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Guest Post: The Status Quo's Fundamental Paradigms Are Broken

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Submitted by Charles Hugh Smith from Of Two Minds

The Status Quo's Fundamental Paradigms Are Broken

The paradigms which undergird the global status quo are broken; doing more of the same (the current strategy) will not fix them.

Reading the Mainstream Media, you almost forget that the Status Quo's fundamental paradigms are completely broken. The Status Quo's essential paradigms are as follows:

1. "Growth" is the essential lifeblood of the global economy.

2. "Growth" means higher GDP and economic activity. Thus new luxury condos and Starbucks cafes on the coast of Peru boost Peru's GDP, and thus Peru is experiencing "growth" which is not just intrinsically "good" but essential.

3. "Growth" requires consuming more resources.

4. There will always be more resources into the foreseeable future. For instance, here is the Status Quo's depiction of fossil fuels supplies:


5. The transition from fossil fuels to alternatives will be slow and seamless because there is still plenty of cheap oil and gas.

6. The dominant paradigms of the global economy are the State Corporation (China) and the Corporate State (U.S.A.). Both are permanent because they are highly efficient.

7. Restrictions on trade and capital flows are "bad." They cause depressions.

8. The nation-state is a durable social structure which will never be seriously threatened with dissolution.

9. As long as the global "pie" of wealth keeps expanding, everyone can grow wealthier together.

10. Low interest rates and expansion of money supply and credit are the three essential financial fuels for "growth."

I think a strong case can be made that each of these paradigms is either already broken or in danger of breaking. Studies have shown that when presented with factual evidence that their core beliefs are wrong, humans respond by clinging even more tightly to their fallacious beliefs.

I think that is precisely the reaction of the global Status Quo.

Here is a typical presentation of the Status Quo's faith in the "China Story" that China's growth can and will continue unimpeded for decades to come:

The Game Changer (China).

Elizabeth C. Economy is a well-informed, insightful analyst. Yet she presumes that China can grow like a tree to the sky and that its consumption of oil and other resources can likewise double every few years forever.

There is not one word in this long essay which even hints at the possibility that constraints in the real world might hinder China's vast ambitions and appetites for "the good life" of middle-class consumption for its 1.2 billion citizens.

Though China runs a good PR game about building a "green economy," we should note that its energy consumption equaled the U.S. this year and its production of vehicles far surpassed the U.S. this year.

Like every other industrialized nation, China's alternative energy sector supplies at best a sliver of the nation's energy. This is a global chart from the IEA which includes nations like Brazil which have vast biofuel industries using sugar cane.


While subsidizing state-owned plants to manufacture solar panels is certainly a forward-thinking strategy, in the meantime building tens of millions of vehicles every year which require gasoline is pursuing an entirely different set of "growth" and dependency priorities.

Even in the U.S., electricity consumption has risen 25% since 1990, outstripping population growth.

Let's look at some facts before we buy into the paradigm that China (or any other nation) can grow to the sky.

I was accused of saber-rattling after I pointed out in The Great Game: Geopolitics and Oil (October 19, 2010) that the U.S. has a "hard power" presence in the heart of the Mideast while China has a presence in Sudan and other African nations. Let's look at which presence controls more oil:


Now let's look at the reality rather than the fantasy of future oil production:


That sets up an inevitable grab for the resources needed for "growth." The timeframes on this chart are of course approximations; no one knows exactly when oil demand will rise above maximum oil production, but the status quo paradigm that China can double its consumption of oil every few years is clearly wrong.

China is culturally predisposed to feeling that the last few hundred years of weakness was an anomaly and that China is once again the center of the world. (The Chinese character for "center" has been read as "middle," i.e. the Middle Kingdom, but this misses the crucial self-awareness of China as the center of the world).

The future course of China's rising confidence in its heft can be seen everywhere: in its hardening claims for islands in the South China Sea, in its plans to divert rivers originating on the Tibetan plain away from other nations to benefit its own consumption, and in its recent export restrictions of rare industrial metals.

Anyone believing China will remain content with making solar panels while its supplies of essential resources dwindle is misreading China's larger plans.


Another paradigm which is already broken is the trade-capital flow fantasy of mercantilist nations funding consumer nation's consumption. China's dissatisfaction with the end-game of this dynamic is already apparent, and a similar breakdown is occurring in Europe as the mercantilist machine that is Germany must bail out one consumer nation after another.


That dynamic is already doomed, and incantations to the contrary are simply beliefs which are unsupported by fact.

The other core paradigm of the Status Quo is a massive Central State--what I call The Savior State in the Survival+ critique.

In the U.S., personal income is around $9 trillion, and the Federal budget is around $3.6 trillion and state/local governments and agencies consume about $1.5 trillion. So government is about 36% of the nation's GDP.

Recently, the Federal government has been borrowing $1.5 trillion a year to maintain the status quo (representing about 11% of GDP). While the Status Quo presents a happy PR picture of an economy rebuilding its decaying infrastructure, the reality is the Federal borrowing is merely propping up personal income. "Transfers" are funds delivered by the government to individuals:


Lastly, the entire fantasy that exponentially rising debt/credit can fuel an asset bubble that then fuels a "virtuous cycle" of rising net worth and more borrowing and spending is also irrevocably broken. Let's start with the trajectory of mortgage delinquencies:



As asset bubbles pop, the "wealth effect" reverses:


No matter how much uncollectible debt is written down, assets are falling faster: the debtor, the bank and the debtor nation all lose "The Red Queen's Race":



Ultimately, the implosion of the Savior State's finances mean the paradigm of a vast Central State is also threatened. We can understand this another way by considering the Central State as an energy consumer. As long as the Central State provides more benefits that it consumes, then the organism it lives off of (the economy) will support it.

But when the benefits dwindle and the carrying costs of the Central State continue rising, than at some point the economy can long longer support the consumption costs of the Central State.

At that point the Central State collapses or shrinks down to a sustainable size.


Anyone who believes the Savior State will endure without any adjustment in the coming decade is simply ignoring the facts and hardening their faulty beliefs. That refusal to learn from facts is not a successful survival strategy.

I don't have "all the answers" or a crystal ball, but it seems clear that "more of the same" is not a sustainable option. New applications of technology and new social/economic models (both localized and international) will have to be developed, tested and adapted which require less energy and resources.

 

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Mon, 11/15/2010 - 16:06 | 728216 Azannoth
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I have only 1 question, what happens when you get a run on the reserve currency ?

Mon, 11/15/2010 - 16:59 | 728383 redpill
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Holy shit I was looking at that and then the giant fucking clown face clicked right in, WTF!

Mon, 11/15/2010 - 17:55 | 728582 Thanatos
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Hey, even Thanatos has a sense of humor.

Besides... Nothing is scarier than Nukes and Clowns combined!

Mon, 11/15/2010 - 17:17 | 728457 Jake3463
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Anyone know what people did when the denari couldn't buy shit in 410 AD?

Mon, 11/15/2010 - 21:09 | 729103 Diogenes
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The Empire collapsed and the Dark Ages began.

No more central government, trade nearly disappeared along with law enforcement and other government infrastructure. Instead you had local feifdoms and baronys, always vaguely hostile to each other and usually a war going on someplace.

The peasants survived by growing what crops they could and lowering their standard of living to homespun clothes, locally grown turnips and barley bread. No more imported wine, silks, and such sophisticated luxuries.

Basically Renaissance Fayre meets Mad Max in a hippy commune.

 

Anyone who had gold and silver, had the only real money. If he could hang onto it. Some of the best relics in museums came from hordes of gold and silver that were buried for safe keeping at this time and never recovered. Other than that, land and cattle were wealth. The right ancestry, a horse, and good weapons and you were in position to acquire wealth. Once you got it, you built a good strong castle if you wanted to keep it.

And of course this was the great era of the Catholic church. When everything goes to hell the people turn to religion and the church was ready to fill the power vacuum left by the collapse of the civil and military authorities.

 

Mon, 11/15/2010 - 23:25 | 729497 TexasAggie
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since our LSM keep informing us that the recession is over, on Sunday, traveling from Houston to Schertz, I counted 20 billboards on IH10 from MP 832 to 599 (Marion), and 5 billboards for rent on TX 78 from Marion to Schertz.  Also, in Katy, 3 sidings at the Katy yard were full of cars (4 sidings available).  Also, on Fox Business today, they had a trucking report which I missed, but I think it was not good.  Do BO where is the recovery - in yours and JB's heads?

Tue, 11/16/2010 - 03:46 | 730058 Broken_Trades
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Katy mall has been on the decline since 2008.  Theres a lot fo empty retail space in there now.

Mon, 11/15/2010 - 17:50 | 728575 JohnG
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TSHTF.

Mon, 11/15/2010 - 16:08 | 728222 Duuude
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"New applications of technology and new social/economic models (both localized and international) will have to be developed, tested and adapted which require less energy and resources."

 

"The guy with the bigger club wins"

 

There, I fixed it fer ya.

 

Mon, 11/15/2010 - 16:11 | 728229 painequalschange
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"That which cannot continue will stop"

Does that imply "that that which can continue will not stop?"

Mon, 11/15/2010 - 16:14 | 728234 Bruno the Bear
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I love the smell of broken paradigms in the morning.

Mon, 11/15/2010 - 16:29 | 728258 whatsinaname
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you arent talking about the 30year bond paradigm this morning are you ?

gotta have quite a few in a fix I guess..

Mon, 11/15/2010 - 16:20 | 728245 CH1
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when presented with factual evidence that their core beliefs are wrong, humans respond by clinging even more tightly to their fallacious beliefs.
I think that is precisely the reaction of the global Status Quo.

 

YOU NAILED IT!!! Well said.

Mon, 11/15/2010 - 16:22 | 728247 Cognitive Dissonance
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Damn you Charles Hugh Smith, damn you to hell. Now you've gone and popped all my bubbles. 

Na na na, I can't hear you.

Mon, 11/15/2010 - 16:43 | 728304 DoChenRollingBearing
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I figured to find you on this thread Cog Dis!

C. H. Smith writes a compelling story that is hard to refute.  I suppose the only topic he may be wrong about is that I think China will blow up somewhere between now and then.  Historically China blows it just as they are heading to becoming No. 1.  Lots of problems in China too, something that the MSM does not write much about.

Since it looks like nothing constructive will be done here in the USA re deficits, we have to look out for ourselves.  That means doing the mental spade work you have often recommended.

Oh, and buy some gold too.

Mon, 11/15/2010 - 17:21 | 728373 Cognitive Dissonance
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I figured to find you on this thread Cog Dis!

Based upon some troll comments lately I'm a ZH whore. Which means I'm everywhere and anywhere you want me and I work real cheap. Looks like I can retire at the top of my game.

Now if someone would be so kind as to explain to me how the ZH pension works I'll be moving on. I've got my 2 years in. :>)

Mon, 11/15/2010 - 18:34 | 728653 Miles Kendig
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Based upon some troll comments lately I'm a ZH whore.

Cog, since when were you overly concerned with trolls?  I can't speak to your retirement plans.  However I can say that my retirement has been made far better by your contributions and I am sure this sentiment is shared by at least one or two others around here.  I can only hope that you find yourself similarly situated.  Best as always and thank you -

Mon, 11/15/2010 - 16:23 | 728250 Robslob
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And now a word from our sponsor Ben Bernanke:

http://www.youtube.com/watch?v=vdED3rVgIu4

Mon, 11/15/2010 - 16:28 | 728255 Quixote2
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Some Thoughts on Money and the Future

I have been trying to get my brain around the future of money, gold, debt, our government, etc.

Gold, money, fiat, inflation, deflation, etc

Gold and silver are money, the constitution defines the dollar in silver.

Fiat money is debt, generated out of thin air by borrowing by individuals; businesses; and local, state, and Federal government agencies.  The Fed issues generic notes or electronic notations for this debt where the generic note has no distinction between the landscape laborer who bought the $300,000 house with nothing down or the US Treasury.

Deflation is a reduction of money in circulation with a resulting reduction in prices due to less money available.

The amount of gold and silver (money) available in circulation is falling.

The price of stuff (commodities, stocks, food, real estate, etc) is falling when priced in gold or silver (money).

The price of debt notes (including fiat) priced in money is also declining.  Or, gold and silver (money) is increasing when priced in fiat units.  Or, in other words, the real rate of return on fiat is negative.  Zero % interest rates with approximately 10% inflation (my assessment).  Thus gold with zero dividends or interest appears to give a positive 10% return when priced in declining fiat.  Any excess return on gold over the negative real return of fiat (on a global fiat average) is due to speculation and might return to the mean.

We are in deflation/depression as in the early 1930’s when we were on a money (gold) standard.  We are currently in an era of deflation/depression when viewed through the lens of gold/silver money.

Because the money (gold/silver) price of fiat is declining faster than the money (gold/silver) price of stuff, the price of stuff in fiat units is increasing.  This price increase in fiat units is price inflation and often confused with the economic term of money inflation or the increase in money (gold/silver) in circulation.  Thus, we are experiencing fiat price inflation while we are in deflation/depression.  There is nothing that says we cannot have hyper fiat price inflation while we are in money deflation and depression (see Zimbawe).

In the future, guaranteed Social Security benefits will be reduced to 50% (your contribution) the other 50% (employer contribution) will be used to fund means test SS payments.  The reductions will be 5% per year over a 10 year period with the existing Federal Reserve Bank fiat system.

Medicare benefits will be reduced, and price schedule based on taxable income and a means test (net worth statement).  Some life extension procedures will be based (denied) on age.

 

How to fix things in the future

Issue treasury gold certificates at $1 per mg of gold, $1,000 per g of gold, $31,103 per troy ounce of gold.  Issue silver certificates at $50 per g of silver, $1,555 per troy ounce silver.  Let the market sort out if you want to carry Federal Reserve notes, treasury certificates or metal coins in your pocket or in your mattress. 

Physical gold and silver will find its way to the treasury to be converted into coin of the realm.  Most people will be content to carry and spend treasury certificates in daily commerce instead of the easily lost/misplaced gold coins of great value.  The Federal Reserve note will find its real value, approximately zero in the market as people convert to treasury certificates.  This proposal has the benefit of effectively eliminating the Federal Reserve Bank printing worthless fiat.  The treasury gold and silver certificates are freely converted between certificates and metal and back.

Previous loans, obligations, and notes made with Federal Reserve Notes are paid back with fiat notes.  Future loans or obligations are specified in notes or certificates.  The loans owed to China are paid back with fiat notes.  They can be purchased in the market with gold or silver certificates and will approach their inherent value.

China is not singled out, all past obligations made in fiat FR Notes (including home mortgages and all other countries) are paid back in Federal Reserve notes purchased on the market (the political third rail of Social Security gets special consideration).  Future wages are paid in treasury certificates and the banks can readily do an exchange value to fed reserve notes similar to your purchases in Euros or other currencies.  The US will operate for a period with two currencies in circulation.  If I had to guess, today’s value would be approximately $20 in Fed notes equal to $1 in Treasury certificates.  One day’s pay at minimum wages would be roughly equivalent to one gram of silver or a $50 silver certificate.  (The pre 1965 dime, containing 0.0715 troy ounces or 2.224 grams of silver, would be worth $111.18.)

The new treasury certificate currency requires controls to be fully backed by metal in the treasury without any fractional reserve trickery.

The banks and previous lenders get paid back in the currency they loaned out, Federal Reserve notes, they are not cheated.  The notes were originally generated out of thin air and to thin air they will return.  The banks are saved from the mortgage foreclosure mess as the underwater debtors can make their payments with treasury certificate wages converted to FR notes for payment.  Unfortunately, the value of the too big to fail banks will drop approximately a factor of 20 (shed crocodile tears here).

For the complainers of windfall profits.  The increase in gold and silver prices will be taxed at the collectible rate when the investments (include mining stocks) are converted to treasury certificates (40% or so taxes).  The net 60% windfall will probably pass into an inheritance and have another 50% federal tax, thus less than 30% net into the economy stimulation.  The supposed windfall achieved by mortgage holders paying off their previous loans at approximately 5 cents on the dollar would be taxed on any gain from the date of the act incorporating gold/silver certificates currency to the date of the real estate sale.  The capital gain would be calculated in terms of treasury certificates and taxed at the rate of gold collectibles.  Approximately 40% of the real estate gain due to change of currency would go to the government.  If part of an estate, some inheritance taxes might also apply.  If the sale is to move to another house, the tax cannot be rolled over but paid at the closing.  The sellers can use the remaining approximately 60% less fees to pay the new required 20% or greater down on the next house with the provision that payments are calculated assuming a single wage earner.  House prices will return to the previous nominal standard of a loan approximately twice the buyer’s annual gross wages.  

Most pensions will result in the purchasing value of their payouts reduced.  The amount of the reduction will depend on the investments in the pension plan.  Fixed income assets will decline, stocks will probably ultimately increase in price.  The pensions have the requirement of minimum payout of benefits in FR notes.  With stock asset increased prices, the payout will be greater than the minimum of previously quoted FR notes but will be less than the same dollars in treasury certificates.  Below a to-be-determined payout the pension is nontaxable, in excess of that value the income is taxed at the collectable rate.

Social Security.  50% of your social security is paid in treasury certificates instead of FR notes (the special political consideration for reelection purposes).  The 50% employer contribution from the past and in the future is used for means testing social security payouts in excess of your 50% contribution payout.  The value increase of treasury certificate over FR note social security payments is treated as taxable income.

Medicare.   Medicare benefits will be reduced, and price schedule based on taxable income and a means test (net worth statement).  Some life extension procedures will be based (denied) on age.

United States balance of trade and industry.  This is an effective factor of 20 devaluation of the dollar and the price of imports will spike up until other countries devalue a comparable amount.  The US government should start a program to rebuild infrastructure and US manufacturing.  We should immediately offer assistance (tax rebates) in retrofitting automobiles, trucks, etc to dual fuel natural gas and require all new autos, trucks, etc to be dual fuel natural gas within two years.  We should start a national program to convert our rail system to electric within 10 years and include high-speed passenger rail.  We should require all government purchases to be greater than 80-90% domestic manufacture.  We should significantly increase tax on corporate profits derived from US corporate foreign manufacturing imported into the US.  We should provide incentives to take back manufacturing and jobs within the US borders.

Mon, 11/15/2010 - 16:49 | 728329 whatsinaname
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Yes the dollar deval is a great incentive provided by our Messiah to get jobs back. Kudos!!

Mon, 11/15/2010 - 17:29 | 728509 rlouis
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A well thought out solution to something. But, no mention of the military industrial complex which supports the empire, and which has arguably lead to our downfall as much as any entitlement program. Or the reality that we have not been a nation of either law or justice for a long time; the government operates for the benefit of the well connected.  I don't think there can be a 'just' solution to national bankruptcy until there is accountability for bribery, corruption, and theft at the highest levels of government and TBTF banks - and considering that we haven't been able to accomplish meaningful campaign finance reform doesn't give much hope for that excepting public outrage forces some sacrifical turkeys.  That being said, I'm sure a number of your tax observations will play out. Thanks.

Mon, 11/15/2010 - 18:23 | 728633 mnevins2
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"We should provide incentives to take back manufacturing and jobs within the US borders."

I read/skimmed everything in this comment and thought "nothing new," but then I came upon the  last sentence and I thought to myself:

BINGO!!!!

If we don't do this - we're in deep(er) doo-doo.

Tue, 11/16/2010 - 05:10 | 730117 jeff montanye
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i'm don't know about much of what you comment, but the tax aspect re: gains seems a bit incomplete.  even if the bush tax cuts are not extended, heirs receive a stepped up to date of death cost basis for capital assets so no "capital gains" or "collectibles" tax would be paid on prior gains.  in addition, the first $1.2 million of estate value would be tax exempt.  obama's (current?) proposal is to increase that to $3.5 million with the rate after that 45% and date of death cost bases.

Tue, 11/16/2010 - 08:19 | 730184 Disambiguation
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Quixote2,

 

The vast majority of gold is held by the exact same group of power players currently in control. Will changing to a gold/silver standard reduce their ability to manipulate the system?

Tue, 11/16/2010 - 08:19 | 730185 Disambiguation
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Quixote2,


The vast majority of gold is held by the exact same group of power players currently in control. Will changing to a gold/silver standard reduce their ability to manipulate the system?

Tue, 11/16/2010 - 11:04 | 730726 Quixote2
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The gold price basis for treasury certificates is arbitrary, make it $311,000 per troy ounce.  The key is to get the Fed out of generating fed notes out of thin air and charging interest for life to a debt slave.  Enable the treasury to generate the nations currency and the treasury to collect the interest payments instead of banksters.

Mon, 11/15/2010 - 16:32 | 728264 samsara
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Thanks TD for this one by Charles.   The nice thing about his articles besides the graphs and illustrations is the fact that he is Peak Oil aware and incorporates that into his articles about the problems we face and the proposed solutions by the average pundit/economist.

If a thinking person just gazed at the "Growing Gap"  graph,  you will understand at the most base level that "Game's Up".   Notice all the discoveries in the 1960's, when Ghawar, Bergan et al were discoverd, and the spike in the 1980's when the north slope and north sea were dicovered.

BTW, the North Slope (ie Alaska Pipeline) used to pump up to 3 million bpd thru the pipeline.  It is just north of 500,000 bpd now, and just a tad lower and they will have to shut it down.  Not enough pumping thru to keep it flowing in a liquid state.  Oh, and the North Sea is virtually gone too. 

See Richard Heinberg's

The end of growth

<SNIP>

As early as 1998, petroleum geologists Colin Campbell and Jean Laherrère were discussing a Peak Oil impact scenario that went like this. Sometime around the year 2010, they theorized, stagnant or falling oil supplies would lead to soaring and more volatile petroleum prices, which would precipitate a global economic crash. This rapid economic contraction would in turn lead to sharply curtailed energy demand, so oil prices would then fall; but as soon as the economy regained strength, demand for oil would recover, prices would again soar, and as a result of that the economy would relapse. This cycle would continue, with each recovery phase being shorter and weaker, and each crash deeper and harder, until the economy was in ruins. Financial systems based on the assumption of continued growth would implode, causing more social havoc than the oil price spikes would themselves generate.

<SNIP>

http://www.energybulletin.net/stories/2010-11-12/end-growth

Mon, 11/15/2010 - 17:21 | 728475 trav7777
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one quibble:  the major discoveries of the 60s were Prudhoe and N. Sea.

Ghawar and Burgan were discovered in the 30s and 40s.

The largest discovery since the 70s was Cantarell, and once it peaked, it crashed.  One must pray to whatever God you believe in that they all don't decline like that.

Unfortunately, one of the biggest fields ever, Burgan, peaked around '05 and has seen 14% YoY decline rates.  This is incredibly bad.

It's very important to not look at in-place reserves for late discoveries, as the production figures of fields like Tupi and Carioca will be laughably small compared to production figures of older fields of similar stated reserves.

Mon, 11/15/2010 - 17:28 | 728504 samsara
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I stand corrected Trav, (it was a quick from memory).

True about Bergan and Cantarell.

And I agree with your main point, It's all about Flow Rate.

Makes little difference if you have 10 million in the bank, if you can only withdraw 500 dollars a month eh?

If someone mentions Reserve Size, you know it's a red herring...

 

Mon, 11/15/2010 - 17:59 | 728592 trav7777
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what's worst is when they purport to DIVIDE reserves by consumption and get "lifespan."  I even had it out with a pipeline engineer on that one, who cited that the tarsands would last the US 50 years or something.  As if you could flow 18mbpd from them simply because that is the math of reserves/consumption.

The tarsands would last the US a couple hours a day is my response. 

Mon, 11/15/2010 - 18:23 | 728632 Spalding_Smailes
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http://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/ngp...

 

A friend of mine sells dynamite in the pipeline industry. I guess they are working on a major line now coming down from Canada. Will be interesting how this plays out in the future ...

 

Tue, 11/16/2010 - 05:14 | 730118 jeff montanye
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thank you for that cogent point and your expertise generally.

Mon, 11/15/2010 - 18:36 | 728661 Citxmech
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Otherwise known as the "bumpy plateau" [although you could also picture the whole economy  packaged into a box marked "fragile" and dropped down a verry long flight of stairs].

If there's one good thing about the whole peak oil debate is that we should get pretty irrefutable confirmation one way or another within the next 10 years or so of where we're at on the curve [in case the current state of affairs isn't enough evidence for you].

 

Mon, 11/15/2010 - 16:35 | 728274 francismarion
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Charles Hugh Smith, who always seems to hit the nail on the head, says in this posting that 2017 is the beginning of the time of greatest likelihood of war between the US and China.

On Nov 10, 2010, a Song-class Chinese submarine surfaced between Japan and Taiwan, in the middle of a twelve-ship battle group, literally right next to the aircraft carrier USS Kitty Hawk.

That was the day after the missile contrail, later discredited as an aircraft contrail, was spotted fifteen miles more or less off the coast of California.

Message received.

Mon, 11/15/2010 - 17:12 | 728427 Tortfeasor
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The event you are talking about happened in 2007.  You just happened to read the article about it on Nov 10, 2010.

Mon, 11/15/2010 - 17:37 | 728532 francismarion
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Thanks tortfeasor.

Good ol' Google.

 

Mon, 11/15/2010 - 17:37 | 728533 francismarion
francismarion's picture

Thanks tortfeasor.

Good ol' Google.

 

Mon, 11/15/2010 - 17:25 | 728493 trav7777
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Minor quibble:  there is an unstatably VAST difference between maritime and wartime ASW.  Anyone thinking subs can operate with impunity during war is a fool.  They will not be surfacing near anything.

Operating a sub when surface ships and ASW helos are actively looking for you is a completely different proposition.  Nevermind the destruction of your sub yards.

Mon, 11/15/2010 - 22:11 | 729288 Non Passaran
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Search for "carrier killer" and then think again.
Five (or seven, as the case may be) years from now the situation will be very different from now.

Mon, 11/15/2010 - 22:13 | 729291 Non Passaran
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Search for "carrier killer" and then think again. Five (or seven, as the case may be) years from now the situation will be very different from now.

Mon, 11/15/2010 - 18:42 | 728683 Citxmech
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I'm guessing we will have a multitude regional proxy wars over resources before we'll have a standup fight between China and the US.  If the US and China ever go into a hot conflict, we're all going to be in some seriously deep sht.

Mon, 11/15/2010 - 16:36 | 728281 HarryWanger
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Can argue with many points here but merely have to point to one thing only that today is showing: strong dollar across the board and rising stock market. Last time this happened last year, the market rallied hard until year's end with the dollar rising. 

Mon, 11/15/2010 - 16:54 | 728354 samsara
samsara's picture

Ah, comeon HW, at least argue the "Growing Gap" graph with me.  It would seem easy for you to refute since it is only based on 50year geological history. 

Surely you can point to HUGE, I mean HUGE discoveries,

You haven't even mentioned Bakken in SD to solve all are problems...

I bet if they came out and said that an asteroid would hit earth in  10 days, you would still say there is time yet to make money in the markets.  

Psst, Wanna buy my seats on the Fan Tail Harry,  I'll give'm to ya cheap....

Mon, 11/15/2010 - 18:02 | 728594 PolishHammer
PolishHammer's picture

That said, you're spot on Harry and asteroid...but that's why he's worth reading.

 

Cause you know, the people here would hear about asteroid gonna hit in 100 years and they would just buy gold and ammunition and hide in the hills while the "sheeple" would drink fine spirits and party with whores.

Mon, 11/15/2010 - 18:37 | 728667 Miles Kendig
Miles Kendig's picture

Harry, I have to hand it to you.  You are supremely consistent in your commentary and there can be no question that you have a pair of solid brass. Agreed or not in perspective this cheers is for you.

Mon, 11/15/2010 - 20:55 | 729072 fiddler_on_the_roof
fiddler_on_the_roof's picture

I was expecting this. I am waiting for  S&P=1200 and DXY=100 in less than a month. If DXY does not reach that high, S&P should compensate for that. I could be wrong but that is my calculation.

 

Harry : It looks like you will win your bet for $100. I am in your camp.

Mon, 11/15/2010 - 16:37 | 728285 hugolp
hugolp's picture

Absolutely brilliant.

Economist should ditch forever the notion that GDP = growth. Its stupid.

Mon, 11/15/2010 - 18:47 | 728695 the rookie cynic
the rookie cynic's picture

Yes, exponential growth is impossible in system with finite resources.

But until then…repeat after me: growth at all costs, growth at all costs, growth at all costs! We chant it over and over to the Keynesian High Priests that have become gods unto themselves.  Just one problem. Nature, the ultimate lender-of-last-resort, has a balance sheet problem: depletion.

The powers-that-be deny all this. They are a bunch of greedy cowards.

Wake up fellas. Growth is now a curse. In a finite system, exponential growth is a oxymoron.

Contrary to what they preach in Washington and Wall Street, our current economic system destroys the basic resources it depends on to survive. 

They don’t get it. By making us slaves to growth, they force us to commit environmental, and by extension, economic suicide.

 

http://therookiecynic.wordpress.com/2010/10/12/your-lethal-education-par...

Mon, 11/15/2010 - 20:54 | 729067 hugolp
hugolp's picture

You did not get it.

The problem is that increasing the GDP does not necesarely mean growth. Thats the point.

Tue, 11/16/2010 - 18:46 | 732621 the rookie cynic
the rookie cynic's picture

Whether GDP numbers reflect real economic activity is a different issue.

The point I'm trying to make is that a system that destroys the very resources it needs for long term survival is not going to end well.

The goal should be sustainable economics. The planet's too small for everyone to grow exponentially.

Tue, 11/16/2010 - 00:02 | 729741 StychoKiller
StychoKiller's picture

Is the surface of a planet the right place for an expanding
technological civilization?  Check your premises.

Mon, 11/15/2010 - 16:42 | 728298 michael.suede
michael.suede's picture

The fascists have been whining since the 1800's that oil and gas will eventually run out.  Of course, this is always a pretext to support a government takeover of the energy industry.

Anyone who claims we will suddenly run out of this stuff is a nut.

A pure unadulterated nut.

As prices rise, new supplies of energy will be created or found. 

It has been this way throughout history and it will be this way forever.

 

 

Mon, 11/15/2010 - 16:55 | 728362 MyKillK
MyKillK's picture

It's not about running out of oil. It's about production dropping behind consumption, which is already happening. Ever hear of peak oil? Just this last week the IEA announced that peak oil occurred in 2006.

 

"As prices rise, new supplies of energy will be created or found." LOL! Did you even read this article?

Mon, 11/15/2010 - 17:34 | 728524 trav7777
trav7777's picture

I have been citing the world C&C production peak in late 2005 for years.  Did it to the deniers on TF, have done it here.

Didn't do any good then, won't now.  People cannot accept that we cannot simply "put the criminals in jail" and everything will go back to the way it was.

IEA's 2010 energy report is awesome.  As was the World Oil Forecast; I have a copy laying around somewhere.  The ENTIRETY of growth in the medium future is fields "yet to be discovered."  HAHAHAHAHAHA.  Morbidly humorous.

Of course we can maintain NGL and nonconventionals production too...forever.  And there is no inclusion of EROI into the production figures...unconventional oil is fractionally as useful as C&C.  The Peak of net is already here

Tue, 11/16/2010 - 00:15 | 729712 wake the roach
wake the roach's picture

The Peak of net is already here

 

Yep...

Net energy is all that matters and that game is over...  

Its just a more accurate way of saying peak energy purchasing power has come and gone... We may be able to increase total supply (in volume, BOE etc), but you better be able to pay more for it as production profit margins (NEG) is decreasing...

We are already on the "long decline" folks. Increasing total supply to a global economy dependent upon profit (infinite growth/energy consumption) as its modus operandi means nothing when we cannot produce that increased supply without driving value per energy unit higher. When the real value of energy rises (falling NEG from production), the purchasing power of money (and thus economies) falls...

Now anyone who can solve that little predicament and thus save the profit system of energy exchange, please, let me know ok. Oh, and increasing efficiency per unit energy consumed does not count... We have been doing that for thousands of years already. Shoes, clothing etc that cost almost nothing to produce should be proof of our nearing production efficiency limits and as all new "real" value added to an economy must come through the production and sale of new goods/services, well? And don't forget to include Jevons paradox...

When the sum global energy income of consumers reaches the point where goods/services cannot be produced and exchanged above energy value embodied (for profit), the system implodes... Checkmate...

Mon, 11/15/2010 - 17:02 | 728393 samsara
samsara's picture

The fascists have been whining since the 1800's that oil and gas will eventually run out.  Of course, this is always a pretext to support a government takeover of the energy industry.

said the BP employee.

As I said to Harry,  instead of the rhetoric, just dispute the "Growing Gap" graph with any SCIENTIFIC evidence you may have. 

Pop question for you,  What ever happened to the sheep in the in the "Boy who cried wolf" fable?

Mon, 11/15/2010 - 18:41 | 728673 Miles Kendig
Miles Kendig's picture

How can government take over energy when energy, along with finance have taken over government?  That's the fascism

Wed, 11/17/2010 - 14:19 | 734770 Weaseldog
Weaseldog's picture

Anyone who claims we will suddenly run out of this stuff is a nut.

 

Right. That's why nobody says it.

 

As prices rise, new supplies of energy will be created or found.

 

Yes, we'll create energy from nothing, or find it lying around somewhere. For now, we seem to be too ignorant to find thta energy. But someday, in the future, we'll have the technology to save the present, in the future.

 

But for now, we're SOL, aren't we?

Mon, 11/15/2010 - 16:48 | 728318 jmc8888
jmc8888's picture

Less Energy and Resources?

Guy must have never heard of fusion or fusion arc.

Whoops.

Except we do have to actually fund decades of research, and every day that clock is running out.

If we reach his scenario, it's only because we fucked up, in a british monetarist way, and lost our American way.  Anyone see that as possible?

So impeach Obama

Glass/Steagall

NAWAPA (north american water and power act)

Focus obviously on FUSION and FUSION ARC

Space program (lots of resources like h3 in the solar system, hint: moon)

We can't play the same game, the author is right, but is absolutely fucking clueless with how to proceed.

It doesn't involve less energy, and less resources.  You're a fucking smelly fish cunt.

It involves research and development.  It involves throwing out the sophistry that has permeated the world's non-thinking.  It's not about less, it's about MORE.  But from OTHER sources, that we MUST fund.

Think we can get any money from cancelling the bailouts, giveaways, and mortgage guarantees?  Sure can.

One's a waste, the other is a way out.

Or we can all fight for the scraps as everything runs out....needlessly.  The author is a dumbass, because his box, his viewpoint of reality is really just a UPS flate rate box.  For the mentally challenged, that means small.

This is our only shot to survive.  The author's way, won't work.  It never had a chance of working, it was just about using up finite resources slower to prolong the inevitable by fascist destroying the world and depopulating the planet.  His way doesn't work, and it surely might cost you and yours everything. 

Only way out is to use human ingenuity.  Now!

Get Obama out NOW!  Article 25 come on.  Biden's choice, the reality meets the definition.

Glass/steagall

NAWAPA

ETC

It's not hard.  A fucking smart three year old could understand it. 

 

Wed, 11/17/2010 - 14:31 | 734830 Weaseldog
Weaseldog's picture

It doesn't involve less energy, and less resources.  You're a fucking smelly fish cunt.

 

Yes, because annual resource consumption can exceed the mass of the solar system.

 

Our energy production can rise until the Earth emits more enegry than the sun!

 

Screw exponents. They're stupid...

 

There are no limits! Ever!

 

"To infinity and beyond!" - Buzz Lightyear

Mon, 11/15/2010 - 16:51 | 728342 OutLookingIn
OutLookingIn's picture

 

 Another energy 'fact' that was not touched on is energy consumption by per capita of population. Yes. China has surpassed the US in 'net' energy consumption, but when viewed as per capita usage, China and India use 2 barrels of oil per citizen. Whereas the US uses 20 barrels of oil per citizen!

This is now in the process of reversing. Imagine what that portends for the future living standard of Americans? I foresee North American rickshaws and bicycles! 

Mon, 11/15/2010 - 17:02 | 728394 Citxmech
Citxmech's picture

Those pesky laws of thermodynamics might be a bit of impediment to your plan for infinite growth.

"Manufacturing" energy is always an engery sink [ie charging batteries, generating electricity, liquifying coal, etc...]. 

Finding worthwhile stores of existing energy gets more difficult over time and the energy returned on the energy invested to access said energy gets lower as the quality of the stores decline. 

Time will not solve this problem. 

Mon, 11/15/2010 - 17:02 | 728397 Canucklehead
Canucklehead's picture

I smell a bear raid in the offing...

Mon, 11/15/2010 - 17:05 | 728404 Sudden Debt
Sudden Debt's picture

7 good years, 2001 to 2008

7 bad years, 2009 to 2016

 

All you need to know people, all you need to know.

Mon, 11/15/2010 - 17:19 | 728471 anarkst
anarkst's picture

Hey Charles, did you hear about the big earthquake in San Fransisco?

Mon, 11/15/2010 - 17:39 | 728542 rlouis
rlouis's picture

Excellent analysis, graphs and charts.  Another path to the cliff of doom, and only one reference to unfunded liabilities for social security.  As with the  tobacco companies legal teams, we can't expect an honest discussion with the entrenched interests as long as they have any belief or hope of holding on to their power.  Thanks.  

Mon, 11/15/2010 - 17:39 | 728543 trav7777
trav7777's picture

good article.  A restatement of drums I've been beating for years. 

Mon, 11/15/2010 - 18:19 | 728622 Mercury
Mercury's picture

11. The government is in business for itself.

I'd say that paradigm is still holding up nicely.

Mon, 11/15/2010 - 18:45 | 728684 Miles Kendig
Miles Kendig's picture

The business of American government is serving business, winners or losers. The rest of the crap is a facade to keep the citizenry secure in their belief systems while serving the interests of the corporate state.  Old news

Tue, 11/16/2010 - 01:00 | 729889 CH1
CH1's picture

The business of the American government is skimming money from their subjects. Well, that and gaining the worship, adoration and obedience of the masses.

Mon, 11/15/2010 - 18:28 | 728640 Djirk
Djirk's picture

{on the couch} "I'll never drink again"....{phone rings}  "no man, I am way too hung over...well OK but only one drink"   rinse repeat.

Well done T.D.....Great perspectives on wealth and recurring bad behaivior.

I think there are ways to innovate out of some of these cycles (maybe not the pending entitlement cluster fjuk).

Unfortunately I believe people and politicians will probably need a(nother) crisis to shake them into action.

Sorry gotta run and turn up the heat, the cold wind is coming through my windows.

 

Mon, 11/15/2010 - 18:58 | 728724 Stuck on Zero
Stuck on Zero's picture

We should add number 11 to the Status Quo's essential paradigms:

11) Billionaires are #1 in all considerations. 

 

Mon, 11/15/2010 - 19:05 | 728738 Fu Manchu
Fu Manchu's picture

Well unlike the author of this article, I do have a crystal ball, and this is what I see: game-changing innovations, unforeseen cultural changes, technological singularities, possibly even the emergence of a new prophet or religion.  Imagine some hunter-gatherers ten thousand years ago sitting around saying "we're doomed!" while in the next valley over some enterprising fellows were busy revolutionizing human society by inventing agriculture.  That's about where we are now, on the cusp of a new paradigm, the mother of all black swans, so making predictions based on the old paradigm is just plain silly.

 

 

Mon, 11/15/2010 - 19:54 | 728888 samsara
samsara's picture

...Well unlike the author of this article, I do have a crystal ball, and this is what I see: game-changing innovations, unforeseen cultural changes,...

Actually you are right on the unforeseen cultural changes.   Oil might last a while longer.

Of course that's after we drop a billion or 3 in population.

No one ever sees those changes coming either.

 

 

Mon, 11/15/2010 - 19:14 | 728768 Ye Ye
Ye Ye's picture

I agree with many of the dynamics illustrated here, but the easy out seems to be massive currency devaluation.  "Fixes" asset devaluation and "avoids" default.  Nobody will want to trade with the US anymore (including sending us oil), which might force us into a PM standard, but it will certainly free up China to import tons of energy.  The unsustainable "defense" machine will have to be shut down.  We'll all curse the baby boomers, STFU, convert to natural gas, and discover our backbones.

How to trade?  I first tried Linux in 1994 and immediately concluded Sun was dead, about 5 lucrative years ahead of schedule.  Having said that, holding physical seems reasonable.

Mon, 11/15/2010 - 19:28 | 728813 ApeMilesHigh
ApeMilesHigh's picture

Is anyone up on the use of Thorium to replace most of the uranium in a modified reactor that will operate more safely and allow us to use up the leftovers of spent fuel rods and so to get rid of most nuclear waste. I believe we have abundant availability of Thorium.

Mon, 11/15/2010 - 19:58 | 728905 samsara
samsara's picture

Hey, can you make high density polyethylene out of that there thorium?  How about PVC?  ABS? Any Long chain organic compounds? ....

Or does it only make electricity?

Mon, 11/15/2010 - 19:36 | 728833 Kina
Kina's picture

And Assyria was all powerful, until it wasn't. Bet they were suprised at the change in reality.

At its height Assyria conquered Egypt (and expelled its Nubian dynasty), Babylonia, Chaldea, Elam, Media, Persia, Urartu, Phoenicia, Aramea, the Neo-Hittites, Hurrians, northern Arabia, Gutium, Palestine, Israel, Judah, Moab, Edom, Corduene, Mannea and parts of Ancient Greece, and defeated Scythia, Cimmeria, Lydia, Nubia and others. Assyria finally succumbed with the sack of Nineveh in 612 BC by a coalition of Babylonians, Medes, Scythians and Cimmerians. An Assyrian king Ashur-uballit II held out at Harran until 608 BC, but was presumed killed when it was besieged. Final resistance seems to have ended in 605 BC with the failure of an Egyptian relief force.

Mon, 11/15/2010 - 19:48 | 728866 trav7777
trav7777's picture

no...they weren't.

This paragraph you wrote about a century long decline took me a mere few seconds to read.

History didn't unfold in a few seconds.  Even the final conquest took 7 years.  There was no sudden shock, no surprise, no instantaneous collapse.

It only *looks* that way when you read about it.  Even Weimar took years.

We are currently in a period which will occupy a few-second paragraph in a future history book.  They will surely ask about how surprised we all were to "wake up" in a geological time sense and find that everything had changed.

Tue, 11/16/2010 - 12:13 | 731014 powersjq
powersjq's picture

+1

History has to be written as a drama--emphases on interesting moments and high points, passing over the boring stuff--or it isn't interesting to read.  Life is lived without any skips over the boring or unpleasant parts.

Mon, 11/15/2010 - 20:03 | 728924 Kina
Kina's picture

Things went south quickly for the Assyrians, no doubt over stretched and over spent though they used to commadere defeated forces into their own armies. From being invincible to continually being on the defensive was the paradigm shift for them.

 

And oh how the bible rejoices and blows rasperries at their ending.

Mon, 11/15/2010 - 23:31 | 729540 Buck Johnson
Buck Johnson's picture

No fixing this one, we are done.

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own's picture

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Tue, 11/16/2010 - 02:22 | 730000 tony bonn
tony bonn's picture

as a tangent, petroleum and natural gas are NOT fossil fuels....i feel that folks will start clinging REAL hard.

Wed, 11/17/2010 - 14:35 | 734852 Weaseldog
Weaseldog's picture

Uhm? What?

 

Is that sarcasm?

 

I hope so, because yeah, they are fossil fuels.

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