Why the World Economy Hasn’t Collapsed Yet | Hacker News Reader

Why the World Economy Hasn’t Collapsed Yet

thehonestsorcerer.medium.com

20 pointsmactitan41 comments

To be quite honest, I expect more intellectual honesty from an HN post. This reads, at best, like an opinion piece and most if not all of the controversial “facts” presented are not sourced in any way — not for lack of trying though as the piece does the classic sleight of hand of actually linking plenty of other sources and factual images, hoping that the reader will gloss over the fact that these do nothing to prove the claims made which are mostly pure conjecture.

Yes, this contradicts everything I thought have learned. Without any credible sources I have to assume the whole article is bogus.

I am annoyed he portrays the professionals as idiots that did not see things coming, but I remember professionals making clear that the current inflation is partly 'real' inflation and partly inflation due to post-covid/Russian agression/.. developments. So rent hikes are still justified for that first part of inflation.

The author ignores that the source of inflation is multi-faceted. Eventually the supply chain issues and the war will be resolved, and we’ll be left with moderate inflation.

The world is actually quite fortunate that there’s the beginning of a sort of natural carbon tax right as we desperately need to decarbonize our economies.

This is essentially a trial run for running out of oil. It has already spurred significant European investment is diversifying energy sources.

Do you think the sanctions on Russia will end when the war ends?

Heh, possibilities are all over the map. Say Putin loses power/dies/is overthrown, 100% of Russian forces are withdrawn, 100% of Ukraine is returned, and reparations are paid to rebuild Ukraine. Sure, it should be pretty quick.

However the reality is likely to be much less, the the sanctions will be slower to be withdrawn.

The sanctions have little impact on oil supply. Oil is mostly fungible and somebody is buying Russian oil already.

It hasn’t collapsed yet because the people who predict a collapse keep cherry picking data to justify their doomsday predictions.

There are just as many or more indicators that things are going great.

Yes, we’ve had some road bumps here in the past couple years, but that’s on the tail of the strongest expansion of the world economy in human history.

At the end of the day, the strength of the economy is just a matter of the exchange of goods and services. As long as people are working and spending, the rest is just microeconomic noise.

Society will collapse once absolutely nobody is predicting collapse.

If there's still a chorus predicting collapse, we're not there yet.

Then, once everyone is convinced we are now in a permanent dark ages and all advanced civilization is at an end, it will rebound.

It would be interesting if the government could figure out a way to hold the price of energy at a higher price when the economy is going well and energy supply is high.

Or perhaps there should be some sort of non-strategic reserve stockpile. I'm almost curious if the US government has made money by buying up oil during the pandemic when the price of oil was spiraling downward and then selling at today's inflated pricing.

This would actually probably not be opposed by the energy lobby as the profits would go to the firms (as opposed to a energy tax).

This would act to set a higher and more stable floor for energy costs to enable the development of alternative energy sources.

we have most probably reached peak oil extraction in 2018

We’ve been assured this is imminent for 50 (FIFTY) years. I’d bet the farm this prediction is dead-ass wrong too.

Plenty of oil yet to get. The constraint is limited capacity.

We only have radical politicians to thank for that underinvestment by private companies.

Politicians who, by the way, have no real interest in solving the climate crisis de jour but instead are simply trying to create special programs, credits, subsidies and other govt perks for cronies.

> We only have radical politicians to thank for that underinvestment by private companies.

Source?

Energy company execs themselves. See recent news for examples

Would you invest billions in projects with 10-20 year payback periods if politicians eager to score points were using your industry as a scapegoat and vowing to destroy it?

> We only have radical politicians to thank for that underinvestment by private companies.

I'm not sure who you are talking about.

Domestic producers start talking about "switching modes to returning value to shareholders" in mid-2020.

We were headed for higher oil prices regardless because shale producers were sprinting to stand still in terms of production. The pandemic certainly pulled that future forward. Certain other politicians orchestrating supply-side cuts without demanding price stability on the rebound [1] -- despite obvious impending bullwhip -- probably didn't help.

Generally speaking, though, when it comes to oil prices, it's best to avoid discussing politics and let your personal investments do the talking. I've been selling XLE.

[1] https://www.nytimes.com/2020/04/12/business/energy-environme...

A specific example would be US refining capacity.

How so? There's no reasonable sense in which reduced US refining capacity is a problem created by "radical politicians".

Is your position that oil companies under-invested in oil refineries, which are now being decommissioned due to being out of repair, because Trump was radically anti-oil? I don't think oil companies even believe that Biden will have a friendly legislature in 2023...

This reeks of "something I might believe after a beer listening to a cable news channel but not something I would bet $150K on". Again, I tend to ignore what people say and simply ask: "what are you doing with your money?"

If the answer has anything to do with your political emotions, well, good luck mate.

See my other comment in this thread. Energy company execs have cited the exact things I stated as stopping them from investing in infrastructure.

Execs are salespeople. Tip: that 2012 Buick with rusted out baseboards isn’t actually a good deal, and oil co ceos are also sometimes full of it.

Refineries don’t fall out of repair overnight. Underinvestment is strategic, market-driven, and goes back over two decades. Politics is an excuse, and blaming a current crop of politicians for 20 years of underinvestment is prime facie bullshit.

I disagree. The constraint is the prisoner's dilemma that is the oil extraction industry, where the incentives are currently aligned such that extracting less oil maintains steady profits for all players as demand recovers from 2020. If you recall, oversupply combined with demand reduction caused oil futures to go negative in that year. The industry does not want to relive that experience in 2022.

Politicians (and policies) don't really have much sway over oil prices compared to market forces. For example, the federal gas tax is 18 cents a gallon, a pretty small fraction of the current price.

We're very nearly at the 2018 peak anyways [1].

The stock is so big relative to the flow that I can't imagine how anyone has confidence in claims like this. Even if we will completely run out of extractable oil in N years, consumption could continue to grow for the next M << N years.

[1] https://www.eia.gov/outlooks/steo/report/global_oil.php

Every time some limitation is predicted, particularly when the only limitation is investment, it's usually surpassed. There's more extraction that can be done, and more efficiencies that can be found, so we're not at 'peak', but I can believe that we're at a point of diminishing returns.

Pour one out for the Oil Drum.

This author sure loves to escalate things. His optimistic take is for Europe to slide into full poverty, the pessimistic scenario total nuclear annihilation.

There's no regard at all for the current aggressive plan for energy savings and energy alternatives. There's incredible potential for using less energy whilst not destroying the economy.

The author also fails to understand that the pre-pandemic economy was a bullshit economy. Pumped up for more than a decade, creating bullshit demand that enable bullshit jobs.

For sure it's going to hurt when it deflates, but it's not like we can't take a hit. In fact, we might as well use it as an opportunity to relocate the limited workers we have to parts of society that matter most.

If anything, we should be concerned about the developing world that have less options to plan around these events. Sri Lanka is an example, but also large parts of Africa are directly dependent on particular commodities in a truly existential way.

> Current price increases are not a result of too much money, or bad policies

This seems naive. Was the sudden onset of printed USD not a factor in the Feds rate surging?

Author also believes in the “peak oil” thesis.

There is so much oil, so insanely much, and we constantly find new sources. The biggest risk to oil is governments outlawing / taxing it to be uncompetitive.

That and people realising that, in fact, solar and wind can fully replace oil with a concerted logistical and infrastructure buildout.

Not yet, no. Not at all in fact. Not for at least 50 years.

When i get the proof that cooper mines and refineries can work without oil and coal, i will get my hopes up.

[edit] And anyway, we're nowhere clse to that yet. https://www.iea.org/data-and-statistics/data-browser?country...

Peak oil generally refers to extraction peak. It is possible to have more sources than ever but no longer the need to extract as much as in the past.

Also the energy return on investment (EROI) to extract oil is steadily declining I believe.

The reserves are high, but the energy required to extract them are increasingly costly. Shale oil extraction requires about 25% of the energy extracted. Same goes for Venezuela's gargantuan reserves: higher volume than Saudi Arabia, but the lowest quality; almost entirely asphalt-like. You have to expend large amounts of energy to heat it so that it becomes liquid and can go into a pipe.

And peak oil is very real. Earth is desperately still 13k km in diameter, in the face of economic growth that has been exponential for the last 200 years. At some point some limits are going to be reached; and the author thinks we're not that far from them.

It would be a factor but larger factors would be supply and demand issues due to COVID and sanctions on Russian oil due to the war in Ukraine. Without Russian oil on the global market, supply is down, causing high fuel prices. These high fuel prices not only affect the cost to fill your vehicle, but increase the cost of transporting every good and even some services. High transportation costs increases the cost of everything you buy that wasn't locally produced.

"larger" is just more unsupported speculation. We know energy prices flow through the entire economy and energy is expensive right now. We also know The US and other advanced economies printed a huge amount of money in 2020 and money supply is correlated with inflation [1][1].

[1]: https://www.longtermtrends.net/m2-money-supply-vs-inflation/

It's an entertaining read, but mostly subjective opinion. I love doom predictions in general, they're always correct if you wait long enough and keep the framing loose, like saying we're in the process of collapsing. Something will eventually cause a severe global disruption, and when it happens it's easy to just say you were off on the timeline.

I don't have enough expertise to make anything other than a totally uneducated rebuttal. I'm honestly a little bit more optimistic than the author. I think he's on the money for a lot of things. The world economy is going get screwed because of energy and our leaders are dropping the ball. We're seeing the results in Sri Lanka but also in Europe. On the other hand, I think he does discount renewables more than needed. There is very little barrier to us rolling fields of solar panels and batteries other than purely a political one. There is also a lot of flex in the system. Simply removing meat and replacing it with chicken would save untolds amount of energy. Imagine if we were forced to live off beans

Chicken is meat.

Dietary adjustments would arguably help us more from a health and medical expense perspective. In terms of energy, agriculture apparently only uses around 2% of US energy consumption.

I’m not sure if that includes industrial energy which goes into producing fertilizer. If not, it would only bump up the percentage a fraction of a percent.

Even if we all eat beans, we won’t stop climate change.

I’m not saying the effort wouldn’t be worth it. Research shows unequivocally that eating more beans is a great idea. Well, eating more plants. The energy saving would be icing on top.

But then how are you going to employ the people who grow feed for livestock, and the people who raise livestock? If we all ate beans, we’d need fewer farmers. That’s a radical change we don’t have a plan or strategy for.

Widespread all-legume diets would accelerate climate change if anything, what with all of the methane produced.

I’m not actually suggesting we all only eat beans. If anything something like a few servings per day seems like the recommendation in plant based diets (around 2 imperial cups/500ml of cooked legumes?)

I’m not aware of legumes producing any significant amount of methane. Can you point me to that information?

At a glance I’ve found a few studies suggesting high-tannin legumes can reduce methane when fed to livestock:

https://uknowledge.uky.edu/cgi/viewcontent.cgi?article=4279&...

I was making an elaborate fart joke.

Haha how did I miss that!? My bad.

Classic Malthusian viewpoint, nothing new to see here. If only it were true that oil is running out - it might force us to think about alternatives more.

Conventionnal oil is running out though, unless you think IAE's world energy outlook is Malthusian.

The 1970's called. It wants this article back.

Reply on news.ycombinator.com