perceptions_now wrote on Aug 25^th, 2010 at 12:33pm:

Keynesian Economics, is just A branch of Economics

Just a branch? Didn't you hear? We are all Keynesians now.


perceptions_now wrote on Aug 25^th, 2010 at 12:33pm:

and given the right inputs, those solutions would be correct

What are the correct inputs?

freediver wrote on Aug 25^th, 2010 at 7:39pm:

perceptions_now wrote on Aug 25th, 2010 at 12:33pm: Keynesian Economics, is just A branch of Economics Just a branch? Didn't you hear? We are all Keynesians now.

Well, there are certainly some, who seem determined to push that bit of string!

That said, both they & it have zero chance of success, given the macro factors arrayed against them/it!

Which then begs the question, why attempt to do it, it you know it will fail & actually make things worse?

As I said in another thread, given that most scenarios have occurred to "them", that co-incidences don't happen too often and that agreement between various interest groups & indeed countries was/is unlikely, perhaps we should wonder what contingency plans have been enacted already and what still awaits us?

freediver wrote on Aug 25^th, 2010 at 7:39pm:

perceptions_now wrote on Aug 25th, 2010 at 12:33pm: and given the right inputs, those solutions would be correct What are the correct inputs?

Ah, now there is the $64 Trillion question!

Let me say 2 things very clearly, the right inputs should have started about 50-60 years ago, but that did not happen and there are now no Hollywood endings!

That said, perhaps human nature being what it is, the game was always going to play out in this manner?

So, leaving the past alone, as it only leads to recriminations, we are now essentially faced with 2 choices -
1) Live for today & screw the future consequences.
2) Take the pain now & leave future generations with a fighting chance, for their survival & that of the human race.

I vote for the later! But what will that mean?

It will mean 20-30 years of higher taxes & lower benefits.

It will mean heading to ZPG, over the next 20-30 years, then a gradual reduction in the Global Population, to around 2 Billion , by natural regression, over time.

It will mean an urgent "Manhattan Style Project" to locate any possible replacement/s for Oil, Coal & Gas, as quickly as humanly possible. A large part of that project will be to enable the transition away from Fossil Fuels, to their replacements, in the shortest time possible, to assist in restricting the flow of GHG's into the environment.

It will mean changing the Political & Economic status quo, into something new, which will allow us the time needed to extricate ourselves from the CRAP that we ALL created! And, do do that, it will mean dragging every nation into a common agreement, on the actions needed, by any & all means.

Now, I don't know IF we will be allowed to make our own decisions, which may result in better outcomes, as I suspect that some contingency plans are already under way.

Whether we like it or not & whether they work or not, are entirely different questions!

So, FD, I doubt I answered your direct question, but as Malcolm Fraser & George Bernard Shaw said, "life wasn't meant to be easy" and I suspect we are in the process of confirming that to be a fact?

I think we do have the right conditions for Keynsianism to work and the success of the reserve bank in taking corrective action well before the GFC struck backs this up.

freediver wrote on Aug 27^th, 2010 at 10:22pm:

I think we do have the right conditions for Keynsianism to work and the success of the reserve bank in taking corrective action well before the GFC struck backs this up.

In looking at the current situation, we need to understand that Australia can not swim against the Global Economic tide, that the Keynesian Economics uses various Economic levers to provide a temporary transition in Economic Activity (up or down) to smooth the usual business cycle and the following Global macro  factors are either already in play &/or will come to be in play.

Given the above & the following, regrettably I think the Keynesian time has passed.

Global Macro Factors :-
1) Baby Boomer Retirement  

2) Peak Energy

3) Declining Global Population

4) Interest Rates already at or near Zero, in many major Economies.

5) Debt & Deficits already thru the roof, in many major economies.

6) Climate Change looking to curtail the Usual Economic expansion.

7) Real Estate markets are De-valuing, Financial markets are De-leveraging & Currencies (particularly in the USA) may be De-valued & Sovereign Debt (including the USA) may De-fault.

I'm sure I have missed a few others, but these issues & others, are well beyond the usual cyclical ups & downs that the Keynesians &/or Austrians would normally be involved in and be able to "fix" with the usual "Hollywood upbeat ending".

These are long term issues, some unique in history, which will affect Supply & Demand on a Global scale, for a very long time.

The time for short term fixes/adjustments is in the past.

If alterations had been made, such as -
1) Adjusting the great Global Baby Bulge birth rate, as it was happening 50-60 years ago, then the current Boomer Bust may have been preventable.
2) Restricting the splurge in Energy use and looking to sustain such sources as Oil over a much longer time frame, than merely a few short decades.
3) If the Baby Boom & Bust (rise & fall of birth rate) had been smoothed and restricted at the time, then we would not be looking at the coming great Population decline, because it would not have escalated to the current point, where a continued expansion would threathen the very existence of humanity. An Economic Recovery, after Extinction is not likely.

The Aging & decline of the Global Population, alone, will severely restrict Demand and far outweigh, any possible Kenesian or Austrians solutions.

However, the addition impact of Peak Energy, the decline in Supply of Oil & other Essential Resources will make the continuation of the Status quo economy an impossible task, along with the restrictions imposed by Climate Change.

That said, I would prefer to be wrong!  

But Keynsianism was never intended to fix those long term problems anyway. The fact that they exist is not a rational argument against Keynesian style intervention.

freediver wrote on Aug 28^th, 2010 at 1:24pm:

But Keynsianism was never intended to fix those long term problems anyway. The fact that they exist is not a rational argument against Keynesian style intervention.

And yet economic stimulus and quantitative easing have done nothing to solve America's or Europe's problems.

What's going on Freediver? Why isn't it working?

Sappho wrote on Aug 28^th, 2010 at 2:34pm:

freediver wrote on Aug 28th, 2010 at 1:24pm: But Keynsianism was never intended to fix those long term problems anyway. The fact that they exist is not a rational argument against Keynesian style intervention. And yet economic stimulus and quantitative easing have done nothing to solve America's or Europe's problems. What's going on Freediver? Why isn't it working?

Probably because too many still believe in the insatiable and destructive Growth Fairy and his evil twin, the Good Greedy Witch of the West!?

::)

freediver wrote on Aug 28^th, 2010 at 1:24pm:

But Keynsianism was never intended to fix those long term problems anyway. The fact that they exist is not a rational argument against Keynesian style intervention.

Yes, I am aware of that and that is why Keynesian Economics can not fix the current situation, because the current situation is all about long term problems in both Supply & Demand.

And, in any event, the usual economic levers are almost exhausted and the Global Economy is still going backward.

That can be clearly demonstrated by looking at the anaemic US GDP figures in recent times, despite the impact of the massive US stimulus packages & bailouts. In fact, without these, the US GDP would be massively negative, over recent times!

Of course, even if they could be useful, which clearly they aren't against the long term factors referred to in my earlier post, there are limits to the capacity of the USA & others to continue to provide economic stimulus packages, particularly given the existing extent of Deficits & Debt.

As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly!

To clarify, I am not saying that Keynesian &/or Austrian Economics don't have their place & would work, given certain circumstances, but clearly under the current circumstances neither will fix our current problems.

Most of the stimulus spending was ill-targeted towards the top end of the upside-down pyramid...

The real problem, is that such measures simply reinforced or exacerbated the exponential polarisation of income, wealth and debt of the past few decades...

We will continue on our downward spiral, unless and until we appreciate the need for a paradigm shift in the distribution of income, wealth and opportunity - and debt!

Most of the stimulus spending was ill-targeted towards the top end of the upside-down pyramid...

The real problem, is that such measures simply reinforced or exacerbated the exponential polarisation of income, wealth and debt of the past few decades...

We will continue on our downward spiral, unless and until we appreciate the need for a paradigm shift in the distribution of income, wealth and opportunity - and debt!

perceptions_now wrote on Aug 28^th, 2010 at 2:47pm:

As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly![/b]

LOL... an ol' fashioned alarmist I do declare.

Tell me, what changes need to take place quickly?

Sappho wrote on Aug 28^th, 2010 at 2:59pm:

perceptions_now wrote on Aug 28th, 2010 at 2:47pm: As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly![/b] LOL... an ol' fashioned alarmist I do declare. Tell me, what changes need to take place quickly?

I know it is alarming!

I doubt that what I am saying, has much ol' fashioned content!

That said, what is not factual?  

perceptions_now wrote on Aug 28^th, 2010 at 3:20pm:

Sappho wrote on Aug 28th, 2010 at 2:59pm: perceptions_now wrote on Aug 28th, 2010 at 2:47pm: As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly![/b] LOL... an ol' fashioned alarmist I do declare. Tell me, what changes need to take place quickly? I know it is alarming! I doubt that what I am saying, has much ol' fashioned content! That said, what is not factual?

Why not answer the question Chicken Little. What changes need to take place quickly?

Sappho wrote on Aug 28^th, 2010 at 4:02pm:

perceptions_now wrote on Aug 28th, 2010 at 3:20pm: Sappho wrote on Aug 28th, 2010 at 2:59pm: perceptions_now wrote on Aug 28th, 2010 at 2:47pm: As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly![/b] LOL... an ol' fashioned alarmist I do declare. Tell me, what changes need to take place quickly? I know it is alarming! I doubt that what I am saying, has much ol' fashioned content! That said, what is not factual?   Why not answer the question Chicken Little. What changes need to take place quickly?

Because, if you answer my question about what is not factual, much of the answer to your question will start to become apparent, even if you don't necessarily like it!

perceptions_now wrote on Aug 28^th, 2010 at 4:20pm:

Sappho wrote on Aug 28th, 2010 at 4:02pm: perceptions_now wrote on Aug 28th, 2010 at 3:20pm: Sappho wrote on Aug 28th, 2010 at 2:59pm: perceptions_now wrote on Aug 28th, 2010 at 2:47pm: As I have said previously, we now need to look at both our Economy & Society sustaining each other, changes need to take place & quickly![/b] LOL... an ol' fashioned alarmist I do declare. Tell me, what changes need to take place quickly? I know it is alarming! I doubt that what I am saying, has much ol' fashioned content! That said, what is not factual?   Why not answer the question Chicken Little. What changes need to take place quickly? Because, if you answer my question about what is not factual, much of the answer to your question will start to become apparent, even if you don't necessarily like it!

Your question came after mine... good manners and netiquette require that you answer my question first.

What's more... I am not actually questioning the facts, my 'Chicken Little' simile is questioning your scaremongering approach.

So, for the third time, what changes need to take place quickly?

Quote:

And, in any event, the usual economic levers are almost exhausted

So the reserve bank will be unable to maintain low interest rates?

freediver wrote on Aug 28^th, 2010 at 4:43pm:

Quote: And, in any event, the usual economic levers are almost exhausted So the reserve bank will be unable to maintain low interest rates?

What a crock! America still has fiscal policy to rely on. Nothing like a little austerity to stir the revolutionary blood eh?

Australia has the full suite of economic levers to work with. Unlike America, we have forced retirement savings as collateral for any quantitative easing required.

@ Perceptions.

You think that we should suffer the pain now so that the future gens will prosper. Yet, if you were to talk to a Japanese person, they would rather suffer an economic bust that two lost decades as they had.

I think it is the difference between a slow death and slow recovery vs a fast death and slow recovery. The latter will get us to stability quicker.

Well for starters Europe with its essentially pegged currency and weird maastricht treaty is a different kettle of fish to the US or Australia.

In the case of quantitative easing, having more money in the reserve is meaningless.  It only has meaning if you give it out to people.

Simply put, the case with the US is it's fiscal stimulus is and was nowhere near big enough.  However, to even try again they would be combating the very naive US public

Senexx wrote on Aug 28^th, 2010 at 10:04pm:

In the case of quantitative easing, having more money in the reserve is meaningless.  It only has meaning if you give it out to people. Simply put, the case with the US is it's fiscal stimulus is and was nowhere near big enough.  However, to even try again they would be combating the very naive US public

QE is all about Keynesian economics. And I do not think that the US public would be naive to question further stimulus since they have already contributed more than 1.3 trillion USD to the American Chapter of GFC.

More over, America lacks the savings collateral to back up QE and they are living beyond their means already.

Quote:

So, for the third time, what changes need to take place quickly?

More work, less pay?  ;D ;D ;D

There's frikin' geniuses all over the joint!

Amadd wrote on Aug 29^th, 2010 at 9:45am:

Quote: So, for the third time, what changes need to take place quickly? More work, less pay?  ;D ;D ;D There's frikin' geniuses all over the joint!

Are YOU volunteering, Amadd?

http://www.ozpolitic.com/yabbfiles/Templates/Forum/brown/grin.gif

Amadd wrote on Aug 29^th, 2010 at 9:45am:

Quote: So, for the third time, what changes need to take place quickly? More work, less pay?  ;D ;D ;D There's frikin' geniuses all over the joint!

That's it... public services and infrastructure remain unaffected eh?

Less pay = less disposable income = less consumer demand.
More work for less pay = less leisure time = less consumer demand.

Sounds like a recipe for social unrest to me.

perceptions_now wrote on Aug 25^th, 2010 at 8:34pm:

Let me say 2 things very clearly, the right inputs should have started about 50-60 years ago, but that did not happen and there are now no Hollywood endings!

That's a clique that tells us nothing.


Quote:

That said, perhaps human nature being what it is, the game was always going to play out in this manner?

That is speculation upon an unrealistic clique. New Flash: Only Hollywood has Hollywood endings.


Quote:

So, leaving the past alone, as it only leads to recriminations, we are now essentially faced with 2 choices - 1) Live for today & screw the future consequences. 2) Take the pain now & leave future generations with a fighting chance, for their survival & that of the human race.

There are always more than two choices.
3) We could let the current economic system implode and pick up the pieces to start over again. Not unheard of in hindsight, but a frightening prospect in foresight... given that human resistance to major change.


Quote:

I vote for the later! But what will that mean?

Why?


Quote:

It will mean 20-30 years of higher taxes & lower benefits.

Less disposable income? Do you understand the implications of that?


Quote:

It will mean heading to ZPG, over the next 20-30 years, then a gradual reduction in the Global Population, to around 2 Billion , by natural regression, over time.

How? You gonna call Dr Cutyacokoff for assistance?

And what's this talk of 'natural regression'. What the hell is that? And if it exists, why is it not in play now?


Quote:

It will mean an urgent "Manhattan Style Project" to locate any possible replacement/s for Oil, Coal & Gas, as quickly as humanly possible. A large part of that project will be to enable the transition away from Fossil Fuels, to their replacements, in the shortest time possible, to assist in restricting the flow of GHG's into the environment.

OMG... do you even know what the Manhattan Project was about?

I'll be kind and assume you are talking about a shift from fossil fuels to nuclear energy. But again... How? We are all of us already paying high taxes to pay back the debt of excess... in your model.


Quote:

It will mean changing the Political & Economic status quo, into something new, which will allow us the time needed to extricate ourselves from the CRAP that we ALL created! And, do do that, it will mean dragging every nation into a common agreement, on the actions needed, by any & all means.

Oh yeah... like that's gonna work. We can't even agree globally on a climate action and you expect this Hollywood Solution to save the day?

And what do you mean by 'dragging ever nation into common agreement'... that smells of war or threats of war.  


Quote:

Now, I don't know IF we will be allowed to make our own decisions, which may result in better outcomes, as I suspect that some contingency plans are already under way. Whether we like it or not & whether they work or not, are entirely different questions! So, FD, I doubt I answered your direct question, but as Malcolm Fraser & George Bernard Shaw said, "life wasn't meant to be easy" and I suspect we are in the process of confirming that to be a fact?

You watch too many movies. Pfft...

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: Let me say 2 things very clearly, the right inputs should have started about 50-60 years ago, but that did not happen and there are now no Hollywood endings! That's a clique that tells us nothing.

As I have said elsewhere, we should have started 50-60 years ago, to re-shape the Baby Boom, so it never became the boom/bust issue that it now is!
We should also have stopped the boom in the use of "Carbon based Fossil fuels", before it started and we should have taken that slowly, slowly, catch the monkey approach!

If we (humans) had changed the inputs over the last 50-60 years, then we may have had somewhat different outcomes, now?

But, hindsight is somewhat easier, than foresight!

That said, foresight is more needed now, than ever, but are enough of us (humans) capable of changing?

The answer is most likely not and therefore we may no be involved in the choices?

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: That said, perhaps human nature being what it is, the game was always going to play out in this manner? That is speculation upon an unrealistic clique. New Flash: Only Hollywood has Hollywood endings.

I beg to differ, we (humans) have a propensity to think it will never happen &/or if it does, it won't happen to me!

So, we have postponed this day, for some 60 years, until now it simply can not be postponed any longer and even though we still can not get agreement, the ramifications are set to play out anyway!

I think the common perception of a Hollywood ending will do, which of course is that everyone lives happily, ever after, which of course does only happen in Hollywood. Coming from the financial sector and mostly insurance, I know that in the real world, the other perspective is that "sh!t happens".

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: So, leaving the past alone, as it only leads to recriminations, we are now essentially faced with 2 choices - 1) Live for today & screw the future consequences. 2) Take the pain now & leave future generations with a fighting chance, for their survival & that of the human race. There are always more than two choices. 3) We could let the current economic system implode and pick up the pieces to start over again. Not unheard of in hindsight, but a frightening prospect in foresight... given that human resistance to major change.

I have heard of foresight and it is not being used!

The two choices stand!

It is beyond who may come out better off, this is about survival of the race, the human race!

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: I vote for the later! But what will that mean? Why?

Because I prefer to see the human species continue beyond this century, even at a greater cost to you, I & a few Billion others!

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: It will mean 20-30 years of higher taxes & lower benefits. Less disposable income? Do you understand the implications of that?

I didn't say, it was going to be good for the Global Economy, because it will not.

But, we are stuck with the best of a bundle of bad choices, so we will get higher taxes & lower benefits, whether we want it or not and whether we like it or not.

The thing is, we need to pull every lever possible to maintain productivity and do away with as much as possible that won't affect that disposable income, which will be crucial!

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: It will mean heading to ZPG, over the next 20-30 years, then a gradual reduction in the Global Population, to around 2 Billion , by natural regression, over time. How? You gonna call Dr Cutyacokoff for assistance? And what's this talk of 'natural regression'. What the hell is that? And if it exists, why is it not in play now?

You really do need to do a little more research.
Sorry, I forgot your in management, so you may think you know it all?

The Global Fertility rate has been in decline for about 40 or so years, so the rate of the Global Population Growth is slowing.

There are already a number of countries like Japan & Europe particularly, where the population is already actually in decline.

Some say a little later, but I expect the Global Popuation to hit ZPG in around 20-30 years by natural regression and it will then commence to decline for quite some time.

By natural regression, I mean by means other than war and a few other, no so nice possibilities.  

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: It will mean an urgent "Manhattan Style Project" to locate any possible replacement/s for Oil, Coal & Gas, as quickly as humanly possible. A large part of that project will be to enable the transition away from Fossil Fuels, to their replacements, in the shortest time possible, to assist in restricting the flow of GHG's into the environment. OMG... do you even know what the Manhattan Project was about? I'll be kind and assume you are talking about a shift from fossil fuels to nuclear energy. But again... How? We are all of us already paying high taxes to pay back the debt of excess... in your model.

You shouldn't be so kind!
And, you shouldn't assume!

The Amercian Manhattan Project was actually a race against time, to produce the Atomic Bomb and to beat Germany to it.

We have a similar issue today, as we are running up against Supply Peaks in our major Energy Resources, particularly Oil, but also and shortly Coal & Gas.

We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry.

We need it for 2 major reasons -
1) Our Global Economy is powered (pun intended) by Fossil Fuels and if they go into decline before we find replacement, for the many uses of Oil & the other Carbon fuels, then our Economy will go down the toilet & quickly.
2) We desperately need to get off the "Carbon cycle" & other GHG's or Climate Change will make all other discussions look like small change.
Whilst there are some who will not agree that Climate Change is man made or indeed even a problem, on the basis of the evidence thus far and the need to take proper mitigation measures on a danger so large, we are obliged to take all necessary measures to avoid the worse case scenario's!  

Btw, the Nuclear option is expensive & limited in scope, as it will not fix all the required issues and it too has Supply constraints.

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: It will mean changing the Political & Economic status quo, into something new, which will allow us the time needed to extricate ourselves from the CRAP that we ALL created! And, do do that, it will mean dragging every nation into a common agreement, on the actions needed, by any & all means. Oh yeah... like that's gonna work. We can't even agree globally on a climate action and you expect this Hollywood Solution to save the day? And what do you mean by 'dragging ever nation into common agreement'... that smells of war or threats of war.

Actually, I did say, by any & all means, precisely because I doubt that any volunatry effort will succeed, as shown by Climate Change.

And, I think that measures are already under way to have some actions done, but in such a way that there may be no choice. In any event, we are in the midst of playing the highest game of chance & bluff in human history & the stakes are all of our tomorrows.

I hope we win!

Sappho wrote on Aug 29^th, 2010 at 1:16pm:

perceptions_now wrote on Aug 25th, 2010 at 8:34pm: Now, I don't know IF we will be allowed to make our own decisions, which may result in better outcomes, as I suspect that some contingency plans are already under way. Whether we like it or not & whether they work or not, are entirely different questions! So, FD, I doubt I answered your direct question, but as Malcolm Fraser & George Bernard Shaw said, "life wasn't meant to be easy" and I suspect we are in the process of confirming that to be a fact? You watch too many movies. Pfft...

You may be correct?

But, I generally pick the ending & the twist!

Quote:

We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry.

How about windmills?

freediver wrote on Aug 29^th, 2010 at 10:04pm:

Quote: We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry. How about windmills?

There are various options that will fill the void, but only partially!

Wind, Solar Geo-thermal, Water and others will fill part of the gap, but there will be a lot of gap to fill and all too soon!

Can't you put another windmill in the gap? I think it is big enough.

freediver wrote on Aug 30^th, 2010 at 10:10pm:

Can't you put another windmill in the gap? I think it is big enough.

What is your point, FD?

That we don't need some silly government directed 'manahatten project' to find the answers. We already have the technology. We could go a long way without even chaning energy production methods. The only remaining barriers are political and economics.

Not that government funded research is a bad thing, just that it is silly to make it a precursor to action.

perceptions_now wrote on Aug 25^th, 2010 at 8:34pm:

It will mean an urgent "Manhattan Style Project" to locate any possible replacement/s for Oil, Coal & Gas, as quickly as humanly possible. A large part of that project will be to enable the transition away from Fossil Fuels, to their replacements, in the shortest time possible, to assist in restricting the flow of GHG's into the environment.

perceptions_now wrote on Aug 29^th, 2010 at 9:46pm:

The Amercian Manhattan Project was actually a race against time, to produce the Atomic Bomb and to beat Germany to it. We have a similar issue today, as we are running up against Supply Peaks in our major Energy Resources, particularly Oil, but also and shortly Coal & Gas. We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry. We need it for 2 major reasons - 1) Our Global Economy is powered (pun intended) by Fossil Fuels and if they go into decline before we find replacement, for the many uses of Oil & the other Carbon fuels, then our Economy will go down the toilet & quickly. 2) We desperately need to get off the "Carbon cycle" & other GHG's or Climate Change will make all other discussions look like small change. Whilst there are some who will not agree that Climate Change is man made or indeed even a problem, on the basis of the evidence thus far and the need to take proper mitigation measures on a danger so large, we are obliged to take all necessary measures to avoid the worse case scenario's!   Btw, the Nuclear option is expensive & limited in scope, as it will not fix all the required issues and it too has Supply constraints.

perceptions_now wrote on Aug 29^th, 2010 at 10:32pm:

freediver wrote on Aug 29th, 2010 at 10:04pm: Quote: We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry. How about windmills? There are various options that will fill the void, but only partially! Wind, Solar Geo-thermal, Water and others will fill part of the gap, but there will be a lot of gap to fill and all too soon!

perceptions_now wrote on Aug 30^th, 2010 at 10:33pm:

freediver wrote on Aug 30th, 2010 at 10:10pm: Can't you put another windmill in the gap? I think it is big enough. What is your point, FD?

freediver wrote on Sep 2^nd, 2010 at 10:26pm:

That we don't need some silly government directed 'manahatten project' to find the answers. We already have the technology. We could go a long way without even chaning energy production methods. The only remaining barriers are political and economics. Not that government funded research is a bad thing, just that it is silly to make it a precursor to action.

Scratches then head?

I'm not sure how "another windmill into the gap" has much to do with a Manhattan style project, to speed the transition away from Carbon based Energy & GHG's?

In any event, it is evident (to me) that we do not have the Political &/or Economic will or the the technology.

But above all, we do not have the time, for the normal processed to work thru Political & Economic systems which are still strugggling to retain the status quo, when the reality is that they are dying!

Hirsch report

Conclusions
World oil peaking is going to happen, and will likely be abrupt.
Peaking will happen, but the timing is uncertain.

Oil peaking will adversely affect global economies, particularly the U.S.
Over the past century the U.S. economy has been shaped by the availability of low-cost oil.
The economic loss to the United States could be measured on a trillion-dollar scale.
Aggressive fuel efficiency and substitute fuel production could provide substantial mitigation.

Oil peaking presents a unique challenge.
Without massive mitigation, the problem will be pervasive and long-term.
Oil peaking will be abrupt and revolutionary.

The problem is liquid fuels for transportation.
The lifetimes of transportation equipment are measured in decades.
Rapid changeover in transportation equipment is inherently impossible.
Motor vehicles, aircraft, trains, and ships have no ready alternative to liquid fuels.

Mitigation efforts will require substantial time.
Waiting until production peaks would leave the world with a liquid fuel deficit for 20 years.
Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a decade.
Initiating a crash program 20 years before peaking could avoid a world liquid fuels shortfall.

It is a matter of risk management.
The peaking of world oil production is a classic risk management problem
If peaking is soon, failure to initiate mitigation could be extremely damaging.

Government intervention will be required.
The economic and social implications of oil peaking would otherwise be chaotic.
Expediency may require major changes to existing administrative and regulatory procedures.
Link -
http://en.wikipedia.org/wiki/Hirsch_report

Quote:

I'm not sure how "another windmill into the gap" has much to do with a Manhattan style project

It's the alternative.


Quote:

In any event, it is evident (to me) that we do not have the Political &/or Economic will or the the technology.

We have the technology. It is really quite simple to do. We don't just have one technology, we have lots of different technologies that could do the job.

freediver wrote on Sep 3^rd, 2010 at 10:31pm:

Quote: I'm not sure how "another windmill into the gap" has much to do with a Manhattan style project It's the alternative.

I don't think so!

The problem is liquid fuels for transportation.
The lifetimes of transportation equipment are measured in decades.
Rapid changeover in transportation equipment is inherently impossible.
Motor vehicles, aircraft, trains, and ships have no ready alternative to liquid fuels.

Mitigation efforts will require substantial time.
Waiting until production peaks would leave the world with a liquid fuel deficit for 20 years.
Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a decade.
Initiating a crash program 20 years before peaking could avoid a world liquid fuels shortfall.

freediver wrote on Sep 3^rd, 2010 at 10:31pm:

Quote: In any event, it is evident (to me) that we do not have the Political &/or Economic will or the the technology. We have the technology. It is really quite simple to do. We don't just have one technology, we have lots of different technologies that could do the job.

Where is/are the available technology/s that can deliver similar EROEI to the existing conventional Oil fields, produce it in such an abundant volume to offset a continuing Population growth for at least another 20-30 years and in a manner suitable for Power generation, Transport & the myriad of other uses, to offest the decline in Oil.

And, most importantly, can this or these new technologies deliver all of this, in a time frame that will prevent a Global Economic collapse, given that we need at least 10-20 years prior to Peak Oil and on a Global scale, for an effective changeover to be possible and that Oil Production already  Peak in 2005?

Btw, I gather from your non comment that you agree we don't have the Political &/or Economic will?

Why does EROEI matter? Isn't it cost that ultimately matters? After, energy is always free at the source.

freediver wrote on Sep 4^th, 2010 at 9:53pm:

Why does EROEI matter? Isn't it cost that ultimately matters? After, energy is always free at the source.

In physics, energy economics and ecological energetics, EROEI (energy returned on energy invested), ERoEI, or EROI (energy return on investment), is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource.

When the EROEI of a resource is equal to or lower than 1, that energy source becomes an "energy sink", and can no longer be used as a primary source of energy.

The economic influence of EROEI
High per-capita energy use has been considered desirable as it is associated with a high standard of living based on energy-intensive machines. A society will generally exploit the highest available EROEI energy sources first, as these provide the most energy for the least effort. With non-renewable sources, progressively lower EROEI sources are then used as the higher-quality ones are exhausted.

For example, when oil was originally discovered, it took on average one barrel of oil to find, extract, and process about 100 barrels of oil. That ratio has declined steadily over the last century to about three barrels gained for one barrel used up in the U.S. (and about ten for one in Saudi Arabia).[citation needed] [1] Currently (2006) the EROEI of wind energy in North America and Europe is about 20:1[2] which has driven its adoption.

Joseph Tainter[4] suggests that diminishing returns of the EROEI is a chief cause of the collapse of complex societies. Falling EROEI due to depletion of non-renewable resources also poses a difficult challenge for industrial economies.

EROEI under rapid growth
A related recent concern is energy cannibalism where energy technologies can have a limited growth rate if climate neutrality is demanded. Many energy technologies are capable of replacing significant volumes of fossil fuels and concomitant green house gas emissions.

Unfortunately, neither the enormous scale of the current fossil fuel energy system nor the necessary growth rate of these technologies is well understood within the limits imposed by the net energy produced for a growing industry.
Link -
http://en.wikipedia.org/wiki/EROEI
===========
Cost is what EROEI is about!

If it takes the equivalent of 1 barrel of oil (COST), to make a barrel of Oil (BENEFIT), then what is the Economic point? Which is the case, for example, in Corn Ethanol.

The cost at the point of source is not what people look at, it is the cost at the point of retail sale, that people are now starting to find objectionable!

Quote:

Cost is what EROEI is about!

Not really. You could have dirt cheap technology with a low EROI. EROI is only a minor part of the cost and any comparison based on EROI alone is obviously going to be close to useless.

perceptions_now wrote on Sep 4^th, 2010 at 11:01am:

Where is/are the available technology/s that can deliver similar EROEI to the existing conventional Oil fields, produce it in such an abundant volume to offset a continuing Population growth for at least another 20-30 years and in a manner suitable for Power generation, Transport & the myriad of other uses, to offest the decline in Oil.

Nuclear fission, Solar thermal and Combined cycle. You must have missed my post. The EROI is high enough.

I tend  to agree with FD though. The EROI is not everything. Take nuclear fusion  for example. The energy input is huge, however even a net energy gain of 1% could be cost effective given a large enough scale of operation.  

Taking coal, the EROI figures don't include the fact that in order for it to be sustainable, we need to factor in removing CO2 emissions, otherwise there will be much higher costs downstream.

There are problems inherent in the analysis you presented. The main problem is the fact that no matter how much we try to delay it, tomorrow eventually comes.

40 years from now, we'll be fully immersed in 'tomorrow' up to our necks, and trying to deal with the consequences of that.

freediver wrote on Sep 2^nd, 2010 at 10:26pm:

That we don't need some silly government directed 'manahatten project' to find the answers. We already have the technology. We could go a long way without even chaning energy production methods. The only remaining barriers are political and economics. Not that government funded research is a bad thing, just that it is silly to make it a precursor to action.

- not to find the answers perhaps, but we may have to throw huge amounts of capital behind it the way governments are dithering over any transition to alternative energy.  If we put enough capital behind it we could at least come up with the infrastructure.

If we're going to use solar power worldwide, we could ultimately  build a global High Voltage DC (HVDC) grid, running at 1MV. We have the technology to do that now. At higher voltages, the conductors don't need to be as large, and with DC, there are less harmful EM radiation effects.

The initial costs would be  horrendously high, but the final result would be better for everybody. With a global solar network, there would be no need for storage.

freediver wrote on Sep 5^th, 2010 at 8:05am:

Quote: Cost is what EROEI is about! Not really. You could have dirt cheap technology with a low EROI. EROI is only a minor part of the cost and any comparison based on EROI alone is obviously going to be close to useless.

The economic influence of EROEI
A society will generally exploit the highest available EROEI energy sources first, as these provide the most energy for the least effort. With non-renewable sources, progressively lower EROEI sources are then used as the higher-quality ones are exhausted.

FD, The most easily accessible & most cost effective fruit has already been picked.

What new Energy sources are you proposing to use, to provide the Global Economy with a mix of Energy sources that will do it -
1) For all of what Oil does?
2) At anything other than a substantially higher EROEI mix & higher costs?
3) In a manner acceptable to the Public?
4) In relation to liquid fuels for transportation?
5) In the timeline now available?

Whilst EROEI is not the sole consideration here, it is certainly not minor and when considered with the other Major Economic factors that are in play, it will mean the next 20 years, will be nothing like the last 20 years!

muso wrote on Sep 5^th, 2010 at 11:30am:

perceptions_now wrote on Sep 4th, 2010 at 11:01am: Where is/are the available technology/s that can deliver similar EROEI to the existing conventional Oil fields, produce it in such an abundant volume to offset a continuing Population growth for at least another 20-30 years and in a manner suitable for Power generation, Transport & the myriad of other uses, to offest the decline in Oil. Nuclear fission, Solar thermal and Combined cycle. You must have missed my post. The EROI is high enough. I tend  to agree with FD though. The EROI is not everything. Take nuclear fusion  for example. The energy input is huge, however even a net energy gain of 1% could be cost effective given a large enough scale of operation.   Taking coal, the EROI figures don't include the fact that in order for it to be sustainable, we need to factor in removing CO2 emissions, otherwise there will be much higher costs downstream. There are problems inherent in the analysis you presented. The main problem is the fact that no matter how much we try to delay it, tomorrow eventually comes. 40 years from now, we'll be fully immersed in 'tomorrow' up to our necks, and trying to deal with the consequences of that.

I do recall seeing your post and from memory I thought I had responded. If not, my apology!



muso wrote on Sep 5^th, 2010 at 11:46am:

freediver wrote on Sep 2nd, 2010 at 10:26pm: That we don't need some silly government directed 'manahatten project' to find the answers. We already have the technology. We could go a long way without even chaning energy production methods. The only remaining barriers are political and economics. Not that government funded research is a bad thing, just that it is silly to make it a precursor to action. - not to find the answers perhaps, but we may have to throw huge amounts of capital behind it the way governments are dithering over any transition to alternative energy.  If we put enough capital behind it we could at least come up with the infrastructure. If we're going to use solar power worldwide, we could ultimately  build a global High Voltage DC (HVDC) grid, running at 1MV. We have the technology to do that now. At higher voltages, the conductors don't need to be as large, and with DC, there are less harmful EM radiation effects. The initial costs would be  horrendously high, but the final result would be better for everybody. With a global solar network, there would be no need for storage.

Whilst I agree there are a number of replacements for "carbon based" power generation, there are also major obstacles, including -
1) Lack of time, given that we are already 5 years into a Post Peak Oil world. (See Hirsch report)
2) Lack of funds, given the existing amount of Sovereign & Personal Debt, thruout most of the world.
3) Other major negative Economic factors, including Demographics, which will exacerbate the above factors.

That said, we have little alternative, but to proceed with all haste, as time is also getting short on the other great drama, that being Climate Change.

In respect of Nuclear power, whilst I think it may be needed, at least in the medium term, it may find great difficulty getting past public opinion!

Notwithstanding the above, the other great difficulty and perhaps greatest, is the transition of Transport (See Hirsch report), which will be very time consuming and by its very nature (at present), it may require a largely liquid fix?  

Finally, I would get too concerned about 40 years from now, the next 20 will be concerning enough!

Quote:

A society will generally exploit the highest available EROEI energy sources first

No PN. EROI is only loosly correlated with cost. A society will exploit the cheapest source first, regardless of EROI.


Quote:

Whilst I agree there are a number of replacements for "carbon based" power generation

Then why do you insist we need to find more?


Quote:

We need a similar project, with similar urgency, to locate another source of Energy, which can replace the existing "Carbon Based Fossil Fuels" and do so, in a hurry.

1) Lack of time, given that we are already 5 years into a Post Peak Oil world. (See Hirsch report)


Quote:

If we are short of time, why would you prioritise developing new technologies when we already have plenty of options?

perceptions_now wrote on Sep 5^th, 2010 at 12:23pm:

That said, we have little alternative, but to proceed with all haste, as time is also getting short on the other great drama, that being Climate Change. In respect of Nuclear power, whilst I think it may be needed, at least in the medium term, it may find great difficulty getting past public opinion!

I don't think there is as much of an obstacle as you might think.

How many million dollars would you put into changing public opinion if the overall benefit was there ? ;)

Maybe we should ask the political parties and their very expensive PR machines.

Am I being cynical here?

I'm saying that the main obstacle to renewable energy is probably democracy, however the opinion of the electorate can be swayed quite easily by professional astroturfers. China has some advantage in that respect.

We continue to find allies in the most unlikely of places. Who is most likely to see Renewable Energy projects getting off the ground? The deep green environmentalists who dominate the Australian Greens, or Bob Katter with his proposal for a Green corridor?  

Hey, I don't care what kind of hat they wear or what other looney ideas they might have. If they can get Renewable Energy projects happening, they have my support. I'd even buy a horse.

Food for thought.

freediver wrote on Sep 5^th, 2010 at 10:38pm:

Quote: Whilst I agree there are a number of replacements for "carbon based" power generation Then why do you insist we need to find more?

I think I already substantially covered that in the following post.


perceptions_now wrote on Sep 5^th, 2010 at 12:23pm:

Whilst I agree there are a number of replacements for "carbon based" power generation, there are also major obstacles, including - 1) Lack of time, given that we are already 5 years into a Post Peak Oil world. (See Hirsch report) 2) Lack of funds, given the existing amount of Sovereign & Personal Debt, thruout most of the world. 3) Other major negative Economic factors, including Demographics, which will exacerbate the above factors. That said, we have little alternative, but to proceed with all haste, as time is also getting short on the other great drama, that being Climate Change. In respect of Nuclear power, whilst I think it may be needed, at least in the medium term, it may find great difficulty getting past public opinion! Notwithstanding the above, the other great difficulty and perhaps greatest, is the transition of Transport (See Hirsch report), which will be very time consuming and by its very nature (at present), it may require a largely liquid fix?   Finally, I would get too concerned about 40 years from now, the next 20 will be concerning enough!

muso wrote on Sep 6^th, 2010 at 12:02pm:

perceptions_now wrote on Sep 5th, 2010 at 12:23pm: That said, we have little alternative, but to proceed with all haste, as time is also getting short on the other great drama, that being Climate Change. In respect of Nuclear power, whilst I think it may be needed, at least in the medium term, it may find great difficulty getting past public opinion! I don't think there is as much of an obstacle as you might think. How many million dollars would you put into changing public opinion if the overall benefit was there ? ;) Maybe we should ask the political parties and their very expensive PR machines. Am I being cynical here? I'm saying that the main obstacle to renewable energy is probably democracy, however the opinion of the electorate can be swayed quite easily by professional astroturfers. China has some advantage in that respect. We continue to find allies in the most unlikely of places. Who is most likely to see Renewable Energy projects getting off the ground? The deep green environmentalists who dominate the Australian Greens, or Bob Katter with his proposal for a Green corridor?   Hey, I don't care what kind of hat they wear or what other looney ideas they might have. If they can get Renewable Energy projects happening, they have my support. I'd even buy a horse. Food for thought.

Even if the Public opinion battle could be won and Nuclear power gets a run, it would not be a panacea.

There are many other issues, just in Energy, let alone in a number of other areas.

That said, I think it is quite possible that Nuclear may get to the table, even if only on a medium term basis, so that other factors can catch up?  

FD, Muso & Others,
This discussion seems to have morphed!

It started on Keynesianism, but it now seems more related to Energy?

If the theme is now to be about Energy, then perhaps comments in relation to that issue, should go to The Peak Energy Debate thread -
http://www.ozpolitic.com/forum/YaBB.pl?num=1276908003/all

Quote:

I think I already substantially covered that in the following post.

But those points don't support your claim. They contradict it, as I have already pointed out. Simply listing a bunch of random opinions and factoids is not the same thing as contructing a reasoned argument.


Quote:

It started on Keynesianism, but it now seems more related to Energy?

Yes, you do often seem keen to avoid discussing the real economic stuff.

freediver wrote on Sep 6^th, 2010 at 11:08pm:

Quote: It started on Keynesianism, but it now seems more related to Energy? Yes, you do often seem keen to avoid discussing the real economic stuff.

Really?

freediver wrote on Aug 28^th, 2010 at 4:43pm:

Quote: And, in any event, the usual economic levers are almost exhausted So the reserve bank will be unable to maintain low interest rates?

freediver wrote on Sep 7^th, 2010 at 11:47pm:

freediver wrote on Aug 28th, 2010 at 4:43pm: Quote: perceptions_now And, in any event, the usual economic levers are almost exhausted So the reserve bank will be unable to maintain low interest rates?

The RBA is only minnow, FD, it has some capacity (in OZ) to make a difference, but only at the margins and it certainly can not swim against the major Global Economic directions.

That said, my comment was directed more to the major players such as the USA, Europe & China. The USA & Europe are already at all time interest rate lows & they are closing in quickly on all time Debt to GDP highs.

Their levers are nearly exhausted! Of course, they can, have & will continue (more than likely) to resort to one of their last perceived "fixes", which is the printing press, as they monetize Debt.

However, that will also fail, because as they monetize, international support for their Debt will decline, particularly via China & Japan.

Eventually the lacky band is stretched too far & it snaps, as their Currency & Bonds markets collapse.

But, you can never say never and the RBA may be able to stop all of that by lowering the OZ interest rates?

I wouldn't hold your breath!

Btw, a small present for you, a video -
"Fear the Boom and Bust" Hayek vs. Keynes
http://www.youtube.com/watch?v=d0nERTFo-Sk

Quote:

The RBA is only minnow, FD, it has some capacity (in OZ) to make a difference, but only at the margins and it certainly can not swim against the major Global Economic directions.

That's why every country has one.


Quote:

That said, my comment was directed more to the major players such as the USA, Europe & China. The USA & Europe are already at all time interest rate lows & they are closing in quickly on all time Debt to GDP highs.

Does that mean the reserve bank leavers will stop working? Countries have had negative interest rates before. It is only a psychological barrier, nothing more.

freediver wrote on Sep 9^th, 2010 at 1:29am:

Quote: The RBA is only minnow, FD, it has some capacity (in OZ) to make a difference, but only at the margins and it certainly can not swim against the major Global Economic directions. That's why every country has one.

Really? To swim against the Macro Global tide?

I'd like to see that!

freediver wrote on Sep 9^th, 2010 at 1:29am:

Quote: That said, my comment was directed more to the major players such as the USA, Europe & China. The USA & Europe are already at all time interest rate lows & they are closing in quickly on all time Debt to GDP highs. 1) Does that mean the reserve bank leavers will stop working? 2) Countries have had negative interest rates before. 3) It is only a psychological barrier, nothing more.

1) I asumme you mean levers and the answer is, No!
They won't STOP WORKING, but they will only work at the margins, they will not & can not stop the tide from going out on Demand and that is the issue, falling Demand!

Demand has already started to fall slightly, but as the Aging Boomer generation starts retiring enmass, Demand will decline further (as will productivity per capita), over the next 10-20 years, before the massive Boomer generation start to die enmass.

In concert with that, the Global Population Growth rate has already been slowing for over 40 years, it will continue to do so and within 20-30 years the falling Global Fertility rate will mix with the massive die-off of the Boomer generation, to produce an actual decline in the Global total Population, which will continue perhaps until the end of this century.
The combined effect of these two Population issues, will result in a massive decline in Demand for everything!

2) Which major Economies & When?
3) I disagree, the barriers involved here are real, very real and they will not be moved by Central Banks or governments!

Both Governments and Central Banks have had their opportunities & they blew it!

Quote:

They won't STOP WORKING, but they will only work at the margins

They have only ever worked at the margins. The actions of the reserve bank are only intended to restrict 'short term' fluctations and were never intended to drive long term growth.

freediver wrote on Sep 17^th, 2010 at 8:41pm:

Quote: They won't STOP WORKING, but they will only work at the margins They have only ever worked at the margins. The actions of the reserve bank are only intended to restrict 'short term' fluctations and were never intended to drive long term growth.

That's a reasonable statement!

However, I doubt that Keynes or anyone else ever thought there would be a situation, such as this, where the Central Banks levers would not be able to correct an Economic downturn, within a fairly quick period of time.

They were wrong!  

Sounds like a strawman argument to me.

freediver wrote on Sep 18^th, 2010 at 10:36am:

Sounds like a strawman argument to me.

Is that the one, about "the straw/man that broke the camels (Golbal Economy) back"?

No. It's where you put words into these people's mouths, then claim they were wrong because the arguments you made up on their behalf are wrong.

Keynes et all were well aware of the potential situations that could arise and there is absolutely nothing unique about our current situation. It is still looking like a rapid recovery compared to the depressions that occurred prior to Keynesian style intervention. Central banks have never been able to completely eliminate macroeconomic ups and downs and you are shifting the goal posts to suggest that they should.

The fact is, we are far better off now that we would have been without the actions of central banks. Prior to the downturn, interest rates were artificially high due to the central banks for many years. The debt bubble and it's collapse would have been far bigger without the central banks.

freediver wrote on Sep 18^th, 2010 at 1:14pm:

No. It's where you put words into these people's mouths, then claim they were wrong because the arguments you made up on their behalf are wrong. 1) Keynes et all were well aware of the potential situations that could arise 2) and there is absolutely nothing unique about our current situation. 3) It is still looking like a rapid recovery compared to the depressions that occurred prior to Keynesian style intervention. 4) Central banks have never been able to completely eliminate macroeconomic ups and downs and you are shifting the goal posts to suggest that they should. 5) The fact is, we are far better off now that we would have been without the actions of central banks. 6) Prior to the downturn, interest rates were artificially high due to the central banks for many years. 7) The debt bubble and it's collapse would have been far bigger without the central banks.

1 & 2) Are you seriously suggesting that in the 1930's Keynes was aware  that the Great Depression he was then fighting,( which would finally be resolved only by a World War), would spawn the greatest Baby Boom in human history?

That he also knew that Baby Boom would repeat on humanity, some 60 years later, in the form of the Great Baby Boomer Bust?

Did Keynes also know that in the early part of this century the Global Energy Sources, which were then only just coming in, that those Energy sources would start to Decline, thus exposing the Global Economy to massive costs & productivity shortfalls?

And, did Keynes also know that following the Economic Bust of a generation that had not even started to be born, when Keynes was fighting the Great Depression, that an even great Economic conundrum was waiting, as the Global Population would decline back from around 8 Billion (4 times 1930), to around 2-3 Billion?

If you are suggesting that, then Keynes must indeed have been a unique person!

3) Ihope you are correct, but logic tells me it just isn't going to happen that way. It is likely be long, protracted & not all that pretty!

4) In fact, I have not been saying that Central Banks can completely eliminate macroeconomic ups and downs. I have been saying that CB's can make a difference at the margins, but they can not swim against the Global Macro Economic forces, particularly those now arrayed against them.

5) Yes, but that effect is only temporary and because of the Debts incurred, particularly in the USA & Europe, it may make matters worse.

6) In fact, in the USA, where it counts, I can not agree thay rates were articifially high prior to the the downturn (2007).
http://www.moneycafe.com/library/ratecharts/ratecharts17.gif

http://www.abilityfinance.com.au/sites/default/files/img_thumbnails/24_28.jpeg

If anything, the US Fed held rates far to low, for far too long, after 9/11.

7) In fact, the CB's & various national governments (Pollies) were actually largely responsible these Debt bubbles, in the first place.

He didn't have a crystal ball, but that is not the same as being aware of the potential situations. The whole point of a functioning economy is that it can handle whatever level of resource availability becomes the reaslity.


Quote:

Ihope you are correct, but logic tells me it just isn't going to happen that way. It is likely be long, protracted & not all that pretty!

These are all relative terms that are meaningless in judging the effectiveness of the reserve bank. The rational way to judge the reserve bank is whether they made the situation better or worse. It would be extremely difficult to argue that they made it worse.


Quote:

I have been saying that CB's can make a difference at the margins, but they can not swim against the Global Macro Economic forces, particularly those now arrayed against them.

Right. And this is all about figuring out what you actually mean by 'at the margins'. It could mean everything from making only a negligible difference to functioning exactly as they are intended to.


Quote:

In fact, in the USA, where it counts, I can not agree thay rates were articifially high prior to the the downturn (2007).

So you think they would have been higher without the US federal reserve? Please explain? Again, you present evidence, but fail to interpret it correctly. Artifically high does not mean a specific number, but only means higher than they would have been if left to market forces alone.

freediver wrote on Sep 18^th, 2010 at 7:25pm:

He didn't have a crystal ball, but that is not the same as being aware of the potential situations. The whole point of a functioning economy is that it can handle whatever level of resource availability becomes the reaslity.

The whole point is -
That the Global Economy is running down, for reasons I have frequently stated and it will shortly cease to be the relatively smooth functioning Economy, that we have known for the last 60 years or so!

So your point has nothing to do with keynesianism? I thought you were keen to get back to the topic?

freediver wrote on Sep 19^th, 2010 at 9:54am:

perceptions_now wrote on Sep 19th, 2010 at 9:05am: freediver wrote on Sep 18th, 2010 at 7:25pm: He didn't have a crystal ball, but that is not the same as being aware of the potential situations. The whole point of a functioning economy is that it can handle whatever level of resource availability becomes the reaslity. The whole point is - That the Global Economy is running down, for reasons I have frequently stated and it will shortly cease to be the relatively smooth functioning Economy, that we have known for the last 60 years or so! So your point has nothing to do with keynesianism? I thought you were keen to get back to the topic?

Ok, how is this, for on topic.

You have said that, the Keynesian approach is short term, not long term and that the whole point of a functioning economy is that it can handle whatever level of resource availability becomes the reality.

Well, the reality is that the set of Global Macro Factors we are now facing, means there must be a long term delevraging of the Global Economy, as Demand WILL DECLINE, slightly at first, then building to massive levels, as this century continues.

Keynesian approaches may still be usefull, but this time to smooth the lumps on the Economic down trend, instead of the up-trend we have experienced for the last 60 or so years!

But, the Austrian approach will also have its moments! It's a little like Food, a little of this & a little of that, but everything in moderation, which is what should have happened with Global Debt!

Btw, in case you haven't noticed, it's not all about Keynes, nor you, nor me, all of these things are interlocked.

In other words, the butterfly effect is very real and it is the whole view that matters!

What do you mean by delevraging?

What Does Deleverage Mean?
A company's attempt to decrease its financial leverage. The best way for a company to delever is to immediately pay off any existing debt on its balance sheet. If it is unable to do this, the company will be in significant risk of defaulting.

freediver wrote on Sep 19^th, 2010 at 1:11pm:

What do you mean by delevraging?

Have a look thru Chris Martensons Crash Course, for which I have now posted all sections on the following thread.

As suggested, I think it is worth having a look at Chapter 19 first, for an overview, then go back to Chapter’s 1 thru 18, to get a full perspective and finally, look at Chapter 20.

Then come back & see if you want to ask the same question or if you have something different in mind?

http://www.ozpolitic.com/forum/YaBB.pl?num=1277536490/all

So if I read this entire book I will find an answer to my simple question?

freediver wrote on Sep 20^th, 2010 at 9:14pm:

So if I read this entire book I will find an answer to my simple question?

First, they are video's, not books!

And no, your question does not have simple answers, but you may find your perspectives may change.
I am also posting all of the Dr Albert Bartlet video's, on Arithmetic, Population & Energy, for you & others.

These also confirms that we need a different view of how we view the world, our place in this world & our Economic system!

Quote:

And no, your question does not have simple answers

Is that because you don't understand your own posts?

freediver wrote on Sep 20^th, 2010 at 9:46pm:

Quote: And no, your question does not have simple answers Is that because you don't understand your own posts?

No, I am trying to make it understood that things are not what people think they are!

There are not simple black & white choices, followed by another Hollywood ending!  

If you want to help people understand, you should figure out how to explain it yourslf. Telling people they have to read a whole book to get an answer to a simple question just makes it look like you have no idea at all.

freediver wrote on Sep 21^st, 2010 at 10:41pm:

If you want to help people understand, you should figure out how to explain it yourslf. Telling people they have to read a whole book to get an answer to a simple question just makes it look like you have no idea at all.

Like I said, there video's not books!

Unlike some, I know just enuff, to know that I don't know much at all.

However, the little that I do know, tells me to ask questions & look for the real truth, not just the "facts" that are usually dealt out, which means looking outside my comfort zone.

That said, before we have alook at De-leveraging, can I ask what your parameters are?

To get some guage of how wide a net you want to delve into, I ask what is your interpretation of what we refer to as Leverage?

Is it purely the narrow interpretation of "direct financial leverage" or is it more and if more what?

I wouldn't want to waste more time than I need to on things you have no interest  in or understanding of!

I enjoyed the videos...well, sort of  :'(
It was a very good crash course (probably about an hour) to get a better understanding, or at least a different perspective on where our economy may be at today.

Personally, I agree with the information shown. I've never had any misconceptions that exponential growth reliant on finite resources cannot continue beyond a finite length of time.

Unfortunately, when the exponentiality reaches it's limits, simple mathematics tells you that it's going to be a very sudden realisation that our system was a ponzi scheme just like so many others.

All indications are that saturation point is very close indeed without an infinite energy source that can cope with the required economic growth.

I'm sort of looking forward to the next chapter.i

Amadd wrote on Sep 22^nd, 2010 at 7:50am:

I enjoyed the videos...well, sort of  :'( It was a very good crash course (probably about an hour) to get a better understanding, or at least a different perspective on where our economy may be at today. Personally, I agree with the information shown. I've never had any misconceptions that exponential growth reliant on finite resources cannot continue beyond a finite length of time. Unfortunately, when the exponentiality reaches it's limits, simple mathematics tells you that it's going to be a very sudden realisation that our system was a ponzi scheme just like so many others. All indications are that saturation point is very close indeed without an infinite energy source that can cope with the required economic growth. I'm sort of looking forward to the next chapter.

It is good to hear that you got something out of these video's.

Although, you may already have agreed with much of what was put, they do a fair job of clarifying some of the issues!  

Anyone has hasn't already looked into the real issues or who hasn't made their mind up, would get quite a lot to think about!

You mentioned being very close to "saturation point" and I liken this situation to Wile E Coyote, who gets up a head of steam, whilst chasing our friend the Road Runner.

http://paulandlayne.com/wp-content/uploads/2009/12/wile-e-coyote-gravity1.jpg

If you can imagine Wile E in the frame before the above, hanging ten, looking down at the at the fall.

The Road Runner thinks for a moment, I can save Wile from his own destruction, caused by his own greed, all I have to do is give him a very slight pull back from the edge of the precipice and there will be a Hollywood ending for good old Wile E Coyote!

Then a moment later, comes the frame we see above, as the Road Runner realises that if he saves the Coyote, Wile E will again pursue him and the Road Runner gives Wile E the slightest of nudges, thus tipping Wile E over the edge and gravity then takes over to complete the job.

In other words, because we are at stauration, it will only take a small nudge, a small miscalculation, by those who think they have a handle on events, then we & our Global Economy, will join Wile E Coyote, as we both go over the cliff edge!

Off-Topic replies have been moved to this Topic.


Quote:

That said, before we have alook at De-leveraging, can I ask what your parameters are?

I have a question, not parameters. Or should I ask, what do you mean by parameters?


Quote:

I ask what is your interpretation of what we refer to as Leverage?

It usually refers to borrowing to invest.

freediver wrote on Sep 22^nd, 2010 at 11:11pm:

Quote: I ask what is your interpretation of what we refer to as Leverage? It usually refers to borrowing to invest.

Leverage & Deleveraging
There are actually a number of aspects to Leverage & Deleveraging, but we should start with the more commonly known.

Financial Leverage & Deleveraging
Leverage is the process of using Debt, which is funded by future Earnings, to acquire Assets (Physical or Intellectual Property). These Assets may then be used to acquire or increase income or simply to improve a standard of living.

In good times, which were pretty much the last 60 years, being highly Geared or Levered, was usually an advantage, as income rolled in from everywhere, to pay off the Debt, in a Global Economy that was virtually guaranteed to grow, in a world blessed with a growing Population, Cheap & abundant Energy sources & apparently limitless Other Essential Resources!

In fact, the higher the Debt, the better.
If you owed the Bank a little and you had a problem, then YOU HAD THE PROBLEM!
Whereas, if you & your mates owed the Bank a ShipLoad and you had a problem, then THE BANK HAD THE PROBLEM!

However, nothing lasts forever and one day the inevitable happens, the Assets you acquired (by virtue of Debt) are now worth less than what you owe on the Debt or in some instances the assets really were “worthless” (subprime mortgages) OR your income declines, to the point where you can not make the required payments.

You may perceive the need to transfer surplus income into paying your Debt down or off, if you have any surplus income?
If you don’t have sufficient surplus income or not enough income or no income at all, then you may voluntarily decide to sell some or all of your assets, until the Debt is cleared? Of course, the Bank may make that decision, in-voluntary!

If there is only one of you or you are a small entity, then YOU HAVE A DELEVERAGING PROBLEM!
If there are many of you & you are large entities, with a particular Bank, THEN THAT BANK ALSO HAS A DELVERAGING PROBLEM!
If the whole nation has similar problems, then THERE IS A SYSTEMIC DELEVERAGING PROBLEM and the problem again becomes one for EVERY TAXPAYER!

In the current instance, pretty much every country in the world will be Deleveraging simultaneously!

There are two obvious ways to deleverage –
1)      Pay down or off, the relevant Debt.
2)      Increase income/earnings or Capital in the case of a business, possibly via more Borrowings.

Given the current Financial settings, where Banks are also deleveraging, many are finding & will continue to find, increased borrowings quite difficult.
And, given the Marco Global settings of reducing Demand, due to Baby Boomer retirements, a slowing Population growth rate & a decline in the Consumers disposable income, many will also find increasing their net income will also be quite difficult in future.

Is this correct? Well, yes and all we need to do, is look at the Japanese experience since 1990, to confirm it. Japanese businesses & Private individuals have been hunkering down since 1990, when their Aging Population started to impact their economy. Notwithstanding, that the Japanese had the rest of the world still going gangbusters until around 2005, the Japanese are still in the Deleveraging Doldrums Two decades later and the Japanese didn’t even have Peak Oil to contend with, until recently, when it bust forth onto the world.

So, paying down Private & Business Debt, that’s all there is, CORRECT?
Well, actually no! There’s more, quite a bit more!

For starters there is Government Debt, which in the case of Japan, the USA and many other countries, Government Debt has been rising quickly in the form of Economic Stimulus packages & Corporate Bailouts, as Private & Business Debt may or may not have been declining. The effect is, in the main, that net Debt or Total Debt to GDP ratio’s are still as high or even higher now, than was the case in 2007. You see, all Debt, whether it starts as Private, Business or Government, will finally revert back to the national consumer and in one way, shape or form, the Public will pay!

In the case of the USA, Private individuals and Business have started paying down Debt, but the two recent governments & the Federal Reserve Bank have gone on a Debt binge, with the net result being that the total US Debt has not yet started to De-lever.  

In fact, many countries, including the USA, are going down the Japanese path, in the mistaken belief that things will eventually return to “normal” & the Politicians now in charge, won’t have “the collapse” on their watch?

The fact is, that due to Baby Boomer retirements, a slowing Population growth rate, Peak Energy, Climate Change & the massive existing Debt, things are not going to return to normal and at some point, we will have to voluntarily start the process of Deleveraging or others (China) may make the decision in-voluntary!

Leverage & Deleveraging (Cont)

So, at last, that’s it, that’s all there is, CORRECT?
Well, actually no! There’s quite a bit more!

For starters, we have only talked about Real or Tangible Debt, where Private Individuals, Business & Government have acquired Assets of a Physical or Intellectual Property nature, which were funded by future Earnings.

But for many decades now, Politicians (in many countries), Economists & others, have also Borrowed from the future, in order to fund various issues of their day, thinking that the future would always grow and generate the funds needed, then.
THE POLITICIANS & ECONOMISTS WERE WRONG!

Tomorrow has now become today & just as the Baby Boomers are starting to retire, the promise of their pensions, their Self Funded Superannuation schemes, Share Markets, Real Estate prices & their Aging medical care, ARE ALL EVAPORATING, leaving a mountain of UNFUNDED OR UNDERFUNDED Government Liabilities, which do not show up as Debt, but these Liabilities will need to be paid in full, thus greatly increasing future Debt or paid in part or defaulted on and any of those actions will make an already bad situation, worse, in some way or another!
http://financialinsights.files.wordpress.com/2010/09/population-pyramid2.jpg

Above is a snapshot of the Canadian situation, where the total Population is somewhat higher than Australia, but the Demographics situation is similar to OZ & for that matter much of the world. It is the Baby Boomer Bulge that is set to cause so many difficulties, with not only unfunded Pension & Medical Liabilities, but also the substantial decline in Demand that must come in all areas of Products & Services, as the following generations are relatively less in numbers, but they will also be less well endowed financially, as this GFC wears on, year after year!  
In the case of the USA, the unfunded Liabilities are estimated at anything from US$50-$80 Trillion!

http://financialinsights.files.wordpress.com/2010/09/consumer-spending-profile.jpg

The above chart demonstrates how expenditure and investment changes during various periods of life. Whilst the chart suggests that Spending Peaks at 46.5 years and savings then start to take precedent, I usually prefer the range between 45-55 years old, with 50 being the Peak.  
Whichever is the case, the boomer generation decline in spending & increase in savings, will now become increasingly noticeable and that will contribute towards Deleveraging & the slowing of the overall Global Economy!

So, paying down Private, Business & Government Debt, plus unfunded Government Liabilities, that’s all there is, CORRECT?
Well, actually no! There’s more, quite a bit more!

You see, the entire Global Monetary system is based on the proposition that the Economy will, in fact MUST, continue to grow forever, so the entire Economic system is leveraged to a claim that Future Earnings will always be exponentially larger than before, which contravenes at least 2 basic laws –
1)      The laws of nature prescribe that exponential growth of anything, is not possible in a finite world!
2)      Dr Albert Bartlett’s First law of Sustainability, is that Population growth (human) &/or growth in the rates of Consumption of Resources CAN NOT BE SUSTAINED!

But our Monetary system is not the only Macro Economic factor, which involves our Economic system Leveraging that Factor against Future Earnings and where the system assumes the exponential growth of that factor!

Also in that same boat, the Titanic, are –
1)      The never ending Growth of Human Population, which delivers a claim of future human labour.
2)      An ever improving pool of human Knowledge & Innovation, which delivers on the necessity for future claims on increased Productivity.
3)      A Limitless Supply of Cheap & Abundant Energy, including Transport, which is necessary to enable all of the other claims on the future, to become reality!    

Let me be abundantly clear, Exponential Growth of anything, in a finite world, IS NOT POSSIBLE, over time and we are now approaching a many of those limits!
All of the above will eventually come to an end, the only thing in doubt, IS THE MATTER OF TIMING.
That said, human Population growth & Energy Supply are now Peaking and within a relatively short span of time, both will start to Decline, without mitigation having started.

There is then, only one remaining possible bastion of hope for the Monetary, Economic system and a massive Global Deleveraging against future expectations and that is that the human condition of Intellect, will outweigh the other human conditions of Wrath, Greed, Sloth, Pride, Lust, Envy & Gluttony?

Now, that may be entirely possible and I hope it is!

But I just don’t believe that good Global Economic Policy, with so much riding on the outcomes, can be left to such a wing & a prayer?

Good luck & watch the Debt!

Amadd wrote on Sep 23^rd, 2010 at 8:37am:

Quote: Exponential economic growth is possible because it is not a measure of natural resources. It is a measure of many man-made or artificial forms of capital, including knowledge, which have no obvious constraints. Many of the 'laymans' critiques of economics confuse exponential economic growth with exponential gorwth in natural resource consumption, when in fact a technology that allows you to get the same service with fewer natural resources is highly valuable, even though it manifests as a reduction in consumption. I really wish that were true, but logic tells me that our economic growth is reliant on natural resources, and most especially oil. Whatever category of business you wish to choose, you will find that the bottom-line is usually dependent on resources, either directly or indirectly. Yes, there are "the arts" which require minimal resources, but that doesn't put bread on the table. The problem, is that most businesses rely on the relative cheapness of fossil fuels to even exist. Also, it's no secret that an increase in (working age) immigrants will also help bolster the economy. They could also be called a "resource", which requires additional resources for them to add to the economy. I really do feel that it's a tangled web that we have woven. In our current economic situation, which is geared to, and reliant on, "oil", it's doomed to a massive failure well before the oil reserves run out. It's already getting harder and more expensive to extract oil. And that is being reflected in the price right now. I wouldn't be suprised at all if the U.S. had sacrificed the lives of a few thousand civilians to ensure a short sighted economic success, which in actuality may not be all that short sighted, although extremely immoral. I noted a recent discussion here with Helian, where there were some takers for sacrificing moral values for a more economical outcome. I wasn't surprised at all about the small decisions that justified a lack of personal morals for the possible outcome of a greater good. That wrestle has existed well before the emergence of religions. [quote]No matter what political reasons are given for war, the underlying reason is always economic. A. J. P. Taylor

Oil is the reason, but it is a finite source which cannot support growth for the entire planet in the manner that we've been using it.
You may say FD, that increased consumption of natural resources is not imperative for a growing economy. History tells us different story.

The economics is what it's all about. Biofuels, solar, windpower, etc. They cannot match value of oil. Nothing can thus far.
Whoever controls the oil has economic supremacy.

[/quote]

It would seem, we are on a similar wavelength!

I didn't ask you to copy and paste a bunch of possible meanings. I asked you what you meant when you used the term.

freediver wrote on Sep 23^rd, 2010 at 9:52pm:

I didn't ask you to copy and paste a bunch of possible meanings. I asked you what you meant when you used the term.

I copied & pasted 2 charts, to assist with what I was saying, the rest is me.

That said, I am happy that what I have said, addresses the issues!

The Paradox of Capitalism: The Relevance of John Maynard Keynes

John Maynard Keynes, though bourgeois in his outlook, was a remarkably insightful economist, whose book Economic Consequences of the Peace was copiously quoted by Lenin at the Second Congress of the Communist International to argue that conditions had ripened for the world revolution.  But even Keynes' insights could not fully comprehend the paradox that is capitalism.

In a famous essay "Economic Possibilities for Our Grandchildren", written in 1930, Keynes had argued: "Assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years.  This means that the economic problem is not, if we look into the future, the permanent problem of the human race" (emphasis in the original).

True, after Keynes had written there was the Second World War, but thereafter mankind has had six and a half decades without any "important war" of the sort that could interrupt what he had called the "era of progress and invention".  And the rate of population growth has also not accelerated to a point that can be considered to have invalidated Keynes' premise.

Dichotomy Structurally Inbuilt in Capitalism
Keynes missed this structural aspect of capitalism.  His entire argument in fact was based on the mere logic of compound interest, i.e. on the sheer fact that "if capital increases, say, 2 percent per annum, the capital equipment of the world will have increased by a half in twenty years, and seven and a half times in a hundred years".  From this sheer fact it follows that output too would have increased more or less by a similar order of magnitude, and mankind, with so much more of goods at its disposal, would have overcome the struggle for subsistence.  The reason Keynes assumed that an increase in the mass of goods would eventually benefit everyone lies not just in his inability to see the antagonistic nature of the capitalist mode of production (and its antagonistic relationship with the surrounding universe of petty producers), but also in his belief that capitalism is a malleable system which can be moulded, in accordance with the dictates of reason, by the interventions of the State as the representative of society.  He was a liberal and saw the state as standing above, and acting on behalf of, society as a whole, in accordance with the dictates of reason.  The world, he thought, was ruled by ideas; and correct, and benevolent, ideas would clearly translate themselves into reality, so that the increase in mankind's productive capacity would get naturally transformed into an end of the economic problem.  If the antagonism of capitalism was pointed out to Keynes, he would have simply talked about state intervention restraining this antagonism to ensure that the benefit of the increase in productive capacity reached all.

The state, instead of being an embodiment of reason, which intervenes in the interests of society as a whole, as liberalism believes, acts to defend the class interests of the hegemonic class, and hence to perpetuate the antagonisms of the capitalist system.

Antagonisms in Three Distinct Ways
These antagonisms perpetuate in three quite distinct ways the struggle for subsistence in which the bulk of mankind is caught.  The first centres around the fact that the level of wages in the capitalist system depends upon the relative size of the reserve army of labour.  And to the extent that the relative size of the reserve army of labour never shrinks below a certain threshold level, the wage rate remains tied to the subsistence level despite significant increases in labour productivity, as necessarily occur in the "era of progress and innovation".  Work itself therefore becomes a struggle for subsistence and remains so.  Secondly, those who constitute the reserve army of labour are themselves destitute and hence condemned to an even more acute struggle for subsistence, to eke out for themselves an even more meager magnitude of goods and services.  And thirdly, the encroachment by the capitalist mode upon the surrounding universe of petty production, whereby it displaces petty producers, grabs land from the peasants, uses the tax machinery of the State to appropriate for itself, at the expense of the petty producers, an amount of surplus value over and above what is produced within the capitalist mode itself, in short, the entire mechanism of "primitive accumulation of capital", ensures that the size of the reserve army always remains above this threshold level.

The growth rates of world output have been even greater in the post-war period than in Keynes' time.  The growth rates in particular capitalist countries like India have been of an order unimaginable in Keynes' time, and yet there is no let-up in the struggle for subsistence on the part of the bulk of the population even within these countries.

Keynes' faith in the miracle of compound interest would be justified in a socialist order, but not in a capitalist one.
Link -
http://www.globalresearch.ca/index.php?context=va&aid=21603
================
As Socrates said, "The first step to wisdom is realizing that we know nothing."

Well, perhaps not nothing, but clearly Keynes did not aniticpate everything correctly and I suspect, nor do many of the Pollies, Economists or Establishment, Now!