What good is a used up world?

[Samuel]

having more osmium to make ballpoint pens with if climate change is impacting agriculture to the point your industrial workers are starving to death; or are being killed in heat waves and/or massive storms.

The primary danger isn't the change, but the speed. Humanity can adjust to a changing climate, but only if it goes slow enough for us to make adjustments.

Although it's not entirely clear why this isn't happening in other first world nations, such as the United States,

Immigrants and second generation drive up the growth rate. I'm not sure if it would be positive if they were factored out.

Rarity of lithium. You're going to need a LOT of it to put together the batteries for those cars, barring some breakthrough in the supercapacitor technologies they've been tinkering with. Beside that, batteries lack the energy density and portability of mediums like gasoline.

While I'm not sure if you can simply switch over to alternatives like some optomists believe, with enough energy it becomes more feasible to recycle and extract from sources that have a lower concentration of what you want. If a resource becomes more valuable than the cost to extract it from lower grade ores, we won't run out.

[Admiral Valdemar]

Ah, the business cycle is invalid, then? Your fantasies about the future and how we're all going to die and then eat cockroaches would be a marvelous piece of rhetoric if intentional. You would dangle them out there, daring people to disagree with you and thus drag things off course, if it were intentional. I am sure that you would not do so, of course.

What?

See, the problem is that with the gold standard, or the seashell standard, or with the plutonium standard, we would not be issuing money, but rather certificates for a specific amount of said commodity. Choosing a rare commodity will produce either massive deflation or else be no different than the current system, as the quantities of gold would be so small as to enable rapid changes in the value of money without people noticing. These are flaws with the idea of tying money to any commodity. Further, I would like to note, on the grounds of smartassery, that all money has a value, even if it is the value of the memory it takes up in the case of credit. Finally, the potential overability of credit does not make your wet dreams about gold certificates any more valid. The two are separate issues. The easy availability of credit is something that can be fixed without zooming back to the nineteenth century.

The availability of credit is a different matter, yes, but if you look at historical inflation rates, you'll see that in the US, they were pretty much stable for centuries, except in times of warfare, or until we got to the removal of the gold standard where they, along with debt levels, exploded. Incomes have fallen in real terms for decades, and the trade deficit has grown at an exponential rate.

Tying the currency to a commodity may not make the perfect system, but it sure as hell would make a good start along with the regulations we had in place circa the Great Depression being reinstated, in rectifying the whole problem. The problem for the US is that if this were to be brought in, you'd all be screwed there overnight. To be honest, most of the world would be if something that massive happened overnight. There will be an end to the debt-for-goods game with China sooner or later.

So why call them "gambling" as a pejorative? Oh, wait, you seem to have forgotten what I was saying.

Except I never implied anything of the sort. Gambling is exactly what investing in the stock market is. Bigger payoffs, but bigger losses too.

Dude. The point is that there are more people than can be sustained at a comfortable level of existence. They have to die one way or another, preferably through a happy old age with a great many children, but regardless, the population has to come down. Unless you have some sort of magic solution to said problem that involves immortality and infinite resources.

Your response to this, and the fact that you freak out about the thought of billions dying, apart from assuring me that you approximate a functioning human being in most respects, encapsulates my point exactly. You aren't comfortable with it. Neither am I. Nobody that isn't divorced from reality in some respect is. I can see why people react negatively to it, and why some people would send death threats to Attenborough.

Look, of course it elicits that kind of response. It scares the shit out of me some days, depresses me others. I sometimes wish I didn't know of these things and was still of the mind that the recession is over, or soon will be, and the party can continue. But it won't.

The people who are going to die are already well on their way there. They die young, downtrodden and in numbers that make 9/11 look positively quaint. Again, the paradigm shift will be that this kind of thing will occur with richer nations, albeit, not at as drastic a rate. It's the simple fact that the numbers don't work when crunched that makes it harder to not feel even worse when you bring this point up and someone handwaves the problem, citing technology or social progress, or alludes to the catch-all solution that is human ingenuity. We always find a way, they say. Which is hilarious if you apply it to Titanic. How, exactly, would plucky spirit and a can do attitude change the fact that half of the people on that ship were going to die regardless?

Anyway, Shep brought up nuclear. Good idea, I'm all for it and it is the only way you'll match baseload in a decentralised system without using fossil fuels (forget "clean coal", it's totally unproven and not financially viable. Add fusion to that too). The problem is lead times, uranium bottlenecks and nuclear proliferation. The first can be dealt with via government cutting red-tape, but as we all know, Windscale, TMI and Chernobyl will make any such plans impossible. It's bad enough getting NIMBYs to accept nukes anywhere near them, imagine the reaction to a nuke being built in half the time it normally takes, even with a CANDU or MAGNOX design which is well proven.

The second issue is simply a matter of bringing about largescale uranium mining again. Australia is one of the big sources for the ore, it just simply takes too much time and necessary interest/capital to get things going along at a rate that will enable the world to adopt an all nuke policy. Reprocessing spent fuel rods and old bombs would be a better bet, however, the US is actually unable to give away MOX right now simply because most reactors either don't run such a fuel efficiently, or countries are wary of buying it.

The third problem is totally obliterated by using thorium, which could be used and get around any near future uranium ore bottlenecks.

However none of this addresses the energy crisis at hand, which is a liquid energy crisis. While the UK will run into an electricity crisis very soon (potentially starting next year given how close we got this winter) and could do with nuclear, it will come too late to really make a difference given the horrible planning delays and lead time for building such reactors, not to mention the huge investment and even the threat of cheaper LNG imports killing a nuke project dead.

Electric cars are s semi-answer. There are well over 700 million vehicles on the world's roads. To replace even America's with EVs in any real time-frame (a decade) would take a Manhattan or Apollo project scale effort. With many nations debt ridden or just plain insolvent, and people feeling the squeeze, this simply will not happen. And you can't run EV trucks for logistics, or for agriculture and mining (although some mining vehicles can work off mains power via an umbilical, this is rare).

Anyway, as Mike mentions, solving energy doesn't solve the crises. It only means you have the party go on longer until the next limiting factor hits, be it water or food or living space etc.

Climate change is the concern that ought to top your list of things to be concerned about. It will be hard to be concerned about, say, having more osmium to make ballpoint pens with if climate change is impacting agriculture to the point your industrial workers are starving to death; or are being killed in heat waves and/or massive storms. The second thing to be concerned about is reducing global resource consumption and population growth. The third is weaning the globe off its dependence on fossil petrochemicals before their declining production and rising costs strangle the economic efforts required to get away from them. Finding more sources of rare metals . . . way down the list.

Even at the fastest possible rates of climate change, short of a clathrate gun event in Siberia, peak oil will impact food far sooner and to a more devastating degree in our lifetimes. The price spike of 2008 may have been down to speculation for the most part, but then speculation will always happen, it's the degree to which it reflects supply-demand ratios that matters, and it is clear as day that in 2008, oil output was barely meeting oil demand, which caused marginal barrel profit taking on an unforeseen scale.

Since '97, we have seen a trend showing higher highs and higher lows for oil, these are the lowest prices recorded:

1998: $14
2001: $26
2009: $62

As of today, this trend is continuing, possibly accelerating.

Are either of these actually feasible on the orders of magnitude required to support six to nine billion people? Or even, say, three to five billion? Are these genuinely scalable technologies, or just buzzwords to throw around?

Not in the timeline needed, even assuming the investment was there. I've seen designs for city farms using aeroponics in skyscrapers, even having wildfowl and cattle and using renewable energy to power it all. These ideas won't be off the drawing board this decade, and they sure won't be coming to a city near you before your food bill starts taking up a larger proportion of your salary like energy (in the UK, the government expects several million more people to hit fuel poverty status in the next couple of years; this is defined as energy taking 10% or more of your income).

As with everything else, it's not a matter of technology. It's a matter of scale, time and motivation. In a market economy, these things are horrendous to do unlike in a command economy (and if we can't convince people climate change is dire enough to compare to wartime footing, then no one will listen regarding the quack theory of PO or ecological collapse).

Two problems, actually. First, is that there are too many people. Second, those people consume too much. You can sustain a much smaller number of people on a First World lifestyle complete with recycling. However, the planet's current consumption and population are absolutely unsustainable without technologies and geo-engineering projects that are "just on the horizon."

Precisely. Chindia will be the big affront to any change here. With near two billion people wanting to live like your average American, we would need at least four more Earths by some accounts, just to maintain that living standard. I count one Earth in inventory so far.

Remember, all of these problems here are physical ones. PO has a decline rate globally of around 7-8%. But the export problem is another matter. There are numerous case studies showing that exporters look after their own demand first in-house, before they export products, and with most of the Middle-East experiencing explosive population growth and consumption going up too (they're, ironically, looking at energy crises right now; cognitive dissonance much?), nations that rely on exports for the bulk of their energy like the US or UK are going to find that they may drop off a cliff very soon, even if the likes of OPEC are pumping a fair bit still, none of it will hit the market without revolt in their own nations.

Apply the same principle to food and anything else exported. Someone mentioned a market for selling water. We already have that: food. Few people realise that exporting food and animals means moving water in vast quantities, as well as fossil fuel energy, around the globe.

[ray245]

Precisely. Chindia will be the big affront to any change here. With near two billion people wanting to live like your average American, we would need at least four more Earths by some accounts, just to maintain that living standard. I count one Earth in inventory so far.

On the other hand, it is also possible that people in China and India will be satisfied with living in a second world economy as opposed to living in a first world economy.

[Admiral Valdemar]

On the other hand, it is also possible that people in China and India will be satisfied with living in a second world economy as opposed to living in a first world economy.

Unlikely, given China and India's unquenchable thirst for resources and business. There are numerous contracts being made from those two countries with resource rich ones in Africa or S. America, from oil to metals. In exchange, China or India supply them with cash to build infrastructure, or just keep the locals in order.

There would be literal riots in the streets if the Party in China announced that, actually, they can't promise a better life for all like they expected. Sure, second world status is better than third, but that won't make taking second place next to the Anglo nations any easier to accept. They're going for all or broke, and a good chunk of those dwindling exports I mentioned are now going east, not west, as China outbids America and others.

[GrandMasterTerwynn]

Precisely. Chindia will be the big affront to any change here. With near two billion people wanting to live like your average American, we would need at least four more Earths by some accounts, just to maintain that living standard. I count one Earth in inventory so far.

On the other hand, it is also possible that people in China and India will be satisfied with living in a second world economy as opposed to living in a first world economy.

There. I did it. I used a smiley. That's how completely ridiculous I find your assertion to be. History suggests that people aren't really happy with having less when they know that more is possible. If people were happy to settle with second world economies, global economic growth would've come to a screaming halt by the early 20th century. Unfortunately they're not. And neither the Chinese nor the Indians show any indication of wanting to settle for second world economies. If they did, China wouldn't be burning coal as fast as it can dig it out of the ground, or setting up to massively exploit Africa for its natural resources.

[ray245]

Precisely. Chindia will be the big affront to any change here. With near two billion people wanting to live like your average American, we would need at least four more Earths by some accounts, just to maintain that living standard. I count one Earth in inventory so far.

On the other hand, it is also possible that people in China and India will be satisfied with living in a second world economy as opposed to living in a first world economy.

There. I did it. I used a smiley. That's how completely ridiculous I find your assertion to be. History suggests that people aren't really happy with having less when they know that more is possible. If people were happy to settle with second world economies, global economic growth would've come to a screaming halt by the early 20th century. Unfortunately they're not. And neither the Chinese nor the Indians show any indication of wanting to settle for second world economies. If they did, China wouldn't be burning coal as fast as it can dig it out of the ground, or setting up to massively exploit Africa for its natural resources.

I'm not saying that the Chinese and the Indians are aiming to be a second world economy. I'm saying that they can be content with a second world economy if they reached a point where they are unable to exploit the remaining resources to develop themselves into a first world economy.

Additionally, I think that we should not forget that not everyone around the world have the desire to live like a well-off American even if they are living in a developed nation.

[Bakustra]

Ah, the business cycle is invalid, then? Your fantasies about the future and how we're all going to die and then eat cockroaches would be a marvelous piece of rhetoric if intentional. You would dangle them out there, daring people to disagree with you and thus drag things off course, if it were intentional. I am sure that you would not do so, of course.

What?

Claiming that this recession will be never-ending implies that either the theory of the business cycle is invalid, or that civilization will implode relatively quickly. Of course, if you simply mean that things will never reach the same level again, then you run headlong into the definition of a recession. It is a period where the economy (in general, not just GDP) shrinks rather than growing, and when the economy begins to grow again and undergoes a period of sustained growth (since there are dips and rises within the larger boom-bust cycle), then the recession is over. I decided to cover both angles, since arguing about the gold standard implies that there will be something to argue about within the next decade. Somewhat incompatible with the aura that descends typically over these threads, to be sure.

The part that has presumably left you all bamboozled refers to your habit of taking an economics discussion, and then implanting comments like "this recession will never end with the end of cheap energy" and your other prophesies of the apocalypse within your posts. I was remarking that this would be an effective rhetorical strategy, since many people will take exception to them, much like if I were to insert one of my hobbyhorses into the majority of my posts, as I am worried by the high proportion of smokers on campus. (example hobbyhorse emphasized for clarity).

See, the problem is that with the gold standard, or the seashell standard, or with the plutonium standard, we would not be issuing money, but rather certificates for a specific amount of said commodity. Choosing a rare commodity will produce either massive deflation or else be no different than the current system, as the quantities of gold would be so small as to enable rapid changes in the value of money without people noticing. These are flaws with the idea of tying money to any commodity. Further, I would like to note, on the grounds of smartassery, that all money has a value, even if it is the value of the memory it takes up in the case of credit. Finally, the potential overability of credit does not make your wet dreams about gold certificates any more valid. The two are separate issues. The easy availability of credit is something that can be fixed without zooming back to the nineteenth century.

The availability of credit is a different matter, yes, but if you look at historical inflation rates, you'll see that in the US, they were pretty much stable for centuries, except in times of warfare, or until we got to the removal of the gold standard where they, along with debt levels, exploded. Incomes have fallen in real terms for decades, and the trade deficit has grown at an exponential rate.

Tying the currency to a commodity may not make the perfect system, but it sure as hell would make a good start along with the regulations we had in place circa the Great Depression being reinstated, in rectifying the whole problem. The problem for the US is that if this were to be brought in, you'd all be screwed there overnight. To be honest, most of the world would be if something that massive happened overnight. There will be an end to the debt-for-goods game with China sooner or later.

So what about other countries that don't have much of a gold reserve? This would cut them free from their currency having any tie to economic strength, and most of these countries would then have the problem of massive inflation, assuming that we adopted a certain amount of gold as the value of the dollar or euro and then based currencies in relation to that amount of gold. Most would simply prefer fiat money over the problems that adopting the gold standard would cause. In addition, countries with the opposite situation would suffer massive deflation as their currencies shot up in value. Your high-minded scheme, like many, runs into the problem of causing as many problems as it fixes, in particular since the other half of your proposal would fix most of these problems without creating so many.

So why call them "gambling" as a pejorative? Oh, wait, you seem to have forgotten what I was saying.

Except I never implied anything of the sort. Gambling is exactly what investing in the stock market is. Bigger payoffs, but bigger losses too.

derivatives and related financial instruments which are basically fancy mathematical terms for gambling.

Yes, I can see how you didn't use the term pejoratively.

Dude. The point is that there are more people than can be sustained at a comfortable level of existence. They have to die one way or another, preferably through a happy old age with a great many children, but regardless, the population has to come down. Unless you have some sort of magic solution to said problem that involves immortality and infinite resources.

Your response to this, and the fact that you freak out about the thought of billions dying, apart from assuring me that you approximate a functioning human being in most respects, encapsulates my point exactly. You aren't comfortable with it. Neither am I. Nobody that isn't divorced from reality in some respect is. I can see why people react negatively to it, and why some people would send death threats to Attenborough.

Look, of course it elicits that kind of response. It scares the shit out of me some days, depresses me others. I sometimes wish I didn't know of these things and was still of the mind that the recession is over, or soon will be, and the party can continue. But it won't.

The people who are going to die are already well on their way there. They die young, downtrodden and in numbers that make 9/11 look positively quaint. Again, the paradigm shift will be that this kind of thing will occur with richer nations, albeit, not at as drastic a rate. It's the simple fact that the numbers don't work when crunched that makes it harder to not feel even worse when you bring this point up and someone handwaves the problem, citing technology or social progress, or alludes to the catch-all solution that is human ingenuity. We always find a way, they say. Which is hilarious if you apply it to Titanic. How, exactly, would plucky spirit and a can do attitude change the fact that half of the people on that ship were going to die regardless?

That's a lot of words to agree with me and then go ahead and then start up with your famous defeatism.

[GrandMasterTerwynn]

I'm not saying that the Chinese and the Indians are aiming to be a second world economy. I'm saying that they can be content with a second world economy if they reached a point where they are unable to exploit the remaining resources to develop themselves into a first world economy.

Additionally, I think that we should not forget that not everyone around the world have the desire to live like a well-off American even if they are living in a developed nation.

They don't have to aspire to live like Americans to make the global situation unsustainable. Simply aspiring to have a sizable plurality of their people living like western Europeans would be bad enough.

[Admiral Valdemar]

Claiming that this recession will be never-ending implies that either the theory of the business cycle is invalid, or that civilization will implode relatively quickly. Of course, if you simply mean that things will never reach the same level again, then you run headlong into the definition of a recession. It is a period where the economy (in general, not just GDP) shrinks rather than growing, and when the economy begins to grow again and undergoes a period of sustained growth (since there are dips and rises within the larger boom-bust cycle), then the recession is over. I decided to cover both angles, since arguing about the gold standard implies that there will be something to argue about within the next decade. Somewhat incompatible with the aura that descends typically over these threads, to be sure.

The part that has presumably left you all bamboozled refers to your habit of taking an economics discussion, and then implanting comments like "this recession will never end with the end of cheap energy" and your other prophesies of the apocalypse within your posts. I was remarking that this would be an effective rhetorical strategy, since many people will take exception to them, much like if I were to insert one of my hobbyhorses into the majority of my posts, as I am worried by the high proportion of smokers on campus. (example hobbyhorse emphasized for clarity).

None of what I suggest is going to get implemented, nor will it actually change our course. I thought it was obvious that I was talking about what would ideally have happened, since the big banks are too complex and need to change, but simply don't want to.

The "recession not ending" reference is to economic growth being curtailed at ever lower levels. If you want to nitpick, then we may rise out of a recession. Then go straight back into it. But by most accounts, the US has been in recession for years already, not just from the crisis of 2008, so I'm not about to get all antsy about the semantics debate, frankly.

So what about other countries that don't have much of a gold reserve? This would cut them free from their currency having any tie to economic strength, and most of these countries would then have the problem of massive inflation, assuming that we adopted a certain amount of gold as the value of the dollar or euro and then based currencies in relation to that amount of gold. Most would simply prefer fiat money over the problems that adopting the gold standard would cause. In addition, countries with the opposite situation would suffer massive deflation as their currencies shot up in value. Your high-minded scheme, like many, runs into the problem of causing as many problems as it fixes, in particular since the other half of your proposal would fix most of these problems without creating so many.

Which is precisely why I said it was unworkable now. Even switching to a basket of reserve currencies, or using bourses for commodites like oil that use something other than the dollar, are hard to get going and may cause economic problems on an even bigger scale than now anyway

This is all thinking about possible ways to run the show, since there isn't any action being taken either way regarding my suggestions or those other leading economists who aren't happy with the system today.

Yes, I can see how you didn't use the term pejoratively.

No, I was simply pointing out they're no different to the kind of investing one does via stocks and shares. Whether you see it as a slamming of the concept of gambling with savings or not is immaterial. At the end of the day, the whole edifice is hugely risky, with the risk being enough to sink companies like Lehman. No previous form of investment "gambling" (quotation marks for the discerning reader) has ever reached the levels of fucking up the economy that the new financials have.

So in that respect, that form of "gambling" is totally ludicrous.

That's a lot of words to agree with me and then go ahead and then start up with your famous defeatism.

How, exactly, is it defeatist to accept reality? Would you rather I harped on about fiction like we'll all drive EVs, have carbon neutral homes with their own local farm and jobs with security and salaries unmatched in history? I've heard this elsewhere whenever someone brings up the possibility of breaking the speed of light and exploring other worlds. Sorry, it's fact. Too many people: many must die. Take it or leave it, the problem is, most people are too ignorant to grasp this simple premise of finiteness.

[J]

Also, all investment is gambling. The idea is trading off between low-risk, low-return investments such as dividends and high-risk, high-return investments such as blue-chip stocks and day trading, just as examples for personal investors. Seriously, try to find a means of investment that doesn't involve gambling. I dare you.

US government bonds. If they default or fail to pass through the coupon, you have much larger problems to worry about than money.

Ah, the good old habit of disregarding what people actually say in favor of what you wanted them to say. Describing the irresponsible practices of many American banks as "gambling" and singling them out as such implies that you believe that responsible investment is somehow different in character. The difference is one of degree, not of some fundamental divide beyond simple irresponsibility and responsibility.

It appears you do not understand the difference between investing and speculating. Investing is in short, seeking a secure long term return on capital based upon solid fundamentals, for example, buying shares of Canadian banks 15 years ago and holding them for the long haul. Speculation is playing any & all price movements for gains regardless of the fundamentals, for instance, going long on the USD because it took a big dump the day before. There is no reason why the USD should move either way, it's a pure gamble based on nothing.

[Samuel]

So doesn't speculation help stabilize the market? If something goes down and they buy or vice versa, it helps prevent large fluctuations. Of course, they could manipulate the prices to make money, but that is a different problem from just speculating.

[Admiral Valdemar]

So doesn't speculation help stabilize the market? If something goes down and they buy or vice versa, it helps prevent large fluctuations. Of course, they could manipulate the prices to make money, but that is a different problem from just speculating.

The problem is, with respect to oil, it was one big positive feedback loop. The economy was overheating and oil was not meeting the required demand, so every barrel produced was having more and more money thrown at it to avoid people having to do without. When it got to $147/bbl. then the economy collapsed, thanks in part to the horribly overleveraged money system in place and our general way of life being unable to deal with such high energy prices. When your economy is used to $10/bbl., it's hard to live long with $100+ oil.

The same can be applied to other commodities, like rice, which had a similar boom as yields were seen to be falling well below the expected levels, though ironically it would be the hoarding from speculator actions that would cause countries to withhold exports of rice and fuel potential food riots.

[Iosef Cross]

Now that I have children I see all the recycling that's being done, all the environmental impacts, the climate change going on around me and it makes me wonder what kind of world are my kids going to be in when I'm gone or they are adults?

Probably a better one than the current one. However that depends on what country do you live. The US is decadent for sure, as Western Europe. Those two places might might get worse in the next decades if they continue thought the path that they are now. However, I still believe that living standards there will continue to improve, but at decreasing rates.

But for 90% of humanity, with doesn't live in Western Europe or the US, things are looking excellent right now.

Before I left here on my sabbatical I remember a raging debate going on about Peak Oil and the oil prices that were skyrocketing and how that sent us into a frenzy with the inevitable rise in price for everything else.

Well, oil only makes up for 35% of the world's energy consumption. And it is decreasing. An high oil price will decrease oil consumption and its relative importance as an energy source.

A increased oil price will not cause inflation, inflation is a consequence of a badly managed monetary policy. The US monetary policy since 2001 is pretty bad and apparently will continue to be. But don't worry, in the world as whole, monetary policy is steadily improving since the 1980's.

Of course now with the worst economy in generations there are other things to worry about but that only exaserbates the issues.

The worst "American" economy in generations. But for 90% of humanity the crisis passed by as if never existed. Here in Brazil the crisis only affected the economy in the first half of 2009. By the second half economic growth resumed. Unemployment didn't increase significantly.

You see because if you look at what caused that collapse you start getting into the murky world of derivatives and other weird market devices that makes you realize America no longer makes anything. We push around paper, we provide financial services and we trade in these bogus market gimicks like derivatives and when the party is over and people finally realize there is this whole economy based on things that cannot be accurately assesed or valued you have to imagine economically things might get even worse.

The US still is the world's largest industrial nation. While the relative importance of material goods is decreasing to the economic system as whole, the proportion of US production with is made up of services is increasing.

That's expected since the productivity of labor for industry and agriculture can be easily increased through the use of machinery while a doctor or barber cannot substitute his labor for machinery. Since people don't need more material goods, an increase in income brought by increase productivity in the production of material goods means an increase in demand for services, while the proportion of income spent in material goods decreases.

The increase in relative importance of the service sector is expected and is not a problem like you appear to believe.

So with all this doom and gloom in mind it makes me wonder have we reached a point where our world may no longer provide a brighter future for our kids and descendants than it did for us?

No. We haven't. Even if the US becomes a bad place to live, the option to emigrate to other countries exists...

Are we looking at some (unexagerated) bladerunner like world where the climate sucks, everything is recycled and the haves look down at the have nots from their giant skyscrapers. Will homes and apartments start looking like Bruce Willis' apartment in The Fifth Element because we're running out of places to live or can't afford the bigger places?

In the US the average American home is quite large, about 220 square meters. It was 130 square meters in 1950. The size of the average American home will probably not decrease, since the population of the US will not increase by much in the next decades.

Also, Japan has a population density about 10 times of the US, still they don't live in Bruce Willis' apartment in The Fifth Element.

What do you fine folks think, in particular parents who are raising kids and looking ahead to what might be waiting for them 40-50 years from now. I'm not pessimistic, just concerned.

You don't need to be.

In times of economic depression people always become concerned about the future, in the 30's people were thinking that the world would become a terrible place in 50 years. During the 70's stagflation people started thinking that by 2000 the world would suck, pollution, etc. This type of concern is always irrational thought.

[Iosef Cross]

So doesn't speculation help stabilize the market? If something goes down and they buy or vice versa, it helps prevent large fluctuations. Of course, they could manipulate the prices to make money, but that is a different problem from just speculating.

Speculation is a type of entrepreneurship, and like other types of entrepreneurship, it reduces the price discrepancies. In the case of speculation it reduces the price discrepancies between present and future stock, commodities, etc, prices.

By anticipating future prices, speculators drive present prices to reflect future resource scarcities. It means that the market anticipates future economic needs and allocates present resources in anticipation of these needs.

[Iosef Cross]

The problem is, with respect to oil, it was one big positive feedback loop. The economy was overheating and oil was not meeting the required demand, so every barrel produced was having more and more money thrown at it to avoid people having to do without. When it got to $147/bbl. then the economy collapsed, thanks in part to the horribly overleveraged money system in place and our general way of life being unable to deal with such high energy prices. When your economy is used to $10/bbl., it's hard to live long with $100+ oil.

No, the US economy didn't collapse because of high oil prices.

High oil prices were a symptom of the monetary disequilibrium that was feeding the 2001-2008 economic boom. Their causes are complex, but I can attempt to explain some elements of the phenomena. Their increase reflected the increasing money supply, with decreased interest rates, with means that the same expectations of rising oil prices in the future, with lower interest rates, increase oil prices in the present. That's because speculators demand oil at higher prices when investments that depend on interest rates have smaller rates of return. Also there is the indirect effect of the economic boom, with increased the prices of commodities and the expected future prices of commodities. The crisis reduced expected future prices of commodities and therefore present prices.

[Admiral Valdemar]

Probably a better one than the current one. However that depends on what country do you live. The US is decadent for sure, as Western Europe. Those two places might might get worse in the next decades if they continue thought the path that they are now. However, I still believe that living standards there will continue to improve, but at decreasing rates.

You clearly don't live in Europe or know anything about the situation here. There are several EU nations ready to collapse from financial strain, the UK is practically a third world pauper with the deficit spending going on now on top of a looming energy crisis, and radical parties are getting support off those people disillusioned with the main parties for getting us in this mess.

But for 90% of humanity, with doesn't live in Western Europe or the US, things are looking excellent right now.

That's because they seemingly have no clue about the problems just round the corner. It's the US and Western European nations that prop everyone else up, remember. If they go down, say goodbye to the wealth flowing out to the 90% who are looking towards a brighter future.

Well, oil only makes up for 35% of the world's energy consumption. And it is decreasing. An high oil price will decrease oil consumption and its relative importance as an energy source.

This... is just so simplistic, it hurts. You've just handwaved away the biggest single problem facing humanity right now, and somehow labelled something that "only"(!) makes 35% of global energy usage as easily being replaced when it gets expensive.

I guess that's why we stopped using oil and switched entirely to electric and biofuels in 2008 when oil more than tripled in price in weeks.

By the way, oil accounts for well over 90% of transportation energy usage. You're not replacing it any time soon, and there are NO equivalent replacements. Everything else is either vastly more expensive, harder to produce or unscalable.

And no, Brazil's take on the oil problem is not a worldwide solution anymore than geothermal is because Iceland manages it.

[Iosef Cross]

It appears you do not understand the difference between investing and speculating. Investing is in short, seeking a secure long term return on capital based upon solid fundamentals, for example, buying shares of Canadian banks 15 years ago and holding them for the long haul. Speculation is playing any & all price movements for gains regardless of the fundamentals, for instance, going long on the USD because it took a big dump the day before. There is no reason why the USD should move either way, it's a pure gamble based on nothing.

You are half right. There is a clear difference between interest, return on risk and profit. Interest in the return on savings, buying stocks for long term investing yields interest plus return of increased risk (over bonds).

Speculating is taking advantage of price discrepancies. Most people don't see the price discrepancies, if they noticed them, they would also take advantage of them and soon these discrepancies wouldn't exist! You call speculation "pure gamble based on nothing" because you don't understand what these speculators have figured out. That's expected, if you everybody knew what they knew, inter-temporal price discrepancies wouldn't exist, and therefore, speculation.

[Admiral Valdemar]

No, the US economy didn't collapse because of high oil prices.

High oil prices were a symptom of the monetary disequilibrium that was feeding the 2001-2008 economic boom. Their causes are complex, but I can attempt to explain some elements of the phenomena. Their increase reflected the increasing money supply, with decreased interest rates, with means that the same expectations of rising oil prices in the future, with lower interest rates, increase oil prices in the present. That's because speculators demand oil at higher prices when investments that depend on interest rates have smaller rates of return. Also there is the indirect effect of the economic boom, with increased the prices of commodities and the expected future prices of commodities. The crisis reduced expected future prices of commodities and therefore present prices.

The economic policy that was adopted by other countries didn't help. The overleveraging of assets, the insane mortgage rates and rampant credit all contributed. But it is fair to say that oil did contribute to the downfall of the whole house of cards given the demand destruction that was going on during that time around nations that couldn't afford the oil being big up in the markets, but yet could still be afforded by the richer nations. There was contango for oil that went out to months in advance because of the bubbles being inflated, but also because the simple fact was that at a time where oil price was surging, the markets were unable to grab enough of the commodity. This is demonstrated in the ever decreasing storage levels for crude at the US SPR over that time period too, along with a global diesel shortage that was significant enough in China to cause rationing.

To clarify, I am not saying oil is the ONLY contributor to the credit crunch. Rather, it was the catalyst for bringing about what would inevitably unwind sooner or later because of reckless fiscal responsibility on behalf of governments, banks and individuals.

Additionally, charts like this show the relation between the booming price of oil over the last decade and the general consumption of a public faced with ever higher fuel bills. I also recommend Driven to the Brink. How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs (PDF warning) as a good overview of the relation between housing and energy relating to this crisis.

As oil is rising now, again, and since there is little spare capacity even from OPEC to fuel a resurging global economy, it is hard to see how any significant recovery can come about when the underlying factor that affects all GDP growth is energy, of which, oil is by far the most important such resource.

[GrandMasterTerwynn]

Now that I have children I see all the recycling that's being done, all the environmental impacts, the climate change going on around me and it makes me wonder what kind of world are my kids going to be in when I'm gone or they are adults?

Probably a better one than the current one. However that depends on what country do you live. The US is decadent for sure, as Western Europe. Those two places might might get worse in the next decades if they continue thought the path that they are now. However, I still believe that living standards there will continue to improve, but at decreasing rates.

But for 90% of humanity, with doesn't live in Western Europe or the US, things are looking excellent right now.

Wow. Whatever the hell you're smoking . . . I want some of that. As has been stated, there are nations in Europe whose economic situations are quite precarious. And one blithely disregards the fate of the US and western Europe at their peril, as the driving force behind much of the global economy is American IOUs.

Before I left here on my sabbatical I remember a raging debate going on about Peak Oil and the oil prices that were skyrocketing and how that sent us into a frenzy with the inevitable rise in price for everything else.

Well, oil only makes up for 35% of the world's energy consumption. And it is decreasing. An high oil price will decrease oil consumption and its relative importance as an energy source.

Decreasing, to be replaced principally by natural gas (largely a byproduct of oil production . . . oh yeah, and I'm told that natural gas production and reserves are overstated in the U.S., one of the world's largest producers of the stuff,) and coal (which, itself, has limited supplies. This disregards all the pollution and CO2 that coal burning pumps into the atmosphere.) Non fossil-fuel energy sources make up less than fifteen percent; with nuclear, biomass, and hydro being the big three players. The problem with oil is that it's not just used for energy. It makes up the lion's share of transportation. It's also used in quite a few industrial processes, including the production of fertilizer that makes the "green revolution" possible.

A increased oil price will not cause inflation, inflation is a consequence of a badly managed monetary policy. The US monetary policy since 2001 is pretty bad and apparently will continue to be. But don't worry, in the world as whole, monetary policy is steadily improving since the 1980's.

Rising demand for oil meets inelastic oil production. This drives oil prices up. Oil is used to generate energy to manufacture widgets, the industrial lubricants in the factory making the widgets, the energy used to mine the minerals that go into the widgets, the fuel to transport those raw materials to the factory to make the widgets, and the fuel required to get those widgets to market. The price of oil goes up, so the price of all those inputs goes up, meaning the price of widgets ultimately goes up. If the price of enough kinds of widgets goes up, you get inflation. No amount of monetary policy hijinks will magically put more energy and fuel sources into the ground.

[J]

So doesn't speculation help stabilize the market? If something goes down and they buy or vice versa, it helps prevent large fluctuations. Of course, they could manipulate the prices to make money, but that is a different problem from just speculating.

It can in some cases to a certain extent. For instance if speculators took short positions in a stock then covered their shorts as the price falls, the buying they carry out to cover their positions will tend to keep the decline from going out of control and turning into a panic selloff. Conversely, it can also be destabilizing, say for instance if a large number of speculators took long positions going into a price decline. As the share prices fall they're hit with margin calls and forced to liquidate their positions, selling their shares into the decline which accelerates the selloff and makes the decline larger & faster than it would otherwise be.

Speculating is taking advantage of price discrepancies. Most people don't see the price discrepancies, if they noticed them, they would also take advantage of them and soon these discrepancies wouldn't exist! You call speculation "pure gamble based on nothing" because you don't understand what these speculators have figured out. That's expected, if you everybody knew what they knew, inter-temporal price discrepancies wouldn't exist, and therefore, speculation.

What's the underlying on a synthetic CDO? How does one determine the market price, and thus the price discrepancy, if any, on such a structured finance vehicle? How would one calculate the market price of a CDO based upon the above CDO? Get back to me with a non-BS answer on the above and I'll concede that speculation isn't a pure gamble based on nothing.

[Darth Wong]

Instead of wrangling over the line where investment becomes speculation, why not talk about the massive over-leveraging that allowed individual bank traders to piss away tens of billions of dollars overnight? You had fucking investment banks where they had one dollar of assets for every thirty dollars they were trading, and thanks to "deregulation", those investment banks were merging with regular banks so that we could not afford to let them fall.

[Bakustra]

Also, all investment is gambling. The idea is trading off between low-risk, low-return investments such as dividends and high-risk, high-return investments such as blue-chip stocks and day trading, just as examples for personal investors. Seriously, try to find a means of investment that doesn't involve gambling. I dare you.

US government bonds. If they default or fail to pass through the coupon, you have much larger problems to worry about than money.

You are still taking a risk with those, just like with CD accounts and other such very low-risk investments, because you are transferring money into a form that you can't access easily, thereby taking the risk that you will need the money in the future. You take the risk of running low on money now, for an increased reward in the future. There is a similar risk in investing in land/real estate; while land prices (as opposed to house prices) are not particularly volatile, they still involve transferring money to a form that can't be readily accessed in the hopes of making a return on this investment. Yeah, I'm not seeing how this is exempt from the principle of risk versus reward, unless we are to define risk as solely a matter of catastrophic collapses and failures.

Ah, the good old habit of disregarding what people actually say in favor of what you wanted them to say. Describing the irresponsible practices of many American banks as "gambling" and singling them out as such implies that you believe that responsible investment is somehow different in character. The difference is one of degree, not of some fundamental divide beyond simple irresponsibility and responsibility.

It appears you do not understand the difference between investing and speculating. Investing is in short, seeking a secure long term return on capital based upon solid fundamentals, for example, buying shares of Canadian banks 15 years ago and holding them for the long haul. Speculation is playing any & all price movements for gains regardless of the fundamentals, for instance, going long on the USD because it took a big dump the day before. There is no reason why the USD should move either way, it's a pure gamble based on nothing.

So what is the fundamental difference, then? One is taking sane risks, the other crazy risks, but both involve trading off potential risks versus potential rewards. The fact that one is immoral because of its deleterious effects on the market simply means that investments should ideally be made carefully, not that there is some fundamental divide between investment and speculation for practical purposes (i.e. without going into the problem of discerning motivations).

Claiming that this recession will be never-ending implies that either the theory of the business cycle is invalid, or that civilization will implode relatively quickly. Of course, if you simply mean that things will never reach the same level again, then you run headlong into the definition of a recession. It is a period where the economy (in general, not just GDP) shrinks rather than growing, and when the economy begins to grow again and undergoes a period of sustained growth (since there are dips and rises within the larger boom-bust cycle), then the recession is over. I decided to cover both angles, since arguing about the gold standard implies that there will be something to argue about within the next decade. Somewhat incompatible with the aura that descends typically over these threads, to be sure.

The part that has presumably left you all bamboozled refers to your habit of taking an economics discussion, and then implanting comments like "this recession will never end with the end of cheap energy" and your other prophesies of the apocalypse within your posts. I was remarking that this would be an effective rhetorical strategy, since many people will take exception to them, much like if I were to insert one of my hobbyhorses into the majority of my posts, as I am worried by the high proportion of smokers on campus. (example hobbyhorse emphasized for clarity).

None of what I suggest is going to get implemented, nor will it actually change our course. I thought it was obvious that I was talking about what would ideally have happened, since the big banks are too complex and need to change, but simply don't want to.

The "recession not ending" reference is to economic growth being curtailed at ever lower levels. If you want to nitpick, then we may rise out of a recession. Then go straight back into it. But by most accounts, the US has been in recession for years already, not just from the crisis of 2008, so I'm not about to get all antsy about the semantics debate, frankly.

This is precisely why I gave voice to my frustrations.

So what about other countries that don't have much of a gold reserve? This would cut them free from their currency having any tie to economic strength, and most of these countries would then have the problem of massive inflation, assuming that we adopted a certain amount of gold as the value of the dollar or euro and then based currencies in relation to that amount of gold. Most would simply prefer fiat money over the problems that adopting the gold standard would cause. In addition, countries with the opposite situation would suffer massive deflation as their currencies shot up in value. Your high-minded scheme, like many, runs into the problem of causing as many problems as it fixes, in particular since the other half of your proposal would fix most of these problems without creating so many.

Which is precisely why I said it was unworkable now. Even switching to a basket of reserve currencies, or using bourses for commodites like oil that use something other than the dollar, are hard to get going and may cause economic problems on an even bigger scale than now anyway

This is all thinking about possible ways to run the show, since there isn't any action being taken either way regarding my suggestions or those other leading economists who aren't happy with the system today.

Well, your possible ways revolve around an equitable distribution of a hypothetical commodity such that it is held by countries in proportions equal to their share of the global economy. It also has to be a natural material, not a manufactured one, or else there is the problem of inflation/deflation staring you right in the face again. To be honest, this plan of yours would only be practical if there was either alien chiropterans forcing it upon the world, or else a global government that would presumably adopt a single currency in any case. In other words, your plan isn't really workable under any foreseeable circumstances.

Yes, I can see how you didn't use the term pejoratively.

No, I was simply pointing out they're no different to the kind of investing one does via stocks and shares. Whether you see it as a slamming of the concept of gambling with savings or not is immaterial. At the end of the day, the whole edifice is hugely risky, with the risk being enough to sink companies like Lehman. No previous form of investment "gambling" (quotation marks for the discerning reader) has ever reached the levels of fucking up the economy that the new financials have.

So in that respect, that form of "gambling" is totally ludicrous.

Very well, conceded.

That's a lot of words to agree with me and then go ahead and then start up with your famous defeatism.

How, exactly, is it defeatist to accept reality? Would you rather I harped on about fiction like we'll all drive EVs, have carbon neutral homes with their own local farm and jobs with security and salaries unmatched in history? I've heard this elsewhere whenever someone brings up the possibility of breaking the speed of light and exploring other worlds. Sorry, it's fact. Too many people: many must die. Take it or leave it, the problem is, most people are too ignorant to grasp this simple premise of finiteness.

Fuck you. Fuck you in your eyes, in your mouth, in your nose, and in your ears. Fuck you in your malfunctioning long-term memory. Fuuuuuck yoouuuu.

I was agreeing with you just posts before, and now you presume that I'm disagreeing with you. I will say this: you are defeatist because practically every other post from your fingers (counting from before your sabbatical) consists of "we're all doomed! doomed I tell you!" interspersed with attempts to explain various problems facing the world to people. Your approach is something that I, as somebody concerned about most of these same problems, despise utterly. It would frankly be better for the world if you kept your mouth shut and fingers away from keyboards.

Your approach actively denies that people can do anything to halt the course of various ongoing problems. This is because you claim, "we are doomed, and there is nothing anybody can do". Well, you base this on the apathy of the average person. How do you think the average person will react? They will most likely disregard you, remaining apathetic. How else will changes be made, if the average person is not convinced? (Well, there is always totalitarianism {*snicker*}. Good luck establishing an army of Green Shirts to oppress the average person "for their own good".) How will the average person be convinced, if the only voice telling them about this tells them that they can't do anything about it?

There is also the matter of convincing the more informed. Your approach turns people away because of said apocalyptic, fatalistic, outlook. They would normally be willing to hear you out and potentially change their way of life. However, your rhetoric turns them away and they become cynical about your posts, as they become the same thing over and over again. Meanwhile, you have the temerity (though you do not recognize it as such) to bitch about how people just won't listen to you. Well, nobody likes a lecturer, but nobody likes a glum bastard either, and you manage to impressively be both. Now, if you manage to put on a cheery face and make subtle suggestions rather than "a full plate? you're why kids are starving in Africa!" and still get that same response, I understand. However, you are still in a public forum. You are talking to people, making persuasive arguments. I can only recommend, but hopefully I have made myself clear.

Instead of wrangling over the line where investment becomes speculation, why not talk about the massive over-leveraging that allowed individual bank traders to piss away tens of billions of dollars overnight? You had fucking investment banks where they had one dollar of assets for every thirty dollars they were trading, and thanks to "deregulation", those investment banks were merging with regular banks so that we could not afford to let them fall.

Because people took exception to my statement about investment and speculation not having some shiny golden line between the two? Besides, I thought that this was one of the requisite "let's try to depress people!" threads that pop up every so often, generally about the environment.

[Darth Wong]

Well, if we're going to draw a shiny line between investment and speculation, I don't think it would be that hard. If you hold onto assets for years, it's investing. If you have rapid turnover or highly leveraged (which requires rapid turnover), then it's speculation. Why make everything seem more complicated than it is?

[J]

US government bonds. If they default or fail to pass through the coupon, you have much larger problems to worry about than money.

You are still taking a risk with those, just like with CD accounts and other such very low-risk investments, because you are transferring money into a form that you can't access easily, thereby taking the risk that you will need the money in the future. You take the risk of running low on money now, for an increased reward in the future. There is a similar risk in investing in land/real estate; while land prices (as opposed to house prices) are not particularly volatile, they still involve transferring money to a form that can't be readily accessed in the hopes of making a return on this investment. Yeah, I'm not seeing how this is exempt from the principle of risk versus reward, unless we are to define risk as solely a matter of catastrophic collapses and failures.

US goverment bonds are a form of money which isn't easily accessed? I guess you haven't heard of this thing known as the bond market? And I suppose you don't know that said bonds are cashable and take precedence above all else at financial institutions? In other words, if a bank has $20k sitting in its vault and I wish to cash in my $15k in bonds while someone else wants to pull $10k from his demand deposit account (you do know what a demand deposit is, right?) and another wants to exchange 10oz of gold bars for cash, the other two people are completely out of luck. Short term T-bills are as good as money in your hand. By the time that significant losses are being taken on those T-bills, the system is so screwed that the dollar bills in your wallet are worthless anyway, as are all other traditional stores of value.

It appears you do not understand the difference between investing and speculating. Investing is in short, seeking a secure long term return on capital based upon solid fundamentals, for example, buying shares of Canadian banks 15 years ago and holding them for the long haul. Speculation is playing any & all price movements for gains regardless of the fundamentals, for instance, going long on the USD because it took a big dump the day before. There is no reason why the USD should move either way, it's a pure gamble based on nothing.

So what is the fundamental difference, then? One is taking sane risks, the other crazy risks, but both involve trading off potential risks versus potential rewards. The fact that one is immoral because of its deleterious effects on the market simply means that investments should ideally be made carefully, not that there is some fundamental divide between investment and speculation for practical purposes (i.e. without going into the problem of discerning motivations).

Look up "capital formation". Investment is. Speculation isn't.

[aieeegrunt]

Well human nature being what it is, I think we're looking at an Easter Island scenario for our civilization; this ridiculous overconsumption craze isn't going to end because the people with the power and authority to do so are benefiting too much from it.