Summary: Yesterday’s post The end of the post-WWII world is not the end of the world discussed the large-scale processes at work now. Today we discuss the most astonishing — and seldom seen — aspect of these things.
The problems of the many individual nations in crisis have received ample attention from experts. The two global dimensions of the crisis have not. First, the global financial regime no longer works well (as seen, for example, in the faltering ability of the US to act as the reserve currency, the disinterest of other nations in replacing the US in that role, and the wild gyrations of currency values). Second, the large number of nations experiencing large-scale structural change. Here we look at the second — and least well seen — aspect.
Contents
- The grand alignment of the nations
- Cause of the grand alignment
- A tour of the nations
- For more information
(1) The grand alignment of the nations
What caused the disaster of the Titanic? There was no single cause, it resulted from a constellation of simultaneous events. Bad weather. Bad luck. Mistakes. Lost gear. Errors of judgement.
Similarly today we have the major nations of the world simultaneously at or near (1 or 2 years?) major inflection points: Eurozone, UK, Japan, USA, and China. In each case largely due to internal dynamics, as their current internal economic systems fail and require major reforms. It’s the geopolitical version of the planetary grand alignment (which allowed NASA to send the Voyager One and Two probes to tour the solar system).
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This creates danger and opportunity for each nation (as in the legend of the meaning of “crisis” in Chinese), but also the possibility of global synergy in a bad way over the short-term. As shown in yesterday’s post, even successful transitions are painful. Most or all of the major nations in transition would depress the global economy and lead to geopolitical instability.
What about the long-term? It could be very good, if everybody works their way through to successful new regimes. Or very bad, if most major nations fail to do so.
(2) Causes
The odds of this synchrony are too great for this to result from coincidence. What systemic factor might account for it? These nations have different demographics, economic and political structures, social systems, and trade patterns.
My guess (emphasis on guess): the common elements are poorly managed debt and lax regulation of their financial industry — although in different ways. Debt excesses differ from nation to nation: internal or external loans, private or public sector debt, debt incurred for investment or consumption. It’s the debt supercycle (coined by Hamilton Bolton and Tony Boeckh of Bank Credit Analyst).
Ditto for the banks. Some got into trouble speculating. Some the old fashioned way, by excessive and imprudent mortgage and business loans. Some were ordered or pressured by governments to make bad loans (often to the government).
But no matter what the path, the result was debt that could not be paid back and wrecked banks. There may be no other path to the future other than mass defaults and rebuilding many of the world’s banks (at somebody’s expense). The new world will probably build a fundamentally different global financial system than ours, learning from our generation-long experiment with debt. It’s a useful tool but, like many powerful tools (opiates, nuclear power, nailguns) becomes a fearsome thing when misused.
(3) A tour of the nations
(a) The Eurozone
The Eurozone is furthest along of the major nations in the cycle of crisis and resolution, and exhibits many of the traits only dimly visible elsewhere. It might also be the template that other nations follow to disaster: incorrect diagnosis of their problem, dogmatic adherence to unworkable solutions, reluctance to confront their core structural problems, and a refusal to learn from either economic theory or history.
Worse, Europe’s leaders appear unwilling to address their core problem. Perhaps because Europe’s people are not yet willing to do so. As we see in the Greek polls: 80% want to stay, 80% don’t want to pay the price of staying. Polls in Germany show a similar contradiction.
Francisco Blanch (Global Investment Strategist, Bank of America Merrill Lynch) explains the first three problems:
To begin with, it should be apparent by now that forcing consumers, corporates and governments to delever all at the same time is a painful policy. With consumers, corporates and governments in Peripheral Europe all rushing to sell assets, GDP has nose-dived in Spain, Italy, Greece or Portugal, to name a few. With GDP contracting at a faster rate than overall indebtedness in Peripheral Europe, debt to GDP ratios are not showing much improvement and borrowing costs are soaring, pushing some economies into a debt deflation spiral.
… As European deficit countries face a similar current account problem to that of the US but lack a flexible currency, continued debt rollovers are only perpetuating the problem. Meanwhile, Germany has instead shown a similar position to China several years ago (Chart 15). Quite strikingly, Germany’s foreign position has barely budged, making it nearly impossible for Peripheral countries to regain competitiveness. Put differently, the core is fast absorbing capital and labor, and exporting misery to the periphery. Germany is having its cake and eating it too, for now.
… Unfortunately, this situation is unlikely to persist. World history is littered with ruinous experiments linked to a lack of exchange rate and monetary policy flexibility (Chart 16). The gold standard in the Great Depression, the lost decade in Latin America, and the Asian Financial Crisis are good examples of how exchange rate distortions led to economic ruin. … But in the absence of currency, monetary and energy flexibility, the European sovereign debt crisis is far from over and about to start its most dangerous phase.
In the New York Times of 20 May 2012 Paul Krugman explains the last of these problem, showing how today’s situation in the Eurozone is similar to that of the US-European situation at the end of WWI.
Read Keynes from Essays in Persuasion:
“Ultimately, and probably soon, there must be a readjustment of the balance of exports and imports. America must buy more and sell less. This is the only alternative to her making to Europe an annual present. Either American prices must rise faster than European (which will be the case if the Federal Reserve Board allows the gold influx to produce its natural consequences), or, failing this, the same result must be brought about by a further depreciation of the European exchanges, until Europe, by inability to buy, has reduced her purchases to articles of necessity.”
He {Keynes} then goes on to discuss the folly of American policy, which simultaneously demanded that the Europeans pay in full while denying them the ability to export enough to make those payments. So here too we are repeating ancient mistakes. But why does nobody learn?
The situation will eventually sort out. Despite the hysterical forecasts of doom, Europe will not sink forever like Atlantis. The process might be quick (these things tend to accelerate fast), but probably with much turmoil and pain. Here are some incisive recent articles about the Euro-crisis:
- “Tempting Rationale for Leaving the Euro“, New York Times, 15 May 2012
- “Greece’s predicament: Lessons from Argentina“, Peter Kretzmer and Mickey Levy, VOX, 16 May 2012
- “Greece Must Exit“, Nouriel Roubini, Roubini Global Economics, 18 May 2012
- “Europe’s Depressing Prospects: Two Reasons Why Spain Will Leave the Euro“, Michael Pettis, Roubini Global Economics, 18 May 2012
- “Today Germany Is the Big Loser, Not Greece“, Marshall Auerback, Naked Capitalism, 21 May 2012
(b) Japan
Japan’s increasingly elderly majority have locked the nation into box of dyfunctional guaranteed to fail policies. Some experts believe their leaders have in effect given up on finding a solution, and just wait for the eventual singularity — wrecking the existing order and making possible a new Japan. The process probably will be painful. Here are two obituary notices:
- A bearish perspective on Japan by Hayman Capital Management, a Harvard Business School Case Study, 12 April 2012
- As Japan sails into the shadows, let’s wish them well and wave good-by, 14 July 2009
(c) UK
The UK now confronts decades of errors: over-reliance on North Sea oil (rapidly depleting), a poorly managed and over-size financial sector, and large public debt and liabilities. Worse, their leaders and people appear clueless about their problems and possible solutions. For details about this bleak situation see “Thinking the unthinkable – might there be no way out for Britain?“, Dr Tim Morgan (Global Head of Research), Tullett Prebon (UK brokerage firm), July 2011 (large pdf) — An excerpt looks at their future:
Our analysis indicates that the British economy, as currently aligned, is incapable of delivering growth at anywhere near the levels required by the deficit reduction agenda. In the decade prior to the financial crisis, the UK economy became hugely dependent upon debt. Taking public and private components together, debts have increased at an annual average rate of 11.2% of GDP since 2003. The two big drivers of the economy have been private (mortgage and credit) borrowing, and huge (and debt-dependent) increases in public spending.
- Three of the UK’s 8 largest industries (real estate, financial services and construction), which account for 39% of the economy, are incapable of growth now that net private borrowing has evaporated.
- Another 3 of the top 8 sectors (health, education, and public administration and defence) account for a further 19%, and cannot expand now that growth in public spending is a thing of the past.
- This means that 58% of the economy is ex-growth, a figure that could rise to 70% if, as seems probable, growth in retailing is precluded by falling real consumer incomes. a very British mess
Together, the severity of Britain’s indebtedness and the challenging outlook for the economy mean that the UK is now mired in a high-debt, low growth trap.
(d) China, India, and the US
All these are in earlier stages of the crisis cycle which will test their people and leaders. Some will be in effect voted out of the major league nations; others will become regional hegemons or even perhaps superpowers in the next world order. For more about China and India see the FM Reference Page listing all posts by nation.
(4) For more information
See these FM Reference Pages for other posts about these topics:
“To begin with, it should be apparent by now that forcing consumers, corporates and governments to delever all at the same time is a painful policy.”
If you read a piece starting with that sentence there is no point reading any more; such a process is not painful but impossible and it is clear the writer does not understand the difference between financial and physical assets.
Financial assets always and everywhere must add upp to zero ie finacial savings = borrowings. So All three sectors could not possible be leveraged at once (though members of all three could be). This means that if the consumer and corporate sector in aggregate wish to delever (save) then the Government by definition has to borrow and visa vera. This is not economics but purely double entry bookkeeping, a neccessary but not sufficient condition for any macroeconomic theory.
Tim,
It is seldom a good idea to lightly declare that experts are wrong concerning basic statements of fact about their field (as opposed to forecasts, which are a different order of statement).
“Financial assets always and everywhere must add upp to zero ie finacial savings = borrowings”
The author said “delevering” — reducing the ratio of debt to assets (both real and financial). That’s a different number than you describe, which is net credit (aggregate debt – credit).
“such a process is not painful but impossible”
Not so. The first is slow (esp in a downturn); the second is painful; the third is fun (but very difficult in a downturn)
If one posits, as many of us do, that the nationstate as an institution is in terminal decline ( much as, for example, the Greek polis was in terminal decline during the 4th century BC ) then we should expect to see what we now are seeing. As nationstates become less and less in sync with social realities, they will therefore exhibit various problems that with time will be both more frequent and more serious.
It does not necessarily follow from the nationstate’s malaise that the the inhabitants of those states are in trouble – any more than, say, the inhabitants of Corinth in 300 BC were worse off than those in 400 BC. They just were no longer living in a polis.
Duncan,
Only the 3rd comment and got to be a best of thread! Also, it’s a Martin van Creveld reference, always a good thing (to his masterwork, Rise and Decline of the State).
Political evolution is typically associated with social turmoil and pain, but as you note that need not be so. Esp if we can work through this without serious state-to-state conflict or violent social unrest.
We would rather bear those ills we have than flee to those we know not of.
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FM note: Hamlet speaks in Act III, scene i.
Thought provoking. I will speak from an English perspective, but this is relevant to many others I feel. Little is spoken of fulfilment of spiritual needs within humankind. Western societies in particular consist of bored consumerists. Eagerly awaiting the next toy or “app”. Then getting into debt to fund their habits, much akin to their governments, using debt to ensure reelection and compliance.
A more agrarian existence, alongside the best that science can offer to aid health, less globetrotting as a “right”. Well, I for one have rediscovered self worth and self reliance. It takes a sea change in thinking, education systems need to alter. Aspiration needs to be realistic.
If local economies are developed, wealth based on a true none fiat system ( metal? ) I feel this is achievable in a short time. Respect for elders and family means a lot when rediscovered, respect for self even more. Produce something of value that others need.
Yes I am angry at one level. I reject the corporate / banker view of controlling mankind. They have nothing to offer, except more misery, debt, starvation and war. Austrian attracts me, though local fires my belly on a personal level. Once greed is replaced by a sense of personal worth as a measure of wealth, well we are on the right road.
On a final note, Iceland, it bounced back in a short time. Greece is rediscovering its agricultural / barter system through need. The people are taking control. Pity the politicians and others who try and stop this. An internet reformation is underway, this will be used increasingly to reject corporate speke. I use the term liberation sparingly, there have been many false dawns, maybe this time it will work without war. We can but hope.
Thank you for that valuable perspective. In the previous post I said that economic turmoil were not atomic war (a shadow we lived under for a generation), or even war. You remind us that economic turmoil is not necessarily unhappiness.
But… while money isn’t everything, economic stress can produce social stress with unpleasant results (Europe’s people have displayed great social cohesion so far, more than I expected). Also, economic downturn produces great suffering among the poor. Loss of health care, loss of food and shelter — the spiritual benefits to the middle and upper classes do not IMO offset that.
Also — thank you for reminding us of Iceland. As Krugman repeatedly mentions, Iceland is a model for Greece. Like Argentina, they broke the banker-friendly rules of the western world and prospered — despite the forecasts of certain ruin.
I take your point about the poor. My vision encompasses a common charity, surely people can see that suffering needs alleviating? The strength of family ensures this, a thing not lost on social engineers who have unravelled family life as the foundation of functioning society.
Yes Europeans are hardy. I need not remind you of course, having been bombed, occupied and abused for generations leads to a natural flair for survival. In fact the one favour the EU may have unwittingly given Europe is a tolerance of difference, between peoples. Contrary to MSM lies and political manipulation our Eastern European neighbours have, like million of others throughout history, integrated well.
I enjoy your articles enormously, optimism is a rare commodity nowadays!
“The strength of family ensures this, a thing not lost on social engineers who have unravelled family life as the foundation of functioning society.”
Sad but true. I wonder how much this has weakened us. Much? Little?. The Nordic nations seem to have gone far down this road with few ill effects. But it has had a catastrophic effect on the poor in America, especially when combined with economic changes that reduce opportunity (both jobs and wages) for unskilled workers.
America’s big opportunity to reverse these policies was the Moynihan Report: “The Negro Family: The Case For National Action“, US Department of Labor, March 1965. Instead of providing government support to black Americans in a way that supported their families, Federal support was exquisitely designed to undermine their family and community structures. The result is a large almost dysfunctional underclass, with areas like Harlem in worse shape than they were in 1964.
For more on the Moynihan report see “Moynihan, Welfare Reform, and the Myth of “Benign Neglect”“, Larry DeWitt, October 2005.
Barack Obama commented on the impact of government aid programs on black Americans in his speech “A More Perfect Union” (18 March 2008):
I feel many contradictions need addressing within the west. I have experience of Nordic culture and yes, to a degree, functioning families are as rare as hens teeth. Divorce rates are high, but also so is mental illness. This is of course against a backdrop of relative prosperity, albeit provided by primarily socialist government. Intervention, as in Britain, is a government speciality. Often with tragic consequences. Interestingly, the Sami people have resisted, maintained a traditional lifestyle and flourish.
Historically of course, the family structure began to die with industrialisation and migration. However, I note pockets of the US where families are still the mainstay of community. Usually, as in Europe, in rural locations.
As for the causes, there are many. The main culprits being Prussian education and state interference. I follow with great interest the efforts to alter Amish lifestyle. The intolerance of David Koresh and his community. All are attacks on family. All are caused by state interference. Welfare, as you rightly point to, being the cause of erosion within poor black families.
As for the US, well, many see immigration as a deliberate ploy to “water down” a culture. One of the stated problems ( I see it as a strength ) for British governments, is the refusal by Pakistani Muslims to integrate. Family has become a bug bear for interventionists. Rather ironic having spent years dismantling native British families!
As for how much this has weakened us. A lot. Marx and his ilk bear much of the blame, if not all. State sponsored socialist intervention undermines, disables and reduces the role of families. For families are the enemy of collectivism, especially large extended ones.
I also find it ironic that the western military has met its nemesis, as did the Russian, at the hands of poor Pashtun tribesmen, a society funnily where family is a mainstay of life.
cromwellsheart (CH) is being disingenious when he asserts the success of the Sami people. It is heavy state subsidising by the Swedish, Finnish and Norwegian governments, based on well deserved “white mans guilt” that has been the catalyst for the blossoming of Sami culture and cultural institutions. Thus in actuality it’s completely opposite what CH posits. It’s due to interventionism by the Nordic governments that the Sami culture is blossoming.
State subsidies and support makes Sami language primary, secondary and higher education possible. State subsidies makes the Sami language newspapers and radio stations possible. It’s state subsidies and state support that makes daily TV-news in Sami and Sami language childrens television possible.
Now, do not misunderstand this as a the-state-is-the-great-saviour argument. I’m merely exposing the fallacy in CH’s post.
For those bystanders to this interesting discussion who (like me) don’t know the Sami: From Wikipedia:
Where does Krugman stand on the importance of debt? My understanding is he still pooh pooh’s the role of private debt in macro economic analysis, arguing that debt and credit merely transfer funds within the economy with no important impact on behavioral variables like aggregate demand and money velocity. It’s hard to reconcile these views with any notion that bankers are the problem (for Argentina, Greece, Iceland) unless Krugman thinks only sovereign debt is important. If so, he looks foolish given the massive efforts governments keep making to convert private debts into public ones. How can this convert a non-issue into a real problem per Krugman? This is a key point of departure between Keen and Krugman.
peterblogdanovich,
That’s an important question, about which people can easily get confused by the vast flow of misinformation about economics flooding the US media. Before dealing with it, a bit of background.
Economics at the basic level is simple but often counterintuitive math. Instead of confronting the math people (non-economists) often adopt believe in magical thinking — usually in support of their political and social beliefs. This frequently appears in discussions about debt, banking, international trade, and gold.
And in discussions about theory. Mainstream theory like Austrian and Keynesian, fringe (in a professional sense, not implying false or pseudoscience) like modern monetary theory (MMT). The same is seen in internet discussions of medicine, quantum mechanics, climate science, and astronomy. To non-experts these theories are often indistringuishable from pseusdoscience (such as homeopathy and barycentric astronomy).
Now about debt.
(1) “arguing that debt and credit merely transfer funds within the economy”
That’s simple math, and hence correct.
(2) “with no important impact on behavioral variables like aggregate demand and money velocity.”
That’s not an accurate representation of his views. IMO debt is a not well-integrated factor in standard Keynesian theory. Efforts to integrate it (eg, Fisher, Minsky — see here for details) have only had partial success. This comes to the surface most often in discussion of banks. Their role is often seen in magical terms, but in fact they are just highly leveraged institutions lending on assets and cash flows. They are highly vulnerable, especially to
This is important because of their vulnerability and central role in free-market economies. Almost all depression have bank collapses as a factor in their early stages. Hence the need for regulation; but that will still not save banks if the macro instability grows too large. Effective regulation should be simple and easy, except that banks tend to be politically powerful — and use that power to reduce or evade regulation. Problems results. US economic history since 1980 has been largely shaped by the every decade’s crash of major banks.
(3) “with any notion that bankers are the problem (for Argentina, Greece, Iceland”
I dont’ believe bankers were the problem for Argentina (pre-default) or Greece (today). In both cases they were collateral damage; banks are almost always collateral damage from highly unstable macro conditions.
For more see these articles by Krugman:
FM, what do you think is the EU/EMU’s strategy for dealing with the crisis? I’m having a hard time figuring this out from the news that I see…
I assume you are speaking of the current response to the current crisis.
Um… what response? So far all the leaders are doing looking at their feet and mumbling. The recent elections indicate that the leader’s passion for austerity is going to get them thrown out of office. This seems to have complete caught the leaders off-guard and they are wisely saying nothing publicly until they have some sort of a plan. But events are moving much faster than the leaders so it is very hard to see where this will all end up.
Pluto,
(1) “So far all the leaders are doing looking at their feet and mumbling.”
I think that’s a bit harsh. Europe’s leaders have acted. Merkel, for example, has been a whirlwind. Unfortunately they’re doing things that future historians will probably characterize as “stupid”.
(2) “The recent elections indicate that the leader’s passion for austerity is going to get them thrown out of office”
IMO its more accurate to say that the failure of austerity to produce economic gains has gotten them thown out of office in France and Spain. The other defeats by incumbants are more complex (eg, Italy). We’ll see who wins in Greece, as the April election didn’t throw anyone out since there was no winner (in the sense of new government).
(3) “events are moving much faster than the leaders so it is very hard to see where this will all end up.”
Nicely said. Economic events often accellerate towards a climax, and I suspect (ie, guess) that’s happening now.
For good analysis of economic events in Europe see see Krugman at the NY Times and Roubini Global Economics. Readers of these have understood in real time both what’s happening and the likely effects of current policy actions.
The EU strategy is based on an obvious misunderstanding of the causes of the crisis (eg, visible in their large factual errors about basic facts in most speeches) and the probability of their cure (ie, fiscal austerity) working. Fiscal austerity has been frequently used, there is a good understanding of its effects. It seldom works when done without devaluation and massive monetary stimulus (ie, low interest rates) — neither of which the PIIGS have today.
It’s another fascinating example of Europe’s stupidity, which has been their defining characteristic during many decades since 1914. It shows the great strength of their peoples that Europe has done so well despite the consequences of their massive errors during the past century.
It seems evident that economically we are now transitioning gradually and painfully to a zero-growth global economy. We don’t have a choice: scientists now predict, for example, that all sea life will be fished out of the oceans by 2050 if we continue harvesting fish at the current rate. Likewise, Peak Oil rushes toward us, arriving at some point we know not precisely when, but certainly not more than 50 or 60 years from now (if not sooner). Likewise, we’re hitting brick walls in a wide range of technologies: audio (we hit that one first — going beyond 16 bits 44.1 khz does not produce audible improvement in recorded sound, no human can hear the difference), video (hi-def video at 120 hz refresh rates is getting close to our eye’s capacity to resolve details in a moving picture), computers (see this interview with a leading supercomputing expert who points out that physical limits of current microprocessors make it unlikely that we will ever go beyond the exaflop barrier to the zettaflop range of computing speeds), transportation (supersonic commercial air travel turned out to be impractically expensive and dangerous and the Concorde has been retired with no replacement; no significant improvement in the improvement of the internal combustion engine is visible on the current technological horizon), voice recognition (<A HREF="http://robertfortner.posterous.com/the-unrecognized-death-of-speech-recognition") we hit the brick wall at 80%, not good enough to be widely useful, and have never gotten beyond that), face recognition (a technology forever “about to take off” but which never actually does — no one can get it work well enough to avoid recognizing dogs as people or people wearing sunglasses as vending machines), AI (dead in the water — just take a look at what happens to your amazon.com recommendations if you buy a book for a friend or a relative), nuclear fusion (“forty years away” for the last 60 years, and still forty years away today), etc.
Capitalism as we know it derives from the fundamental assumption of endless growth. The modern nation-state depends integrally on conventional capitalism. With the transition to a zero-growth economy, capitalism as we know it will have to go away, replaced by something else, which we can’t at present envision. The nation-state as it currently exists will either cease to exist or get replaced by something else.
The current zeitgeist seems to recognize that the world is approaching a huge sea-change in its economic and social arrangements due to the impossibility of continued exponential technological and economic and population growth. As witness this trailer for a new J. J. Abrams American TV series which posits a collapse in the near future and a return to an agrarian piecework pre-industrial society.
This is probably a terrible idea but I’m going to challenge Thomas Moore. Not on the detail, he seems to have an excellent grasp on them, but on the broad brush strokes.
Moore’s Law, for example. It’s obvious that Moore is going to be wrong at some point, nothing keeps improving on a geometric scale forever, and Moore himself predicted we’d hit the wall long ago. But there are a lot of really bleeding edge technologies that promise considerable improvements in the speed of computing that people experience. On the way-out-there side are quantum state computing and using entangled particles to store bits. On the more practical side are ever-shrinking consumer devices, solid state hard drives, and ever improving screen technology that deliver the same effect as Moore’s Law without actually meeting the specific requirements of Moore’s Law. We are still meeting Moore’s Law if you consider the density and speed of information instead of the number of semi-conductors on a computer chip.
Likewise, you’ve correctly identified Peak Oil as a major game changer. True, but there are already a number of sustainable energy and alternative energy projects that are showing promise. Polywell Fusion researchers, for example, have probably started building their first production power plant at China Lake. We’re also rapidly learning how to build better and cheaper solar cells and wind turbines. Yes, Peak Oil is a major game changer. There WILL be pain, but it IS NOT going to stop the game.
“Capitalism as we know it derives from the fundamental assumption of endless growth.”
Show me a quote from a widely respected source to that effect. You’re right that this is implied in a lot of Wall Street projections but you’ll notice that Wall Street is full of sales people and you can’t really trust sales people to be accurate predictors of large trends.
“The current zeitgeist seems to recognize that the world is approaching a huge sea-change in its economic and social arrangements due to the impossibility of continued exponential technological and economic and population growth.”
Again, I agree. But a sea-change isn’t necessarily always for the worse. It is just a change and as history shows, things change and change again. Humanity will adapt to whatever the new circumstances are as long as we don’t blow ourselves to kingdom come and I wouldn’t be altogether surprised if capitalism is still a major force when we hit a new equilibrium point.
Perhaps even more scary, we might be headed towards an automated world where most humans are out of work.
The coming robot revolution — a major theme on the FM website! See the first in the series here (links to other chapters appear at the end): The coming big increase in structural unemployment, 7 August 2010.
@Pluto-
I would add geothermal to the energy list. Right now this can only be done where geology brings the heat close to the surface (parts of california, for instance). All the drilling technology we are developing now to reach the remaining oil/gas, could be put to use for extracting heat out from deeper below the surface, making it possible in more places.
For more information about new energy sources see the FM reference page about energy.
In reply to Rune. My observations on the Sami are based on Nordics generally. Yes state intervention has played a large part and “white mans guilt” also. However, even without, and the same argument can be used for the Welsh and Western Islanders. All are proud and fine folk.
Most post war Nordic governments have, like many others, thrown themselves pell mell into interference. Your comments frankly undermine the Sami’s ability to run their own affairs.
Please remember Swedish eugenics, active until the seventies, as an example of Nordic governments efforts to interfere with the population.
This is a great discussion! I didn’t know about the Swedes love of Eugenics. From Wikipedia (as always in Wikipedia, see the entry for the links to sources):
CH
That might be so, but how does being proud and fine folk have anything to do with it? You posit implicitly via your phrasing “Interestingly, the Sami people have resisted, maintained a traditional lifestyle and flourish.” that the flourishing of the Sami people is done purely through their own agency, which is demonstrably untrue.
Even the part about the Sami maintaining a traditional lifestyle is questionable. How do you define a traditional lifestyle? Of 70,000 Sami only approx. 10% are connected with and 2,800 directly involved with herding reindeer. So is it profession? Is it how the family is organised? Is it a question of whether certain traditions are kept and traditional dress worn (everyday or just on special occasions, where’s the line?)
You give me far greater power than I posses, if my refuting your fantasy that the Sami, through tight-knit clans and perseverance alone made their culture flourish.You give me far greater power than I posses if you think, my refuting your fantasy that the Sami through tight-knit clans and perseverance alone made their culture flourish, has any impact on their ability to run their own affairs.I don’t see what the Swedish eugenics program have to do with anything in this context. Please explain this to me.
So, I can conclude that what you are telling me are four things:
1) You know about the Nordics and I shouldn’t question your knowledge.
2) You like “proud” peoples like the Sami, Welsh or Western Islanders (ed: The Hebrides and other islands part of the old Duchy of the Isles.)
3) I’m a bad man, hurting the Sami by my arguments.
4) The Nordic governments are evil, just look at what they did!
Would you like to try again, without putting words in my mouth or attacking straw men? If so, I’d be happy to continue the discussion civilly without the obvious poking fun I have perpetrated here. If not, then I’m out of this discussion.
Disclosure: My observations of the Nordics come from being born, raised and, apart from a couple of years living in London, lived my life in Scandinavia. That being said, I am not making this argument, as said before, as a the-state-is-the-great-saviour argument.
Rune. I respect your views, as I do all mens. My observations are based on my experiences and contacts. Frankly I will not enter into arguments, your views are yours alone. As are mine.
If you take exception to my statements, then that is your prerogative. I seek to criticise no other, or hinder their particular philosophy. Voltaire taught us many things, the most valuable in my book is defending another fellows views, even if you disagree.
My final observation, one you will no doubt contradict, is this. Nordic governments and many people carry a collective guilt. Not just at the abysmal, collectivist interference that is historic fact. Collusion with German Nazism, eugenics, present collusion by governments with corporate interests ( true this is the world over, and will change )
I am not poking fun at you or others. Your peoples history, like mine, leaves much to be desired. I try and provide a balanced view based on my personal contact with people. This based on a libertarian philosophy from within a Christian faith, not on a romanticised view of indigenous people.
Pluto doubts that capitalism as we know it requires continue exponential growth.
This is such a well-known basic fact of economics that it almost seem superfluous to cite any references…it’s nearly on the level of requiring references to prove that the sun shines. But let’s go there.
Or simply look at this pdf of a basic presentation of the mathematics of exponential growth and capitalism. As source after source points out, less than 3% annualized growth produces convulsions and self-destructive paroxysms in capitalism as it currently exists. Yet we now globally consume resources at a rate that would require 1.5 earths to continue. Clearly, we can’t continue.
The evidence from essentially every economist, every economic study, every historical survey of economics since the 18th century, and every scientist is the same: capitalism as we know it requires endless growth to function. Failure to recognize this basic fact is shocking, but also amazingly widespread.
As evidence of the incredible ignorance even on the part of respected economists of the basic fact that capitalism as we know it depends on constant exponential growth, consider this widely-reported exchange between a tenured well-known economist and a physicist: “Exponential economist meets finite physicist,” from April 2012.
As for claims about alleged improvement in flash drives, those depend on memory technology, which has already hit its limits. Science fictional technologies like quantum computing are nowhere near to becoming a reality, and (like fusion power and manned space travel to distant planets in the solar system) probably never will materialize as a reality — physicists with actual knowledge about quantum systems point out that even if a quantum computer can entangle the qubits, the big problem involves getting the information back into the outside world, since the qubits must be rigorously isolated from the rest of the universe in order to entangle them. And this is a problem no one has a clue how to solve.
As with hard AI or face recognition or speech recognition, quantum computers and exponentially faster RAM-based hard drives remains science fictional fantasies. We have largely hit the technological and physical limits in those technologies.
“This is such a well-known basic fact of economics that it almost seem superfluous to cite any references”
It’s not a “basic fact” of economics. It’s a theory, and a relatively recent one (as history goes) — as is the concept of constant economic growth.
As for the inevitable limits to growth, that’s just a wild guess. Much like considering the supply of fuel (cow dung, wood, whale oil) as the limiting factor. Our current use of resources and technology is quite primitive — compared, for instance, to the catalytic-based chemical processes of living things. Efficient technology, clean energy, move the dirty industries into orbit, mining the asteroids — who knows what the future will bring?
Pluto asserts: “Likewise, you’ve correctly identified Peak Oil as a major game changer. True, but there are already a number of sustainable energy and alternative energy projects that are showing promise. Polywell Fusion researchers, for example, have probably started building their first production power plant at China Lake. We’re also rapidly learning how to build better and cheaper solar cells and wind turbines.”
The Polywell fusion system is nothing but an updated version of Philo. T. Farsworth’s “fusor” from the 1930s. That technology never went anywhere, and, like the fusor, Bussard’s scheme has to date shown no realistic commercializable results. (There are inherent physics problems with the thermalization of the collisions in a fusor design. The tokamak deals with this problem by confining the plasma inside a toroid, but creates other problems because of the much higher energy densities required by the tokamak design. Neither fusor nor tokamak has yet produced sustainable realistic commercializable results.) Of course the fusion energy boosters continually claim that success is just around the corner, in the same way that hard AI proponents claim that “true AI is only 20 years away” (every decade since the 1950s true AI has only been “20 years away”) and as face recognition advocates assert every decade that “reliable accurate face recognition is only 10 years away.” Yet the decades pass and the researchers grow old and retire and their funding runs out and none of these mythical technologies every comes to fruition.
As for “better and cheaper solar cells and wind turbines,” I suggest Pluto read the book “The False Promise of Green Energy” by Meiners, Morriss, Bogart and Dorchak. They go into some detail to debunk the inflated claims and outlandish assumptions that lie behind most of the green energy claims. As just one example, consider that in order to manufacture enough solar panels to supply the energy needs of the United States, we would need to use more than the world’s total supply of indium. That’s without including all the batteries we would need to store that energy, which would require more than the world’s total supply of lithium, and the fact that the U.S. energy grid as it currently exists is not capable of handling the power fluctuations from night to day produced by a solar-based system (solar energy gets generated in the day, and isn’t at night). Likewise with wind power, which is highly intermittant, requires a great deal of storage using battery technology which simply isn’t adequate to the task, and which in any case can’t power really large industrial systems like smelters or arc welders or football stadiums or large factories full of machine tools. (Batteries aren’t capable to producing the high-amperage surges requires for heavy machinery, arc welders, and so on. Ultracapacitors or some other new untried technology are required for such large-scale energy storage with high amperage requirements. This is an unknown area, because to date extremely high-amperage source requirements have been met by switching in addigtional dynamos in electric grids. An electric grid made up on dynamos represents a fundamentally different system than a set of batteries and reacts very differently when large changes in voltage or amperage are required.)
As for the claim that solar or wind power has any realistic chance of taking over the share of petroleum and coal- and gas-based fuels currently occupied by the American economy within the next several generations, Pluto may want to take a look at the paper by MIT researchers Dresselhaus and Thomas “Alternative Energy Technologies.” The conclusion? For the next several generations (say the next 40 years at least) there is no realistic alternative to coal + petroleum + natural gas. As the authors remark “There is a great lack of public appreciation of the scientific and technological difficulties in supplying energy once fossil fuel sources become seriously depleted.” That represents an understatement of astounding proportions, given the huge gap at present between battery and PV technology and the power requirements which will soon be upon us. Over the next 50 years, for example, the world’s total energy usage is estimated to double. Solar-thermal and PV and wind power currently provide 7.73% of America’s energy usage per annum, about the same amount as nuclear power. That means that at present, 85% of America’s energy is provided by petroleum or coal or natural gas sources.
Ironically, the one renewable energy technology which shows genuine promise for replacing gas/coal/oil-based energy is nuclear — and that’s the one technology Pluto didn’t mention. American anti-nuclear hysteria has rendered nuclear power unapproachable as a matter of serious policy discussion, despite the fact that plants like San Onofre have worked well for more than 30 years with no problem, and that countries like France get most of their electricity from nuclear power with no accidents and no incidents. One unusual once-in-a-lifetime event like the Richter 9 earthquake that hit Fukushima apparently suffices to drive everyone in the developed world into a mindless frenzy of panic…despite the fact that fewer people died at Fukushima than die annual mining the coal which provides power for the United States. But because the coal miners died of black lung disease and cave-ins, that’s okay, apparently.
I agree with much of this (esp about renewables and nukes), but much of this it wildly exaggerated.
“The Polywell fusion system is nothing but an updated version of Philo. T. Farsworth’s “fusor” from the 1930s.”
That’s true, in a sense (see Wikipedia’s history of the fusor). In the same sense a modern megawatt power plant is like the aeolipile (Hero’s first century AD steam engine). You’re not getting the “progress” thing.
For more accurate perspectives see:
It certainly seems odd that Britain forget the lessons of John Maynard Keynes so quickly. You’d think that since he was British, their economists would have been especially prone to celebrate and perpetuate his work and his legacy.
“No prophet is accepted in his own country”
— Luke 4:24 (also Mark 6:4).
My grandfather told me when I was a young man, that there is no way to borrow one’s way to wealth. The world has proven him right.
And according to the resident expert (my youngest son, who started reading this over my shoulder) on the Titanic and Britannic, the weather was clear, seas calm. Errors of judgment and mistakes, yes. Bad luck and lost equipment, no. And some abuse and misuse of the available rescue facilities by the upper classes.