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Peak Oil Might Be Just Three Years Away, McKinsey Says
McKinsey’s Global Energy Perspective research was launched at a time when global energy markets are facing an unprecedented array of uncertainties, including the conflict in Ukraine. Nonetheless, the long-term transition to low-carbon energy systems continues to see strong momentum and, in several respects, acceleration.
Leading up to COP26, a total of 64 countries, covering more than 89 percent of global emissions, have pledged or legislated to achieve net-zero in the coming decades.
To keep up with these net-zero ambitions, the global energy system may need to significantly accelerate its transformation. The report projects a rapid shift in the global energy mix, with the share of renewables in global power generation expected to double in the next 15 years while total fossil fuel demand is projected to peak before 2030, depending on the scenario.
However, even with current government commitments and forecasted technology trends, global warming is projected to exceed 1.7 degrees Celsius by 2100, and reaching a 1.5 degrees Celsius pathway is increasingly challenging.
“In the past few years, we have certainly seen the energy transition pick up the pace. Every year we’ve published this report, peak oil demand has moved closer. Under our middle scenario assumptions, oil demand could even peak in the next three to five years, primarily driven by electric-vehicle adoption,” Christer Tryggestad, a Senior Partner at McKinsey, said
“However, even if all countries with net-zero commitments deliver on their aspirations, global warming is still expected to reach 1.7°C. To keep the 1.5°C pathway in sight, even more ambitious acceleration is needed,” Tryggestad added.
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“The Resentment Will Explode” – In Dramatic Twist, McKinsey Slams Globalization
“The Resentment Will Explode” – In Dramatic Twist, McKinsey Slams Globalization
Moments ago, in a speech in Washington, IMF head Christine Lagarde said that “The greatest challenge we face today is the risk of the world turning its back on global cooperation—the cooperation which has served us all well. We know that globalization – and increased integration – over the past generation has yielded many economic benefits for many people.”
The IMF is not alone: for years, consultancy giant McKinsey towed the party line as well saying in 2010 that “the core drivers of globalization are alive and well” and adding as recently as 2014 that “to be unconnected is to fall behind.”
That appears have changing, and cracks are starting to form behind the cohesive push for globalization, at least among those who benefit the most from globalization.
In a stunning study released today, one which effectively refutes all its prior conclusions on the matter, McKinsey slams the establishment’s status quo thinking and admits that the economic gains of changes in the global economy have not been widely shared lately, especially in the developed world. In the report titled “Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies” it finds that prospects for income growth have deteriorated significantly since the financial crisis, and that the benefits from globalization are now over:
This overwhelmingly positive income trend has ended. A new McKinsey Global Institute report, Poorer than their parents? Flat or falling incomes in advanced economies, finds that between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people (exhibit). And while government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade.
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Japan Hits Demographic Tipping Point With First Official Population Decline In History
Japan Hits Demographic Tipping Point With First Official Population Decline In History
According to data released yesterday by the Ministry of Internal Affairs and Communications, in the latest 5 year census, Japan’s population declined last year for the first time in nearly a century.
The Internal Affairs and Communications Ministry said the latest census shows that Japan’s population as of Oct. 1, 2015, was 127,110,047 – a decline of 947,305, or 0.7 percent, since the last census conducted in 2010.
The number of Japanese dropped to 127.1 million in a national census for 2015, down 0.7 percent compared with five years earlier, and was the first recorded decline since the 5-year census started in 1920. As the Shimbun adds, in the 2015 census, men accounted for 61,829,237 of the population, and women 65,280,810.
The population of Fukushima Prefecture, where many residents are still being forced to live away from home due to damage caused to their hometowns by the 2011 Fukushima nuclear power plant disaster, saw the biggest decrease, or 115,458, a 5.7 percent decline from the last census. The two other prefectures hit hardest by the disaster — Iwate and Miyagi — also saw population declines.
To be sure, this is not exactly a surprise: Japan’s ministry had estimated that the nation’s population had been declining for four straight years since 2011, but the latest results are the first official confirmation via a census that the national population has gone down since the government began conducting them.
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Deranged Central Bankers Blowing Up the World
DERANGED CENTRAL BANKERS BLOWING UP THE WORLD
It is now self-evident to any sentient being (excludes CNBC shills, Wall Street shyster economists, and Keynesian loving politicians) the mountainous level of unpayable global debt is about to crash down like an avalanche upon hundreds of millions of willfully ignorant citizens who trusted their politician leaders and the central bankers who created the debt out of thin air. McKinsey produced a report last year showing the world had added $57 trillion of debt between 2008 and the 2nd quarter of 2014, with global debt to GDP reaching 286%.
The global economy has only deteriorated since mid-2014, with politicians and central bankers accelerating the issuance of debt. These deranged psychopaths have added in excess of $70 trillion of debt in the last eight years, a 50% increase. With $142 trillion of global debt enough to collapse the global economy in 2008, only a lunatic would implement a “solution” that increased global debt to $212 trillion over the next seven years thinking that would solve a problem created by too much debt.
The truth is, these central bankers and captured politicians knew this massive issuance of more unpayable debt wouldn’t solve anything. Their goal was to keep the global economy afloat so their banker owners and corporate masters would not have to accept the consequences of their criminal actions and could keep their pillaging of global wealth going unabated.
The issuance of debt and easy money policies of the Fed and their foreign central banker co-conspirators functioned to drive equity prices to all-time highs in 2015, but the debt issuance and money printing needs to increase exponentially in order keep stock markets rising. Once the QE spigot was shut off markets have flattened and are now falling hard. You can sense the desperation among the financial elite. The desperation is borne out by the frantic reckless measures taken by central bankers and politicians since 2008.
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Horror Stories Emerge After A Cursory Look At Chinese Corporate Leverage
Horror Stories Emerge After A Cursory Look At Chinese Corporate Leverage
Far less has been discussed about China’s corporate debt at the micro level. Back in October we were shocked when we looked at the inverse of corporate leverage, namely interest coverage within the heavily indebted commodity sector where we found that as of the end of 2014, just one half of Chinese companies could cover their annual interest expense, implying that according to a Macquarie analysis, some CNY2 trillion in debt was in danger of default.
This was over a year ago: since then both industry pricing and cash flow dynamics have deteriorated substantially and some estimate that more than three-quarters of leveraged commodity companies are dead zombies walking, suggesting a massive default wave is about to be unleashed.
And while we are keeping a close eye on this very troublesome development, last week the FT revealed something even more disturbing: Chinese corporate leverage, represented by the traditional debt/EBITDA ratio is, in some cases, absolutely ludicrous, especially among companies which in recent weeks have tried to mask their balance sheet devastation through global M&A activity, such as ChemChina’s recent record for a Chinese company $44 billion purchase of Syngenta, or Zoomlion’s $3.3 bid for US rival Terex last month.
In fact, as the otherwise demure FT notes, “so high are the debt levels at ChemChina and several other companies behind some of the country’s biggest overseas investments that financing for the deals would have been difficult or prohibitively expensive were it not for the backing of the Chinese state, analysts said.”
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A Major Bank Just Made Global Financial “Meltdown” Its Base Case: “The Worst The World Has Ever Seen”
A Major Bank Just Made Global Financial “Meltdown” Its Base Case: “The Worst The World Has Ever Seen”
When it comes to the epic bubble in China’s economy, it really boils down to one – or rather two – things: a vast debt build up (by now everybody should be familiar with McKinsey’s chart showing China’s consolidated debt buildup) leading to a just as vast build up of excess capacity, also known as capital stock accumulation. And/or vice versa.
It is how China resolves this pernicious, and self-reinforcing feedback loop, that is a far greater threat to the global economy than even what happens to China’s bad debt (China NPLs are currently realistically at a 10-20% level of total financial assets) or whether China successfully devalues its currency without experiencing runaway capital flight and a currency crisis.
One bank that is now less than optimistic that China can escape a total economic meltdown is the Daiwa Institute of Research, a think tank owned by Daiwa Securities Group, the second largest brokerage in Japan after Nomura.
Actually, scratch that: Daiwa is downright apocalyptic.
In a report released on Friday titled “What Will Happen if China’s Economic Bubble Bursts“, Daiwa – among other things – looks at this pernicious relationship between debt (and thus “growth”) and China’s capital stock. This is what it says:
The sense of surplus in China’s supply capacity has been indicated previously. This produces the risk of a large-scale capital stock adjustment occurring in the future.Chart 6 shows long-term change in China’s capital coefficient (= real capital stock / real GDP). This chart indicates that China’s policies for handling the aftermath of the financial crisis of 2008 led to the carrying out of large-scale capital investment, and we see that in recent years, the capital coefficient has been on the rise. Recently, the coefficient has moved further upwards on the chart, diverging markedly from the trend of the past twenty years. It appears that the sense of overcapacity is increasing.
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