Oil Production: Will the Peak Hold?

[snow hope]

The single thing that scares me most about PO is what the markets will do when everyone finally works out we're on a long descent. As we have already discussed the banking system can't handle it. Banks will fail and people will default on loans and loose goods and assets. Banks will stop lending (sounding familiar yet)? I don't see how a bank would ever lend money or make money. What happens to 'the markets' when the banks collapse? I don't have all the answers yet. I don't know how a financial system based on long term financial contraction would or could work.

Now you guys have kissed and made up..... I would like to highlight this point as it also worries (scares) me. WTF is going to happen, when as Jim says everyone knows? To my simple understanding of economics and banking, they require ongoing growth to be sustainable(!), yet it obvious to us all that the ongoing growth we have had for 60 years is about to come undone.

So are we going to get: -
1. an ordered progression of the economy, banks and money to a new basis?
2. a depression?
3. world at war?
4. anarchy and chaos?
5. the rich getting richer and the rest of us suffering starvation and die-off?

I would really like some input to explore this as I need to understand more clearly what the possibilities are.

[SunnyJim]

The single thing that scares me most about PO is what the markets will do when everyone finally works out we're on a long descent. As we have already discussed the banking system can't handle it. Banks will fail and people will default on loans and loose goods and assets. Banks will stop lending (sounding familiar yet)? I don't see how a bank would ever lend money or make money. What happens to 'the markets' when the banks collapse? I don't have all the answers yet. I don't know how a financial system based on long term financial contraction would or could work.

Now you guys have kissed and made up..... I would like to highlight this point as it also worries (scares) me. WTF is going to happen, when as Jim says everyone knows? To my simple understanding of economics and banking, they require ongoing growth to be sustainable(!), yet it obvious to us all that the ongoing growth we have had for 60 years is about to come undone.

So are we going to get: -
1. an ordered progression of the economy, banks and money to a new basis?
2. a depression?
3. world at war?
4. anarchy and chaos?
5. the rich getting richer and the rest of us suffering starvation and die-off?

I would really like some input to explore this as I need to understand more clearly what the possibilities are.

Yeah, I'd love to see this one thrashed around a bit.... I'll add an option.

6. Nationalisation of the banks, and all lending put under goverment control? Goverment could then lend for 'projects' deemed worth of public support. They could also control money supply. Judging by their ineptness thought this is bound to failure. Probably end in revolution or overthrow...

I'd say a depression is very likely. As MacG keeps saying at the moment the whole dynamics change when stuff is in short supply and prices are rising. Why sell today if it will be worth more tomorrow, and if it's an essential commodity, why sell at all? Look at the hoarding going on by people here! Imagine that on a global scale..... trade dries up.

Commodities become in short supply and you get inflation. Hyperinflation is what you get when the economy stagnates, but you have inflation. I guess that's what we'll get. The money supply will be shrinking, GDP will be shrinking but goods will be going up in price. If money supply can be shrunk at the same rate as the availiability of goods then we won't get inflation, but we won't have as much money, and won't be able to buy as much stuff... same result. In these conditions, 'stuff' is the best thing to have.

I don't know. It's all so very complicated.....

Late night ramblings. Don't crusify me for it eh

No doubt the goverments will try to keep it going as long as poss. Another bubble or two before people 'get it'.

[Totally_Baffled]

6. Nationalisation of the banks, and all lending put under goverment control? Goverment could then lend for 'projects' deemed worth of public support. They could also control money supply. Judging by their ineptness thought this is bound to failure. Probably end in revolution or overthrow...

Wasn't this one of the options explained in the "money is debt" you tube video?

Controlled govenrment lending only, with no interest. So in effect the money supply matches the level of goods/services in the economy to avoid inflation, but doesnt require constant growth as there is no interest to worry about?

http://video.google.com/videoplay?docid ... 2583451279

"changing the system" is at 33.37 in the video.

[RogerCO]

Now we are getting to the interesting question - what on earth would a zero growth society or economy be like. We really need to work this out as a matter of some urgency as most of snow's options 2-5 look pretty unattractive.
So how do we get

1. an ordered progression of the economy, banks and money to a new basis?

Will there be a sudden paradigm shift in understanding by 'the powers that be' ? will existing banks wedded to BAU become extinct as they are replaced by new-age banks who understand how a zero growth economy works ? How do we get from here to there?

[MacG]

Now we are getting to the interesting question - what on earth would a zero growth society or economy be like. We really need to work this out as a matter of some urgency as most of snow's options 2-5 look pretty unattractive.
So how do we get

1. an ordered progression of the economy, banks and money to a new basis?

Will there be a sudden paradigm shift in understanding by 'the powers that be' ? will existing banks wedded to BAU become extinct as they are replaced by new-age banks who understand how a zero growth economy works ? How do we get from here to there?

Extremely tricky question!

People everywhere will probably do just about anything to get some "growth" going somewhere. This "growth" thing seems to get the dopamine and serotonin flowing and makes us humans feel good and want more of the good stuff.

If "growth" is going on somewhere, it will attract people and keep a new incarnation of debt- and interest-based money going. It seems like it's impossible to avoid - nobody likes to be poor if it can be avoided. Smoking some weed is the only way to enjoy a poor life.

If the US is kicked from the world economy, maybe Hungary and Slovenia and the likes will start growing like crazy? I don't know. Maybe the US will be the center of a non-growth economy. But not until after some "purification" though.

Frankly, I just speculate - the future have a certain tendency to surprise. Joseph Tainter hint that there are archaeological indications that life actually improved in the periphery after the fall of the western Roman empire.

[Catweazle]

Smoking some weed is the only way to enjoy a poor life.

I guess we'll see legalization soon then, to keep the plebs happy and stave off revolution. This is not entirely a joke.

[Susukino]

Hehehe... bit evasive today aren't we. OK, allow me to to quote you verbatim:

"Two biggest money spinners in manufacturing Planned obsolescence and designed failure"

So tell me:

(1) Did you or did you not write that?
(2) Who is responsible for planned obsolescence and designed failure if not the suppliers? The Illuminati, perhaps? Little green men from Mars? My aunt Mabel?

1/ I did write that.
2/ I don't know. Share holders must bear some blame, banks who need returns on investments.

This is nonsensical. In using the phrase "biggest money spinners in manufacturing" you imply a direct linkage between the profits of the manufacturers and the planned obsolescence that you say exists. You can't write a sentence like that and then turn around and say "oh but I'm not blaming the suppliers". Who else profits from the process of manufacturing other than manufacturers? Logically, who else controls the design of the product? Nobody else is in a position to do this except the manufacturers. Bankers, shareholders - fine, we can discuss their role in allocating capital (or not) but unless the company has already failed they are not involved in day-to-day operations. Certainly not in product design!

I and some others took you to task for some of your posts in this thread not because I think the market needs defending but because (a) portions of your argument aren't consistent, as I have just pointed out and (b) you got your knickers in a twist when others pointed out the inconsistencies.

My perspective seems to be rather different from yours. I don't know what you do or where your experience lies, but I can tell you what informs me. I make a couple of hundred meetings a year with the upper management of the world's most successful electronic component manufacturers. If you have own a car, television, cellphone, radio, dishwasher, or any other electronics-heavy product the chances are that they supplied the parts that make it all work.

These companies operate in a market where the competition is intense and always has been. The only way to survive (and most don't do much more than that) is to continually improve your product. When I say better I mean more functional, more (not less) reliable, smaller, lighter and yes, less hazardous to the environment. The recent shifts to RoHS-compliant and lead-free solder have been financially painful events for these companies. Despite the economic cost of the latter two transitions the industry never considered not complying.

When the customers of these companies look at the products on offer, reliability is a tremendously important metric. If there was even a hint that any of these component suppliers were making a product that entailed designed failure or planned obsolescence that company almost certainly go bust in a matter of months. I say "almost certainly" because I have never come across a company that has been suicidal enough to try.

So when I hear people talking glibly about concepts like "designed failure" I am naturally skeptical. That's not because I am a shill for capitalism but because I have 15 years of experience at the sharp end that tells me the opposite is true - that suppliers are desperate to convince their customers that their products are more reliable than those of the competition.

Suss

[Susukino]

This is all personal choice. Either you reduce, reuse and recycle or you don't. I see the problem essentially as one caused by consumers, not suppliers. I am pretty sure that my mother's little Toyota diesel car will last for a couple of hundred thousand miles.

Yeah. But, but, but: spin, lies and advertising.

The fact that consumers are gullible enough to fall for it every time does not excuse the manufacturers, even though their mendacity is to a degree understandable.

My neighbour is perfectly intelligent and clear thinking but she buys (as an example) cheap washing machines and has had three in the last ten years. I've suggested better makes but she doesn't think she should fork out more than she does.

We bought one extremely good one which I expect will last twenty-five years, if the last good one (second hand and gave us nineteen years of service) is anything to go by.

Indeed that family's landfill of cheap gadgets is eye-widening. And to suggest pushing such wasteful frippery out of the market by regulation is actually seen as 'anti competition' and is one of the more criminal aspects of the current economic system.

But I repeat: spin, lies and advertising.

I regret to say that your repetition doesn't help as I don't understand your argument. Let's take the case of the car I described in my previous post above. I commented that many people have a choice to buy a car and run it into the ground but instead keep buying new cars every few years. In what way is spin and lies relevant here? How is Toyota lying to consumers by selling them a high quality vehicle that would serve drivers well for a decade or more if they let it? What exactly is mendacious about that?

On the other issue you mentioned, any grown-up understands that the task of advertising is to make us want something; this is a truism. However, it is the task of any adult member of society to think carefully and clearly about what they need and can afford as opposed to what they want. If people give way to short-term gratification and put themselves in debt to buy unsuitable or poor quality products, then they only have themselves to blame. The disincentive is that they spend far more money in the long term than they need to, like your neighbour and her washing machines.

Incidentally you mention the alternative being "pushing wasteful frippery out of the market by regulation". If you mean a green tax to encourage recycling and ensure that the cost is reflected in the purchase price, then that already exists in the shape of WEEE and no doubt we'll go further down that road. Or do you mean a command economy in which the government decides (say) the shape and size of the washing machine market, how many models and at what prices?

Suss

[fifthcolumn]

What's going to happen?

Well it's happening already.

The banks don't know what's going to happen - their planning horizon has become muddy.

Thus they are shutting down lending.

Simultaneoulsy we have the central banks furiously printing money in a competitive race to the bottom with the US dollar so we have inflation.

It looks to me like we're going to get a more hardcore rerun of the 1970s followed by a sharper version of the 1980s.

So high inflation till the back of the economy starts to break due to the crushing of consumer spending power by inflation and rising energy costs.

Ultimately the central banks will have to raise interest rates to try to reign inflation in.

My guess is they won't do that until most people have stopped driving and are using public transport.

[SunnyJim]

Hehehe... bit evasive today aren't we. OK, allow me to to quote you verbatim:

"Two biggest money spinners in manufacturing Planned obsolescence and designed failure"

So tell me:

(1) Did you or did you not write that?
(2) Who is responsible for planned obsolescence and designed failure if not the suppliers? The Illuminati, perhaps? Little green men from Mars? My aunt Mabel?

1/ I did write that.
2/ I don't know. Share holders must bear some blame, banks who need returns on investments.

This is nonsensical. In using the phrase "biggest money spinners in manufacturing" you imply a direct linkage between the profits of the manufacturers and the planned obsolescence that you say exists. You can't write a sentence like that and then turn around and say "oh but I'm not blaming the suppliers". Who else profits from the process of manufacturing other than manufacturers? Logically, who else controls the design of the product? Nobody else is in a position to do this except the manufacturers. Bankers, shareholders - fine, we can discuss their role in allocating capital (or not) but unless the company has already failed they are not involved in day-to-day operations. Certainly not in product design!

I and some others took you to task for some of your posts in this thread not because I think the market needs defending but because (a) portions of your argument aren't consistent, as I have just pointed out and (b) you got your knickers in a twist when others pointed out the inconsistencies.

My perspective seems to be rather different from yours. I don't know what you do or where your experience lies, but I can tell you what informs me. I make a couple of hundred meetings a year with the upper management of the world's most successful electronic component manufacturers. If you have own a car, television, cellphone, radio, dishwasher, or any other electronics-heavy product the chances are that they supplied the parts that make it all work.

These companies operate in a market where the competition is intense and always has been. The only way to survive (and most don't do much more than that) is to continually improve your product. When I say better I mean more functional, more (not less) reliable, smaller, lighter and yes, less hazardous to the environment. The recent shifts to RoHS-compliant and lead-free solder have been financially painful events for these companies. Despite the economic cost of the latter two transitions the industry never considered not complying.

When the customers of these companies look at the products on offer, reliability is a tremendously important metric. If there was even a hint that any of these component suppliers were making a product that entailed designed failure or planned obsolescence that company almost certainly go bust in a matter of months. I say "almost certainly" because I have never come across a company that has been suicidal enough to try.

So when I hear people talking glibly about concepts like "designed failure" I am naturally skeptical. That's not because I am a shill for capitalism but because I have 15 years of experience at the sharp end that tells me the opposite is true - that suppliers are desperate to convince their customers that their products are more reliable than those of the competition.

Suss

Software background myself which should tell you everything.

Hey, if I contradict myself etc, it's cause I'm thinking on my feet, exploring this stuff. I'm no expert you know....

I still don't think the markets are particularly clever with allocating resources. Look at the use of corn for biofuel. Arguably that makes sense from a market perspective, but I don't think it makes sense from a 'what is the best use of this corn' perspective!

[Susukino]

Software background myself which should tell you everything.

I still don't think the markets are particularly clever with allocating resources. Look at the use of corn for biofuel. Arguably that makes sense from a market perspective, but I don't think it makes sense from a 'what is the best use of this corn' perspective!

I almost commented in an earlier post something to the effect that PCs and software are one area in which rapid obsolescence really is an issue. I can see how your perspective would be affected by that.

One major problem with corn for biofuel is the subsidies - that is, government intervention in the market! Not that I'm against some government intervention but it seems to me that this one is particularly daft.

Suss

[emordnilap]

Let's take the case of the car I described in my previous post above. I commented that many people have a choice to buy a car and run it into the ground but instead keep buying new cars every few years. In what way is spin and lies relevant here? How is Toyota lying to consumers by selling them a high quality vehicle that would serve drivers well for a decade or more if they let it? What exactly is mendacious about that?

Toyota are not in the business of making cars, they're in the business of making money. People running cars till they fell apart would put them out of that business, surely?

Incidentally you mention the alternative being "pushing wasteful frippery out of the market by regulation". If you mean a green tax to encourage recycling and ensure that the cost is reflected in the purchase price, then that already exists in the shape of WEEE and no doubt we'll go further down that road. Or do you mean a command economy in which the government decides (say) the shape and size of the washing machine market, how many models and at what prices?

Yes, no doubt we will go further down the WEEE path but frankly it's getting a bit late for tinkering.

Taxes have their place. But what I'm getting at - to take the wider point - is that simply producing in the first place something like a private car which can't achieve ten kilometres from a litre of fuel is a crime against nature. It's all seen as 'consumer choice' in a world where consumers often make the wrong choice, bombarded as they are by specious and often misleading advertising in addition to the me-me-me mentality.

Another instance is non-reusable containers, particularly aluminium and plastic. I dislike 'recycling' if you must know. The only thing not returned to manufacturers should be stuff actually consumed or used and compostible stuff. Yes, I know WEEE stuff goes back - or is supposed to go back - to manufacturers and this is a good thing in some ways. Cynicism suggests that it will foster even more of a throwaway mentality as people feel justified in upgrading because it's 'recycled'.

Suss, I dunno. I put a hell of a lot of effort into spending my money wisely. It takes a lot of time to do it and so I expect I'm in a minority. The times I've gone without something I wanted because the only information I had was from the manufacturer!

I've read your other posts and I respect where you're coming from.

[Susukino]

Let's take the case of the car I described in my previous post above. I commented that many people have a choice to buy a car and run it into the ground but instead keep buying new cars every few years. In what way is spin and lies relevant here? How is Toyota lying to consumers by selling them a high quality vehicle that would serve drivers well for a decade or more if they let it? What exactly is mendacious about that?

Toyota are not in the business of making cars, they're in the business of making money. People running cars till they fell apart would put them out of that business, surely? :wink:

Certainly Toyota would prefer that we bought more cars than less, but ultimately the number of cars that people buy is not something that the car companies can control. That is something that we, the consumers, control. We're not victims - we are the people who decide. Of course many, many people see no reason NOT to buy a new car every couple of years, so I don't think the auto industry is going to be too worried for a long time yet...

Suss

[Catweazle]

Toyota are not in the business of making cars, they're in the business of making money. People running cars till they fell apart would put them out of that business, surely?

Not as long as they have competition from other car manufacturers. The market works well in this case as there are alternative cars to buy.