Thoughts on FIRE in a declining nation

[Syonyk]

I guess my last question for you is this - do you think only the US is on a long slow gradual decline?  Or the world as a whole?

"Yes"?

I think that the mostly global civilization known as "industrial civilization" will eventually complete its arc through history (not through the stars, notably).  However, the United States as a former empire is subject to some different forces that aren't applicable to all nations.  Things like our political dysfunction are probably going to be exported out eventually, but will hurt us more than some other countries.

[Reynold]

If you agree that a static culture tends to be stable, and agree that if you want to see improvement (or change - I prefer "change" to "progress" as a description), you require an unstable society, then that unstable society is, one day, no longer going to exist.  Perhaps you expect things will remain stable enough for the remainder of your life?  If so, that's a reasonable enough approach.  I'm less optimistic, but I certainly understand my bias as a paid pessimist.

The instability of the US system may be one of the things that keeps it going longer than might be expected, perhaps even "relatively" indefinitely.  Something it has that the earlier civilizations didn't is a lot of complex feedback loops.  Just as with ecosystems, very simple ones tend to be fragile, complex ones have some resiliency in that if you knock out a piece, something else will move in and replace it.  Capitalism, for all its faults, tends to have a lot of people in it who really want to help others resolve problems, for money (one reason for being FI).  Democracy, for all its faults, tends to have a lot of people in it's government who really want to help others resolve problems, for reelection.  Having the partially Federalist system the U.S. does even allows the luxury of running 50 simultaneous experiments on "what works". 

Thus, providing you don't have a sudden and catastrophic failure (asteroid strike, Carrington event solar flare, etc.) there tends to be time for someone to provide some solution.  It may not be perfect, but it should be able to keep up with oil getting harder to extract and going from $50/barrel to $100/barrel (already seen, and society adapted) to $200/barrel, with each increment making other supplies economically viable.  By the time it is $300/barrel, giving us European gas prices, a lot of alternative energy and storage schemes work, and somebody will be happily making money selling them to everyone. 

(Toyota)
A robust industrial system is dreadfully inefficient, but shrugs if a supplier burns down because they've got months of parts stocked in the factory warehouses, and goes about trying to find a replacement at some point.  JIT is literally the opposite of robust.  It's a truck breakdown away from a line stoppage, in the ideal case.

And yet you could still buy cars, even brand new ones.  Trucks were still bringing food to grocery stores.  I note that in my experience of the semiconductor industry, a few failures like that have gotten the major manufacturers to require their suppliers to have more than one production facility for critical supplies.  There will still be issues like that in the future, and companies that go out of business because of it, but it won't take down a large, modern economy.   

(local food)
That then should raise the question, "Are those environments suited to having massive numbers of humans in them?"

Phoenix is uninhabitable desert without an insane amount of energy and water, as an example.

I would argue most coastal cities have radically exceeded the number of people that should be there as well, but more people keep piling in.

If Phoenix produces and "exports" enough value to pay for the energy and water it uses, it will continue to survive, if it doesn't, it will wither.  Though be cautious about predicting the latter, even Detroit may be having a bit of a rebound.  There are a lot of cities in the U.S. that had pretty horrible down towns in the 1970s who have revitalized them, so things can turn around on a local level.  I agree that a city in the desert is terribly inefficient, but for some odd reason, governments that try to centrally plan who will live where and do what based on efficiency don't seem to have either thriving economies or very happy people.   

Coastal cities are an even easier case, they will be able to afford to desalinate water, and they have good, cheap water based supply lines.   I'm also not sure who gets to decide how many people *should* be in a city.  As Zubrin's book, "Merchants of Despair" points out, there is a very good correlation between more people interacting and progress of civilization.  Pretty densely populated areas seem to spawn a lot of the innovation in our society, which includes solving problems as well as generating new ones. 
 

[Jrr85]

I guess my last question for you is this - do you think only the US is on a long slow gradual decline?  Or the world as a whole?

"Yes"?

I think that the mostly global civilization known as "industrial civilization" will eventually complete its arc through history (not through the stars, notably).  However, the United States as a former empire is subject to some different forces that aren't applicable to all nations.  Things like our political dysfunction are probably going to be exported out eventually, but will hurt us more than some other countries.

This is what is going to make it difficult for people worried about the U.S. declining.

Pretty much all of Western Europe and the U.S. have entitlement systems that are going to create a sovereign debt crisis or quite a bit of political upheaval from telling a bunch of people who are (or expected to be) wards of the state that they can't afford to pay what was "promised" to them or from telling the working population that they are going to have to pay crushing taxes to pay for entitlements, or more likely that working people are going to get to enjoy a crushing tax burden but that instead of receiving government services in return, the government is just going to send all that tax revenue to old people.

Then you have China that is going to have a demographic crisis caused by its one child policy, presumably before it has a chance to get rich enough to manage it like Japan has. 

I guess India is a candidate for the next economic engine of the world, but India still has a lot of growing pains to go through and plenty of opportunities to misstep. 

There will presumably be smaller, less developed countries that have developed a respect for the rule of law and property rights (maybe Chile? Estonia?), but even if they were open to accepting anybody with money to emigrate, where is all the money going to go?  If the U.S. is starved for revenue, is there going to be a dominate stock market where you can put your money in an index fund and be reasonably certain that your money is safe over time? 

I think we are advanced enough that the above scenario won't mean starvation and despair, but I do think it is going to make it hard to simply change countries and retire on a simple index fund portfolio.  At least for the people that wait until after the slide is eminent.     

[Telecaster]

This is what is going to make it difficult for people worried about the U.S. declining.

Pretty much all of Western Europe and the U.S. have entitlement systems that are going to create a sovereign debt crisis or quite a bit of political upheaval from telling a bunch of people who are (or expected to be) wards of the state that they can't afford to pay what was "promised" to them or from telling the working population that they are going to have to pay crushing taxes to pay for entitlements, or more likely that working people are going to get to enjoy a crushing tax burden but that instead of receiving government services in return, the government is just going to send all that tax revenue to old people.

Facts not in evidence.   Medicare and Social Security are not in particularly bad shape.  Medicare in particular has been in far worse shape in the past than it is now.  Back in the early 1980s for example.   And only modest tax increases would keep both programs solvent for decades more.  In the past, taxes have been raised  to fund both programs without any particular political or social upheaval.  In the case of Social Security, benefits have been reduced as well, by increasing the age for full benefits and even instituting taxes on the benefits.   Again, no particular political or social upheaval followed. 

That says to me those same things could happen in the future without any real issues.  And in general taxes have been higher in previous decades, particularly for the wealthy.  For example, at one time the top marginal rate was 90%.   Capital gains taxes were raised to 28% back in 1987 and weren't rolled back until the late 1990s.      Point is, there are many solutions to these problems that have already been tried, including tax increases and benefit cuts.  And again, we only need modest changes.

One thing that won't happen in this country is a sovereign debt crisis.   We're only one country and we control our own currency.   It could happen in a country like Greece, where they don't control their own currency. 

[Jrr85]

This is what is going to make it difficult for people worried about the U.S. declining.

Pretty much all of Western Europe and the U.S. have entitlement systems that are going to create a sovereign debt crisis or quite a bit of political upheaval from telling a bunch of people who are (or expected to be) wards of the state that they can't afford to pay what was "promised" to them or from telling the working population that they are going to have to pay crushing taxes to pay for entitlements, or more likely that working people are going to get to enjoy a crushing tax burden but that instead of receiving government services in return, the government is just going to send all that tax revenue to old people.

Facts not in evidence.   Medicare and Social Security are not in particularly bad shape.  Medicare in particular has been in far worse shape in the past than it is now.  Back in the early 1980s for example.   And only modest tax increases would keep both programs solvent for decades more.  In the past, taxes have been raised  to fund both programs without any particular political or social upheaval.  In the case of Social Security, benefits have been reduced as well, by increasing the age for full benefits and even instituting taxes on the benefits.   Again, no particular political or social upheaval followed. 

That says to me those same things could happen in the future without any real issues.  And in general taxes have been higher in previous decades, particularly for the wealthy.  For example, at one time the top marginal rate was 90%.   Capital gains taxes were raised to 28% back in 1987 and weren't rolled back until the late 1990s.      Point is, there are many solutions to these problems that have already been tried, including tax increases and benefit cuts.  And again, we only need modest changes.

One thing that won't happen in this country is a sovereign debt crisis.   We're only one country and we control our own currency.   It could happen in a country like Greece, where they don't control their own currency.

Just because you have your own currency doesn't mean you can't have sovereign debt in other currencies.  It's hard to imagine the U.S. having a sovereign debt crisis right now because what other currency would people demand the debt be denominated in?  But it's also difficult to imagine people continually loaning into the teeth of inflation.  The U.S. is a different case because of how dominant it has been and there aren't any likely rivals for reserve currency right now, but that is likely what will allow it to get bad enough to be a crisis. 

The U.S. could relatively easily reform entitlements from a finance perspective, right now.  But from a political perspective, it's much easier to continue racking up debt in a low interest rate environment until even without good safe alternatives, creditors are no longer willing to continue to lend to them at rates low enough to avoid a crisis, when the gap between promises and revenue cannot be easily bridged. 


 

[tipster350]

I love the way "entitlements" is used, as if there is something wrong with anyone who dares to want Medicare and SS, and in effect drag the nation into dire financial consequences. I've paid into these programs my entire working life; I'm 56 years old. You are damn well right that I feel entitled to collect on what I paid for. It is so easy to shore up SS it's ridiculous, by simply removing the income cap on which the funds are collected. There is no factual basis whatsoever for saying or alluding to the idea that keeping the programs at their current payout will negatively impact our debt situation or any other situation.

[maizefolk]

One also has to remember the huge unfunded or underfunded pension obligations at the level of individual cities or states. They're good for another $7 trillion or so.

San Jose just passed a $40M/year tax hike that was promoted as "improving police response to reduce violent crimes and burglaries, speeding emergency response times, repairing potholes and streets, and expanding gang prevention." but 3/4 of the new revenue is actually just going to keeping up with growing spending on pensions. http://www.mercurynews.com/2017/02/20/will-san-joses-pension-costs-consume-revenue-from-new-taxes/

[Telecaster]

Just because you have your own currency doesn't mean you can't have sovereign debt in other currencies.  It's hard to imagine the U.S. having a sovereign debt crisis right now because what other currency would people demand the debt be denominated in?  But it's also difficult to imagine people continually loaning into the teeth of inflation.  The U.S. is a different case because of how dominant it has been and there aren't any likely rivals for reserve currency right now, but that is likely what will allow it to get bad enough to be a crisis. 

The U.S. could relatively easily reform entitlements from a finance perspective, right now.  But from a political perspective, it's much easier to continue racking up debt in a low interest rate environment until even without good safe alternatives, creditors are no longer willing to continue to lend to them at rates low enough to avoid a crisis, when the gap between promises and revenue cannot be easily bridged. 

Why not? 

Inflation has been much, much higher in the past (see the 1970s and early 1980s) and US government bonds flew off the shelves. 

Similarly, in the late 1990s, the government was retiring debt, and there was a concern that there would be no government bonds at all in the future.  OMG!  What will anyone do without the risk-free return?   Are you absolutely certain that debt will always be increasing when we know for sure that's not the case?  Oh, and what does the inflation scenario do to that debt?  Crushes the value of those bonds, right? 

I'm just old enough I've seen several crisis come and go, and what we're looking at now seems like roses compared to the past.  Rose.  And I'm not even that old.  So if we're looking at comparatively great times--which we certainly are--then I'm not  sold on the doomsday scenario.  Right now, the country is in waaaaaaaaaaaaaaaaaay better shape than it has been at numerous times in the last several decades.  Somehow, the Republic survived.  And if you go back to the 1800s--not counting the Civil War--there were lots and lots of periods that were again, waaaaaaaaaaaay worse than anything we are seeing today. 

[cheapass]

One also has to remember the huge unfunded or underfunded pension obligations at the level of individual cities or states. They're good for another $7 trillion or so.

San Jose just passed a $40M/year tax hike that was promoted as "improving police response to reduce violent crimes and burglaries, speeding emergency response times, repairing potholes and streets, and expanding gang prevention." but 3/4 of the new revenue is actually just going to keeping up with growing spending on pensions. http://www.mercurynews.com/2017/02/20/will-san-joses-pension-costs-consume-revenue-from-new-taxes/

I listened to an interesting podcast on this topic the other day. Apparently with this huge bulge of baby boomers retiring and straining the insolvent pension system we're going to see quite the disaster in the next decade or so. If taxes in these areas increase too much, they're going to see an exodus which will strain the system even more. Chicago/Cook County is losing many many taxpayers every year.

[Jrr85]

Just because you have your own currency doesn't mean you can't have sovereign debt in other currencies.  It's hard to imagine the U.S. having a sovereign debt crisis right now because what other currency would people demand the debt be denominated in?  But it's also difficult to imagine people continually loaning into the teeth of inflation.  The U.S. is a different case because of how dominant it has been and there aren't any likely rivals for reserve currency right now, but that is likely what will allow it to get bad enough to be a crisis. 

The U.S. could relatively easily reform entitlements from a finance perspective, right now.  But from a political perspective, it's much easier to continue racking up debt in a low interest rate environment until even without good safe alternatives, creditors are no longer willing to continue to lend to them at rates low enough to avoid a crisis, when the gap between promises and revenue cannot be easily bridged. 

Why not? 

Inflation has been much, much higher in the past (see the 1970s and early 1980s) and US government bonds flew off the shelves. 

This argues against your point.  10 year treasury notes were paying anywhere from 6% to over 15% in the 1970's and 1980's.  Right now we pay around 6% of federal revenues on interest.  Even if we didn't increase our debt compared to GDP, tripling our cost of debt (which is what I think a change to 6% average weighted cost of debt would do) would put us up to 18% of federal revenues.  Slightly different scenario from the 70's and 80's. 

Similarly, in the late 1990s, the government was retiring debt, and there was a concern that there would be no government bonds at all in the future.  OMG!  What will anyone do without the risk-free return? 

That was a stupid concern and not related to anything at issue here. 

Are you absolutely certain that debt will always be increasing when we know for sure that's not the case?

Certainly not sure but we routinely have meltdowns when the federal and many state governments simply slow down the rate of their spending increases in areas no involving entitlements, significant increased entitlement spending is scheduled.   Barring a miracle on the productivity side (certainly possible with AI), it doesn't look like we're going to have the political will to bring spending in line with revenues without a crisis. 

  Oh, and what does the inflation scenario do to that debt?  Crushes the value of those bonds, right? 

  Which debt are you talking about?  If you are looking at just your typical government bonds, you can inflate your debt away, once, if you are running a primary surplus.  But depending on what you consider "debt", lots of government debt (primarily entitlements at the state and federal level, including pensions) adjusts with inflation.  So even if we get to a primary surplus and decide to inflate away our debt, without being willing to tell Social security, medicare, medicaid, pension recipients, etc. that they are going to bear some pain, it's not going to fix the problem.   

I'm just old enough I've seen several crisis come and go, and what we're looking at now seems like roses compared to the past.  Rose.  And I'm not even that old.  So if we're looking at comparatively great times--which we certainly are--then I'm not  sold on the doomsday scenario.  Right now, the country is in waaaaaaaaaaaaaaaaaay better shape than it has been at numerous times in the last several decades.  Somehow, the Republic survived.  And if you go back to the 1800s--not counting the Civil War--there were lots and lots of periods that were again, waaaaaaaaaaaay worse than anything we are seeing today.

What we are facing is pretty rosy in a lot of ways.  We have the economic capacity to produce way more than we need.  Our main problem is that the developed world has already promised multiples of our projected future production to different people, primarily bond holders and entitlement recipients.  If you're just worried about not starving to death, we're not facing a crisis.  If you are worried about preserving the assets that you live on, it's a little more challenging, as everybody is going to be a political target to prevent other people from having to bear any of the pain from promises that can't be met.   

[maizefolk]

One also has to remember the huge unfunded or underfunded pension obligations at the level of individual cities or states. They're good for another $7 trillion or so.

San Jose just passed a $40M/year tax hike that was promoted as "improving police response to reduce violent crimes and burglaries, speeding emergency response times, repairing potholes and streets, and expanding gang prevention." but 3/4 of the new revenue is actually just going to keeping up with growing spending on pensions. http://www.mercurynews.com/2017/02/20/will-san-joses-pension-costs-consume-revenue-from-new-taxes/

I listened to an interesting podcast on this topic the other day. Apparently with this huge bulge of baby boomers retiring and straining the insolvent pension system we're going to see quite the disaster in the next decade or so. If taxes in these areas increase too much, they're going to see an exodus which will strain the system even more. Chicago/Cook County is losing many many taxpayers every year.

Yup. A number of cities in CA are in the same boat. Raising taxes to pay old pension obligations while cutting services, which makes the city a less attractive place to live, shrinking the population and property tax base, thus requiring further tax hikes and services cuts driving further population loss and property value declines and so on.

Would be interested in listening to that podcast if you'd be willing to post or PM me a link.

[cheapass]

Would be interested in listening to that podcast if you'd be willing to post or PM me a link.

It's called Adventures in Finance, episode 11. I've listened to a few of their episodes and while I could do without all of their gum flapping about "time the market, short this, long that", there are some really interesting perspectives and ideas. I'd recommend checking out episode 6 as well.

[Telecaster]

This argues against your point.  10 year treasury notes were paying anywhere from 6% to over 15% in the 1970's and 1980's.  Right now we pay around 6% of federal revenues on interest.  Even if we didn't increase our debt compared to GDP, tripling our cost of debt (which is what I think a change to 6% average weighted cost of debt would do) would put us up to 18% of federal revenues.  Slightly different scenario from the 70's and 80's. 

That's not the way bonds work.   As interest rates go up, the value of the all the existing bonds goes down, so the price of debt service stays the same.    At least until those bonds have to be re-issued.  New debt of course is more expensive.   All that said, the inflation you speak of is an unlikely scenario.  The high inflation we experienced in the 1970s was due to an enormous spike in the price of oil coupled with easy money policies of Fed Chairman Arthur Burns.   Oil is now a much smaller portion of economy than it was then, and the Fed has set aggressive targets to keep inflation in check.   So I don't see that situation reoccurring.  Now, there could be a combination of unforseen future events that cause high inflation.  But there could also be a combination of unforseen future events that cause deflation too.  So I don't see why high inflation is the default assumption.

All that said, the original claim was that the U.S. government won't be able to issue USD denominated debt in the event of high inflation.   That's clearly not true, because it has been done in the past. 

Similarly, in the late 1990s, the government was retiring debt, and there was a concern that there would be no government bonds at all in the future.  OMG!  What will anyone do without the risk-free return? 

That was a stupid concern and not related to anything at issue here. 

Actually it is pretty central to what I am talking about.  In the early 1990s, the US went into a recession and was in worse financial shape than we are now, especially in regards to  deficits, debt service, and entitlements.   Ross Perot ran for president on those issues.   The result was Bill Clinton implemented a small tax hike and small adjustments to entitlement spending.   The result was in a few short years, we went from the "Panic!  The Deficit Monster is Coming to Eat Us!"  To, "Wow!  Look at all this extra money!"

A couple lessons there.  One is to be skeptical of straight line projections from now into the future.   The other is that not very long ago we faced worse problems and everything turned out fine, with minimal pain or agony.   Since the problem can be solved, and we know how to solve it, those problems don't seem particularly worrisome.   

  Oh, and what does the inflation scenario do to that debt?  Crushes the value of those bonds, right? 

Which debt are you talking about?  If you are looking at just your typical government bonds, you can inflate your debt away, once, if you are running a primary surplus.  But depending on what you consider "debt", lots of government debt (primarily entitlements at the state and federal level, including pensions) adjusts with inflation.  So even if we get to a primary surplus and decide to inflate away our debt, without being willing to tell Social security, medicare, medicaid, pension recipients, etc. that they are going to bear some pain, it's not going to fix the problem.   

You and I were both talking about bonds.     But if you want to include entitlements that's fine, but entitlements like Social Security and Medicare are paid for through future revenues.   As I pointed out before, payroll taxes have been hiked a bunch of times over the years, including a whopper by Ronald Reagan, who won election after he raised payroll taxes, so I don't see any particular structural barrier to doing so again, other than people don't like taxes in general.  But they don't like losing entitlements either.   Social Security benefits have also been cut, by by raising the age for full benefits and by taxing the benefits for upper incomes.   So that's possible to do again as well. 

Similarly, back in 2010 CMS estimated that Medicare would be insolvent by 2017--that's this year.  However, some structural changes were made to Medicare as well as small tax increase, and now Medicare will be solvent through about 2028, without any cuts to benefits.  I suspect most people don't realize that.  Point is, you don't need draconian or drastic measures to deal with these issues.  In most all cases, small changes are enough to make big differences down the road.   

Keep in mind as well,l that right now federal taxes in general aren't particularly high compared to the last 50 years or so, and if they were on the higher end of that range, most of these problems become pretty small.  If taxes have been higher in the past, they can be higher in the future as well.   

[Jrr85]

This argues against your point.  10 year treasury notes were paying anywhere from 6% to over 15% in the 1970's and 1980's.  Right now we pay around 6% of federal revenues on interest.  Even if we didn't increase our debt compared to GDP, tripling our cost of debt (which is what I think a change to 6% average weighted cost of debt would do) would put us up to 18% of federal revenues.  Slightly different scenario from the 70's and 80's. 

That's not the way bonds work.   As interest rates go up, the value of the all the existing bonds goes down, so the price of debt service stays the same.    At least until those bonds have to be re-issued.  New debt of course is more expensive.   All that said, the inflation you speak of is an unlikely scenario.  The high inflation we experienced in the 1970s was due to an enormous spike in the price of oil coupled with easy money policies of Fed Chairman Arthur Burns.   Oil is now a much smaller portion of economy than it was then, and the Fed has set aggressive targets to keep inflation in check.   So I don't see that situation reoccurring.  Now, there could be a combination of unforseen future events that cause high inflation.  But there could also be a combination of unforseen future events that cause deflation too.  So I don't see why high inflation is the default assumption.

  Bonds absolutely work by an entity selling bonds, buyers giving that entity money (ignoring the intermediaries for simplicity), and then (hopefully) the issuer paying that money back.  So if you are running a primary deficit, and have an average maturity of 5-6 years, then your interest costs will basically lag the market by about 5-6 years.  It doesn't help that some of your older debt is now worth less because interest rates have moved against those bonds.  Yes, you could buy it back for cheap, but that's because it's your low interest rate debt.  Why would you go buyback your low interest rate debt when you are currently borrowing money at higher rates just to cover your current spending, even before you have to pay interest costs. 

All that said, the original claim was that the U.S. government won't be able to issue USD denominated debt in the event of high inflation.   That's clearly not true, because it has been done in the past. 

  That was not the original claim.  The original claim was that such an environment would cause the U.S. problems in the future.  In the 1970's, our debt to GDP was significantly different.  The U.S.'s interest rates went up (all the way to 15%), but that didn't mean that the U.S.'s interest payments were going to eat up 40% of federal spending (I'm not sure what the actual weighted average cost of debt peaked at, but say you split the difference and put it at 10% or even 8%, you're still talking about 20% plus of federal spending on interest on debt).   

Similarly, in the late 1990s, the government was retiring debt, and there was a concern that there would be no government bonds at all in the future.  OMG!  What will anyone do without the risk-free return? 

That was a stupid concern and not related to anything at issue here. 

Actually it is pretty central to what I am talking about.  In the early 1990s, the US went into a recession and was in worse financial shape than we are now, especially in regards to  deficits, debt service, and entitlements.   Ross Perot ran for president on those issues.   The result was Bill Clinton implemented a small tax hike and small adjustments to entitlement spending.   The result was in a few short years, we went from the "Panic!  The Deficit Monster is Coming to Eat Us!"  To, "Wow!  Look at all this extra money!"

A couple lessons there.  One is to be skeptical of straight line projections from now into the future.   The other is that not very long ago we faced worse problems and everything turned out fine, with minimal pain or agony.   Since the problem can be solved, and we know how to solve it, those problems don't seem particularly worrisome.   

I'm sorry, it was always stupid to assume that hitting a surplus for a few years, was going to be an endless problem.  There is never a problem finding enough voters that want lower taxes and/or enough handouts to cause a deficit.  And we didn't solve any problems.  We didn't think medicare and social security were set up to be funded long term.  We just kicked the problem down the road.  If you assume that we can continually raise taxes on workers and/or continually slash benefits, we don't have a problem.  But the longer we wait to do it, and the more reliance people place on receiving what they've been "promised" the more dangerous it is.   

 

  Oh, and what does the inflation scenario do to that debt?  Crushes the value of those bonds, right? 

Which debt are you talking about?  If you are looking at just your typical government bonds, you can inflate your debt away, once, if you are running a primary surplus.  But depending on what you consider "debt", lots of government debt (primarily entitlements at the state and federal level, including pensions) adjusts with inflation.  So even if we get to a primary surplus and decide to inflate away our debt, without being willing to tell Social security, medicare, medicaid, pension recipients, etc. that they are going to bear some pain, it's not going to fix the problem.   

You and I were both talking about bonds.     But if you want to include entitlements that's fine, but entitlements like Social Security and Medicare are paid for through future revenues.   As I pointed out before, payroll taxes have been hiked a bunch of times over the years, including a whopper by Ronald Reagan, who won election after he raised payroll taxes, so I don't see any particular structural barrier to doing so again, other than people don't like taxes in general.  But they don't like losing entitlements either.   Social Security benefits have also been cut, by by raising the age for full benefits and by taxing the benefits for upper incomes.   So that's possible to do again as well. 

Well, if you assume that entitlements won't be paid, then no, the bonds don't cause a problem.  But assuming we're not just going to tell retirees to go pound sand, that money is going to have to be paid from somewhere. 

And the point is that future revenues are unlikely to be enough, barring drastic tax increases, to pay for the future benefits. 

 
Similarly, back in 2010 CMS estimated that Medicare would be insolvent by 2017--that's this year.  However, some structural changes were made to Medicare as well as small tax increase, and now Medicare will be solvent through about 2028, without any cuts to benefits.  I suspect most people don't realize that.  Point is, you don't need draconian or drastic measures to deal with these issues.  In most all cases, small changes are enough to make big differences down the road.   

  If we would make small cuts right now, this wouldn't be an issue.  But we are a voting populace that elected Donald Trump and our backup was Hillarying freaking clinton.  We run ads depicting poilticians dumping the elderly off cliffs if anyone talks about being realistic about entitlements.  I'm a little skeptical that we're going to do anything while the pain will be small.  I think we're going to wait until the cuts/tax increases necessary will be significant. 

  Keep in mind as well,l that right now federal taxes in general aren't particularly high compared to the last 50 years or so, and if they were on the higher end of that range, most of these problems become pretty small.  If taxes have been higher in the past, they can be higher in the future as well.

  Federal revenues as a percent of GDP are above average right now.  We also have more burdensome state and local taxes.  We are also running up huge future debts right now at the federal and state level.  It'd be painful but doable to close that right now.  But the longer we wait, the more painful it will be. 

All that to say, I'm not saying it's eminent or unavoidable.  I'm just saying I'm skeptical we're going to solve the problem by suddenly acting reasonable through the political process.  It's going to have to be self-driving cars or other type of AI or something else that is not predictable that changes our trajectory.  I'm reasonably optimistic that something like that will happen.  But since I will be looking to have some assets when the Baby Boomer pinch is the worst, I just want to have some options. 

[ChrisLansing]

...My focus for this thread was more on individual plans, not ways to forcibly reshape society. 

Therein lies part of the problem of communicating between people with disparate views - some are relying on individual plans, while otheres believe "society" will find a way to deal with problems, so why worry?   

I'm largely in agreement with the sentiments expressed in the OP.   Our current energy intensive lifestyles are unsustainable and, IMO, this will be true even when solar power replaces fosil fuels.   

I see a slow gradual decline in our economy because we've organized ourselves on the basis of cheap ever abundant fosil fuels.    In reality fosil fuels are finite.   We've long passed peak oil production (extraction, to be more precise) in the USA and we are likely past peak production world wide.   That means either a decliine, as the oil and coal run out, or a change to another energy source.   

Many here seem to believe that we'll have a relatively seamless trasition to solar/wind power and that our industrial economy and energy intensive lifestyles can therefore continue indefintiely.    I'm not an engineer or scientist so it's difficult for me to say what exactly will happen.   I'm betting that the diffuse and intermittent nature of solar/wind means that the transition will not be seamless.    I doubt the energy intensity of oil/coal can be completely substituted for by sheer quantity of solar panels or windmills.    I might be wrong.     

I'm not predicting a return to cave dwelling and torches for lighting, but I think we'll be much more restricted in the future than we are now.   

To return to the quote at the top, the focus in this thread has been on individual response.   As much as I'm in agreement with the basic premises of the OP, and as much as I'm starting to respond, as an individual, to the situation, I don't really think that individual responses will be sufficient.   As a society we're going to have to figure out what to do about it.   Of course, at present, we don't even agree there is a problem so the solution (if there needs to be one) won't come about until things get considerably worse.   
 

[nara]

I've heard the quote about all great civilizations inevitably collapsing again and again. However, what I think is different and unique to our time is that we are more integrated with other countries than ever before. Bogle & Buffet both do not believe in international diversification because if you are invested in the S&P500 you are already diversified due to the majority of US corporations being heavily invested in foreign markets. When corporations are more powerful than many small countries, are actually countries onto themselves--the old rules don't seem to apply. Maybe if the US collapses in some way, I don't necessary agree that the market will either..

[caracarn]

I've heard the quote about all great civilizations inevitably collapsing again and again. However, what I think is different and unique to our time is that we are more integrated with other countries than ever before. Bogle & Buffet both do not believe in international diversification because if you are invested in the S&P500 you are already diversified due to the majority of US corporations being heavily invested in foreign markets. When corporations are more powerful than many small countries, are actually countries onto themselves--the old rules don't seem to apply. Maybe if the US collapses in some way, I don't necessary agree that the market will either..

+1

If there is one thing that studying history has shown me, is that human ingenuity finds a way, and I will add to the fact that the integration created by the internet of all knowledge in the world is the differentiator.  Almost everything we consider important technology was invented hundreds or thousands of years earlier in China than it was in the Western World, yet that technology was not shared because of the difficulty in communicating it.  Now you can know anything learned anywhere in the world a few seconds after it is placed on the internet.  I've said many months ago in this thread, declines do not occur in a matter of weeks, they take a long time.  In the period of "decline" there are people building on the knowledge of others to make that incremental improvement that will solve the problem we currently face that was insurmountable.

[Syonyk]

Therein lies part of the problem of communicating between people with disparate views - some are relying on individual plans, while otheres believe "society" will find a way to deal with problems, so why worry?

Certainly.  And assuming that "society" will figure it out is certainly easier than refactoring one's life to provide for more of one's own needs locally.

We've long passed peak oil production (extraction, to be more precise) in the USA and we are likely past peak production world wide.   That means either a decliine, as the oil and coal run out, or a change to another energy source.

But... but... ethanol!  I mean, uh, fracking!  I mean, uh, solar panel manufacturing!  My favorite phrase about oil in the US is along the lines of, "Fracking is the process of frantically scraping the bottom of the barrel, and pointing to the muck you extract as evidence that the barrel is still full."

I'm betting that the diffuse and intermittent nature of solar/wind means that the transition will not be seamless.

That's an understatement.  If we had paired nuclear base load with solar/wind for peaking, it would be a lot more feasible, but reliable solar/wind base load is just not a thing - even with batteries.  The amount needed to handle winter in regions of the country is insane.

As much as I'm in agreement with the basic premises of the OP, and as much as I'm starting to respond, as an individual, to the situation, I don't really think that individual responses will be sufficient.   As a society we're going to have to figure out what to do about it.   Of course, at present, we don't even agree there is a problem so the solution (if there needs to be one) won't come about until things get considerably worse.   

Oh, I don't think individual responses will make a bit of a difference at the societal level.  Just locally.  And offer some tested solutions that can scale in hyper-local climates.

The problem with waiting until things get considerably worse is that, usually, by the time people actually decide they should do something, it's far, far too late to do anything that would be useful.

However, what I think is different and unique to our time is that we are more integrated with other countries than ever before.

"But it's different this time!"

... and I will add to the fact that the integration created by the internet of all knowledge in the world is the differentiator.

"But it's different this time!"

A quite common phrasing throughout history - that doesn't seem to make a bit of difference.

[Stachless]

Bill Gates (and I) think (most of) you are all wrong!!!

If avid reader Bill Gates could give every member of the class of 2017 a graduation present, it would be, fittingly, a book. Specifically, a copy of "The Better Angels of Our Nature," by Harvard psychology professor Steven Pinker.

"Pinker makes a persuasive argument that the world is getting better, that we are living in the most peaceful time in human history," the billionaire co-founder of Microsoft writes on Mic.

"When you tell people the world is improving, they often look at you like you're either naive or crazy," he says. "But it's true. And once you understand it, you start to see the world differently."

This level of optimism "doesn't mean you ignore the serious problems we face," he says. "It just means you believe they can be solved, and you're moved to act on that belief."

[Classical_Liberal]

The world has improved greatly!  Over a very long-term span, if humans destroy ourselves completely, will likely continue to get better over time.  This improvement, however, is just like tracking the S&P.  Long term upward trend with very dramatic ups/owns in the short term.  The difference being "short term" in the scale of human history is decades or centuries that span multiple human generations. 

I just happen to think the last few generations are a bubble, this bubble is going to deflate as cheap energy runs out and we will have a "secular bear" for society.  How bad the bear is really depends on how well society prepares itself for the impending change (diversification).  It doesn't do anyone any good to say "hey, no worries, we'll come out of this in a few hundred years and society will be better than ever", when food and clean water become daily concerns again (as they have been through 99% of all human history).

[Syonyk]

I just happen to think the last few generations are a bubble, this bubble is going to deflate as cheap energy runs out and we will have a "secular bear" for society.  How bad the bear is really depends on how well society prepares itself for the impending change (diversification).  It doesn't do anyone any good to say "hey, no worries, we'll come out of this in a few hundred years and society will be better than ever", when food and clean water become daily concerns again (as they have been through 99% of all human history).

The problem is that industrial civilization is a one shot function.  All the easy resources are gone - you can't bootstrap an industrial civilization with deep coal mining and offshore fracking, if you don't have the resources.  There's plenty you can scavenge from the remains of the previous industrial civilization, but it's unlikely to get you to anywhere near the same level.

Also, those few hundred years in the middle, historically, suck.

[Classical_Liberal]

Also, those few hundred years in the middle, historically, suck.

Yes, that was really my point, which I evidently did not make clearly.

The problem is that industrial civilization is a one shot function.  All the easy resources are gone - you can't bootstrap an industrial civilization with deep coal mining and offshore fracking, if you don't have the resources.  There's plenty you can scavenge from the remains of the previous industrial civilization, but it's unlikely to get you to anywhere near the same level.

I agree, but in many ways most past civilizations were set up as "one hit wonders".  After an initial advancement that provides huge expansion, the advantage is lost through lack of additional resources or an equalization of technologies and the civilization back-steps or disappears.  If our current society used the remaining resources effectively, then the eventual disappearance of fossil fuel based energy would be felt less dramatically.  IOW use remaining resources wisely so you have some QE available for the upcoming secular bear. This means more sacrifice now before it gets "too bad".  Historically, it rarely happens and the current state of affairs is no different, but the wisdom of doing so is present throughout history (Joseph telling pharaoh to save for the seven lean years?).

I'm not arguing that we will ever achieve such wealth with such a large global population again, although some revolutionary technological advance may make it possible.  Rather, the overall upward trend will probably be entirely different and unexpected in the next secular bull.  This may just be a difference in opinion, but if knowledge is not irretrievably lost, vis-a-vis  the burning of the library of Alexandra, then I believe human society can eventually adjust to a much lower carrying capacity with sustainable energy.  If we manage to learn from any of the social and governmental experiments of the past, perhaps a more equitable social order can arise out of the ashes of industrialism in several generations.  I guess I'm just an optimist at heart?

[Telecaster]

I just happen to think the last few generations are a bubble, this bubble is going to deflate as cheap energy runs out and we will have a "secular bear" for society.

PV cost in USD/watt:

1977 $76.00
1985 $12.00
1995 $8.00
2005 $4.00
2015 $0.30

http://www.visualcapitalist.com/experts-bad-forecasting-solar/

Let's not make the mistake of assuming that trend will continue on forever, but we're also rapidly approaching stupid cheap. 

[Classical_Liberal]

@telecaster

Interesting, I don't pretend to be an expert in this area.  Earlier in this thread I stated just that.  That said, it's my understanding that these huge advances in solar are highly dependent on other resources.  Meaning that without petroleum (think past direct uses) can these panels/inverters/charge controllers continue to be produced, maintained and replaced at those costs?  With out significant new advances in batteries a grid also needs to be maintained, correct?  So we need nuclear or coal.  Can we even adequately maintain those without petroleum?

Seriously, I wouldn't mind an overview on the subject.  My knowledge is really limited to individual/household use and I have very little understanding of large scale grid and industrial requirements/needs (can we maintain industrial electric machines in a cost effective way without petroleum?). Unfortunately, most of the information out there for non-experts(I probably don't even know, what I don't know) has an agenda, one way or the other. 

[Prairie Stash]

@telecaster

Interesting, I don't pretend to be an expert in this area.  Earlier in this thread I stated just that.  That said, it's my understanding that these huge advances in solar are highly dependent on other resources.  Meaning that without petroleum (think past direct uses) can these panels/inverters/charge controllers continue to be produced, maintained and replaced at those costs?  With out significant new advances in batteries a grid also needs to be maintained, correct?  So we need nuclear or coal.  Can we even adequately maintain those without petroleum?

Nuclear and coal are not suitable as backups for solar power. Nuclear and coal are base load suppliers whereas solar and wind are intermittent suppliers (research base load, its a big step in understanding electric grids). As part of the economic analysis you'll find natural gas is preferable due to its quick response time and its smaller incremental turbines. Whereas a nuclear generator might be on/off at 500 MW for maximum efficiency a natural gas turbine is on/off in 30 minutes (or less) and can be scaled to run at peak performance at 30 MW, so you have 15 units that can be deployed to run at maximum efficiency instead of a single unit, it drastically cuts down marginal cost of production. The natural gas option is currently being deployed and alleviates grid batteries. Why have batteries when you can produce power on demand?

As for maintain industrial electric motors without petroleum, that's already been accomplished several decades ago. Without fossil fuels the maintenance would not significantly increase in cost, its a few pennies of cost, but the labour cost is approximately 100 times as much. Its like worrying about a piece of paper in a photocopier when you get paid $30/hour.

The argument you're proposing about petroleum used for solar is based on petroleum being a significant cost of production. Do you have any proof that its more than 5% of the total cost? Lets say its really 10% of the total cost of production and the alternatives to petroleum currently cost 5 times as much (there are fossil alternatives, in fact PV is an example of a coal alternative). That would mean the cost to produce PV with fossil fuel alternatives would raise the cost by 40%, bringing us back to 2012 levels from 2015 cost levels, 3 years. Feel free to find the exact cost of petroleum in PV, at most it 90%, the argument still holds up, at most we go back to 2005 costs from 2015, but that's not remotely possible because technology will continue to progress and still bring the costs down.

[Syonyk]

This may just be a difference in opinion, but if knowledge is not irretrievably lost, vis-a-vis  the burning of the library of Alexandra, then I believe human society can eventually adjust to a much lower carrying capacity with sustainable energy.  If we manage to learn from any of the social and governmental experiments of the past, perhaps a more equitable social order can arise out of the ashes of industrialism in several generations.  I guess I'm just an optimist at heart?

Here's an interesting (depressing?) question to ask yourself: How do we store knowledge today, what is required to access that knowledge, and how well will that knowledge be accessible in 20 years or 200 years?

To get yourself started, go find a paper you wrote 20 years ago (say, 1997), and access it.

We store knowledge in digital form, which requires a seriously functional industrial civilization to work, reliable electricity, and regular copying of the data to new media.  "The Cloud" doesn't really change any of this - it just adds regular payment requirements and internet access as base requirements to access knowledge.

Get rid of that, we drop back to a 1970s-1980s technology base in terms of knowledge, simply because most of the newer knowledge is in digital form.

I can read a book from 100 years ago.  I would struggle to read a floppy with some calculator programs I wrote in high school right now.

Let's not make the mistake of assuming that trend will continue on forever, but we're also rapidly approaching stupid cheap.

"Stupid cheap" is not a winning solution if you cannot pay for and maintain grid stability on the power grid with that cheap solar.  I think the power grid is pretty neat, and if you pay attention to Hawaii, you'll see a solid case of grid defection in action (it's cheaper to put up your own solar and battery, if you have the money for that) - I expect Hawaii will lose their power grid in the next 30 years, or at least major chunks of it, because they simply cannot afford to pay for the maintenance.  Grid maintenance is more or less coupled to miles of line and area covered, not power delivered.  Fewer people using it, less money, less reliability or more money for the remaining people.

Meaning that without petroleum (think past direct uses) can these panels/inverters/charge controllers continue to be produced, maintained and replaced at those costs?  With out significant new advances in batteries a grid also needs to be maintained, correct?  So we need nuclear or coal.  Can we even adequately maintain those without petroleum?

Correct, correct, and "probably not."  Renewables make for great energy sources if you have intermittent demands that can work with the available energy, they make acceptable peakers if you put some batteries on, and they're dreadful base load.

Seriously, I wouldn't mind an overview on the subject.  My knowledge is really limited to individual/household use and I have very little understanding of large scale grid and industrial requirements/needs (can we maintain industrial electric machines in a cost effective way without petroleum?). Unfortunately, most of the information out there for non-experts(I probably don't even know, what I don't know) has an agenda, one way or the other.

One of the big questions that is still an active research area (of which I play in, slightly) is simply grid stability - how do you maintain a stable power grid with high renewable deployment?  The power generation and power production have to match, almost exactly, at every moment of every day, or things go out of whack.  One of the biggest issues here is that the UN requirements for residential inverters are designed for when those inverters were owned by a few fringe hippies, not contributing meaningfully to power production, and nobody cared.  They don't do a thing for grid stability, and are actually harmful - they require a fairly tight voltage and frequency band to sync up, and if that goes out of sync, they trip off.  So if you have a grid transient and the frequency changes, you can drop off a bunch of residential production in a hurry and drop the whole segment of grid.  It's a pain to get those lit back up again as well, because once power comes on, you have a surge of inverters joining in at certain intervals you have to deal with.  Those inverters don't have any sort of synthetic inertia in them, they just follow the grid.  Fine when you have a few, a serious problem when you have a lot.  Plus, you can end up with interesting flows of power through the grid when areas get clouds.  The grid is designed implicitly assuming one way transmission - from generating plants to transmission lines to distribution lines.  Residential solar breaks that assumption.

I'm all for commercial solar - love me that stuff.  I do plan to put rooftop solar on my place, since I can, but I would love to be able to buy inverters that provide grid stability services and get paid for those (since I'll have a battery bank, I could agree to stricter requirements on what I push on the grid, and I'll have power source/sinks to push/pull frequency, but I can't in terms of inverters available or legal requirements).

It's... complex.  Grid stability is heavily tied to inertia, which, historically, was literal inertia of spinning generators and turbines.  Thousands of tons of spinning metal at 3600 RPM stores a lot of energy.

And then there's the storage issue, which Prairie Stash touched on quite nicely.

[surfhb]

I love how we are above 95% employment, the stock market is at an all time high, violent crimes are way down and we are so damn rich that we have entire communities of people online teaching each other how to FIRE, and people think we're in DECLINE????  Haha, that is some funny sh!t.

No kidding!   

 I remember my dad and grandfather spewing the same shit back in the 70s.   

Times were tougher back then.    Gas was $6-7 a gallon in today's dollars, unemployment, inflation and London had an IRA bombing on a weekly basis.   

World Wars, financial crisis, etc.  Yet we are still here.   

Btw....we're actually all lucky to be alive.   In 1963 we almost committed nuclear holocaust.   

I say to the doomers and gloomers: 

Shut the fuck up and enjoy what you have and stop whining!!  :)


Sent from my iPhone using Tapatalk

[caracarn]

However, what I think is different and unique to our time is that we are more integrated with other countries than ever before.

"But it's different this time!"

... and I will add to the fact that the integration created by the internet of all knowledge in the world is the differentiator.

"But it's different this time!"

A quite common phrasing throughout history - that doesn't seem to make a bit of difference.

Did you read anything past these line in either or our posts?  Totally serious.

Do you not feel that this knowledge sharing has vastly improved our ability as a group to respond to any event that occurs and therefore lessen the poor outcomes?

[Syonyk]

Did you read anything past these line in either or our posts?  Totally serious.

Do you not feel that this knowledge sharing has vastly improved our ability as a group to respond to any event that occurs and therefore lessen the poor outcomes?

I question whether "Doing the same thing that got us into the problem" will successfully get us out.  Just like it hasn't throughout history.

In particular, the "Well, you can keep doing exactly what you're doing if you buy this brand new Green(TM) thing for lots and lots of money!" trend is particularly absurd - wasteful consumerism has caused a lot of the problems we're facing, so I don't think wasteful consumerism will get us out (and from what I've seen of the useful lifespan of the new Green(TM) things, they're pretty well wasteful - I make a lot of money supporting systems that are under a decade old that the manufacturer would rather people throw out).

I also think that the fact that we can't think outside of the "exponential growth on a finite planet" paradigm is going to be another contributor to problems - you cannot grow your way out of problems caused by growth.

So, no, I don't think that "We can share cat pictures across the world instantly by using a ton of energy!" is likely to solve most of our problems.  Having exported our ability to remember, think, and store information locally, however, will be a serious problem when people can't look things up on the internet at some point in the future.

[caracarn]

Did you read anything past these line in either or our posts?  Totally serious.

Do you not feel that this knowledge sharing has vastly improved our ability as a group to respond to any event that occurs and therefore lessen the poor outcomes?

I question whether "Doing the same thing that got us into the problem" will successfully get us out.  Just like it hasn't throughout history.

In particular, the "Well, you can keep doing exactly what you're doing if you buy this brand new Green(TM) thing for lots and lots of money!" trend is particularly absurd - wasteful consumerism has caused a lot of the problems we're facing, so I don't think wasteful consumerism will get us out (and from what I've seen of the useful lifespan of the new Green(TM) things, they're pretty well wasteful - I make a lot of money supporting systems that are under a decade old that the manufacturer would rather people throw out).

I also think that the fact that we can't think outside of the "exponential growth on a finite planet" paradigm is going to be another contributor to problems - you cannot grow your way out of problems caused by growth.

So, no, I don't think that "We can share cat pictures across the world instantly by using a ton of energy!" is likely to solve most of our problems.  Having exported our ability to remember, think, and store information locally, however, will be a serious problem when people can't look things up on the internet at some point in the future.

OK, just such a vastly different worldview we have.

I get all the things you list as problems and certainly we need to address those, but I go back to what I said to you long ago in this thread.  It's an incredibly dystopian view to feel that everything globally will just collapse.  The internet is not US focused, so even what I though was your point when you started this thread that the US is a declining nation has now progressed to gloom and doom on the whole world. 

[Syonyk]

OK, just such a vastly different worldview we have.

It seems so, yes.

I get all the things you list as problems and certainly we need to address those, but I go back to what I said to you long ago in this thread.  It's an incredibly dystopian view to feel that everything globally will just collapse.  The internet is not US focused, so even what I though was your point when you started this thread that the US is a declining nation has now progressed to gloom and doom on the whole world.

The Internet is quite heavily US-centric.  The rest of the world certainly uses it, but it's heavily US-centric in operation and core companies involved.  Get rid of Google, Facebook, Amazon, eBay, Netflix... that's an awful lot of what pays for the internet.

I don't think things will "just collapse."  I think they will head down the long, slow decline that is common for nations and empires throughout history.  And, since everything is so heavily intertwined globally at this point, I think there's a good chance that can happen globally.  I assume that people observing that the Roman empire wasn't doing so hot were told to stop being doom-and-gloom dystopians, same for the Mayans, Egyptians, etc.

My focus is certainly on the US, because that's where I live, but I don't think "Well, just rely on the rest of the western world!" is a particularly great strategy either.

[Tyson]

Yep, it's like belief in god.  Either you have it or you don't.  No amount of discussion will sway either party.  Same holds true re: optimism for the future.  Either you are an optimist or a pessimist.  No amount of discussion will bridge that gap.

[Classical_Liberal]

Yep, it's like belief in god.  Either you have it or you don't.  No amount of discussion will sway either party.  Same holds true re: optimism for the future.  Either you are an optimist or a pessimist.  No amount of discussion will bridge that gap.

I disagree.  Armed with more facts, either from a historical or from a current state of affairs perspective has a huge impact on how I see the future developing.  If we discover a sci-fi zero-point energy tomorrow, my outlook for 20 years down the road changes.   Maybe I just tend to be fickle.

Thanks to @syonyk and @prairie stash for taking the time to arm me with a few more facts. 

[Tyson]

Yep, it's like belief in god.  Either you have it or you don't.  No amount of discussion will sway either party.  Same holds true re: optimism for the future.  Either you are an optimist or a pessimist.  No amount of discussion will bridge that gap.

I disagree.  Armed with more facts, either from a historical or from a current state of affairs perspective has a huge impact on how I see the future developing.  If we discover a sci-fi zero-point energy tomorrow, my outlook for 20 years down the road changes.   Maybe I just tend to be fickle.

Thanks to @syonyk and @prairie stash for taking the time to arm me with a few more facts.

One thing I've learned - given the same set of facts, people can come to wildly different conclusions.  If you go back and read some of the writings 200 years ago you will see that people thought that America was 'in decline' almost from the very beginning.  Many of them had compelling arguments that were well reasoned (from their perspective).  And when one prediction of doom didn't come to pass, well then it was time to jump on another.

You can also see this with financial news - people have been predicting doom and gloom since the beginning.  The ones from the 80s are particularly amusing.  When one dire prediction doesn't work out, just move on to the next. 

Same with the concerns here, around energy.  If/when these issues are decisively fixed, people like Syonyk will merely move on to the next dire prediction.  For people like that, we can never be 'anti-fragile' enough.

Which is fine.  But it would be nice if the doomers and preppers would admit, at least on occasion, that they were wrong.  But instead they merely move the date to a later date and say "well just you wait!". 

[Syonyk]

Same holds true re: optimism for the future.  Either you are an optimist or a pessimist.  No amount of discussion will bridge that gap.

And, again, going back to the original point of discussion, my intention was to look at things that are useful in both cases.

I'm absolutely not looking to be a "buh muh MREs, got muh guns, got muh bunker, gonna wait fer the world to end" type prepper.  I think those types are pretty stupid.  But I'm OK spending a bit more on my household solar power setup to maintain grid down capability (if I could find an inverter and power company that would pay me for grid stability services, which are broken out in the UK, this would be even better).

I don't see a huge downside to gardens and greenhouses, especially if I can automate parts of it (not cloud-based nonsense, locally designed stuff that works autonomously).

And that puts me in a much, much more robust position if "Put it all in index funds!" doesn't work out as hoped.

If we discover a sci-fi zero-point energy tomorrow, my outlook for 20 years down the road changes.

Absolutely and totally.  If we solve energy in a manner that doesn't require much in the way of natural resources to harness (solar panels and transistors don't come out of nowhere, and there actually is some concern about sand supplies - http://www.economist.com/news/finance-and-economics/21719797-thanks-booming-construction-activity-asia-sand-high-demand), we solve most known problems.  I mean, if you have enough energy, you can just make whatever matter you want.

I don't think that's likely - and I'm willing to make some decent bets that it won't happen in my lifetime, or my kid's lifetime.

Thanks to @syonyk and @prairie stash for taking the time to arm me with a few more facts.

No problem.  I delve deeper into electronics than a lot of people, and power systems are fascinating.  I read a lot of papers on grid stability and renewables, and none of them come to the "Yay, this is solved!" conclusion outside relatively small technical corners, and even those corners tend to be at odds with the UL requirements for inverters.  So... yeah.  Nothing good comes from ignoring all this, when ignoring it leads to a grid that can vary enough in exceptional conditions to trip a huge number of inverters off all at once.

You can also see this with financial news - people have been predicting doom and gloom since the beginning.  The ones from the 80s are particularly amusing.

And you see rather massive "corrections" on a pretty regular basis, so, yeah, some of those warnings are accurate.  It turns out that everyone using their house as an ATM, and everyone giving out loans for zero down, zero a month, and zero requirements beyond a heartbeat, weren't ideal.

Same with the concerns here, around energy.  If/when these issues are decisively fixed, people like Syonyk will merely move on to the next dire prediction.  For people like that, we can never be 'anti-fragile' enough.

Energy is just one concern that happened to be brought up recently.  I have plenty of others. :)  Given that society is active moving in the direction of "increased fragility" (efficiency), yeah, I think it's hard to be anti-fragile enough.  The collapse of the Soviet Union involved a people and industry that was hugely anti-fragile (mostly because Communism hadn't been feeding people, so they had impressive gardens, and the factory inventories were high), and it was still rough.

Which is fine.  But it would be nice if the doomers and preppers would admit, at least on occasion, that they were wrong.  But instead they merely move the date to a later date and say "well just you wait!".

"Just you wait!" is a reasonable thing when talking about the collapse of nations/empires, because historically, they all have - except for the relatively recent ones that haven't passed their expiration date yet.

I'm certainly not making any predictions about timelines and dates, beyond "I think that in my hopeful 60 years more of life, I think some of these things will cause enough problems to make life difficult."

[Telecaster]

"Stupid cheap" is not a winning solution if you cannot pay for and maintain grid stability on the power grid with that cheap solar.  I think the power grid is pretty neat, and if you pay attention to Hawaii, you'll see a solid case of grid defection in action (it's cheaper to put up your own solar and battery, if you have the money for that) - I expect Hawaii will lose their power grid in the next 30 years, or at least major chunks of it, because they simply cannot afford to pay for the maintenance.  Grid maintenance is more or less coupled to miles of line and area covered, not power delivered.  Fewer people using it, less money, less reliability or more money for the remaining people.

Sure you can.  You simply charge a flat fee for grid connectivity in addition to charging for the power.   Already being done in many places. 

[lemonde]

Meh, we just focus on trying to live well together as a family while making the world better (a lot of charity, volunteering, activism, etc). It's all we can do.

[Syonyk]

Sure you can.  You simply charge a flat fee for grid connectivity in addition to charging for the power.   Already being done in many places.

Right, but if that's the full infrastructure fee, it gets reasonably expensive - go look at industrial rate schedules for things that are broken out that way.

And that then drives more grid defection.

[Telecaster]

Sure you can.  You simply charge a flat fee for grid connectivity in addition to charging for the power.   Already being done in many places.

Right, but if that's the full infrastructure fee, it gets reasonably expensive - go look at industrial rate schedules for things that are broken out that way.

And that then drives more grid defection.

Remember the claim was that "cheap energy would run out."  If energy is cheaper off the grid is cheaper than on the grid, that means energy is pretty farkin' cheap, right?    If grid energy is needed, then people will pay for it (just as they do now).  But there is lots of evidence that says utility scale solar is cheaper than distributed solar, so maybe that's the way things are headed.  It would take some regulatory changes, but those changes are already well under way. 

Either way, I don't see how cheap solar is going to contribute to the collapse of this nation.  And FWIW, wind power has also become dramatically cheaper over the decades to the point where it is competitive with natural gas in many markets, and natural gas itself is pretty cheap.  So, I don't see the era of cheap energy end and causing ruin. 

[ChrisLansing]

We keep having this optimism/pessimism discussion and I think it's out of place.   I don't see much pessimism, just the realization that finite non-renewables will run out someday, at any rate of consumption.   Whether that's next Thrusday, or 300 years from now I don't know.    But we all know a civilization/economy based on extration and burning of fosil fuels has to end someday.   

The intelligent and interesting part of the discussion has been whether or not renewable energy sources can be substituted for ff w/o much change in individual lifestyles or nationwide impact on the economy.   Reasonable minds can disagree.   I'm all for more solar/wind power.  In my opinion we may have trouble mainting our current level of industrial production on diffuse intermittent power supplies.   But I could be wrong. 

The really frightening part of the discussion has come from those who insist "You've got to admit it's getting better, it's getting better all the time".      Some of you live in a bubble.   If you're 32 and FIRED from you $90K job and have enough income from your index funds to live well the rest of your life then yes life probably looks fantastic.  But you represent a tiny fraction of the total population.    For many - a much larger % than is FIRED at 32- are suffereing long term unemployment, or underemployment.  They are driving, if they can still afford a car, on roads that get steadily worse year by year, despite the patchwork repairs.  Some live in cities where they cannot drink the tap water.   People in Flint MI. can't even bath in the tap water.    We pretend there is less than 5% unemployment but we can only keep up the make-believe by not counting those who've given up looking for work, or those who's unemployment benefits have expired.   You may not be aware, in your bubble, about the heroin epidemic. You may not be aware that people who work at Burger King are not living as well as you.    Things are getting better for a tiny fraction of the people, but for many that's not the case.   There is much evidence pointing to a decline in living standards for a great many people.   There is much evidence of a decline in infrastructre which is a mark of a nation in decline.   Recognizing decline when it's all  around you isn't pessimism, it's realism.   

[Tyson]

Some cities are in decline, others are booming.  That's just how it always is and always will be.  I feel bad for people suffering in regions where jobs are not in abundance. 

Where I live, things are booming.

I've posted much data and many graphs in this thread to back my assertion that the world is getting better.  You should rebut those with your own data and graphs, otherwise we're just throwing anecdotes and gut-feelings at each other.

[ChrisLansing]

Either way, I don't see how cheap solar is going to contribute to the collapse of this nation.

 And FWIW, wind power has also become dramatically cheaper over the decades to the point where it is competitive with natural gas in many markets, and natural gas itself is pretty cheap.  So, I don't see the era of cheap energy end and causing ruin.


I don't think anyone is trying to make the case that cheap solar contributes to collapse.   The question is this - can solar prevent a collapse when the oil/coal runs out.     

[Telecaster]

And FWIW, wind power has also become dramatically cheaper over the decades to the point where it is competitive with natural gas in many markets, and natural gas itself is pretty cheap.  So, I don't see the era of cheap energy end and causing ruin.

I don't think anyone is trying to make the case that cheap solar contributes to collapse.   The question is this - can solar prevent a collapse when the oil/coal runs out.   

The first post in this thread posited that a collapse/decline might happen within 30-60 years, within the lifetimes of most people reading these posts.  A different poster posited that the era of cheap energy would end and contribute to that collapse/decline.  I disagree.  There is exactly zero evidence that will be the case in our lifetimes.  For one, the US has enormous coal reserves which will outlast all of us.  Coal is cheap.  We got lots.  To answer you question, coal is not going to run out while we are all still vertical.  But as cheap as coal is, it is in a death struggle with cheap wind, cheap natural gas, and now cheap solar.

Petroleum is perhaps a different issue, but we're currently awash in oil.  For most of the previous four decades we were a major oil importer and somehow we survived, and even prospered.  We may again become an oil importer but that doesn't automatically follow we will collapse because of that.  While there is certainly a finite amount of oil in the country, technology allows us to extract more and more of it.  Think plateau oil rather than peak oil.  That said, a major consumer of oil--transportation--is rapidly moving towards electric vehicles. See: Cheap wind, cheap natural gas, and now cheap solar.  With cars becoming more and more efficient and moving away from petroleum, we are approaching have already moved past peak demand.  Petroleum consumption peaked a decade ago.  Production is up, consumption is down...this is a recipe for collapse?

Syonyk pointed out that perhaps all the rooftop solar folks aren't paying their fair share for grid connectivity.   That could well be true.  But if it is true, then ultimately grid connection fees (which already exist in lots of places) will be increased, with the result of making utility scale solar more attractive, which is probably already more attractive when the smoke clears.   And right now, rooftop solar is a rounding error in the energy mix.   It isn't a major problem, and it is a problem with easy solutions.

In short, I don't buy the notion we will run out of cheap energy in our lifetimes.  We are awash in cheap energy, and it is rapidly getting cheaper.  And not only that we are using less.   

[caracarn]

We keep having this optimism/pessimism discussion and I think it's out of place.   I don't see much pessimism, just the realization that finite non-renewables will run out someday, at any rate of consumption.   Whether that's next Thrusday, or 300 years from now I don't know.    But we all know a civilization/economy based on extration and burning of fosil fuels has to end someday.   

The intelligent and interesting part of the discussion has been whether or not renewable energy sources can be substituted for ff w/o much change in individual lifestyles or nationwide impact on the economy.   Reasonable minds can disagree.   I'm all for more solar/wind power.  In my opinion we may have trouble mainting our current level of industrial production on diffuse intermittent power supplies.   But I could be wrong. 

The really frightening part of the discussion has come from those who insist "You've got to admit it's getting better, it's getting better all the time".      Some of you live in a bubble.   If you're 32 and FIRED from you $90K job and have enough income from your index funds to live well the rest of your life then yes life probably looks fantastic.  But you represent a tiny fraction of the total population.    For many - a much larger % than is FIRED at 32- are suffereing long term unemployment, or underemployment.  They are driving, if they can still afford a car, on roads that get steadily worse year by year, despite the patchwork repairs.  Some live in cities where they cannot drink the tap water.   People in Flint MI. can't even bath in the tap water.    We pretend there is less than 5% unemployment but we can only keep up the make-believe by not counting those who've given up looking for work, or those who's unemployment benefits have expired.   You may not be aware, in your bubble, about the heroin epidemic. You may not be aware that people who work at Burger King are not living as well as you.    Things are getting better for a tiny fraction of the people, but for many that's not the case.   There is much evidence pointing to a decline in living standards for a great many people.   There is much evidence of a decline in infrastructre which is a mark of a nation in decline.   Recognizing decline when it's all  around you isn't pessimism, it's realism.   

All valid points about regionalism of circumstances, but I come from the perspective that MMM fostered early on on this board, is that this "decline" is from an insanely luxurious, decadent lifestyle compared to people even just a hundred years ago.  Even quite poor households, have a roof over their heads they did not have to cleave out of the wilderness and assemble with their own bare hands while their family huddled in a lean-to for the months it took them to build  it.  They have running water to keep disease down, even though some of that water may have terrible issues, though those are limited.  They have little gadgets and helpers and tools that once again, people could not just go around town and obtain but had to make themselves or do without.  They have stores or food pantries or other places where piles of food are available for purchase or are given out free of charge to the truly needy versus having to figure out how to kill a rabbit, start a fire and share it amongst a family of 10 with the prospect of catching another rabbit being days away and having to subsist on plants in the interim.  There is a heroin epidemic, but that does not define a nation, that defines a subset of people who have lost hope and choose to cope with it by numbing the pain.  We're not passing out heroin in the classroom as the cure to all our declining national woes and the way to deal with the world, it's still a conscious choice people make to bring into their lives.  We're a long way from our infrastructure declining to rutted tracks for our wagons and gravity fed aqueducts for our water, and those nations made it hundreds of years with just that level of infrastructure.  I don't know.  Maybe the reason there is not a lot of bandwagon jumping on this thread is that this site is based on learning to live within your means and adjusting as circumstances change, so few are crying "woe is our nation" as we will just adjust to what comes as we always have.

[Jrr85]

All valid points about regionalism of circumstances, but I come from the perspective that MMM fostered early on on this board, is that this "decline" is from an insanely luxurious, decadent lifestyle compared to people even just a hundred years ago.  Even quite poor households, have a roof over their heads they did not have to cleave out of the wilderness and assemble with their own bare hands while their family huddled in a lean-to for the months it took them to build  it.  They have running water to keep disease down, even though some of that water may have terrible issues, though those are limited.  They have little gadgets and helpers and tools that once again, people could not just go around town and obtain but had to make themselves or do without.  They have stores or food pantries or other places where piles of food are available for purchase or are given out free of charge to the truly needy versus having to figure out how to kill a rabbit, start a fire and share it amongst a family of 10 with the prospect of catching another rabbit being days away and having to subsist on plants in the interim.  There is a heroin epidemic, but that does not define a nation, that defines a subset of people who have lost hope and choose to cope with it by numbing the pain.  We're not passing out heroin in the classroom as the cure to all our declining national woes and the way to deal with the world, it's still a conscious choice people make to bring into their lives.  We're a long way from our infrastructure declining to rutted tracks for our wagons and gravity fed aqueducts for our water, and those nations made it hundreds of years with just that level of infrastructure.  I don't know.  Maybe the reason there is not a lot of bandwagon jumping on this thread is that this site is based on learning to live within your means and adjusting as circumstances change, so few are crying "woe is our nation" as we will just adjust to what comes as we always have.

Adjusting to what comes is relatively easy as long as the U.S. remains a reasonably free country.  Even if the stock market were to no longer be a vehicle to grow wealth, just having it as a place to preserve wealth relative to inflation would leave a manageable situation.  But the biggest threat to the world outside of a large meteor strike is probably that the U.S. pulls a Venezuela and decides to commit national suicide by stupid policy.  Then you'd have the traditional economic engine of the world being a disaster, China facing a demographic crisis driven by its one child policy, western europe and Japan facing a slightly less catastrophic demographic crisis driven by low fertility rates, and no clear leader going forward.  India maybe? 

I think it's unlikely the U.S. goes that route for the foreseeable future, and we're more likely on a long, long gradual decline like most of Western Europe, where "decline" is really self imposed limits on growth, but our entitlement situation is pretty similar to most of western Europe or worse, so maybe we are not as far behind them as it seems and maybe we go full stupid in the next three or four decades rather than declining gradually over the next couple of hundred years. 

[Tyson]

Recognizing decline when it's all  around you isn't pessimism, it's realism.   

Just wanted to point out that all pessimists think they are realists.

People talk about the middle class shrinking.  Some of the are slipping into poverty (which is bad), but some of them are becoming wealthy (which is good!).  That's a lot more nuanced and accurate than just saying "Things are in decline". 

But I'll point out again, same set of facts can be interpreted very differently.  A pessimist looks at that and says "oh, more poor people", an optimist looks at it and says "Oh, cool more rich people!".  See how pre-existing perspectives color perceptions?

[qval]

I've ready maybe 40% of the posts in this thread, and while I in general agree with the specific points (high debt is bad, declining industrial capacity, etc.), I don't agree that the US is the nation in decline.

I'll include links at the bottom to videos to watch, but the US is going to be fine. We are safe from international invasion, we have a domestic market that is relatively strong (compared to everyone else), and we have lots of energy. These points are made by Peter Zeihan in The Accidental Superpower and The Absent Superpower. I think he's possibly overstating his case, but the jist of it is real: We've got 30+ years of prosperity ahead of us, just based on cheap energy.


Two videos to watch, maybe at 2x speed?(search Peter Zeihan on youtube to find more):

https://www.commonfund.org/2017/04/27/de-globalizing-superpower/
This is the most recent version of his talk I've found on the internet: it explains how US geography, demography and energy makes us a superpower by default. It also goes into US politics a little, and how things might be bad for the next 15 years while the Baby Boomers retire and stop saving money and instead spend it.
I'd actually like some Mustachians to weigh in on how us millenials acting like boomers (saving for retirement rather than spending and going into debt) is affecting the economy (probably not much) and how the coming demographic timebomb will affect us. This is probably going into market timing territory, but is there an argument for jumping into safer investments before the bulk of the boomers to so?


https://www.youtube.com/watch?v=FseKcahmDiA
NPR debate on whether America is in decline. Zeihan is on one side with Josef Joffe, who argues that Americans have been debating on whether America is in decline for over 100 years. But we keep entering the next decade stronger than we entered the last. And relative to Europe, Japan, China, and almost all other countries, the USA is in great and improving shape.

I don't mean to say there won't be setbacks, but the US is not going to decline back to the backwater it was before industrialization. Be optimistically realistic about this country.


So, now that we're talking about how to retire in a declining nation like Japan, Germany, China, Italy, Spain, or Russia, what do you do? Make sure your Stash is mobile enough to be able to get to the US when TSHTF. 

[ChrisLansing]

I'm reluctant to resurect this thread, but, I thought this would be interesting to the various optimists/pessimists who've posted.

https://www.currentaffairs.org/2017/06/pessimism-is-suicide

[Tyson]

I'm reluctant to resurect this thread, but, I thought this would be interesting to the various optimists/pessimists who've posted.

https://www.currentaffairs.org/2017/06/pessimism-is-suicide

I think there's a correlation between high intelligence and pessimism (see this very thread).  The smarter you are, the more ways you can think of for things to go wrong. 

Or as I joke - "Being smart just makes you better at worrying".  Hahaha.

[Syonyk]

That's... a rather bizarre article.

And, here.

Predictions are tricky things to make about anything, let alone the destiny of the species.

Here's one of mine: I predict that exponential growth on a finite planet cannot continue forever.