Reaching Limits in a Finite World
Off the keyboard of Gail Tverberg
Published on Our Finite World on May 6, 2013
Discuss this article at the Epicurean Delights Smorgasbord inside the Diner
We don’t usually think about it, but we live in a finite world. In other words, in theory we can count precisely how many atoms make up the earth. We can also theoretically count how many humans live on earth and how many of any other species live on earth at a particular point in time.
At some point, in a finite world, we start reaching limits. There are now about seven billion people in the world. We could probably add some more, but how many? What is it that limits our ability to add more people to the world we live in today?
Too Much Population “Morphs” to an Energy and Financial Limit
One obvious guess as to what might limit world population is the amount fresh water that is available. If we don’t have enough fresh water available, we can’t continue to expand population.
The amount of fresh water that is available can be changed, though, by adding desalination plants. There are many other ways of getting fresh water. To give an extreme example, the amount of fresh water available could be increased by melting ice in Antarctica and importing it by ship. Either of these solutions would require energy in an appropriate form—either to run the desalination plant, or to melt the ice and transport it by ship. Thus the fresh water shortage, at least for the foreseeable future, can be worked around if there is sufficient energy available of the right type.
The other not-so-minor detail is that the cost of desalination or of importing melted ice from Antarctica needs to be inexpensive enough that users of fresh water can afford it. In order for this to be the case, the cost of the appropriate type of energy must be extremely inexpensive.
We can think of other kinds of limits to population growth as well. For example, carbon dioxide limits. In theory, there are ways around carbon dioxide limits. For example, assuming current research projects are successful, we can build carbon capture and storage facilities and change our electricity generating plants so that the carbon dioxide that is emitted can be captured and stored underground.
Here, too, there are energy limits and cost limits. Carbon has a molecular weight of 12, while carbon dioxide has a molecular weight of 44. Because of this, if we create carbon dioxide from coal, the carbon dioxide we produce is much heavier and bulkier than the coal that we burned to make the electricity. It will take a lot of energy to store this gas underground in a suitable place. Thus, we have another problem that can be handled, if there is enough cheap energy of the right type available.
Almost any kind of obstacle to increased human population that we can think of has an energy-based work-around. Will people be so crowded that disease transmission will be a problem? There are workarounds: better water treatment plants and sewer treatment plants, especially in the poorer parts of the world; more immunizations; more and better hospitals; antibiotics for all those who need them. These solutions also require energy, as well as other inputs (which indirectly require energy as well). The difficulty is making them affordable for the people who need them.
If the problem is not enough food, perhaps because of degraded soil, there are energy-based workarounds as well. Food can be imported from a distance. More fertilizers and soil amendments (either made using fossil fuels, or transported using fossil fuels) may be used. Irrigation, which uses either diesel fuel or electricity to pump water may be used to pump water to too dry areas, to increase food production per acre. In some cases, artificial soil can be created, and plants grown in a green house—again requiring much energy. The issue again gets to be whether consumers can afford the food produced using this more energy-intensive procedure.
The Problem With Degraded Resource Supplies
Degraded resource supplies occasionally run out—for example, an aquifer may run dry. A more common situation, though, is that resources become progressively more expensive to extract as we approach limits. We tend to extract the easiest to extract (and thus cheapest-to extract) resources first. These resources are the highest quality ones, in the easiest to access locations. We then move on to more expensive to extract resources. A similar pattern applies to many types of resources, including ore used in making metals, oil, gas, coal, and uranium.
When we analyze resources of a given type, say uranium, we find that there are always more resources available. The problem is that they are increasingly expensive to extract because the ore is of lower concentration, or is located in a harder to reach area, or there is some other problem involved.
We have illustrated this situation in Figure 1, as a triangle with a dotted line at the bottom, because of the uncertain cut-off regarding how much is available. The cut-off is really a price cut-off. At some point, the resource becomes too expensive for customers to afford products made with it.
FIGURE 1 – Triangle of Available Resources
Figure 1. Triangle of available resources, with dotted line indicating uncertain financial cut-off.A company starts from the top of this triangle, extracting whatever resource is involved. A company can “see” a little way ahead, as it looks down toward the bottom of the triangle. The company will report reserves which are continually increasing because the width of the triangle keeps getting wider, even though these reserves are of lower quality and can only be extracted in a more energy-intensive way. The question then becomes whether customers can really afford products made with these expensive-to-extract resources.
The Broader Energy Picture
Energy is pretty amazing. Energy is what allows work of any kind to be done, from making a clay pot by hand, to baking a cake, to creating a carbon capture and storage facility. Humans by themselves are able to produce some energy, because of the food we eat. But we are also able to leverage the energy that our own bodies produce with energy from other sources, such as from burning biomass. We learned to burn biomass a very long time ago, over 1,000,000 year ago.
If humans were like other large primates, there would be only 100,000 or 200,000 of us, rather than 7 billion of us. We would live in an area to which we are biologically adapted, most likely a very warm part of Africa. Humans’ population is much higher, because once we learned to control fire, we were able to settle areas of the world that would otherwise be too cold or dry to live in, and we were able to increase population densities through energy-related techniques we developed.
One thing we learned to do was cook part of our food supply. This had many advantages. Unlike apes, we no longer needed to spend literally half of our day chewing. This freed up time for other activities, like tool-making, hunting, and clothing making. It also allowed the human body to evolve in a way that allowed a bigger brain and smaller digestive organs. Gradually we used our improved brain to develop other techniques such as making heat-tempered stone tools, which were sharper than other stone tools, and teaching dogs to help us with hunting for food. All of these approaches to using external energy allowed humans to leverage our own puny energy supply from food with energy supply from other sources and gain an advantage over other animals.
Human prosperity was able to increase and population was able to grow as we learned to use increasing amounts of energy from outside sources. Energy sources we gained control over included domesticated plants and animals, facilitating agriculture. World population by the year 1 C. E. reached 200 million, or over 1,000 times the population level before the leveraging impact of external energy supplies began enabling greater human world population.
Fossil fuel (coal, oil and natural gas) use became common after about 1800 C. E., and population grew very quickly. In fact, when population is graphed, it looks like it went straight up starting when fossil fuels were added.
FIGURE 2 – World Population
Figure 2. World population based on data from “Atlas of World History,” McEvedy and Jones, Penguin Reference Books, 1978 and Wikipedia-World Population.Use of fossil fuels did not grow by themselves. Their use was facilitated by the development of improved technology, which provided the vehicle for their use. Increased debt also facilitated fossil fuel use, because it allowed potential buyers to afford the new products being developed, and provided companies doing energy extraction funds for their work.
Our ability to do physical work using human labor is quite limited. For example, if we want to dig a well for water, the depth that humans can dig without the assistance of a machine intended for this purpose is only about 20 feet. With mechanical drilling equipment, typically powered by oil, we can quickly and cheaply dig a well many hundreds of feet deep.
As another example, if we want to transport goods a long distance without external energy, we can only push a cart at the speed at which we can walk. Oil or another other modern fuel allows inexpensive long-distance transport of goods.
Adding energy use changes costs. There is a two-way tug on costs:
1. Costs are typically reduced when fossil fuel energy or electricity from any source can be substituted for human energy. This allows greater leverage of the energy of the remaining humans doing the “work”.
2. Costs tend to increase, as the cost of the energy source in (1) increases. Such an increase in costs occurs as we approach limits of a finite world, partly because extraction is from more depleted resources (farther down in the resource triangle shown in Figure 1), and partly because we reach increased problems with pollution, such as the BP Deepwater Horizon well blowout in 2010. The cost of mitigating pollution problems also adds to energy costs.
Up until about the year 2000, this tug of war had a favorable outcome. An increased amount of fossil fuel energy was substituted for human energy, leading to lower costs. As mentioned previously, improved technology and additional debt enabling this substitution played a role as well.
In recent years, the tug of war has started to go the other direction. The cost, particularly for oil energy, has tended to rise far more rapidly than costs in general (Figure 3). This has produced many dislocations within the economy, making countries that use a lot of oil less competitive in the world marketplace and reducing economic growth rates, especially among countries no longer able to complete. The higher cost of oil products reduces disposable income of citizen, leading to recession and to deficit spending by governments.
FIGURE 3 – World Oil Price in Current $
Figure 3. Brent-equivalent oil price in current $, based on data from BP 2012 Statistical Review of World Energy.In future years, we can expect that two way tug on costs will increasingly be lead to higher costs, because of greater impact of limits of a finite world. This will tend to send economies increasingly into recession.
Our financial system has been built assuming that economic growth will continue indefinitely. There is significant risk that the recessionary influences of high oil costs will bring down the current economy. We know from a recent analysis by Peter Turchin and Sergey Nefedov (Secular Cycles, Princeton University Press, 2009) that historically, when civilizations collapsed, they did so for financial reasons, as the cost of government became too great for citizens to fund with tax revenue. There would seem to be a significant risk that today’s economy will reach the same end.
Why didn’t others recognize this issue?
Reaching limits of a finite world is a subject that does not easily fit into any one subject area, so the subject tends to be missed by researchers concentrating on one field of study.
The closest fit came in the analysis The Limits to Growth (Donella Meadows et al, Universe books, 1972). This analysis came very close, but did not quite hit the nail on the head because it missed the connection of debt to limits to growth. (The model was of course not expected to be complete.) More recent analyses along this line to miss the debt connection as well, pushing the likely date of collapse forward.
There is much confusion about the question of what limits, such as oil limits, mean. Many people believe that rising oil reserves (which are a given when the problem is ever-more expensive to extract oil, as illustrated in Figure 1) mean that our oil problems are solved. Our problem is not a lack of oil reserves; our problem is that the selling price needs to keep rising, to cover the rising costs of extraction and to cover government dependence on tax revenues. This increase in selling price makes oil ever less affordable, which is our real problem.
Even when oil price drops, this is not necessarily a good sign. It may mean that some oil extraction companies will no longer be able to afford to add new wells, because production will not be sufficiently profitable at the new lower price. It may also mean that some oil exporting nations will
not be able to get enough tax revenue from oil operations to fund programs (food subsidies, for example) that prevent revolt.
Reaching limits in a finite world is a scary issue. The book Limits to Growth was not well received when it was published. Governments have tried their best to avoid the issue. No president or prime minister wants to announce, “We have a problem that we have no way to solve.”
Why might I be able to shed light on the real impact of finite world limits?
My background is as a casualty actuary, doing financial forecasting for insurance companies. Thus, I started with somewhat of a financial background, but did not have the usual “brainwashing” that comes when a person has studied the economy from the perspective of today’s economists. My background gave me a great deal of experience hunting for publicly available databases, making graphs, doing analyses, and explaining the results to lay audience.
I got interested in the issue of oil limits and what impact they might have when read the book, The Empty Tank: Oil, Gas, Hot Air, and the Coming Global Financial Catastrophe (Jeremy Leggett, Random House, 2005). His view comes from the “peak oil” view, which is close to my view, but not quite the same.
When I read Leggett’s book, it hit a responsive chord because I had had first hand experience with the impact that high oil prices had on insurance companies in the 1973-1974 period. In 1973, I was the actuary for a small insurance company that ultimately went bankrupt, at least partly because of the indirect impact of higher oil prices. Reporting to the president of the company, I got to see up close what kind of havoc high oil prices could cause in the financial world.
After I read Leggett’s book, I started researching the issue on my own. I wrote an article for insurance executives in early 2006 and an article for actuaries in early 2007. In March 2007, I decided to take early retirement, and work on the issue full time.
I set up my blog site, OurFiniteWorld.com in March 2007. I soon was asked to help with the website TheOilDrum.com, where I wrote under the name, “Gail the Actuary,” and made many contacts with others interested in the issue of limited oil supply.
To make a long story short, over the past several years, I have made many contacts with researchers who have discovered at least part of the story of oil limits and energy limits. Through my blog posts, I also received much valuable input, including suggestions from readers regarding academic books that might be helpful.
My work is now being published in the academic world as well. I wrote a paper, “Oil Supply Limits and the Continuing Financial Crisis,” published in the journal Energy in January 2012. It has so far been cited by 10. I was also a co-author of “An analysis of China’s coal supply and its impact on China’s future economic growth” (Energy Policy, June 2013). My most recent publication is an article called, “Financial Issues Affecting Energy Security” in the soon-to-be published book, Energy Security and Development–The Changing Global Context, (B. S. Reddy and S. Ulgiati Eds., Cambridge Scholars Publishing, 2013).
Food
Off the keyboard of Monsta666
Discuss this article at the Environment Table inside the Diner
This article should form the final connection between the Water article written by RE and the Peak Oil Primer written by myself earlier this week. As I like to stress to many people the connection between the vital commodities of food, water and oil are numerous. What is more these commodities cannot be easily substituted and in the case of water and food there are no alternatives if we wish for humans to survive on this planet. A man has got to eat and drink!
The means of acquiring food have changed throughout the ages with much of these changes coming as result of increased pressures from population growth. As we know when man first climbed out of the trees his main means of procuring food came from either gathering food or hunting wild game. While this simple method is the most sustainable and leaves the smallest footprint on the environment this method of food extraction also supports the least people in any given area. As a result of this paradigms limitations it was not long before man’s population had increased to such a degree that he soon began hunting at an unsustainable rate. This excessive hunting resulted in the extinction of numerous species particularly the larger fauna roaming the plains at the time. In effect man had reached the natural carrying capacity of the land following the hunter gather paradigm. As the population continued to rise despite this fact it created social stresses and the number of conflicts between humans increased as there were more disputes over the remaining food resources.
It was around this time that agriculture was developed. This change did not come because agriculture was superior to the hunter-gatherer paradigm as commonly depicted in literature but rather this change came about due to necessity as agriculture could support denser human populations. In other words this move was not a move of inspiration and a sign of man progressing and taking a step towards civilisation rather this was a move of desperation on the part of mankind to support increasing populations. Indeed archaeological evidence supports this assertion for early farmers were not only six inches (15cm) shorter than their hunter gatherer counterparts but they also suffered from a greater range of diseases due to closer contact with more people and animals. Other negative aspects came from the fact that the early farmer’s diet was less varied as his diet consisted of a small range of crops as opposed to the varied diets of his ancestors. This lack of variety in the diet would result in increasing incidents of malnutrition. [1] To many people of the time these lower standards of living would be seen as a step backwards.
In addition to these negative aspects described above agriculture also placed greater stress on the natural environment as more land was needed to be cleared to grow the said crops thus displacing more animals and even deforestation if forests were cleared to acquire crop land. Once the land is cleared for farming the land itself is put under major stress as every year the farmland is ploughed and replanted resulting in the loss of some topsoil. If enough topsoil is lost then it can mean the land is no longer suitable for growing crops and it will make the area more prone to desertification. The removal of topsoil is also largely irreversible as it can take 500 years to regain one inch of topsoil back. What is more by planting only a small range of crops the habitat contained less diversity and therefore became less resilient to changes in the environment. Moreover this lack of diversity also meant the soils that were used to grow crops would degrade in quality if it was not carefully managed through crop rotation and natural fertilizers such as manure.
The biggest issue that resulted from agriculture however is that it places large demands on water resources in the area as crops need large amounts of water to grow. For example one kilogram of wheat corn requires 880-2200 litres of water while a kilo of corn requires 880 litres. [2] Seeing as these two crops are one of the most widely grown crops in the US it easy to see how dependant agriculture is on rich water sources. If we consider meats then water demand increases by an order of magnitude so if we wanted to produce a kilo of beef we would need around 10-20,000 litres of water. [3]. This large demand for water was one of the main reasons why many early cities formed around rivers as these regions were most suitable for growing crops.
As populations expanded and the demand for food increased the water demanded also increased since food production is so dependent on water. This continual increase in water demand lead to innovations such as the irrigation which can allow more marginal lands to produce food or allow existing fields to increase yields of crops. Such methods however are not without their disadvantages however as over use of irrigation can lead to reduce water flows to rivers, saline, reduced water tables (a particular concern for deep water aquifers) and water pollution. Another side issue with over intensive farming methods is it can lead to desertification of regions if the farm land is not managed properly. It is said that Mesopotamia (the region encompassing modern day Turkey, Syria and Iraq) used to contain the most fertile lands on the planet but due to over irrigation and exploitation of these lands the region gradually turned into a desert. This loss of land played a significant part in the collapse of civilisations such as Greece, Carthage and the Roman Empire. [4]
For the most part despite the listed disadvantages the agriculture paradigm did deliver in feeding its population provided the farms were properly managed and were not overexploited. This allowed human population too slowly but steadily rise as more and more land was devoted to growing crops. Innovations in farming equipment, better crop varieties (for example the introduction of potato as a stable crop in the 16th century) and improvements in irrigation allowed incremental increases in yields during this time facilitating further population growth.
The real turning point started around the advent of industrial revolution particularly after 1900 when the rate of population growth began to accelerate in earnest due to improvements in sanitation and medicine that lowered the death rates in various countries. This issue became more acute and noticeable during the world war periods particularly in World War II when not only had the population exceeded two billion by that point but food production was effected by the on-going wars. As a result of these factors rationing took place in many countries and for the first time many nations were no longer self-sufficient in meeting its local food demands. This food insecurity resulted in various governments placing a greater priority in increasing food production to ensure they were no longer dependant on food imports and had to endure the accompanying swings in food price from the world food market.
The main way this food security became assured was by deploying more farm machinery, pesticides, synthetic nitrogen/potassium and phosphate fertilizers as well as improved crop varieties. All these factors lead to huge increases in crop yields and was later called the Green Revolution. Once this development, which began in Mexico in 1943 by Norman Borlaug with the help of the Rockefeller Foundation was discovered the practice was quickly adopted by other nations. [5] As the name implies the green revolution had a large effect on many countries particularly the developing countries (not Africa however) such as India which during the 1960s was in the brink of mass starvation. Not only did the green revolution make India and other nations self-sufficient and not dependent on food imports it also allowed lower food prices which facilitated not only population growth but enabled greater economic
growth due to reduced living costs.
Like all new technologies these innovations in farming came with their own disadvantages. The chief problem about sustaining the green revolution is the fact that much of the inputs necessary for this form of farming are non-renewable. For example synthetic nitrogen fertilizers come from either natural gas or coal which is not only non-renewable but the processes to make this fertilizer are energy intensive. Meanwhile potassium and phosphorus based fertilizers come from potash and phosphate rock respectively which have to be mined thus they are subject to peak production rates which in the case of phosphate is likely to come around 2030.[6] The pesticides used in farms are derivatives from oil.
The other big issue with the green revolution is the number of environmental issues it imposes on the area. Modern farming practices reduce biodiversity to an even greater degree than traditional farming methods. This is because one of the main ways of achieving the higher yields is to use specially selected breeds that only really thrive under the artificial conditions of inorganic fertilizers and pesticides. As a result the number of viable species used in farms has significantly declined making them less resilient to changes in environment (which is a bigger concern if one considers the impacts of global warming). It should be also noted that these new strains of crop do not perform better than traditional crop varieties if no artificial fertilizers or pesticides are applied. Another problematic aspect of these modern practices comes from the fact that over time fields that use phosphate type fertilizers will gradually sterilise the soil thus making farmers dependant on using only artificial fertilizers to keep growing crops on their fields. Finally these new farming practices have done little to reduce the increased demand for water. As food yields have increased so has water consumption.
There are also large economic implications; first of all such methods are less labour intensive and more capital intensive meaning that not only is less labour needed but the demand for credit will increase as more capital investments become necessary to start a farming operation. Since richer farmers have easier access to credit it means they can gain a bigger competitive advantage to poorer farmers thus increasing existing inequalities which will eventually lead to further consolidation of the farming industry which can further exacerbate the issue of decreased diversity in crop inventories.
Another issue that can extend from this last point is the fact that oil becomes more extensively used as it is needed to fuel the farm machinery and due to the larger fields that can be deployed using modern farming methods the amount of oil consumed is that much greater. If were to include processing and distribution in food in this equation the use of oil is increased further. It is this increased oil dependence that has made food prices strongly correlate with oil prices as oil is used in all stages of food production, processing and distribution.
These factors have meant that while industrialised farming has resulted in increased efficiently in terms of crop yields per acre it has become less efficient in terms of energy consumption. [7]
What is more like most things the gains made from the green revolution have suffered from diminishing returns for example the period between 1950-1984 global food production increased by 250% yet the increase between 1984 and the present is only 40%. More important however is the fact that for the past 60 years increases in global food production have consistently surpassed population however this trend is unlikely to continue much longer as production increases are barely keeping up with population growth.
Considering how it is expected that the population will reach 9.1 billion by 2050[8] with food and water demand increasing by 70%[9] and 55%[10] respectively it seems questionable whether these targets can be achieved. These already ambitious targets seem even more daunting if one considers the fact that we are already extracting water at non-sustainable rates. This unsustainable water extraction comes about from the fact that many water tables across the globe are falling and once these water reservoirs are depleted then the source of water can only be extracted by its natural recharge rate. More worrying is the fact that many deep water aquifers are not rechargeable at all from rainfall. These aquifers, sometimes dubbed “fossil water” for the fact they only charge at very slow rates spanning hundreds of years is a serious issue in India, China and perhaps most notably the US which is depleting the Ogallala aquifer; one of the biggest deep aquifers in the world.
Another significant issue is that of peak oil. Seeing as modern agriculture is so heavily dependent on oil a decline in total oil production is very likely to lead in a reduction in total FOOD production which will result first in higher food and eventually shortages. However it is likely the globe will face problems even before peak oil arrives due to fact that as oil production increases stops rising at the same rate as population growth then prices of oil will raise which will eventually lead to higher food prices. Once food prices get high enough the probability of a food riot increases considerably. It should not be forgotten that during the big oil spike in 2008 when oil reached $147 a barrel there was a large number of food riots. When high food prices struck again in 2011 the world witnessed the Arab Springs which was a revolution that started because of mass youth unemployment and high food prices.
Other exacerbating issues in delivering these targets will come from global warming which is likely to lead to more extreme weather patterns that can adversely affect crop yields. The recent drought 2012 in the US is one of the worst droughts in the US for 50 years and has decimated many crops and livestock in the region. Considering that the US is the biggest food exporter in the world (and indirectly water exporter) then it is likely that food prices will be considerably higher in 2013. If these droughts are a sign of things to come then it is very possible that we may actually see a peak in global food production in the coming decade particularly if these changing weather patterns occur simultaneously with declining global oil production AND water production.
References:
[1] = People Grew Shorter Growing Crops (DiscoverNews)
[2] = The USGS Water Science School (U.S Geological Survey)
[3] = Reducing the impact of humanity’s water footprint (WWF)
[4] = Ecology of desert systems, p.277
[5] = The Nobel Peace Prize 1970 Norman Borlaug
[6] = Peak Phosphorus (Wikipedia)
[7] = Why Our Food is So Dependent on Oil (Energy Bulletin)
[8] = World population to reach 9.1 billion in 2050 (UN)
[9] = Global agriculture towards 2050 (Food And Agricultural Organization of the United Nations)
[10] = Global Water Forum
Water
Off the keyboard of RE
Discuss this article at the Environment Table inside the Diner
I was pondering tonight as I often do on exactly how it was that Homo Sapiens expanded across the face of the Earth to the tune of around 7B Human Souls at this point, possibly more than that if you accept that the Birth Rate continues to outpace the Death Rate overall, which I am none too certain of anymore. I know what the UN Publishes here in terms of Data on this stuff, but the models are all based on assumptions, there is no real Census of World Population ever done. Even the FSofA Census done every Decade is full of statistical assumptions.
We “know” from some published data that Birth Rates are decreasing in some of the Industrialized nations, most notably Japan and Russia, and the Ruskies have actually seen a decrease in total population according to the released statistics on this stuff. Do we REALLY know that populations in the 3rd World are increasing at the stated rates? How is that likely when such places are non-stop War Zones these days? How is that possible when the price of food outstrips the purchasing ability of the population of people making $2 a day in places like Egypt and Libya, and really virtually ZERO in failed states like Zimbabwe and Somalia?
Anyhow, whether total World Population is actually still increasing or now decreasing, I want to take a closer look at exactly HOW it increased to such magnificent numbers to begin with, and what the parameters involved in that really are.
The most common reason for Population increase is attributed to the development of Agriculture, and undoubtedly it is true that Ag is responsible for the massive increase in Human population after the Paleolithic era, but really only in certain locations. Before you can have Ag, you must have a location with plenty of Water to support the Ag system, which in turn must either come from very regular rainfall during the growing season, and/or nearby river sources of water. Remember, early populations transitioning from Paleolithic to Neolithic ways of life could not dig deep wells to pull up ground water from aquifers for irrigation, and even if they could dig a reasonably deep well, they did not have Pumping methods to get the water up from below. 
For a LONG time, the primary means of yanking up water from below ground level was the Classic Well with Rope & Bucket. You can’t pull up enough water to Irrigate that way, at best you can yank up enough for your daily Drinking Water and Drinking Water for your Domesticated Animals.
So, in the Paleolithic era, while you might think Nomadic H-Gs distributed out over continents in some sort of uniform fashion, they of course did not. The Great Plains of the FSofA for instance likely held EXTREMELY few people if any during these years, and any who were wandering around there going after the herds of Buffalo had to congregate around the rivers that make their way down from the Rocky Mountains and cross the Plains on their way to the final resting place of the Water, back out in the Ocean until the sun evaporates it up again for another trip through the system.
If you have ever done any Camping & Hiking, you know you are limited in your range on foot between the Water Sources and how much water you can carry with you in your Canteen/Water Bottle. Our Paleo ancestors had their versions of these things also, Gourds and cleaned out Stomachs of their kills which could hold water for perhaps 2-3 days of stalking a herd. They also learned over time the locations of Springs where they could refresh the water supply, but in the Plains such springs are few and far between of course, like Oasis in the Desert.
Once Horses were Domesticated, the Range which these H-Gs could hunt across was expanded, but not as much as you might think. Even though Horses can eat Grass which Homo Sapiens cannot, they are not Camels with a Hump that can store weeks worth of Water. So if you are going to travel far and wide on Horseback, you need to carry Water for the Horse also, unless you know all the spots where Water is up there at Ground level exposed for the Horse to drink from. The main thing the Horse did was increase the speed at which Homo Sapiens could move arounnd territory he already moved around on foot, and made some different and more effective Hunting techniques possible. It did not really make that much difference in terms of neighborhoods Homo Sapiens and Horses could actually Inhabit.
So, as the Smart Toolmaker proliferated around the Globe, He/She did so mainly along the Rivers which network all the continents except Antarctica which is basically Frozen Solid at this point, though perhaps not for that much longer. While this Network is fairly extensive, by no means does it cover all the neighborhoods we currently inhabit at all. Here is a basic map of the main North American Rivers.
Most of the population of North America (and really everywhere, this is just an example) is congregated closely around these rivers. Beyond that, the largest Old Cities are all centered around the BEST places for Homo Sapiens to live, where Major Navigable Rivers either Converge or Exit to the Sea.
For the Cities, these Rivers serve not only as a source of Water (although nowadays it has to be processed to be drinkable about anywhere), but also as a channel by which to move the Waste the society creates out to Sea. Downstream from any large City, any OTHER community using the SAME river has even MORE issues with removing Waste to make that water Drinkable and in many cases even useful for irrigation without dropping toxins into the irrigation water.
In EVERY Good Location around the world to set up a large community of Homo Sapiens, over the course of the last 10 Millenia or so such a community has been set up. That INCLUDES my own location up in Alaska, which has its main population set up in Anchorage where the Rivers drain out into Prince William Sound. it was one of the last set up, and is not really all THAT big at around 350K people, but still a pretty large community overall in this habitat, which historically housed around 60K H-G people in ALL of Alaska.
How has it been possible to keep dropping more and more people along these rivers over time? Energy and Fossil Fuel burning of course. Each location along the rivers pumps and processes the water, each deposits waste that hits the next town downstream, which further has to process the water. At a certain point, it is no longer possible to process the water for Drinking at all, and in this case alternate Conduits for Drinking water have been built. In the case of my Old Home Town of New York City, nobody drinks water out of the Hudson River anymore of course, even just SWIMMING in it is probably quite dangerous to your health. So the Architects who made NYC what it is today built some amazing upgrades on the Aqueduct idea the Romans had, which are 3 HUGE Water Tunnels which bring drinking water to NYC from the Watershed up in the Adirondack Mountains. MARVELS of Engineering they are, but these days you cannot even shut them down for maintenance of any type, there is no guarantee if you could actually get some of the big valves to close that you could open them up again.
So, for a MARVELOUS location like NYC for Homo Sapiens to set up Camp, over time it has become ever more dependent on Energy to keep the water system running. Although for the most part the Water Tunnels are a Gravity driven system, the maintenance of them is energy dependent and will eventually fail. You certainly can’t turn NYC into a Farming community too easily, though perhaps Hydroponic systems could be set up in some of the Glass Office Towers. This still does depend though on the water delivery system to the city remaining functional.
All over the rest of the continent, you have some neighborhoods like Los Angeles and Las Vegas which neither get much rainfall nor do they have local fresh water sources in the absence of water pumping from the Colorado River, seriously overtaxed right now even with the energy available to shift the water around some in its final destination.
Then of course across the Midwest, you have all the water pumping coming up from the Ogalala Aquifer to keep all the Agribusiness Monoculture Farms producing mega tons of Corn and Soy Beans to feed the World Population. The Aquifer drops ever lower each year, which means more energy needs to be expended to pump up the water and sprinkle it down on the fields. It is unlikely much of this land can be kept in cultivation as energy becomes ever more expensive and scarce.
Without the Ogallala Aquifer, America’s heartland food production collapses. No water means no irrigation for the corn, wheat, alfalfa and other crops grown across these states to feed people and animals. And each year, the Ogallala Aquifer drops another few inches as it is literally being sucked dry by the tens of thousands of agricultural wells that tap into it across the heartland of America.This problem with all this is that the Ogallala Aquifer isn’t being rechargedin any significant way from rainfall or rivers. This is so-called “fossil water” because once you use it, it’s gone. And it’s disappearing now faster than ever.In some regions along the aquifer, the water level has dropped so far that it has effectively disappeared — places like Happy, Texas, where a once-booming agricultural town has collapsed to a population of just 595. All the wells drilled there in the 1950′s tapped into the Ogallala Aquifer and seemed to provide abundant water at the time. But today the wells have all run dry.Happy, Texas has become a place of despair. Dead cattle. Wilted crops. Once-moist soils turned to dust. And Happy is just the beginning of this story because this same agricultural tragedy will be repeated across Oklahoma, Nebraska, Kansas and parts of Colorado in the next few decades. That’s a hydrologic fact. Water doesn’t magically reappear in the Ogallala. Once it’s used up, it’s gone.Learn more: http://www.naturalnews.com/031658_aquifer_depletion_Ogallala.html#ixzz2DrG9kRnn
All considered when you examine the issue closely, Homo Sapiens has to retreat to areas close to available water that runs at ground level or near to it for Wells dug perhaps 30 feet deep or so for mechanical pumping systems that could be run on Wind Power. However, in the retreat to these areas and abandonment of the energy dependent locations for water resource, you put ever more stress on the OTHER function of Rivers, which is as Waste Disposal conduits. Imagine what occurs for instance if the current population of Los Angeles attempts to emmigrate out and sprinkle themselves lengthwise along the shores of the Colorado River. Anybody not at the positive TOP of the Watershed somewhere in the Rocky Mountains is going to have some mighty gross water flowing past them, full of Cholera and Typhus and lord only knows what other types of bacteria will evolve in that stew. Energy for water treatment, even just Boiling will become ever more scarce along the river banks, and the end result of this of course is mass death via Plague & Disease, at the same time any local energy sources get rapidly depleted.
Clearly, the only possible survival locations under this scenario is to position yourself in the lowest population zone possible which still has decent water availability and which is as far UPSTREAM the system as possible.
Where ARE those locations? You guessed it, they are in the MOUNTAINS, the GREAT WALL THAT GOD BUILT to protect the Independent Souls of the World. If you currently live in NYC, a Bugout Location somewhere near Lake Tier of the Clouds where the Hudson River has its beginnings would be a decent place to shoot for with your Bugout Machine. Of course, defending your Bugout Location from the Millions of OTHER Zombies heading out on Foot & Bicycle to the SAME location won’t be very easy either.
Lake Tier of the Clouds.
I camped their twice. The Park Service actually recommends you NOT drink the water unless boiled or otherwise purified.
In the final analysis, lack of good Drinking Water is what kills off populations the fastest. Drought produces a lack of food, and it also increases the incidence of disease spread through the accumulation of waste in a given location. For most of the High Population Zones which have evolved since Ag had its beginnings 10,000 years ago, this is what will be the Vector for the Final Solution to Overshoot of Homo Sapiens. The only thing which remains unclear is how many will make it through the Zero Point and where they will be.
My best guess, deep in the Amazon Rainforest perhaps, in the Far North in Nunavut perhaps, and way up there in the Mountains of the Himalayas and Andes and Rocky Mountains too perhaps. Anywhere else is basically TOAST.
RE
Reaching financial limits–What kinds of solutions are available?
Off the Keyboard of Gail Tverberg
Published originally on Our Finite World on August 7th, 2012
Discuss this article at the Epicurean Delights Table inside the Diner
We live in a finite world. At this point, we seem to be reaching limits in several different areas:
- Cheap oil. Our economy runs on cheap oil, but there is a limit to the amount of cheap oil that can be pulled out of the ground. There is still a lot of expensive-to-produce oil left, but this is not a substitute for cheap oil.
- Fresh water. Fresh water is used for drinking, for growing food, for producing oil and gas, and for creating electricity, among other things. In many parts of the world, we are using fresh water faster than aquifers can replenish.
- Climate Change. Our agricultural system depends on relatively constant climate. Changes to climate, whether caused by humans or not, are a problem. It is possible that this year’s hot summer is caused by climate change.
- Soil fertility. Soil fertility depends on adequate depth of top soil, adequate humus content, suitable bacteria in the soil, and proper mineral balance. We have been able to hide soil fertility problems through greater use fertilizers, pesticides, and irrigation, but these are not permanent “fixes”.
- Pollution. There are many types of pollution that are problems, from excessive carbon dioxide, to mercury in food sources, to endocrine disruptors, to algal blooms.
- Human population. The number of humans on earth is out of balance with world ecosystems and keeps growing, year after year.
- Financial system. Our financial system depends on growth, but growth in a finite world system cannot continue forever. High oil prices tend to lead to recession, and reduced economic growth–hence the need for cheap oil, rather than expensive oil.
The question then becomes, “What can we do?” Are there any solutions available, even if they are only partial solutions, as high oil prices and other limits squeeze the economy?
Many of us sense that we likely are not too far away from a contraction imposed by nature–something that looks like a severe recession that will help bring the world back into balance. While we probably cannot completely “fix” the situation, there seem to be several things we can do, in the way of mitigation.
1. Manage your finances to try to avoid the impact of a possible crash. My crystal ball is not as good as it should be, but it is hard to believe that the stock market will continue to rise, as we get closer to the limits nature is imposing. Recession will hit, and the result will likely be both lower oil prices and lower stock market prices. Default rates on bonds are also likely to rise.
I am not sure there are any entirely safe investments, but actual goods and land you own would seem more likely to hold value. Cash would seem to be safer than stocks or bonds. Things like tools you expect to need in the future would seem to be especially good investments.
2. Plan your own family size with world limits in mind. Most people will still want to have children, but stopping at two would seem to be a good choice. It would be even better if families would choose to stop at one.
3. Get family planning back on the world agenda. When Paul Ehrlich wrote the book Population Bomb back in 1968, he got the need for family planning on the world’s agenda at that time. Now, it is off the world’s agenda, as richer nations feel that the situation will fix itself, as education of women rises. I am not sure how to get the issue back on the agenda, but free “rhythm method” classes for women around the world would seem to be a start.
Figure 1. World Population by Area based on data of the US Energy Information Administration. FSU is Former Soviet Union.
4. As layoffs hit, depend more on family and friends. Even before layoffs hit, it would be in our best interests to strengthen ties with family and friends. Then, if misfortune hits, there is a better chance of being able to move in together, if the need arises.
5. Plant trees and bushes with edible fruit or nuts. In terms of protecting the soil, perennials seem to be much better than annual plants. Complementary plants and animals will be needed as well, if long-term fertility is to be maintained. There are other things that can be done to upgrade the soil, but these generally require time and money.
6. Look for simpler and cheaper ways of doing things. The usual pattern is to move toward more complex and more expensive solutions, with ever-better technology and more bells and whistles. We need to be going the other way though–toward simpler solutions that are easier to maintain with local materials, and cheaper. LEED certified homes sound great, but what we really need is homes that are closer in size to what we usually think of as storage sheds, and that can be put up quickly with local materials. It would be great to have state of the art commuter trains, but we need to be planning based on what communities can really afford, and that may be bicycle paths.
7. Appreciate what you have. We are very privileged now–we enjoy a wide selection of food, generally seasonable weather, and nations that are mostly at peace with one another. Every day, think about the good things that are part of your life–the squirrel on your lawn; the ability to zip around in a car or on a bicycle; the job you have that allows you to pay bills; the time you spend with family members. Even if things go downhill, there are likely still to be many good things. We need to keep looking for these every day.
8. Don’t focus too much on bad things that might happen. We really don’t know what exactly will happen. About all we can do is be flexible and continue living our lives as best we can. If we take care of our bodies by exercising and by eating well, that will be to our benefit, regardless of what happens. Learning skills that might be helpful for the long term, especially if they are enjoyable now might be good as well (playing a musical instrument; doing crafts; studying how we coped without fossil fuels before, as through Low-Tech Magazine).
9. Be prepared for minor outages. If things go downhill, there will be more chance of outages of various kinds. The most likely of these is that you will lose your job and not be able to pay your bills. There is also the possibility that food or water or fuel for your vehicle will become unavailable. It seems worthwhile to do at least some planning for emergencies. I personally am not an advocate of hoarding, but it does make sense to keep some inventory on hand.
Energy Observations
I might note that I am doubtful that energy solutions will come quickly enough to fix our many interrelated limits problems before a financial crunch hits.
Clearly, if we have an adequate supply of cheap oil substitutes, we can continue to hide many of our other “limits” problems. For example, if there is enough cheap oil substitutes, countries like Saudi Arabia can get water from desalination, so fresh water ceases to be as much of an issue an issue. Soil problems are also less of an issue, if we can continue to use fossil fuels for fertilizer and irrigation.
There are some renewable energy sources that may be helpful for individual families, but don’t really fix our problem with a lack of cheap oil. For example, solar can be used by families for heating hot water, and a reflective solar cooker can be used for cooking. Neither of these directly substitutes for cheap oil, though. Wind and solar PV can both be used to generate intermittent electricity, but again, this is not really a substitute for oil, certainly not in the time frame to prevent a financial crash in the next year or two.
The closest substitutes for oil are biofuels, but these are in direct competition in the use of soil for food. The next closest would seem to be natural gas, since existing vehicles can be converted to use natural gas. Even this takes time and money, so I am not convinced that natural gas, if available, could prevent a contraction in the next 12 to 24 months. So in the end, we find ourselves thinking about what other solutions to a potential financial crash are available, besides oil substitutes.
Theory of Everything: Part I
Discuss this article at the Economics Table of the Diner
Frostbite Falls Daily Rant-4/25/2011
Posted originally on TBP on 25th April 2011 by Reverse Engineer in Economy
Tonight’s topic is a tough one. The bickering regarding precisely how the monetary system will collapse framed around Inflation and Deflation is getting us precisely NOWHERE. The reason for this I think is because it is mostly ex-post facto analysis of the money supply and asset values, and this bogs you down in conflicting numbers, many of which are not even certain to be valid given how the data is manipulated these days. So what I am going to try to do in this post is look at precisely how fiat money accrues value and how that attaches to physical resources, energy and labor to create an economic system. It’s a Theory of Everything kind of post, and I have no idea how its going to come out here as I begin. My objective in developing a TOE here is to try to get a better idea of how the folks in current control over the monetary system will behave as the system disintegrates. I am trying to figure this out, and I do not have an absolute answer, but writing about it helps me to frame the questions, and responses I get help me refine it. I am just “thinking out loud” as I go, and no besides everything I remember I haven’t done ANY research for this post. Its a thought experiment.
Now, I am using “disintegrates” with respect to the economic system not in the colloquial meaning of being hit by a Phaser blast and vanishing, but in a more pure concept of dis-Integration, where to be integrated means to be connected. The problem we are faced with at the moment is that Money is becoming less and less connected to Real Value. This is not simply because a lot of it is being “printed” by the various CBs around the world, but rather because it is becoming further disconnected from the value creation mechanism of the money itself. Lots of freely floating money in the market certainly should devalue it, but competing against that is what causes fiat to have any value at all, which is Interest. If you create more money but at the same time make that money more expensive in terms of interest, the money will retain value with respect to whatever it is buying. So the freshly printed money the Greeks need right now is still actually worth something because the interest rates they have to pay for it are skyrocketing upwards.
In the Fiat system as it has been pursued since around 1692, CBs have had a virtually unlimited ability to create money. Money is a great Lubricant for trade, it allows you to rise above a pure barter exchange mechanism utilizing a portable store of value. Whatever that store of value is has to be recognized as such all across the trading markets, which these days are global and interconnected via computers. It wasn’t always that way though, certainly not in 1692, at that time it was all Paper that had to hold value across the world. How do you go about making a piece of paper a valuable instrument of monetary transaction across societies? To do it, you need to have Banking Houses established in different societies which all recognize the paper as holding value. A note written by the House of Medici in Venice has to be recognized in the Mongol Empire as “Good as Gold”, so that when the Note arrives by Camel train with Marco Polo, the Credits it represents actually buy real goods for Ghenghis Khan, so he can buy more Saddles for the Mongol Horde and expand his Raping and Pillaging Empire a bit further. Needless to say, if you actually have control over the trade routes and have warehouses stocked with real goods those credits can buy, the Paper has very real value.
It is of course very important for anyone running such a monetary system based on Notes they create that they in fact do maintain real value to buy goods and services. It is not generally in the interest of a Bankster to create worthless notes, because once those notes stop functioning to buy goods and services, the Bankster is outta biz. It should be noted here that the TBTF banking houses which grew out of this era have NEVER allowed their notes to go completely worthless, although any number of small countries have been in some way shut out of the system and seen this occur. Argentina, Weimar Germany, and Zimbabwe are all examples of small countries who got shut out of the credit system periodically and saw their currencies completely lose value. All paper currencies amount to is a Note of Zero Duration with no coupon attached issued by the Central Bank of a local Goobermint. Long as it is respected internationally, it holds value to buy goods and services. When it is not, Hyperinflation results. As Jesse points out on Café Americain, Deflation, Hyperinflation and Stagflation are all possible outcomes for a collapsing monetary system, your main problem is to figure out how the politics will evolve to force a given choice.
As the Global system of trade grew in size and complexity, a mechanism needed to be created to both perpetually increase the Money Supply to match the growing population AND to insure that the notes they created would retain their value. How do you do that? You do it through the Bond Market, which essentially attaches all the Value a given society can create through its Labor and Natural resources to a Bond of the perceived value of those assets. So if a given country has a lot of Coal in the ground and Laborers to dig up the coal, you issue out a Loan in the form of a Bond to start money circulating to pay the laborers to dig up the coal, and attach an interest rate to that loan to in theory compensate for the risk involved in getting the project going. As long as you have new projects and new ways to use labor and natural resources to keep expanding, you can keep expanding the money supply and keep sieving back interest on the money you create, and of course if you have a monopoly on this money creation you get fabulously wealthy in the process.
The primary Debtors to attach here in this process are the Sovereigns, since they have the power to Tax the entire population on some portion of their productive enterprise. So for the most part, Sovereign nations have always been the biggest debtors. (This begs the question of why Sovereigns that can issue their own money have to go in debt to get it. That question is a whole other rant. Part II coming soon to a Theatre Near You.) However, through the Capitalist era, its also been possible to Loan large sums of money to individual Entrepreneurs and Corporations to build large scale projects, and then in addition to that the advent of “Home Ownership” in the post WWII years allowed large scale loaning of money in aggregate on the retail level to individuals. All 3 of these classes of Debtors accumulated a very large Debt through the post WWII years to finance further expansion of this system. It is this debt overhang now that is causing so much worldwide havoc with the monetary system, and it is not just in the FSofA. Every last country connected up to this banking system is in precisely the same pickle, even what appear to be net creditors like China. This because the savings they accumulated is mostly irredeemable debt. It is irredeemable debt that cannot be serviced anymore, because the growth necessary to service it simply is not happening. The lowest level debtors, J6P Home “Owners” are the ones being hit first here, because J6P is not getting ANY kind of Bailout. Stuff like HAMP is just smoke and mirrors to bail out the TBTF Banks, not J6P. The Sovereigns are being Bailed out, but the peripheral ones are seeing their Interest Rates rise to compensate for the risk that they won’t pay off and to maintain the value in the money they are being issued through the loans. The least affected so far are the TBTF Banks, which are being issued money at near ZIRP to speculate in the markets which they are not accountable for, it’s other Low Hanging Fruit who will eventually lose their shirts. Long as that speculation continues, regardless of whether these companies actually turn a profit the managers and executives can pay themselves quite well and the wheels keep turning on the bus.
The thing to remember here is that the CBs cannot keep issuing money in perpetuity, because if they do so the money will go worthless and no longer measure the value of what it is supposed to be buying. As the Sovereigns become increasingly unable to Tax enough money to pay their bonds, they will fail and I do not see it as likely that after anything bigger than about Portugal you will see the CBs bailing out Sovereigns. To do so, they would have to create valueless money, and that is not in their interest to do so.
Now, it is unclear as to whether Sir Isaac Newton as Master of the Mint back in 1692 really understood all the implications of a velocity based money supply of perpetual growth, but IMHO by the 1970s when Local Peak Oil was reached here in the FSofA and when all the bad Loans to South America made by my Dad and other apparatchiks of the system in the name of Chase Manhattan, JP Morgan et al went South, the folks running this system were quite aware of the flaws and that it had a limited lifespan. The last 40 years have been spent manipulating the system to consolidate ownership and further capture the political process, quite successfully. However, the whole ball of wax is now up between a Rock and a Hard Place GLOBALLY, which is why the idea Capital will take off and run for cover outside our own borders is IMHO ridiculous. There just isn’t anywhere to run now, all the sovereigns are in the deep doo doo, so the idea you can pull value from any of them through taxation is ludicrous. People are going to rapidly be moving to subsistence level almost everywhere, there is not going to be surplus to sieve anywhere. If the surplus does not EXIST, no financial instrument can make it exist. Of course, people can be starved out of existence to reduce demand, but they do not go quietly into that Good Night either. So this requires military action which draws down your own surplus, such as it might still exist. See the Roman Empire to understand this problem.
This still does not answer the question of how our Goobermint and Da Fed will behave as the debt default moves up the chain to the Too Big to Bail. This besides nation-states like Spain includes our own States like CA, IL, NJ, TX et al. They cannot issue high interest bonds to rollover the debt they already cannot afford to service, but with low interest there is no incentive for anyone to buy this debt. No incentive for anyone except Da Goobermint, which wishes to perpetuate itself. So the TBTF Banks will offload sovereign bonds on Da Fed, which serves as the “Bad Bank” upon which to dump all your losing bets. The large Banking Houses will consolidate down to just holding and trading about anything perceived as an asset holding real value, commodities for the most part. Regardless of the numerical denomination, with respect to each other these commodities will more or less move in tandem in perceive value, though it is likely in this scenario that PMs will crash with margin calls across other commodities Put it this way, if you are a Sovereign Nation holding a few tons of Gold and you need to buy Rice to feed the population, you are going to put that Gold up for sale at whatever the market will bear, elsewise your people are likely to Riot and string you up by the Gonads.
At this point, you have major banking houses owning large quantities of “stuff” everybody needs at a relatively high dollar denominated value. There are two roads possible, one is to issue money on the retail level to J6P to be able to buy the stuff at these high prices. In a country where most of the population is employed through Goobermint Trade Unions, you could just start indexing and raising the salaries to meet the rising costs of the commodities, but that isn’t the model the FSofA is working under. Rather what you see at the moment here is wage depression, more unemployment and further loss of purchasing power amongst the people who would buy the commodities for end use.
The most sensitive commodity here in the FSofA would be refined gasoline for private automobiles. As the price continues to rise here, it has to force people to start conserving and cutting back on usage. This would force inventories to rise as long as the supply chain is still producing the same amounts, but it may not be doing that. Libya for instance is not contributing its share to the supply chain at the moment. However, what is produced will move in the direction where the most people still have money to pay for it, and that would be toward the western nations with some percentage of the population still solvent. Less wealthy countries will begin to see shortages.
It is unclear how high a price the remaining solvent people in the FSofA can tolerate for gas before it forces too many people out of the market to maintain the distribution chain. I’m going to make a WAG it could go to $10/gallon at some stage before there is a complete collapse of distribution, but even a perpetuated period at the $5 range will have a devastating effect on commerce and GDP.
Similar effect here with Food, which as a percentage of the budget of even the lowest paid of the still employed here is relatively low, compared to countries where people subsist on $2/day. I think most Amerikans could withstand a doubling of food prices as long as they are still employed, simply by buying cheaper foods. As long as the SNAP card program keeps the unemployed fed, again we can see a steady rise in these prices that is compensated for by a forced economic rationing.
The problem is much larger and more immediate in the poorer countries of the world, and this is the most destabilizing aspect of the spin down. Again unclear is exactly how many places we can try to police to keep the Oil moving out of the M.E., so this can force a breaking point to occur much faster than just the economics.
In no scenario I can imagine would it behoove our Goobermint or Da Fed to keep issuing essentially free money to the States and Municipal Goobermints. So like Meredith Whitney, I see a period coming of Defaults through these entities, with less and less money circulating through their economies, which means ever falling tax receipts to fund their local Goobermints. This doesn’t mean an overnight failure of the monetary system, but it will put many places in a grinding down phase of increasing poverty which will be very difficult, complete with the kind of social dislocation you see now in places like Greece and Portugal, getting worse as time goes by.
Is this Inflation or Deflation? You could look at it either way, since core commodities will be increasing in price but real wages and purchasing power will be decreasing. Far as Hyperinflation goes, that is another phenomenon altogether, more Political in nature than economic. A given currency has to be more or less abandoned by the BIS and the country cut off from the international trade system to get a hyperinflation rolling. It does not seem likely that the BIS will abandon the Dollar as a currency unless and until there is a workable alternative to it, and there isn’t one on the Horizon at the moment. There will thus be political pressure both internally here and internationally to withdraw credit issuance by Da Fed, which Da Fed is looking for ways to do ever so gently so as not to rock the boat too much, but at this point it is a very unstable boat and very sensitive to perturbation of any kind. The effect remains possible of a virtually instant Lock Up in the financial markets if too much liquidity is withdrawn from the market, because without that liquidity a few margin calls can cause a cascade selling event on the markets with no bottom in sight. The Doomer in me waits impatiently for that day, because it would be a sight to behold indeed. It would make the Flash Crashes we have seen as Coming Attractions look like Chump Change. Credit where credit is due however, Helicopter Ben and the other Geniuses running the Super Computers for the PPT have demonstrated they have the ability to freeze, re-capitalize and manipulate these markets at will, so such an instantaneous crash may never happen. I have been regularly wrong in looking at the collapse at the gross market level because I underestimated just how smart these folks really are and how much control they actually do have over the markets. They cannot stop the eventual recognition though that the system is globally bankrupt, several times over actually.
To conclude this portion of the argument, I don’t think that examining the prices ex-post facto is the best way to understand how the collapse will proceed. In essence what we are looking at is a failure of the Credit-Debit model of the Bond Market at the Sovereign level. Because of the simultaneous geometric growth in population size and the tandem consumption of resources upon which to build those large populations, the ability of Sovereigns to tax out their populations to pay off on Bonds predicated on growth has for all intents and purposes disappeared. Without that ability, what gives money any value at all? Fiat money is a debt instrument, a Note of Zero Duration based on future production that isn’t coming down the pipe. So the fiat system will collapse as a result, though it can be a long grinding collapse because all production does not cease instantly everywhere.
Far as utilizing PMs as money, they do not represent Debt on future production but rather are the result of past production, the effort to dig up and smelt the relatively rare metal and then coin it. What value they actually hold depends upon exactly what there is available to buy with them, and whether it is in surplus or not. Anything still in surplus you will be able to buy with very little Gold; anything not in surplus you may not be able to buy with all the Gold in your basement safe. What you are dependent on here is the overall ability of your society to produce a surplus of food to feed the population, at its most basic level. Here in the FSofA, as long as some portion of the Oil Conduit keeps moving and we can as a society produce a surplus of food, the PMs will hold some value, but trading with them will likely become difficult and dangerous, and the Goobermint confiscation of such things becomes ever more likely if they gain any traction as a trading mechanism. I do not think they will gain such traction in most places, so I think the value of these metals will fall with respect to more necessary items.
In the medium term as a result, I see fewer Dollars being available to J6P to buy STUFF, which thus will continue to keep the Dollar valuable to J6P through its scarcity. I just do not see it likely that Helicopter Ben and TPTB will start sprinkling down higher wages and free money to J6P. In this environment, prices can rise as commodities become more scarce and Profit margins disappear on production, but as long as the Dollars are scarce to the consumer of the end products, you cannot support a Hyperinflationary event. The abandonment of the Dollar on the international level of trade by the BIS would cause a Hyperinflation, but there isn’t a readily available alternative to it right now so such an abandonment does not seem immediately likely.
However it does play itself out on the monetary level, inflation or deflation, the primary problem you are going to have is decreasing availability of the products of industrialized society. No matter how much Gold you have, if you want to buy a Plasma TV you won’t be able to do so, because the Plasma TV factories will shut down. Not ENOUGH people will have Gold to buy Plasma TVs to make running such a factory model profitable. You probably won’t miss a Plasma TV all that much, but when the profit margins in producing food along the industrial model disappear, this you will miss VERY much. It is as we approach that stage of the Spin Down that how you position yourself will become very important, because no group of people anywhere ever goes Quietly into the Good Night of Starvation. The industrial model of food production will be replaced on the local level in areas that can produce food for their populations. Farmland that is dependent on water pumped up from deep aquifers utilizing the thermodynamic energy of Oil will no longer produce, so these are not good long term areas for survival.
You cannot know how the climate might change in the future, but where you settle yourself must most certainly right NOW have enough Water dropping down as rainfall or sluicing down from mountains during the spring thaw. Water is NUMERO UNO in picking your hole. After the water, the condition of the local soil for supporting agriculture is the next bet you make, unless you are near a Coast where there is still good fisherie not contaminated by Radioactive Cesium and Iodine effluent from Fuk-U-Shima Nukes or Spilled Oil from BP’s Macondo Well in the GOM. After the water and food are covered, the next one to consider is Energy resources. The best places have all of these things, but of course in the future they will be popular places every last Zombie out there wants to migrate to. No guarantees you or your progeny will be able to keep or “own” the land you live on because you bought it with 10 pieces of Silver from the last Goobermint to run the show in that neighborhood. Your only Property Rights are what you can Protect and Defend, and nobody can do that effectively alone. So pick a place somewhere on the face of the earth with the Water and the Food resources and Good People you affiliate with well, and make yourself ready to defend that little patch of land. Because when this monetary system crashes and when the industrial model goes the way of the Dinosaur which they both inevitably MUST, that is all you will have left. If it is not enough to support you and your Tribe, you too will go the way of the Dinosaur.
See You on the Other Side.
RE
Discuss this article at the Economics Table of the Diner
RE’s Excellent Mexican Dental Adventure: Part I
Discuss this article at the Kitchen Sink of the Diner
Background Music courtesy of “The Voice”, Jay Black and the the Amerikans
I’m currently sitting in a Luxury Hotel Room in Yuma, AZ after an exhausting Red Eye flight down here from the Last Great Frontier. Reason for the trip? Tomorrow I will walk across the border with Mejico into “Los Algodones”, a town of Dentists, Optometrists and Pharmacies that makes its living on Amerikans making day trips there to buy prescription drugs and get affordable dentistry.
Its soooo much cheaper there that the cost of the flight from Alaska and the luxury Hotel Suite and the Rental Car is more than made up for by savings on the Dental Work, if you have a decent amount to be done and I have a LOT. I may end up having them all pulled and get dentures, but I will try to get Implants instead, or at least implants that will help stabilize the dentures. For most people, if you just have a couple of Root Canals and Crowns to get done, this is enough to justify the trip. My Dentist comes to me Highly Recommended by numerous Alaskan friends who have used him.
Anyhow, every trip I make down to the Lower 48 these days brings me some new insights into how things are progressing with the spin down. Needless to say, up in the Mat Valley of Alaska, you don’t get a real feel for what is going on down here.
For my first new experience on this adventure, I got my first Molestation from the TSA Perverts. Ted Stevens International Airport finally got its Full Body Scanners and mine showed up “too many hot spots” so I got the full Blue Glove exploration of the Family Jewels. LOL. The pervert doing the job had a rehearsed Patter as a constant drone explaining what area he would touch next, when he would use the Back of his hand instead of the front, all almost unintelligible its spouted off in a monotone with no inflection to the voice. Anyhow, after coming up Clean I asked him just why I had “hot spots” that needed the pat down when nothing was there. His response was that sometimes the machine gets confused by folds in the clothing etc. Anyhow, its just freaking stupid, everybody knows you will get scanned so nobody will be carrying weapons this way. If you want to carry something, you will do orifice stuffing. Until they start doing Anal and Vaginal cavity checks, this is just a waste of time. I could come up with a zillion other ways to creatively turn the average Wheely Bag into a weapon also.
Anyhow, this bizness doesn’t bug me or embarass me and it certainly does nothing to keep me from carrying my weapons along for the ride. My weapons are words and ideas, and I carry them inside my head, not outside my body or even in my body cavities.When Fatherland Security bans Laptops on Commercial Airlines, I’ll have a problem. Until then, “ Have Keyboard, Will Travel”.
The next BIG Difference I saw or rather heard was Militarization Propaganda. First off, now in addition to First Class Passengers and Handicapped people and people with small children getting first Boarding Priviledges, Military Personnel in Uniform travelling also get to board first. I saw many more Military in fatigues travelling this go round then I ever have before. There were also numerous announcements about supporting our Troops defending our Freedom and so forth. Tourist and Bizness flying may be declining, but I suspect it is being made up for by the military using the commercial aviation system as a troop transport and redeployment mechanism.
Upon my arrival as I drove down here and saw the sprawl across the Arizona Desert, it drove home to me once again how appallingly unsustainable the model is here, there just is not enough WATER around natively to support towns and communities that are really dropped intot he middle of NOWHERE. They are only there because they serve as waypoints between the very few places that there IS enough water around, like in Yuma which sits right on top of the Colorado River, though by the time it gets down to Yuma its a pretty pathetically small river. Then of course you have the fact that down the line here the water needs of this side of the border are balanced against the needs on the CA side of the border, not to mention the Mexicans.
The water avaialble from the river does make Ag possible around here, I passed numerous Green Farms surrounded by Brown Desert. However, such irrigated Ag has salinization problems over time, and I doubt without liming the soil and the constant input of fossil fuel based fertilizer you could continue making this ag land productive. Then you have the fact its so far from everything and surrounded by vast stretches of Desert with NO water. Even if you can grow stuff around here, how will you move it from here to anywhere else without the Trucks and the Oil?
Regardless of all these very obvious problems, in these last 20 years or so Arizona was very attractive land for RE Developers on the Suburban Sprawl model. There is a lot of land, all very FLAT and easy to layout a road structure on and drop whatever kind of structure it is you would like on it, be it Mcmansions or Malls. The prices could be made attractive to aging Boomer Retirees since the land itself was so cheap. They love the nice Warm and Dry climate also, long as they have HVAC in the Malls and McMansions of course.
Even MORE than McMansions though, what you have down here are a PLETHORA of Bugout Machine Communities. This actually makes the most sense of anything done down here to date. All you need to do to set up a Bugout Machine community is provide Hookups for water, electric and sewer, a Pad to park on and the Retired Boomer can live cheaply down here most of the year, and then occassionaly drive the Bugout machine to visit Grandkids sprinkled all over the rest of the lower 48.
Besides the Boomers living in classy Diesel Pushers, you also have many more lower class older Mobile Home parks which are home to the local Ag workers, and the Service Personnel who staff the restaurants and Malls that serve the retired Boomers. Basically, an economy has developed here which takes the Social Security checks the Boomers live on and then filters it out to the rest of the community through the Malls and Restaraunts. Sense a problem with this?
Really, the economy here depends on the Transfer Payments made through Social Security. The overall cost of living for someone on SS is sufficiently cheap if you live in a Bugout Machine that even with JUST SS you have surplus income to spend at the Mall and Restaraunts. Since aging Boomers looking for cheap places to live on SS is a Growing Demographic, Yuma’s Future was so Bright you Hadda Where Shades if you were an RE Developer, and so they built up yet another one of those MONSTROUS Mall/Hotel complexes, where I am currently writing this missive from. It looks new enough to me that it was likely built in the last decade. Got your Dillards, Target, Sam’s Club, Olive Garden, Red Lobster et al, along with several redundant 3 star Hotels where in theory I suppose the developers figured Grandkids would stay when visiting Boomer Grandma and Grandpa, since they can’t all fit in the Bugout Machine. Also of course trying to attract the Convention Biz, so these hotels have the meeting Rooms and the Spas as well.
Know what I PAID for my spacious and comfy Hotel room here? $40/night on the Travelocity “Super Secret Deals” plan. On this one, you don’t get to know the name of the Hotel until AFTER you pay for it in advance, but I figured what the hell I would take a chance. In my trucking years, I stayed in many Roach Motels, I have no problem with this as long as the place has a working shower, a fridge for my beer and wireless internet I don’t mind sharing the space with a few roaches and spiders and having Welfare Moms for neighbors. I just paid the SAME price I paid for that kind of stay in a Roach Motel at this place! LOL. Its a freaking palace.
Obviously, my $40/night is not going to pay the mortgage on this CRE. This sucker has to be losing money hand over fist here.
View from RE's Room Balcony
However, the Mall and associated Restaurants all seem to be doing OK. Long as the SS checks keep rolling in and the Dollar still works to buy something, Yuma’s Future remains pretty bright overall. You can live overall very cheap in a Bugout Machine here, you don’t have Mildew or Condensation problems, and currently the flow rate from the Colorado river is sufficient to keep the water and sewage systems running OK.
In this respect, the Bugout Machine paradigm is pretty good around here these days, and probably for a little while yet to come also. Its certainly better than anyone who bought one of the Fixed Retirement Homes in the neighborhood, at least when it goes south here if you keep enough Gas inthe tank you’ll have enough to unhook and drive up into the Rocky Mountains where maybe you can find a spot to park it for good that actually gets some Rainfall.
For the older folks who need Medicines also, you can cross the border over to Los Algodones whenever you need to and buy your medications at 20% of what you would pay here for the same stuff. Of course, you will need Gas to get to the Border Parking Lot, and once the dollar goes south or Mejico completely collapses, this system will stop working also.
In the long term, most of the stuff built up around here is an ENORMOUS Ghost Town in the making. Those SS checks are not going to keep coming in perpetuity, and Gas to move around the vast sprawl of the Desert won’t be available either. The Water will get diverted from here to other places also. What this area can support sustainably is FAR less than the number of Bugout Machines you see parked all around the neighborhood. Until the Seneca Effect Sudden Stop occurs though, the economics here work a bit better than they do in some other places like the Rust belt and Inner Shities.
Until this occurs though, you can enjoy a first class Hotel stay and get your Teeth fixed up on the Cheap in Mejico down here in Yuma, and go visit the Prison also, which is a Legendary One and is one of their biggest Tourist Attractions. Culturally speaking of course, if a prison is your big Tourist Attraction, there is something seriously WRONG with your culture to begin with, but let us not dwell on that one too much here.
More tomorrow after I get back from over the Border.
RE