The shape of things to come…..?

30 11 2018

Consciousness of Sheep keeps coming up with magnificent articles, like this one…..  

I know I keep saying this too, but the Matrix can’t continue lurching about for too much longer….

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Despite a series of stock market scares, see-sawing oil prices and central banks jacking up interest rates, it seems likely that we are going to get through 2018 without experiencing the economic crash that many expected at the start of the year.  But while we may breathe a sigh of relief to have got to the festive season without a complete meltdown, the odds of another crash are still high.

Understanding what might go wrong is a particular problem according to Helen Thompson at the New Statesman.  Not least because 10 years on, we still cannot agree on what caused the last one:

“In July 2008 the then president of the European Central Bank (ECB), Jean-Claude Trichet, declared while announcing an increase in interest rates that the Eurozone’s fundamentals were sound. In fact, a recession had begun in the first quarter of that year.

“The causes of recessions are also sometimes wrongly diagnosed – even in retrospect. For instance, the impact of exceptionally high oil prices and the response of central banks to those prices are still routinely ignored as causes of the US and European recessions in the aftermath of the 2008 crash.”

Thompson’s article sets out a range of weaknesses across the global economy where a new economic meltdown could begin.  China, the (albeit anaemic) growth engine of the global economy for the last decade, has developed debt problems not dissimilar to those in the west in 2008:

“Economic growth in China has been slowing since the second half of 2017, and even the growth of the first half of that year was an interruption of a downward slope that began in 2013. Predictions of a Chinese financial crisis, owing to the country’s huge accumulation of debt since 2008, are made too readily. But China is now caught between a policy shift towards deleveraging to try to avoid such a debt-induced financial crisis, and another debt-financed push for higher growth amid an economic slowdown and a fierce trade war with the US. The Chinese government is struggling under these conflicting imperatives as the country’s dollar reserves fall.”

The Eurozone is also in trouble:

“Growth in the third quarter was the weakest since the second quarter of 2014. Germany’s economy contracted and Italy’s experienced no growth. If the Eurozone’s troubles were confined to Italy, there would be less cause for concern. But even Germany’s powerhouse economy is weakening: retail sales and exports have fallen for several successive months.”

Canada – like the UK – is a basket case just waiting the central bank to add that last interest rate hike to push it over the edge.  Things are more complicated across the border in the USA:

“The official US unemployment rate stands at 3.7 per cent, the lowest since 1969. But this masks a notably low participation rate (62.9 per cent), as significant numbers of people have withdrawn from the labour market. Ever-fewer jobs sustain middle-class lifestyles, especially in cities where housing costs have risen over the past decade.”

Of course, a “black swan” event beyond the areas that Thompson points to might also prove to be the trigger for the next meltdown.  A collapse in the Australian property market, renewed conflict in one of the successor states of the Soviet Union or an oil shock in the Middle East are not beyond the bounds of possibility in 2019.

What is clear, however, is that we are in uncharted territory when it comes to understanding and having any chance of fixing the next meltdown.  As Thompson points out:

“Central banks cannot fix what they set in motion after 2008. There appears to be no way forward that would let this economic cycle play out without risking much more disruption than the typical recession would bring. What is at stake is compounded by the problem of oil: shale production must be sustained by one or more of the following: high prices, extremely cheap credit or investors’ indifference to profitability.

“When a recession does come, central banks are unlikely to be able to respond without wading even further into uncharted monetary and political waters. And major economies will have significantly higher levels of debt than in 2008, interest rates will already be low and central banks will have enormous balance sheets. As a consequence, a policy response comparable to that of 2008 is likely to be more dangerous and insufficient to restore sustained growth. In times of fear, high debt ensures that, beyond a certain point, consumers simply cannot be incentivised to spend more. Even if they were to be tempted with ‘helicopter money’ from central banks – new money distributed freely to citizens – there is no guarantee at all that the money would do much for aggregate demand.”

Unusually for a mainstream academic Thompson – who is a professor of political economy at Cambridge University – grasps the impact of energy on the economy; particularly the hard choices that face politicians and central bankers as we transition from energy growth to energy decline:

“It has become impossible to confront the economic predicaments in the global economy without contemplating sacrifice, whether that be politicians and central bankers choosing where the heavy costs of the next policy response will fall, or recognising the role that energy sustainability has in maintaining material living standards and a liberal international politics…”

Tighter energy, coupled to the central bank policies that have kept business as usual limping along since the last meltdown, has given rise to a populist revolt that has thus far focused on the democratic pathways in liberal democracies, but has also favoured an emboldened nationalist right that has successfully targeted immigration as the cause of people’s woes.  Worse still, via social media, contrarian economists like Steve Keen, campaign groups like Positive Money and even central bank economists themselves, far more people understand that zero percent interest rates and quantitative easing were designed to favour the already wealthy at the expense of the majority of the population.  It would be lunacy for politicians and central bankers to attempt to do the same thing again this time around:

“The 2007-09 recessions exposed the political discontent that had grown in Western democracies over the previous decade. The next recession will begin with that discontent already bringing about substantial political disruption – from Brexit to Trump’s election to the Lega-Five Star coalition in Italy – which in itself has become a source of economic fear. The economic dangers that lurk are only likely to increase political fragmentation, especially when there is little understanding of the structural economic forces that serve to divide people.”

Unfortunately, the political left are like so many rabbits caught in the headlights in relation to the crisis that is coming.  Rather than the right wing economic and social policies of Trump or the European nationalist parties, the left is most opposed to the populism that these movements harness.  The opposite of populism, of course, is elitism… and that puts the political left on the same platform that Marie Antoinette found herself on in October 1793.

There is no written law that says that the political left or even benign liberals have to win in the end – that storyline only works in Hollywood movies.  In the crisis that we are about to face – whether it be 2019 or 2020 – responding with more policies that favour the wealthy while driving the faces of the poor into the dirt can only end one way, as Thompson reminds us:

“History is full of grisly episodes, usually in eras of revolution, when the politics of sacrifice have come to the fore. Indeed, in many ways, the whole ideal of Western liberal democracies in the postwar world has been about the importance of avoiding such a politics, even as the policies governments pursued unavoidably created winners and losers.

“But the conditions for politics have now become much harder, and the collective and individual question of our times has become how we can confront the inescapable political conflict generated by deep economic dysfunctionality without losing the democratic and liberal foundations of political order as we know it?”

The answer to this question might be the same as the answer to the two other existential crises facing us – How can we prevent runaway climate change without undermining our civilisation? And how can we prevent resource depletion and energy decline undermining it?  The answer is very likely to be that we can’t.





What’s happened to Peak Oil since Peak Oil….

2 10 2018

The latest news that Mexico has this month switched from being a net oil exporter to a net oil importer prompted me to do some more research on what stage we all are with Peak Oil…….  and as expected, the news are not good. Since the peak of conventional oil in 2005, ALL the major producing nations except for Iraq and the US have been producing less and less in real terms, and let’s face it, half the US’ production is unviable shale oil which since the GFC has lost the oil industry $280 billion and counting…..

Meanwhile, pundits on TV are expressing disbelief at how the price of fuel is skyrocketing in Australia (with our dollar struggling to remain above $US0.70) while oil is simultaneously surging under all sorts of pressures.

Crude_prod_changes_2005-May_2018Fig 2: Crude production changes between 2005 and 2018 by country

Group A
Countries where average oil production Jan-May 2018 was lower than the average in 2005. At the bottom is Mexico with the highest rate of decline. This group started to peak in 1997, entering a long bumpy production plateau at around 25 mb/d, ending – you guessed it – in 2005. This is down now to 16 mb/d, a decline of 700 kb/d pa (-2.8% pa).

Decline-group_1994-May2018Fig 3: Group A countries

Group B

Countries where average oil production Jan-May 2018 was higher than the average in 2005. At the top of the stack are Iraq and the US, where growth was highest. Group B compensated for the decline in group A and provided for growth above the red dashed line in Fig 1.
The 2018 data have not been seasonally adjusted.
In group B we have a subgroup of countries which peaked after 2005

Crude_post-2005-peaking_1994-May2018Fig 4: Countries peaking after 2005

A production plateau above 7 mb/d lasted for 6 years between 2010 and 2016. The average was 7.1 mb/d, around +1.8 mb/d higher than in 2005. Another country in this subgroup is China, here shown separately because of its importance and consequences.

Cumulative_crude_prod_changes_2005-May_2018Fig 13: Cumulative crude production changes since 2005

This is a cumulative curve of Fig 2 with changes in ascending order (from negative to positive). On the left, declining production from group A adds up to -9 mb/d (column at Ecuador). Then moving to the right, countries with growing production reduce the cumulative (still negative) until the system is in balance (column at Canada). Only Iraq and the US provide for growth.

According to Crude Oil Peak, where all the above charts came from, the only viable conclusion is…..:

Assuming that the balancing act between declining and growing countries continues (from Mexico through to Canada) the whole system will peak when the US shale oil peaks (in the Permian) as a result of geology or other factors and/or lack of finance in the next credit crunch and when Iraq peaks due to social unrest or other military confrontation in the oil producing Basra region. There are added risks from continuing disruptions in Nigeria and Libya, steeper declines in Venezuela and the impact of sanctions on Iran.

Assuming that the balancing act between declining and growing countries continues (from Mexico through to Canada) the whole system will peak when the US shale oil peaks (in the Permian) as a result of geology or other factors and/or lack of finance in the next credit crunch and when Iraq peaks due to social unrest or other military confrontation in the oil producing Basra region. There are added risks from continuing disruptions in Nigeria and Libya, steeper declines in Venezuela and the impact of sanctions on Iran.

To top it off, here’s a video clip of this guy I’ve never heard of before but which, whilst not peak oil specific, seems on the money to me…….





Conjuring Up the Next Depression

11 09 2018

chrishedges

Chris Hedges

During the financial crisis of 2008, the world’s central banks, including the Federal Reserve, injected trillions of dollars of fabricated money into the global financial system. This fabricated money has created a worldwide debt of $325 trillion, more than three times global GDP. The fabricated money was hoarded by banks and corporations, loaned by banks at predatory interest rates, used to service interest on unpayable debt or spent buying back stock, providing millions in compensation for elites. The fabricated money was not invested in the real economy. Products were not manufactured and sold. Workers were not reinstated into the middle class with sustainable incomes, benefits and pensions. Infrastructure projects were not undertaken. The fabricated money reinflated massive financial bubbles built on debt and papered over a fatally diseased financial system destined for collapse.

What will trigger the next crash? The $13.2 trillion in unsustainable U.S. household debt? The $1.5 trillion in unsustainable student debt? The billions Wall Street has invested in a fracking industry that has spent $280 billion more than it generated from its operations? Who knows. What is certain is that a global financial crash, one that will dwarf the meltdown of 2008, is inevitable. And this time, with interest rates near zero, the elites have no escape plan. The financial structure will disintegrate. The global economy will go into a death spiral. The rage of a betrayed and impoverished population will, I fear, further empower right-wing demagogues who promise vengeance on the global elites, moral renewal, a nativist revival heralding a return to a mythical golden age when immigrants, women and people of color knew their place, and a Christianized fascism.

The 2008 financial crisis, as the economist Nomi Prins points out, “converted central banks into a new class of power brokers.” They looted national treasuries and amassed trillions in wealth to become politically and economically omnipotent. In her book “Collusion: How Central Bankers Rigged the World,” she writes that central bankers and the world’s largest financial institutions fraudulently manipulate global markets and use fabricated, or as she writes, “fake money,” to inflate asset bubbles for short-term profit as they drive us toward “a dangerous financial precipice.”

“Before the crisis, they were just asleep at the wheel, in particular, the Federal Reserve of the United States, which is supposed to be the main regulator of the major banks in the United States,” Prins said when we met in New York. “It did a horrible job of doing that, which is why we had the financial crisis. It became a deregulator instead of a regulator. In the wake of the financial crisis, the solution to fixing the crisis and saving the economy from a great depression or recession, whatever the terminology that was used at any given time, was to fabricate trillions and trillions of dollars out of an electronic ether.”

The Federal Reserve handed over an estimated $29 trillion of this fabricated money to American banks, according to researchers at the University of MissouriTwenty-nine trillion dollars! We could have provided free college tuition to every student or universal health care, repaired our crumbling infrastructure, transitioned to clean energy, forgiven student debt, raised wages, bailed out underwater homeowners, formed public banks to invest at low interest rates in our communities, provided a guaranteed minimum income for everyone and organized a massive jobs program for the unemployed and underemployed. Sixteen million children would not go to bed hungry. The mentally ill and the homeless—an estimated 553,742 Americans are homeless every night—would not be left on the streets or locked away in our prisons. The economy would revive. Instead, $29 trillion in fabricated money was handed to financial gangsters who are about to make most of it evaporate and plunge us into a depression that will rival that of the global crash of 1929.

Kevin Zeese and Margaret Flowers write on the website Popular Resistance, “One-sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all U.S. public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade.”

An emergency clause in the Federal Reserve Act of 1913 allows the Fed to provide liquidity to a distressed banking system. But the Federal Reserve did not stop with the creation of a few hundred billion dollars. It flooded the financial markets with absurd levels of fabricated money. This had the effect of making the economy appear as if it had revived. And for the oligarchs, who had access to this fabricated money while we did not, it did.

The Fed cut interest rates to near zero. Some central banks in Europe instituted negative interest rates, meaning they would pay borrowers to take loans. The Fed, in a clever bit of accounting, even permitted distressed banks to use these no-interest loans to buy U.S. Treasury bonds. The banks gave the bonds back to the Fed and received a quarter of a percent of interest from the Fed. In short, the banks were loaned money at virtually no interest by the Fed and then were paid interest by the Fed on the money they borrowed. The Fed also bought up worthless mortgage assets and other toxic assets from the banks. Since Fed authorities could fabricate as much money as they wanted, it did not matter how they spent it.

“It’s like going to someone’s old garage sale and saying, ‘I want that bicycle with no wheels. I’ll pay you 100 grand for it. Why? Because it’s not my money,’ ” Prins said.

“These people have rigged the system,” she said of the bankers. “There is money fabricated at the top. It is used to pump up financial assets, including stock. It has to come from somewhere. Because money is cheap there’s more borrowing at the corporate level. There’s more money borrowed at the government level.”

“Where do you go to repay it?” she asked. “You go into the nation. You go into the economy. You extract money from the foundational economy, from social programs. You impose austerity.”

Given the staggering amount of fabricated money that has to be repaid, the banks need to build greater and greater pools of debt. This is why when you are late in paying your credit card the interest rate jumps to 28 percent. This is why if you declare bankruptcy you are still responsible for paying off your student loan, even as 1 million people a year default on student loans, with 40 percent of all borrowers expected to default on student loans by 2023. This is why wages are stagnant or have declined while costs, from health care and pharmaceutical products to bank fees and basic utilities, are skyrocketing. The enforced debt peonage grows to feed the beast until, as with the subprime mortgage crisis, the predatory system fails because of massive defaults. There will come a day, for example, as with all financial bubbles, when the wildly optimistic projected profits of industries such as fracking will no longer be an effective excuse to keep pumping money into failing businesses burdened by debt they cannot repay.

“The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses,” Bethany McLean writes of the fracking industry in an article titled “The Next Financial Crisis Lurks Underground” that appeared in The New York Times. “In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.”

The global financial system is a ticking time bomb. The question is not if it will explode but when it will explode. And once it does, the inability of the global speculators to use fabricated money with zero interest to paper over the debacle will trigger massive unemployment, high prices for imports and basic services, and a devaluation in which the dollar will become nearly worthless as it is abandoned as the world’s reserve currency. This manufactured financial tsunami will transform the United States, already a failed democracy, into an authoritarian police state. Life will become very cheap, especially for the vulnerable—undocumented workers, Muslims, poor people of color, girls and women, anti-capitalist and anti-imperialist critics branded as agents of  foreign powers—who will be demonized and persecuted for the collapse. The elites, in a desperate bid to cling to their unchecked power and obscene wealth, will disembowel what is left of the United States.





Club of Rome’s predictions on target….

1 09 2018

Anyone following this blog will know I bang on about Limits to Growth constantly…… just click on the “Limits to Growth” text in the issues cloud in the right hand side bar of this blog, and you will see what I mean….. One of the most read entry on this blog is an interview with Dennis Meadows in which he says “There’s nothing we can do”, closely followed by Graham Turner’s most recent studies showing the CoR’s standard run is bang on target for realisation…….

Now along comes this fascinating video that apparently made the news on our own trusted ABC in 1973 (Australian Broadcasting Corporation if you’re not from here!) which, in my internet circles at least, is surfacing constantly….

I love its historic implications, and the way it shows how crude computing power could still come up with the goods……. and also shows how we did absolutely nothing to stave off disaster.

World One – the name of the computer – showed that by 2040 there would be a global collapse if the expansion of the population and industry was to continue at the current levels….. I frankly doubt this won’t happen by 2030.

2020 is the first milestone envisioned by World One. We now have less than two years folks…. That’s when the quality of life is supposed to drop dramatically. The broadcaster presented this scenario that will lead to the demise of large numbers of people:

“At around 2020, the condition of the planet becomes highly critical. If we do nothing about it, the quality of life goes down to zero. Pollution becomes so seriously it will start to kill people, which in turn will cause the population to diminish, lower than it was in 1900. At this stage, around 2040 to 2050, civilised life as we know it on this planet will cease to exist.”

Alexander King, the then-leader of the Club of Rome, evaluated the program’s results to also mean that nation-states will lose their sovereignty, forecasting a New World Order with corporations managing everything.

“Sovereignty of nations is no longer absolute,” King told ABC. “There is a gradual diminishing of sovereignty, little bit by little bit. Even in the big nations, this will happen.”

Well, THAT has already happened……

And now this…….  “enjoy”…..





Areas Of The World More Vulnerable To Collapse

16 06 2018

ANOTHER great post from SRSrocco…..  this one should be of particular interest to Australians though, because we are in a more vulnerable region…. and while Australia may look not too bad on those charts, it’s only because our relatively small population means we consume way less than most of the other nations of the Asia Pacific region…

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Certain areas of the world are more vulnerable to economic and societal collapse.  While most analysts gauge the strength or weakness of an economy based on its outstanding debt or debt to GDP ratio, there is another factor that is a much better indicator.  To understand which areas and regions of the world that will suffer a larger degree of collapse than others, we need to look at their energy dynamics.

For example, while the United States is still the largest oil consumer on the planet, it is no longer the number one oil importer.  China surpassed the United States by importing a record 8.9 million barrels per day (mbd) in 2017.  This data came from the recently released BP 2018 Statistical Review.  Each year, BP publishes a report that lists each countries’ energy production and consumption figures.

BP also lists the total oil production and consumption for each area (regions and continents).  I took BP’s figures and calculated the Net Oil Exports for each area.  As we can see, the Middle East has the highest amount of net oil exports with 22.3 million barrels per day in 2017:

The figures in the chart above are shown in “thousand barrels per day.”  Russia and CIS (Commonwealth Independent States) came in second with 10 mbd of net oil exports followed by Africa with 4 mbd and Central and South America with 388,000 barrels per day.  The areas with the negative figures are net oil importers.

The area in the world with the largest net oil imports was the Asia-Pacific region at 26.6 mbd followed by Europe with 11.4 mbd and North America (Canada, USA & Mexico) at 4.1 mbd.

Now, that we understand the energy dynamics shown in the chart above, the basic rule of thumb is that the areas in the world that are more vulnerable to collapse are those with the highest amount of net oil imports.  Of course, it is true that the Middle Eastern or African countries with significant oil exports can suffer a collapse due to geopolitics and civil wars (example, Iraq, and Libya), but this was not a result of domestic oil supply and demand forces.  Rather the collapse of Iraq and Libya can be blamed on certain superpowers’ desire to control the oil market as they are strategic net oil importers.

The areas with the largest net oil imports, Asia-Pacific and Europe, have designed complex economies that are highly dependent on significant oil supplies to function.  Thus, the areas and countries with the largest net oil imports will experience a higher degree of collapse. Yes, there’s more to it than the amount of net oil imports, but that is an easy gauge to use.   I will explain the other factors shortly.  If we look at the Asia-Pacific countries with the largest net oil imports, China, India, and Japan lead the pack:

China is a net importer of nearly 9 mbd of oil, followed by India at 4 mbd and Japan with 3.9 mbd.  Thus, as these net oil imports decline, so will the degree of economic activity.  However, when net oil imports fall to a certain level, then a more sudden collapse of the economy will result… resembling the Seneca Cliff.

We must remember, a great deal of the economic infrastructure (Skyscrapers, commercial buildings, retail stores, roads, equipment, buses, trucks, automobiles, etc etc.) only function if a lot of oil continually runs throughout the system.  Once the oil supply falls to a certain level, then the economic system disintegrates.

While China is the largest net oil importer, the United States is still the largest consumer of oil in the world.  Being the largest oil consumer is another very troubling sign.  The next chart shows the countries with the highest oil consumption in the world and their percentage of net oil imports:

Due to the rapid increase in domestic shale oil production, the United States net oil imports have fallen drastically over the past decade.  At one point, the U.S. was importing nearly three-quarters (75%) of its oil but is now only importing 34%.  Unfortunately, this current situation will not last for long.  As quickly as shale oil production surged, it will decline in the same fashion… or even quicker.

You will notice that Saudi Arabia is the sixth largest oil consumer in the world followed by Russia.  Both Saudi Arabia and Russia export a much higher percentage of oil than they consume.  However, Russia will likely survive a much longer than Saudi Arabia because Russia can provide a great deal more than just oil.  Russia and the Commonwealth Independent States can produce a lot of food, goods, commodities, and metals domestically, whereas Saudi Arabia must import most of these items.

Of the largest consumers of oil in the chart above, Japan and South Korea import 100% (or nearly 100%) of their oil needs.  According to the data put out by BP 2018 Statistical Review, they did not list any individual oil production figures for Japan or South Korea.  However, the U.S. Energy Information Agency reported in 2015 that Japan produced 139,000 bd of total petroleum liquids while S. Korea supplied 97,000 bd.  Production of petroleum liquids from Japan and South Korea only account for roughly 3% of their total consumption…. peanuts.

Analysts or individuals who continue to believe the United States will become energy independent are ignorant of the impacts of Falling EROI – Energy Returned On Investment or the Thermodynamics of oil depletion.  Many analysts believe that if the price of oil gets high enough, say $100 or $150; then shale oil would be hugely profitable.  The error in their thinking is the complete failure to comprehend this simple relationship… that as oil prices rise, SO DO the COSTS… 

Do you honestly believe a trucking company that transports fracking sand, water or oil for the shale oil industry is going to provide the very same costs when the oil price doubles????  We must remember, the diesel price per gallon increases significantly as the oil price moves higher.  Does the energy analyst believe the trucking companies are just going to eat that higher cost for the benefit of the shale oil industry??  This is only one example, but as the oil price increases, inflationary costs will thunder throughout the shale oil industry.

If the oil price shoots up to $100 or higher and stays there (which I highly doubt), then costs will start to surge once again for the shale oil industry.  As costs increase, we can kiss goodbye the notion of higher shale oil profits.  But as I mentioned in the brackets, I don’t see the oil price jumping to $100 and staying there.  Yes, we could see an oil price spike, but not a long-term sustained price as the current economic cycle is getting ready to roll over.  And with it, we are going to experience one hell of a deflationary collapse.  This will take the oil price closer to $30 than $100.

Regardless, the areas and countries with the highest oil consumption and net oil imports will be more vulnerable to collapse and will fall the hardest.  Just imagine the U.S. economy consuming 5 million barrels of oil per day, rather than the current 20 mbd.  The United States just has more stuff that will become worthless and dysfunctional than other countries.

Lastly, the end game suggests that the majority of countries will experience an economic collapse due to the upcoming rapid decline in global oil production.  However, some countries will likely be able to transition better than others, as the leverage and complexity of the economies aren’t as dependent on oil as the highly advanced Western and Eastern countries.





The beginning of the end for the USA?

10 09 2017

America Can’t Afford to Rebuild

By Raul Illargi

A number of people have argued over the past few days that Hurricane Harvey will NOT boost the US housing market. As if any such argument would or should be required. Hurricane Irma will not provide any such boost either. News about the ‘resurrection’ of New Orleans post-Katrina has pretty much dried up, but we know scores of people there never returned, in most cases because they couldn’t afford to.

And Katrina took place 12 years ago, well before the financial crisis. How do you think this will play out today? Houston is a rich city, but that doesn’t mean it’s full of rich people only. Most homeowners in the city and its surroundings have no flood insurance; they can’t afford it. But they still lost everything. So how will they rebuild?

Sure, the US has a National Flood Insurance Program, but who’s covered by it? Besides, the Program was already $24 billion in debt by 2014 largely due to hurricanes Katrina and Sandy. With total costs of Harvey estimated at $200 billion or more, and Irma threating to cause far more damage than that, where’s the money going to come from?

It took an actual fight just to push the first few billion dollars in emergency aid for Houston through Congress, with four Texan representatives voting against of all people. Who then will vote for half a trillion or so in aid? And even if they do, where would it come from?

 

 

Trump’s plans for an infrastructure fund were never going to be an easy sell in Washington, and every single penny he might have gotten for it would now have to go towards repairing existing roads and bridges, not updating them -necessary as that may be-, let alone new construction.

Towns, cities, states, they’re all maxed out as things are, with hugely underfunded pension obligations and crumbling infrastructure of their own. They’re going to come calling on the feds, but Washington is hitting its debt ceiling. All the numbers are stacked against any serious efforts at rebuilding whatever Harvey and Irma have blown to pieces or drowned.

As for individual Americans, two-thirds of them don’t have enough money to pay for a $500 emergency, let alone to rebuild a home. Most will have a very hard time lending from banks as well, because A) they’re already neck-deep in debt, and B) because the banks will get whacked too by Harvey and Irma. For one thing, people won’t pay the mortgage on a home they can’t afford to repair. Companies will go under. You get the picture.

There are thousands of graphs that tell the story of how American debt, government, financial and non-financial, household, has gutted the country. Let’s stick with some recent ones provided by Lance Roberts. Here’s how Americans have maintained the illusion of their standard of living. Lance’s comment:

This is why during the 80’s and 90’s, as the ease of credit permeated its way through the system, the standard of living seemingly rose in America even while economic growth rate slowed along with incomes. Therefore, as the gap between the “desired” living standard and disposable income expanded it led to a decrease in the personal savings rates and increase in leverage. It is a simple function of math. But the following chart shows why this has likely come to the inevitable conclusion, and why tax cuts and reforms are unlikely to spur higher rates of economic growth.

 

 

There’s no meat left on that bone. There isn’t even a bone left. There’s only a debt-ridden mirage of a bone. If you’re looking to define the country in bumper-sticker terms, that’s it. A debt-ridden mirage. Which can only wait until it’s relieved of its suffering. Irma may well do that. A second graph shows the relentless and pitiless consequences of building your society, your lives, your nation, on debt.

 

 

It may not look all that dramatic, but look again. Those are long-term trendlines, and they can’t just simply be reversed. And as debt grows, the economy deteriorates. It’s a double trendline, it’s as self-reinforcing as the way a hurricane forms.

 

Back to Harvey and Irma. Even with so many people uninsured, the insurance industry will still take a major hit on what actually is insured. The re-insurance field, Munich RE, Swiss RE et al, is also in deep trouble. Expect premiums to go through the ceiling. As your roof blows off.

We can go on listing all the reasons why, but fact is America is in no position to rebuild. Which is a direct consequence of the fact that the entire nation has been built on credit for decades now. Which in turn makes it extremely vulnerable and fragile. Please do understand that mechanism. Every single inch of the country is in debt. America has been able to build on debt, but it can’t rebuild on it too, precisely because of that.

There is no resilience and no redundancy left, there is no way to shift sufficient funds from one place to the other (the funds don’t exist). And the grand credit experiment is on its last legs, even with ultra low rates. Washington either can’t or won’t -depending on what affiliation representatives have- add another trillion+ dollars to its tally, state capitals are already reeling from their debt levels, and individuals, since they have much less access to creative accounting than politicians, can just forget about it all.

Not that all of this is necessarily bad: why would people be encouraged to build or buy homes in flood- and hurricane prone areas in the first place? Why is that government policy? Why is it accepted? Yes, developers and banks love it, because it makes them a quick buck, and then some, and the Fed loves it because it keeps adding to the money supply, but it has turned America into a de facto debt colony.

If you want to know what will happen to Houston and whatever part of Florida gets hit worst, think New Orleans/Katrina, but squared or cubed -thanks to the 2007/8 crisis.





Environmentalists didn’t kill the nuclear power industry, economics did.

10 08 2017

One of Nicole Foss’ standout statements for me when I last saw her speak all those years ago now, was that an economic collapse can and will occur much fater than the other crises humanity is facing, like peak oil and climate change…..  and I see signs of economic collapse every day now; not least this one.

Our friend Eclipse Now will probably blow his top and would probably post his usual rubbish here, but I saw the sense of Alice Friedemann’s blocking him from her site, I have done the same now too. After all, how can you take seriously anyone who believes in terra forming Mars and even giving that planet a flag…..?

An interesting article turned up on my feed today.

South Carolina Electric and Gas Co. and partner Santee Cooper abandoned work on two new nuclear reactors this week, not because of public protests, but because the only way to pay for them was to overcharge customers or bankrupt both companies.

The decision comes after the main contractor, Westinghouse, has completed a third of the work at the V.C. Sumner Nuclear Station. Of course, the project has already bankrupted Westinghouse due to missed deadlines and costs spiraling out of control. Westinghouse parent Toshiba Corp. had to pay $2.7 billion to get out of its contract.

Electricité de France too is in trouble. EDF could be heading towards bankruptcy, as it faces the perfect storm of under-estimated costs for decommissioning and waste disposal. Hinkley C power station (in Somerset, England) has just bumped up £1.5bn, and its completion date slipped 15 months.. Meanwhile income from power sales is lagging behind costs, and 17 of EDF’s reactors are off-line for safety tests. Yet French and UK governments are turning a blind eye to the looming financial crisis.

What the nuclear industry really needs is the new technology Eclipse is always banging on about. Scientists are working on these smaller reactors that are less dangerous, but none of them are ready for commercial deployment…..  starting to sound like fusion.

There could be a future for nuclear power in the United States, but only if the technology can compete on cost with renewable sources and natural gas. That is the real challenge for the nuclear power industry.

In any case, I firmly believe that the cost of decommissioning the 400 odd reactors that are now well beyond their use by date will finish off the industry before anything worthwhile happens on this front. The energy cliff is still on its way.

UPDATE.

Since publishing this, Alice Fridemann pointed out she has written this article on her own website…….

Nuclear power too expensive. In 2013, 37 reactors predicted to shut down, 16 already have

[ Since this article was published in 2013, 10 of the 37 at risk plants Cooper listed have been or are scheduled to close down (in red) : Diablo CanyonClintonFitzpatrickFt. CalhounIndian PointOyster CreekPilgrimQuad CitiesThree Mile IslandVermont Yankee.  Plus four plants he didn’t list are scheduled to shut down as well: San Onofre 2 & San Onofre 3, Diablo Canyon 1 & Diablo Canyon 2. In addition, not long before this article was written, Kewaunee (2012) and Crystal River (2009) closed for financial reasons.

Here are the remaining plants Cooper listed that have yet to close: Browns Ferry, Callaway, Calvert Cliff, Commanche Peak, Cook, Cooper, Davis-Besse, Dresden, Duane Arnold, Fermi,  Ginna, Hope Creek, LaSalle, Limerick, Millstone, Monticello, Nine Mile Point, Palisades, Perry, Point Beach, Prairie Island, Robinson, Seabrook, Sequoyah, South Texas, Susquehanna, Turkey Point, Wolf Creek

After spending $9 billion dollars on the two reactors of the Virgil C. Summer Nuclear Generating Station, with only 40% completion, and expected final price tag of $25 billion, it was shut down in 2017 (Plumer).  The only new nuclear plant being built in the U.S. now is in Georgia.

Cooper leaves out the cost of nuclear waste storage, which makes the economics of nuclear plants even worse than in the article below (see his testimony before the Nuclear Regulatory Commission).

One of the costs Cooper mentions are Post-Fukushima updates. Five years after the accident at Fukushima in Japan resulted in three reactor meltdowns, the global nuclear industry is spending $47 billion on safety enhancements mandated after the accident revealed weaknesses in plant protection from earthquakes and flooding. The median cost per nuclear power reactor is $46.7 million (Platts).

“New reactors at Georgia Power’s Vogtle plant were initially estimated to cost $14 billion to build; the latest estimate is $21 billion. The first reactors at the plant, in the 1970s, took a decade longer to build than planned, and cost 10 times more than expected. In France, a new plant is running around six years behind scheduled and likely to cost around $8 billion more than planned. Even keeping old reactors running may not make financial sense. In California, for example, extending the life of the Diablo Canyon plant will require new cooling towers that cost around $8 billion. It may also need billions in earthquake retrofits, because engineers realized after the project was built that it’s on a fault line” (Peters).  2016 update: this is one of the reasons they’re going to be shut down.

There are only 61 commercially operating nuclear power plants left (of 90) in the United States

MORE @ http://energyskeptic.com/2017/nuclear-power-never-econ-viable-never-will-be/