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Gail Tverberg: Something Has Got To Break
The more we look at it the more we see that the rate of growth and energy supply is very closely correlated with the rate of GDP growth. And I know on some of my recent posts I’ve included a chart that goes back to 1820 that shows the same correlation. You have to have an increasing supply of energy in order to get GDP growth. The GDP growth tends to be a little higher than the energy growth. That’s especially the same when we made the change in the mid 70’s, when we had the big first oil crisis and we realized that Japan had already started making small cars, and so we could make smaller cars, too, and save quite a bit of oil very quickly. And we realized then that we didn’t have to burn oil to create electricity; there were a lot of other alternative approaches, including nuclear. So we pulled those off line, and where home heating had been done by oil it was easy to transfer that to other types of energy. So we had a number of different things we could do very quickly back then — and I think people got the idea that because we could pick the low-hanging fruit, then somehow or other we could do the same thing again. But we’re not getting that same kind of effect any more.
I think the thing that people don’t realize is how closely the growth in debt is tied to the growth in the economy. Even back many years ago we needed to add more debt as the economy attempted to grow, and what you would see very often back then was some country would add debt to fund a war. And if they were successful, maybe they would get some increment into the economy so that the debt made sense. And if they lost the war then somebody got their bonds written off. But what’s happened is that, as the cost of energy has gone up, especially since about the mid 70’s, the amount of debt required to find GDP growth has gone way, way up. And I think this is because it takes a given quantity of energy in terms of BTU’s or in terms of how far it can make a truck go — if it now costs a whole lot more to do that, we’re going to have to borrow a whole lot more money in order to make the whole system operate. We have a seen a spiraling of debt since the mid 70’s, and I think that’s very much related to the higher cost of energy since then.
That only works for a while. You can dial up your debt growth for a while but then you discover that debt growth has a lot of adverse effects. And one of the big ones is that it tends to funnel money to the wealthier class and take money away from the poor members of society.
I’m afraid what it means is that at some point there’s got to be a discontinuity. Something has got to break.
89 Comments on "Gail Tverberg: Something Has Got To Break"
Apneaman on Tue, 5th Jan 2016 2:39 pm
Orlov for POTUS 2016
Hello on Tue, 5th Jan 2016 3:11 pm
So after 50 comments the first 50 don’t get displayed anymore?
Or is that only with my display?
Davy on Tue, 5th Jan 2016 3:33 pm
Yeap hello, ape gets the prize. That prize is an all expense paid trip to a Trump rally. I had a great comeback comment at 49 too and it got trash canned. Good strategy for information blocking actions in the future.
ghung on Tue, 5th Jan 2016 4:13 pm
You can get to the sub-50 comments via your browser history or clicking on a sub-50 comment on the PO.com list.
Stevo on Tue, 5th Jan 2016 4:14 pm
Gail’s opinions are just that opinions……there are lots of quotes before WW1 that the war would not last very long because of debts etc….I think she has a point but she looks at debt and fiat like household debt….hell look at the stock market today….you can’t honestly tell me that it was not manipulated to be positive today….oil energy ..etc is much more complicated than Gail makes it out to be…I don’t know if she is just dumbing her argument down for the masses or if she is just a bit naive…..
Just like climate change yes I think it is happening I don’t know what the outcome will be…my guess is that it will be a lot of refugees but shit…I don’t know…nor do I pretend to know. I see a lot of people on here throw out armchair physics bullshit but If you don’t have a PHD in physics and are at the top of your field you really have no business talking like you know physics…I guess the internet exemplifies the phrase opinions are like assholes….
ghung on Tue, 5th Jan 2016 4:52 pm
Stevo said; I see a lot of people on here throw out armchair physics bullshit but If you don’t have a PHD in physics and are at the top of your field you really have no business talking like you know physics…”
I don’t agree. I’m not a physicist, but have had enough to understand entropy can’t be ignored, or that you can’t ignore the laws of thermodynamics and come up with valid solutions to our energy issues. You do know that it’s impossible for an internal combustion engine to be 100% efficient in terms of energy in/work out, right? Can you show me the math? All of it?
I can’t do all the math in interconnected complex systems (can anyone?), but know enough to determine that it’s likely to fail at some point due to imbalances. I also know that you can’t keep substituting debt for real resources forever, since fiat currency is only a token, a claim on real work and resources. Too many (increasing) claims on declining resources only works until those claims come due. Claims that can never be paid are false claims.
Apneaman on Tue, 5th Jan 2016 5:21 pm
Stevo, there are more fields involved in the study of climate change than just physics. Even among Phd physicists who study climate change there are differences of opinion on timelines and details. For example, many climate modelers seem to think models are the best predictive tool while some paleo climatologists think their method is superior. We found out a starting a couple of years ago that the climate models were off, on the underestimating side, on many climate phenomena by upwards of 75 years in some cases. What does that say about their expertise and your faith in them as the sole source of knowledge? I’m not saying we should not listen to them, but there is no law that says you can only understand physics or any subject for that matter if you go to a fancy university. Your assertion is a blanket argument from authority and if applied to other disciplines then only Phd economists are allowed to talk economics on this site and only Phd geologists can talk about oil extraction (Hey, Rockman you got a Phd? If not you’re gone). If you claim you don’t know the physics then how do you know if anyone else does or not? Lacking a Phd, you could study on your own. You’ll never become accredited that way or a world expert, but you could learn an awful lot if your willing. The internet can mimic parts of going to university if you want to put in the time. Even better in some way since you can attend cyber lectures from many of the world’s leading climate scientists and any other discipline too. The public library is another great resource. I bet it’s safe to say that many around here have done a great deal of self motivated homeschooling on petroleum geology, the oil industry, economics, ecology, permaculture, firearms, etc.
Climate change models underestimate likely temperature rise, report shows
Forecasts predicting less global warming fail to properly take into account cloud formation, say scientists
http://www.theguardian.com/science/2014/jan/01/climate-change-models-underestimate-likely-temperature-rise-report-shows
Climate Science Predictions Prove Too Conservative
Checking 20 years worth of projections shows that the Intergovernmental Panel on Climate Change has consistently underestimated the pace and impacts of global warming
http://www.scientificamerican.com/article/climate-science-predictions-prove-too-conservative/
Laypeople, in addition to an infinite amount of printed material on the tubes can also learn for free from Phd climate change knowing professors.
Earth´s Climate and Climate Change. Lecture 1 part 1
“Earth´s Climate and Climate Change is a PhD course held at Gothenburg University, spring 2014. This is the first of a series of PhD courses which we will record, edit and post on http://www.efdinitiative.org, free for everyone interested. This first lecture is given by Martin Persson, Assistant Professor at Physical Resource Theory at
Department of Energy & Environment at Chalmers University of Technology”
https://www.youtube.com/watch?v=A2DInk1OE9o
GregT on Tue, 5th Jan 2016 6:56 pm
Globalism is not in our long term future. IMO, it is only of question of time. Those locales that are more self sufficient will be in better positions as globalism grinds down. Those locales that are more reliant on goods from far away places, will be the most ‘exposed’. If I were to hazard a guess, I would say that over 90% of our consumer goods on the shelves here in NA, are now manufactured in Asia. Thanks to the “globalists”, we have exported not only our pollution, but our technologies, infrastructure, and our skilled workforce. What we are left with is a largely service based economy, that is surviving on the exploitation of cheap labor in far away places. The west is in for a serious reality check, if/when globalism collapses.
makati1 on Tue, 5th Jan 2016 7:08 pm
Ap, I think an open, inquisitive mind, a reasonable I.Q. and some common sense trumps a piece of paper from some ‘for profit’ college or university anytime. Some of the most stupid people I have known have those pieces of paper on their walls. And some of the smartest never went beyond 12th grade. The ability to think beats the ability to talk anytime. Some only open their mouths to prove my point. lol
Apneaman on Tue, 5th Jan 2016 7:10 pm
Baltic Dry Ship Index Tumbles to Fresh Record Amid China Turmoil
-Measure falls to 468 points, lowest since it began in 1985
-Slowing Chinese economic growth seen causing rates to slump
http://www.bloomberg.com/news/articles/2016-01-05/baltic-dry-ship-index-tumbles-to-fresh-record-amid-china-turmoil
makati1 on Tue, 5th Jan 2016 7:15 pm
GregT, that percentage may be low. I love to read labels when I visit the States and buy stuff to bring back. Often, I see that they were made next door in China or S.Korea, or another Asian country. I am also seeing more from Central and South America or Mexico. Even the stuff ‘assembled’ in the US is made in other countries. The only store that may have a higher percentage of NA made stuff is the grocery store and there it may be around 50% or more foreign imports.
Starbucks will not do very well when coffee stops coming from other places. And electronics … LOL
Stevo on Tue, 5th Jan 2016 7:22 pm
Ghung…what is your background in physics? I am not talking high school or undergraduate work…..
Stevo on Tue, 5th Jan 2016 7:26 pm
Damn apeman! you have a lot of free time!! you are not on the dole are you? Shit ….
makati1 on Tue, 5th Jan 2016 7:55 pm
Stevo, maybe Ap just uses his time more effectively? Or does not have to report in to some ‘office’ everyday like the Pavlovian dogs we all heard about?
I have a friend in Arizona that reports into his den every morning to read the financial news and to call the manager of his motel back in PA. Then he goes out and swims in his pool or plays tennis on his court with his wife, until lunch.
And, no, he did not inherit it nor did he ever go to college. He just worked hard and made the right investments. THAT is his work day and he has been doing it since he was in his early forties.
BTW: Dole? Would you be insinuating that something like Social Security is “dole”? I hope not. That is a sign of stupidity/greed. A government forced payment on all income is not dole. It is a promise to be paid back in full. We who are retired are expecting it in full. If they can fund a trillion dollar plus military security complex, they can fund SS.
Apneaman on Tue, 5th Jan 2016 8:21 pm
Stevo, zero debt, no kids, no wife (fwb), very modest income from property investment, low low expenses, odd jobs. A lot of free time indeed, which is exactly what I planned for and what I gave up a bunch of shiny shit for. Answer to no one except maybe my mom……. sometimes. No Phd.
Have fun sitting in traffic the rest of your life.
Stevo on Tue, 5th Jan 2016 8:25 pm
Nice! At least you have a sense of humor…I can appreciate that!
antaris on Tue, 5th Jan 2016 10:41 pm
fwb? fucking wicked bitch ?
GregT on Tue, 5th Jan 2016 10:42 pm
I don’t think that Apnea was making a funny Stevo……….
GregT on Tue, 5th Jan 2016 11:09 pm
Friend(s) with benefits.
antaris on Tue, 5th Jan 2016 11:40 pm
So Ap is a partially kept man ?, friends with benefits.
Apneaman on Tue, 5th Jan 2016 11:45 pm
Kept well drained.
antaris on Wed, 6th Jan 2016 12:36 am
Divorced. Once married always married. I have an acquaintance with 3 children, each from a different woman. He will pay $$$ till the day he dies.
theedrich on Wed, 6th Jan 2016 1:46 am
To back up Davy’s point, once again Joseph A. Tainter, The Collapse of Complex Societies (Cambridge [England], NY: Cambridge Univ. Press, 1988, 1992, pp. 214.):
“Collapse, if and when it comes again, will this time be global. No longer can any individual nation collapse. World civilization will disintegrate as a whole. Competitors who evolve as peers collapse in like manner.”
Davy on Wed, 6th Jan 2016 6:56 am
This is a good summation of an economic predicament if I ever seen one in a short explanation. Nothing new here just a reminder for any misplaced optimism at a minimum this will be a tough year economically.
“NEW YEAR, SAME PROBLEMS”
http://www.zerohedge.com/news/2016-01-05/visualizing-how-global-economy-played-out-2015
“Most investors and central bankers find themselves between a rock and a hard place to start 2016. The Federal Reserve finally raised rates in December, but mainly in the interest of preserving credibility. While unemployment itself has looked good enough and there has been some wage growth, the labor force participation is at 62.5%, which is essentially its lowest mark since 1977. Meanwhile, the stock market has been volatile, junk bonds have been hammered, and manufacturing contracted in December at the fastest pace in the U.S. in more than six years.”
“Most major central banks still have rates close to zero, which gives little policy ammunition for any additional stimulus. The flipside of these record-low rates has been soaring (or extremely bubbly) asset prices that have failed to trickle down to Main Street. A slowing China and general oversupply has led to slumping commodity prices. Oil has been hammered down to its lowest price since 2003. Copper is trading at $2/lb, which is comparable to its price during the Financial Crisis. These low input prices, in theory, are great for consumers and manufacturers. In reality, however, they usually mean that economic growth is grinding to a halt.”
“It’s hard to say where markets will turn in 2016, but for now it will continue to be much of the same volatility until the picture becomes clearer.”
“Original graphic by: The Straits Times”
JuanP on Wed, 6th Jan 2016 7:36 am
Stevo, The fact that you are extremely ignorant does not necessarily imply that others here or elsewhere are ignorant, too. Read a few of their comments for a couple of months before insulting people you don’t know. I have learnt many useful things from the people in this forum, even from those I disagree with on other subjects like politics, economy, or religion. You could learn, too, and become less ignorant.
ghung on Wed, 6th Jan 2016 7:51 am
Gosh, Juan, Stevo hasn’t figured out that “you don’t need a weatherman to know which way the wind blows”.”
[Brutha Bob Dylan]
Davy on Wed, 6th Jan 2016 8:01 am
Juan, the kettle calling the pot black.
JuanP on Wed, 6th Jan 2016 8:24 am
Davy, I read your delusional rants for three years before calling you out as the delusional American exceptionalist one percenter fucktard you are, and everyone on this forum knows that I was very nice and patient with you. Do you need more time? Too late, delusional moron! My broomstick will be up yours every day and night from now on. Get used to it! I will not give you a break. We all know what you are, IT IS FRIGGING OBVIOUS! Why do you think you are the only person we all attack on this forum? Why does your daughter hate you? How many women have left you? It is because you are a Delusional American exceptionalist prick living in denial.
Davy on Wed, 6th Jan 2016 8:38 am
Juan, you words are hilarious because they have no bite. We are not face to face we are digital with nothing to cause harm. Words are empty in our fight. You are barking like a ranting mentally ill person you are. The more you rant the more you appear sick.
JuanP on Wed, 6th Jan 2016 8:49 am
Davy, You keep projecting your delusions and flaws onto others, denialist. You do the same thing every day. You are such a coward and a weakling that you can’t accept making mistakes or being wrong. You are a sad, wretched excuse of a human being, despicable narcissist prick.
Kenz300 on Wed, 6th Jan 2016 8:56 am
The future will demand safer, cleaner and cheaper alternative energy ……..fossil fuels are the past and will be phased out…..
6 Charts that Will Make You Optimistic About America’s Clean Energy Future
http://energy.gov/articles/6-charts-will-make-you-optimistic-about-america-s-clean-energy-future
shortonoil on Wed, 6th Jan 2016 9:41 am
“I see a lot of people on here throw out armchair physics bullshit but If you don’t have a PHD in physics and are at the top of your field you really have no business talking like you know physics…”
Mechanical engineers spend 4 years, and often more, studying Newtonian Laws. Not only do we know the physics down to the decimal point, we know how to use it. If engineers used physics like physicists do you would still be sitting in your cave banging the rocks together. If you want to appreciate the elegance of the world’s design call a physicist. If you need to live it; consult an engineer.
Amvet on Wed, 6th Jan 2016 2:13 pm
Some years ago I looked at how GDP was calculated and noticed that debt was not considered. This was not an accident.
Borrow money or print it to drive up the GDP and claim the economy is better.
Davy on Wed, 6th Jan 2016 5:47 pm
Here is some good doom and gloom on the economy for your Wednesday evening.
“China Has A “Colossal Credit Bubble” And No One Knows How It Will Unwind, Marc Faber Warns”
http://www.bloomberg.com/news/videos/2016-01-06/marc-faber-we-have-colossal-credit-bubble-in-china
http://www.zerohedge.com/news/2016-01-06/china-has-colossal-credit-bubble-and-no-one-knows-how-it-will-unwind-marc-faber-warn
“I would imagine that by next year the Fed will cut rates once again and launch QE4.”
“Asked why he believes the US is already in a recession, Faber says all one need do is “look at exports, look at industrial production and the slowdown in credit growth.”
“Janet Yellen will go down in the history books as the biggest joke, the biggest failure,” he continues, noting that in hindsight, the Fed will be shown to have hiked right on the eve of a recession.”
“As for China, Faber thinks it’s better to be “overly cautious than overly optimsitic” given the fact that the country “has a colossal credit bubble” and no one knows how it’s going to unwind. Quizzed on whether the Chinese economy will ultimately experience a “hard landing”, Faber says simply this: “We had a hard landing in the stock market already. We had a hard landing in commodities. [So yes], we could have a hard landing in the economy.”
theedrich on Thu, 7th Jan 2016 4:55 am
Hmm, seems the Uruguayan Pee suffers from coprolalia (often used against Davy). Maybe his coloring book doesn’t have any vocabulary beyond the level of Latino bottom dwellers.
Davy on Thu, 7th Jan 2016 6:13 am
Damn, Thee, I had to look that up (coprolalia). Shouldn’t we try to start the day off differently? I would rather not be forced into battle by association. I am trying to climb a muddy hill to higher ground. This is probably futile.
JuanP on Thu, 7th Jan 2016 7:10 am
The Delusional American Exceptionalist is at it again with his white supremacist racist trailer park buddy again. Birds of a feather flock together! Do you enjoy hanging out with white exceptionalist rabid racists, Delusional Davy? Just look at the company you keep, man. It seems you are friends now with all the board’s trash.
JuanP on Thu, 7th Jan 2016 7:14 am
Delusional Davy, I just got up from a good night of restful sleep and I am ready to go at it all day long one more time. You can look forward to another 16 hours of me bullying and insulting you again. Carpe diem, delusional bully!
Davy on Thu, 7th Jan 2016 7:27 am
Morning Juan, nice to see your day is starting off happy.