New Mars Forums

Official discussion forum of The Mars Society and MarsNews.com

You are not logged in.

Announcement

Announcement: We've recently made changes to our user database and have removed inactive and spam users. If you can not login, please re-register.

#26 2019-12-04 06:26:51

Calliban
Member
From: Northern England, UK
Registered: 2019-08-18
Posts: 212

Re: Is the world doomed to economic collapse

With each passing year since about 1980, US interest rates have followed a slowly declining trend.  Effective federal funds rate is now zero, meaning that the federal reserve is creating and lending money for free.

https://talkmarkets.com/content/us-mark … ost=137808

Interest rates are basically an expectation of growth.  Low interest rates are an attempt to stimulate growth in the economy.  If other growth factors are expensive, cheap money is a way of compensating and stimulating growth.  The problem is that it hasn't been working.  And low interest rates mean lower returns on investment, leading to shortfalls in things like pension provision.  We are effectively robbing the future, in a desperate attempt to keep things running today.

https://www.valuewalk.com/2016/11/tempe … ectations/

https://www.zerohedge.com/news/2017-01- … gdp-growth

The mystery behind declining Western World growth rates is solved when one realises that the economy is basically a machine that runs on surplus energy.  This is very obvious if you care to think about it, because energy is the enabling factor for any physical activity at all, including the products and services that human beings value.  If energy is cheap and abundant, then economic growth can occur very quickly, because the energy supply to the economy can grow quickly.

Between the end of WW2 and the early 1970s; oil was very cheap and in the US at least, supply could be expanded easily using onshore conventional drilling.  Unfortunately, America's low-cost, conventional, onshore oil reached peak production in 1971.  Ever since then, oil prices rose progressively, gradually squeezing the life out of economic growth.
https://misunderstoodfinance.blogspot.c … -1980.html

Around 2014, quantitative easing began, which allowed shale oil companies access to effectively free money, whose interest rates were lower than inflation.  Global oil price declined to levels not seen in decades.  But real economic growth has failed to reappear.  Could it be that so much labour and physical resources are now being consumed by energy production, that capital investments in other parts of the economy are starting to suffer?
https://ourfiniteworld.com/2013/02/14/t … to-growth/

The hidden cost of low EROI energy.  It is precisely the declining 'energy return on energy investment' of energy sources that is sucking the life out of the global economy.  Some important reading:

https://www.tullettprebon.com/documents … si_006.pdf

Last edited by Calliban (2019-12-04 06:52:35)


Interested in space science, engineering and technology.

Offline

#27 2019-12-04 08:20:17

tahanson43206
Member
Registered: 2018-04-27
Posts: 1,622

Re: Is the world doomed to economic collapse

For Calliban re topic ...

Thanks for creating and developing this topic. 

I agree with the proposition that increased abundance and availability of energy to members of the population will (should) lead to increased prosperity.

However, I believe that it is the clever use of whatever resources are available to make useful products and services that is the source of wealth for a population.

Abundance of energy and material supplies feeds into productive activity of human beings.

I'd like to offer a way of thinking about debt that seems foreign to your way of thinking.

When I see the total amount of debt you reported, I see the amount of value individual humans have committed to each other.

If people had not made any commitments to each other, the global debt would be zero, and the economy would be stagnant.

I would expect the total of debt to keep rising as the population increases, and as the amount of goods produced and services exchanged increases.

It is possible one or more economists have explored this idea, but if they have, I've missed the discussion.

(th)

Last edited by tahanson43206 (2019-12-04 08:20:54)

Offline

#28 2019-12-04 22:22:30

kbd512
Moderator
Registered: 2015-01-02
Posts: 3,102

Re: Is the world doomed to economic collapse

Calliban,

The answer to economic problems caused by a lack of the master resource must therefore be "solved" by making energy significantly more unaffordable and scarce through the use of "renewable energy", aka "expensive energy", aka "no energy when the Sun don't shine and the wind don't blow".  That makes perfect sense to me.  Not!

I have a different theory about the economic slowdown of more recent decades and how it relates to valuation.

Advanced economies are driven by consumption and added value.  After basic needs have been met for the overwhelming majority of the citizenry, everything thereafter is a degree of privilege which some will decide has added value while others will not.  Everyone will differ in that regard.  In a capitalist system, we reserve the right to differing valuation.  In a communist system, valuation is forced rather ruthlessly.  That's why one system flourishes and the other quickly withers and dies.  Without the ability to differ in valuation, valuation is contrived rather than derived.  Basically, it's an unnatural state that punishes rather than rewards ingenuity.

For example, against my wishes my wife purchased new clothes for me to wear once I started my new job.  Some of the clothes I had previously were still serviceable, in my opinion, and I would've worn those clothes until they had holes in them or more noticeable holes in them.  A few of my slacks and shirts were older than my son, but most were only around 5 to 6 years old.  There's no way I would ever buy a new article of clothing unless I thought I actually needed it.  However, my wife quite clearly doesn't value the exact same things that I do.

If the iPhone 10 is only slightly less capable than the iPhone 11, but the iPhone 11 costs an extra $200, then at some point whatever additional benefits one might derive from the iPhone 11 won't be considered to be worth the additional associated cost (to some specific person or group of people, not necessarily everyone).  That said, when there are fewer and fewer people who think that they're deriving sufficient tangible benefits from "the next best thing", then there will be less and less demand and therefore associated supporting activities for the next best thing.  Over time, the economy will contract as the participants begin to believe that they no longer derive sufficient added value from newer / faster / more advanced "whatever" for money to trade hands.

On that note, the collapse in population expansion amongst those of us living in industrialized countries has also decreased demand for goods and services.  When the pool of new customers stops expanding, or especially when it actually contracts, there are ever fewer customers who may decide that they derive added benefit from the next best thing.  The economy eventually stagnates, with decline being the ultimate result.  This doesn't mean that growth will stop completely, just that the next best thing has to be nearly revolutionary, or very cleverly marketed as such, in order to be considered a worthy "upgrade".

While we would certainly derive additional benefits from cheaper energy, there will come a point when most of us realize that more consumption doesn't bring about sufficient additional benefits to warrant the increase.  There are all kinds of examples of this over time.

tahanson43206,

There are plenty of economists who are adherents to the "debt is good" philosophy, but they're simply not very principled.  Debt is an unpaid obligation due to the inability to repay.  It's a unit of human productivity that's been practically or even irretrievably lost.  I can understand why so many people would believe this, given the wholesale replacement of results-oriented principles with ideology in academia, but it's still just another variation of the broken window fallacy.  Anyone who's ever read Henry Hazlitt's "Economics In One Lesson" (freely available online) can plainly and simply understand why broken windows are bad for the economy.  Breaking all the windows in a city doesn't add any economic value, even though the window companies stand to make a fortune off of the city's misfortune.

Offline

#29 2019-12-05 05:28:40

louis
Member
From: UK
Registered: 2008-03-24
Posts: 5,319

Re: Is the world doomed to economic collapse

So many wrong ideas in this thread! smile

1. Population is increasing at a very fast rate in both the UK and USA. There is no shortage of population-based demand. Population in both countries is increasing around 0.7% per annum - an extremely high rate of population growth (far too high I would say).

2. Interest rates might have declined since the 80s but that hasn't stopped huge growth in GDP. Real GDP in the USA has grown from $6.8 trillion in 1980 to $18.6 trillion in 2018.

https://www.thebalance.com/us-gdp-by-year-3305543

There might be questions about how the increase has been distributed but there's no doubt the increase has been huge, despite low interest rates.

There has certainly been no "economic slowdown" in the sense of a recession over the last 10 years. But one key factor seems to be slower increases in productivity. That might in turn reflect previous shifts away from manufacturing to services.

3. Low interest rates are probably more an indication of tightened profit margins...basically the US has opened up its markets to external competition (at least until the Trump era has reversed that a little). There was no way American companies could compete with Chinese and Indian companies that had access to very cheap pools of labour (from rural areas) in the hundreds of millions.

4. There's no evidence that renewable energy makes anyone poorer. Hydroelectric demonstrably turned poor countries like Norway and Sweden into advanced economies.  Renewable energy is already a cheaper method of electricity generation than coal, oil and gas in many countries in the equatorial and sub-tropical zone. But it also creates lots of domestic employment as well, so rather than make fabulously wealthy Arab potentates even more fabulously wealthy, you spread your energy expenditure as wealth within your own economy.

Last edited by louis (2019-12-05 05:57:54)


Let's Go to Mars...Google on: Fast Track to Mars blogspot.com

Offline

#30 2019-12-05 21:28:48

kbd512
Moderator
Registered: 2015-01-02
Posts: 3,102

Re: Is the world doomed to economic collapse

Louis,

Speaking of "wrong ideas", welcome to the discussion.

Maybe you were off vacationing on Mars about ten years ago, but the world lost hundreds of billions if not trillions of dollars and we're still suffering from the effects of that recession.  BTW, some of us would really like to see some of those Mars rocks you undoubtedly collected when you're not otherwise busy.

If you take away the immigrant populations entering the US, both legal and illegal, then you wind up with a nearly stagnant demographic of replacement people to carry on the American experiment.  Furthermore, the people who entered the US merely shifted the concentration of people from one area of the world to another.  Birth rates have fallen off of a cliff in nearly every industrialized country.  In any event, these people simply moved to where the economy was still much better than the places they left.  The Millennials and immigrants (the younger ones) are America's only "life line".  As the boomers start to die off, America's population will be contracting, not increasing.  Our population is only "growing" at present because we have a lot of old people that modern medicine has kept alive for many years longer than they would otherwise live.  I think longevity is a good thing, since a well-functioning society needs people around who remember what life used to be like, as a warning order if nothing else, but the fact remains that that's the only reason our population is presently "increasing".  That's why we need as many qualified immigrants (law abiding citizens who came here in search of a better life) as we can get our hands on.

There are certainly up-and-coming countries like India where there is a net positive growth in the consumer base.  Life isn't all rainbows and roses for them right now, but they're making huge strides in quality of life on a decade over decade basis.  China, like the US, is rapidly becoming an old folks home.

Hydroelectric is an example of a nearly tapped-out resource.  Developing countries aren't building hydroelectric plants, nor wind or solar farms, like they're going out of style.  However, they do seem to have a voracious appetite for coal and gas.  That pretty much negates your assertion that coal is actually more expensive than wind and solar.  When a rich country purchases wind or solar for a developing nation, the poverty-stricken nation won't turn their noses up at free power infrastructure, even if it's not very reliable.  Something is better than nothing.

Most industrialized countries have enacted self-imposed regulations to prevent their use of coal.  It's a manipulation of the market that doesn't apply to nations that can't afford expensive energy.  That said, it's only been replaced with natural gas.  Your proposed plan to solve the storage problem unique to expensive energy is to make and burn natural gas from scratch, which will only further increase the price of energy by consuming more energy.  Only wealthy countries can afford to use renewable / expensive / unavailable more often than not energy.

You can advocate for a personal belief only so far, whereupon objective reality rears it's head.  Germany has spent more than double the amount of money they would've spent to purchase brand new nuclear reactors, yet only managed to supply 40% of their energy with expensive energy.  Nobody even knows how much a 100% expensive energy solution would cost since no country larger than a postage stamp has ever achieved that.  Cherry-picking idealized examples as "proof" that something works is not making much of a case for it, either.  It's like running a car powered by a fighter jet engine down a drag strip and proclaiming that jet engines can work for passenger vehicles at a global scale.  That's the level of absurdity that we're arguing over.  At some point, pragmatism needs to be allowed to work its magic.

America, land of litigiousness and bureaucracy, spent $5B for each new 1.25GW light water reactor 15 years after Germany embarked on their Energiewende / Energieunbezahlbar crusade.  20 years later, they've blown through more than twice as much money as it would've cost them to purchase brand new nuclear reactors in today's dollars.  Despite having nearly double the required installed capacity to meet their energy demands, in terms of expensive energy, that still provides less than half of the electricity they consume.  Meanwhile, they're busily digging up centuries-old forests and bulldozing medieval architecture to get at the coal that you don't think they need.

I'm 100% in favor of experimentation leading to the industrial scale manufacture of synthetic fuels.  There's no reason why we shouldn't perfect those processes ASAP.  One day, that's all we'll have left.

Offline

#31 2019-12-06 08:07:26

louis
Member
From: UK
Registered: 2008-03-24
Posts: 5,319

Re: Is the world doomed to economic collapse

Real World GDP has increased by over a third since 2009.  2009 was the only year of recession in World GDP in the last five decades.

https://www.worldometers.info/gdp/#gdpyear

The USA is not the only country in the world but it too has only had two years of negative growth in the last 25 years.

In terms of demand, a person is a person. Once resident in the USA, migrants - even if they are on low incomes - will be adding demand.
Old people also eat, heat and tweet.

Seems like you are just trying to argue population growth away.

I agree hydro is not the future for energy - I referenced it only as an example of renewable energy that has never impoverished anyone.

France is probably the most enthusiastic user of nuclear power in Europe:

https://en.wikipedia.org/wiki/Nuclear_power_in_France

But the new French EPR reactor has been a disaster and looks like it is going to produce electricity at a high cost of 7-9 cents per KwH.
Reference is made to S Korean reactors being the cheapest but South Korean electricity prices for consumers and businesses are between 7 and 10 cents per KwH, so it is difficult going forward to see how even their reactors can compete with wind and solar when they're getting down to producing electricity at 2 cents and lower.

https://www.globalpetrolprices.com/Sout … ty_prices/

The only thing that can possibly prevent complete domination by renewable energy is the storage problem but that too is being addressed.

kbd512 wrote:

Louis,

Speaking of "wrong ideas", welcome to the discussion.

Maybe you were off vacationing on Mars about ten years ago, but the world lost hundreds of billions if not trillions of dollars and we're still suffering from the effects of that recession.  BTW, some of us would really like to see some of those Mars rocks you undoubtedly collected when you're not otherwise busy.

If you take away the immigrant populations entering the US, both legal and illegal, then you wind up with a nearly stagnant demographic of replacement people to carry on the American experiment.  Furthermore, the people who entered the US merely shifted the concentration of people from one area of the world to another.  Birth rates have fallen off of a cliff in nearly every industrialized country.  In any event, these people simply moved to where the economy was still much better than the places they left.  The Millennials and immigrants (the younger ones) are America's only "life line".  As the boomers start to die off, America's population will be contracting, not increasing.  Our population is only "growing" at present because we have a lot of old people that modern medicine has kept alive for many years longer than they would otherwise live.  I think longevity is a good thing, since a well-functioning society needs people around who remember what life used to be like, as a warning order if nothing else, but the fact remains that that's the only reason our population is presently "increasing".  That's why we need as many qualified immigrants (law abiding citizens who came here in search of a better life) as we can get our hands on.

There are certainly up-and-coming countries like India where there is a net positive growth in the consumer base.  Life isn't all rainbows and roses for them right now, but they're making huge strides in quality of life on a decade over decade basis.  China, like the US, is rapidly becoming an old folks home.

Hydroelectric is an example of a nearly tapped-out resource.  Developing countries aren't building hydroelectric plants, nor wind or solar farms, like they're going out of style.  However, they do seem to have a voracious appetite for coal and gas.  That pretty much negates your assertion that coal is actually more expensive than wind and solar.  When a rich country purchases wind or solar for a developing nation, the poverty-stricken nation won't turn their noses up at free power infrastructure, even if it's not very reliable.  Something is better than nothing.

Most industrialized countries have enacted self-imposed regulations to prevent their use of coal.  It's a manipulation of the market that doesn't apply to nations that can't afford expensive energy.  That said, it's only been replaced with natural gas.  Your proposed plan to solve the storage problem unique to expensive energy is to make and burn natural gas from scratch, which will only further increase the price of energy by consuming more energy.  Only wealthy countries can afford to use renewable / expensive / unavailable more often than not energy.

You can advocate for a personal belief only so far, whereupon objective reality rears it's head.  Germany has spent more than double the amount of money they would've spent to purchase brand new nuclear reactors, yet only managed to supply 40% of their energy with expensive energy.  Nobody even knows how much a 100% expensive energy solution would cost since no country larger than a postage stamp has ever achieved that.  Cherry-picking idealized examples as "proof" that something works is not making much of a case for it, either.  It's like running a car powered by a fighter jet engine down a drag strip and proclaiming that jet engines can work for passenger vehicles at a global scale.  That's the level of absurdity that we're arguing over.  At some point, pragmatism needs to be allowed to work its magic.

America, land of litigiousness and bureaucracy, spent $5B for each new 1.25GW light water reactor 15 years after Germany embarked on their Energiewende / Energieunbezahlbar crusade.  20 years later, they've blown through more than twice as much money as it would've cost them to purchase brand new nuclear reactors in today's dollars.  Despite having nearly double the required installed capacity to meet their energy demands, in terms of expensive energy, that still provides less than half of the electricity they consume.  Meanwhile, they're busily digging up centuries-old forests and bulldozing medieval architecture to get at the coal that you don't think they need.

I'm 100% in favor of experimentation leading to the industrial scale manufacture of synthetic fuels.  There's no reason why we shouldn't perfect those processes ASAP.  One day, that's all we'll have left.


Let's Go to Mars...Google on: Fast Track to Mars blogspot.com

Offline

#32 2019-12-06 08:40:14

Calliban
Member
From: Northern England, UK
Registered: 2019-08-18
Posts: 212

Re: Is the world doomed to economic collapse

Some interesting ideas here.

I propose the following idea: The economy is basically a machine that manufactures things that human beings value (wealth).  As such, it is governed by the laws of physics.  We can define economic activity as:
•    Human labour…
•    …leveraged through the use of artificial energy…
•    …which is harnessed by capital equipment…
•    …for the production of goods and services…
•    …through the action of energy on matter, changing its state…
•       creating things that human beings value (wealth).

That is how wealth is made.  Possible drags on per capita wealth would be declines in one or all of the following:
1.    Labour force as a percent of total population;
2.    Quality of labour (education levels, health, etc.);
3.    Availability of energy;
4.    Quantity or quality of capital equipment;
5.    Availability of key materials.

No 1 appears to be declining.  I agree with Kbd512 that declining working age population is a very significant contributor to current economic problems.  Working age population is now declining as a percent of total population in virtually every developed country.  In US and UK, it peaked around 2010.  In Germany and Japan, it peaked in the 1990s.
http://conversableeconomist.blogspot.co … n-and.html
It is difficult to see how GDP per capita can continue expanding for very long, if the number of workers is declining.  It would require that productivity per hour worked increases at a rate far above historical trends.

No 2 appears to be on the up (in the US at least), if the number of graduates is at all indicative.  But student loan debt is growing exponentially.
https://hyperallergic.com/156068/indict … nd-beyond/

No3: Availability of energy is clearly hitting limits.  Global conventional oil production levelled off around 2005 and all supply growth since then has been from more expensive (and lower EROI) unconventional deposits.
https://twitter.com/aeberman12/status/9 … 3253604353

The US shale industry (tight oil) has racked up $2trillion in debt; has never turned a profit and requires enormous drilling rates just to maintain production at constant levels.  This technology would never have been pursued if non-OPEC countries had available abundant supplies of conventional oil and it would not be possible if interest rates were greater than inflation.  Unconventional supply will grow only as long as interest rates remain low.

No 4: Capital investment appears to be stagnating in OECD countries at least.
http://haskelecon.blogspot.com/2015/06/ … ining.html

No 5: Global materials use is still growing, but shows signs of levelling off.  The huge increases since 2000 reflect China's industrialisation.
https://www.researchgate.net/figure/Glo … _330533894


Interested in space science, engineering and technology.

Offline

#33 2019-12-06 09:03:00

Calliban
Member
From: Northern England, UK
Registered: 2019-08-18
Posts: 212

Re: Is the world doomed to economic collapse

louis wrote:

Real World GDP has increased by over a third since 2009.  2009 was the only year of recession in World GDP in the last five decades.

https://www.worldometers.info/gdp/#gdpyear

How much of this is the simple spending of borrowed (or printed) money?  Most of this is simply inflating asset prices.  Asset price escalation is incorporated into GDP growth figures.  But it clearly doesn't represent any increase in net wealth for society as a whole.  For individuals it may represent an increase in net wealth, if they can sell their inflated assets.  But this does nothing but swap ownership and money around.  It doesn't create anything real that didn't exist before.

If you want a good indication of Real GDP, look at global exports in manufactured goods.  Those are the things that people consume.  Not so rosy is it?

https://data.worldbank.org/indicator/BX.GSR.MRCH.CD

Last edited by Calliban (2019-12-06 09:05:19)


Interested in space science, engineering and technology.

Offline

#34 2019-12-06 09:44:00

Calliban
Member
From: Northern England, UK
Registered: 2019-08-18
Posts: 212

Re: Is the world doomed to economic collapse

In the developed world, the lions share of debt is owned by private investors (especially pension funds) or domestic banks.

https://www.businessinsider.com/heres-w … ?r=US&IR=T

Low interests rates are now essential in preventing the economy from collapsing, yet they are undermining pension fund returns and bank profitability by destroying the return on capital.  This is now less than inflation in developed economies.  Yet, increasing interest rates would push economic growth into negative territory.  Low interest rates rob long term investors, but allow resources to be consumed today instead of tomorrow.  They allow you to keep your job today, but destroy your provisions for old age.  The decline in interest rates across the world, suggest that investments across the entire global economy are becoming less profitable.  This is discouraging capital investment.  China continues to dominate the world in capital investment, but its soaring debt-GDP ratio since 2008, indicates steadily diminishing returns.

This is strongly suggestive of physical resource constraints.  Either there are fewer working age people who can afford to buy goods or there is inherently less surplus energy available to fuel the economy.  I suspect it may be a combination of the two.  It cannot be a coincidence that global conventional oil production peaked immediately before the beginning of the great recession and that all increase in global production has come from lower EROI non-conventional deposits since then.  The relatively poor growth in globally exported goods since 2008, suggest that real world GDP has barely budged.

Last edited by Calliban (2019-12-06 09:53:59)


Interested in space science, engineering and technology.

Offline

#35 2019-12-06 18:47:13

louis
Member
From: UK
Registered: 2008-03-24
Posts: 5,319

Re: Is the world doomed to economic collapse

I'd say no economy can defy the laws of physics, but an economy doesn't operate on the basis of the laws of physics. Economies operate on the basis of technology, land and raw materials, labour, capital, investment strategies, level of education of labour force, confidence, population growth and other human-based factors (we seem to agree on that).

A contraction in labour power is not very relevant if technology is increasing productivity. Technology is increasing productivity right across the world and will continue to do so in the future. The only reason the USA might be performing poorly in relative terms is because, despite being a continental economy, it opened up its markets to the Communist Chinese and others who operate on completely different rules.  It's the equivalent of the Manhattan Native Americans selling off their island for a few beads. Nixon and Kissinger made a just about the worst mistake in history in cosying up to Maoist China.

On use of raw materials you have to understand that recycling technology is improving all the time so don't expect raw material usage to increase at the same exponential rates seen in the past.

Until you can explain why World GDP is increasing at such a rapid rate year by year unimpeded, I won't take any of your Jeremiah predictions seriously.






Calliban wrote:

Some interesting ideas here.

I propose the following idea: The economy is basically a machine that manufactures things that human beings value (wealth).  As such, it is governed by the laws of physics.  We can define economic activity as:
•    Human labour…
•    …leveraged through the use of artificial energy…
•    …which is harnessed by capital equipment…
•    …for the production of goods and services…
•    …through the action of energy on matter, changing its state…
•       creating things that human beings value (wealth).

That is how wealth is made.  Possible drags on per capita wealth would be declines in one or all of the following:
1.    Labour force as a percent of total population;
2.    Quality of labour (education levels, health, etc.);
3.    Availability of energy;
4.    Quantity or quality of capital equipment;
5.    Availability of key materials.

No 1 appears to be declining.  I agree with Kbd512 that declining working age population is a very significant contributor to current economic problems.  Working age population is now declining as a percent of total population in virtually every developed country.  In US and UK, it peaked around 2010.  In Germany and Japan, it peaked in the 1990s.
http://conversableeconomist.blogspot.co … n-and.html
It is difficult to see how GDP per capita can continue expanding for very long, if the number of workers is declining.  It would require that productivity per hour worked increases at a rate far above historical trends.

No 2 appears to be on the up (in the US at least), if the number of graduates is at all indicative.  But student loan debt is growing exponentially.
https://hyperallergic.com/156068/indict … nd-beyond/

No3: Availability of energy is clearly hitting limits.  Global conventional oil production levelled off around 2005 and all supply growth since then has been from more expensive (and lower EROI) unconventional deposits.
https://twitter.com/aeberman12/status/9 … 3253604353

The US shale industry (tight oil) has racked up $2trillion in debt; has never turned a profit and requires enormous drilling rates just to maintain production at constant levels.  This technology would never have been pursued if non-OPEC countries had available abundant supplies of conventional oil and it would not be possible if interest rates were greater than inflation.  Unconventional supply will grow only as long as interest rates remain low.

No 4: Capital investment appears to be stagnating in OECD countries at least.
http://haskelecon.blogspot.com/2015/06/ … ining.html

No 5: Global materials use is still growing, but shows signs of levelling off.  The huge increases since 2000 reflect China's industrialisation.
https://www.researchgate.net/figure/Glo … _330533894


Let's Go to Mars...Google on: Fast Track to Mars blogspot.com

Offline

#36 2019-12-06 18:53:33

louis
Member
From: UK
Registered: 2008-03-24
Posts: 5,319

Re: Is the world doomed to economic collapse

I think this is completely wrong headed. What determines economic output is essentially technology, particularly technology applied in agriculture and industry. This is why we are seeing huge world GDP growth every year - non stop (apart from 2009) for the last five decades. 

Everything else is just minor expansion and contraction. It wasn't the fact that the Model T Ford looked nice that made it sell everywhere, it wasn't the fact that there were millions more Americans in 1920 compared with 1900, it wasn't because Ford were more profitable on a percentage basis than other firms...it was because technology (production line assembly and other innovations) allowed Model T Fords to be produced much more cheaply than before. That's all. Once you could produce them at a certain price people would buy them.

Calliban wrote:

In the developed world, the lions share of debt is owned by private investors (especially pension funds) or domestic banks.

https://www.businessinsider.com/heres-w … ?r=US&IR=T

Low interests rates are now essential in preventing the economy from collapsing, yet they are undermining pension fund returns and bank profitability by destroying the return on capital.  This is now less than inflation in developed economies.  Yet, increasing interest rates would push economic growth into negative territory.  Low interest rates rob long term investors, but allow resources to be consumed today instead of tomorrow.  They allow you to keep your job today, but destroy your provisions for old age.  The decline in interest rates across the world, suggest that investments across the entire global economy are becoming less profitable.  This is discouraging capital investment.  China continues to dominate the world in capital investment, but its soaring debt-GDP ratio since 2008, indicates steadily diminishing returns.

This is strongly suggestive of physical resource constraints.  Either there are fewer working age people who can afford to buy goods or there is inherently less surplus energy available to fuel the economy.  I suspect it may be a combination of the two.  It cannot be a coincidence that global conventional oil production peaked immediately before the beginning of the great recession and that all increase in global production has come from lower EROI non-conventional deposits since then.  The relatively poor growth in globally exported goods since 2008, suggest that real world GDP has barely budged.


Let's Go to Mars...Google on: Fast Track to Mars blogspot.com

Offline

Board footer

Powered by FluxBB