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The Future (Not)

I took myself to the new movie Blade Runner 2049 to see what kind of future the Hollywood dream-shop is serving up in these days. It was an excellent illustration of the over-investments in technology with diminishing returns that are dragging us into collapse and of the attendant techno-narcissism that afflicts the supposedly thinking class in this society, who absolutely don’t get what this collapse is about. The more computer magic Hollywood drags into the picture, the less coherent their story-telling gets. Hollywood is collapsing, and it’s not just because of Harvey Weinstein’s antics.

Movies of this genre are really always more about the current moment than about the future, and Blade Runner 2049 is full of hilarious retro-anachronisms — things around us now which will probably not be in the future. The signature trope in many sci-fi dystopias of recent times is the assumed ever-presence of automobiles.

The original Mad Max was little more than an extended car chase — though apparently all that people remember about it is the desolate desert landscape and Mel Gibson’s leather jumpsuit. As the series wore on, both the vehicles and the staged chases became more spectacularly grandiose, until, in the latest edition, the movie was solely about Charlize Theron driving a truck. I always wondered where Mel got new air filters and radiator hoses, not to mention where he gassed up. In a world that broken, of course, there would be no supply and manufacturing chains.

So, of course, Blade Runner 2049 opens with a shot of the detective played by Ryan Gosling in his flying car, zooming over a landscape that looks more like a computer motherboard than actual earthly terrain. As the movie goes on, he gets in and out of his flying car more often than a San Fernando soccer mom on her daily rounds.

…click on the above link to read the rest of the article…

Diminishing Returns


These two words are the hinge that is swinging American life — and the advanced techno-industrial world, for that matter — toward darkness. They represent an infection in the critical operations of daily life, like a metabolic disease, driving us into disorder and failure. And they are so omnipresent that we’ve failed to even notice the growing failure all around us.

Mostly, these diminishing returns are the results of our over-investments in making complex systems more complex, for instance the replacement of the 37-page Glass-Steagall Act that regulated American banking, with the 848 page Dodd-Frank Act, which was only an outline for over 22,000 pages of subsequent regulatory content — all of it cooked up by banking lobbyists, and none of which replaced the single most important rule in Glass-Steagall, which required the separation of commercial banking from trafficking in securities. Dodd-Frank was a colossal act of misdirection of the public’s attention, an impenetrable smokescreen of legal blather in the service of racketeering.

For Wall Street, Dodd-Frank aggravated the conditions that allow stock indexes to only move in one direction, up, for nine years. During the same period, the American economy of real people and real stuff only went steadily down, including the number of people out of the work force, the incomes of those who still had jobs, the number of people with full-time jobs, the number of people who were able to buy food without government help, or pay for a place to live, or send a kid to college.

When that morbid tension finally snaps, as it must, it won’t only be the Hedge Funders of the Hamptons who get hurt. It will be the entire global financial system, especially currencies (dollars, Euros, Yen, Pounds, Renminbi) that undergo a swift and dire re-pricing, and all the other things of this world priced in them. And when that happens, the world will awake to a new reality of steeply reduced possibilities for supporting 7-plus billion people.

…click on the above link to read the rest of the article…

The Structure of Collapse: 2016-2019

The Structure of Collapse: 2016-2019

Leaders face a no-win dilemma: any change of course will crash the system, but maintaining the current course will also crash the system.

The end-state of unsustainable systems is collapse. Though collapse may appear to be sudden and chaotic, we can discern key structures that guide the processes of collapse.

Though the subject is complex enough to justify an entire shelf of books, these six dynamics are sufficient to illuminate the inevitable collapse of the status quo.

1. Doing more of what has failed spectacularly. The leaders of the status quo inevitably keep doing more of what worked in the past, even when it no longer works. Indeed, the failure only increases the leadership’s push to new extremes of what has failed spectacularly. At some point, this single-minded pursuit of failed policies speeds the system’s collapse.

2. Emergency measures become permanent policies. The status quo’s leaders expect the system to right itself once emergency measures stabilize a crisis. But broken systems cannot right themselves, and so the leadership is forced to make temporary emergency measures (such as lowering interest rates to zero) permanent policy. This increases the fragility of the system, as any attempt to end the emergency measures triggers a system-threatening crisis.

3. Diminishing returns on status quo solutions. Back when the economic tree was loaded with low-hanging fruit, solutions such as lowering interest rates had a large multiplier effect. But as the tree is stripped of fruit, the returns on these solutions diminish to zero.

4. Declining social mobility. As the economic pie shrinks, the privileged maintain or increase their share, and the slice left to the disenfranchised shrinks. As the privileged take care of their own class, there are fewer slots open for talented outsiders. The status quo is slowly starved of talent and the ranks of those opposed to the status quo swell with those denied access to the top rungs of the social mobility ladder. 

…click on the above link to read the rest of the article…

The other side of the global crisis: entropy and the collapse of civilizations

The other side of the global crisis: entropy and the collapse of civilizations

When we discuss the impending crisis of our civilisation, we mainly look at the resources our economy need in a growing quantity. And we explain why the Diminishing Returns of resource exploitation pose a growing burden on the possibility of a further growing of the global economy. It is a very interesting topic, indeed, but here I suggest to turn 180 degrees around and take a look at the “other side;” that is to what happens where the used resources are discarded.

Eventually, our society (as any other society in history) is a dissipative structure. It means that it exist only because it is able to dissipate energy in order to stock information inside itself. And there is a positive feedback: more energy permits to implement more complexity; and more complexity needs, but it also permits a larger energy flow. This, I think, is a crucial point: at the very end, wealth is information stocked inside the socio-economic system in different forms (such livestock, infrastructures, agrarian facilities, machines, buildings, books, the web and so on). Human population is peculiar because it is a large part of the information stocked inside the society system. So, from a thermodynamic point of view, it is the key part of “wealth”, while from an economic point of view people can be seen as the denominator of the global wealth.

The accumulation of information inside a system is possible only by an increment of entropy outside the same system. This is usual with all the dissipative structures, but our civilisation is unique in its dimension. Today about 97% of the terrestrial vertebrate biomass is composed of humans and of their symbionts and we use about the 50% of the primary production (400 TW?), plus a little less than 20 TW we have from fossil fuels and other inorganic sources.

…click on the above link to read the rest of the article…

GDP Declines When Govt. Grows — This is Basic Common Sense

Armey Curve

A reader has contributed these charts that demonstrate why the socialist agenda is destroying the world. As the reader points out: “It seems that the optimal govt spending (share) is max 35% (US, AUS), and not >50% like in Europe. Lower govt expenditure has doubled GDP at least in the recent history.” The socialists refuse to listen simply because they are greedy. If you earn $1,000 and your rent if $200, your disposable income is $800. If government demands 10%, you have $720 to spend; if government demands 50%, you have $400. This is why we call them “public servants” for they consume wealth; they do not produce it.
OECD Debt Growth
The OECD has done studies but nobody ever pays attention. Any way you cut it, the larger the share of the economy consumed by the government, the lower the economic growth. So the sublime fool never looks at the data and simply regurgitates the same socialist propaganda into infinity. They live in a state of total denial simply because the core of their position is sheer material jealousy. They justify robbing other people because they lack the wealth they wish they had. It is just a question of greed.

2016 Theme #4: The End-Game of Debt-Fueled “Growth”

2016 Theme #4: The End-Game of Debt-Fueled “Growth”

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the end-game of debt-fueled “growth.”

We can summarize the official “solution” to the Global Financial Meltdown of 2008 in one line: borrow and blow trillions–of yen, yuan, dollars, euros, reals, you name it.

The goal of borrowing and blowing trillions was to re-invigorate “growth”— any kind of “growth,” no matter how wasteful, unproductive or even counter-productive it might be: wars, nation-building, ghost cities, needless MRIs, useless college diplomas, bridge to nowhere–anything the borrowed money was squandered on counts as “growth” in the Keynesian status quo.

Unsurprisingly, this strategy yields diminishing returns as the negative returns on all this debt-fueled spending piles up. While the yield on the “investment” is either negative or only fleetingly positive, the interest due on the debt is forever. That’s the source of diminishing returns in a nutshell.

The diminishing returns on additional debt is clearly visible in these charts.

Global debt has soared but this massive stimulus has yielded subpar “growth” (and the final costs of all the astounding mal-investment have yet to be totaled):

Has borrowing and blowing $9 trillion solved any structural problem in the U.S. economy? No.

While total credit in the U.S. has exploded, GDP (a measure of actual output) has under-performed for years. The tiny decline of credit in the 2008-09 financial meltdown almost collapsed the global economy. The strategy of borrowing and blowing trillions has backed the global economy into a corner: expand debt or die.

While U.S. bank credit has expanded by 40%, GDP has risen 21.7%–roughly half the rate of credit expansion. This is diminishing returns on a vast scale.

…click on the above link to read the rest of the article…

Gail Tverberg: Something Has Got To Break

Gail Tverberg: Something Has Got To Break

Growing debt faster than your energy supply has hard limits

Actuary Gail Tverberg explains the tight correlation between the rates of GDP growth and growth in energy supply. For decades, energy has been becoming more costly to obtain, and instead of accepting lower GDP growth, we have been using debt to fund further energy exploration and extraction.

That strategy has diminishing returns, Tverberg warns. And we are close to the moment of reckoning:

The more we look at it the more we see that the rate of growth and energy supply is very closely correlated with the rate of GDP growth. And I know on some of my recent posts I’ve included a chart that goes back to 1820 that shows the same correlation. You have to have an increasing supply of energy in order to get GDP growth. The GDP growth tends to be a little higher than the energy growth. That’s especially the same when we made the change in the mid 70’s, when we had the big first oil crisis and we realized that Japan had already started making small cars, and so we could make smaller cars, too, and save quite a bit of oil very quickly. And we realized then that we didn’t have to burn oil to create electricity; there were a lot of other alternative approaches, including nuclear. So we pulled those off line, and where home heating had been done by oil it was easy to transfer that to other types of energy. So we had a number of different things we could do very quickly back then — and I think people got the idea that because we could pick the low-hanging fruit, then somehow or other we could do the same thing again. But we’re not getting that same kind of effect any more.

…click on the above link to read the rest of the article…

How Economic Growth Fails

How Economic Growth Fails

We all know generally how today’s economy works:

Figure 1

Our economy is a networked system. I have illustrated it as being similar to a child’s building toy. Ever-larger structures can be built by adding more businesses and consumers, and by using resources of various kinds to produce an increasing quantity of goods and services.

Figure 2. Dome constructed using Leonardo Sticks

There is no overall direction to the system, so the system is said to be “self-organizing.”

The economy operates within a finite world, so at some point, a problem ofdiminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world? Many people imagine that we will “run out” of some necessary resource, such as oil, but I see the situation differently. Let me explain a few issues that may not be obvious.

1. Our economy is like a pump that works increasingly slowly over time, as diminishing returns and other adverse influences affect its operation. Eventually, it is likely to stop.

As nearly as I can tell, the way economic growth occurs (and stops taking place) is as summarized in Figure 3.

Figure 3. Overview of our economic predicament

As long as (a) energy and other resources are cheap, (2) debt is readily available, and (3) “overhead” in the form of payments for government services, business overhead, and interest payments on debt are low, the pump can continue working as normal. As various parts of the pump “gum up,” the economic growth pump slows down. It is likely to eventually stop, once it becomes too difficult to repay debt with interest with the meager level of economic growth achieved.

 

 

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The Cost of Stagnation: We’re Living in Limbo

The Cost of Stagnation: We’re Living in Limbo

This erosion of opportunities to complete life’s stages and core dramas is rarely recognized, much less addressed.

The idea that human life subdivides rather naturally into stages is based on our natural progression from childhood into adulthood and eventual (if we’re lucky) old age.

Confucian thought views life as a developmental process with seven stages, each roughly corresponding to a decade: childhood, young adulthood (16-30), age of independence (30-39), age of mental independence (40-49), age of spiritual maturity (50-59), age of acceptance (60-69), and age of unification (70 – end of life).

Each stage has various tasks, goals and duties, which establish the foundation for the next stage.

Each stage is centered on a core human challenge: for the teenager, establishing an identity and life that is independent of parents; for the young adult, finding a mate and establishing a career; for the middle-aged, navigating the challenges of raising children and establishing some measure of financial security; for those in late middle-age, helping offspring reach independent adulthood and caring for aging parents; early old age, seeking fulfillment now that life’s primary duties have been accomplished and managing one’s health; and old age, the passage of accepting mortality and the loss of vitality.

The End of Secure Work and the diminishing returns of financialization are disrupting these core human challenges and frustrating those who are unable to proceed to the next stage of life:

1. Teenagers are being pressured to focus their lives on achieving a conventional financial success (see “Training for Discontent” in From Left Field) that is becoming harder to achieve.

2. Young adults without secure full-time careers cannot afford marriage or children, so they extend the self-absorption of late adolescence into middle age.

3. The middle-aged are finding financial security elusive or out of reach as they struggle to fund their young adult children, aging parents and their own retirement.

…click on the above link to read the rest of the article…

 

 

Twenty-Three Geniuses

Twenty-Three Geniuses

If there is a Pulitzer Booby Prize for stupidity, waste no time in awarding it to The New York Times’ Monday feature, The Unrealized Horrors of Population Explosion. The former “newspaper of record” wants us to assume now that the sky’s the limit for human activity on the planet earth. Problemo cancelled. The article and accompanying video was actually prepared by a staff of 23 journalists. Give the Times another award for rounding up so many credentialed idiots for one job.

Apart from just dumping on Stanford U. biologist Paul Ehrlich, author of The Population Bomb(1968), this foolish “crisis report” strenuously overlooks virtually every blossoming fiasco around the world. This must be what comes of viewing the world through your cell phone.

One main contention in the story is that the problem of feeding an exponentially growing population was already solved by the plant scientist Norman Borlaug’s “Green Revolution,” which gave the world hybridized high-yielding grain crops. Wrong. The “Green Revolution” was much more about converting fossil fuels into food. What happens to the hypothetically even larger world population when that’s not possible anymore? And did any of the 23 journalists notice that the world now has enormous additional problems with water depletion and soil degradation? Or that reckless genetic modification is now required to keep the grain production stats up?

No, they didn’t notice because the Times is firmly in the camp of techno-narcissism, the belief that the diminishing returns, unanticipated consequences, and over-investments in technology can be “solved” by layering on more technology — an idea whose first cousin is the wish to solve global over-indebtedness by generating more debt. Anyone seeking to understand why the public conversation about our pressing problems is so dumb, seek no further than this article, which explains it all.

…click on the above link to read the rest of the article…

 

Money Worries

Money Worries

 

The cynicism among the informed classes has never been so deep. Even the pompom boys in the cheerleading clubs like CNBC and The Wall Street Journal express wonderment at the levitation of stock indexes and bond values. They chatter about a “correction” of 20 percent being a healthful tonic that would clear away some dross and quickly usher in a new episode of “growth” — or growthiness, which, like truthiness, became an acceptable approximation of the real thing. The truth, as opposed to truthiness, is they no longer believe their own bullshit about growthiness.

The suppression of interest rates and pervasive accounting fraud has thundered through the financial system, and the deformities caused by it have emerged in currency war, currency instability, trade collapse, and political crisis. Years of central bank intervention have stolen the capital of the future to construct a Potemkin economy meant to conceal the sickening gyre of diminishing returns strangling business as usual.

Until it collapses by a great deal more than the wished-for mere 20 percent, more perversities will be piled onto the already existing burden. Is it not a wonder that professionalized interest groups like AARP have not screamed bloody murder over the suppression of interest rates which deprives its members of bank account and bond interest on savings? Instead AARP, like virtually every enterprise in America, has turned to racketeering. Don’t worry, they’ll be gone from the scene soon enough.

…click on the above link to read the rest of the article…

 

Climate change: can the Seneca effect save us?

Climate change: can the Seneca effect save us?

Nothing we do (or try to do) seems to be able to stop carbon dioxide from accumulating in the atmosphere. And, as a consequence, nothing seems to be able to stop climate change. With the situation getting worse and worse (see here for an example), we are hoping that some kind of international agreement can be reached to limit emissions. But, after many attempts and many failures, can we really expect that next time – miraculously – we could succeed?

Another line of thought, instead, has that depletion will save us. After all, if we run out of oil (and of fossil fuels in general) then we’ll have to stop emitting greenhouse gases. Won’t that solve the problem? In principle, yes, but is it going to happen?

The gist of the debate on the future of fossil fuel production is that, despite the theoretically abundant resources, the production rate is strongly affected by diminishing economic returns generated by depletion. This factor forces the production curve to follow a “bell shaped”, or “Hubbert,” curve that peaks and starts declining much before the resource runs out, physically. In practice, most studies that take into account the diminishing economic returns of productionarrive to the conclusion that the IPCC scenarios often overestimate the amount of fossil carbon that can be burned (see a recent review by Hook et al.). From this, some have arrived to the optimistic conclusion that peak oil will save us from climate change (see this post of mine). But that’s way too simplistic.

…click on the above link to read the rest of the article…

 

 

The Unraveling Is Gathering Speed

The Unraveling Is Gathering Speed

Debt saturation and debt fatigue = diminishing returns on central bank tricks.

Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed?

Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.

The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new Eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi’s famous “whatever it takes speech” in late July, 2012.

 

The Greek debt crisis quickly went from “boil” to “simmer,” where it stayed for almost two-and-a-half years. But no one with any knowledge of the gravity and precariousness of the situation expects the latest “extend and pretend” deal to patch everything together for another two years.  Current deals are more likely to last a matter of months, not years.

We can discern the same diminishing returnsin Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns.

What factors are reducing the positive effects of intervention and causing increased volatility? Let’s start with the engine behind every central bank/state intervention and every “save” of the status quo: debt.

 

…click on the above link to read the rest of the article…

The One Chart You Need to Predict the Future

The One Chart You Need to Predict the Future

We are witnessing a profound secular sea-change: the failure of expanding debt and leverage to lift the real economy of wages and household income.

 
When push comes to shove, you only need one chart to predict the future: debt and wages ( credit and compensation). This chart displays debt and wages as a ratio: debt/wages. What it reveals is the endgame of financialization: creating more debt no longer pushes wages higher.
 

 

I have broken the past five decades into easily recognizable economic periods. During the organic growth of the 1960s that many view as the ideal–what I term the pre-financialized economy, the line is almost flat, as debt and wages expanded in a balanced fashion.
The 1970s, a rocky period of stagflation, higher energy costs and painful adjustments to the economy, is remarkably stable when boiled down to the debt/wage ratio.
Financialization–the securitization of previously stable assets, the expansion of leverage and speculative financial instruments–began in the early 1980s. We see the effect of rapidly expanding debt on the economy: the line leaps higher and only flattens out in the tech-boom 1990s.

 

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A new theory of energy and the economy – Part 1 – Generating economic growth

A new theory of energy and the economy – Part 1 – Generating economic growth

How does the economy really work? In my view, there are many erroneous theories in published literature. I have been investigating this topic and have come to the conclusion that both energy and debt play an extremely important role in an economic system. Once energy supply and other aspects of the economy start hitting diminishing returns, there is a serious chance that a debt implosion will bring the whole system down. In this post, I will look at the first piece of this story, relating to how the economy is tied to energy, and how the leveraging impact of cheap energy creates economic growth.

Trying to tackle this topic is a daunting task. The subject crosses many fields of study, including anthropology, ecology, systems analysis, economics, and physics of a thermodynamically open system. It also involves reaching limits in a finite world. Most researchers have tackled the subject without understanding the many issues involved. I hope my analysis can shed some light on the subject.

I plan to add related posts later.

An Overview of a Networked Economy

The economy is a networked system of customers, businesses, and governments. It is tied together by a financial system and by many laws and customs that have grown up over the years. I represent the economic network as a child’s toy made of sticks that connect together, but that can, if disturbed in the wrong way, collapse.

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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