Deflationary Collapse Ahead?

Submitted by Gail Tverberg via OurFiniteWorld.com,

Both the stock market and oil prices have been plunging. Is this “just another cycle,” or is it something much worse? I think it is something much worse.

Back in January, I wrote a post called Oil and the Economy: Where are We Headed in 2015-16? In it, I said that persistent very low prices could be a sign that we are reaching limits of a finite world. In fact, the scenario that is playing out matches up with what I expected to happen in my January post. In that post, I said

Needless to say, stagnating wages together with rapidly rising costs of oil production leads to a mismatch between:

• The amount consumers can afford for oil
• The cost of oil, if oil price matches the cost of production

This mismatch between rising costs of oil production and stagnating wages is what has been happening. The unaffordability problem can be hidden by a rising amount of debt for a while (since adding cheap debt helps make unaffordable big items seem affordable), but this scheme cannot go on forever.

Eventually, even at near zero interest rates, the amount of debt becomes too high, relative to income. Governments become afraid of adding more debt. Young people find student loans so burdensome that they put off buying homes and cars. The economic “pump” that used to result from rising wages and rising debt slows, slowing the growth of the world economy. With slow economic growth comes low demand for commodities that are used to make homes, cars, factories, and other goods. This slow economic growth is what brings the persistent trend toward low commodity prices experienced in recent years.

A chart I showed in my January post was this one:

Figure 1. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.

The price of oil dropped dramatically in the latter half of 2008, partly because of the adverse impact high oil prices had on the economy, and partly because of a contraction in debt amounts at that time. It was only when banks were bailed out and the United States began its first round of Quantitative Easing (QE) to get longer term interest rates down even further that energy prices began to rise. Furthermore, China ramped up its debt in this time period, using its additional debt to build new homes, roads, and factories. This also helped pump energy prices back up again.

The price of oil was trending slightly downward between 2011 and 2014, suggesting that even then, prices were subject to an underlying downward trend. In mid-2014, there was a big downdraft in prices, which coincided with the end of US QE3 and with slower growth in debt in China. Prices rose for a time, but have recently dropped again, related to slowing Chinese, and thus world, economic growth. In part, China’s slowdown is occurring because it has reached limits regarding how many homes, roads and factories it needs.

I gave a list of likely changes to expect in my January post. These haven’t changed. I won’t repeat them all here. Instead, I will give an overview of what is going wrong and offer some thoughts regarding why others are not pointing out this same problem.

Overview of What is Going Wrong

1. The big thing that is happening is that the world financial system is likely to collapse. Back in 2008, the world financial system almost collapsed. This time, our chances of avoiding collapse are very slim.
2. Without the financial system, pretty much nothing else works: the oil extraction system, the electricity delivery system, the pension system, the ability of the stock market to hold its value. The change we are encountering is similar to losing the operating system on a computer, or unplugging a refrigerator from the wall.
3. We don’t know how fast things will unravel, but things are likely to be quite different in as short a time as a year. World financial leaders are likely to “pull out the stops,” trying to keep things together. A big part of our problem is too much debt. This is hard to fix, because reducing debt reduces demand and makes commodity prices fall further. With low prices, production of commodities is likely to fall. For example, food production using fossil fuel inputs is likely to greatly decline over time, as is oil, gas, and coal production.
4. The electricity system, as delivered by the grid, is likely to fail in approximately the same timeframe as our oil-based system. Nothing will fail overnight, but it seems highly unlikely that electricity will outlast oil by more than a year or two. All systems are dependent on the financial system. If the oil system cannot pay its workers and get replacement parts because of a collapse in the financial system, the same is likely to be true of the electrical grid system.
5. Our economy is a self-organized networked system that continuously dissipates energy, known in physics as a dissipative structure. Other examples of dissipative structures include all plants and animals (including humans) and hurricanes. All of these grow from small beginnings, gradually plateau in size, and eventually collapse and die. We know of a huge number of prior civilizations that have collapsed. This appears to have happened when the return on human labor has fallen too low. This is much like the after-tax wages of non-elite workers falling too low. Wages reflect not only the workers’ own energy (gained from eating food), but any supplemental energy used, such as from draft animals, wind-powered boats, or electricity. Falling median wages, especially of young people, are one of the indications that our economy is headed toward collapse, just like the other economies.
6. The reason that collapse happens quickly has to do with debt and derivatives. Our networked economy requires debt in order to extract fossil fuels from the ground and to create renewable energy sources, for several reasons: (a) Producers don’t have to save up as much money in advance, (b) Middle-men making products that use energy products (such cars and refrigerators) can “finance” their factories, so they don’t have to save up as much, (c) Consumers can afford to buy “big-ticket” items like homes and cars, with the use of plans that allow monthly payments, so they don’t have to save up as much, and (d) Most importantly, debt helps raise the price of commodities of all sorts (including oil and electricity), because it allows more customers to afford products that use them. The problem as the economy slows, and as we add more and more debt, is that eventually debt collapses. This happens because the economy fails to grow enough to allow the economy to generate sufficient goods and services to keep the system going–that is, pay adequate wages, even to non-elite workers; pay growing government and corporate overhead; and repay debt with interest, all at the same time. Figure 2 is an illustration of the problem with the debt component.
   
   
   

   Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Where Did Modeling of Energy and the Economy Go Wrong?

1. Today’s general level of understanding about how the economy works, and energy’s relationship to the economy, is dismally low. Economics has generally denied that energy has more than a very indirect relationship to the economy. Since 1800, world population has grown from 1 billion to more than 7 billion, thanks to the use of fossil fuels for increased food production and medicines, among other things. Yet environmentalists often believe that the world economy can somehow continue as today, without fossil fuels. There is a possibility that with a financial crash, we will need to start over, with new local economies based on the use of local resources. In such a scenario, it is doubtful that we can maintain a world population of even 1 billion.
2. Economics modeling is based on observations of how the economy worked when we were far from limits of a finite world. The indications from this modeling are not at all generalizable to the situation when we are reaching limits of a finite world. The expectation of economists, based on past situations, is that prices will rise when there is scarcity. This expectation is completely wrong when the basic problem is lack of adequate wages for non-elite workers. When the problem is a lack of wages, workers find it impossible to purchase high-priced goods like homes, cars, and refrigerators. All of these products are created using commodities, so a lack of adequate wages tends to “feed back” through the system as low commodity prices. This is exactly the opposite of what standard economic models predict.
3. M. King Hubbert’s “peak oil” analysis provided a best-case scenario that was clearly unrealistic, but it was taken literally by his followers. One of Hubbert’s sources of optimism was to assume that another energy product, such as nuclear, would arise in huge quantity, prior to the time when a decline in fossil fuels would become a problem.
   
   
   

   Figure 3. Figure from Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.

   The way nuclear energy operates in Figure 2 seems to me to be pretty much equivalent to the output of a perpetual motion machine, adding an endless amount of cheap energy that can be substituted for fossil fuels. A related source of optimism has to do with the shape of a curve that is created by the sum of curves of a given type. There is no reason to expect that the “total” curve will be of the same shape as the underlying curves, unless a perfect substitute (that is, having low price, unlimited quantity, and the ability to work directly in current devices) is available for what is being modeled–here fossil fuels. When the amount of extraction is determined by price, and price can quickly swing from high to low, there is good reason to believe that the shape of the sum curve will be quite pointed, rather than rounded. For example we know that a square wave can be approximated using the sum of sine functions, using Fourier Series (Figure 4).

   
   

   Figure 4. Sum of sine waves converging to a square wave. Source: Wolfram Mathworld.

4. The world economy operates on energy flows in a given year, even though most analysts today are accustomed to thinking on a discounted cash flow basis.  You and I eat food that was grown very recently. A model of food potentially available in the future is interesting, but it doesn’t satisfy our need for food when we are hungry. Similarly, our vehicles run on oil that has recently been extracted; our electrical system operates on electricity that has been produced, essentially simultaneously. The very close relationship in time between production and consumption of energy products is in sharp contrast to the way the financial system works. It makes promises, such as the availability of bank deposits, the amounts of pension payments, and the continuing value of corporate stocks, far out into the future. When these promises are made, there is no check made that goods and services will actually be available to repay these promises. We end up with a system that has promised very many more goods and services in the future than the real world will actually be able to produce. A break is inevitable; it looks like the break will be happening in the near future.
5. Changes in the financial system have huge potential to disrupt the operation of the energy flow system. Demand in a given year comes from a combination of (wages and other income streams in a given year) plus the (change in debt in a given year). Historically, the (change in debt) has been positive. This has helped raise commodity prices. As soon as we start getting large defaults on debt, the (change in debt) component turns negative, and tends to bring down the price of commodities. (Note Point 6 in the previous section.) Once this happens, it is virtually impossible to keep prices up high enough to extract oil, coal and natural gas. This is a major reason why the system tends to crash.
6. Researchers are expected to follow in the steps of researchers before them, rather than starting from a basic understudying of the whole problem. Trying to understand the whole problem, rather than simply trying to look at a small segment of a problem is difficult, especially if a researcher is expected to churn out a large number of peer reviewed academic articles each year. Unfortunately, there is a huge amount of research that might have seemed correct when it was written, but which is really wrong, if viewed through a broader lens. Churning out a high volume of articles based on past research tends to simply repeat past errors. This problem is hard to correct, because the field of energy and the economy cuts across many areas of study. It is hard for anyone to understand the full picture.
7. In the area of energy and the economy, it is very tempting to tell people what they want to hear. If a researcher doesn’t understand how the system of energy and the economy works, and needs to guess, the guesses that are most likely to be favorably received when it comes time for publication are the ones that say, “All is well. Innovation will save the day.” Or, “Substitution will save the day.” This tends to bias research toward saying, “All is well.” The availability of financial grants on topics that appear hopeful adds to this effect.
8. Energy Returned on Energy Investment (EROEI) analysis doesn’t really get to the point of today’s problems. Many people have high hopes for EROEI analysis, and indeed, it does make some progress in figuring out what is happening. But it misses many important points. One of them is that there are many different kinds of EROEI. The kind that matters, in terms of keeping the economy from collapsing, is the return on human labor. This type of EROEI is equivalent to after-tax wages of non-elite workers. This kind of return tends to drop too low if the total quantity of energy being used to leverage human labor is too low. We would expect a drop to occur in the quantity of energy used, if energy prices are too high, or if the quantity of energy products available is restricted.
9. Instead of looking at wages of workers, most EROEI analyses consider returns on fossil fuel energy–something that is at least part of the puzzle, but is far from the whole picture. Returns on fossil fuel energy can be done either on a cash flow (energy flow) basis or on a “model” basis, similar to discounted cash flow. The two are not at all equivalent. What the economy needs is cash flow energy now, not modeled energy production in the future. Cash flow analyses probably need to be performed on an industry-wide basis; direct and indirect inputs in a given calendar year would be compared with energy outputs in the same calendar year. Man-made renewables will tend to do badly in such analyses, because considerable energy is used in making them, but the energy provided is primarily modeled future energy production, assuming that the current economy can continue to operate as today–something that seems increasingly unlikely.
10. If we are headed for a near term sharp break in the economy, there is no point in trying to add man-made renewables to the electric grid. The whole point of adding man-made renewables is to try to keep what we have today longer. But if the system is collapsing, the whole plan is futile. We end up extracting more coal and oil today, in order to add wind or solar PV to what will soon become a useless grid electric system. The grid system will not last long, because we cannot pay workers and we cannot maintain the grid without a financial system. So if we add man-made renewables, most of what we get is their short-term disadvantages, with few of their hoped-for long-term advantages.

Conclusion

The analysis that comes closest to the situation we are reaching today is the 1972 analysis of limits of a finite world, published in the book “The Limits to Growth” by Donella Meadows and others. It models what can be expected to happen, if population and resource extraction grow as expected, gradually tapering off as diminishing returns are encountered. The base model seems to indicate that a collapse will happen about now.

Figure 5. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil” http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

The shape of the downturn is not likely to be correct in Figure 5.  One reason is that the model was put together based on physical quantities of goods and people, without considering the role the financial system, particularly debt, plays. I expect that debt would tend to make collapse quicker. Also, the modelers had no experience with interactions in a contracting world economy, so had no idea regarding what adjustments to make. The authors have even said that the shapes of the curves, after the initial downturn, cannot be relied on. So we end up with something like Figure 6, as about all that we can rely on.

Figure 6. Figure 5, truncated shortly after industrial output per capita (grey) and food per capita turns down, since modeled amounts are unreliable after that date.

If we are indeed facing the downturn forecast by Limits to Growth modeling, we are facing  a predicament that doesn’t have a real solution. We can make the best of what we have today, and we can try to strengthen bonds with family and friends. We can try to diversify our financial resources, so if one bank encounters problems early on, it won’t be a huge problem. We can perhaps keep a little food and water on hand, to tide us over a temporary shortage. We can study our religious beliefs for guidance.

Some people believe that it is possible for groups of survivalists to continue, given adequate preparation. This may or may not be true. The only kind of renewables that we can truly count on for the long term are those used by our forefathers, such as wood, draft animals, and wind-driven boats. Anyone who decides to use today’s technology, such as solar panels and a pump adapted for use with solar panels, needs to plan for the day when that technology fails. At that point, hard decisions will need to be made regarding how the group will live without the technology.

We can’t say that no one warned us about the predicament we are facing. Instead, we chose not to listen. Public officials gave a further push in this direction, by channeling research funds toward distant theoretically solvable problems, instead of understanding the true nature of what we are up against. Too many people took what Hubbert said literally, without understanding that what he offered was a best-case scenario, if we could find something equivalent to a perpetual motion machine to help us out of our predicament.

Comments

[Rhal]

Radiation has ways of sticking around in ways smog doesn't, and the danger is completely unnecessary. 

We are running the exact WRONG sort of reactors. These fast reactors have frequent downtimes wherein they are dependant on outside power for cooling. And the spent fuel is still lethal. Today there is enough "spent" fuel to power breeder reactors for a long time.  No reactor should ever be built unless it can passively self-cool, and burn to depletion. ( Think breeder reactor, like the Candu series). 

Better yet a thorium reactor. 

[jmaloy5365]

You go Really, 

Don't suspect that most on here know that the NRC has made change requirements of nuclear plants to prevent a fukashima here. and OUR current nuclear fleet are spending millions and millions on making them SAFER.....

[jmaloy5365]

Quit talking out your ass, I'm a radiation protection tech for 25+ years and you don't know what you're are talking about. You have as much knowledge about nuclear power as Cramer knows about stock markets.

You know how much alpha radiation/contamination that a coal plant puts out? I do....

Only people up arrowing you are people that watch CNN....

[serotonindumptruck]

"It is difficult to get a man to understand something, when his salary depends on his not understanding it." -- Upton Sinclair

[rsnoble]

At one time I wanted to be one of those 'survivors'.  Now, after years and years of studying all this shit, and seeing what has happened, and what might happen, i'm not so sure.  I'm starting to lean more towards gun to the head, fuck this bs it's all a pathetic existence.  In other words, i've had enough.

[robertocarlos]

She just blew my mind.

[blindman]

you serious man?
"...We end up with a system that has promised very many more goods and services in the future than the real world will actually be able to produce."
....
comment:
think,
understanding is about direct experience combined
with reflection and cognitive mapping.
.
i missed the part where any promises were ever made
or kept excepting that one lady.

[honestann]

The sad thing is, if money wasted by the predators-that-be on wars and welfare were invested in new energy sources, we'd already be set with sufficient energy for another million years.

All this "finite resources" talk is pure nonsense.  The only reason that talk more-or-less corresponds to what may happen, is because human predators waste about 98% of human production and ingenuity.

The article is correct about one thing though.  The current financial/credit/debt system is so utterly corrupt, that it could spell death for the entire human race the way things are going, because too much is wired to depend on its smooth operation.

[dogster]

Quite right, Dutti.  The economy is collapsing because the Jews are suppressing the price of gold and keeping the borrowers on the hook.

I say a quick hyperinflation is in order, and Antarctica for the Jews.

[coast]

All I asked is "who will you sell your gold too"?  the central bankers? China?  Switzerland?.   So what you thinking is, things will get better, and a a new regime will take over, and the monetary policy will go back to normal.....are you friggin kidding me?

[Hope Copy]

gold = black market barter..  paper = rationing

[Downtoolong]

I love the charts in the Conclusion Section. Forget the labels. The lines pretty much work for any explanation of current affairs.

[TheObsoleteMan]

STAY FOCUSED. As the global economic system becomes increasingly more fragile, the Anglo-American-Zionist powers will do what they always do: WAR. Iran and Russia are being set up for hostilities. Keep your eyes on the ball.

http://www.cnn.com/2015/08/25/politics/air-force-f-22-europe/index.html

[Vlad the Inhaler]

"Without the financial system, pretty much nothing else works". Um, no. Things "worked" for homo sapiens for about 200,000 years. From the time we diverged from other ape men, to when we numbered about half a mil as the industrial revolution came along. And things will work again if we don't kill each other first, they'll work without this rotten financial system.

[outlaw.guru]

Although I like most of this article, I find too many contradicting terms. I believe we will one day hit the limits of growth but this is not it yet. What we are encountering is the max inequality period which is also explained in the article as in that people cannot afford many things. This leads to lowering the resource use of our finite earth, not reaching the limits. When we hit these, food, clean water and energy will go sky high causing what the chart shows i.e. a lot of death. Either through fighting or famine. Reaching it would require each man on earth to consume as much as western civilazation. After a trip to India I understand how little resources a 1.3 billion of people live of. If they consumed as much as the west, this would be an immediate hit to oil, forest land, food.

[kchrisc]

I have been hearing about peak oil for at least 35 years now. Whatever.

There is no such thing as peak oil. As a matter a fact, the "peak oil" speech was given to a nuclear energy group. And nuclear energy IS safe, at smaller scales.

Zion, and the "fossil fuels" industries, hobbled nuclear in the 50s. As a result, "fossil fuels" have continued to dominate, and the nuclear plants that were built were built on a massive, and unsafe, scale.

Zion is a scheme, not an ethnicity.

[hungrydweller]

This article became stupid once she showed a chart that indicates the growing supply of oil juxtaposed against her entire premise of "a finite world".  There are so many inconsistencies in this article that it is rendered useless.

[humble_man]

RE: Graphs in your conclusion. Where are the numbers on the y-axis? I would not have made it through intro Calculus (or Stats) if I left an axis blank. Also, when did you originally publish these graphs, and how have current events changed it?

I'm not opposed to the premise, but if there is weakness in your logic, I dig deeper. Want me to keep going?

[Bemused Observer]

Deflationary collapse...you say that like it's a bad thing...

[steelrules]

I don't about this deflation thing you speak of, as a business owner I can only say that everyone of my input costs is going up, just got a letter today from my biggest supplier that there's another 6.5% coming.

[CHX]

GDP ~ (inflated) money supply * (collapsed) money velocity

That is all you need to know. The real economy has been going down for years (money velocity is the proof) and this has been (over-)compensated by monetary inflation. As money velocity is approaching zero, we're getting closer and closer to the event horizon of a gigantic black hole (debt that cannot be serviced).   

[Hope Copy]

I've got three books of pre soviet railway bonds, last coupon clipped although..  this time there will be no clipping... and martial law, rationing and the show goes on.

[22winmag]

It's getting awfully near the point where it takes a barrel of oil to extract and refine one.

You know what happens then?

GAME OVER!

[Dr_Snooz]

The 2008 collapse was precipitated by vast millions of subprime home "owners" who couldn't afford their skyrocketing mortages. The banks making CDO gambles on those crummy loans immediately collapsed. Now it seemed obvious to me at the time that the answer was to bail out the homeowners. Leaving aside the moral objections, keeping people in their homes through write-downs, write-offs and debt jubilees, would have yielded the least disruption to society and the financial system. Instead, we opted to give a big pile of money to the banks, then let them take all the houses too! This solution bankrupted the government and the people. It was criminally insane and set us up for the ugly cataclysm we face now.

As was the case with the last crisis, the answer to this crisis is, again, debt write-downs, write-offs and jubilees. Instead, we are going to stick it to the little people again, stealing their tents, cardboard boxes and shopping carts, all so the banks can keep pursuing their suicidal policies. This article points out that this is going to bring down the entire global financial architecture. The future is indeed grim. Everyone is going to be destroyed so, again, the banks can pursue their own destruction.

We could solve this all easy enough with real and meaningful reform, but we won't. We don't have to burn down the world, but we will. *Sigh*

[Dis-obey]

Dishing out cash to the homeowners to keep them in their houses seems like a good idea especially if your a homeowner.  However it is intervention in the free market. Let the defaults happen. Let the banks that made the bad bets fail. This would bring the prices down to where they should be. Instead we are making an entire generation homeless because “deflation is bad”

[Arthur]

Wow, what a bunch of garbage.   I kept reading to see just how inane the logic could get.

There is plenty of oil.  Certainly enough for the next fifty years.  Presuambly by that time alternative sources will be in place. heck Germany is majority solar now.  They just need to work out the back up and peak demand challenges.  I'm sure they will in 20 years certainly 50.

[yt75]

"lol"

No, Germany isn't "majority" solar -- at all --

Looking at a few numbers before talking could help you a bit maybe.

[TeaClipper]

An understanding of all the products oil is used in wouldnt go amiss either. I'll give you Plastic for starters

[yt75]

Here is a hint :

https://upload.wikimedia.org/wikipedia/commons/a/af/Electricity_Producti...

And remember that this is only for electricity, so far from the complete energy consumption

For the complete energy mix, you get :

• Oil 35.0%
• Bituminous coal 12.6%
• Lignite 12.0 %
• Natural gas 20.4%
• Nuclear power 8.1%
• Hydropower, windpower, solar 2.1%
• Other renewable 9.0%
• Others

Knowing that amongst the 2.1%, solar is the smaller, getting the right figure is left as an exercice for ya.

[TeethVillage88s]

I think must be thinking Households in Germany.

Germany shut down Nuclear Power after Fukushima, and then subsidized Solar for Houses.

I don't know the numbers.

But found reference that Lignite is 26% of Germany's Power.

https://en.wikipedia.org/wiki/Lignite

- found reference that at times Solar can reach 50%

"Finally, the reform efforts of the solar PV and renewable support programs in Germany should not be interpreted as an acknowledgment of a broad failure of the Germany system of FITs. Rather, while the reforms are indeed an effort to improve the design of the FIT system, for example by introducing more rapid adjustments of FITs to observed deviations of actual from desired installation levels, they are also a sign of the solar PV sector maturing. Germany is unique among OECD countries in having managed to significantly increase the share of renewables in its electricity mix – by now a power generation share of some 25% has been reached. There is broad political support for a continued aggressive move towards an essentially carbon-free sector by 2050 with a renewables share above 50% by 2030. "

"By year-end 2013, Germany had installed 35.7 GW of solar PV capacity. With almost a third of global installed capacity, this makes Germany by far the country with the largest installed solar PV capacity, as shown in Figure 1 below. The 29.7 TWh of electricity produced by PV represented 5.7% of total energy production in Germany. At times, output from solar PV plants in Germany now covers in excess of 50% of demand.[6]"

[6] See Fraunhofer ISE, Recent Facts about Photovoltaics in Germany, April 10, 2014

http://www.seia.org/research-resources/solar-energy-support-germany-clos...

[Dr. Engali]

Wow! That's a special kind of stupid right there.

[Rhal]

I agree this article is needlessly negative on its future outlook. But my reason for optimism is based on suppressed technology that should be available after the collapse. 

If you research the history of energy suppression you'll quickly learn that oil and even nuclear are obsolete. Well, they should be...

[Magooo]

ARE YOU READY TO SUFFER, STARVE AND DIE?  

THAT'S THE FATE THAT AWAITS US ALL.

COLLAPSE IS IMMINENT

[Dis-obey]

3rd century Rome 2.0 Bread (food stamps) circuses (Mainstream media) a self serving deep state (same) and an ever diluted currency to pay for it all(QE). Do you remember what came next.

Welcome to New age. -Imagine Dragons  

[Md4]

Eventually, even at near zero interest rates, the amount of debt becomes too high, relative to income. Governments become afraid of adding more debt. Young people find student loans so burdensome that they put off buying homes and cars. The economic “pump” that used to result from rising wages and rising debt slows, slowing the growth of the world economy. With slow economic growth comes low demand for commodities that are used to make homes, cars, factories, and other goods. This slow economic growth is what brings the persistent trend toward low commodity prices experienced in recent years."

Been saying this for quite some time now.

Western corporate outsourcing (for greedy short-term gain) may well have accelerated the inevitible: productive capitialism has it's limits.

I mean, think about it. When you outsource industries and middle class jobs (livelihoods) that were products of the industrial revolution and the genius of a relative handful (an Alexander Graham Bell or a Thomas Edison, as examples), that led to inventions that generations of first-world workers turned into superpower economies (the US and western Europe mostly), and you replace that with essentially...nothing...what does anyone expect is going to happen?

It took generations to advance to the peak (probably sometime in the 1980's) of western civilization as we knew it. One simply cannot order up a Bell or an Edison on command. They happen, or they don't. And today's "innovation" is much more about mere iterations of what already is, instead of the kinds of "revolutionary" ideas they had. Further still, with each advance comes more and more sophisticated capacity required JUST to comprehend and build upon what was, let alone, actually "discover or invent" something really new.

Like a completely new form of endless energy unlike anything we've ever seen, for example.

That's tough to do, even with more sophisticated masses, which we seem to lack. And no, merely being able to use a cellphone, for example, really doesn't qualify us to be labelled "sophisticated". Contemplating that wholly new form of energy not seen before...would.

Bottom line to me is, if we expect any chance at overcoming the painful effects of the outsourcing "checkmate" we're all but in, we'd better start thinking much more like the crew members of a StarFleet vessel.

Sound silly?

Not really.

That fictional "culture" arose out of the realization that money and the further advance of humanity--along a new course of discovery for discovery's sake, purely--were completely incompatible. Even, an anathema.

Greed, always the fuel of for-profit endeavors, ALWAYS ended in war, famine, death, and destruction. If human beings were to survive, let alone advance, we had to get a whole lot more serious about what is...and what is NOT important.

Perhaps, Mr. Rodenberry really does have some answers for us.

m

[mcq]

This is such hogwash.  There may in fact be a big debt reset coming, but it will not stop the world from turning.

New currencies will be issued, new laws, probably some new tyrants.  

Will America break up?  Maybe.  But there will NOT BE a complete dissolution of society.

There will still be weatlhy, there will still be poor, but the world will mostly go on... AS IT ALWAYS HAS!

[RockySpears]

"There will still be weatlhy, there will still be poor, but the world will mostly go on... AS IT ALWAYS HAS!"

That's is the point though, IT HASN'T.

Everything we know is basically less than 3,000 years old, and most of it less than 200.

Nothing new has come along in near 100 years, telephones, TV, Planes, Cars etc etc.  Even space travel is now 60 years old!  The internet has just replaced reference books, board games and newspapers.  What genuinely new things are there?

We do the same things with slightly different kit, but what new stuff do we do?

  Remember, just 3 or 4 (missing) meals away, is chaos.

[mcq]

It won't be chaos.

You obviously don't live in the North East.  I do.  I lived in NJ during 2013 when Sandy hit.  There was no power for weeks.  No where to buy gas.  Only one place to shop for food.

Also... NJ is the most densly populated state, and some of the areas seriously effected were in the "dense" part of the state.

It really doesn't get much worse than that, but people tend to be much better people during crisis.  So no matter what, the world will go on in the same but diffrerent.

[Rhal]

Well said, more people should realise that. There will be locales where people have a "dog eat dog" attitude, and will loot for any excuse, but most people will help each other just like in previous disasters. We will actually become better for this. 

[OleMiss22]

I'm 24 years old, I wish I would have been mature enough to absorb Ron Paul's politics. The man was spot on about everything.

I don't even know what to think anymore. Tonight at the grocery, I was almost ran over by a chick my age, as she mindlessly operated her buggy through the store, while staring down at her cell phone. That is a symbol of the mental breadth of my generation. My only console is that I have barely any skin in this f'ed up "market". I wish y'all the best. I would like to say we don't deserve this, but it takes an alert, steadfast populace to maintain liberty - for which we have most definitely failed.

[Dis-obey]

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

-Thomas Jefferson in opposition to the creation of the first national bank. The banks charter expired in 1811

-Then you have AJ on the secound national bank:

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out."

Today both of these great men would be considered crackpots by the standards of the mainstream. For the tendrils of the beast run deep.

There is a ray of light. History shows us the banksters can be taken down.  Who will have the courage to bring down the beast. End the fed.

[sTls7]

The system/country will go on with the 'middle class' being replaced by the 'nanny state'...  corporatons and the government won't miss a step and this could go on for decades before any collapse.

[Rastech]

Plasma Gasification + Syngas can produce all the liquid and gas fuels we need, quite economically (even more economically when free waste is used as a feedstock, free waste that includes sewage sludge). Molten Salt Thorium Reactors can easily provide safe, clean, cheap electrical power, for 1,000's of years. Waste heat from Plasma and MSTR can provide clean, cheap, water (especially with the new Lockheed Martin desalination membrane) and the 'waste' waste heat and electricity can heat huge numbers of greenhouses and power growing lights.

Plastics etc can be produced from synthetic hydrocarbons (as well as things like hemp).

Synthetic fuels are ultra clean, Plasma and MSTR have very little in the way of emissions (emissions are feedstock, who would want to waste them). We already have the solutions to real problems that can carry us for centuries, and even longer term solutions are now in easy reach, with availability in the near future (China, for example, is going full speed ahead for MSTR).

The human footprint today, is less than 2.5% of the World's surface (yes, it's been measured), and the vast majority of that, is agricultural land. Even the UN admits that human population is going to fall significantly from around 2050. With poverty (e.g. Third World), the most important power source is manpower (and child power). For survival, large families in those circumstances are essential, and that manpower is too tied up with survival (collecting fuel, collecting water, growing food) to have time to waste on education.

Too many people are wasting their time and our resources and wealth (even destroying wealth creation in the process), concentrating on fictitious problems, because it is problems that give them power, and problems that make them rich. Solutions do not give them an edge that they can exploit to their advantage (and our disadvantage).

Synthetic lubricants have been far superior to oil based lubricants, for about 50 years now. I first used synthetic lubricants in my motorbike over 40 years ago - it was made from sugar.

Personally, I have had mnore than enough of the deliberate scaremongering, and the deliberate obstruction of affordable solutions, all going on whiel people's purchasing power and wealth is being destroyed for them by unscrupulous, criminally insane incompetents in Government, Bureaucracy, and paid lobbyists who only serve anti-human radicla Marxist agendas.

We don't have 'Capitalism' (Capitalism requires 'Capital'), we have Cartel, Monopolistic, Anti Competitive, Racketeering, Corporate Socialism. Corporate Socialism is Fascism (it was Mussolini's definition of Fascism, which he created to restore Internationalism for Communism after the disaster for Internationqalism that was WW1), and in Mussolini's own words: “Fascism is the same thing as Communism.” Benito Mussolini to Alfred Bingham, 1931  

[Batman11]

When one financial system collapses you change the rules and create another.

The dollar used to be directly tied to gold but too many people wanted to swap their dollars for gold.

What would happen when all the US gold ran out?

In 1971, they changed the rules so that the dollar was not backed by gold.

The crisis was averted.

The monetary system is a fairly arbitrary construct, in the past they have used shells, tally sticks, etc  ......

Going back to shells is not that practical but there are many, many other possibilities.

One paper currency can soon become another, Reichsmarks to Deutsche Marks.

You can mint a quadrillion dollar coin to pay off all debts.

Anything is possible, you just need to change the rules (and laws if necessary).

[falak pema]

Just as PCR's take on ruinous Imperial Oligarchy vs demise of western democracy, Gail's take of finite resources vs runaway debt's impact in western run economies is a watershed article.

Neither of them are soothsayers. The future is beyond our absolute comprehension BY Definition; Heisenberg's uncertainty principle always applies, especially to human constructs; BUT, both have reasoned their arguments to its logical conclusion based on past history, comparative analysis and extrapolation into future.

At least we have a framework to work with in each case.

Lets see how this plays out in each case. We are the privileged audience in PCR's Coliseum world and Gail's debt suffocating web of financial intricacy that throttles human energy and fossil energy's diminishing EROEI.

[Man-Bear-Pig]

A complete mish-mash of ideas.  No focus to the article.

[falak pema]

holistic; doesn't meant its mish-mashed but creating a complex model does have many correlative assumptions.

[gcjohns1971]

% rise in housing costs, auto costs, health care costs, and many other consumables have risen by multiples in the last 70 years adjusted for inflation.  Oil, gasoline, and other petroleum products are By comparison are flat.

Authors' entire argument requires petroleum to be more expensive with accelerating price rises relative to other goods.

[AE911Truth]

We have not needed coal, oil, gas, or nuclear energy, or surface roads for transportation for more than fifty years.

https://www.youtube.com/watch?feature=player_detailpage&v=lyXi1efbYrk#t=4028

Humanity has a very bright future once everybody wakes up and rid ourselves of these criminals.