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The Real Reason the Economy Is Broken (and Will Stay That Way)

More and more economic sinkholes
Tuesday, February 12, 2013, 8:54 PM

We are far enough and deep enough into the most heroic monetary and fiscal efforts ever undertaken to finally ask, why aren't these measures working?

Or at least we should be.  Oddly, many in DC, on Wall Street, and the Federal Reserve continue to steadfastly refuse to include anything in their approaches and frameworks other than "more of the same."

So we are treated to an endless parade of news items that seek to convince us that a bottom is in and that we've 'turned the corner' often on the flimsy basis that in the past things have always gotten better by now.

The framework we operate from around here is simply encapsulated in the observation that there has never been global economic recovery with oil prices above $100 over barrel.  That is shorthand for the idea that oil is the primary lubricant of economic growth and that it is not just the amount of oil one has to burn but also the quality, or net energy, of the oil that matters. 

If we want to understand why all of the tried-and-true monetary and fiscal efforts have failed, we have to appreciate the headwinds that are offered by both a condition of too-much-debt and expensive energy.  Neither alone can account for the economic malaise that stalks the world.

Getting a Little for a Lot

Trillions have been printed and injected into the world's economies, and yet things seem to be barely limping along, requiring constant attention and interventions from both fiscal and monetary authorities. 

The broadest measure of money in the U.S. is Money of Zero Maturity, or MZM.  Note that it has increased by an astonishing 44% since the start of the crisis:

We could similarly look at the Federal Reserve balance sheet, or excess reserves, or a dozen other indicators that all say the same thing: The money supply has been expanded enormously.

And what do we have to show for it?

Not much.

Since 2005 real that is, inflation-adjusted GDP has only expanded by 0.9% on an annualized basis.  On a nominal basis (not inflation-adjusted), the number is only 2.9%, far below the 5%-6% required to sustain a banking system dependent on exponential growth in that range.

In a very nice piece of work entitled Our Investment Sinkhole Problem, Gail Tverberg put up this handy and extremely important chart:

Oil and GDP are highly correlated and always have been.  The general observation is that growth in GDP is usually higher than growth in oil consumption - as growth in oil consumption powers economic growth.  Without growth in oil consumption, GDP growth doesn't advance.

Back in 2009, in a piece entitled Oil - The Coming Supply Crunch (Part I), I calculated that every 1% increase in global GDP was associated with a 0.25% increase in oil consumption in other words, a roughly 4:1 ratio.

Since 2007, something quite remarkable has happened in the world of oil, and that has been a decline in the consumption of oil in the U.S. and Europe -- with China and India pretty much making up the difference for everything that the West didn't consume.

That, plus a dramatic increase in the price of oil were the only ways to balance out the fact that since 2005 oil production has been essentially dead flat:

If the view that oil consumption and economic growth are linked is correct, then we might easily imagine that simply making money cheaper and more widely available would do little to boost the real economy.

Sure all that funny money will boost asset prices, but in this story, the tail does not and cannot wag the dog.  Stock prices may rise, but unemployment will not budge.  Bonds will become more expensive, but GDP will stall.

Hollowed Out

Now the Fed is finally showing signs of saying hey, what gives? as its policies do little to improve the things it publicly admits to wanting to improve.

In this recent speech by Janet Yellen, Vice Chair of the Fed, you can see her nibbling all around the edges of the mystery:

In the three years after the Great Recession ended, growth in real gross domestic product (GDP) averaged only 2.2 percent per year. In the same span of time following the previous 10 U.S. recessions, real GDP grew, on average, more than twice as fast--at a 4.6 percent annual rate.  So, why has the economy's recovery from the Great Recession been so weak?

(...)

[T]he unprecedented level and persistence of long-term unemployment in this recovery have prompted some to ask whether a significant share of unemployment since the recession is due to structural problems in labor markets and not simply a cyclical shortfall in aggregate demand. This question is important for anyone committed to the goal of maximum employment, because it implicitly asks whether the best we can hope for, even in a healthy economy, is an unemployment rate significantly higher than what has been achieved in the past.

For the Federal Reserve, the answer to this question has important implications for monetary policy. If the current, elevated rate of unemployment is largely cyclical, then the straightforward solution is to take action to raise aggregate demand.

If unemployment is instead substantially structural, some worry that attempts to raise aggregate demand will have little effect on unemployment and serve only to stoke inflation.

(Source)

As I said, the Fed is nibbling, but it is not yet even close to the center of the conundrum.  Yes, there are structural issues at play, but they have as much to do with expensive oil as they do with any great shifts in labor market trends. 

The main part to consider here is contained in the last two bolded parts in the above quote.  If the Fed is just chucking more and more money into an economy that has fundamentally shifted into a lower gear, then all they are doing is laying the tinder for future inflation.

Given the amounts involved, the potential for a very punishing period of inflation is quite high, for reasons often discussed here, such as in the recent article QE For Dummies.

Economic Sinkholes

This leads us back to Gail Tverberg's piece on economic sinkholes.  Her main point in that piece was that in times past, higher investment led to higher output.  That is, spending led to economic growth, especially investment spending.

Carefully buried within higher oil prices are higher prices for every single economic activity that uses them.  Along with diminishing ore yields come incrementally higher costs to simply, extract, and refine those ores, let alone fashion them into something useful.

Gail writes:

All types of mineral extraction, but particularly oil, eventually reach the situation where it takes an increasing amount of investment (money, energy products, and often water) to extract a given amount of resource. This situation arises because companies extract the cheapest to extract resources first, and move on to the more expensive to extract resources later.

As consumers, we recognize the situation through rising commodity prices. There is generally a real issue behind the rising prices -- not enough resource available in readily accessible locations -- so we need to dig deeper, or apply more “high tech” solutions. These high tech solutions indirectly require more investment and more energy, as well.

While we don’t stop to think about what is happening, the reality is that increasingly less oil (or other product such as natural gas, coal, gold, or copper) is being produced, for the same investment dollar. As long as the price of the product keeps rising sufficiently to cover the higher cost of extraction, the investor is happy, even if the cost of the resource is becoming unbearably high for consumers.

(Source)

The summary here is that it takes more and more to achieve less and less.  The old form of economic growth is no longer with us, but the Fed still doesn't get it.  It still has its eyes firmly trained on economic indicators and equations, having not yet raised its gaze into the real world where limits are being reached.

As Gail nicely encapsulates, many of those limits are carefully hidden from view as a slightly but steadily reducing net energy for oil seeps into every nook and cranny of our complex economy.

The sinkholes that we are facing now are extraordinary.  Some of them are quite literal, and numerous, as Harrisburg, Pennsylvania is demonstrating:

Bottom Falls Out of Debt-Ridden City

Jan 31, 2013

HARRISBURG, Pa.—With midnight approaching on New Year's Eve, Sherri Lewis and her two children knelt to pray for a better year ahead.

A few minutes later, she heard a rumbling that sounded like fireworks. The ground outside her apartment had opened up, revealing a municipal disaster that shows how far this city's finances have sunk.

A sinkhole, measuring about 50 feet long and eight feet deep, had swallowed Ms. Lewis's street, damaging water and gas pipes and forcing more than a dozen residents to evacuate one of the city's poorest neighborhoods. "I thought the world was ending,'' says Ms. Lewis, 42 years old.

Harrisburg officials have identified at least 40 other sinkholes around the 50,000-person city. The combination of particularly sandy soil and leaky pipes under Harrisburg's streets make it susceptible to sinkholes, city officials say. But Harrisburg has a bigger problem: The Pennsylvania capital can't afford to replace many of the aging pipes, some of which date back to the 19th century.

The metaphor perfectly offered by Harrisburg is that once you run out economy, your current infrastructure alone may be well beyond your means to maintain.

The embodied energy in just our existing property, plant, and equipment is enormous.  Nearly every high-tech dream of a kinder, gentler future where 9 billion people somehow enjoy higher average standards of living than the current 7 billion requires an extraordinary investment of energy.

Left out of this dream is a crisp articulation of exactly where that energy will come from and when we will begin to transition to prioritizing its use towards building and maintaining all of that new infrastructure.  It's not enough to merely buy electric cars, should they ever be manufactured in sufficient quantities, because we also need new grid components, electrical storage, generation, and a thousand other components to pull it off.

I note that with every passing year, more and more internal combustion engine (ICE) vehicles are manufactured and sold, not fewer and fewer.  The past 7 years has seen the number of new ICE vehicles sold grow at a compounded rate of 3.7% per annum, and at that rate, 2013 should see more than 80,000,000 sold.  That's up from just over 50,000,000 only ten years ago.

Every one of those represents the investment of energy and capital that will consume our remaining oil at the expense of anything else we might choose to do with that oil, such as maintain our current infrastructure as we build out the next one.

Conclusion

As we dump more and more money into the economy, hoping with all our collective might that it will once again sputter back to life and lift all fortunes and boats, too few are asking what happens if it does not.

If there are other factors at work here besides a simple case of too much debt, then the Fed is not only barking up the wrong tree, but is unaware that a very dangerous animal with a bad attitude is resting up there.

These are truly extraordinary times.  I am in awe of the number of otherwise professional investors who believe that the Fed has things safely in hand.  The amount of market insanity and complete disconnect from reality has me thankful that I already lived through a similar time and can keep things in perspective now.

That time was 2005 to 2007, when I was trading quite actively and thought the world had gone mad.  Nothing made sense, because I was trying make sense of things that could not be made sense of.   In times of extraordinarily abundant liquidity and loose monetary policies, all that has to be understood is that financial assets tend to run up in price during such moments.

The fact that this all ended quite badly then does little to make me think this time is going to end any better.  Thin-air money, attempting to print one's way to prosperity, and spending more than you have are proven losers in the history books.

Yet here we are, doubling down we're all in and I guess there's no turning back now.  The Fed is going to keep with the program until forced to change by circumstances.

As I see it, the economy is broken and it will stay that way.  Our only hope for an alternative would be to immediately cut our losses in those enterprises that do not make sense in a world of increasingly expensive liquid fuels, and invest heavily in those things that will help us transition to a future without fossil fuels.

I am quite aware that many decades’ worth of fossil fuels remain, but equally aware that all energy transitions require four to six decades under ideal conditions where one is transitioning to a higher quality fuel source and capital is expanding. 

And under less-than-ideal conditions, where we are transitioning to a lower density energy source (as all alternative energy sources are) and capital is shrinking?  There we might imagine it could take longer than usual; a 100-year transition period is not out of the question.

In the meantime, the best I can tell you is that the markets are reflecting liquidity, not reality, and that until and unless the world suddenly starts to produce a lot more crude oil and the U.S. and Europe increase their consumption of it, I will remain quite skeptical of all pronouncements of recovery in the West.

~ Chris Martenson

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25 Comments

MarkBahner's picture
MarkBahner
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This observation is based on how many instances?

The framework we operate from around here is simply encapsulated in the observation that there has never been global economic recovery with oil prices above $100 over barrel.

How many times in the 20th century were oil prices over $100 a barrel?

cmartenson's picture
cmartenson
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Oil over $100

MarkBahner wrote:

The framework we operate from around here is simply encapsulated in the observation that there has never been global economic recovery with oil prices above $100 over barrel.

How many times in the 20th century were oil prices over $100 a barrel?

There was a period in the late 1970's (inflation adjusted of course) where oil was over $100 per barrel wadn that was followed by the infamous double dip recessions of the early 1980's, then there was the price spike in 2008, and now there is the past year.  

So that would make three in the past thirty four years.  It bears noting that the current run is the longest in the series and is still going.

In six out of the last six recessions in the US, oil prices spiked.  The only anomaly of the past forty years was the period from 2003 to 2007 where oil prices trippled without triggering a recession.  Of course, that was also a period of incredibly loose monetary policies and extraordinary private credit growth which, of course, ended quite badly not long after that.

However, we cannot really call that period from 2003 to 2007 a period robust growth either, as the chart in the above article suggests by noting that real per capita GDP between 2005 and 2011 logged a miserable -0.1% growth in GDP.

As ever, my point is see if anyone cares to explain why this time will be different.

SingleSpeak's picture
SingleSpeak
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This observation is based on how many instances?........

All of them.   enlightened

SS

Stan Robertson's picture
Stan Robertson
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Oil price effect on economy

After the double dip recession in 1982, oil prices remained at about $90 / bbl in current dollars until the Saudis pulled the plug on the OPEC quota cheaters in late 1985. In the meantime, the U.S. economy grew robustly for the next three years. Of course the cheaper oil spurred even further growth after the drop in oil price. (Saudi production declined from about 12 million barrels per day down to about 2.5 million barrels per day between 1979 and late 1985. KSA was the swing producer that maintained the high oil prices until their revenues dropped too low.)

While high oil prices may be part of the reason for the current sluggish economy, the example of rapid economic growth in 1983-4-5 suggests that there are other major contributors. In addition, the impact on consumers ought to be comparatively muted these days because the higher fuel economy of the vehicle and truck fleet has reduced fuel consumption per vehicle by about 25% for the same number of miles driven.

While it is inevitable that there will come a day when world oil production begins to decline, it is not clear to me that it will occur before the end of another decade. For numerous reasons, shale and tight formation oil production will likely never push U.S. oil production up above 10 million barrels per day, but that might well be enough to delay peak oil by as much as ten years.

Stan

Arthur Robey's picture
Arthur Robey
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The importance of Energy.

Not forgetting the biggest bit of data. When we never had oil our economy was a desperate struggle for survival.

I see that the Celani demonstration is now at 115% efficiency.

In the wee hours of the 13th they halved the input power to 51W. And still the efficiency goes up. Oh Happy day.

tricky rick's picture
tricky rick
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tricky rick

Arthur...  Celani demonstration...  what is that?

cmartenson's picture
cmartenson
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Oil and inflation and economic growth/recessions

Stan Robertson wrote:

After the double dip recession in 1982, oil prices remained at about $90 / bbl in current dollars until the Saudis pulled the plug on the OPEC quota cheaters in late 1985.(...)

Stan

Stan,

the data I have tells a different story...

Here's a chart of inalfation adjusted oil prices.  Mind you, I think inflation has been systematically understated for a few decades, so this chart is not exactly right as far as I am concerned, but I think it is directionally correct.

It wasn't until oil fell below $80 that the double dip recession ended, and then the bull market of the 1980's started (marked by the first green arrow).  Fallling oil prices are a good, and I would say necessary, tailwind for a rising equity market.

Note that the entire time that oil was rising theough the 1970's was economically ugly.  Inflation was high, growth was low, and stocks just gyrated about as real growth was hard to come by.

After the quickie recession in 1991 oil prices continued to slide to their recent historical low of $10-$11 per barrel in 1998.  This too was associated with a lot of economic growth and advance of equity prices.  

So my general relationships are:

  • Low and/or falling oil prices = necessary for economic growth (and equity advancement)
  • High and/or rising oil prices = a headwind  for economic growth (and equity advancement)

Perhaps correlation is not causation but this is one of the more robust correlations in the data series.  

Certainly there are a lot of other factors too, such as demographics, technology developments that enable productivity gains, etc., but I think one could do worse than to elevate the master resource to the top of the heap and keep a close eye on it.

gillbilly's picture
gillbilly
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I would also add falling interest rates

and a greater widening of income disparity. Real wages continue to fall for most people or remain stagnant. It would be interesting to see the above inflation adjusted oil price chart superimposed on top of the move in interest rates. As you have pointed out many times, I agree that even if we discover a new energy source (for instance Aurthur's Celani), the build out will take a long time. Moore's law has been in a state of decline for the past 15 years, so contrary to most people's belief, the rate of innovation in computation is actually slowing.

Thank You

Stan Robertson's picture
Stan Robertson
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More on oil prices

Chris,

I was working for an oil reservoir engineering firm in the 1980s. We had to keep track of oil prices because of windfall profits taxes applicable to our clients. The price of crude oil in the nominal dollars of the day stayed within a dollar or two of $30 per barrel from late 1982 to late 1985. I just guessed at a factor of 3 inflation to arrive at a $90 current equivalent. The CPI deflator would make that about $74, however that number is so cooked that I have no confidence in it. Nevetheless, oil prices were not falling appreciably here in the mid-continent in 83-84-85.

Stan

Pioneer's picture
Pioneer
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A confidence game more than real economics?

I wonder if one of the Fed's goals is a little more selfish than actually fixing the economy for the welfare of humanity: creating an illusion of economic health so people will keep spending, committing their futures, and thereby keep business as usual going, pumping profits into the pockets of the vested interests of the Old Paradigm  - a "confidence game", where the lemmings keep lining up at the cliff where they are fleeced as they fall over the edge by a Plutocracy who have parachutes for themselves (or think they do). 

I don't think this is just a cynical view but a real possibility.  Surely the inefficiencies and abuses of the Old Paradigm are not just mistakes, especially not now that their flaws are exposed and yet they are still ingrained in policy  - someone does not want the economy fixed because they will lose control and cash, or at least they don't want it fixed until they are sure they can keep their favored strategic position? 

I'll place my bets with REALITY, and thank God people like Chris can see it and help us to see it clearly  - not play the game but preserve my wealth in PMs and life-critical tangible assets.  And when the people AND their leaders realize we must create a New Paradigm and consequent policy and economic activity can actually "be made sense of", then I will invest in the New Paradigm.  OR SHOULD WE BEGIN TO INVEST IN THAT PARADIGM NOW?  (renewable energy, rail system, geothermal-solar-wind, electric car battery research....)  - any comments?

RJE's picture
RJE
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OIL is the game, and watching the price is most...

...necessary. Oil today is probably 10 to 20 Bucks higher because of above ground issues that will be with us until well past the plateau, and down the backslide of King Hubbert's curve. If anyone really thinks that the Middle Eastern political issues are resolvable then I feel they are mistaken. $90 dollar Oil is not sustainable let alone $100.

Debt too is a huge problem, it cannot be paid back, and entitlements cannot be paid out. So Debt will get destroyed and entitlements will be modified. Growth is just not going to happen and that is that. I would be extremely happy to afford the necessities going forward. Food, Water, Heat, and Clothing. This outcome though means the end of everything we have enjoyed, and frankly if you're not moving forward then backwards and the human is not wired to go backwards. So something must give at some point. Natural disaster or man made it will happen. It always has, and we are not entitled, really, so why get bogged down in the "lets suppose this or that"? I'm not talking about managing our current affairs but of the extremes. That reality will play out I suspect but no one here really even understands that hardship, and as well as we plan our plans are finite too for there are others who are stronger than we are.

Not until someone takes the hit on debt, and it gets destroyed, and the realization that entitlements have never been saved but already spent, will change in narrative be achievable.

Not until we implement some energy plan our future will just consist of many more pot holes as was demonstrated in Harrisburg, and then one day, 30 years hence, we wake up to Detroit. What happened?

Some may laugh at Detroit but I think it is everywhere USA in 30 years if we don't use it as an awakening.

These times we live in feels like war time. It does. Liberties suspended, surveillance is heightened, borders protected, shipping lanes are quarrelled about, resources fought over, and everyone blames the other. All nations propaganda is measured, and truth is buried deep, and is highly suspect. You only lie when the truth is worse than anyone could possibly imagine. Or you lie when what you have is more than you need but you haven't the muscle to protect it.

The Fed is perplexed! That's reveling don't you think?

Oil is embedded in everything, and will always react in sync with paper printing as passing the cost of inflation on to the consumers of the world is an easy add where Oil is concerned. So all necessities like food, water, and heat will walk in lock step with Oil. You gotta have it. Everything else is discretionary and at $90 to $100 hundred dollars a barrel with wage deflation means everything else suffers. IMHO

Man, am I ever happy that the Tigers have started spring training. For the next 8 months I will have joys to my days, and nothing in this world will take from me my memories, and times spent with my Lady and loved ones. The only things I care about frankly in these uncertain times. Well, one other thing I see as very important, and can't get off my mind is the price of a barrel of Oil. It keeps me from being spontaneous as I understand how precious that energy source is. So I maintain my Preparations and Resilience so I can think when others are scrambling. It's cheaper this way too.

Lastly, not all is grim. Michigan does now have "right to work laws", natural gas (Antrum Shale), land, water for drinking and for navigation, plenty of cheap housing, great climate, and a work ethic. Detroit is at the bottom as the bottom has indeed fallen out so a resurgence in manufactuering then? I hope so.

BOB

gillbilly's picture
gillbilly
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Oil IA price and interest rates...

The two charts are pretty much identical (excluding normal lag) until you get to around 2004 - 7 (40 years after peak oil discovery), then they diverge. There is forty years of correlation which now is broken. Well, at least for now... I can almost hear the inflation calling in the distance.

http://www.fedprimerate.com/prime-rate-chart.htm

RJE's picture
RJE
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Gillbilly,

...the first chart looks like Dr. Kings Oil chart at its completion. Yikes!... " In the year 2065... if Man is still alive"...............He will be.

BOB

Dwig's picture
Dwig
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With a broken market, what next?

Chris,

As I see it, the economy is broken and it will stay that way.

OK, let's take that as a given.  You and your associates here have done an excellent job analyzing the "brokenness" of the economy, and predicting the likely macroeconomic effects.  I can understand the scary fascination of this, somewhat akin to watching a large ship sink over a period of several hours.

I'm going to suggest another theme that I think deserves at least equal attention in the feature article section and weekly newsletters.  In "What should I Do" you have a nicely developing section on the site.  Also, given my interests, I was happy to see the Community wiki.  So, how about ferreting out and tracking "What people are doing" to adapt to the emerging reality?  For example:

  • Instructive examples of individual and family resilience
  • Applications of appropriate technology
  • Economic relocalization
  • Alternative and complementary local currencies, especially created by and/or adopted by local governments
  • Non-currency transaction systems such as time banks, credit clearing systems, community sharing of resources
  • Local production of primary resources like food and energy
  • Cohousing, intentional communities (there's an emerging body of experience and knowledge of success and failure factors.
  • Inner city areas taking charge of their own destinies. (I'm thinking especially of things like Will Allen's work in Detroit, but probably Majora Carter of PCI could put you on to some other good examples.  Come to think of it, Debbie Cook, also of PCI, might be a good resource.)

I guess the main theme might be "chronicling the birthing process of the new US economy and society".

Arthur Robey's picture
Arthur Robey
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Your Little Ray of Sunshine.

Can I resist the temptation? Umm. No.

The second thing bringing manufacturing back to the U.S. is the rise of fracking techniques for the immense U.S. shale gas deposits.

and

The U.S. manufacturing renaissance is not just a fantasy - it is actually happening. Jobs that had been outsourced to China and elsewhere really are returning to the United States.

Source.

The Celani demonstration is at 114% efficiency and climbing steadily.

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amusedtodeath
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Chimp brains in a bell jar!

Could we have have David Collum back for a half year report please? I've listened to the year end reveiw podcast at least 3 times and I feel like one of Davids "chimp brains in a bell jar" while the world says everything is normal out there. Today the BBC program World Buisnes had I guy from PricewaterhouseCoopers saying (with accompanying graphs) that fracking will reduce the oil price by 40% in 20 years!

Nobody in the mainstream media wants to confront these things and ask the really difficult questions of high energy extraction and rapid depletion rates. 

RJE's picture
RJE
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Arthur,

...we really do need to get out of the way and let these fine Folks change the world don't we? Someone, somewhere out there has solutions to our issues and they need to be elevated to their rightful place. Some day, some day. If given the proper motivation I believe a commercial sized, scalable, battery storage system can be had.

Be good Captain

BOB

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funglestrumpet
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Climate Change

The thing I find most confusing is the complete absence of any discussion of climate change. Can it really be that it is such a hot topic in America that it is in fact too hot to discuss? Surely not!

We can clearly see that the climate is changing, and changing in line with how the science says it will change. With a weakening jet stream that is now prone to meander, farmers - and resilient communities for that matter - will find it very difficult to produce food when they do not know if they are going to suffer drought or deluge.

Climate change is not something that only concerns future generations, it is upon us now and unless we have some dramatic event, such as WW3, it is only going to get worse. Surely articles such as this one should at least take it into consideration, oil is a fossil fuel after all. Or is it the case that it is not only the Fed and the other central banks that have blindfolds on when it comes to difficult issues?

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therooster
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On the cusp of some huge answers

We need to keep simple issues simple. There are a host of things we need to do, including creating energy alternatives. Underlying all of those issues, we still have a need for liquidity and debt keeps getting in the way. The market (not gov't or banking) needs to wake up from its sleep and realize that the table has been set to use real-time (floating) gold-as-money.  Debt-free store of value has now been married with instant global liquidity (restrained only by trade value which now floats). I hope this creates appreciation for why the gold-dollar FIXED peg of $35/oz had to be severed so that gold could be re-monetized in real-time at the point of the market's choosing. This real-time migration MUST be bottom-up and organic and cannot be top-down in consideration of the legacy system of the USD. We must be as wise as serpents.

RJE's picture
RJE
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My Dear Brother,

...please do educate. You spent all this time trying to bitch slap me/us that I didn't hear your message. Tell us what we should do within your thread, and please remember you are talking to people who are more like you than not. That have made changes themselves.. Personally I am all ears and have made many changes behaviorally to be a part of the solution.

I meant all due respect with my response so please take it that way. I DO NOT however care to be preached to nor do I respond well to the self righteous.

Respectfully

BOB

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Doug
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no discussion??

funglestrumpet wrote:

The thing I find most confusing is the complete absence of any discussion of climate change. Can it really be that it is such a hot topic in America that it is in fact too hot to discuss? Surely not!

We can clearly see that the climate is changing, and changing in line with how the science says it will change. With a weakening jet stream that is now prone to meander, farmers - and resilient communities for that matter - will find it very difficult to produce food when they do not know if they are going to suffer drought or deluge.

Climate change is not something that only concerns future generations, it is upon us now and unless we have some dramatic event, such as WW3, it is only going to get worse. Surely articles such as this one should at least take it into consideration, oil is a fossil fuel after all. Or is it the case that it is not only the Fed and the other central banks that have blindfolds on when it comes to difficult issues?

I don't know if you are referring to this site or in general, but there is a very good and long thread on climate change here:

http://www.peakprosperity.com/forum/definitive-global-climate-change-aka-global-warming-thread-general-discussion-and-questions/71

The other day I was watching C-Span which was showing a Senate Agriculture Committee hearing with the Secretary of Agriculture and the Department's Chief Economist.  I found it heartening that both had a very sophisticated understanding of climate change, particularly with regard to its effects on, not surprisingly, agriculture.  The message they were delivering was that the dry regions of the country, particularly the plains states and the southwest, should be preparing for drier conditions.  They have already experienced a couple years of drought and this year appears to be shaping up to be another one.  Low snowpack in the Rockies, Mississippi levels still low and the Ogalalla acquifer draining were all on the drawing board.  Many of these areas are facing a real dilemma as to whether to continue to rely on irrigation which is dwindling or to switch to "dry land" farming.  The latter may be be forced on them, which means lower production and exports of ag goods.  They are also looking at another possible dust bowl that many of the farmers heard about from their parents and grandparents.  There is a great deal of concern and awareness out there.

Doug

smb12321's picture
smb12321
Status: Member (Offline)
Joined: Nov 19 2011
Posts: 10
Alternative Energy Alert

Watch out.   Cheering for a way out of our current mess is unpopular on PP.  There will NEVER be a tech fix; we will NEVER find cheap fuels; technology will NEVER allow us to view our impending decline of resources as a small glitch  LOL  Efficiency, miniaturization, conservation - all are starting to make a difference.  

RJE's picture
RJE
Status: Diamond Member (Offline)
Joined: Aug 31 2008
Posts: 1369
smb12321,

...not fair Brother. We have reems, and reems of discussion where we know what we could be doing, and using all of the above alternatives and technology but we have 'NO PLAN'. Talk all you want about how we can do things, and it is likely we would all agree. Now what are you going to do? Yup, you'll shake your head as we all do.

Regards

BOB 

westcoastjan's picture
westcoastjan
Status: Gold Member (Offline)
Joined: Jun 4 2012
Posts: 468
please elaborate for us

@ smb12321,

Efficiency, miniaturization, conservation - all are starting to make a difference. 

Wonderful news! I would like to hear more about how these things you are speaking of are making a difference in a meaningful way. Will you please provide us with some concrete facts backed up with the appropriate sources to support up your claim? That way we will know that you have some credibility, and are not a troll getting your jollies...

Contrary to what you may think, I believe everyone in this PP community would like nothing more than to find some truly workable solutions. Most people have families and want nothing more than to be assured that their children and grandchildren will have decent futures. But until those solutions are presented as being credible and being implemented most of us are hedging our bets, which, when you think about it, is a really rational thing to do. When there are systemic risks, any prudent person would take steps to mitigate those risks. The problem is, prudent people seem to be few and far between.

It is always great to have contrarian opinions to make us think. But if you are going to take that kind of a stance don't just lob it out there like a grenade and then head for the hills. Justify what you say, and if you can't then don't waste our time with your silly opinions.

Jan

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WebofLife
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Joined: Jul 10 2012
Posts: 2
Clarification please

On page 3

ue to structural problems in labor markets and not simply a cyclical shortfall in aggregate demand.

If unemployment is instead substantially structural, some worry that attempts to raise aggregate demand will have little effect on unemployment and serve only to stoke inflation. 

Would someone be so kind as to provide examples of the difference between structural and cyclical (perhaps noting where the edge is between the two) and also what indicators exist to denote an issue of one or the other.  Further, if cyclical (I assume this means iwth the context of supply and demand - basic stuff) is what policymakers have presumed to be the issue (find ways to increase demand, to solve) what structural components would be waiting to A. undercut this effort and B. directly feed an acceleration of whatever mistake QE might be taking us towards?

Thanks for your thoughts if this gets a response,

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