Energy, Oil & Money: Interrelationships

Following below are a couple of the posts I made so far in a very interesting debate begun by Ilargi of The Automatic Earth in a thread called There Is Not Enough Money On Planet EarthYou can follow the full set of arguments being made on TAE by following the link.

Do you follow Steve’s argument? Possibly not, because much as I agree with his analysis, he has a very confusing style for making arguments. Sorry Steve, this is true. LOL.

I’ll just pick out a core argument he makes and try to flesh it out from my perspective.

Central banks cannot print oil or jobs, they cannot move interest rates (money worth is set continually at gas pumps) they can do very little. They do not print money. – Steve from Virginia

Any money created in the Oil Economy has to work to BUY OIL. Helicopter Ben can issue more Credit to the TBTF Member Banks which own Da Fed, but he cannot make them lend out the credit he hands off to them for others to buy and burn oil.

It is not remunerative now for lenders to make Loans to individuals, biznesses or Goobermints to buy and burn Oil. It never was, but while there was a ton of it out there to waste the owners of the Oil could keep issuing credit to buy more of it, and collect on the interest of what they loaned out to buy it in the first place.

The problem the lenders face now is two-fold. First, all the consumers of the oil cannot repay on the debt of the oil already consumed, so old loans are now all going south. Second, they will not issue new credit to buy more Oil, because they just do not have all that much left to sell anymore to EVERYBODY. So some places are being triaged off the Credit Train, namely places like Egypt, Greece and Spain right now.

Money is not STRICTLY oil based, since clearly money existed before the Oil economy did. Money IS always energy based though, even in an Ag system where the energy to run the civilization is coming from what grows from the land. Monetary systems fail when the resources upon which it is based fall from surplus to scarcity. So an Egyptian monetary system fails when the Grain held in the Warehouse is no longer sufficient to feed the population. Money Tokens of whatever sort held are no good, because the grain just is not in the warehouse to redeem for the tokens.

Similarly here with Oil. there are numerous claims to the Oil held in the geound, as Stoneleigh puts it often “multiple claims to underlying wealth”. The Money issued though cannot make more Oil available, all you really can do is restrict credit to buy the oil from some places so others who still have credit can buy it. The credit system is collapsing because in this economy, the Oil resource upon which that credit was issued and is based is collapsing. The credit collapse of the monetary system is an EFFECT of Peak Oil, because since the beginning of the age of Oil, credit has been issued to BUY OIL.

RE

All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era.-RE

At the same time, Karl Marx just about predicted all of the problems occurring in global markets right now, and he didn’t write a lick about energy or oil. OTOH, he implicitly recognized its importance when he focused on the global expansion of industrial capitalism and its constant means of “revolutionizing production” through technology.-Ashvin

I don’t think Marx was wrong in what he did analyze, I just don’t think it was a complete analysis.  Like other economists of the era, I think Marx viewed energy as an inexaustible resource.  His focus was on the flaws in the Industrial model far as finance goes, and those are accurate observations for the most part, though by no means am I well read in Marxist analysis to be able to defend that idea.  I’m sure Ashvin could defend that better than I could.  The thing is, there is no way you can make an accurate analysis of this problem without looking carefully at what underpins it, which is energy extraction and utilization.

Saying money/credit is a proxy for energy (and, most importantly now, oil) is like saying working hours during the day is a proxy for energy. It is axiomatic. There can be no logical separation of the financial/monetary system from the extraction/production of net energy.-Ashvin

No Labor and Energy are not comparable in this way because of the vast differential in terms of thermodynamic input into the manufacturing process that Oil has over Labor.  You cannot substitute Labor for Oil in many aspects of this economy, a simple example would be the Interstate Highways, which took the power of many Caterpillar Back Hoes and Front End Loaders and Cranes to build.  A force of Slaves would have taken millenia to build such a thing, even if it could be built at all.  Laborers cannot make the huge steel beams that support those Spaghetti intersections.

While it is possible to base your Money on just about any commodity, in the Oil economy MOST of the money in existence, probably 99.9% of it is tagged to the Oil it can buy.  The Oil produces the Food through the Industrial Ag process, literally we do Eat Oil that is processed this way.  Oil produces the McMansions we buy and sell and it provides the Energy to run them and make them livable.

The folks who Own the Oil issued the Credit to buy the Oil, in many ways through Sovereign, Corporate and Private debt issuance over the course of the Age of Oil.  It is no coincidence of course that John D Rockefeller who created the Monopoly of Standard Oil ALSO was the main force behind Chase Manhattan Bank, the bank my Dad the Pigman worked for making many bad loans to South American countries back in the 60s.

As the Oil decreases in its availability due to extraction costs in more difficult locales and more places with expanding populations demand the Oil, the truth is the Rockefellers do not have enough left to SELL to everyone anymore, and so the Credit to buy it is disappearing here now.  Various economies all over the world are being Triaged off of the Oil Economy, Steve expresses this as “Cosnervation by Other Means”.  Demand crushed in Greece is exported to the FSofA, which still has some credit to buy Oil, but that is disappearing as well.  It is just masked because so many other places are doing WORSE here in the contraction of credit availability.

Any Nation State can issue it’s own Credit, but if that credit won’t buy Oil, then it is useless as a means to maintain an Oil based economy.  The Greeks can go ahead and issue Credit in Drachmas, but the Drachmas won’t buy Oil or it’s products.  They can try and trade Olives for Oil, but it’s unclear how many barrels of Oil a barrel of Olives would actually buy.  In any event, they cannot get “productive” enough with an Ag based economy to buy much Oil at all.

However, not every issue that arises within the former is directly a function of the latter, as evidenced by the theories of people like Marx, Fisher, Keynes, Minsky, etc. which accurately describe the dynamics of the economic/financial system but do not directly rely on the functions of the energy/oil industry to do so.-Ashvin

Again, I do not think any of these economists directly confronted the issue of limitations to the energy reserves of the world.  The assumptions they make sometimes hold true in a world of surplus energy, but for the most part I do not think any of these economic theories are holding up too well as the energy inputs become scarce and expensive.

It remains true that in an Energy intensive economy based primarily on Oil now, whatever Money is issued out must serve to Buy Oil.  More debt issuance can increase the Money Supply (if it is lent out), but it will not be lent out if the Lender knows from the Get-Go its a losing bet.  The non-productive nature of Industry is revealed as the Energy input crosses a threshold price level and there isn’t enough cheap energy to keep subsidizing it.

Marx foresaw a crisis in Capitalism based on economic principles, and he was largely correct far as I understand Marx anyhow.  The analysis is not complete though, because Avaialble per capita Energy puts even more stress on the system and undermines the Finance economy further.  Basically, this just produces a Bigger and Better Collapse than Marx ever foresaw.

RE

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

Support the Diner
Search the Diner
Surveys & Podcasts

NEW SURVEY

Renewable Energy

VISIT AND FOLLOW US ON DINER SOUNDCLOUD

" As a daily reader of all of the doomsday blogs, e.g. the Diner, Nature Bats Last, Zerohedge, Scribbler, etc… I must say that I most look forward to your “off the microphone” rants. Your analysis, insights, and conclusions are always logical, well supported, and clearly articulated – a trifecta not frequently achieved."- Joe D
Archives
Global Diners

View Full Diner Stats

Global Population Stats

Enter a Country Name for full Population & Demographic Statistics

Lake Mead Watch

http://si.wsj.net/public/resources/images/NA-BX686_LakeMe_G_20130816175615.jpg

loading

Inside the Diner

Quote from: knarf on Today at 04:20:07 AMCow escapes on way to slaughterhouse, smashes through metal fence, breaks arm of man trying to catch her then swims to safety on island in lakeLocal politician reportedly agre...

[html]   

In today's Smorgasbord, I loaded the plate with Gravlax and Herring and Lime...and the rest I don't know what but it looks good.  RE[...

Doomstead Diner Daily 2/1[/u...

The boreal, one of the world’s largest carbon sinks, is in danger. By working to save it, Canada could make a quantum leap, culturally and environmentally.[img width=1000 height=700]https://www.nrdc.org/sites/default/files/styles/full_content--...

Recent Facebook Posts

Who is Guilty of Climate Crimes?

Who is Guilty of Climate Crimes? These are the key perpetrators of the largest human rights violation in history.

3 hours ago

Cow escapes on way to slaughterhouse, smashes metal fence, breaks human's arm, and swims to uninhabited island where she still lives

We’ve found the Diner’s Spirit Animal: Cow escapes on way to slaughterhouse, smashes through metal fence, breaks arm of man trying to catch her..

3 hours ago

How can I make money from my DNA?

How can I make money from my DNA? If you have your DNA sequenced, someone somewhere will be making money from the data. A new start-up aims to..

3 hours ago

Under Trump, America's religious right is rewriting its code of ethics

That scramble to their knees does not mean what you think it means– From scorning immigrants to accepting the president’s profanity, evangelicals..

3 hours ago

Ex-CIA operative says US has long meddled in elections, but it’s OK since they are ‘good cops’

Ex-CIA operative says US has long meddled in elections, but it’s OK since they are ‘good cops’…

3 hours ago

Diner Twitter feed

Knarf’s Knewz

The boreal, one of the world’s largest carbon sink [...]

The ‘American Empire Defined’ (in three ways) is a [...]

Models from 100% Capri walk through the Bal Harbou [...]

 Outspoken Philippines President Rodrigo Duterte h [...]

Diner Newz Feeds
  • Surly
  • Agelbert
  • Knarf
  • Golden Oxen
  • Frostbite Falls

Quote from: Golden Oxen on Today at 07:04:13 AMQuo [...]

Quote from: RE on Today at 11:12:36 AMQuote from: [...]

Quote from: luciddreams on Today at 10:39:19 AMDum [...]

Quote from: luciddreams on Today at 10:39:19 AMWel [...]

Well, a traitor to what?  The Murikan way of life? [...]

Quote from: Golden Oxen on February 08, 2018, 12:3 [...]

I just call 'em like I see 'em. I never [...]

Quote from: Eddie on February 08, 2018, 12:30:03 P [...]

Quote from: agelbert on February 08, 2018, 10:51:2 [...]

The boreal, one of the world’s largest carbon sink [...]

The ‘American Empire Defined’ (in three ways) is a [...]

Models from 100% Capri walk through the Bal Harbou [...]

 Outspoken Philippines President Rodrigo Duterte h [...]

DEVELOPING: Buildings shake in Mexico City after m [...]

Quote from: Golden Oxen on February 16, 2018, 09:5 [...]

The dog shit at the FBI fuck up big time again. Th [...]

Quote from: Palloy2 on February 13, 2018, 05:51:30 [...]

The Korean War was a proxy war. The US and China w [...]

The Alaska Soap Opera continues...REhttps://www.us [...]

It was a walk in, spirit change.8th inning relieve [...]

It was that spoonful of sugar she took to make the [...]

Alternate Perspectives
  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

The Pendulum - Part One Retreat to High Ground By High Desert     Missing in the mix of hundreds of [...]

The (Mind) Games People Play By Cognitive Dissonance     Fair warning! This is a long and dense read [...]

Wisdom, Experience and Just-In-Time Thinking By Cognitive Dissonance   I try to remind myself each g [...]

This and That Vol 4 Mid Winter Musings By Cognitive Dissonance     Probably the one topic Mrs. Cog a [...]

Taking a Pass on Gas – Wood Preferred - Part Three By High Desert Homesteading This is the final ins [...]

Event Update For 2018-02-16http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2018-02-15http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2018-02-14http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2018-02-13http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2018-02-12http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

You know things have taken a turn for the desperate when women have started to drive. Or rather, whe [...]

From Filmers to Farmers is re-launched on the astounding open source blogging platform Ghost! [...]

The blogging scene is admittedly atrocious. Is there really no option for a collapse blogger to turn [...]

Daily Doom Photo

man-watching-tv

Sustainability
  • Peak Surfer
  • SUN
  • Transition Voice

Breathing Highways and Sponge Cities"We could do worse than to go back to the way nature manages rainfall."During the 20th Cen [...]

Junk Food for Salmon"For the geoengineering set, all this news provides an opening for more advanced biotech . [...]

Follow the Money, Mr. Mueller"“Ivanka got her father to bomb Syria by adroitly pushing his buttons. ‘Ivanka had long ago fig [...]

Yarrow's Spiderweb"We are, like spiders, carbon creations that have learned to use carbon as tools. "At the [...]

A Hawaiian Missile Lullaby"Q: What should one do to prepare for an incoming ICBM just minutes away?A: Hug. Smile. Your sh [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

To fight climate change, you need to get the world off of fossil fuels. And to do that, you need to [...]

Americans are good on the "thoughts and prayers" thing. Also not so bad about digging in f [...]

In the echo-sphere of political punditry consensus forms rapidly, gels, and then, in short order…cal [...]

Discussions with figures from Noam Chomsky and Peter Senge to Thich Nhat Hanh and the Dalai Lama off [...]

Lefty Greenies have some laudable ideas. Why is it then that they don't bother to really build [...]

Top Commentariats
  • Our Finite World
  • Economic Undertow

America put whitey on the Moon. But, it also is the only country to use nuclear weapons on civilian [...]

Search and read Bernays and a different view of what has shaped opinion and why might emerge. We hav [...]

Americans just don't care. The pursuit of materialism is probably mostly to blame. The endless [...]

A partial list of products made from Petroleum (6000 items). One 42-gallon barrel of oil creates 19. [...]

Central banks are system regulators. When they allow commercial bankers commit crimes they are compl [...]

In a way Steve, it seems that you are always arguing that the system is legit, even though many of u [...]

Coming at this from the perspective of a "woo", it's clear to me that a lot of negati [...]

We can look back and find clues: In 1907 there was a money panic that grew out of the failure of the [...]

Sorry, I meant for the above to be a link. In the article Mish Shedlock, cynically suggests that the [...]

RE Economics

Going Cashless

Off the keyboard of RE Follow us on Twitter @doomstead666...

Simplifying the Final Countdown

Off the keyboard of RE Follow us on Twitter @doomstead666...

Bond Market Collapse and the Banning of Cash

Off the microphone of RE Follow us on Twitter @doomstead666...

Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

Off the Keyboard of RE Follow us on Twitter @doomstead666...

Kurrency Kollapse: To Print or Not To Print?

Off the microphone of RE Follow us on Twitter @doomstead666...

SWISSIE CAPITULATION!

Off the microphone of RE Follow us on Twitter @doomstead666...

Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

Off the keyboard of RE Follow us on Twitter @doomstead666...

Merry Doomy Christmas

Off the keyboard of RE Follow us on Twitter @doomstead666...

Peak Customers: The Final Liquidation Sale

Off the keyboard of RE Follow us on Twitter @doomstead666...

Collapse Fiction
Useful Links
Technical Journals

Green areas induce smaller increases in the air temperature than built-up areas. They can offer a so [...]

The study of frequency analysis is important to find the most suitable model that could anticipate e [...]

Climate change is an important factor for sustainable water resource management in the arid and semi [...]

Follow on our http://www.doomsteaddiner.net/forum/