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PeakOil is You

PeakOil is You

Renewable Energy and Economic Growth Pt. 2

Discussions about the economic and financial ramifications of PEAK OIL

Re: Renewable energy and economic growth

Unread postby MonteQuest » Sun 07 Dec 2014, 12:02:37

copious.abundance wrote:
MonteQuest wrote:Didn't say it did. I mentioned that, in the US, inflating assets via $4 trillion of QE has contributed to a rising GDP without needing a corresponding increase in energy use.

1. Since money just sitting in an account does not count towards GDP, any "asset inflation" cannot contribute towards GDP unless it is spent on goods or services, or on capital investments (the latter of which always involves spending on goods and services anyway). So ...


So, who says it sat there? I sure didn't. You assert I don't know what QE is or what it did. I am quite well read on the subject, so here goes.

In 2007, the Fed followed an expansionary monetary policy in an effort to stimulate economic growth. One key part of this effort was to buy short-term Treasury securities through its open-market operations. Through these asset purchases, the Fed adds reserves to the commercial banking system, thus allowing banks to lend more money.

These open-market operations failed to provide the stimulus needed due to unusually slow economic growth.

Quantitative easing then became an extension of TARP. (Troubled Asset Relief Program). I guess the theory was that by removing toxic assets from the bank's books they would have more liquidity to offer more credit, or to purchase more government debt. The Fed purchased troubled assets in exchange for base money rather than have the banks borrow money from the FED through the discount window.

Somehow this was supposed to trickle down and help improve unemployment; it did not.

Since the banking system was not prepared to immediately loan this new base money, the system's reserves increased dramatically. The Fed then started paying interest on these excess reserves to remove the incentive for them to be fully used and cause inflation (too much money in circulation). I still fail to see the sense that makes unless it was a ploy to make the FED look like inflation fighters while they bailed out the banks and investors, again.

These banks held a lot of mortgage-backed securities that, if sold, would make many banks insolvent. Why?

Take California subprime housing where loans were made on inflated prices. A house with, say a $500,000 mortgage, became worth only $175,000. The loan became upside down with the owner owing more than the house was worth if marked to market. Those types of loans were bundled together and bought by banks (mortgage-backed securities). The banks maintained the loan value on their books as an asset, even though it was no longer really worth that much.

So, QE effectively took these toxic assets off the books of the banks in exchange for cash. A liquidity swap. The unmarketable toxic assets became liquid; easily bought and sold. The FED’s purchase, in effect, inflated their value bailing out the banks and investors and pumping up the stock market.

Inflated assets have nothing to do with GDP? Why did this headline just pop up?

BOJ keeps QE intact in wake of shocking GDP

Image

Or this chart? These numbers show the Fed's QE programs inflated GDP.

Image

One thing all of this tells me is that economic growth like we have known it is over. After injecting all this stimulus economies are still going into recession and depression? Even the IMF has cut its global growth forecasts for 2014 and 2015 and warned that the world economy may never return to the pace of expansion seen before the financial crisis.
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Sun 07 Dec 2014, 12:55:35

Getting back to this threads main point. Many have pinned their hopes on the assumption that somewhere, somehow a technological solution will come along that will allow us to continue our ways. The optimists have concentrated their efforts on finding new ways to exploit renewable resources or come up with a new infinite source of energy. While we all agree that there must, and will be a shift from non-renewable back to renewable, what remains to be determined is the type of energy transformers we shall embrace and at what scale. They reject the notion to returning to a low-entropy flow and a greater accord with natural systems. While the solar flow is virtually unlimited, the matter-energy that makes up the Earth is not. Thus, the faster we speed up the flow of matter-energy through the system, the faster we will run out of renewable resources, regardless of how long the sun shines. Continuing to try to meet demand with renewables is a fool’s errand. And trying to continue economic growth in a finite world is just pure folly.
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Re: Renewable energy and economic growth

Unread postby Graeme » Sun 07 Dec 2014, 16:10:23

I have to say that I am gratified to see you say this:

While we all agree that there must, and will be a shift from non-renewable back to renewable


However, the rest of your argument is flawed for basically two main reasons; firstly, you do not acknowledge that raw materials to make RE systems can be recycled, nor do you realize that the new systems developed after serving their lifetime will be the product of new innovations and increased efficiencies. We are not going to run out of renewable resources! We will be returning to natural renewable energy sources like the sun and wind, which is in accord with exploiting sustainable natural systems. We discussed earlier that GDP growth has decoupled from energy consumption. As noted on page three (see part 1 old thread), in the US, this decoupling occurred within the last few years by a combination of a switch from coal to natural gas, greater energy efficiency, and a rise in renewable power (in order of importance). So your conclusions are false. As noted in the following article, this trend toward using RE is global - that is the scale of the RE development which is occurring now.

Locally-Controlled, Renewable Energy Championed as Key to Climate Justice

As progress at the UN climate summit in Lima, Peru has been reported as "slow" by many observers so far, green campaigners on Friday called on world governments participating in the talks to end their continued dependence on outdated fossil fuel- and nuclear-powered energy systems and urged investment and policies geared toward building clean, sustainable, community-based energy solutions.

"We urgently need to decrease our energy consumption and push for a just transition to community-controlled renewable energy if we are to avoid devastating climate change," said Susann Scherbarth, climate justice and energy campaigner at Friends of the Earth Europe. "We must stop subsidizing fossil fuels and put this money towards community-based energy solutions."

Backed by a new white paper by researchers at the What's Next Forum, Scherbarth and her colleagues at FOEI say that locally implemented and decentralized energy systems—including small-scale wind farms and distributive solar arrays that can feed-in to local power grids—are the key to pulling people out of poverty while also addressing the glaring crisis of runaway greenhouse gas emissions that are ruining the planet and the climate.

"We urgently need a transition to clean energy in developing countries and one of the best incentives is globally funded feed-in tariffs for renewable energy," said Godwin Ojo, executive director of Friends of the Earth Nigeria.

With rights activists across the world putting an emphasis on the idea of climate justice, Ojo put forth that Africans are not interesting in the fossil fuel industry's promises that more oil, coal and natural gas projects are the answer to the continent's energy needs or economic woes. Instead, he said, "Africans are pointing to real solutions to stop global warming and for environmental justice."

Among other policies, Ojo and his colleagues at Friends of the Earth have endorsed a proposal presented by African nations (pdf) earlier this year which called for an energy transformation focused on renewable sources, local control, and sustainable financing.

According to Sven Teske, a senior energy expert with Greenpeace, the debate that any nation must choose between economic prosperity and cleaner forms of energy should now be over.

"What’s giving this conference and the energy transition an added boost is that the costs of wind and solar energy have fallen considerably over the past few years," Teske wrote in a blog post as the talks began earlier this week. "In many countries renewable power plants are now cheaper and produce energy at a lower cost that fossil power plants. Nuclear energy is losing its allure as it proves to be expensive, dangerous and unsustainable."

Reporting last month from the New York Times showed that the overall costs of "providing electricity from wind and solar power plants has plummeted over the last five years, so much so that in some markets renewable generation is now cheaper than coal or natural gas."

And according to the Renewables 2014 Global Status Report (pdf), published in November, "Global installed capacity and production from all renewable technologies have increased substantially; costs for most technologies have decreased significantly; and supporting policies have continued to spread throughout the world."


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Re: Renewable energy and economic growth

Unread postby copious.abundance » Sun 07 Dec 2014, 21:03:30

MonteQuest wrote:
copious.abundance wrote:1. Since money just sitting in an account does not count towards GDP, any "asset inflation" cannot contribute towards GDP unless it is spent on goods or services, or on capital investments (the latter of which always involves spending on goods and services anyway). So ...

So, who says it sat there? I sure didn't.

Yes you did! In fact you just said it right below in the same reply:

MonteQuest wrote:These open-market operations failed to provide the stimulus needed due to unusually slow economic growth ... Somehow this was supposed to trickle down and help improve unemployment; it did not. ... Since the banking system was not prepared to immediately loan this new base money, the system's reserves increased dramatically.

So here you're saying that the QE money just sat there in banks' excess reserves, not being loaned out, and thus it did not help unemployment and economic growth remained slow. IOW, it just sat there doing nothing!

How many times do I have to tell you you contradict yourself? Here you're doing in within the same reply! :roll:

MonteQuest wrote:Inflated assets have nothing to do with GDP? Why did this headline just pop up?

BOJ keeps QE intact in wake of shocking GDP

Image

Or this chart? These numbers show the Fed's QE programs inflated GDP.

Image

And again you contradict yourself here. And make an assertion without providing any evidence. You have no idea about cause and effect relationships. None. First of all, QE itself does not boost GDP, as you yourself inferred when you said:
MonteQuest wrote:These open-market operations failed to provide the stimulus needed due to unusually slow economic growth ... Somehow this was supposed to trickle down and help improve unemployment; it did not. ... Since the banking system was not prepared to immediately loan this new base money ...

Earth to Monte: If the QE money did not trickle down to the real economy and improve unemployment, and if the banking system did not or could not lend out the money, it is impossible that it could have helped GDP. Because, as I said before, GDP measures the value of sales in the economy, not money just sitting in an account somewhere. Without more people becoming employed, and without banks loaning out the money to fund purchases of various kinds, the economy is unlikely to grow. Thus you have contradicted yourself once again.

As for the Bank of Japan, that headline actually disproves your claim that QE boosts GDP. The Bank of Japan began an aggressive round of QE in mid-late 2012. Do you know what they have to show for it? 5 quarters of negative GDP growth and only 4 quarters of positive GDP growth. Now tell me, how the hell does this prove that QE boosts GDP growth? :roll:

Image
source

MonteQuest wrote:One thing all of this tells me is that economic growth like we have known it is over. After injecting all this stimulus economies are still going into recession and depression? Even the IMF has cut its global growth forecasts for 2014 and 2015 and warned that the world economy may never return to the pace of expansion seen before the financial crisis.

Since you obviously don't follow economic statistics, least of all for the US, here is some information for you, regarding the US economy for the past year-and-a-half. I note that this began at roughly the time the Fed announced, and then began, a scaling down of its QE program.

07/13: +149K
08/13: +202K
09/13: +164K
10/13: +237K
11/13: +274K
12/13: +84K
01/14: +144K
02/14: +222K
03/14: +203K
04/14: +304K
05/14: +229K
06/14: +267K
07/14: +243K
08/14: +203K
09/14: +271K
10/14: +234K
11/14: +321K

And GDP growth:
2013 Q3 +4.5%
2013 Q4 +3.5%
2014 Q1 -2.1%
2014 Q2 +4.6%
2014 Q3 +3.9%

Those are some pretty damn good numbers (excepting the Q1 negative GDP growth, which was obviously an outlier). The payroll growth numbers this year have been the best since 1999.
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Sun 07 Dec 2014, 23:46:36

copious.abundance wrote:How many times do I have to tell you you contradict yourself?


You only think I contradict myself. It's your motivated reasoning that only sees what you want to see. If there is one thing I am known for on this site, it's that I do my homework.

The charts show the influence of deficit spending on GDP, the charts show the influence of QE on GDP. You can find article after article explaining each.

As for the Bank of Japan, that headline actually disproves your claim that QE boosts GDP. The Bank of Japan began an aggressive round of QE in mid-late 2012. Do you know what they have to show for it? 5 quarters of negative GDP growth and only 4 quarters of positive GDP growth. Now tell me, how the hell does this prove that QE boosts GDP growth? :roll:


It tells you that the real GDP is even worse and that even more QE is required.

If we are to believe your position, all stimulus spending, QE, and deficit spending have absolutely no effect on GDP. All the governments an economists in the world are wrong.

Good luck with that bizarre thinking.
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:09:36

Graeme wrote:I have to say that I am gratified to see you say this:

While we all agree that there must, and will be a shift from non-renewable back to renewable


I see you left out the most important part. "While we all agree that there must, and will be a shift from non-renewable back to renewable, what remains to be determined is the type of energy transformers we shall embrace and at what scale."

However, the rest of your argument is flawed for basically two main reasons; firstly, you do not acknowledge that raw materials to make RE systems can be recycled, nor do you realize that the new systems developed after serving their lifetime will be the product of new innovations and increased efficiencies.


So? That doesn't change a thing. I have shown that very little can be recycled.

We are not going to run out of renewable resources!


Like trees, wildlife, fisheries, and all the other natural resources our overshoot population consumes beyond sustainable limits?

We will be returning to natural renewable energy sources like the sun and wind, which is in accord with exploiting sustainable natural systems.


But not on a scale that is sustainable. Have you forgotten the damage having access to that kind of energy has done? Why would you wish to repeat it? Why don't you advocate dismantling much of our energy infrastructure down to a level on par with a sustainable population? Why do you wish to perpetuate overshoot?

We discussed earlier that GDP growth has decoupled from energy consumption. As noted on page three (see part 1 old thread), in the US, this decoupling occurred within the last few years by a combination of a switch from coal to natural gas, greater energy efficiency, and a rise in renewable power (in order of importance).


Bullshit! I have shown that ever increasing debt is responsible for the decoupling.

Care to debunk the data?
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:20:55

copious.abundance wrote: So here you're saying that the QE money just sat there in banks' excess reserves, not being loaned out, and thus it did not help unemployment and economic growth remained slow. IOW, it just sat there doing nothing!


Currently, $2.6 trillion of the $4 trillion sits there collecting interest from the FED as excess reserves.

And like I said, "So, QE effectively took these toxic assets off the books of the banks in exchange for cash. A liquidity swap. The unmarketable toxic assets became liquid; easily bought and sold. The FED’s purchase, in effect, inflated their value bailing out the banks and investors and pumping up the stock market."

You think this didn't have any effect on GDP? People made money. I bet they spent some of it. The rich got richer and the poor got poorer. How obtuse are you?
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Re: Renewable energy and economic growth

Unread postby copious.abundance » Mon 08 Dec 2014, 00:34:57

MonteQuest wrote:
copious.abundance wrote:How many times do I have to tell you you contradict yourself?

You only think I contradict myself.

No, you really do contradict yourself. You just refuse to see it.

MonteQuest wrote:It's your motivated reasoning that only sees what you want to see.

No Monte, it is you who only sees what he wants to see.

MonteQuest wrote:If there is one thing I am known for on this site, it's that I do my homework.

That was funny! :lol: BTW, as proof of the humor of that statement, your explanation of QE was WAY off, but I digress.

MonteQuest wrote:The charts show the influence of deficit spending on GDP, the charts show the influence of QE on GDP. You can find article after article explaining each.

You do realize I can find just as many articles stating that QE has no effect on GDP, don't you? Or are you so blind you think there is only one position on the matter?

81.5% of Money Created through Quantitative Easing Is Sitting There Gathering Dust … Instead of Helping the Economy
3 Academic Studies Show that Quantitative Easing Doesn’t Help the Economy

Even the San Francisco Fed has stated it does little to help the economy!
SF Fed: QE Doesn’t do Much to Help Economic Growth….

MonteQuest wrote:
As for the Bank of Japan, that headline actually disproves your claim that QE boosts GDP. The Bank of Japan began an aggressive round of QE in mid-late 2012. Do you know what they have to show for it? 5 quarters of negative GDP growth and only 4 quarters of positive GDP growth. Now tell me, how the hell does this prove that QE boosts GDP growth? :roll:


It tells you that the real GDP is even worse and that even more QE is required.

Oh pu-LEEEZE!!! :lol:

FYI, Japan's problems are demographic, which all the QE in the world cannot ameliorate.

MonteQuest wrote:If we are to believe your position, all stimulus spending, QE, and deficit spending have absolutely no effect on GDP. All the governments an economists in the world are wrong.

Um, in case you aren't aware, not all economists and governments in the world agree that QE and deficit spending boost GDP. In fact, there are entire schools of economic thought that hold that deficit spending hinders economic growth. In fact, if you didn't know that, goes to prove how little you know, since it is pretty much common knowledge. So much for "doing your homework." :roll:
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http://peakoil.com/forums/post1190117.html#p1190117
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:39:13

copious.abundance wrote:
MonteQuest wrote:These open-market operations failed to provide the stimulus needed due to unusually slow economic growth ... Somehow this was supposed to trickle down and help improve unemployment; it did not. ... Since the banking system was not prepared to immediately loan this new base money, the system's reserves increased dramatically.

So here you're saying that the QE money just sat there in banks' excess reserves, not being loaned out, and thus it did not help unemployment and economic growth remained slow. IOW, it just sat there doing nothing!


Open-market operations is one of the ways the FED controls the money supply. Buying short-term bonds to increase base money for banks to lend. It has nothing to do with QE. The failure of traditional FED action to help employment and growth led to QE. I guess you don't have a grasp of this.

All this shows that without all this deficit spending, QE, and stimulus, economic growth would have been over. It still may be when all this unwinds, which it must.
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:43:50

copious.abundance wrote: Oh pu-LEEEZE!!! :lol:


Classic motivated reasoning.
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Re: Renewable energy and economic growth

Unread postby copious.abundance » Mon 08 Dec 2014, 00:47:54

MonteQuest wrote:Open-market operations is one of the ways the FED controls the money supply. Buying short-term bonds to increase base money for banks to lend. It has nothing to do with QE.

I was wondering if and when you were going to say this. :lol:

It is the most sure-fire proof yet that you have no idea what you're talking about! Seriously!

Why?

Because Quantitative easing is done through open market operations! The only difference between QE and traditional open market operations is that in QE longer-duration securities are purchased, and the aim to influence long-term interest rates rather than just short-term ones. But they are still open market operations.

What Is Quantitative Easing?
To understand what quantitative easing is, you first need to understand the difference between monetary and fiscal policy, the three Federal Reserve tools, and how the Federal Reserve implements QE through Open Market Operations (OMO).

:lol: :roll:
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:51:27

copious.abundance wrote: You do realize I can find just as many articles stating that QE has no effect on GDP, don't you? Or are you so blind you think there is only one position on the matter?


There maybe two schools of thought, but there is only one set of data.

Debunk the data in the charts. You don't seem to want to debate the merits.
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 00:58:20

copious.abundance wrote:
MonteQuest wrote:Open-market operations is one of the ways the FED controls the money supply. Buying short-term bonds to increase base money for banks to lend. It has nothing to do with QE.

I was wondering if and when you were going to say this. :lol:

It is the most sure-fire proof yet that you have no idea what you're talking about! Seriously!

Why?

Because [u]Quantitative easing is done through open market operations!

:lol: :roll:[/quote]

Read what I wrote.

"In 2007, the Fed followed an expansionary monetary policy in an effort to stimulate economic growth. One key part of this effort was to buy short-term Treasury securities through its open-market operations. Through these asset purchases, the Fed adds reserves to the commercial banking system, thus allowing banks to lend more money.

These open-market operations failed to provide the stimulus needed due to unusually slow economic growth."

I was referring to normal FED actions that had nothing to do with QE. That's what [i]you responded to. Normal open market operation also don't buy toxic assets.

You seem hell bent on nothing but a confrontational and divisive debate. If you aren't clear about something I write, then ask for clarity.

You are just being an ass/troll.
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Re: Renewable Energy and Economic Growth Pt. 2

Unread postby copious.abundance » Mon 08 Dec 2014, 01:13:46

There maybe two schools of thought, but there is only one set of data.

Debunk the data in the charts. You don't seem to want to debate the merits.

I've already debunked the data in your charts a half dozen times.

But since you asked, here is some more recent data from the BP statistical review. Since you like to focus on the post-2000 numbers ...

BP statistical review 2014

Primary energy consumption 2000 - 9,342.1 Mtoe
Primary energy consumption 2013 - 12,730.4 Mtoe
-------------------------------------------------------------
An increase of 36.3%

From another source (USDA to be exact), here is World Real GDP (Excel file, row 15):
2000 - 48,762.94 billion $$
2013 - 69,655.66 billion $$
-------------------------------
An increase of 42.8%

So with the latest available data, I have now falsified your claim that world GDP is no longer growing faster than energy consumption since the year 2000. It is. You lose.
MonteQuest wrote:In total, is the growth in world GDP any less energy intense? The answer since 2000 seems to be “No”.

Wrong. The answer is "yes."
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Re: Renewable energy and economic growth

Unread postby MonteQuest » Mon 08 Dec 2014, 02:01:50

copious.abundance wrote: You do realize I can find just as many articles stating that QE has no effect on GDP, don't you?


From one of your links: "Quantitative easing doesn’t help Main Street or the average American. It only helps big banks, giant corporations, and big investors."

As I have said in previous posts. The big banks, giant corporations, and big investors got richer, while Joe Sixpack got a pink slip.

When Congress authorized the stimulus package and it didn't work as hoped, many pointed out that it wasn't big enough. The stimulus was too small. The same has been said for QE, too little too late. Often these policies have done little but put a floor under a declining GDP.

What many people fail to grasp is that there is a underlying reason why they haven't been as effective as promised. However, without them we wouldn't have growth at all, IMHO.

Consider that interest rates are at basically zero. The govt spends over a trillion dollars a year of money borrowed from the future. We have collectively borrowed $17 trillion from the future so we could spend it now. One of the problems in using GDP as a measure of growth is that it includes government spending. In the case of the US, it is approaching 25% of the output of the country. We have over $100 trillion in unfunded entitlements. FED normal open market operations are maxed out and QE had to be introduced to inject $4 trillion, yet the economy remains at stall speed or just above.

What's wrong with this picture? We should have inflation going through the roof and money galore. While deficit spending has allowed for GDP to increase, it is reaching the point where it is fast becoming a hindrance. We have debt saturation and the hole in the bucket is larger than what is poured in. I think it will remain so. Thus, the observed decoupling of GDP to energy use will end when the house of cards comes down. How can it not?

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Re: Renewable Energy and Economic Growth Pt. 2

Unread postby MonteQuest » Mon 08 Dec 2014, 02:12:18

copious.abundance wrote:
There maybe two schools of thought, but there is only one set of data.

Debunk the data in the charts. You don't seem to want to debate the merits.

I've already debunked the data in your charts a half dozen times.


No, you haven't. You never addressed them at all. You hand waved them away with "old charts" and ad hominem attacks on the source.

So with the latest available data, I have now falsified your claim that world GDP is no longer growing faster than energy consumption since the year 2000. It is. You lose.


That was a quote from Gail Tverberg based upon the data she showed which supported that remark.

I tire of this, Reminds of the trolls we used to deal with.
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Re: Renewable Energy and Economic Growth Pt. 2

Unread postby copious.abundance » Mon 08 Dec 2014, 02:18:24

Your charts remind me of the gold bugs who were constantly posting charts comparing the price of gold with the Federal Reserve balance sheet.

Image

It sure looked good for a while. But unfortunately for them, they forgot that little mathematical axiom, "correlation does not imply causation." And because of that, a lot of them started to make themselves look a wee bit foolish, and lost a lot of money, to boot.

Image

The price is now under $1200. Oops.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Renewable Energy and Economic Growth Pt. 2

Unread postby copious.abundance » Mon 08 Dec 2014, 02:21:00

MonteQuest wrote:
So with the latest available data, I have now falsified your claim that world GDP is no longer growing faster than energy consumption since the year 2000. It is. You lose.


That was a quote from Gail Tverberg based upon the data she showed which supported that remark.

I tire of this, Reminds of the trolls we used to deal with.

Translation: I have no rebuttal to C.A's data and give up.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Renewable Energy and Economic Growth Pt. 2

Unread postby Quinny » Mon 08 Dec 2014, 02:55:21

Graeme I don't see anyone being against renewables. Just against the idea that they can scale up to replace ff.

CA, if QE doesn't boost GDP figures - Why does BOJ and fed bother?
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