Craig Constantine

Debt: This time is different

January 16, 2015

Many seem to believe that if we worked our way out of debt problems in the past, we can do the same thing again. The same assets may have new owners, but everything will work together in the long run. Businesses will continue operating, and people will continue to have jobs. We may have to adjust monetary policy, or perhaps regulation of financial institutions, but that is about all.

I think this is where the story goes wrong. The situation we have now is very different, and far worse, than what happened in the past.
~ Gail Tverberg from, http://ourfiniteworld.com/2014/07/07/debt-eight-reasons-this-time-is-different/

Oil limits and the economy

January 4, 2015

While the press treats these issues as separate stories, they are in fact very closely connected, related to the fact that we are reaching limits in many different directions simultaneously. The economy is the coordinating system that ties together all available resources, as well as the users of these resources. It does this almost magically, by figuring out what prices are needed to keep the system in balance—how much materials of which types are needed, given what consumers can afford to pay.
~ Gail Tverberg from, http://ourfiniteworld.com/2014/03/21/oil-limits-and-the-economy-one-story-not-two/

Energy return on energy invested

December 26, 2014

Eventually, the civilization hit a period of stagflation, typically lasting 50 or 60 years, as the population hit the carrying capacity of the land, and as additional workers did not add proportionately more output. When this happened, the wages of common workers tended to stagnate or decrease, resulting in increased wage disparity. The price of food tended to spike. To counter these problems, the amount of government services rose, as did the amount of debt.
~ Gail Tverberg from, http://ourfiniteworld.com/2013/12/06/diminishing-returns-energy-return-on-energy-invested-and-collapse/

Oil limits

May 15, 2014

This model “works” fairly well, as long as the economy is growing fast enough–population continues to grow and resource extraction continues to grow as planned. In a finite world, we know that this model cannot work forever. At some point, we can expect to start reaching limits.

What do these limits look like? I would argue that in the case of resource extraction, these limits look like increasingly high cost of extraction.
~ Gail Tverberg from, http://ourfiniteworld.com/2013/08/02/oil-limits-reduce-gdp-growth-unwinding-qe-a-problem/

You should also read “Quantitative Easing (QE)” (the first three, short paragraphs on WikiPedia summarize it neatly.)

My opinion: We need to start seriously talking about a STEADY STATE ECONOMY. What would that look like? How would it work? How do we get to that? Seriously. We simply CANNOT have a growing and expanding economy forever on a finite planet with finite room and finite resources. What part of “finite” don’t you understand?

Energy and economic models

April 3, 2014

We live in an economic world. Economic models that were developed years ago were created based on observations of how the economy seemed to work at the time. As time goes on, it is becoming clear that early economists missed important connections. The most important of these is the role of energy and its connection to the economy. It takes energy to make anything, from a piece of steel to a loaf of bread. It takes energy to transport anything. Humans need energy in the form of food to continue to live. Clearly, energy should have a place in economic models.
~ Gail Tverberg from, http://ourfiniteworld.com/2013/07/22/energy-and-the-economy-basic-principles-and-feedback-loops-2/

I find this stuff fascinating; It’s this giant, emergent phenomenon. Billions of individual people going about their daily lives create such a whirl of activity and action. But the ultimate result is what… an “economy”? A path to “enlightenment” for humankind? Meaningless in total, but meaningful at the individual’s level of experience? Perhaps it’s simply [on the whole] incomprehensible. If you study a little chaos theory, you learn: The butterfly’s beating wings have ZERO affect on the weather. Instead, the fully understood system, (“stochastic”) is truly unpredictable.

Stumbling Blocks

January 2, 2014

The story of oil limits is one that crosses many disciplines. It is not an easy one to understand. Most of those who are writing about peak oil come from hard sciences such as geology, chemistry, and engineering. The following are several stumbling blocks to figuring out the full story that I have encountered. Needless to say, not all of those writing about peak oil have been tripped up by these issues, but it makes it difficult to understand the “real” story.
~ Gail Tverberg from, http://ourfiniteworld.com/2013/08/13/stumbling-blocks-to-figuring-out-the-real-oil-limits-story/

Our energy predicament in charts

September 3, 2013

There is considerable evidence that we are already reaching the situation where governments are encountering financial distress of the type shown in Figure 18. With wages being depressing in recent years (Figure 16), it is difficult to collect as much taxes as required. At the same time, expenses are elevated to handle the many issues that arise (such as payments to the unemployed, subsidies for alternative energy, and the higher costs of road repairs due to higher asphalt costs). The big gap between revenue and expense makes it hard to fix our current financial predicament, and increases the likelihood of political problems.
~ Gail Tverberg from, http://www.theoildrum.com/node/9901

Inflation, deflation or discontinuity?

August 13, 2013

After a while, a period of stagflation is reached. Population catches up to the new resource, and job opportunities for young people become less plentiful. Wage disparity grows, with wages of the common worker lagging behind. The cost of government rises. Because of the low wages of workers, it becomes increasingly difficult to collect enough taxes from workers to pay for rising government costs. To work around these problems, use of debt grows. Needless to say, this scenario tends to end very badly.
~ Gail Tverberg from, http://ourfiniteworld.com/2013/07/01/inflation-deflation-or-discontinuity/