What is the limiting factor?

[Corella]

...the effect of such is decreasing population...! -> @ralfy: http://en.wikipedia.org/wiki/Demographic_transition

Don't forget increasing resource consumption which negates savings from a demographic transition, as seen in factors like ecological footprint:

http://en.wikipedia.org/wiki/Ecological_footprint

as well as footprint vs. biocapacity:

http://en.wikipedia.org/wiki/List_of_co ... _footprint

That´s why there is urgent hurry! There is no other chance than to afford developing countries bigger food prints in order to support transition. You and me can work on smaller foot prints in the meantime.

[Corella]

@Agent & Ralfy, my 2 cents: you are arguing matters not possible to quantify: not to mention to balance against each other. Whether any single opinion becomes a real scenario will be a matter of organization, especially on an international level. Therein lie both: fears and hope!

[radon]

No. A global capitalist economy requires increasing REAL production and consumption of goods due to competition. That's why oil demand has been rising for decades and continues to do so.

Suppose you produce 102 gadgets and you competitor 100, thus you are 2% ahead of competition. Then the economy shrinks in around half, and you now produce, say, 52 gadgets and your competitor 50. You are now 4% ahead of competition. Moreover, if the circumstances allow, you can triple your price and will be even more profitable than before the economy's shrinkage, despite the numbers of the real production falling.

[Corella]

It is the theories of Schumpeter, describing an economy where no company can ever rest if it wants to survive. Processes aim at increasing consumption but more effectivity as well. The way it balances is a matter of regulation!

[evilgenius]

It seems to me that there are a lot of supply side arguments in this thread. I'm much more of a demand side thinker when it comes to what the limiting factors are. Take right now, for instance, a shrinking ability of people to spend is what the problem is, not a lack of investment funds, except where those funds are not making it at low rates to small business at the street level. Those who make the decisions generally are not in favor of measures that put money into the hands of the middle class during times like these because they figure that your average person will exhibit too high a tendency to save rather than consume. Isn't it interesting that because of such biased thinking against the middle class the operations of the government were oriented towards the banks, who proceeded to do exactly what they feared from the middle class, but at a much more perilous level within the framework of the economy.

Anyway, focusing more on the limiting factor discussion, it has mostly to do with consumption by the middle class. You could say that it pertains to Marx's argument of worker surplus, but that would miss how modern economies have managed to grow to the place they have. Worker surplus economies under Marx could only have gotten here via some huge capitalist pillage that would have left no room for what we understand the middle class to be. I think this points out the role of debt in a developing and a thriving middle class. Debt can either be employed to create more wealth or it can be employed to luxuriate or it can be employed falsely. In the housing crash it was employed falsely. The veneer over the last few decades is that it was employed luxuriously. Judging by how much money retirees have to spend, and are projected to have to spend going forward, a lot of it was employed to create more wealth.

More and more in the US what is emerging is a huge gulf between those who managed their financial paths throughout their lives, staying clear of poor investment of their money and labor, and those who didn't. The US doesn't have a dole. As a consequence there are people lining every freeway offramp and large intersection holding cardboard signs. They are the kind of people who don't stop to ask themselves whether getting caught up in sign holding as a means to cope is a viable strategy for getting out of the mess they are in. Mostly they are in too deep. They are going whole hog with the strategy that even though their own selfishness was the cause of their predicament appealing to the masses is the answer. Hmmm, isn't that what they were also doing when they were misplacing their chips in their actions which led up to this mess? Isn't it also what the successful do as well? Whether investing or developing skills or starting a business or simply participating in society the successful also appeal to the masses, to a sense of common identity. Their efforts are not generally directed outside of their society, except where those efforts can bring back wealth into their lives and thus back into their society.

This, of course, sets up a criticism of the role of fraudulent tax haven offshore banking, sucking society's wealth into other systems. It also lays bare the poverty of cowtowing to such offshoring within the political system because it allows all sorts of money laundering schemes such as the drug business to take advantage of the same system and expropriate wealth as well. The very mindset inebriates officers of large corporations to selfishly see their own roles as more important than they really are and remunerate themselves lavishly, to the detriment of investor returns. They get away with this because investor have drunk the coolaid of growth over dividends to such an extent that they are willing to see growth where it doesn't exist. When a society turns away from the fruitful grindstone and toward the flowers which lay along the path it is never long before trouble follows. It's too darn bad that the right things are not sexy enough, are never sexy enough.

[AgentR11]

In short, you're comparing the global situation to New England, where "there aren't hundreds of thousands freezing to death" or are not "short on calories."

No. I'm not. New England is pretty much unique. It is however a "check-off" box on my "we're doomed" list. A canary in the mine, if you like.

In short, everything is fine because things are fine in New England. You make the same mistakes in many of your posts, i.e., insisting that things are fine in one place and then assuming that that place represents the global situation.

Our definitions of "fine" may be the underlying cause of the disagreement and point of view discrepancy.

Fine, to me, is the HEB grocery, having flour, salt, and yeast on its shelves in my area. If that holds true, things are fine. Fine doesn't imply millions aren't dieing somewhere from some cause; fine doesn't imply bubblescale employment; fine doesn't imply growth, prosperity, or dancing on Main Street. (those joyful things are gone, FOREVER) Its a very selfish view of course, but we're long past the point where the Malthusian result could be avoided. As something that is inevitable, I do not lament wildly and rail against the immovable. The point of the game of life at the moment is to do everything you can to prevent one's child(ren) from being crushed by the coming result.

And given around 60 pct of the global population earning only around $2 a day, food is definitely not cheap. Food is cheap only when after spending on it one has more than enough credit to pay for other needs.

If they are not dieing of starvation at $2/day, food is cheap.

The global capitalist economy requires increasing NOMINAL production&consumption.
The global capitalist economy does NOT require increasing REAL production&consumption.

No. A global capitalist economy requires increasing REAL production and consumption of goods due to competition. That's why oil demand has been rising for decades and continues to do so.

This is a core disagreement, though I do share some blame as I leave off "per capita" in places that I shouldn't. From Accounting experience, I can prove to myself directly and simply why NOMINAL (the absolute number of $ without regard to purchasing power) increase is fundamentally required. Basic evaluation of balance sheets and inventory/cost of goods sold and depreciation require it, and with the speed of current debt turnover in the commercial markets, if the NOMINAL growth goes away, things go belly up, very, very quickly. But per capita real growth is much less urgent, and not really required, though its loss is certainly unpleasant for the markets.

Oil demand is currently only driving price, production has basically peaked, thus the nominal cost is rising, and the PER CAPITA CONSUMPTION IS FALLING.

Food calories have been increasing because of the use of oil and other resources, but food prices are going up because of speculation and concentration of resources among a few. Only around 15 pct of the world's population is responsible for over 60 pct of personal consumption of various resources. Not surprisingly, the credit is also concentrated among a few, with over 60 pct of the world's population earning only around $2 a day.

"Speculation" is always the villain trotted out to gain approval of the masses. I'm completely unimpressed by it though. Futures prices of high demand and consumption commodities like grain and oil are not artificially high or low as a result of people buying and selling futures contracts on them. Its called price discovery. No one can know what the value of a bushel of wheat will be twelve months from now, the only way to find out, is to bid it around and see what a willing buyer and willing seller can agree on. Some call this "speculation", but in absence of evidence of collusion (which should be brutally prosecuted), this bidding process is how the price of the commodity can be discovered such that both farmers will plant, and final buyers will buy and accept delivery.

(Agentr11 suggests) the world is like New England.

You sure are locked on New England (which I use as the butt of many jokes...) So I find this really funny in a weird way. But no, the world is nothing like New England.

The "policy choice" does not simply involve "borrowing as fast as possible or "using a larger number of currency to buy a smaller number of things" but buying things that still don't exist with money that also doesn't exist. That is what is happening right now. And the fact that it is "gimping along" doesn't mean that the problems that will lead it to stop hasn't appeared yet.

You think a futures contract is something that doesn't exist?
That hurts my head.

The rest of your post in NO WAY contradicts what I wrote.

Well, we really do agree about alot; we disagree about intention, and cause and effect, and what constitutes the acceptable result.

when you said that people won't lower consumption rates.

Not willingly they won't. However, as nominal prices rise, money supply rises, credit availability declines, and wages stay stagnant for most, they are forcefully powered-down, and their real consumption does fall, even if their dollar denominated consumption does rise. This is seen in the US easily enough by the divergence of income growth curves for those in the lower 80 vs those in the upper 20.

some "sense of ethics" but with what has been reported in this forum

My apologies for using that phrase. It implies knowledge of intent that I do not have.

That is also why your implicit point about some gold standard coming to the rescue won't help,

no no no. I am VERY opposed to a gold standard in currency, it'd wreck the economy so fast, the ink wouldn't even have had time to dry on the legislation's presidential signature. We trade much to fast now for there to be an exchange-ability at anywhere near market price for a commodity like gold or even silver. No, currencies must stay fiat.

[ralfy]

No. I'm not. New England is pretty much unique. It is however a "check-off" box on my "we're doomed" list. A canary in the mine, if you like.

The fact that you see New England as a canary in a coal mine contradicts the claim that it is "pretty much unique." Also, given your first reference to it as proof that the world is doing fine, then it's not a canary in a coal mine for "we're doomed."

Our definitions of "fine" may be the underlying cause of the disagreement and point of view discrepancy.

Your definition of "fine" is based on your "area" (as seen in your subsequent paragraph). My definition is based on global data. Which one is more logical?

Fine, to me, is the HEB grocery, having flour, salt, and yeast on its shelves in my area. If that holds true, things are fine. Fine doesn't imply millions aren't dieing somewhere from some cause; fine doesn't imply bubblescale employment; fine doesn't imply growth, prosperity, or dancing on Main Street. (those joyful things are gone, FOREVER) Its a very selfish view of course, but we're long past the point where the Malthusian result could be avoided. As something that is inevitable, I do not lament wildly and rail against the immovable. The point of the game of life at the moment is to do everything you can to prevent one's child(ren) from being crushed by the coming result.

I already dealt with the first point, but the rest makes no sense to me. Just because predicaments are "immovable" doesn't mean that my referring to them is wrong.

If this thread was about philosophical views of the future, then I'd welcome your argument, i.e., worry about your loved ones and surroundings rather than what is happening elsewhere. But it doesn't in any way counter any of my arguments.

If they are not dieing of starvation at $2/day, food is cheap.

If you cannot afford other basic needs, then food is not cheap.

This is a core disagreement, though I do share some blame as I leave off "per capita" in places that I shouldn't. From Accounting experience, I can prove to myself directly and simply why NOMINAL (the absolute number of $ without regard to purchasing power) increase is fundamentally required. Basic evaluation of balance sheets and inventory/cost of goods sold and depreciation require it, and with the speed of current debt turnover in the commercial markets, if the NOMINAL growth goes away, things go belly up, very, very quickly. But per capita real growth is much less urgent, and not really required, though its loss is certainly unpleasant for the markets.

Production and consumption of goods have been rising worldwide for several decades as part of a global capitalist system. The same goes for money supply. The use of accounting or referring to nominal increases do not contradict that reality.

Oil demand is currently only driving price, production has basically peaked, thus the nominal cost is rising, and the PER CAPITA CONSUMPTION IS FALLING.

Oil demand isn't the only factor that's driving price. It's not just the nominal cost that is rising. And if "per capita consumption is falling," then "oil demand" cannot be "only driving price."

"Speculation" is always the villain trotted out to gain approval of the masses. I'm completely unimpressed by it though. Futures prices of high demand and consumption commodities like grain and oil are not artificially high or low as a result of people buying and selling futures contracts on them. Its called price discovery. No one can know what the value of a bushel of wheat will be twelve months from now, the only way to find out, is to bid it around and see what a willing buyer and willing seller can agree on. Some call this "speculation", but in absence of evidence of collusion (which should be brutally prosecuted), this bidding process is how the price of the commodity can be discovered such that both farmers will plant, and final buyers will buy and accept delivery.

Of course, you are not completely unimpressed. You base the global situation only on your "area," remember? But the articles that I have presented to you, plus the various threads in this forum, show a different picture.

You sure are locked on New England (which I use as the butt of many jokes...) So I find this really funny in a weird way. But no, the world is nothing like New England.

Or the opposite, given what you said at the start of your message. If there's anything that's "really funny in a weird way," it's such.

You think a futures contract is something that doesn't exist?
That hurts my head.

Actually, it's the other way round: I should be asking that question to you, especially given your claim that you are "completely unimpressed" by the effects of speculation. With that, it's my head that should be hurting, not yours.

Well, we really do agree about alot; we disagree about intention, and cause and effect, and what constitutes the acceptable result.

What I do know is that you end up repeating what I say then contradicting yourself.

Not willingly they won't. However, as nominal prices rise, money supply rises, credit availability declines, and wages stay stagnant for most, they are forcefully powered-down, and their real consumption does fall, even if their dollar denominated consumption does rise. This is seen in the US easily enough by the divergence of income growth curves for those in the lower 80 vs those in the upper 20.

When money supply rises, then credit availability should go up. When prices fall with wages, then real consumption doesn't necessarily fall. You can see that not with the U.S. but with global demand for various resources, such as demand destruction from OECD countries for oil offset by increases from non-OECD countries, as seen in IEA charts.

My apologies for using that phrase. It implies knowledge of intent that I do not have.

I think you should focus on global data rather than stick to the U.S.

no no no. I am VERY opposed to a gold standard in currency, it'd wreck the economy so fast, the ink wouldn't even have had time to dry on the legislation's presidential signature. We trade much to fast now for there to be an exchange-ability at anywhere near market price for a commodity like gold or even silver. No, currencies must stay fiat.

This contradicts what you wrote earlier:

"They both [i.e., food and oil], today, remain spectacularly cheap; and expressed in terms of ounces of gold or any other tradeable commodity, remain more or less unchanged in cost."

[AgentR11]

no no no. I am VERY opposed to a gold standard in currency, it'd wreck the economy so fast, the ink wouldn't even have had time to dry on the legislation's presidential signature. We trade much to fast now for there to be an exchange-ability at anywhere near market price for a commodity like gold or even silver. No, currencies must stay fiat.

This contradicts what you wrote earlier:

"They both [i.e., food and oil], today, remain spectacularly cheap; and expressed in terms of ounces of gold or any other tradeable commodity, remain more or less unchanged in cost."

No, it doesn't contradict it. For analysis purposes, any random commodity can be used as the denominator on a set in order to remove some of the price manipulation that is the result of fiat currency policies. That doesn't imply that I think a gold (or any other commodity) standard would be in any way beneficial(or even possible) to the economy. Its also a good way to compare costs across currency discontinuities (such as the dropping of the gold standard, introduction of a new currency, or the creation of a federal reserve system aka lender of last resort).

BTW: I don't live in New England, its not "my area".

[SeaGypsy]

One thing a peaker travelling notices very clearly is the global link between the local cost of fuel and the cost of energy intensive products. The saying 'Oil in another form' is apt. First worlders have been living atop the reward (oil) for effort (value extraction) positive feedback loop. At peak, we have reached a stage where just about all our resources are mapped, where exploitation is dependent on the cost of (oil) extraction just as development depends on affordable inputs (extracted primary value) and labor (second cycle) and on and on..

Having lived in the 3rd world recently, I can assure you agent, food is not cheap. Being embodied oil, food is similarly priced globally, especially primary commodities like rice. However the whole of life is so differently viewed. If you have 10 people in a house and 5 of them work and bring home $5 a day, that $25 a day pooled is enough to have a reasonable standard of living for the household. Enough to even have a status symbol or 2 on credit parked in front or used as a taxi whilst everyone works their 6/12 week. New England is the ideal 'canary' because it is the classic secondary economy, with very high personal consumption and little of importance to offer outside of consumption.

(I can buy most food cheaper (in cross currency) in Melbourne, than I can in Manila. Fuel is about the same, but cooking gas is 3 times cheaper because Melbourne is on mains.)

[radon]

Enforcement was slow in old times, you'd have to send a regiment of soldiers to sort out irregularities in case someone decided to play odd with the money. Hence coins had to carry intrinsic value with them in order to ensure validity of the money/goods exchange instantaneously.

Nowadays the enforcement is instantaneous, money/goods exchange can be traced/enforced with a mouse click at a speed of light. Therefore no intrinsic value is required to enforce the legal consequences of the contract designated by a money bill.

When and if the modern society crumbles, golden money may gain allure again, for the same reasons.

[Pops]

Nowadays the enforcement is instantaneous, money/goods exchange can be traced/enforced with a mouse click at a speed of light. Therefore no intrinsic value is required to enforce the legal consequences of the contract designated by a money bill.

Man, that is true even in modern times. Most folks alive today don't recall the age before ATMs and debit cards when your haircut was as important as your drivers licensee in getting your check cashed. If you were young and driving a beater and away from home you'd better have the cash.

I though credit cards and reporting agencies were great too for the same reason, you carried your reputation with you sorta speak. My folks could get a personal loan because they'd known the guy at the S&L ('nother institution screwed up by crooks) for years and years. But if they were away from home or moved to another area? Pfft.

Sorry, I digress.

[AgentR11]

Ok... if yall won't accept the phrase "food is cheap"; let me offer something different.

Food will become vastly more expensive in the years ahead.

[ralfy]

No, it doesn't contradict it. For analysis purposes, any random commodity can be used as the denominator on a set in order to remove some of the price manipulation that is the result of fiat currency policies. That doesn't imply that I think a gold (or any other commodity) standard would be in any way beneficial(or even possible) to the economy. Its also a good way to compare costs across currency discontinuities (such as the dropping of the gold standard, introduction of a new currency, or the creation of a federal reserve system aka lender of last resort).

There is a contradiction, as fiat currencies are not produced in the same way as physical commodities.

BTW: I don't live in New England, its not "my area".

Same problem: you can name any area, and it still won't represent the global situation.

[AgentR11]

That makes about as much sense as saying paper is an inappropriate medium for drawing graphs of oil well productivity since pumps are not made of paper.

currency, trading commodities, orbs of magic light... whatever, its just a yardstick used to measure relative and over-time changes in cost.

[ralfy]

That makes about as much sense as saying paper is an inappropriate medium for drawing graphs of oil well productivity since pumps are not made of paper.

Most money doesn't come in the form of paper bills, coins, and FRNs, but are numbers in accounts, and you don't have to create more money by making more paper and printing on it.

currency, trading commodities, orbs of magic light... whatever, its just a yardstick used to measure relative and over-time changes in cost.

Fiat currency is not necessarily the same as trading commodities and certainly not the same as "orbits of magic light." The first and third are not yardsticks for obvious reasons, and the second definitely not if contracts are involved.

[Corella]

Contents of contracts potentially are real values, equivalent to physical resources or production. Since this is a virtual thing in its origin, it seems somehow appropriate to represent this by fiat money. Boon and bane at close quarters...

Problem is: quantifying! I don´t think it possible to guess future scenarios because effects how sufficient coming up crisis will be organized have overwhelming effects in all directions.

[AgentR11]

The first (trading commodities) is most certainly a yardstick; however, some might dislike what it reveals.

If you are going to claim its "obvious" then prove it. I get decent insight on price valuations by observing the changing cost of things over time in relation to the changing cost of various commodities.

How can it not be possible to measure the changing value of item type A as stated in the same-value quantity of item type B.

At any point in time, I can draw a point that is defined as the ratio between the cost of A and the cost of B as stated in any fiat currency of choice. Stating a function as that ratio over time, yields a curve that represents the value of A as stated in units of B.

[Corella]

@Agent: you certainly gain precise figures But whenever you try to put these on real things there is bias, and: volatility, psychology, circumstances, coincidence...
But i actually did not try mention that, there are more decisive issues. In Germany all discountings on conventional power stations currently fail systemic, because of mandatory regulation due to fluent wind- and solar power, as a very simple example. Less simple: try find out about an investment into social projects here and now and its gains 15 years later, or opposite, the cost if you don´t. The money within this example is of a dimension of an average national debt amount, if you consider a longer perspective!

And once we touch ecological issues: can you calculate whether or not Amazon rain forests will be cut down or not and its consequences? Will nations together find a solution to solve overfishing or not? Still simple examples...

[ralfy]

Contents of contracts potentially are real values, equivalent to physical resources or production. Since this is a virtual thing in its origin, it seems somehow appropriate to represent this by fiat money. Boon and bane at close quarters...

Problem is: quantifying! I don´t think it possible to guess future scenarios because effects how sufficient coming up crisis will be organized have overwhelming effects in all directions.

Given the liquidity chart in this site:

http://www.greatcreditcontraction.com/

one can argue that the total worth of "physical resources or production" is perhaps hundreds of trillions of dollars, but non-monetary commodities and precious metals might be valued at around $10 trillion or so.

The catch is that total money supply is a lot larger, with contracts like "shadow" derivatives at almost a quadrillion dollars.

[ralfy]

The first (trading commodities) is most certainly a yardstick; however, some might dislike what it reveals.

Not by a long shot!

If you are going to claim its "obvious" then prove it. I get decent insight on price valuations by observing the changing cost of things over time in relation to the changing cost of various commodities.

See the chart presented in the link given to Corella. The amounts involved in financial instruments, especially derivatives, are far larger than the value of non-monetary commodities, precious metals, physical assets, and "power money" combined.

How can it not be possible to measure the changing value of item type A as stated in the same-value quantity of item type B.

When Type B is increased many times over.

At any point in time, I can draw a point that is defined as the ratio between the cost of A and the cost of B as stated in any fiat currency of choice. Stating a function as that ratio over time, yields a curve that represents the value of A as stated in units of B.

That's because total money supply doesn't consist wholly of fiat currency.