The Global Financial Crisis (GFC) of 2008/2009 truly broke the US (and global) financial system and ever since then the US government (and other Western governments) has practised a mix of extremely lax banking oversight, massive amounts of monetary stimulus, the socialization of private debts, and government deficit spending to keep the financial system afloat.
The financiers and their political enablers have behaved like termites and have eaten away at the support structures of their civilization, which is only still standing because there is a small level of resilience left. However no efforts are being made to repair the damage already inflicted so the coming collapse seems inevitable. In addition to this, the delusion of our political leadership is such that they will not recognise the collapse even when angry citizens are roaming the streets baying for blood, which is already happening with the European farmers.
I didn't think that Western civilisation would last for ever but I never imagined that it implode so fast. It is quite frightening as the implosion seems to be accelerating rather than slowing.
From your essay... "With US$1.5 trillion of CRE debt coming due in the next 18 months, there will be a forced market clearing which will most probably drive CRE prices lower and force banks to take extremely large credit write offs."
Would seem we could expect some financial crisis next year?
The first couple of years of any presidency (especially the first year given mid-term elections) is when the tough work is best carried out, to give time for happier days before the next election. The establishment will try everything to keep the crisis at bay to try and get their candidate in the White House.
We could even see the same scenario as the second-half of the 1970s, where a premature easing reignited inflation which then lead to the Volcker shock. We are already seeing a melt up in technology stocks on declining market breadth, usually the sign of a blow off top. Yes, next year could be very ugly for the economy and financial markets.
I distinctly remember an earlier post wherein you mentioned meassures taken by Yellen/Powell between 2016-2019 to gradually deflate a prior bubble.
I note that the same team is currently in place.
I speculate that Powell & the FOMC will put off rate cuts meeting by meeting because
Inflation will prove intractable, due to the very large federal deficit in place. Denninger at market-ticker waxes euporic on this issue, repeatedly.
As for deflation caused by dropping goods prices, others mention that goods are less than half the consumption of the public, with services the majority of their expenses, and services inflation > 5% and holding.
As exemplified by the recent strike at Univ of Calif which landed the teaching staff back to back 5% pay raises, it would seem that wage push inflation is alive and well..
Wolf has repeatedly mentioned that surplus Office Space and Mall Space are caused by structural changes in office work, and shopping habits. Office workers prefer to work from home, and consumers prefer to shop at home. Two dynamics unlikely to be reversed.
So, it would seem that the FED might just extend their RRP program beyond 11 March, and very likely the FDIC/FED will create a "Bad Bank" to house and work off surplus/redundant CRE holdings..
I think this because the FED is owned by it's member banks, and has proven over the years to favor their welfare first and foremost, so what's to prevent it bailing them out yet again?
Only the possible destruction of the US dollar as a reserve currency, a privilege which the US has spent decades abusing and is now pushing to its limits. If the US$ starts to significantly depreciate all bets are off.
Thanks for the drum roll rendition of reality as it is. Love the truth . Best summary I have read. Feasting upon democracy as its bones were picked clean .
"As is the inability of Western industries to compete in the clean energy industries such as solar, wind, batteries and electric vehicles which form the basis of so much future growth and economic strength."
Unfortunately biophysical reality dictates we can only build and maintain solar energy harvesting infrastructure - that has a 20-30 year life span - with fossil fuels, which are rapidly depleting.
We simply can NOT build wind mills nor solar farms nor hydroelectric dams nor mass electricity storage nor distribution networks with electricity.
This means at best a "just and sustainable future" and "the energy transition" is NOT "well within our reach" at best it is only possible for far fewer than ~8 billion humans - and even if humans dis magically spend every last effort on building "the energy transition" with the least pain and suffering, it would only last for a few decades - because fossil fuels are rapidly depleting.
Fossil fuel depletion is measured by the 'Energy Returned on Energy Invested' (EROI) of fossil fuels, which is decreasing. The EROI for the production of oil and gas globally by publicly traded companies has declined from 30:1 in 1995 to about 18:1 in 2006 (Gagnon et al., 2009). The EROI for discovering oil and gas in the US has decreased from more than 1000:1 in 1919 to 5:1 in the 2010s, and for production from about 25:1 in the 1970s to approximately 10:1 in 2007 (Guilford et al., 2011). Alternatives to traditional fossil fuels such as tar sands and oil shale (Lambert et al., 2012) deliver a lower EROI, having a mean EROI of 4:1 (n of 4 from 4 publications) and 7:1 (n of 15 from 15 publication). In 2013 world oil and gas had a mean EROI of about 20:1
We can't mine minerals needed for "the energy transition" without diesel due to its ~40 times higher energy density than batteries, which are close their maximum density the laws of physics dictates.
Clearly Russia and Kazakhstan and others have greater reserves than 'Western' Big Oil but the trajectory is the same just delayed a hand full of decades or so.
Geo Political analysis without this back drop of biophysical reality is misleading. Please read these very insightful researchers / authors.
The vast majority of global oil consumption is used for land transportation purposes, which in China is already significantly electrified with the balance being rapidly electrified. Sinopec has stated that Chinese oil demand already peaked in 2023. It will fall rapidly with new ICE efficiency standards and the rapid move to EV's. China is now spreading that trend outwards, including to developing countries.
And EV production is not mineral constrained, as the move to Sodium-Ion batteries at the low end is showing. Even short-distance shipping is already being electrified, and 40% of bulk long distance shipping is for fossil fuels. Marine gas turbine engines can also be used to reduce the oil consumption of shipping.
With respect to passenger aircraft, countries such as France and China have shown that high speed trains can significantly replace aircraft, with only the long-haul routes still needing them. Much of that long-haul is for the utter waste of flying thousands of miles to a beach or meeting that can be easily replaced with closer destinations and other technologies.
With respect to mining, with transportation demand for oil being reduced the relatively small amount used in mining will be available. Such liquid fuel can also be produced from coal if required. A lot of mining can also actually be electrified without battery usage, just go look at the average large scale coal mine.
Please stop quoting old EROI studies that do not relate to our present reality and keep abreast of actual energy and technological realities in the here and now.
Much work has been done at MIT and elsewhere on catalysts which convert atmospheric CO2 into ammonia, methanol, and distillate. Driving force is electrical power, supplied via renewables... wind and solar.
Of course the laws of thermodynamics apply and the process is ~ 50% efficient.
However, this allows intermittent resources like wind & solar to be stored when they are plentiful, for use as liquid fuels. Our institute did a financial analysis of this in it's nomograph "The carbon dioxide neutral US economy".
The recent issue of "Here Comes China" By Godfree Roberts featured
an article about China's "Hydrogen Economy".... Actually the article is minimally about Hydrogen and mostly about creating Ammonia, Methanol, and Distillate using surplus renewable power...
So, it appears that the Chinese are forging ahead with plants to make fuels using renewable electric power as the driving force.
Perhaps Godfree might weigh in, and expound upon this...
Since we live on a finite pale blue dot historical extraction ratios (EROI) are implicitly related to current and future ratios. Further, declining ratios are not linear with respect to energy required to extract a give volume / weight of final material.
Bardi (2013) estimates the energy consumption of metal production around 5–10% of Total Primary Energy Supply (TPES), and Bihouix and De Guillebon (2012) around 8–10%. Similar values are obtained by Nuss et al. (2014) for the whole metal production process.
Given ~10% TPES is used for whole supply chain metal mining, and today most of that consumption was liquid fuels, we can estimate that ~30% of all liquid fuel consumption is mining related. Its actually worse than this since mining relies on diesel and only about a third of all liquid hydrocarbons are diesel.
You claim: “And EV production is not mineral constrained, as the move to Sodium-Ion batteries at the low end is showing.” But “sodium” is a mineral. And the battery housings and copper connections and body work and tyres and all the machines to make them are ALL made from minerals.
If EVs are set to take over, then why has Ford Lost $4.7B On EVs Last Year, Or About $64,731 For Every EV It Sold ?
The Japanese form NGK Insulators commercialized Sodium-Sulfur Batteries decades ago. These batteries use Sodium, Sulfur, and Alumina. All of which are freely available.
EVs are taking over the vehicle market in.... China...
Not by accident, of course....
China has a dense network of electrified railways, with closely spaced stations..
China has numerous mega-cities with populations > 25 million, and concomitant air quality issues, aggravated by ICE vehicles.
China invested in a dense network of charging stations, state owned.
China continues to invest in advanced battery technologies to the point that Chinese batteries are state of the art.
China is aggressively shifting freight onto it's railways and away from lorrys, as exemplified by a new program for livestock transport using pens incorporated into passenger cars to hold sheep, pigs, etc, where the farmer buys himself a ticket and his livestock go free.
Our institute studied the impact of shifting 95% of all ton-miles in the US to double tracked electrified rail, and the energy savings were enormous.
Personally, I have an issue with Hugo.... He posted a false claim of plagiarism against me, brought by a former employee of ours who built himself a following on the Oil Drum using our proprietary research with out attribution. which he has yet to retract.
Both Hugo and Gail have made careers out of gloom and dooming peak oil, but neither have looked seriously into structural changes which could resolve matters.
WRT global warming, a recent journal article mentioned that years ago, during an ice age, CO2 concentration was 5,000 ppm. Thus orbit mechanics and solar output changes are more important. FYI we are entering a grand solar minimum.
As far as water vapor concentrations, and CO2 concentrations, the recent eruption in Tonga vastly increased water vapor in the upper atmosphere.
As far as CO2 from burning hydrocarbons, we should all consider the massive amount of CO2 tied up in carbonate rocks, all the consequence of millions of years of coral reef building, virtually none of which is being released back into the atmosphere.
As far as the base level of CO2 in the atmosphere, recent research has shown that shortly before discovery, agricultural civilizations in the Americas collapsed, including in Amazonia, MesoAmerica, and North America, followed by re-forestation of most of the two continents, which dramatically cooled the earth, tied up CO2, and led to mass migrations.
So, matters are not as simple as portrayed by Hugo and Gail...
Your EROEI issue was dealt with by our Institute's analysis, and the EROEI of renewables is much higher than credited by either of your sources.
Now if we can get back to topic, which to me is pressing, thank you very much.
Thanks Roger.
The financiers and their political enablers have behaved like termites and have eaten away at the support structures of their civilization, which is only still standing because there is a small level of resilience left. However no efforts are being made to repair the damage already inflicted so the coming collapse seems inevitable. In addition to this, the delusion of our political leadership is such that they will not recognise the collapse even when angry citizens are roaming the streets baying for blood, which is already happening with the European farmers.
I didn't think that Western civilisation would last for ever but I never imagined that it implode so fast. It is quite frightening as the implosion seems to be accelerating rather than slowing.
FYI... Prof. Richard Werner brilliantly explains how the banking system and financial sector really work.
https://www.youtube.com/watch?v=EC0G7pY4wRE
My head is bursting!
Thank you Roger!
From your essay... "With US$1.5 trillion of CRE debt coming due in the next 18 months, there will be a forced market clearing which will most probably drive CRE prices lower and force banks to take extremely large credit write offs."
Would seem we could expect some financial crisis next year?
INDY
The first couple of years of any presidency (especially the first year given mid-term elections) is when the tough work is best carried out, to give time for happier days before the next election. The establishment will try everything to keep the crisis at bay to try and get their candidate in the White House.
We could even see the same scenario as the second-half of the 1970s, where a premature easing reignited inflation which then lead to the Volcker shock. We are already seeing a melt up in technology stocks on declining market breadth, usually the sign of a blow off top. Yes, next year could be very ugly for the economy and financial markets.
I distinctly remember an earlier post wherein you mentioned meassures taken by Yellen/Powell between 2016-2019 to gradually deflate a prior bubble.
I note that the same team is currently in place.
I speculate that Powell & the FOMC will put off rate cuts meeting by meeting because
Inflation will prove intractable, due to the very large federal deficit in place. Denninger at market-ticker waxes euporic on this issue, repeatedly.
As for deflation caused by dropping goods prices, others mention that goods are less than half the consumption of the public, with services the majority of their expenses, and services inflation > 5% and holding.
As exemplified by the recent strike at Univ of Calif which landed the teaching staff back to back 5% pay raises, it would seem that wage push inflation is alive and well..
Wolf has repeatedly mentioned that surplus Office Space and Mall Space are caused by structural changes in office work, and shopping habits. Office workers prefer to work from home, and consumers prefer to shop at home. Two dynamics unlikely to be reversed.
So, it would seem that the FED might just extend their RRP program beyond 11 March, and very likely the FDIC/FED will create a "Bad Bank" to house and work off surplus/redundant CRE holdings..
I think this because the FED is owned by it's member banks, and has proven over the years to favor their welfare first and foremost, so what's to prevent it bailing them out yet again?
Regards,
INDY
Only the possible destruction of the US dollar as a reserve currency, a privilege which the US has spent decades abusing and is now pushing to its limits. If the US$ starts to significantly depreciate all bets are off.
roger - an article you might find interesting -
https://www.thebureau.news/p/fake-chinese-income-mortgages-fuel?utm_campaign=post
Thanks for the drum roll rendition of reality as it is. Love the truth . Best summary I have read. Feasting upon democracy as its bones were picked clean .
"As is the inability of Western industries to compete in the clean energy industries such as solar, wind, batteries and electric vehicles which form the basis of so much future growth and economic strength."
Unfortunately biophysical reality dictates we can only build and maintain solar energy harvesting infrastructure - that has a 20-30 year life span - with fossil fuels, which are rapidly depleting.
We simply can NOT build wind mills nor solar farms nor hydroelectric dams nor mass electricity storage nor distribution networks with electricity.
This means at best a "just and sustainable future" and "the energy transition" is NOT "well within our reach" at best it is only possible for far fewer than ~8 billion humans - and even if humans dis magically spend every last effort on building "the energy transition" with the least pain and suffering, it would only last for a few decades - because fossil fuels are rapidly depleting.
Fossil fuel depletion is measured by the 'Energy Returned on Energy Invested' (EROI) of fossil fuels, which is decreasing. The EROI for the production of oil and gas globally by publicly traded companies has declined from 30:1 in 1995 to about 18:1 in 2006 (Gagnon et al., 2009). The EROI for discovering oil and gas in the US has decreased from more than 1000:1 in 1919 to 5:1 in the 2010s, and for production from about 25:1 in the 1970s to approximately 10:1 in 2007 (Guilford et al., 2011). Alternatives to traditional fossil fuels such as tar sands and oil shale (Lambert et al., 2012) deliver a lower EROI, having a mean EROI of 4:1 (n of 4 from 4 publications) and 7:1 (n of 15 from 15 publication). In 2013 world oil and gas had a mean EROI of about 20:1
https://www.sciencedirect.com/science/article/pii/S0301421513003856#s0020
We can't mine minerals needed for "the energy transition" without diesel due to its ~40 times higher energy density than batteries, which are close their maximum density the laws of physics dictates.
Clearly Russia and Kazakhstan and others have greater reserves than 'Western' Big Oil but the trajectory is the same just delayed a hand full of decades or so.
Geo Political analysis without this back drop of biophysical reality is misleading. Please read these very insightful researchers / authors.
https://surplusenergyeconomics.wordpress.com/2023/11/10/265-explore-and-explain/
https://dothemath.ucsd.edu/2023/09/can-modernity-last/
The vast majority of global oil consumption is used for land transportation purposes, which in China is already significantly electrified with the balance being rapidly electrified. Sinopec has stated that Chinese oil demand already peaked in 2023. It will fall rapidly with new ICE efficiency standards and the rapid move to EV's. China is now spreading that trend outwards, including to developing countries.
https://cleantechnica.com/2023/10/11/chinas-oil-gas-giant-sinopec-says-peak-oil-demand-already-happened-in-china/
And EV production is not mineral constrained, as the move to Sodium-Ion batteries at the low end is showing. Even short-distance shipping is already being electrified, and 40% of bulk long distance shipping is for fossil fuels. Marine gas turbine engines can also be used to reduce the oil consumption of shipping.
https://www.resilience.org/stories/2022-07-28/making-waves-electric-ships-are-sailing-ahead/
With respect to passenger aircraft, countries such as France and China have shown that high speed trains can significantly replace aircraft, with only the long-haul routes still needing them. Much of that long-haul is for the utter waste of flying thousands of miles to a beach or meeting that can be easily replaced with closer destinations and other technologies.
With respect to mining, with transportation demand for oil being reduced the relatively small amount used in mining will be available. Such liquid fuel can also be produced from coal if required. A lot of mining can also actually be electrified without battery usage, just go look at the average large scale coal mine.
Please stop quoting old EROI studies that do not relate to our present reality and keep abreast of actual energy and technological realities in the here and now.
Much work has been done at MIT and elsewhere on catalysts which convert atmospheric CO2 into ammonia, methanol, and distillate. Driving force is electrical power, supplied via renewables... wind and solar.
Of course the laws of thermodynamics apply and the process is ~ 50% efficient.
However, this allows intermittent resources like wind & solar to be stored when they are plentiful, for use as liquid fuels. Our institute did a financial analysis of this in it's nomograph "The carbon dioxide neutral US economy".
Warmly,
INDY
Hi,
Sorry to appear to be beating a dead horse....
BUT....
The recent issue of "Here Comes China" By Godfree Roberts featured
an article about China's "Hydrogen Economy".... Actually the article is minimally about Hydrogen and mostly about creating Ammonia, Methanol, and Distillate using surplus renewable power...
So, it appears that the Chinese are forging ahead with plants to make fuels using renewable electric power as the driving force.
Perhaps Godfree might weigh in, and expound upon this...
Regards,
INDY
Since we live on a finite pale blue dot historical extraction ratios (EROI) are implicitly related to current and future ratios. Further, declining ratios are not linear with respect to energy required to extract a give volume / weight of final material.
Bardi (2013) estimates the energy consumption of metal production around 5–10% of Total Primary Energy Supply (TPES), and Bihouix and De Guillebon (2012) around 8–10%. Similar values are obtained by Nuss et al. (2014) for the whole metal production process.
https://www.sciencedirect.com/science/article/pii/S0959378023001115#s0020
In 2022 oil was 29.61% of TPES
https://ourworldindata.org/energy-mix
Given ~10% TPES is used for whole supply chain metal mining, and today most of that consumption was liquid fuels, we can estimate that ~30% of all liquid fuel consumption is mining related. Its actually worse than this since mining relies on diesel and only about a third of all liquid hydrocarbons are diesel.
You claim: “And EV production is not mineral constrained, as the move to Sodium-Ion batteries at the low end is showing.” But “sodium” is a mineral. And the battery housings and copper connections and body work and tyres and all the machines to make them are ALL made from minerals.
If EVs are set to take over, then why has Ford Lost $4.7B On EVs Last Year, Or About $64,731 For Every EV It Sold ?
https://robertbryce.substack.com/p/ford-lost-47b-on-evs-last-year-or
The Japanese form NGK Insulators commercialized Sodium-Sulfur Batteries decades ago. These batteries use Sodium, Sulfur, and Alumina. All of which are freely available.
I presume Roger is mentioning the above.
INDY
This is not relevant to my post and it is obvious that you have your mind already made up, so I will not engage any further.
EVs are taking over the vehicle market in.... China...
Not by accident, of course....
China has a dense network of electrified railways, with closely spaced stations..
China has numerous mega-cities with populations > 25 million, and concomitant air quality issues, aggravated by ICE vehicles.
China invested in a dense network of charging stations, state owned.
China continues to invest in advanced battery technologies to the point that Chinese batteries are state of the art.
China is aggressively shifting freight onto it's railways and away from lorrys, as exemplified by a new program for livestock transport using pens incorporated into passenger cars to hold sheep, pigs, etc, where the farmer buys himself a ticket and his livestock go free.
Our institute studied the impact of shifting 95% of all ton-miles in the US to double tracked electrified rail, and the energy savings were enormous.
Personally, I have an issue with Hugo.... He posted a false claim of plagiarism against me, brought by a former employee of ours who built himself a following on the Oil Drum using our proprietary research with out attribution. which he has yet to retract.
Both Hugo and Gail have made careers out of gloom and dooming peak oil, but neither have looked seriously into structural changes which could resolve matters.
WRT global warming, a recent journal article mentioned that years ago, during an ice age, CO2 concentration was 5,000 ppm. Thus orbit mechanics and solar output changes are more important. FYI we are entering a grand solar minimum.
As far as water vapor concentrations, and CO2 concentrations, the recent eruption in Tonga vastly increased water vapor in the upper atmosphere.
As far as CO2 from burning hydrocarbons, we should all consider the massive amount of CO2 tied up in carbonate rocks, all the consequence of millions of years of coral reef building, virtually none of which is being released back into the atmosphere.
As far as the base level of CO2 in the atmosphere, recent research has shown that shortly before discovery, agricultural civilizations in the Americas collapsed, including in Amazonia, MesoAmerica, and North America, followed by re-forestation of most of the two continents, which dramatically cooled the earth, tied up CO2, and led to mass migrations.
So, matters are not as simple as portrayed by Hugo and Gail...
Your EROEI issue was dealt with by our Institute's analysis, and the EROEI of renewables is much higher than credited by either of your sources.
Now if we can get back to topic, which to me is pressing, thank you very much.
Warmly,
INDY