The Trouble with Permaculture

4 10 2016

With the recent passing of Bill Mollison, much has been published on the interweb about Permaculture; While Glenda was here for nine days, I didn’t spend much time at this laptop, preferring to help her set her own stamp on the Fanny Farm and using her very able gardening skills to get stuck into some planting…. and fixing the goose tractor in readiness for the acquisition of more birds, but there will be time for that some place else on this site.

Having published Samuel Alexander’s epitaph for Bill Mollison by merely copying and pasting the Conversation article, I didn’t bother following the links therein; luckily, Greg Bell did, and posted a couple in a comment he left here, many thanks Greg…. as he says in his comment, “Those two “here” links to critiques of permaculture are the two most important things I’ve read all year (and they, in turn, link to even more)……

The first link is to Resilience.org and bears the same title as this entry. Fascinating reading indeed, as are the comments below it.





A Market Collapse Is On The Horizon

18 02 2016

The bit that worries me the most is this……:
The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits.
I better spend that money quick smart.  Just had a quote for $17,000 for the blocks to go into the retaining wall.  By the time I’ve bought the double glazing and the roof, most of my big expenses, apart from the footings and slab, will have gone…..
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
By

tverberg

Gail Tverberg

Posted on Sat, 13 February 2016

What is ahead for 2016? Most people don’t realize how tightly the following are linked:

1. Growth in debt
2. Growth in the economy
3. Growth in cheap-to-extract energy supplies
4. Inflation in the cost of producing commodities
5. Growth in asset prices, such as the price of shares of stock and of farmland
6. Growth in wages of non-elite workers
7. Population growth

It looks to me as though this linkage is about to cause a very substantial disruption to the economy, as oil limits, as well as other energy limits, cause a rapid shift from the benevolent version of the economic supercycle to the portion of the economic supercycle reflecting contraction. Many people have talked about Peak Oil, the Limits to Growth, and the Debt Supercycle without realizing that the underlying problem is really the same–the fact the we are reaching the limits of a finite world.

There are actually a number of different kinds of limits to a finite world, all leading toward the rising cost of commodity production. I will discuss these in more detail later. In the past, the contraction phase of the supercycle seems to have been caused primarily by too high a population relative to resources. This time, depleting fossil fuels–particularly oil–plays a major role. Other limits contributing to the end of the current debt supercycle include rising pollution and depletion of resources other than fossil fuels.

The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.

I expect that the particular problem we are likely to reach in 2016 is limits to oil storage. This may happen at different times for crude oil and the various types of refined products. As storage fills, prices can be expected to drop to a very low level–less than $10 per barrel for crude oil, and correspondingly low prices for the various types of oil products, such as gasoline, diesel, and asphalt. We can then expect to face a problem with debt defaults, failing banks, and failing governments (especially of oil exporters).

The idea of a bounce back to new higher oil prices seems exceedingly unlikely, in part because of the huge overhang of supply in storage, which owners will want to sell, keeping supply high for a long time. Furthermore, the underlying cause of the problem is the failure of wages of non-elite workers to rise rapidly enough to keep up with the rising cost of commodity production, particularly oil production. Because of falling inflation-adjusted wages, non-elite workers are becoming increasingly unable to afford the output of the economic system. As non-elite workers cut back on their purchases of goods, the economy tends to contract rather than expand. Efficiencies of scale are lost, and debt becomes increasingly difficult to repay with interest. The whole system tends to collapse.

How the Economic Growth Supercycle Works, in an Ideal Situation

In an ideal situation, growth in debt tends to stimulate the economy. The availability of debt makes the purchase of high-priced goods such as factories, homes, cars, and trucks more affordable. All of these high-priced goods require the use of commodities, including energy products and metals. Thus, growing debt tends to add to the demand for commodities, and helps keep their prices higher than the cost of production, making it profitable to produce these commodities. The availability of profits encourages the extraction of an ever-greater quantity of energy supplies and other commodities.

The growing quantity of energy supplies made possible by this profitability can be used to leverage human labor to an ever-greater extent, so that workers become increasingly productive. For example, energy supplies help build roads, trucks, and machines used in factories, making workers more productive. As a result, wages tend to rise, reflecting the greater productivity of workers in the context of these new investments. Businesses find that demand for their goods and services grows because of the growing wages of workers, and governments find that they can collect increasing tax revenue. The arrangement of repaying debt with interest tends to work well in this situation. GDP grows sufficiently rapidly that the ratio of debt to GDP stays relatively flat.

Over time, the cost of commodity production tends to rise for several reasons:

1. Population tends to grow over time, so the quantity of agricultural land available per person tends to fall. Higher-priced techniques (such as irrigation, better seeds, fertilizer, pesticides, herbicides) are required to increase production per acre. Similarly, rising population gives rise to a need to produce fresh water using increasingly high-priced techniques, such as desalination.

2. Businesses tend to extract the least expensive fuels such as oil, coal, natural gas, and uranium first. They later move on to more expensive to extract fuels, when the less-expensive fuels are depleted. For example, Figure 1 shows the sharp increase in the cost of oil extraction that took place about 1999.

Figure 1. Figure by Steve Kopits of Westwood Douglas showing the trend in per-barrel capital expenditures for oil exploration and production. CAGR is “Compound Annual Growth Rate.”

3. Pollution tends to become an increasing problem because the least polluting commodity sources are used first. When mitigations such as substituting renewables for fossil fuels are used, they tend to be more expensive than the products they are replacing. The leads to the higher cost of final products.

Related: The Hidden Agenda Behind Saudi Arabia’s Market Share Strategy

4. Overuse of resources other than fuels becomes a problem, leading to problems such as the higher cost of producing metals, deforestation, depleted fish stocks, and eroded topsoil. Some workarounds are available, but these tend to add costs as well.

As long as the cost of commodity production is rising only slowly, its increasing cost is benevolent. This increase in cost adds to inflation in the price of goods and helps inflate away prior debt, so that debt is easier to pay. It also leads to asset inflation, making the use of debt seem to be a worthwhile approach to finance future economic growth, including the growth of energy supplies. The whole system seems to work as an economic growth pump, with the rising wages of non-elite workers pushing the growth pump along.

The Big “Oops” Comes when the Price of Commodities Starts Rising Faster than Wages of Non-Elite Workers

Clearly the wages of non-elite workers need to be rising faster than commodity prices in order to push the economic growth pump along. The economic pump effect is lost when the wages of non-elite workers start falling, relative to the price of commodities. This tends to happen when the cost of commodity production begins rising rapidly, as it did for oil after 1999 (Figure 1).

The loss of the economic pump effect occurs because the rising cost of oil (or electricity, or food, or other energy products) forces workers to cut back on discretionary expenditures. This is what happened in the 2003 to 2008 period as oil prices spiked and other energy prices rose sharply. (See my article Oil Supply Limits and the Continuing Financial Crisis.) Non-elite workers found it increasingly difficult to afford expensive products such as homes, cars, and washing machines. Housing prices dropped. Debt growth slowed, leading to a sharp drop in oil prices and other commodity prices.

Figure 2. World oil supply and prices based on EIA data.

It was somewhat possible to “fix” low oil prices through the use of Quantitative Easing (QE) and the growth of debt at very low interest rates, after 2008. In fact, these very low interest rates are what encouraged the very rapid growth in the production of US crude oil, natural gas liquids, and biofuels.

Now, debt is reaching limits. Both the US and China have (in a sense) “taken their foot off the economic debt accelerator.” It doesn’t seem to make sense to encourage more use of debt, because recent very low interest rates have encouraged unwise investments. In China, more factories and homes have been built than the market can absorb. In the US, oil “liquids” production rose faster than it could be absorbed by the world market when prices were over $100 per barrel. This led to the big price drop. If it were possible to produce the additional oil for a very low price, say $20 per barrel, the world economy could probably absorb it. Such a low selling price doesn’t really “work” because of the high cost of production.

Debt is important because it can help an economy grow, as long as the total amount of debt does not become unmanageable. Thus, for a time, growing debt can offset the adverse impact of the rising cost of energy products. We know that oil prices began to rise sharply in the 1970s, and in fact other energy prices rose as well.

Figure 3. Historical World Energy Price in 2014$, from BP Statistical Review of World History 2015.

Looking at debt growth, we find that it rose rapidly, starting about the time oil prices started spiking. Former Director of the Office of Management and Budget, David Stockman, talks about “The Distastrous 40-Year Debt Supercycle,” which he believes is now ending.

Figure 4. Worldwide average inflation-adjusted annual growth rates in debt and GDP, for selected time periods. See post on debt for explanation of methodology.

In recent years, we have been reaching a situation where commodity prices have been rising faster than the wages of non-elite workers. Jobs that are available tend to be low-paid service jobs. Young people find it necessary to stay in school longer. They also find it necessary to delay marriage and postpone buying a car and home. All of these issues contribute to the falling wages of non-elite workers. Some of these individuals are, in fact, getting zero wages, because they are in school longer. Individuals who retire or voluntarily leave the work force further add to the problem of wages no longer rising sufficiently to afford the output of the system.

The US government has recently decided to raise interest rates. This further reduces the buying power of non-elite workers. We have a situation where the “economic growth pump,” created through the use of a rising quantity of cheap energy products plus rising debt, is disappearing. While homes, cars, and vacation travel are available, an increasing share of the population cannot afford them. This tends to lead to a situation where commodity prices fall below the cost of production for a wide range of types of commodities, making the production of commodities unprofitable. In such a situation, a person expects companies to cut back on production. Many defaults may occur.

China has acted as a major growth pump for the world for the last 15 years, since it joined the World Trade Organization in 2001. China’s growth is now slowing, and can be expected to slow further. Its growth was financed by a huge increase in debt. Paying back this debt is likely to be a problem.

Figure 5. Author’s illustration of problem we are now encountering.

Thus, we seem to be coming to the contraction portion of the debt supercycle. This is frightening, because if debt is contracting, asset prices (such as stock prices and the price of land) are likely to fall. Banks are likely to fail, unless they can transfer their problems to others–owners of the bank or even those with bank deposits. Governments will be affected as well, because it will become more expensive to borrow money, and because it becomes more difficult to obtain revenue through taxation. Many governments may fail as well for that reason.

The U. S. Oil Storage Problem

Oil prices began falling in the middle of 2014, so we might expect oil storage problems to start about that time, but this is not exactly the case. Supplies of US crude oil in storage didn’t start rising until about the end of 2014.

Related: Why Today’s Oil Bust Pales In Comparison To The 80’s

Figure 6. US crude oil in storage, excluding Strategic Petroleum Reserve, based on EIA data.

Cushing, Oklahoma, is the largest storage area for crude oil. According to the EIA, maximum working storage for the facility is 73 million barrels. Oil storage at Cushing since oil prices started declining is shown in Figure 7.

Figure 7. Quantity of crude oil stored at Cushing between June 27, 2014, and June 1, 2016, based on EIA data.

Clearly the same kind of run up in oil storage that occurred between December and April one year ago cannot all be stored at Cushing, if maximum working capacity is only 73 million barrels, and the amount currently in storage is 64 million barrels.

Another way of storing oil is as finished products. Here, the run-up in storage began earlier (starting in mid-2014) and stabilized at about 65 million barrels per day above the prior year, by January 2015. Clearly, if companies can do some pre-planning, they would prefer not to refine products for which there is little market. They would rather store unneeded oil as crude, rather than as refined products.

Figure 8. Total Oil Products in Storage, based on EIA data.

EIA indicates that the total capacity for oil products is 1,549 million barrels. Thus, in theory, the amount of oil products stored can be increased by as much as 700 million barrels, assuming that the products needing to be stored and the locations where storage are available match up exactly. In practice, the amount of additional storage available is probably quite a bit less than 700 million barrels because of mismatch problems.

In theory, if companies can be persuaded to refine more products than they can sell, the amount of products that can be stored can rise significantly. Even in this case, the amount of storage is not unlimited. Even if the full 700 million barrels of storage for crude oil products is available, this corresponds to less than one million barrels a day for two years, or two million barrels a day for one year. Thus, products storage could easily be filled as well, if demand remains low.

At this point, we don’t have the mismatch between oil production and consumption fixed. In fact, both Iraq and Iran would like to increase their production, adding to the production/consumption mismatch. China’s economy seems to be stalling, keeping its oil consumption from rising as quickly as in the past, and further adding to the supply/demand mismatch problem. Figure 9 shows an approximation to our mismatch problem. As far as I can tell, the problem is still getting worse, not better.

Figure 9. Total liquids oil production and consumption, based on a combination of BP and EIA data.

There has been a lot of talk about the United States reducing its production, but the impact so far has been small, based on data from EIA’s International Energy Statistics and its December 2015 Monthly Energy Review.

Figure 10. US quarterly oil liquids production data, based on EIA’s International Energy Statistics and Monthly Energy Review.

Based on information through November from EIA’s Monthly Energy Review, total liquids production for the US for the year 2015 will be about 700,000 barrels per day higher than it was for 2014. This increase is likely greater than the increase in production by either Saudi Arabia or Iraq. Perhaps in 2016, oil production of the US will start decreasing, but so far, increases in biofuels and natural gas liquids are partly offsetting recent reductions in crude oil production. Also, even when companies are forced into bankruptcy, oil production does not necessarily stop because of the potential value of the oil to new owners.

Figure 11 shows that very high stocks of oil were a problem, way back in the 1920s. There were other similarities to today’s problems as well, including a deflating debt bubble and low commodity prices. Thus, we should not be too surprised by high oil stocks now, when oil prices are low.

(Click to enlarge)

Figure 11. US ending stock of crude oil, excluding the strategic petroleum reserve. Figure by EIA.

Many people overlook the problems today because the US economy tends to be doing better than that of the rest of the world. The oil storage problem is really a world problem, however, reflecting a combination of low demand growth (caused by low wage growth and lack of debt growth, as the world economy hits limits) continuing supply growth (related to very low interest rates making all kinds of investment appear profitable and new production from Iraq and, in the near future, Iran). Storage on ships is increasingly being filled up and storage in Western Europe is 97% filled. Thus, the US is quite likely to see a growing need for oil storage in the year ahead, partly because there are few other places to put the oil, and partly because the gap between supply and demand has not yet been fixed.

What is Ahead for 2016?

1. Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.

Related: OPEC-Russia Rumors Persist After Comments From Rosneft Chief

2. Oil storage seems likely to become a problem sometime in 2016. In fact, if the run-up in oil supply is heavily front-ended to the December to April period, similar to what happened a year ago, lack of crude oil storage space could become a problem within the next three months. Oil prices could fall to $10 or below. We know that for natural gas and electricity, prices often fall below zero when the ability of the system to absorb more supply disappears. It is not clear the oil prices can fall below zero, but they can certainly fall very low. Even if we can somehow manage to escape the problem of running out of crude oil storage capacity in 2016, we could encounter storage problems of some type in 2017 or 2018.

3. Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities. Part of the reason for the fall in price has to do with the falling price of the commodities produced. Also, sovereign wealth funds will need to sell securities, to have money to keep their economies going. The sale of these securities will put downward pressure on stock and bond prices.

4. Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds. Even electricity companies may be affected, if their suppliers go bankrupt and their customers become less able to pay their bills.
5. Governments of some oil exporters may collapse or be overthrown, if prices fall to a low level. The resulting disruption of oil exports may be welcomed, if storage is becoming an increased problem.

6. It is not clear that the complete unwind will take place in 2016, but a major piece of this unwind could take place in 2016, especially if crude oil storage fills up, pushing oil prices to less than $10 per barrel.

7. Whether or not oil storage fills up, oil prices are likely to remain very low, as the result of rising supply, barely rising demand, and no one willing to take steps to try to fix the problem. Everyone seems to think that someone else (Saudi Arabia?) can or should fix the problem. In fact, the problem is too large for Saudi Arabia to fix. The United States could in theory fix the current oil supply problem by taxing its own oil production at a confiscatory tax rate, but this seems exceedingly unlikely. Closing existing oil production before it is forced to close would guarantee future dependency on oil imports. A more likely approach would be to tax imported oil, to keep the amount imported down to a manageable level. This approach would likely cause the ire of oil exporters.

8. The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits. At first, any such losses will likely be limited to amounts in excess of FDIC insurance limits. As the crisis spreads, losses could spread to other deposits. Deposits of employers may be affected as well, leading to difficulty in paying employees.

9. All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.

10. Two years ago, I put together the chart shown as Figure 12. It shows the production of all energy products declining rapidly after 2015. I see no reason why this forecast should be changed. Once the debt supercycle starts its contraction phase, we can expect a major reduction in both the demand and supply of all kinds of energy products.

Figure 12. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Conclusion

We are certainly entering a worrying period. We have not really understood how the economy works, so we have tended to assume we could fix one or another part of the problem. The underlying problem seems to be a problem of physics. The economy is a dissipative structure, a type of self-organizing system that forms in thermodynamically open systems. As such, it requires energy to grow. Ultimately, diminishing returns with respect to human labor–what some of us would call falling inflation-adjusted wages of non-elite workers–tends to bring economies down. Thus all economies have finite lifetimes, just as humans, animals, plants, and hurricanes do. We are in the unfortunate position of observing the end of our economy’s lifetime.

Most energy research to date has focused on the Second Law of Thermodynamics. While this is a contributing problem, this is really not the proximate cause of the impending collapse. The Second Law of Thermodynamics operates in thermodynamically closed systems, which is not precisely the issue here.

We know that historically collapses have tended to take many years. This collapse may take place more rapidly because today’s economy is dependent on international supply chains, electricity, and liquid fuels–things that previous economies were not dependent on.





More living on the land…

25 11 2015

I’ve been rather crook for the past couple of weeks, a virus I’m certain I caught right here at the Geeveston Community Centre (henceforth recognised as Geco), and whilst I have been getting some things done, it’s been a struggle.

I’ve almost finished building a second insulated bolt hole, initially for the family visiting over Christmas, but mostly to house wwoofers, because there’s no way I can manage the farm on my own…

I’ve been agisting the neighbour’s cattle for the past two or three weeks, a rather large – too large? – mob of thirty or so heads that have taken my grass down to sub fire hazard levels, and left piles of manure I will deal with later when it dries.

Now the grass is down, all the thistles have become clearly visible, and I’ve been hoeing them (in their many hundreds!) rather than spraying as the neighbour was threatening to do…. It’s chop and drop on a large scale. Lots of walking, I just wish I could breathe properly. This morning was the first one I almost felt human again, so I’m on the mend, but it’s so unusual for me to get this sick, it’s knocked my socks off.

DSC_2070Yesterday I attended the Huon Producers Network’s inaugural market in Huonville. Well attended with 600 or so visitors counted, it had a great atmosphere, great food, great music, and it was an opportunity to mix with the locals, most of whom I’ve been avoiding so as not to spread the dreaded lurgy.

The wind dropped off, and the sun came out even; must be a good omen!

The network is one of the main reasons we settled on Geeveston; the
DSC_2085energy for the operation started here and in the surrounding area, and I intend to join as soon as I’m in a position to actually produce some food. Which could be sooner rather than later, because the next season of apples is well underway.

DSC_2040The trees were only just beginning to bloom as Richard and I first arrived two and a half months ago, and now those blooms are turning into fruit which is fast needing thinning out to ensure good size fruit.

Apples produce clusters of six flowers, five outer ones and a central one known as the king blossom. At this stage, there are bees everywhere, and without a word of a lie, you can hear the orchard buzz…..

DSC_2091In no time at all, all those flowers turn into grape sized apples, and the trees are just covered in fruit. If left like this, the apples don’t grow much, and whilst they are still delicious, they look far too small to be salable, though they would make excellent cider. I’m also told that pickers are paid by weight, and for them to pick a tonne (say) requires picking loads more apples, which takes longer, making pickers unhappy.


DSC_2092It feels very strange to literally break of hundreds of potential apples; it seems counter-intuitive, but that’s what all the locals tell me to do, and what do I know about apples?

Clusters should be no more than 2 or 3 apples, and must be at least 10cm apart. In their natural state, they look more like grapes than apples, so closely knit are they on the tree……. so off they have to come.DSC_2093

Some trees would easily have 300 tiny apples on them, and there’s no way a tree less than 2m tall could bring so much fruit to maturity. Last season, nothing was done to the trees because everyone involved was busy selling/buying/moving. Most of the crop went to waste apart from a trailer load that went to Charlotte Cove where my sailor friends recently moved to. This is where they were turned into cider by Werner, who, as it happens, has now decided to retire back in New South Wales…… and kindly decided to leave us his cider making equipment!

No prizes for guessing what I’ll be doing next year, watch this space!





Global Economic Red Alert revisited

9 07 2015

Hot on the heels of publishing Global Economic Red Alert, this pops up over on ZeroHedge, an article from Phoenix Capital Research which gets a guernsey in this morning’s post too….

Greece is Just the First of MANY Countries That Will Be Going Belly-Up

Red-Alert-Button-460x306ALL of the so called, “economic recovery” that began in 2009 has been based on the Central Banks’ abilities to rein in the collapse.

The first round of interventions (2007-early 2009) was performed in the name of saving the system. The second round (2010-2012) was done because it was generally believed that the first round hadn’t completed the task of getting the world back to recovery.

However, from 2012 onward, everything changed. At that point the Central Banks went “all in” on the Keynesian lunacy that they’d been employing since 2008. We no longer had QE plans with definitive deadlines. Instead phrases like “open-ended” and doing “whatever it takes” began to emanate from Central Bankers’ mouths.

However, the insanity was in fact greater than this. It is one thing to bluff your way through the weakest recovery in 80+ years with empty promises; but it’s another thing entirely to roll the dice on your entire country’s solvency just to see what happens.

In 2013, the Bank of Japan launched a single QE program equal to 25% of Japan’s GDP. This was unheard of in the history of the world. Never before had a country spent so much money relative to its size so rapidly… and with so little results: a few quarters of increased economic growth while household spending collapsed and misery rose alongside inflation.

This was the beginning of the end. Japan nearly broke its bond market launching this program (the circuit breakers tripped multiple times in that first week). However it wasn’t until late 2014 that things truly became completely and utterly broken.

We are, of course, referring to the Bank of Japan’s decision to increase its already far too big QE program, not because doing so would benefit the country, but because it would bring economists’ forecast inline with governor Kuroda’s intended inflation numbers.

This was the “Rubicon” moment: the instant at which Central Banks gave up pretending that their actions or policies were aimed at anything resembling public good or stability. It was now about forcing reality to match Central Bankers’ theories and forecasts. If reality didn’t react as intended, it wasn’t because the theories were misguided… it was because Central Bankers simply hadn’t left the paperweight on the “print” button long enough.

At this point the current financial system was irrevocably broken. We simply had yet to feel it.

That is, until, January 2015, when the Swiss National Bank lost control, breaking a promise, and a currency peg, losing an amount of money equal to somewhere between 10% and 15% of Swiss GDP in a single day, and showing, once and for all, that there are problems so big that even the ability to print money can’t fix them.

This process is now accelerating in Europe where a country that comprises less than 2% of the EU’s total GDP (Greece) has managed to be FIVE-YEAR problem that cannot be resolved through more debt or money printing.

The ECB and EU have tried everything to kick the Greek “can” down the road. History has shown us time and again that Central Banks first attempt to deal with a debt problem by printing money… but eventually the debt default/haircut has to occur.

This process has now begun in Greece. The fact the markets are imploding should give you an idea of how fragile the system is. One can only imagine what will happen when a larger player such as Spain or France or even Japan goes belly up.

The Big Crisis, the one in which entire countries go bust, has begun. It will not unfold in a matter of weeks; these sorts of things take months to complete. But it has begun.





Richard Wolff on the coming crash…….

30 05 2015

Of course, zero mention of Limits to Growth here………





Enjoy Life while you can…

23 02 2015

lovelock

James Lovelock

‘Enjoy life while you can: in 20 years global warming will hit the fan’, or so says James Lovelock……  I’ve enjoyed Lovelock’s Gaia books for over 20 years now, and they were largely instrumental in reshaping the way I see most things these days.  His recent interview published in The Guardian written by  inspired me to compile this post.

88 year old Lovelock has been dispensing predictions like “It’s just too late for it [climate change]” and “Perhaps if we’d gone along routes like that in 1967, it might have helped. But we don’t have time. All these standard green things, like sustainable development, I think these are just words that mean nothing. I get an awful lot of people coming to me saying you can’t say that, because it gives us nothing to do. I say on the contrary, it gives us an immense amount to do. Just not the kinds of things you want to do.” from his laboratory in an old mill in Cornwall since I was knee high to a grasshopper; and the consistent accuracy of these predictions have earned him the reputation as Britain’s most respected independent scientists.

Working on his own since he was 40, he has invented a device that detected CFCs, thus enabling the growing hole in the ozone layer to be detected.  He also introduced the Gaia hypothesis, a theory that the Earth behaves like a self-regulating super-organism. Initially ridiculed by many scientists, that theory today pretty well forms the basis of most climate science, not least modelling…..

Lovelock is an odd mixture.  On the one hand, he ‘gets it’, but his insistence on developing nuclear power further has enraged many (including myself).  “You’re never going to get enough energy from wind to run a society such as ours,” he says. “Windmills! Oh no. No way of doing it. You can cover the whole country with the blasted things, millions of them. Waste of time.”  We agree on that…  however, when he goes on to say “I see it with everybody. People just want to go on doing what they’re doing. They want business as usual. They say, “there’s going to be a problem up ahead, but they don’t want to change anything.”  So why have nuclear energy unless you want business as usual continuing?  Why criticise people who champion wind energy for wanting BAU to continue, when he’s doing exactly the same thing but this time using nuclear power? To my way of thinking, this is fence sitting on his part.  From the Guardian..:

He dismisses eco ideas briskly, one by one. “Carbon offsetting? I wouldn’t dream of it. It’s just a joke. To pay money to plant trees, to think you’re offsetting the carbon? You’re probably making matters worse. You’re far better off giving to the charity Cool Earth, which gives the money to the native peoples to not take down their forests.”

Do he and his wife try to limit the number of flights they take? “No we don’t. Because we can’t.” And recycling, he adds, is “almost certainly a waste of time and energy”, while having a “green lifestyle” amounts to little more than “ostentatious grand gestures”. He distrusts the notion of ethical consumption. “Because always, in the end, it turns out to be a scam … or if it wasn’t one in the beginning, it becomes one.”

He can’t limit his flights?  Why NOT?  Then, reports that Lovelock was “a socialist as a young man, [but] he now favours market forces”.  The very market forces that got us into this mess…?  I think Lovelock is good at the science, but not economics.  He needs to meet Nicole Foss!

Lovelock fears we won’t invent the necessary technologies in time, and expects “about 80%” of the world’s population to be wiped out by 2100.  “Prophets have been foretelling Armageddon since time began”, he says. “But this is the real thing.”

Humanity is in a period exactly like 1938-9, he explains, when “we all knew something terrible was going to happen, but didn’t know what to do about it”. But once the second world war was under way, “everyone got excited, they loved the things they could do, it was one long holiday … so when I think of the impending crisis now, I think in those terms. A sense of purpose – that’s what people want.”  I can’t see too many people thinking WWII was “one long holiday”, but I hope he’s right about that sense of purpose…..

What would Lovelock do now,  asks……. He smiles and says: “Enjoy life while you can. Because if you’re lucky it’s going to be 20 years before it hits the fan.”





On abandoning effluence

23 12 2014

Some of you might remember that if ever there was a book that changed my life, it was Ted Trainer’s “Abandon Affluence”.  These days, I have a tendency to call it “Abandon Effluence”, as the planet chokes on waste of all kinds produced by our effluent civilisation, be it CO2 in the air or plastic in the ocean….

Today, an article in the Sydney Morning Herald prompted me to comment further on this.  Titled “Miserly Newstart keeps unemployed further away from jobs”, I could not help thinking “thank god for the unemployed”.  For two fundamentally and totally contradictory reasons.  Poor people can’t consume the planet to death, and poor people keep the economy afloat…  You won’t read that in mainstream media…

The morons in charge of our country right now seem to take great pleasure in denigrating the unemployed (and the disabled, and the sick, and anyone else who may have fallen on hard times) for not doing any of the “heavy lifting”.  The media loves to tell us that these dole bludgers live off our taxes (all monopoly money created out of thin air let us not forget) and we should therefore look down upon them as inferior people.  From the SMH:

Australia’s Newstart was comparable to benefits provided in the Southern European nations of Greece, Spain and Portugal, which have all been rocked by the global financial crisis and sovereign debt problems. So we’ve got southern European generosity even though Australia is richer than those nations and escaped the financial crisis relatively unscathed.

What the morons keep forgetting is that whilst these unemployed people may not be paying income tax, they do pay GST on almost everything they buy with their $500 a fortnight (including food, as most of these people probably buy processed food rather than fresh), and rent to their landlords who profit handsomely.  When you earn such paltry amounts of money, everything you get gets ploughed back into the economy and is counted as GDP.  I believe that the main reason the unemployed are so derided is because they don’t actually participate in growth, they simply don’t get enough to consume like those who work!  And they cannot get in debt, except with high interest rate credit cards…. and no doubts the banks love cashing in on that one, even if there are a few defaulters among them.

Unfortunately for the unemployed, nearly all of them do not realise what an opportunity unemployment really is.  They have been so brainwashed into thinking the Matrix is the only modus operandi that they find it impossible to think outside that box.  To be fair, none of the employed do either!

Imagine this…:  next month, all the unemployed wake up to themselves and decide to abandon the Matrix.  They each find one of the 800,000 houses that are empty at any one time in Australia, and squat there.  After all, Australia has a tradition of squatting, that’s how this nation began…!  Using their last dole payment (or two or three), they buy chickens and seeds, a few gardening implements, and start growing their own food.  They won’t need electricity because they won’t be watching TV or charging their smart phones.  They would surely have enough clothing already to keep warm if it’s cold, and most of them would quite likely own essentials like bedding etc….

Now I realise this is pure fantasy, but just bear with me a little longer…..  what would happen to the economy?

According to the ABS, there are 777,700 unemployed people at the moment in Australia, representing 6.2% of the 12,500,000 who make up ‘the work force’.  The underemployed number 14.8%, or another 1.8 million people, for a total 2.6 million people who presumably earn their $500 a fortnight’s worth of pound of flesh.  I make that out to be a total of (in round numbers) 33.8 billion dollars a year.  What, exactly, would happen to the economy if that much spending/consumption was removed from the economy?  Or the 3.4 billion in GST for that matter?  What of all those landlords who suddenly lose their tenants, causing a crash in the housing bubble?  What of the power companies that suddenly find themselves having to shut down 10% of their power stations?  Were the government to exile the unemployed, it would cause an instant depression…….

The reason of course there is any unemployment at all, is due to the very market forces the morons in charge constantly push on us.  If there were no unemployment, it would be an employee’s market instead of the current employers’.  In a labour shortage situation, any potential employee applying to fill a vacant position would be able to name his price (wages) and desperate employers would have little choice but to accept.  And we can’t have that now, can we…..  the labour market will not pay any more than is absolutely necessary.  So the morons in charge continue denigrating the very socio-economic sector they and their precious Capitalism created, even ensuring they mostly cannot get a job even…….  according to the SMH:

Morris and Wilson argue Australia’s current approach is counterproductive. Their study into the implications of life on Newstart found many recipients were so deprived they were ill-equipped to get work. Newstart’s very low rate was “scarring” the unemployed and making it more difficult for them to find a job.

If there were jobs to be had of course.  Furthermore, my imaginary scenario above will one day come to fruition; it’s only a matter of when really.  So many pundits are proclaiming that it will all start next year, like Paul Craig Roberts…

We need a reboot, no doubt about it, but first, we have to rid ourselves of the morons in charge.  Before it’s too late.  If it isn’t already of course, they all have their heads in the sand.