The Roman Philosopher Lucius Anneaus Seneca (4 BCE-65 CE) was perhaps the first to note the universal trend that growth is slow but ruin is rapid. I call this tendency the "Seneca Effect."
Showing posts with label Hubbert. Show all posts
Showing posts with label Hubbert. Show all posts

Sunday, May 7, 2023

Is the Energy Transition Feasible? The Future as a Garden of Forking Paths


"El jardín de senderos que se bifurcan" (J.L. Borges)

Recently, Simon Michaux argued that the transition to renewable energy is not possible for the lack of sufficient mineral resources. This conclusion was criticized by Nafeez Ahmed in a recent post. As usual in our polarized world, that led to a heated discussion based on opposing views. My opinion is that both Michaud and Ahmed are right but they see the question from different points of view. If you allow me, Ahmed is more right because he shows that the future is not running on a fixed path. Rather, it is a garden of forking paths. If we choose the right path, the transition is possible and will lead us to a better world. 

Do you remember the story of the boy who cried wolf? It tells you that you shouldn't cry wolf too many times but also that the wolf will eventually come. It illustrates how our destiny as human beings is to always choose extreme viewpoints: either we are too afraid of the wolf, or we believe it doesn't exist. Indeed, Erwin Schlesinger said, "human beings have only two modes of operation: complacency and panic.

This dichotomy is especially visible in the current debate on the "Energy Transition" that recently flared in an exchange between Simon Michaux and Nafeez Ahmed, the first maintaining that the transition is impossible, the second arriving at the opposite conclusion. In my modest opinion, Michaud's work is correct within the limits of the assumptions he made. But these assumptions are not necessarily right. 

Models may be perfectly correct, but still unable to predict the future. 

If you really believe that they can, you are bound to make enormous mistakes -- as we saw in the way the recent pandemic was (mis)managed. Let me give an example: the story of the "peak oil" movement.

When I stumbled into the peak oil concept some 20 years ago, I thought it was a great idea. I am still thinking it is an incredibly insightful view of how humans exploit natural resources, and I keep studying the subject, as you can read at this link. But you also probably know that peak oil is unpopular nowadays. I have had referees criticizing our work just because it mentioned the term "peak oil." As if we were submitting a paper to "Nature Astronomy" where we argued that the Earth is flat." Why that? 

There was nothing wrong with the peak oil concept. It was based on sound models, and it was proposed by some of the best oil geologists in the world. The problem was that the models didn't allow deviations from the stated path. They didn't take into account how the oil extraction system could rearrange itself to react to the scarcity of resources. Even oil extraction is a garden of forking paths, and the system can choose one or another depending on the circumstances. In this case, it chose a path that led to the exploitation of shale oil resources and that delayed the peak by more than 10 years. 

Shale oil resources were not taken into account in the input data of the model. So, over and over, the peak was announced to be arriving in a specific year, and it didn't: the earliest estimates had it in 2005. Today, in 2023, we may be finally peaking, but we don't know for sure. Many peakers argue that the peak did arrive, but only for "conventional" oil. Sure, the surgery was successful, but the patient died. No wonder that most people, including the referees of scientific papers, are now convinced that peak oil was a hoax. 

The peakers' mistake is typical of the way the role of models is misunderstood. The peak oil models are great to let you understand the cycle of resource exploitation and that you have to expect the peak, sooner or later. But you are making a big mistake if you think they can predict the date of the peak. Instead, that's exactly how the peak oil models were used. I did that, too, regrettably, but we learn from our mistakes (except in politics, of course). 

Models are there to understand the future, not to predict it. 

The future is a garden of forking paths. Where you go depends on the path you choose. But you still need to follow one of the available paths. 


Now, let me try to examine Michaux's work and Ahmed's rebuttal in light of these considerations. I went through Michaux's report, and I can tell you that it is well done, accurate, full of data, and created by competent professionals. That doesn't mean it cannot be wrong, just like the peak oil date was proposed by competent professionals but turned out to be wrong. The problem is evident from the beginning: it is right there, in the title. 

Assessment of the Extra Capacity Required of Alternative Energy Electrical Power Systems to Completely Replace Fossil Fuels 

You see? Michaux assumes from the start that we need "extra capacity" from "alternative" energy in order to "completely replace" fossil fuels. If the problem is stated in these terms, the answer to the question of the feasibility of the transition can only be negative. 

Alas, we didn't need a report of 985 pages to understand that. It was obvious from the beginning. The limits of mineral resources were already shown in 1972 by the authors of "The Limits to Growth," the report sponsored by the Club of Rome. We know that we have limits; the problem is which paths we can choose within these limits. 

This question is often touched on in Michaux's report when he mentions the need to "think outside the box" and to change the structure of the system. But, eventually, the result is still stated in negative terms. It is clear from the summary, where Michaux says, "The existing renewable energy sectors and the EV technology systems are merely steppingstones to something else, rather than the final solution." This suggests that we should stick to fossil fuels while waiting for some miracle leading us to the "final" solution, whatever that means. This statement can be used to argue that renewables are useless. Then, it becomes a memetic weapon to keep us stuck to fossil fuels; an attitude which can only lead us to disaster. 

Nafeez Ahmed perfectly understood the problems in his rebuttal. Ahmed notes several critical points in Michaud's report; the principal ones are underestimating the current EROI of renewables and the recent developments of batteries. That leads him to the statement that renewables are not really "renewable" but, at most, "replaceable." Which is simply wrong. The EROI of renewables is now large enough to allow the use of renewable energy to recycle renewable plants. Renewables are exactly that: renewable. 

You could argue that my (and Ahmed's) evaluation of the EROI of renewables is over-optimistic. Maybe, but that's not the main point. Ahmed's criticism is focused on the roots of the problem: we need to take into account how the system can (and always does) adapt to scarcity. It follows different paths among the many available. Ahmed writes: 

...we remain trapped within the prevailing ideological paradigm associated with modern industrial civilisation. This paradigm is a form of reductive-materialism that defines human nature, the natural world, and the relationship between them through the lens of homo economicus – a reduction of human nature to base imperatives oriented around endless consumption and production of materially-defined pursuits; pursuits which are premised on an understanding of nature as little more than a repository of material resources suitable only for human domination and material self-maximisation; in which both human and nature are projected as separate and competing, themselves comprised of separate and competing units.

Yet this ideology is bound up with a system that is hurtling toward self-destruction. As an empirical test of accuracy, it has utterly failed: it is not true because it clearly does not reflect the reality of human nature and the natural world.

It’s understandable, then, that in reacting to this ideology, many environmentalists have zeroed in on certain features of the current system – its predatory growth trajectory – and sought out alternatives that would seem to be diametrically opposed to those regressive features.

One result of this is a proliferation of narratives claiming that the clean energy transformation is little more than an extension of the same industrialised, endless growth ideological paradigm that led us to this global crisis in the first place. Instead of solving that crisis, they claim, it will only worsen it.

Within this worldview, replacing the existing fossil fuel energy infrastructure with a new one based on renewable energy technologies is a fantasy, and therefore the world is heading for an unavoidable contraction that will result in the demise of modern civilisation.  ... Far from being a sober, scientific perspective, this view is itself an ideological reaction that represents a ‘fight or flight’ response to the current crisis convergence. In fact, the proponents of this view are often as dogmatically committed to their views as those they criticise. ....

Recognising the flaws in Michaux’s approach does not vindicate the idea that the current structures and value-systems of the global economy should simply stay the same. On the contrary, accelerating the energy and transport disruptions entails fundamental changes not only within these sectors, but in the way they are organised and managed in relation to wider society.

My critique of Michaux doesn’t justify complacency about metals and minerals requirements for the clean energy transformation. Resource bottlenecks can happen for a range of reasons as geopolitical crises like Russia's war in Ukraine make obvious. But there are no good reasons to believe that potential materials bottlenecks entail the total infeasibility of the transition.

... we face the unprecedented opportunity and ecological necessity to move into a new system. This system includes the possibilities of abundant clean energy and transport with diminishing material throughput, requiring new circular economy approaches rooted in respect for life and the earth; and where the key technologies are so networked and decentralised that they work best with participatory models of distribution and sharing. This entails the emergence of a new economy with value measured in innovative ways, because traditional GDP metrics focusing on ever-increasing material throughput will become functionally useless.

If you can, please, try to examine these statements by Ahmed with an open mind because he perfectly frames the problem. And never forget one thing: the future is not a single path toward catastrophe. It is a garden of forking paths. We are bound to follow one of these paths: we don't know which one yet, but not all of them lead to the Seneca Cliff. In the transition to a renewable energy system, we can adapt, reduce demand, improve efficiency, deploy new technologies, and simply be happy with a more limited supply of energy at some moments. It is only the rigidity of our mental models that make us think that there are no alternatives to fossil fuels. 

 This post was revised on May 8th 2023 to improve clarity

Sunday, November 27, 2022

The Most Amazing Graph of the 21st Century: How the Empire is Striking Back!


In 1956, Marion King Hubbert predicted that the US oil production would follow a "bell-shaped" curve, starting an irreversible decline around 1970. He was basically correct but, around 2010, the production curve restarted growing. This abrupt rebound was an amazing event that propelled the US back to the role of largest world producer of crude oil, and to become noticeably more bullish in geopolitical terms. Buoyed by its large oil production, the Empire is striking back. But for how long? (image by Paul Kedrosky)

Years ago, James Schlesinger noted that human beings have only two operational modes: complacency and panic. It is an observation that rings true and that we can generalize in terms of groups: some humans are catastrophists, and some are cornucopians. I tend to side with the catastrophists, to the point that I created the term "Seneca Effect" or "Seneca Cliff" to define the rapid decline that comes after that growth stops. Indeed, catastrophes are a common occurrence in human history, but it is also true that sometimes (rarely) a catastrophic decline can be reversed: I termed this effect the "Seneca Rebound.

There is an impressive example of rebound with the story of the US oil production. You probably know how, in 1956, Marion King Hubbert proposed his idea of the "bell-shaped" curve. He turned out to be approximately right in his prediction: the US oil production started to decline after peaking in 1970, following a trajectory that seemed to be irreversible. In the early 2000s, after nearly 40 years of decline, no geologist sane in his/her mind would have said that the decline could be stopped, to say nothing about reversing it. It was not a question of being catastrophist or cornucopian: the members of both categories would normally agree that extracting large amounts of oil from "non-conventional" sources was simply unthinkable in economic terms. 

And then, something happened that changed everything. It took a few years before the new trend was clear but, by the mid-2010s, it couldn't be ignored anymore. By 2018, the US production had returned to the levels of its 1970 peak. In 2019, it had overcome it, and it kept growing. The production of natural gas followed the same trend, shooting up rapidly to levels never seen before. In 2020, the Covid crisis caused a new drop in production, at present only partially recovered. But let's forget the Covid story for now. What happened that changed things so much in the US oil industry?

You probably know that the cause has a name and a story: it is called tight oil or "shale oil," extracted by "fracking". It itself, it is nothing especially new, the concept was already known in the 1930s. The idea is to use high pressure to fracture the rock that contains the oil. That makes it possible for the liquid to flow to the surface. The problem with fracking is that it is expensive. So much that it is commonly said that nobody made any money on it. In 2017, an analysis by the Wall Street Journal arrived at the conclusion that, since 2007, “energy companies have spent $280 billion more than they generated from operations on shale investments.” Other analysts expressed the same concepts: you can extract oil from shales, but don't expect to make any money out of it. So, why are people insisting on pouring good money into bad wells? 

There are good reasons. The people who discounted the possibility of extracting tight oil were perfectly able to evaluate the economic convenience of the process, but they didn't consider that the "market" is an abstraction that doesn't always work, actually, almost never works. So, those financial entities that provide money for oil exploration are part of a mix of interests that include the oil industry, the aerospace industry, the military industry, and others. This mix is what keeps the US economy alive. But there would be no aerospace or military industries if the oil industry could not produce enough oil. 

It is impossible to say how the decision to pour immense amounts of money into tight oil was taken. Maybe it was a strategic decision taken by the military lobby in the US government (you may also note something curious: why was the US the only country that invested in shale oil extraction? After all, there are shale oil deposits in many other countries. I can think of an explanation, but I leave it to commenters to harp on conspiracy theories.) Or maybe the financial lobby recognized that they could survive losses in their investments in oil if these investments kept other sectors of the economy able to generate profits. Or, perhaps, it was a collective decision created by the great panic of 2008, when oil prices spiked up to 150 dollars per barrel. That event scared everyone enough to convince some of the key players that investing in oil was a good idea. In any case, with the second decade of the 21st century, the world changed.

The image above is by Michael Roscoe. It is not updated to the latest levels of oil production, but it shows how the US dominated the oil market (and the world), up to the 1960s. For a while, it was challenged by Russia and Saudi Arabia, but now the US is taking the lead again. Like all complex systems, the American Empire depended on the inflow of energy from the outside. So, it's not surprising that the Empire is striking back!  

One of the visible consequences of the return of the Empire is that it abandoned Afghanistan, which it had invaded 20 years ago in search of new oil resources in Central Asia. These resources turned out to be elusive, perhaps not existing, but the US stubbornly insisted on staying in the area. Then, with tight oil, the powers that be realized that the US didn't need those resources anymore. And that they could concentrate on juicier targets, moving aggressively to push its main competitor, Russia, out of the European gas market. The US is also behaving aggressively toward China, which it correctly considers its main long-term competitor. Whether this will lead to a war, is all to be seen. But it is energy that makes wars possible. 

But for how long will the shale bonanza last? As always, the future is obscure, but not completely. Shale oil remains a limited resource, no matter how often we hear that it will give us centuries of prosperity, or even that technology made it unlimited. After the Covid tsunami, shale oil production restarted to grow, but it has not yet reached the level it had in 2019. Also, its growth is clearly slowing down, while the Empire is facing new constraints in terms of overexploited resources: land, water, food, fertile soil, and more. 

Is tight oil going to peak again and, this time, forever? We cannot say. We can only say that the American Empire is following the ebb and flow of the resources that make it exist. Such is the power of energy, and empires are but slaves to the forces that govern the universe! 



Monday, July 11, 2022

The Mystery of the Mousetrap: Of Chain Reactions and Complex Systems

The "mousetrap chain reaction" from Disney's 1957 movie "Our friend, the Atom." A fascinating experiment that brings a curious question: Why is the mousetrap the only thing you can buy at a hardware store that can create a chain reaction? Another mousetrap-related mystery is why, with so many experiments done, so far nobody had tried to make measurements to quantify the results? Eventually, two Italian researchers, Ilaria Perissi and Ugo Bardi re-examined this old experiment, showing how it can be seen as much more than a representation of a nuclear reaction, but a paradigm of the behavior of complex systems. 

Walt Disney's 1957 movie, "Our Friend the Atom," was an absolute masterpiece in terms of the dissemination of scientific knowledge. It was, of course, sponsored by the US government. It was supposed to promote their energy policy which, at the time, was based on the concept of "atoms for peace." So, the movie was propaganda but, at the same time, it is stunning to think that in the 1950s, the US government was making an effort to obtain an informed consent from its citizens, instead of just scaring them into submission! Things change, indeed. But we can still learn a lot from this old movie. 

So, "Our Friend, the Atom" is a romp through what was known about atomic physics at the time. The images are stunning, the explanations clear, and the story is fascinating with a mix of hard science and fantasy, such as the story of the genie and the fisherman. I went through my studies in chemistry having in mind the images from the movie. Still today, I tend to see in my mind protons as red, neutrons as white, and electrons as green, as they were shown in the book. 

One of the fascinating elements of the story was the chain reaction made with mousetraps. I was so impressed by that experiment that I always had in mind to redo it and, finally, last year, my colleague Ilaria Perissi agreed to give me a hand. Together, we built our wonderful, new, improved, mousetrap machine! We braved the risks of flying balls and we managed to make our experiments with only minor damage to our knuckles. And we were the first, it seems, to make quantitative measurements of this old experiment. 

I will tell you about our results below but, first, a bit of history. The idea of the mousetrap chain reaction was proposed for the first time in 1947 by Richard Sutton (1900-1966). He was a physicist working at Haverford College, in Pennsylvania: a maverick physics teacher who loved to create demonstrations of scientific phenomena. And, no doubt, the idea to use mousetraps to simulate a nuclear chain reaction was nothing less than a stroke of genius. Too bad that Sutton is not mentioned at all in Disney's movie. 
Here is how Sutton proposed the experiment: 

Sutton seems to have actually performed his demonstration in front of his students, although we have no pictures or records of it. We tried to use the same setup, but we found that the corks are too light to trigger the traps, and the reaction dies out immediately. It works only if the traps are not fixed to the table and are left free to fly around, Indeed, Sutton doesn't mention that he fixed the traps to the table. The "flying trap problem" plagues most of the experimental setups of this experiment. But if the chain reaction is generated by flying traps, it is not anymore a simulation of an atomic chain reaction. 

After that Sutton published his idea, performing the mousetrap experiment in public seems to have become fashionable.  You can find another illustration of the setup in the 1955 book by Margaret Hyde: "Atoms today and Tomorrow.

Note how the experiment has changed, probably because of the problems to make it work with corks. Now there are no corks, but a marble is used to trigger one trap, which is linked to other mousetraps by a "heavy thread." Maybe it works, but it is not what Sutton had proposed, and it is hard to present it as a simulation of anything. 

So, in 1956, the filmmakers at Disney were probably scratching their heads and thinking of how they could make the mousetrap experiment work. Eventually, they decided to use ping-pong balls and a large number of mousetraps. You can see the results in the movie: traps are flying all over. Same problem: this is not what the experiment was supposed to do. And there is a reason: also, in this case, we tried to use the same setup, and we found that ping pong balls are too light to cause traps to snap. If the traps are fixed to the table, the experiment just fizzles out after triggering one or two traps at most. 

Strangely, so few people noted the problem: an exception was the nuclear physicist Ivan Oelrich, but that was in 2010! Most of the mousetrap experiments you can find on the Web (and there are many) are of the "flying-traps" type. It is a problem with science for the public: it is often flashy and spectacular, and signifying nothing. 

We found only two experiments on the Web where the traps were fixed to the supporting plate, as they should have been. But, even in these two cases, no quantitative measurements were performed. Strange, but there is this curse with popular science to be often despised and, sometimes, carry a negative mark on a physicist's career. 

But never mind that. Your dream team, Ilaria and Ugo, engaged in making the experiment in the correct way, with fixed traps, and at the same time measuring the parameters of the experiment. Our trick was to use relatively heavy wooden balls that could nicely trigger the traps. We also enlarged the area of the metal triggers using cardboard disks. Then, we used commercial cell phone cameras to record the results. 

It took a lot of patience: it is not easy to load 50 traps with 100 wooden balls, avoiding that they start going off when you don't want them to go off. To say nothing about the gate snapping directly onto the experimenter's fingers. Painful, but not a cause of permanent damage. We did that in the name of science, and it worked! Of course, some reviewers were horrified by a paper that was not using expensive equipment and complicated and mysterious calculations. But, with patience, we succeeded in seeing it published in a serious scientific journal. 

Excuse me for being proud of our brainchild, but I truly found it elegant how we could fit our data with a simple mathematical model. And how the trap setup mirrors not only the chain reaction in a nuclear explosion, but also several other phenomena that flare up and then subside. For instance, the trap array may be seen as a mechanical simulator of the Hubbert curve, with the traps as oil wells and the balls as extracted oil. It can also simulate whaling, various cases of overexploitation of natural resources, the diffusion of memes in cyberspace, and more. Not bad for an object, the mousetrap, that had been developed with just one purpose: killing mice. 

We conclude our paper on "Systems" with the following paragraph: 
Mousetraps seem to be the only simple mechanical device that can be bought at a hardware store that can be used to create a chain reaction. We do not know why this phenomenon is so rare in hardware stores, but chain reactions are surely common in complex adaptive systems. We believe that the results we reported in this paper can be helpful to understanding such systems and, if nothing else, to illustrate how chain reactions can easily go out of control, not only in a critical mass of fissile uranium but also in similar dynamics occurring in the ecosystem that go under the name of “overshoot” and “overexploitation”.
Yes, really, why are mousetraps so exceptional? Who would have thought?
Here is the post that I published a few months ago on this subject. 

The Mousetrap Experiment: Modeling the Memesphere

 Reposted from "The Seneca Effect" Nov 22, 2021

 Ilaria Perissi with our mousetrap-based mechanical model of a fully connected network. You can find a detailed description of our experiment on ArXiv

You may have seen the "mousetrap experiment" performed as a way to demonstrate the mechanism of the chain reaction that takes place in nuclear explosions. One of its earliest versions appeared in the Walt Disney movie "Our Friend, the Atom" in 1957. 

We (myself and Ilaria Perissi) recently redid the experiment with 50 mousetraps and 100 wooden balls. And here it is.

But why bother redoing this old experiment (proposed for the first time in1947)? One reason was that nobody had ever tried a quantitative measurement. That is, measuring the number of triggered traps and flying balls as a function of time. So, we did exactly that. We used cell phone slow-motion cameras to measure the parameters of the experiment and we used a system dynamics model to fit the data. It worked beautifully. You can find a pre-print of the article that we are going to publish on ArXiv. As you can see in the figure, below, the experimental data and the model go reasonably well together. It is not a sophisticated experiment, but it is the first time that it was attempted.

But the main reason why we engaged in this experiment is that it is not just about nuclear reactions. It is much more general and it describes a kind of network that's called "fully connected," that is where all nodes are connected to all other nodes. In the set-up, the traps are nodes of the network, the balls are elements that trigger the connection between nodes. It is a kind of communication based on "enhanced" or "positive" feedback.

This experiment can describe a variety of systems. Imagine that the traps are oil wells. Then, the balls are the energy created by extracting the oil. And you can use that energy to dig and exploit more wells. The result is the "bell-shaped" Hubbert curve, nothing less!  You can see it in the figure above: it is the number of flying balls "produced" by the traps.

We found this kind of curve for a variety of socioeconomic systems, from mineral extraction to fisheries (for the latter, you can see our (mine and Ilaria's) book "The Empty Sea." So, the mousetraps can describe also the behavior of fisheries and have something to do with the story of Moby Dick as told by Melville.

You could also say the mousetrap network is a holobiont because holobionts are non-hierarchical networks of entities that communicate with each other. It is a kind of holobiont that exists in nature, but it is not common. Think of a flock of birds foraging in a field. One bird sees something suspicious, it flies up, and in a moment all the birds are flying away. We didn't have birds to try this experiment, but we found a clip on the Web that shows exactly this phenomenon.

It is a chain reaction. The flock is endowed with a certain degree of intelligence. It can process a signal and act on it. You can see in the figure our measurement of the number of flying birds. It is a logistic function, the integral of the bell-shaped curve that describes the flying balls in the mousetrap experiments

In Nature, holobionts are not normally fully connected. Their connections are short-range, and signals travel more slowly through the network. It is often called "swarm intelligence" and it can be used to optimize systems. Swarm intelligence does transmit a signal, but it doesn't amplify it out of control, as a fully connected network does, at least normally. It is a good control system: bacterial and ant colonies use it. Our brains are much more complicated: they have short-range connections but also long-range ones and probably also collective electromagnetic connections. 

One system that is nearly fully connected is the world wide web. Imagine that traps are people while the balls are memes. Then what you are seeing with the mousetrap experiment is a model of a meme going viral on the Web. Ideas (also called memes) flare-up on the Web when they are stimulated it is the power of propaganda that affects everybody.

It is an intelligent system because it can amplify a signal. That is that's the way it reacts to an external perturbation. You could see the mousetraps as an elaborate detection system for stray balls. But it can only flare up and then decline. It can't be controlled. 

That's the problem with our modern propaganda system: it is dominated by memes flaring up out of control. The main actors in this flaring are those "supernodes" (the Media) that have a huge number of long-range connections. That can do a lot of damage: if the meme that goes out of control is an evil meme and it implies, say, going to war against someone, or exterminating someone. It happened and keeps happening again as long as the memesphere is organized the way it is, as a fully connected network. Memes just go out of control.

All that means we are stuck with a memesphere that's completely unable to manage complex systems. And yet, that's the way the system works. It depends on these waves of out-of-control signals that sweep the web and then become accepted truths. Those who manage the propaganda system are very good at pushing the system to develop this kind of memetic waves, usually for the benefit of their employers. 

Can the memesphere be re-arranged more effectively -- turning it into a good holobiont? Probably yes. Holobionts are evolutionary entities that nobody ever designed. They have been designed by trial and error as a result of the disappearance of the unfit. Holobionts do not strive for the best, they strive for the less bad. It may happen that the same evolutionary pressure will act on the human memesphere. 

The trick should consist in isolating the supernodes (the media) in such a way as to reduce their evil influence on the Web. And, lo and behold, it may be happening: the great memesphere may be rearranging itself in the form of a more efficient, locally connected holobiont.  Haven't you heard how many people say they don't watch TV anymore? Nor do they open the links to the media on the Web. That's exactly the idea. Do that, and maybe you will start a chain reaction in which everyone will get rid of their TV. And the world will be much better. 

Monday, June 27, 2022

The Dewdrop World is a Dewdrop World, and yet, and yet..... The Ethereal Nature of Collapse

It is said that the Japanese poet Kobayashi Issa wrote this haiku upon the death of his daughter: "The dewdrop world is a dewdrop world, and yet, and yet......." (tsuyu no yo wa tsuyu no yo nagara sari nagara). It is poetry at its best: it hints at much more than it says. Here, I start from this poem about dew being an incorporeal thing to examine how another incorporeal thing, such as money, can affect us.

A few days ago, I was looking again at the presentation that Nathan John Hagens produced for the Earth Day of 2021. I had watched it when it appeared, but something made me return to it. It is a long story, but the point that remained in my mind is when Nate shows a graph with a clear "Seneca" shape for the global oil production curve. That is, something that grows slowly, then declines rapidly (at minute 38 of the presentation). Later, at minute 44, he shows a similar curve for the GDP. 

Nate attributes the slanting forward of the curve to financial effects. My first reaction to that was that financial tricks, in themselves, do not produce oil (and can't raise the GDP, either). How can a basically non-existing thing such as money, mainly numbers stored in computer memories, affect the real world in such a way?

But, rethinking the matter, I am not sure anymore that the financial world really is an ethereal and inconsequential thing. Maybe it is the opposite. As I learn more about more things, I am always surprised by what I discover. My latest epiphany came from a talk given by Fabio Vighi, who teaches at the University of Cardiff, about a correlation between the lockdowns of 2020 and the global financial situation and, in particular, of the "REPO" market (you can find his take at this link). 

I must confess that I had no idea of what the REPO was, not even that such a thing existed. Now, I know that it stands for "Repurchase Agreements" and I think I have some idea of how it is supposed to work. Basically, it is a market where financial operators can resupply with money by borrowing it. Where does that money come from? Typically, financial firms with large pools of cash do not want to let that money sit around, so they lend it to financial institutions, banks, at low interest rates. Then, the banks will use this money to fund short-term needs. The REPO market is a short-term thing.

I am far from having assimilated the obscure mechanisms operating inside the entrails of the REPO market, but this much I can understand: it determines the cost of money. Now, connect this concept with the real economy. The economy is made out of real things: resources, materials, equipment, goods, people, and more. And everything in the economy is subjected to depreciation (a name that economists use for the thing that physicists call entropy). If you want to fight depreciation (entropy) you must expend energy. (you can do that in an open system -- in closed ones, entropy always increases, but this is not the case for the economic system.) 

So, to keep the economy running, you need energy. In order to get energy, you need energy (you probably heard the concept of "energy return on energy invested", "EROI"). But, in order to get energy to be invested, our economic system is geared in such a way that you need that non-physical thing called "money."  No money, no investments. No investments in energy, no production of energy. 

What if there is no money? Energy is not produced. Then people become very poor, and many die. Incidentally, it also happens that the rich get richer, but that's another story. Apart from the rich, the poor slide down the downward step of the curve: the Seneca Cliff. I do think that Nate is right in his interpretation: the Seneca Cliff would arrive even independently of financial factors, but financial factors can make it steeper. Money doesn't create resources (as economists are fond to say). But it can direct more resources to exploitation, making it faster. That gives people the illusion that there is more of it. 

You see how everything is connected: our fate is determined by such mysterious things as the one called the "REPO market." Then, something horrible happened in 2019: a cash crunch caused the repo rate to soar — reaching as high as 10 percent intraday on Sept. 17. It pushed up the federal funds rate to levels much higher than it was supposed to be (between 2-2.25 percent) at the time.

The interesting thing about the story is Fabio Vighi's interpretation that the lockdowns of 2020 were the result of the attempt of the powers that be to cool the REPO market and avoid a financial Seneca Cliff. If this was their aim, they succeeded spectacularly.

Note how the REPO rate went down from the Spike of September 2019 to a very low, and apparently stable, level in 2021. So, Fabio Vighi's interpretation could make sense. But can it be true? Personally, I think it might well be the case, but it is also true that correlation does not mean causation and the spike disappeared much before the lockdowns. On the other hand, the powers that be may have been scared enough that they put into practice an emergency plan they had concocted long before. Whatever the case, they will never tell us the truth. 

The thing that doesn't cease to amaze me, though, is how it is possible that humans placed themselves to me so dependent on the thing called "money."  It is an ephemeral entity that has no physical consistency.  I can also understand that small disturbances in the repo (and other money) markets can ripple through the entire system. The physicists call this the "butterfly effect" and you know how small perturbations can send huge systems tumbling down to their doom. Money has no more consistency than the morning dew. And yet, and yet......

Take a look at this incredible painting by Quentin Matsys, "The Money Lender and His Wife." painted in 1514 and representing two burghers of Antwerp, the ancestors of the people who have been playing with the REPO market in modern times. Just like Issa's poem, this painting hints at much more than it shows, but in the opposite way. Whereas Issa hints that the world is not real, here we see it as even too real. Reality is gold coins, much more important than the book of devotions that the wife of the banker should have been looking at, but she is not. Yet, the true value of those coins is all in the minds of people, by themselves they are not worth more than dew in the morning.

You can find Nate Hagen's 2021 posts at
A more recent documentary is at this link: