HIGHER #INTEREST #RATES LEADS TO GREATER #ENERGY AND #RENT COSTS

 

'Most people do not understand that the world economy is a physics-based system, powered by energy.'

OUR FINITE WORLD

Why raising interest rates to reduce inflation may work out very badly

by Gail Tverberg

Are we headed for very high energy prices? Or, are we headed for a financial system that starts falling apart? The whole economic system may change remarkably. For example, what many people thought was money, or a promised pension plan, may not really be there when the time comes to get value from it. Shelves in stores may be empty when it comes time to make a purchase.

Most people do not understand that the world economy is a physics-based system, powered by energy. If the energy is suddenly much less available, there will be a huge problem. The world economy has been powered by a rapidly growing supply of energy for over 200 years.

Figure 1. World energy consumption by fuel based on Vaclav Smil’s estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with data from BP’s 2011 Statistical Review of World Energy for 1965 and subsequent. Wind and solar are included in Biofuels.

My concern is that the current attempt to bring inflation down will lead to falling energy supply and a world economy that is rapidly changing for the worse.

Figure 2. Energy amounts for 2010 and prior equal to those in Figure 1, with a corresponding amount for 2020. Future energy for 2030, 2040 and 2050 are rough estimates based on the observation that the world is now reaching extraction limits for both coal and oil.

OH MY! WHAT IF WE RUN OUT OF OIL?

Everything I can see says that world leaders are not able to face the possibility that the world is already running seriously short of oil and coal. Future supplies are likely to be much lower, and much more expensive, if they are available at all. Other energy types (including natural gas, nuclear, hydroelectric, wind and solar) are simply add-ons to a system built using coal and oil.

Current world leaders do not realize that the energy situation is very much like the water level in Lake Mead. Looking at it from the top, there still seems to be water there but, in fact, the required depth is lacking. Water for watering crops will soon be exhausted. The world’s energy supply is not a whole lot different. The supposedly proven reserves do not tell us anything at all. It is the amount of fossil fuels that can be affordably extracted that is important. We have already exceeded the amount that can be affordably extracted. If central banks cut back future energy supplies using higher interest rates, we can expect to encounter major problems going forward.

THIS ANALOGY TO LAKE MEAD IS BEYOND BELIEF

In this post, I will try to explain some of the issues involved.

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THESE ARE THE KEY TAKEAWAYS

[1] The amount of energy the economy requires depends very much on population. The greater the world population, the more oil is needed for food production and transportation. Non-oil energy is a bit more flexible in quantity than oil, but the total quantity of energy per capita needs to keep rising to prevent very adverse outcomes.

[2] Recently published data through 2021 indicates that energy consumption growth is not keeping up with population growth, similar to the situation of the 1930s. This says that the economy is doing poorly. Supply lines are broken; most jobs don’t pay well; many goods that normally would be available aren’t available.

[3] We can look back and see how rising interest rates were used to slow the world economy in the 2004 to 2006 period, and how different the economic situation was then compared to now. Even with the rapid growth the economy was making at the time of the interest rates increases, the result was still a deep recession in 2008-2009.

[4] The trend in fossil fuel supplies is concerning. Both oil and coal are past peak, on a per capita basis. World coal supply has been lagging population growth since at least 2011. While natural gas production is rising, the price tends to be high and the cost of transport is very high.

[5] Governments and academic institutions have gone out of their way to avoid telling the world how important energy of the right types and in the right quantities is to the economy.

[6] Once the economy starts heading downward, it is not clear that the economy can ever “catch itself” and start back on an upward path again, even for a short while.

ARE WE NEARING THE END GAME?

RESOURCE WARS...

#WORST DAY IN #HUMAN HISTORY AS #POPULATION REACHES 8 #BILLION - HERE'S WHY!

EDITOR'S NOTE

Last week the population of the planet surpassed eight billion people thereby doubling in number over the past fifty years. As a consequence we have grown the ecological, climate, resources, economic and agricultural food impacts by similar degrees. Consider for example, oil and natural gas that have expected reserves of 47 and 53 years, respectively, based on current global per capita consumption. So what happens when we double the population over the next fifty years?

Without factoring in the laws of diminishing returns these reserves may only last 25 years or less. Then what? Society will have no dependable sources of energy - as fossil fuels now provide more than 80 percent of the global energy needs and there are no practical alternatives. Renewable energy sources cannot meet the needs or replace them because they are too intermittent and have storage limitations. Moreover, they negatively affect the biosphere and will use up the precious arable land needed to feed the billions of new and hungry mouths.

In the final analysis, if there is any hope for a sustainable human society we need to stop doubling the population every 5o years, and learn how to Degrowth economic activity and contract population levels. 

Otherwise, we will be joining those other species in  the Sixth Extinction Hall of Shame in fairly short order.

Executive Committee

November 25,2022

 

Richard Heinberg

November 21, 2022

The Final Doubling

THE SIXTH EXTINCTION?

Politicians and economists talk glowingly about growth. They want our cities and GDP to grow. Jobs, profits, companies, and industries all should grow; if they don’t, there’s something wrong, and we must identify the problem and fix it. Yet few discuss doubling time, even though it’s an essential concept for understanding growth.

Doubling time helps us grasp the physical meaning of growth—which otherwise appears as an innocuous-looking number denoting the annual rate of change. At 1 percent annual growth, any given quantity doubles in about 70 years; at 2 percent growth, in 35 years; at 7 percent, in 10 years, and so on. Just divide 70 by the annual growth rate and you’ll get a good sense of doubling time. (Why 70? It’s approximately the natural logarithm of 2. But you don’t need to know higher math to do useful doubling-time calculations.)

REAL IMPACT OF EXPONENTIALS POPULATION AND ENERGY

Here’s why failure to think in terms of doubling time gets us into trouble. Most economists seem to believe that a 2 to 3 percent annual rate of growth for economies is healthy and normal. But that implies a doubling time of roughly 25 years. When an economy grows, it uses more physical materials—everything from trees to titanium. Indeed, the global economy has doubled in size in the last quarter-century, and so has total worldwide extraction of materials. Since 1997 we have used over half the non-renewable resources extracted since the origin of humans.

As the economy grows, it also puts out more waste. In the last 25 years, the amount of solid waste produced globally has soared from roughly 3 million tons per day to about 6 million tons per day.

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OVERPOPULATION, ENERGY, CLIMATE

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