How do we deal with all of the financial distress?
Posted by Gail the Actuary on September 17, 2008 - 9:15am
Topic: Miscellaneous
Tags: credit implosion, financial crisis, original, peak oil, religion [list all tags]
The world's financial markets are in great turmoil. How do we deal with all of this? Let me tell you my view. Yours may differ.
For those of us who are peak oil aware, we know that the world is finite, so the period of continued compound growth cannot continue. Because of this, we have known that eventually we would start seeing turmoil in financial markets. It should be clear that putting our faith in these markets is crazy, even if this is what financial planners have told us to do. If we have already divorced ourselves from this faith, we are ahead of the game.
Looking at the situation from a historical perspective, we have been privileged to live in the world at a very unusual time--a time when oil was in abundance, and we were able to have conveniences that people a few generations ago wouldn't even have dreamed of. We know that this must come to an end, and that gradually we will get back to a world more like it has been over the millions of years that people have walked the earth.
What is happening now in the financial markets is only a small increment in the step-down process. We can either focus on the amazingly good fortune we have had to date, or focus how bad the change ahead might be. It seems like framing the issue as one of historical good fortune is a better approach.
How we count our wealth
We can count our wealth in many ways--the status of our health, our relationships with our family and friends, the physical provisions we have made for the future, or the size of our bank accounts.
I think our health is our most important asset. My own view is that eating the right foods and getting some exercise goes about 85% of the way toward staying healthy. I eat a huge amount of fruits and vegetables, a moderate amount of fish, a little wine, very little processed foods, not much dairy, and very little meat. This diet is hard to come by in modern-day America. With this diet, it is difficult to get heart disease and a host of other things that afflict Americans. Peak oil may actually help with our diet, if we can get enough food. It will certainly help with exercise.
Family and friends are very important as well. My upbringing was that no matter what anyone else says or does, it is always important to immediately forgive. Restraint was also considered a virtue. My parents were of Norwegian background. A favorite "Ole and Lena" joke is that Ole once said, "I love my wife so much, I almost told her so."
Co-operation is another quality that was stressed in my upbringing. I can remember a lot of "arguments" about who was should do what, but they were always of the form, "Let me do more, you are doing too much." I am fortunate that my husband follows the same philosophy. Some of this may come from belief that "Do unto others as you would them do unto you" is a good philosophy. Other religions have similar "rules".
I am fortunate that I have an extended family and quite a few friends. We don't have any "estranged" relatives. One of my sisters is gay. She and her partner are at every family function and family reunion. They stayed with my mother for an extra week after my father's death early this year. Everyone considers my sister and her partner to be a valuable part of the family.
Many of my friends are from my Lutheran church. The pastors are peak oil aware. The assistant pastor has recently started a "green team," to study issues related to resource limitations and climate change. I know the assistant pastor reads The Oil Drum at least occasionally. There are a number of people in the congregation who are interested in peak oil issues, but like other places, many who cannot mentally deal with such thoughts.
In looking at our wealth, there is admittedly a need for some real goods to meet our physical needs. I know I have been stockpiling some additional food. I bought some more last week-end. I have been keeping clothes that are no longer in fashion, figuring that they may be of use later. I am doing a small amount of gardening, but it is difficult with poor soil and much shade. Here in Atlanta, we plant fall gardens, so I got some cabbage, kale, and other vegetables to put out this past week-end.
Our bank accounts are another form of wealth. I have always been taught, "Store not up treasures on earth, but in heaven." I am not sure about the "in heaven" part, but it is easy to see why the "store not up treasures on earth part" makes sense. If we buy huge houses and large cars, they soon "own us", rather than us owning them. We need to devote our lives to maintaining all of the "stuff" that we have bought. Also, having all of this "stuff" isn't very satisfying--it is our family and friends, and what we can accomplish to help other people that is satisfying.
What's ahead
We only have a limited number of years of life ahead of us. It seems to me our focus has to be on doing the most we can with the time we have available, regardless of the turmoil in the world around us.
How is the financial turmoil affecting you? What is your view of how we should be reacting to the news? Are there financial news items other readers might be interested in? Share your thoughts.
I've seen that expressed a dozen different ways and it never really makes sense.
The world (or oil supplies or whatever) has been finite since the beginning. It was finite 100 years ago and 50 years ago and it didn't keep compound growth from occuring... not did the depletion of whale oil (a far more "finite" resourse despite being "renewable") keep the world from shifting to other energy sources and the growth kept coming.
Great perspective, Gail, thank you.
Pos_Photo- please consider the exponential rate of depletion/extinction of the world (or oil supplies or whatever) in the last 100 years. Cheap Energy-Growth is not coming to 98% of the world, no longer on the backs of Lehman, Merrill or AIG for that matter.
phototaxi - yes oil was "finite" then too, but we were only beginning to use it and the "glass" was full with far fewer straws sucking it dry. Now the glass is half-full and there are far too many straws with hungry mouths on the other end.
The key is that in the past there were other energy sources to shift too in order to feed the continued growth.
That is not the case This TimezUp.
There are still other energy sources to shift to - wind/nuclear/solar/etc. You might argue that we won't be able to shift fast enough, but it's simply incorrect to claim that they don't exist.
Wind, nuclear and solar are the future sources of energy.
The important thing is any alternates to oil must be more affordable than what we use now, and continue to get ever more affordable, so that exponentially more is demanded - then the world's economy and population can continue growing exponentially.
At present no such alternative exists, otherwise we would be using it! - the 'technology fairy' might come to the rescue but it is unlikely to come up with a permanent viable solution.
The banking system may recover enough to fund the debt to allow the investment required to develop adequate alternatives, but again, that is unlikely since the financial system, as designed, requires growth which requires exponentially more energy. The availabilty of excess energy drives growth, not the other way around.
That's why the GOVERNMENT must step in! More government is good, level the playing field by introducing taxes on the bad energy sources, and mandating public purchases of plug-in cars. Too little government has made America the country with the highest inequality and one of the worst social mobility rankings in the developed world. The American dream is a pipedream, having a much better chance of doing good in most other developed countries. Beaming "rags to riches" stories on the airwaves is simply a way to keep Joe sixpack down.
Why would you expect the government to be any more competent than joe sixpack? The Soviet Union tried central planning and it didn't work out very well.
Local Swedish experince tells me that it ends up badly if the governemnt toys too much with socialism but can turn out well if it provides incentives for market creation. But government policies should stick to the easy long term trends and not overdo it since some of them will be wrong. Do not bet everything on one trend or problem and keep the core institutions in good shape.
How about looking at countries like the Netherlands? More government is good, a proper safety net, universal health care, higher education for both rich and poor, a government that cares about people, not just leave the country as a playing field for the big corporations and the filthy rich while tens of millions are poor and even more are struggling. Why can't America be more like the Netherlands? A compassionate country taking care of all their citizens, rich and poor, not just leave people in the gutter if you don't have money?
The case just isn't a simplistic "more government." In many respects we have too much government in some sectors--The National Security State and its Imperial Appendage eats about 1.5 Trillion dollars per year and is the best example going of Too much government (and too much power for that matter). On the other hand, we have too little government in many social areas, with the lack of a single payer health care system being the most visible and DRAINING on society monetarily. Combine just these two items, and you have well over 3 Trillion dollars in expeditures that could be used far more productively elsewhere in the socialeconomy. Unfortunately, changing the current status quo regarding just these two items is daunting because of the very deeply entrenched interests that effectively strangle the political (in the widest sense of that word) process and thus prevent ANY substantive change from occurring. IMO, Big War must be killed and its productive parts made into individual companies once again. This also holds for media consolidation; it too must cease and its holdings shattered back into the individual fragments it started as well over 100 years ago. (Yes, Media conglomeration is a problem that's been going on for that long.)
IOW, it's easy for someone with unclouded vision to see what the problems are; it's fixing them that's the challenge because they've gone unaddressed for too long, which itself is a product of too many people's vision being clouded.
Perhaps in the U.S. drinking alcohol is legal but smoking pot is not. I can distantly recall my college days. The drinkers were aggressive and selfish the pot heads laid back and generally caring of others, much friendlier too.
In the Netherlands everyone has health care its true. Its compulsory to pay for your own health care or you have to pay a fine. If your not sick for a given year you recieve a rebate from the health insurance company. Many poor people put of going to the doctor with a minor ailment so they can recieve the rebate check. Because they put off going to the doctor their minor ailment becomes a serious problem.
Comparing the United States to countries like The Netherlands or even Canada is a waste of time. Of course they have socialized programs that seem to work for all of their people. They do not have a massive sub-culture that is all consuming.
About the only slight silver lining coming from Peak oil is shared sacrifice; we will have no choice but to consume only what we produce or assist in producing. The free lunch, whether it be Social Security, Medicare, Medicaid or Welfare (individual or corporate) will be over.
Actually, I think it did reasonably ok. Russia is still a major power. The old USSR fought and won World War II. Then it had to fight the cold war against the rebuilt economies of the G7. There was no Marshall Plan for our ally after the second world war. It stood up against long odds for 80 years and was ultimately done in by several factors. Cuba is often criticized as well, yet that little government is still there after 60 years of economic warfare by the world´s biggest economies.
"The important thing is any alternates to oil must be more affordable than what we use now."
Given that we face imminent decline of our oil fed transportation system I think I dispute that statement.
In fact, we need a bridging transportation system right now EVEN IF it's more expensive.
As you say, costs will come down eventually but we have a choice between a collapse and a partialy arrested collapse followed by the later resumption of what I'd like to call "smart growth" based on natural cycles instead of the banks just pumping up the economy like an algae bloom
If nuclear is so "hot" why do we even need wind and solar? Multi MW nuclar plants are hugely more powerful and watts/unit of land far more efficient.
My local answer based on the situation in Sweden is that competition is good. If all new power is nuclear power we could end up with consumer prices that are higher then the cost for wind power. The long term marginal price is capped by the cost for those entering the market and it gets to tough to enter the market if there is no other way then investing billions in a single plant.
Having a mutlitude of alternatives to fossil power also exercises other parts of the economy making it possible to build more power producten then if nuclear power were the only option.
Renewables and nuclear have complementary strengths.
Nuclear plants are a lot better at providing base lead than load following power, and come in fairly big units which take a while to build, although lines are being set up in China and the US to mass-produce them.
So if you are in a hot climate, for instance, where the main need is cooling, this is likely to provide an early opportunity for the use of solar power, which is currently expensive but is rapidly reducing it's costs.
In remote areas, or where the wind resource if good and we need a lot of power quickly, such as in a lot of the Great Plains in America, then wind makes sense.
The main issue with a lot of other renewable resources is that they will still take a few years to perfect the technology so that we can use it on a big enough scale to really count - for instance hot-rock geothermal power in Australia is undergoing exciting early trials, but it is far too early to start a massive build out.
Wind resources, by their nature, also vary greatly from area to area according to the resources available - there is far too much building solar power where it is not sunny going on - a good idea has to be capable of effective implementation in a particular context to be useful.
A pragmatic attitude which uses different resources according to their applicability would be the best way forward.
Nuclear power has a very big contribution to make, but many other resources will be useful and play a large part.
Perhaps the biggest contribution of all in the developed world is available simply by minimising use.
But how much uranium is available? Lets say nuclear increases 20-fold. Is there enough uranium for such extraction rates?
Here is the latest on uranium supplies:
http://89.151.116.69/ENF_Exploration_drives_uranium_resources_up_17_0206...
Exploration drives uranium resources up 17%
It should be noted that relatively little expenditure on exploration has resulted in a large increase in resources - the exact opposite of the situation in oil, where ever increasing expenditure yields ever lower increases in discoveries.
Also notable in this is that these resources estimates are based on a price of $59/lb.
Even processed fuel accounts for very little of the cost of running a reactor - it is mainly build and some maintenance costs.
Processing is also quite expensive, so the upshot is that a rise of 10 times in the price of uranium would make little difference to the cost of energy from nuclear power, and that increase would mean that supplies could be expected to increase substantially.
As mentioned in the link, we only burn a small fraction of the fuel at the moment, and designs exist which could be implemented in the next twenty years or so to greatly increase that percentage, neatly solving almost all of the 'waste' problem by treating it as a resource.
Thorium can also be burnt - and not just in future designs, but now in CANDU reactors.
It is around 4 times as plentiful as uranium.
Experiments have also been carried out to prove the practicality of obtaining uranium from seawater, but uranium is currently so cheap as not to make it worthwhile.
Supplies would then be enough for millions of years.
So there is no immediate concern, nor any strong reason to feel that supplies will be a significant constraint in the future, which is nice to know but in any case even if there were no long term future for nuclear power, it will certainly help a lot in giving time to develop renewables, which we currently do not deploy on remotely the scale needed to expand rapidly enough to solve problems at this time.
Systems need proper testing and development, nuclear power would give the breathing space to allow that for renewables.
Thank you very much, DaveMart!
I meant to add that, my above comments notwithstanding, supplies using current mines and reactor technologies are sufficiently constrained that uranium is very much a strategic resource, and may be a source of conflict.
India is looking to develop thorium reactors precisely because she does not have much uranium, and China is very concerned with reaching long-term agreements for secure supplies.
OTOH, large amounts of fuel could be obtained simply by reprocessing waste stockpiles - see this for the UK:
http://business.timesonline.co.uk/tol/business/industry_sectors/utilitie...
Britain holds £160bn stockpile of nuclear fuel - Times Online
You need to watch Professor Bartlett's video on growth.
http://www.youtube.com/watch?v=F-QA2rkpBSY
OK, so, at 1 million year's supply at current rates of usage. This 1 million year number assumes zero growth. Lets say 5% growth and see how long it would last... Guess...
At 5% growth, your "million year" supply would last about 200 years. At 3% it'd last about 350 years.
"At 5% growth, your "million year" supply would last about 200 years. At 3% it'd last about 350 years."
No it won't.
At 5% growth of the human population the earth will have 10 trillion people. That's patently ridiculous.
We already know that mature developed economies hit a limit on how much oil they use. Japan's oil use, for example has declined over the last ten years. So has Germany's. There are others. We don't NEED infinite growth of energy to grow the economy. And in any case we don't need to CONTINUALLY grow the economy. We have gotten along plenty wellin the past with periods of growth followed by periods of bust.
It's the natural way.
"We don't NEED infinite growth of energy to grow the economy."
Oh Really?
So what?
We have a desperate energy supply situation now, and you are theorising about what may happen in a couple of hundred years by extrapolating trends to absurdity?
There is a world of difference between allowing energy growth to taper off after supplying people's needs, as is happening now in the developed world whilst allowing the population to naturally reduce as is also happening now in the richer world, and allowing people to remain in poverty right now, and in fact to get worse so that they die by the billion.
Hey, you started it with your "enough for millions of years." zero growth absurdity.
You want to see an example of growth absurdity?
http://en.wikipedia.org/wiki/Image:Population_curve.svg
Actually, I didn't.
I said that the important thing was that we have a viable resource which can contribute greatly right now, and will certainly be sufficient for decades whilst renewables are developed, and may possibly last a lot longer.
So the whole subject seems to me to be a red herring, when what we should be doing is developing all available resources.
It is a bit odd that those most overtly concerned about running out of nuclear fuel are those most opposed to nuclear power, as one would have thought they would have been keen on that happening.
With nuclear I don´t think it is a question of resource availability. It is a question of human arrogance. We think we are smarter than what we really are. We build a nuclear power plant and fail to take into consideration things like human error, human frailty, boredom by operators, and centralization of power. Nature decentralizes and diversifies. When we do the opposite we tend to get in trouble.
And the proponents fail to take into consideration the disposal of the toxic waste.
And the opponents do not take into account the problem of the disposal of toxic waste.
In reality, we can't run the whole of society on renewables as we do not currently know how to do it, so not using nuclear has meant burning coal.
So Germany, for instance, has around twice the CO2 emissions of France.
Whole mountaintops are removed in West Virginia and the wastes allowed to pollute the water, while vast quantities of radioactive uranium is emitted from the smokestacks.
In contrast, the nuclear industry takes responsibility for the very small amounts of waste per person created, and it is only delay and obstuctionism to blame for better reactors which will use this small amount of waste as fuel not being available as yet.
So the actual e3ffect of not building and developing nuclear power as fast as possible over the last 30 years is that the climate has been endangered, and that China, for instance, did not have the alternative of buying cheap, factory produced nuclear power stations so had to build coal plants.
Millions have already died or had their health damaged by coal emissions, and billions could die from lack of energy and climate change.
Any risks from nuclear are minimal compared to this.
Everyone would be pleased if power could be produced by fairy dust, but in the real world of real choices enormous amounts of damage have been done by not confronting reality squarely.
Renewables have a huge contribution to make, but it is nuclear power and conservation which will give us the time to develop them properly.
One could just as easily argue that the expansion of coal plants was due to the U.S.'s failure to build out solar and wind power and improve efficiency more vigorously after Carter set the country on that path in 1979. We should have reduced immigration to stabilize the population, produced PHEV's instead of SUV's and stopped building suburbs.
Moving into the present we need to build out solar, wind and to a lesser degree the other renewables of geothermal, hydro and tidal, until they provide between 20% and 40% of the electric power to reduce, but not eliminate, our consumption of coal and natural gas. Centralized solar thermal can be built with storage, distributed grid-tied PV can be used to provide local peak demand and intermittent wind can be combined with pumped hydro where suitable to provide some storage. Canada can expand their hydroelectric capacity and sell some of it to the northern states. While we are building out that renewable infrastructure we fund research into electric storage and nuclear fusion, improve the efficiency of our electric consumption and cap our population principally by controlling emigration. We electrify our rail lines and build PHEV's, all the while reducing our fossil fuel consumption and thus extending its availability for critical uses. Either electric storage or nuclear fusion could be successfully developed to expand the renewables beyond 40% driving the final nail into the coffins of coal, natural gas and nuclear fission generators. Rather than just doing it, we have wasted 29 years merrily squandering fossil fuels and fighting wars. Because it will require decades to convert the electric utility gird, we do not need more nuclear fission power plants. We need to go renewable, sustainable and environmentally friendly now while developing superior technologies to complete the project, not expand out the most dangerous, expensive, environmentally unfriendly and horrible method of electric power generation (nuclear fission) ever conceived just because we have the proven technological ability. If we do not try, we will not succeed. Because we have had 8 years of anti-technological, anti-environmental Bush, little has been accomplished. Even if it ultimately proves that storage and nuclear fusion are impossible or impractical, we would have replaced nearly 50% of our electric grid with renewables (including the existing hydroelectric and improved efficiency) and would still have the options of large scale interconnected wind and solar or nuclear fission. We need a better plan than 100 or 1,000 years of using toxic, radioactive junk to make electricity.
I'm afraid this illustrates very well the complete unreality of may of the assessments which are made by advocates of renewables only.
Some of the measures suggested such as different zoning laws to discourage building out to suburbs are sensible ans should have been carried out whatever power source was to be used.
Others assume a level of technology which is only just looming into sight now, and would have been utterly impossible at the time - for instance PHEV's
To build modern batteries we need the full panoply of all our technology, including nanotechnology, modern computer systems and so on. We might have been able to speed things up a bit, but you can't just bypass 30 years of technological progress across a broad front.
Solar power is also dependent on the same broad range of modern technology, and we certainly are not there yet, at any reasonable cost.
So the choice in reality 30 years ago was between nuclear and coal, and they went with coal, at the huge cost in environmental impact, and at grave risk to the climate.
As for the future, I have absolutely nothing against introducing renewables as and when they become practical and anything like economic - for instance there seems a good possibility that solar will shortly be able to provide much of the peaking power in hot climates.
However, the present ability of renewables to run society is grossly exaggerated - apart from areas with hydroelectric resources or geothermal as in Iceland, they make a minor contribution to power.
Wind has potential,but for the present in terms of realistic engineering proposals it can only do part of the job at best.
I do not know who the 'we' is that do not need nuclear fission, but it certainly does not include the UK where I live, as it has dark long winters where there is little solar power and proposals to run this crowded country on renewables only are entirely fanciful.
Very shortly we are likely to get very cold, and I am somewhat irked about it, as we could have got on and built what would work, nuclear plants.
This is besides the fact that we may be killed anyway by climate change, as using the technology which was proven to be able to run an advanced society was blocked at every turn, in favour theoretically of a technology we did and do not have at the needed scale, renewables, and in practise to the advantage of the proven dirty killer, coal.
But how much uranium is available?
Uranium is an incredibly common element.
Just take a look at how many homes have "radon problems". Radon is a daughter element from the uranium decay chain.
IOW... the stuff is all over the place.
Uranium is incredibly common, and the vast majority of it is in very low concentration. The issue isn't running out of uranium, it's running out of commercially viable uranium ore. In that way, it's quite similar to oil--we won't run out, but soon it will take more energy to get oil uranium out of the ground and refined for use in a reactor than that the energy produced from the uranium derived. See some of the excellent writing on this site about this very issue.
Is it a done deal where nuclear power cannot play any role in our energy future? No. Is it highly problematic? Yes.
And here are counter arguments:
http://nuclearinfo.net/Nuclearpower/WebHomeEnergyLifecycleOfNuclear_Powe...
Nuclear Power Education - Energy Lifecycle of Nuclear Power
In any case there is not now nor is there any immediate prospect of a shortage of uranium , or even more so of thorium, which we know perfectly well how to use.
We also have the technology to burn it at a much higher efficiency at a high state of development.
This kind of theoretical projection is usually used in the service of an argument that if any conceivable doubt can be cast on being able to get enough fuel for the next few hundred years, then we ,should get on and go straight to all-renewables', which entirely ignores the difference between a theoretical prediction of a shortage and any sign that it is actually going to bite, ignores the fact that renewables are not in any condition to go to running all the power for large societies with present technology and anyway the quality of the resource varies greatly from area to area, and ignores the value of using a short-term resource to get from the present into this future.
It boils down to a few bods somewhere on fairly dodgy grounds have said that at some time in the future, if they have got their figures right, then there might be problems, so the best idea is to give up now.
The "exponential growth" thing... 70 million extra humans each year (9 billion by 2050), Chinese peasants becoming city-slickers, etc, etc... Surely that must factor in.
Or is "growth" about to flatline?
Regards, Matt B
The extra 70 million is going to occur whatever we do.
That doesn't mean we should do nothing as our problems may be insuperable, it just means that we are in a tough place and have to keep pitching.
If it were in our personal lives, none of us would direct our actions according to the very theoretical concerns that are some of the main subjects here.
If you lost your job and things were tight, you would not give up on selling your house and moving into rental accomodation on the grounds that you might not get another job, so you were going to loose everything anyway, you would get on with it and do the best you could and hope that would be enough to pull you through.
In the same way, you would not refuse to burn logs to keep yourself warm and prefer to freeze instead, if you became unsure that your supply of logs were infinite.
Comments that we should not use nuclear power because, in the view of some, supplies of fuel can't be guaranteed beyond a few decades are equally absurd.
Actually, they use some pretty extreme negative assumptions to get to that viewpoint anyway, but in any case the position is not a sensible one.
It is just an excuse to justify opposition on almost entirely specious grounds, when the roots of the animus lie elsewh