft or hard, lots of assets will loose their value (depression) but since people will not just sit by idle, there will also be a frenzy of economic activities. Maybe there will be a race or a competition for getting into the best position for the changes. A lot of investment has to be done too. Of course, a lot of out of date economic structures (car factories, suburbs) will suffer "recession". Any regrets?
Example: If a (medium sized) asteroid drops and causes a lot of destruction in your country, people loose a lot of capital due to the damage, but economic activity will pick up too due to high priority reconstruction works. And the reconstruction of neccessary structures will be a safe investment because no surplus offices will be built, but power plants, schools, factories, that bring in a high real yield to the investment. People may be poorer but will work busy and confident.
(I remember the film "big impact", after the impact and the flood wave, the president of the usa announced, that everyting would be rebuilt the same as it had been before.
Such a openly displayed poverty of mind made me wring my hands in desperation. Not a little bit better, no, just the same damned boring crap as before, what a fool of a president i thought then ...)
So, somehow the cards will just be dealt out new with po. But as long as there is something new overgrowing the rubbles of the old, using tractor or ox, you can find confidence. Maybe our kids will call us old chickenheads. And they may be right because they will look forward to a far more sustainable way of living than we do.
This reminds me to some lines of "Julius Cesar" which go roughly like this ...
The bay-trees in our country are all wither'd
And meteors fright the fixed stars of heaven;
The pale-faced moon looks bloody on the earth
And lean-look'd prophets whisper fearful change;
Rich men look sad and ruffians dance and leap,
The one in fear to lose what they enjoy,
The other to enjoy by rage and war:
ok ok, it was in richard II,
so, maybe less growth but lots of activity ... _________________ The mouse, i`ve been sure for years, limps home from the site of the burning ferris wheel with a brand new, airtight plan for killing the cat.
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