Celtic Tiger Economy’s Potato

Potemkin Villager · Post by **Potemkin Villager** » 23 Mar 2006, 18:26

Oil & Gas, the Celtic Tiger Economy?s Potato.

Revisiting and learning from historical events can help when trying to understand how societies react to inevitable profound change and social dislocation brought on by events that cannot be legislated against, controlled or changed by making speeches .

Often the response is characterised by official bluster and denial followed by an inadequate and unhelpfully confused reaction. This need not be, but frequently is, the case

Here the greatest disaster in modern Irish history, the potato famine, is contrasted with the unfolding resource depletion crisis due to Peak Oil and Gas.

Although the historical context and causes of these two events differ they both share common ecological, political and social characteristics. There are disturbing similarities to official reactions to both.

Carrying Capacity

The carrying capacity of an eco system is limited by any substance that is indispensable but inadequate to support the population. This principle was put forward by the distinguished German agricultural scientist, Justus von Liebig, in 1863. It is known as Liebig?s Law or the ?law of the minimum?.

It is easy to imagine how it applies to food, but some thought will show that it applies to a whole range of physical and mental artefacts essential to life and a complex modern economy. Energy availability fundamentally impacts on all the other key areas such as employment, trade, transport and the distribution and manufacture of goods, the value of equities and property, ability to service debt, water supply and food production to name but a few.

On first consideration making a comparison between the period of the famine and today might be claimed as alarmist and invalid. Closer examination of events and circumstances will show that, despite obvious differences, there are some very pertinent similarities from which lessons must be learnt if we are to prevent a potential drama from escalating into a major disaster.

Then

Politics in mid 19th century Ireland was dominated by O?Connell?s repeal movement and the land question. The government of Ireland was a British military occupation on the eve of the famine. The basis of the land question was denied by the, largely profligate debt burdened landlord packed Devon Commission. In 1842 an estimated ?10 million in rents was being remitted out of Ireland, largely to placate the recipient?s creditors.

Despite the horrifically hard conditions under which the majority of people lived, the population rose rapidly, primarily because there was an abundant source of easily obtained cheap food available, in the form of the potato. The census of 1841 reported an official population of 8 million.

This increasing population produced a huge demand for and the sub division of land resulting in enormously high opportunistic rents and prices. If an Irish labourer could not get hold of a patch of land to grow potatoes on his family would starve. Plots were divided and sub divided until families were attempting to live on less than an acre.

Before the major crop failure of 1845 there had been numerous other failures of varying severity dating from 1728 most recently in 1839, 1841 and 1844. The possibility of failure of this indispensable support to Ireland?s human carrying capacity, albeit with the majority of the population existing under harsh conditions, was therefore not unknown.

Nevertheless when first news of the potato ?Murrain? broke the British Government continued to be optimistic assuming any failures would be local as often the case in the past. ??. there is such a tendency to exaggeration and inaccuracy in Irish reports that delay on acting on them is always desirable? wrote Sir Robert ?Orange? Peel, the British prime minister.

Further delay, procrastination and denial followed. Vested interests and political careers were at stake ? repeal of the Corn Laws was a poisoned chalice. The British home secretary, Sir James Graham, wrote to Peel in October 1865 that no steps need be taken yet as the truth abut the Irish potato crop could not be ascertained until digging was completed!

Here it is not intended to describe the increasingly horrific human misery, death and displacement that followed, which has been widely reported elsewhere, but rather to indicate the continuing inadequacy of official response.

A major problem then was that the cause of potato blight, and how it might be treated, would not be scientifically understood until many years later. This ignorance did not prevent the scientific establishment of the day advancing all sorts of useless quack cures in a breath taking display of arrogance and hubris.

Only the minimum of ?least cost? measures were put in place and withdrawn at the earliest opportunity

Now

Politics in 21st century Ireland is dominated by economic, social and infrastructural issues. We can no longer blame the Brits for any shortcomings in our social and economic institutions and development programmes. Massive funds continue to be remitted out of Ireland in purchasing oil and gas, general imports, profits repatriated by multi nationals here and to placate the recipient?s creditors.

Despite the stretched financial circumstances and the increasingly extreme debt burden under which the majority of people live, the population is rising rapidly. Primarily this is because there is an abundant source of easily obtained fuel in the form of currently cheap oil. The recent census reported an official population of over 4 million and growing.

The increasing population is producing a huge demand for credit and the sub division of land resulting in enormously high rents and prices of land and property. Plots are being divided and sub divided until families are attempting to live on less than half an acre.

Before the coming fuel supply failure there have been numerous other interruptions of varying severity the most recent being 1973 and 1979 and this winter?s events in the Ukraine. The possibility of failure of an indispensable support to Ireland?s human carrying capacity is therefore not unknown.

Nevertheless when first news of oil or gas supply difficulties breaks the Irish Government will probably continue to be optimistic assuming any failures will be local as often the case in the past. ??. there is such a tendency to exaggeration and inaccuracy in Oil and Gas reports that delay on acting on them is always desirable? has probably already been written by some civil servant advising their minister.

Further delay, procrastination and denial will certainly follow. Vested interests are at stake ? fossil energy demand control through increased fuel duties and a carbon tax is a poisoned chalice avoided to date. A civil servant has also probably written to their minister that no steps need be taken yet as the truth abut potential oil and gas shortages cannot be ascertained until all further drilling and exploration is completed!

Here it is not intended to describe the increasingly horrific human misery that may follow, which has been widely reported elsewhere, but rather to indicate the continuing inadequacy of official response.

A major problem is that the cause of oil and gas blight and how it might be treated may not be understood widely until many years hence. This ignorance will not prevent the scientific establishment of today advancing all sorts of useless palliative quack cures in a breath taking display of hubris.

Only the minimum of ?least cost? measures will continue to be put in place and withdrawn at the earliest opportunity.

Bandidoz · Post by **Bandidoz** » 24 Mar 2006, 09:36

oil and gas blight

Excellent

The "then" and "now" sections would look good side-by-side on a poster.

SILVERHARP2 · Post by **SILVERHARP2** » 27 Mar 2006, 13:00

Interesting articles but some obvious difference come to mind

The famine was compressed into a 3 year period, Peak oil effects on the Irish or other EU countries will be drawn out over 10 years min (10 years being the estimate of when oil production drops 50% after production starts to decline) it remains to be seen how much denial there will be, the issue will be clouded as economic growth could fall faster then oil production so there might be apparent surpluses of oil if oil prices drop during the initial peak oil phase.

This time around emigration won?t be an option however there might be pressure on the Gov. of Ireland to repatriate all the new arrivals to these shores in recent years if unemployment goes over 20% for instance.

I don?t see people in Ireland or most EU countries starving because of peak oil, it will mainly be an economic problem, it may cause the Euro to fail, there might be hyperinflation or a depression. The population of Germany for instance is set to fall from 80million to 50million over the next 50 years, Italy and France are probably in similar situations, The population of Russia and Eastern Europe I thinks is already falling. Add to that shortages of gas and heating oil and a deteriation in medical services one could see life expectancy fall throughout Europe

I think the famine peak oil scenario applies more to Africa, Asia and South America where population have risen sharply because of peak oil

GD · Post by GD » 27 Mar 2006, 17:31

SILVERHARP2, you view PO in a similar light to myself. Are you involved in economic reform (or anything similar at all)?

SILVERHARP2 · Post by **SILVERHARP2** » 27 Mar 2006, 20:41

GD - I wish I was but no, I started investing in gold a couple of years back as I was nervous about the debt bubble we all live in today, and a funny thing happens when you buy gold, it makes you think more about what money is, savings, the economy etc.
I came across Peak Oil from sites like Financialsense.com and safehaven.com so more from an economic perspective or investing opportunity then from a green perspective.
I find this site excellent as it is a bit more balanced then some of the US sites as they seem to be full of gun nuts and survivalists which is not relevent to the peak oil debate

Potemkin Villager · Post by **Potemkin Villager** » 28 Mar 2006, 20:49

[quote="SILVERHARP2"]GD - I wish I was but no, I started investing in gold a couple of years back as I was nervous about the debt bubble we all live in today, and a funny thing happens when you buy gold, it makes you think more about what money is, savings, the economy etc.

Hi Silver Harp from Justin

The gold palliative fascinates me me as it has gripped a few of
my friends with loads of money. I think most of them will get ripped off.

Imagine a time of scarcity of basics and ye are offered a gold piece for
a bag of potatoes because ye were hungry.

Might not a spade, spare part for a tractor or 1,000 pea seeds
be of more intrinsic value in exchange and the purveyor of the bag of spuds likely to suggest ye eat yer gold stash?

Just a thought.

Roger

andyh · Post by **andyh** » 28 Mar 2006, 21:54

At the risk of rudely interjecting - the physical gold thread has a good debate along these lines ie gold as a protector of value versus gold wont buy you a meal in times of famine.

I am also an investor in physical gold, and am of the viewpoint that since the coming shake down will not be instantaneous gold will have a 'golden' period during which it acts as one of the best stores of value (and being recognised as such its value relative to paper currencies will soar). If we do reach armageddon days at some point after that then productive land will be the only place to be in (and the value of gold will be questionable), but there should be time to manage the transition at a personal level......

SILVERHARP2 · Post by **SILVERHARP2** » 29 Mar 2006, 07:49

Roger - re gold, the events you are describing are at worst 20 years away if ever, in the next 5 to 10 years hard assets will be the best place to put your savings that being said it is a volitile assetso one has to pick entry points carefully. The first 5 or 10 years after peak oil won't be about famines or going back to the stone age but it will primarily have economic effects.
As you live in Ireland you can imagine what would happen if interest rates went to 7%, property would crash, heavily indebted farmers would get into trouble, land prices would collapse.
I think the mistake that PO writers make is that they don't describe the PO to PO+5years very well, they always jump to the final doomsday scanerio.

Potemkin Villager · Post by **Potemkin Villager** » 31 Mar 2006, 19:06

Silverharp,

The PO+5 period is certainly interesting to speculate about
and i suspect very, very bumpy rather than smooth. Past political oil
shortage periods showed that fuel panic can set in very easily on a fairly modest supply shortfall until the taps were opened again by the Saudis. This will not happen this time and the shotfalls likely to be quite substantial. Given the huge distance most food is transported the supermarket shelves could deplete pretty quickly.

Gold is a purely speculative investment, ie people only invest in in the
expectation that the price is going to go up, so it will end off being
another bubble. Basicly it has a very limited range of useful uses with modest annual demands by medicine, electronics and jewllery

Presumably ye intend to sell your South Sea stock on to a "greater fool" before the PO gold bubble bursts and buy half of Wicklow on the proceeds. :>)

Roger

SILVERHARP2 · Post by **SILVERHARP2** » 01 Apr 2006, 18:55

Roger

it cuts both ways, supply could be unsustainable or demand could be unsustainable, the credit bubbles that exist in the US and China must represent several million barrels/p/d of oil demand that could disapear in a short space of time. so it will be bumby which will add to the confusion.

Re gold, all savings are speculative, holding euros while the central banks are printing 8% more money every year is risky, holding all your savings in an Irish bank is risky because of the extreme exposure to property of these institutions, also the gov. could get very greedy as peak oil bites. Buying land in "wicklow" at current prices is risky because land prices could collapse until agriculture reorganises. It's all about diversivication, I own shares in Cameco, a uranium company in Canada and I invested money in an alternative energy fund. If I make a killing great, if it only holds it's value, great, if peak oil doesn't happen great.

Gold has been around as a store of value for 1000's of years, even in a post oil back to basics world, a farmer who has to buy a new piece of equipment the equivalent of a couple of years of surpluses will need a store of value, no reason why gold or silver may not come back into vogue. OPEC may refuse to take paper dollars and euros, and insist in payment in gold

MacG · Post by **MacG** » 01 Apr 2006, 20:05

SILVERHARP2 wrote:Gold has been around as a store of value for 1000's of years, even in a post oil back to basics world, a farmer who has to buy a new piece of equipment the equivalent of a couple of years of surpluses will need a store of value, no reason why gold or silver may not come back into vogue. OPEC may refuse to take paper dollars and euros, and insist in payment in gold

This talk about "store of value" is kind of a mantra with little physical reality in it.

Which are the *real* values out there? Shelter, water, warmth, food and possibly luxuries and fun.

Imagine a society which manage division of labour, agriculture and engineering. This society manage to mine a large amount of gold. What would happen if this society decided that it had reached such wealth in the form of gold that it did not have to maintain the irrigation channels, the nutritient chains or the buildings anymore?

Real wealth can not be preserved without continous labour. The world is in a constant state of deterioration, and only labour can prevent stuff from falling apart. Why on earth does anyone expect to be able to *store value*? It's rightout stupid to expect that *value* can be stored in some abstract form independent of the ever deteriorating world.

Eat your gold!

snow hope · Post by **snow hope** » 01 Apr 2006, 23:03

Here here MacG!

SILVERHARP2 · Post by **SILVERHARP2** » 02 Apr 2006, 09:21

McG - firstly I need to plan what I think will happen, not what ought/should happen, and I don't see peoples attitude to money changing anytime soon, except that middle east and asian societies tend to value gold more then western societies as they have a history of not trusting their governments. Even in the choas of WW2 in central europe having something tangible to trade could get you out of a sticky situation.

secondly I need to mention my timeframe again, I am talking about the 1st 5 years after peak oil hits, there will be a great redistribution/destruction of "wealth" and for now I would like to be on the right side of the trade.

The concept of savings is not abstract, it's a formal promise by one person to not consume resources until a future date. If you are the borrower you promise to make good use of those resources. It is the Fiat money system that has corrupted this concept as money is now brought into existance at the flick of a keyboard, which is why we have inflation

Snowhope- did you mention on another post that you wanted to buy shares in a gas go for your pension?????? I believe that is called saving

MacG · Post by **MacG** » 02 Apr 2006, 10:43

SILVERHARP2 wrote:The concept of savings is not abstract, it's a formal promise by one person to not consume resources until a future date. If you are the borrower you promise to make good use of those resources. It is the Fiat money system that has corrupted this concept as money is now brought into existance at the flick of a keyboard, which is why we have inflation

A "promise" is something pretty abstract in my book...

Most "resources" have the same characteristics as a loaf of bread - they deteriorate all the time and have to be created again and again. It's impossible to accumulate all the food and clothes you need during a lifetime, since most of the stuff deteriorate.

As for speculation, I think it's a matter of personal choice, but I belive with every bone of my body that it's a great folly to go for monetary systems based on precious metals. Any monetary system which dont reflect the properties of the real world will just cause suffering.

I agree that the current system sucks big time though!

Potemkin Villager · Post by **Potemkin Villager** » 02 Apr 2006, 14:42

I do seem to have stirred up a bit of a hornets nest here! Personaly I would prefer a field I could grow food in to a sack of gold that could easily be stolen by another believer in it's magical properties.

Stores of value, money, credit are all pretty metaphyiscal
when you think about it, they only exist in the believers minds.

An aquaintence recently commented to me that they couldn't decide if
it was better to have substantial savings or be heavily in debt in the
current situation in Ireland.

Many have chosen to be very heavily in debt, and according to Satudays
Indo, personal debt inIreland now stands ata "humongous" ?268 bn

I wonder what the Uk situation is?

So what about "hard" assets, what are usefully useful assets
when the going gets weird(er)?