Kam es ticu (part II)
We are a carbon-based species. Carbon forms the foundation of our bodies and the external world we experience. Almost everything we touch is carbon-based. (..) Not only is our stuff mostly based on carbon, but the energy required to manipulate materials – to make stuff – comes predominately from carbon-based feedstocks as well. While not all stuff is based itself on carbon – copper wire is made of copper, after all – we can’t make use of it without first extracting energy from carbon fuels. In other words, we can’t mine copper without carbon. Those excavators, dump trucks, and bulldozers aren’t going to run themselves.

(..) We are experiencing the early phases of runaway inflation. On what seems like a daily basis, we observe critical inputs into our economy going vertical in price. If you crimp the supply of critical inputs with no workable plan to replace them, inflation is the unavoidable outcome. Energy is stuff. Energy is life. What’s the price elasticity of demand for life, and who can afford to pay it?

Nobody could have seen this coming, they’ll say. We did.

https://doomberg.substack.com/p/where-stuff-comes-from

To keep the chemistry lesson as simple as possible, you need natural gas to produce ammonia and energy from fossil fuels to mine for phosphate. You need ammonia and phosphate to make fertilizer. You need fertilizer to grow food at scale.

https://doomberg.substack.com/p/starvation-diet

The fundamental problem is that governments can add debt and other indirect promises of resources that create goods and services, but they cannot actually create the low-cost energy, water and mineral resources needed to fulfill those promises. (..) Debt is a promise of future funds to purchase goods and services, but it doesn’t make the resources required to create these goods and services materialize out of “thin air.” To keep these promises, oil needs to be extracted, refined, and delivered to farmers. (..) Debt is a promise of future funds to purchase goods and services, but it doesn’t make the resources required to create these goods and services materialize out of “thin air.” To keep these promises, oil needs to be extracted, refined, and delivered to farmers. (..) The catch is that the non-marketable US government debt doesn’t actually correspond to any resources. Any food used in 2022 (or 2050) will need to be grown in that year, using resources available in that year. (..) In some sense, the “real economy” operates on a “cash basis,” rather than an “accrual basis.” This has not been recognized in our accounting or our models. Ignoring the way the system really works likely leads to a hidden crunch, starting about 2021. (..) There is really a two-sided energy price problem. Consumers can afford only low energy prices but, as the result of depletion and population growth in oil exporting countries, producers need high oil prices.

We now live in a world with depleted resources. The oil and other types of energy that are available are high in cost, but the prices tend to stay too low for producers when all costs are included. (..) If we want OPEC to supply the rest of the world with more oil, the price will need to rise much higher than today’s Brent oil price of about $73. It likely will need to rise to at least $100 per barrel and show that it can stay at this high level. Otherwise, the supposed reserves of OPEC will mostly stay in the ground. (..) Why would OPEC want to increase its production, if the US can’t increase its own production at the current price level? All of the producers need a higher price level; it is consumers who cannot afford the higher price level.

(..) If missing energy can be replaced with a promise of debt to pay for more goods and services in the future, made with future energy, then perhaps all will be well. The quantity of debt that is required, relative to the GDP impact, keeps rising, suggesting this substitution is not working very well. We now seem to be reaching the end of the line with respect to what can be done with added debt to make the economy seem like it is performing adequately well.

(..) Today, interest rates are approximately at the level they were during the Great Depression of the 1930s. This makes sense; interest rates to some extent reflect the return an investor can expect to make. Right now, without a lot of government support programs, “Main Street” businesses around the world are struggling. This indicates that the economy is doing very poorly. There are too many people who cannot afford even basic goods and services. Indirectly, this feeds back to commodity prices that are not high enough for producers of energy products.

Recently, governments of many countries have tried a different approach. Instead of loans, they are providing something closer to giveaways. Renters are allowed to stay rent-free in their apartments. Or, checks are given to all citizens earning below some specified amount. What we seem to be finding is that these giveaways produce inflation in the price of goods that poor people buy most frequently, such as food and used cars.

The giveaways don’t actually produce more of the required goods and services, however. Instead, would-be workers decide that they really don’t want to take a low-paid job if the giveaways provide nearly as much income. The loss of workers then acts to reduce production. With lower production of goods and services, a smaller quantity of oil is required, so the oil price tends to fall. The price certainly does not rise to the level needed by oil producers.

In a finite world, longer-term models need to take into account the fact that resources deplete and the population keeps rising. Any modeler who tries to take into account the fact that resources deplete and the overall population keeps rising will quickly come to the conclusion that, at some point, every economy will have to collapse. This has been known for a very long time. Back in 1957, Admiral Hyman Rickover of the US Navy said,

"Surplus energy provides the material foundation for civilized living – a comfortable and tasteful home instead of a bare shelter; attractive clothing instead of mere covering to keep warm; appetizing food instead of anything that suffices to appease hunger. . . For it is an unpleasant fact that according to our best estimates, total fossil fuel reserves recoverable at not over twice today’s unit cost, are likely to run out at some time between the years 2000 and 2050, if present standards of living and population growth rates are taken into account."

Now, in 2021, it looks as if this problem is starting to hit us. But no one (since Jimmy Carter, who was not re-elected) has dared tell the general public. Instead, accrual accounting with more and more debt is used in financial statements, including GDP statements. Actuaries put together Social Security funding estimates as if the resources to provide the promised benefits will really be there. Climate change models are prepared as if business as usual can go on for the next hundred years. Everything published by the mainstream media is based on the underlying assumption that we will have no problems other than climate change for the next 100 years.

(..) We don’t seem to have a good way out of our current predicament. This seems to be what is behind all of the recent internet censorship. Renewables and nuclear require fossil fuel energy for their production and maintenance. The powers that be don’t want anyone to know that nearly all of the “happily ever after using renewables” stories we hear are based on wishful thinking.

https://ourfiniteworld.com/2021/08/30/the-afghanistan-fiasco-and-todays-high-level-of-conflict-reflect-an-energy-problem/