Why this time - it really is different,[ the commodity supercycle ]

[Guest]

Metal minerals scarcity:
A call for managed austerity and the elements of hope
Dr. A.M. Diederen, MSc.

(Editor's Note: This is a research paper by André Diederen. Diederen is a senior research scientist at TNO, Holland, where he has been working since 1997 on defence related matters. His background is mechanical engineering (1987). Because a ruling paradigm in defence related matters is the precautionary principle and since this sector applies various non-abundant metals, he took a closer look at the availability of metals. The implications of metals scarcity reach far beyond the "niche" of defence related materials and might affect our entire industrial civilization.

Abstract
If we keep following the ruling paradigm of sustained global economic growth, we will soon run out of cheap and plentiful metal minerals of most types. Their extraction rates will no longer follow demand. The looming metal minerals crisis is being caused primarily by the unfolding energy crisis. Conventional mitigation strategies including recycling and substitution are necessary but insufficient without a different way of managing our world's resources. The stakes are too high to gamble on timely and adequate future technological breakthroughs to solve our problems. The precautionary principle urges us to take immediate action to prevent or at least postpone future shortages. As soon as possible we should impose a co-ordinated policy of managed austerity, not only to address metal minerals shortages but other interrelated resource constraints (energy, water, food) as well. The framework of managed austerity enables a transition towards application (wherever possible) of the 'elements of hope': the most abundant metal (and non-metal) elements. In this way we can save the many critical metal elements for essential applications where complete substitution with the elements of hope is not viable. We call for a transition from growth in tangible possessions and instant, short-lived luxuries towards growth in consciousness, meaning and sense of purpose, connection with nature and reality and good stewardship for the sake of next generations.
Introducing metal minerals scarcity and managed austerity
Undoubtedly, the global economic growth of the last century, fuelled by and accompanied by exponential growth in population and consumption of resources like fossil fuels, water, food and metal minerals, is unsustainable. Now that we are nearing the second decade of the 21^st century, we are beginning to notice the consequences of supply gaps of various resources. This paper focuses on the issue of metal minerals scarcity within the constellation of interconnected problems of scarcity of water and food, pollution and climate change and most notably scarcity of energy. In case of unlimited energy supply, metal minerals extraction would only be limited by the total amount of mineral resources. However, due to the scarcity of energy, the extraction rates of most types of metal minerals will cease to follow demand. Probably the only acceptable long-term solution to avoid a global systemic collapse of industrial society, caused by these resource constraints, is a path towards managed austerity. Managed austerity will have to be a combination of changes in technology and changes in both individual and collective human behaviour. Managed austerity could prevent non-desirable 'solutions' by doing much too little much too late (also known as 'business as usual') which could ultimately result in large scale conflicts, global chaos and mass starvation of the world's population.
Energy scarcity
Humanity has depleted a significant part of its inheritance of highly concentrated energy resources in the form of fossil fuels. Although huge quantities of these resources remain untapped, the worldwide extraction rate (production flow) has reached a plateau and will soon begin to decline [1,2,3,4,5,6]. The result is an ever widening supply gap because sustained global economic growth requires sustained growth in available energy. Figure 1 gives the general depletion picture for oil and gas [1] in giga barrels of oil equivalent (Gboe) and the left part of the bell-shaped curve strongly resembles a logistic curve. The initial stage of growth is approximately exponential, growth slows as saturation begins ('the low-hanging fruit has been picked') and at maturity growth stops and a maximum is reached. The maximum production rate is referred to as the 'peak' and is not a sharp deflection point in the curve but rather a plateau region.

Figure 1: Depletion curve for oil and gas [1]

It is important to realise that the peak date in the depletion graph (figure 1) is not the same as the half date because production can continue for a long period after the peak. The actual depletion curve will presumably be asymmetric, having a peak date before the half date. Although the exact peak date for oil and gas is being contested (ranging from 2005 to somewhere during the next few decades), experts and authorities seem to converge on a peak date within the next few years. Oil and gas are currently the world's most important energy sources. Transportation for instance is currently almost entirely dependent on oil. Coal will not be able to fill the energy gap after the peak in oil and gas. According to [7] coal may peak around 2025. Again, this does not imply exhaustion of coal reserves, it is quite possible that more coal will be left for extraction after the peak date than has been extracted in total in the years before. The crucial point is that a maximum production rate will be reached after which supply can no longer follow demand. It is estimated that oil, gas and coal combined will reach their 'peak all fossil fuels' close to 2020 [8]. All other energy resources combined (nuclear, hydro, wind, solar, biofuels, tidal, geothermal and so on) cannot fill the supply gap in time [9,10,11,12]. Timely and massive utilisation of these other energy resources is limited by various constraints like lack of concentration, intermittency, issues related to conversion and storage and last but not least the required massive input of fossil fuels and metal minerals. Therefore we will probably be confronted with a peak in global energy production within the next 10 to 15 years, despite progress in technology.
Metal minerals scarcity
The depletion graphs of most metal minerals will resemble the curve for oil and gas (figure 1). Figure 2 gives an example for zirconium mineral concentrates [13].

Figure 2: Depletion curve for zirconium mineral concentrates [13]

Many warnings in the past of impending metal minerals shortages have been proven wrong because of the availability of cheap and abundant fossil fuels. Every time the ratio of reserves to production of a certain metal mineral became uncomfortably small, the reserves of that mineral were being revised upwards because it became economically feasible to extract metals from the so-called reserve base or resource base. Reserves are defined as those ores that can be economically extracted at the time of determination and the term reserves need not signify that extraction facilities are in place and operative. The decades-old paradigm which states that reserves will be revised upwards (to include lower ore grades) as soon as supply gaps are looming, is no longer valid without cheap and abundant energy. Mining and extraction (concentration) consume huge amounts of energy. The energy required for extraction grows exponentially with lower ore grades. This is illustrated in figure 3 for iron ore and aluminium ore [14]. The highest ore grades have already been depleted or are already being mined. Because of energy constraints, the largest parts of mineral deposits are out of reach for economically viable exploitation, see figure 4 [15].

Figure 3: Relation between required energy for extraction and ore grade [14]

Figure 4: Mineralogical barrier for most elements [15]

Below the so-called mineralogical barrier (the red shaded area in figure 4), one would essentially have to pull the rock chemically apart to extract all individual elements. This is of course prohibitively energy intensive. For this reason it is very doubtful that meaningful parts of the reserve base or resource base of many metal minerals will ever be upgraded to reserves [16]. It is even questionable whether all currently stated reserves are fully exploitable given the ever growing constraints with regard to energy required [13].
The trend of geologically and physically based minerals scarcity will be further enhanced by other factors. Global ('average') shortages will most likely be preceded by spot shortages because of geopolitics and export restrictions, as many important metal minerals are concentrated in just a few countries, often outside the western industrialized world (e.g. China).
Extraction rates and reserves of metal minerals
Known data of extraction and consumption rates of metal minerals and their reserves indicate that the so-called 'peak production' for most metal elements will lie in the near future. The data from table 1 and figures 5 through 9 support this statement.
Table 1 represents an overview presented by the US Geological Survey [17] of global annual primary production and global reserves of a large number of metal minerals. Their production goes into various products and compounds, part of them being steels, alloys and metal products. The remaining 'lifetimes' are calculated based on a modest consumption growth of 2% per year. The elements predicted to have a 'lifetime' of less than 50 years are summarized in figure 5. Of course, these minerals are not completely depleted in this period, but their peak production lies well before the estimated moment. Compare the result for zirconium with figure 2: the remaining 'lifetime' of zirconium is 19 years and the peak date is already behind us (1994). Although exact data fail, the elements strontium through niobium (of figure 5) will soon reach their peak production or have already passed their maximum extraction rates.

Figure 5: Years left of reserves at a sustained annual global primary
production growth of 2% (based on table 1)
Figure 6 through 9 depict in more detail global annual production rates and the known reserves. The annual primary production of iron dwarfs all other metal elements combined. Despite its huge reserves, iron will last less than 3 generations (less than 50 years) as far as cheap and abundant primary production is concerned, due to the enormous scale of its annual global consumption. The only viable long-term alternative to iron and in fact all metals at this scale of consumption would be magnesium. Magnesium reserves are virtually unlimited because of its abundance and associated accessibility in seawater [20].

Figure 6: Distribution of annual global primary production (based on table 1)

Figure 7: Distribution of annual global primary production without iron
(based on table 1)

Figure 8: Distribution of global reserves excluding magnesium (based on table 1)

Figure 9: Distribution of global reserves excluding magnesium and iron
(based on table 1)
On a trajectory of 'business as usual', we will have much less than 50 years left of cheap and abundant access to metal minerals. The production rate of metal minerals will start to decline well in advance of the depletion of reserves as it will take exponentially more energy input and metal minerals input to grow or even sustain the current extraction rate of metal minerals. To sustain and increase current production rates, resources have to be extracted at ever more distant locations (including deep mining and ocean floor mining) and at ever lower ore grades which require exponentially more energy to extract. In this sense it could even be stated that metal minerals scarcity aggravates energy scarcity.
Consequences of unmitigated metal minerals scarcity
During the next few decades we will encounter serious problems mining many important metal minerals at the desired extraction rates. Amongst them are all precious metals (gold, silver and platinum-group metals), zinc, tin, indium, zirconium, cadmium, tungsten, copper, manganese, nickel and molybdenum. A number of these metals are already in short supply (e.g. indium). Metals like gallium, germanium and scandium are not incorporated in table 1 by lack of data, but these metals suffer from a very low extraction rate as they are by-products (in very low concentrations) of other metal minerals; independent production growth is therefore not an option, thus making an increasing role for these elements impossible.
Besides the minerals with obvious constraints (low ratio of reserves relative to primary production), we can distinguish different 'categories' of metal minerals in table 1. First, several metal minerals which have a high ratio of reserves relative to primary production suffer from relatively low absolute amounts of reserves and associated low extraction rates, effectively making them non-viable large-scale substitutes for other metals which will be in short supply. It is up for debate for example whether lithium is a viable large-scale substitute for nickel in accumulators for electric energy as far as land mined lithium is concerned (it might be extracted from seawater in future [20], albeit at higher cost). Second, other metal minerals have no acceptable substitutes for their major applications, which is of special interest for those metals which will run out relatively fast at the present course, manganese being an important example. Third, even metals with a high ratio of reserves to primary annual production combined with large absolute amounts of reserves and associated extraction rates, can be susceptible to future supply constraints because they are located in just a few geographic locations. An example is chromium which is mainly located in Kazakhstan and southern Africa.
Without timely implementation of mitigation strategies, the world will soon run out of all kinds of affordable mass products and services. A few examples are given here. First, a striking example are cheap mass-produced consumer electronics like mobile phones, flat screen TVs and personal computers for lack of various scarce metals (amongst others indium and tantalum). Also, large-scale conversion towards more sustainable forms of energy production, energy conversion and energy storage would be slowed down by a lack of sufficient platinum-group metals, rare-earth metals and scarce metals like gallium. This includes large-scale application of high-efficiency solar cells and fuel cells and large-scale electrification of land-based transport. Further, a host of mass-produced products will suffer from much lower production speeds (or much increased tooling wear) during manufacturing owing to a lack of the desired metal elements (a.o. tungsten and molybdenum) for tool steels or ceramics (tungsten carbide). Among the affected mass-produced machined products are various household appliances and all types of motorized transport (cars, trains, ships and aero structures). The lack of various metal elements (a.o. nickel, cobalt, copper) for high-performance steels and electromagnetic applications will affect all sectors which apply high-performance rotating equipment. Besides transportation this includes essential sectors like electric energy generation (coal/oil/gas-based and nuclear power plants, hydropower, wind power). Also the vast areas of construction work in general (housing, infrastructure) and chemical process industries will be affected. The most striking (and perhaps ironic) consequence of a shortage of metal elements is its disastrous effect on global mining and primary production of fossil fuels and minerals: these activities require huge amounts of main and ancillary equipment and consumables (e.g. barium for barite based drilling mud).
These threats to the global economy require political, behavioural and governmental activities as well as technological breakthroughs. Of the breakthroughs, intensified recycling offers the opportunity to buy us time and innovative substitution may lead to sustainable options [18,19].
Efficiency: Jevon's paradox
A potent partial solution for metal minerals scarcity would be a better extraction efficiency, if it wasn't for Jevon's paradox. Jevon's paradox is the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase (rather than decrease) the rate of consumption of that resource. So, technological progress on its own (without 'control') will only accelerate the depletion of reserves.
Recycling: delaying of effects
Recycling the current and constantly growing inventory of metal elements in use in various compounds and products is the obvious choice in order to buy time and avoid or diminish short- to medium-term supply gaps. Although recycling is nothing new, generally the intensity could be further enhanced. We should keep in mind though that recycling has inherent limits, because even 100% recycling (which is virtually impossible) does not account for annual demand growth. At the present course we need to continue to expand the amount of metal elements in use in order to satisfy demand from developing countries like China and India whose vast populations wish to acquire a material wealth comparable with the standard of living of the industrialized western world. Furthermore, recycling also costs lots of energy (progressively more with more intense recycling) and many compounds and products inherently dilute significant parts of their metal constituents back into the environment owing to their nature and use. So even with intense recycling, we will need a continued massive primary production to continue our present collective course.
Substitution: the elements of hope
It is self-evident that - at our current level of technology - substitution of scarce metals by less scarce metals for major applications will lead to less effective processes and products, lower product performance, a loss in product characteristics, or lead to less environmentally friendly or even toxic compounds. An important and very challenging task is therefore to realise the desired functionalities of such products with less scarce elements and to develop processes for production of these products at an economic scale. The best candidates for this sustainable substitution are a group of abundantly available elements, that we have baptised 'elements of hope' (see figure 10). These are the most abundant elements available to mankind and can be extracted from the earth's crust, from the oceans and from the atmosphere. They constitute both metal and non-metal elements. Hydrocarbons for production of materials (including plastics) could be extracted progressively more from biomass, albeit at a much lower extraction rate than from concentrated (fossilized) biomass (oil, natural gas and coal). Not coincidentally, all macronutrients of nature (all flora and fauna including the human body) are found among the elements of hope: nature either uses these elements (metabolism, building blocks) or has shown to be tolerant to these elements (in their abundant natural forms). Substitution based on the elements of hope therefore is potentially inherently environmentally friendly.

Figure 10: The elements of hope; the green elements are macronutrients, the elements
within the thickened section are metals (Si being a metalloid)
Responsible application: frugal and critical elements
We can look at the remaining global reserves of metal minerals as a toolbox for future generations (see figure 11). An important part of the toolbox is reserved for the elements of hope. Another part of our toolbox is reserved for less abundant but still plentiful building blocks, the 'frugal elements'. These elements should only be applied in mass for applications in which their unique properties are essential. In this way their remaining reserves will last longer (most notably copper and manganese). For the sake of completeness, also the non-metals belonging to this category are included in figure 11. Finally a small corner of the toolbox is reserved for all other metal elements, the 'critical elements', which should be saved for the most essential and critical applications. Not described in figure 11 but also belonging to the critical elements are other non-metals and the metal trace elements with high atomic mass (not previously mentioned in this paper by lack of data from [17]).

Figure 11: The toolbox containing the elements of hope, the frugal elements and the critical elements;
PGM = Platinum-Group Metals;
REM = Rare-Earth Metals;
the red elements are non-metals;
B ,Si,Ge,As,Sb,Te are metalloids (for a better resolution version of fig. 11, see this link )
Conclusion: a call for action, ingenuity and responsible behaviour
Because of the surging scarcity of energy, even large-scale substitution and recycling cannot circumvent supply gaps in metal minerals. This is because production of metals consumes vast amounts of energy and so do substitution technologies and intensive recycling. The introduction of managed austerity is required to convince us all to live using less.

With this paper we call for action. We can increase the lifespan of the reserves of various materials by making a shift towards large-scale application of the elements of hope with a sensible use of the frugal and the critical elements. In order to do this mankind will have to mobilize its collective creativity and ingenuity. Technology alone is not enough to achieve this goal, nor can the challenge of metal minerals scarcity be treated as an isolated problem: it is part of a host of interrelated problems. A solution calls for nothing less than a globally co-ordinated societal response. The scarcity of energy, of food and water, of metal minerals and the effects of pollution and climate change all call for intervention by authorities to facilitate a transition towards collective responsible behaviour: managed austerity. They call for a transition from growth in tangible possessions and instant, short-lived luxuries towards growth in consciousness, meaning and sense of purpose, connection with nature and reality and good stewardship for the sake of next generations.
TABLE 1 (data in metric tons from ref [17]) (for a higher resolution version, see this link )







References
[1] Association for the Study of Peak Oil and gas (ASPO), Newsletter No. 97, compiled by C.J. Campbell, Staball Hill, Ballydehob, Co. Cork, Ireland, January 2009
[2] Energy Watch Group (EWG), Crude oil - the supply outlook, EWG-Series No 3/2007, Ottobrunn, Germany, October 2007
[3] International Energy Agency, World Energy Outlook 2008
[4] Koppelaar, R., Meerkerk, B. van, Polder, P., Bulk, J. van den, Kamphorst, F., Olieschaarstebeleid (in Dutch), slotversie, Stichting Peakoil Nederland, October 15, 2008
[5] Simmons, M.R., The energy crisis has arrived, Energy Conversation Series, United States Department of Defense, Alexandria, VA, June 20, 2006
[6] The Oil Crunch – Securing the UK's energy future, Industry Taskforce on Peak Oil & Energy Security (ITPOES), October 2008
[7] EWG, Coal: Resources and Future Production, EWG-Series No 1/2007, Ottobrunn,
Germany, March 28, 2007
[8] Sousa, L. de, Mearns, E., Olduvai revisited 2008, posted February 28, 2008 at the website The Oil Drum: Europe
[9] EWG, Uranium Resources and Nuclear Energy, EWG-Series No 1/2006, Ottobrunn,
Germany, December 3, 2006
[10] Savinar, M.D., "Are We 'Running Out'? I Thought There Was 40 Years of the Stuff
Left", http://www.lifeaftertheoilcrash.net, originally published December 2003,
revised December 2007
[11] Peter, S., Lehmann, H., Renewable Energy Outlook 2030, Energy Watch Group / Ludwig-Boelkow-Foundation, November 2008
[12] Wirth, C.J., Peak oil: alternatives, renewables, and impacts, www.peakoilassociates.com, July 5, 2008.
[13] Bardi, U., Pagani, M., Peak Minerals, ASPO-Italy and Dipartimento di Chemica
dell'UniversitĂ di Firenze, posted October 15, 2007 at the website The Oil Drum:
Europe
[14] Meadows, D., Randers, J., Meadows, D., Limits to Growth – The 30-Year Update,
Chelsea Green Publishing Company, 2004, ISBN 1-931498-51-2
[15] Skinner, B.J., Exploring the resource base, Yale University, 2001
[16] Roper, L.D., Where have all the metals gone?, Virginia Polytechnic Institute and State University, Blacksburg, Virginia, USA, 1976
[17] United States Geological Survey (USGS), Mineral commodity summaries 2008
[18] Bardi, U., The Universal Mining Machine, posted January 23, 2008 at the website
The Oil Drum
[19] Gordon, R.B., Bertram, M., Graedel, T.E., Metal Stocks and Sustainability, Proceedings of the National Academy of Sciences of the U.S., v.103, n.5, January 31, 2006
[20] Bardi, U., Mining the oceans: Can we extract minerals from seawater?, posted September 22, 2008 at the website The Oil Drum: Europe

[metalman]

Re: Why this time - it really is different,[ the commodity supercycle ]

luke, you post the most interesting stuff.

agree with the author's take on 'the problem' but...

The precautionary principle urges us to take immediate action to prevent or at least postpone future shortages. As soon as possible we should impose a co-ordinated policy of managed austerity, not only to address metal minerals shortages but other interrelated resource constraints (energy, water, food) as well.

who is 'us' and who is 'we' who gonna do this 'managed austerity' gambit? usa pols?

ha, ha.

pols around the world?

bwah ha ha ha!

no one... but mr market.

buy metals.

buy 'em now!

[jtabeb]

Re: Why this time - it really is different,[ the commodity supercycle ]

[QUOTE=metalman;96464]luke, you post the most interesting stuff.

agree with the author's take on 'the problem' but...

The precautionary principle urges us to take immediate action to prevent or at least postpone future shortages. As soon as possible we should impose a co-ordinated policy of managed austerity, not only to address metal minerals shortages but other interrelated resource constraints (energy, water, food) as well.

who is 'us' and who is 'we' who gonna do this 'managed austerity' gambit? usa pols?

ha, ha.

pols around the world?

bwah ha ha ha!

no one... but mr market.

buy metals.

buy 'em now!

Well, won't we run out of the ability to print more bonars when we cut down all the trees? So they should go up in value too.:p

James Dines wrote in one of his news letters that someday landfills will be treated as "gold mines" as people seek their fortune by trying to recover metals and rare elements from discarded computers and other consumer technology, and also that people will scour the ocean for plastics, not to clean it up, but to process back into hydrocarbons, because the scarcity will be so severe.

I would point out, Again, that if you see no value or purpose in space exploration, this should change your mind. If for no other reason than it represents the ONLY untapped material resources that will be required to sustain our technological development.

Pause and reflect about that for a moment. Our technology will do us no good if we do not possess the materials required to manufacture and realize what we are technologically capable of.

Just imagine if you had discovered a way to produce unlimited clean electrical power only to then realize that you no longer possessed the materials necessary to manufacture such a device.

What kills me is that this was known in the 1970's and 80's (and I'm sure before, but that's when I became aware) but policies of economic "market fundamentalism" overcame calls for an economic "pricing" of this depleting asset base (think bottle deposit laws, gas taxes, sales taxes, "consumption taxes" in general, etc.) These efforts were early attempts to quantify and source the costs of resource depletion. That we turned a blind eye to what was staring us in the face makes me shudder in horror. Not only because we may have already sealed our fate due to our shortsightedness, but also because the truth of knowledge existed and was squashed in favor of "consumerism". So instead of having a future, we have trinkets made in china (no offense to china, they were selling us what we prioritized as important to us).

The lack of vision is striking. And in the future I have visions of us pleading collectively as one race standing before God "Why, Why god? Why were we so stupid and wasteful and craven. Why didn't you show us the errors of our ways before it was too late."

IF you don't know why the battle over religion (In modern life, Economics is truly the religion of our time, the other stuff is peanuts by comparison) is so important this should galvanize your thinking. Failed policies have not only lead to our "economic failure" they may lead to the "failure" of our existence.

The economic policies that we have pursued have literally brought us to the brink of our own extinction.

Anyone else waking up?

[oddlots]

Re: Why this time - it really is different,[ the commodity supercycle ]

I got interested in what we discuss here only after my wife Claire and I had our son Jack. I remember sitting on a beach in Mexico during a long overdue vacation circa 2003 and it suddenly became very clear to me that we had had it far too good for too long and that we were headed into a very challenging century, a century Jack would have to face head on. That vacation was the best investment I ever made. (Place was Yelapa BTW - highly recommended. Not incidental to that epiphany.)

Anyway, I share your anxieties whole heartedly. One of the touchstone concepts that helped me crystalise what has gone wrong was the "Tragedy of the Commons."

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

I share a lot of the libertarian impulses in evidence here as well as a disgust with the value-destroying predation that seems to pass for capitalism in the financialised OECD political-economies. I share EJ's faith in entrepreneurship and admire Steve Keen's careful attempt to lift the gem of purposeful capitalist enterprise free of the sinking wreckage of neo-classical economics. But I can also see that some power needs to intercede between competitive countries and individuals if we are not to drive ourselves over a cliff. This makes "saving capitalism" - very pompous I know - a really tricky feat.

In this context I really think the anti-government-per-se slant of so many of us here isn't productive. The irony is that, just when government by lobbyists seems to be reaching a zenith in the US (or Brussels I suppose), discrediting even further any recognition of a common weal, the urgent task of reining in pointless development (McMansions, Dubai etc.) has become critical. Who else could play such a limiting role but government? Broadly speaking, the anti-government cant has delivered America into the hands of its tormenters: finance. We need look no further than the bank bailouts for proof. So in a further ironic twist we need to revive a belief in government at exactly the point where "finance capitalism" has most effectively discredited it and capitalism.

Your comments about the 70s ring true as well. I'm fascinated by how we seem unable to objectively match up developments that are indifferent to either our attention- or life-span with our expectations or, more importantly, our judgement. I see this in my own behaviour re. investments. We're kettle-watchers. So when it takes the Club of Rome's predictions a decade or two longer to appear we've already spent a decade or two ridiculing them to the point that we are inured to the message. Seems childish to me.

Lukester: sorry, I hijacked your post. FWIW I'm in commodity stocks heavily: uranium, gold, silver. Contrary to EJ's warnings. All about stock picking and patience IMHO. Hate trading.

[rjwjr]

Re: Why this time - it really is different,[ the commodity supercycle ]

Anyone else waking up?

Sorry, no.

1] I agree with metalman that the free-market will best decide these issues.

2] "Necessity, who is the mother of invention." Plato
I also believe that smart, greedy, and/or lucky people will find alternatives when needed. For example, your idea of mining other planets for materials/metals sounds like a cool solution (once the economics are right).

3] Issues such as these are so complex and dependent on so many factors that I just can't worry about them. For the same reasons (complexity, many factors) I also worry that we could take actions that may be wrong, harmful, or have uninteded negative consequences. With issues of the scope and complexity of these, I'm more of a "let the chips fall where they may then make the best of it" guy.

[rjwjr]

Re: Why this time - it really is different,[ the commodity supercycle ]

I share your anxieties whole heartedly. One of the touchstone concepts that helped me crystalise what has gone wrong was the "Tragedy of the Commons."

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

I share a lot of the libertarian impulses in evidence here as well as a disgust with the value-destroying predation that seems to pass for capitalism in the financialised OECD political-economies. I share EJ's faith in entrepreneurship and admire Steve Keen's careful attempt to lift the gem of purposeful capitalist enterprise free of the sinking wreckage of neo-classical economics. But I can also see that some power needs to intercede between competitive countries and individuals if we are not to drive ourselves over a cliff. This makes "saving capitalism" - very pompous I know - a really tricky feat.

In this context I really think the anti-government-per-se slant of so many of us here isn't productive. The irony is that, just when government by lobbyists seems to be reaching a zenith in the US (or Brussels I suppose), discrediting even further any recognition of a common weal, the urgent task of reining in pointless development (McMansions, Dubai etc.) has become critical. Who else could play such a limiting role but government? Broadly speaking, the anti-government cant has delivered America into the hands of its tormenters: finance. We need look no further than the bank bailouts for proof. So in a further ironic twist we need to revive a belief in government at exactly the point where "finance capitalism" has most effectively discredited it and capitalism.

Nice post, oddlots, even though I harbor conflicting opinions to yours. For starters, I think you place too much faith in "government" while being too hard on private enterprise.

For an example, different administrations keep changing policies. Look at protecting our forests from fires for example. Our government, depending on who is making decisions in each 4-8 year period, have flip-flopped from a "stop the fire" to a "let it burn naturally" policy. So, is it healthier for our forests if we stop the carnage as quickly as we can or is it healthier to let them burn naturally and renew as they had for thousands of years before firemen? The debate still rages and I assume we'll continue to see government/administration flip-flops, as we would if the government was "managing" aluminum, coal, whatever.

Further, I'd rather that natural resources be in the hands of private ownership. If someone is making money off of a resource aren't they more apt to do everything in their power to prolong and nurture their "golden goose"? This includes raising prices in relation to the availability and abundance of said resources. If prices get too high, the market takes over and an alternative is introduced; like nuclear, wind, solar, etc vs oil. Remember the furor over alternative energy when oil approached $150/bbl last summer? That furor has subsided and would likely be almost completely dormant were alt energy not looked upon by the Obama administration as the solution to our unemployment and economic ills.

Let the invisible hand of the market make these decisions then hope for the best and plan for the worst. If government were doing the managing, you could shortcut right to plan for the worst. But, that's just my opinion.

[ggirod]

Re: Why this time - it really is different,[ the commodity supercycle ]

I am always impressed when I read how at the last minute, when we really need it, we will get our infusion of raw materials from space. As if we could reach up and pluck the goodies from the sky, hand them to the ravishing beauty at our side, and say, "Peel me a grape".

The reality is quite different, at least for us in the US. Helium 3 promises to give us simple fusion that converts an impressive portion of the total mass returned to earth to energy in a clean, non-radioactive, waste free manner. Curiosity led me to consider what ever happened to the tales of He3.

Well, this article says, to sum up the issue quite well,

"Currently," he says, "the Department of Energy will tell us, 'We'll make fusion work. But you're never going to go back to the moon, and that's the only way you'll get massive amounts of helium-3. So forget it.' Meanwhile, the NASA folks tell us, 'We can get the helium-3. But you'll never get fusion to work.' So DOE doesn't think NASA can do its job, NASA doesn't think that DOE can do its job, and we're in between trying to get the two to work together."

After all, forty tons of He3 would provide all the electricity needs for the US for a year. I would propose that there are not too many space resources more compact or valuable as a proof of concept. Working mines, delivery systems, and reactors would show that man's technology, economy, culture, and drive, could be harnessed to deliver the goods for a needful population that sacrifices to the free market god with its dollars every day.

Fortunately for humanity, Russia, China, and India are pursuing serious moon missions to exploit the resources, so we can probably just sit back and let them do the heavy lifting for once.

I am confident that our supplications to the free market will take care of us. After all, there are millions of tons up there, and I am sure whoever succeeds in developing them will happily toss some extra for us in the back of their space "pickup truck" when they go to town for supplies.

[goadam1]

Re: Why this time - it really is different,[ the commodity supercycle ]

I've talking about "trash mining" for 20 years. I mostly get cross eyed responses.

[jtabeb]

Re: Why this time - it really is different,[ the commodity supercycle ]

Sorry, no.

1] I agree with metalman that the free-market will best decide these issues.

2] "Necessity, who is the mother of invention." Plato
I also believe that smart, greedy, and/or lucky people will find alternatives when needed. For example, your idea of mining other planets for materials/metals sounds like a cool solution (once the economics are right).

3] Issues such as these are so complex and dependent on so many factors that I just can't worry about them. For the same reasons (complexity, many factors) I also worry that we could take actions that may be wrong, harmful, or have uninteded negative consequences. With issues of the scope and complexity of these, I'm more of a "let the chips fall where they may then make the best of it" guy.

This post reminds me of the three men stranded on a deserted island. There is a physicist, a theologian, and a economist.

After three weeks with out food, a miracle happens and a crate of canned goods washes up on shore. This is a huge crate with enough provisions to last them all a great while.

They group of three can't believe their good fortune until they actually tray to open the cans. Since the don't have any tools of any sort, opening the cans of precious food becomes their primary focus. After many repeated attempts and failures, they decide to share their best idea's on how to get those cans open.

The theologian suggests " well, if we just pray on the subject, god will provide us a solution". The physicist suggests "No,that might take too long, we should drop some large boulders on to the cans and smash them to bits". The others disagree because although the process would open the cans, it would destroy the contents and scatter them in the process so as to render them unusable. The economist finally comes up with a workable solution "Ah HA" he exclaims. "I have the solution!"

"Assume a can opener!"

(Okay so I butchered the joke, but you get the punchline)

[due_indigence]

Re: Why this time - it really is different,[ the commodity supercycle ]

The inherent Ponzi nature of the western banking model requires economic growth in order to service existing loans. Currently (and I would suggest largely due to the captured nature of our public policy apparatus by old regime interests) we are taking fresh wealth from the real economy to bolster this tired paradigm. So we are moving exactly backwards. The finitude of resources only underlines this backwards approach. How do we reconcile sustainability (or austerity) against the current banking regime? This is nothing short of a revolutionary change.

We'll see wars between nations for increasingly scarce resources before we see collegial sustainability programs.

[Mn_Mark]

Re: Why this time - it really is different,[ the commodity supercycle ]

This article quickly loses credibility for me by the end of one of the first paragraphs when the author's real agenda becomes apparent:

"We call for a transition from growth in tangible possessions and instant, short-lived luxuries towards growth in consciousness, meaning and sense of purpose, connection with nature and reality and good stewardship for the sake of next generations."

In other words, he's not just interested in the technical/economic issue of how best to get the metals we need; he is advocating for the environmentalist/progressive/anti-capitalist worldview, and thus of course he is looking at the world through eyes eager to find evidence that government should be used to rein in business and growth. I suspect that to him, the very words "economic growth" suggest something shallow and lacking meaning, something morally suspect. So he uses his mechanical engineering credentials to try to be convincing that we really are permanently running out of resources and the marketplace can't address it.

Look, take his chart labeled "Oil and Gas Production Profiles, 2008 Base Case" and pretend that it was 1974 and you didn't know what was going to happen in the future. This is what you'd see:




I remember those days. We were told very confidently that we would run out of oil by 1990 or 2000. After all, look at the blip downwards in supply that had occurred. People extrapolated that to look something like this:



Instead, because the marketplace worked its magic - magic that government central planners just can't work - high 1970s prices (not prices intentionally set high by "forced austerity" types, but prices set high by the market) stimulated new technologies and ways of using what was available more efficiently, and this is what actually has occurred to date:



In other words, the 1970s doomsters couldn't have been more wrong.

And now we have 2000's doomsters of the same environmentalist/progressive mindset making the same kind of predictions as their spectacularly wrong predecessors:



Excuse me, but I'm not buying it. Even if you could convince me that this time the resources really were going to run out and we really weren't going to invent any new technologies that would yield more of them, use them more efficiently, or find substitutes, I still would prefer that a free marketplace set the prices rather than a government controlled by people who feel it is their moral duty to impose austerity on me so that I'll go do something more valuable with my time than merely grub in the dirt for "economic growth".

[jtabeb]

Re: Why this time - it really is different,[ the commodity supercycle ]

The inherent Ponzi nature of the western banking model requires economic growth in order to service existing loans. Currently (and I would suggest largely due to the captured nature of our public policy apparatus by old regime interests) we are taking fresh wealth from the real economy to bolster this tired paradigm. So we are moving exactly backwards. The finitude of resources only underlines this backwards approach. How do we reconcile sustainability (or austerity) against the current banking regime? This is nothing short of a revolutionary change.

We'll see wars between nations for increasingly scarce resources before we see collegial sustainability programs.

You hit the nail on the head with this post.

How do you have an economic paradigm that requires constant exponential growth to sustain itself when you have fixed (linear) supply of materials. (Answer it works until it doesn't and then EVERYTHING BREAKS).

[Munger]

Re: Why this time - it really is different,[ the commodity supercycle ]

Instead, because the marketplace worked its magic - magic that government central planners just can't work - high 1970s prices (not prices intentionally set high by "forced austerity" types, but prices set high by the market) stimulated new technologies and ways of using what was available more efficiently, and this is what actually has occurred to date:

Magic indeed. Because there is no central force within Exxon mobile making decisions - they just magically happen.

Also, Hubbard et al predicted domestic peak oil in the 70s - completely correctly - and worldwide peak in the early 21st century - yet to be determined. So you are either ignorant or purposely misleading. You also neglect to mention the tragedy of the commons - pointed out to you earlier - as well as the many well understood failures of market forces. Taking the time learning about behavioral and information economics would shatter the neat simplicity of your worldview though, so you might want to keep away from that stuff.

[snakela]

Re: Why this time - it really is different,[ the commodity supercycle ]

Not that I think the sky is falling, but you have to "buy" it at some point. There is a limited supply of oil & minerals. The only decision that needs to be made is how do "we" handle it? Let the entrepreneurial masses take a crack at it and adopt the best replacement or, as the author suggests, submit to "managed austerity".

My big problem is who will be managing this austerity? I'll go out on a limb and guess the Dr. thinks someone like him will be managing it and not a Harvard trained demagogue.fficeffice" />

[Mn_Mark]

Re: Why this time - it really is different,[ the commodity supercycle ]

Magic indeed. Because there is no central force within Exxon mobile making decisions - they just magically happen.

Also, Hubbard et al predicted domestic peak oil in the 70s - completely correctly - and worldwide peak in the early 21st century - yet to be determined. So you are either ignorant or purposely misleading. You also neglect to mention the tragedy of the commons - pointed out to you earlier - as well as the many well understood failures of market forces. Taking the time learning about behavioral and information economics would shatter the neat simplicity of your worldview though, so you might want to keep away from that stuff.

Of course Exxon is making decisions, as are the multitude of other entities out there. The "magic" in the free market is the way price signals in a free market operate to allocate resources so much more efficiently and effectively than central planners. Excuse my liberties in using a word like "magic" to describe this...apparently a more literal choice of words would have been helpful for you to understand my point. Or perhaps you understand my point, disagree, and are just being contrary.

Perhaps there are indeed forecasters who are/will be correct in their predictions. But the most widely-publicized ones that I recall from the 1970s were wrong - Paul Ehrlich, for example. I am open to arguments that we actually are running out of these resources, but I am highly skeptical of anyone presenting such arguments if they also make it clear that they have ideological/quasi-religious reasons for WANTING to believe resources are running out.

I don't recall the tragedy of the commons being "pointed out to me" elsewhere - apparently you or someone wrote a comment to that effect on some other post and I didn't read it - but nothing I said suggests I don't understand or dispute such a concept. Of course we need regulation to protect common resources that cannot be protected with ordinary property rights law, such as the air and water. But some people's idea of the "the commons" seems to extend well beyond those aspects of the world that cannot be allocated as property to any particular owner, and into all the aspects they believe, for ideological reasons, SHOULD be considered common property.

There may be other failures of market forces - perhaps even "many well understood failures of market forces" - but they will never compare to the number, depth, and intensity of government-caused market failures. The current economic crisis is a prime example, caused by a government-sanctioned Federal Reserve bank's easy fiat money policies, government-skewed housing market, government-guaranteed financial markets costing the taxpayers trillions, and so on.