Predictions for 2015

Prediction is very difficult, especially about the future, as Niels Bohr is supposed to have said. I’ve certainly found it so. Apart from the obvious possibility of being wrong, there’s the risk that others will misrepresent you. But, as long as you don’t take it too seriously, it’s helpful to frame discussion around a sharp prediction. So here are three for 2015

1. Peak Oil: I predict that global oil production (conventional and shale etc) will decline in 2015 and will never again reach the peak level of 2014. My reasoning is that 2014 supply can’t be sustained at prices below, say, $75, and (given a downward underlying trend in the developed world), 2014 demand won’t be reached again at prices above $75.

2. The End of Bitcoin: I’ve written in the past that “Bitcoins will attain their true value of zero sooner or later, but it is impossible to say when.” However, I now think the necessary conditions are in place for most holders of Bitcoins to recognise that their asset consists of used-up computation cycles with zero value. In particular, because mainstream merchants now accept Bitcoin (which they immediately sell), it’s possible for hardcore believers to dispose of their holdings without explicitly betting that the price will fall. Of course, the price won’t fall precisely to zero, but it should be well below $100 by the end of the year, and below $10 not long after that.

3. The Paris conference on climate change, will produce a half-baked compromise, which nevertheless represents progress towards stabilization at 2 degrees of warming: OK, this is pretty much a no-brainer, given that this is what we’ve been seeing ever since Kyoto in 1997, but I want to be sure of getting at least one right.

63 thoughts on “Predictions for 2015

  1. If Bitcoin is actually a useful medium of exchange with lower transactions costs when paying for stuff than with a credit card or debit card then it, or at least the technology behind it, isn’t going to go away.

  2. Interesting predictions, but the article you link to admits that car use continues to rise in the developing world. And there are a lot more of them than there are of us…

  3. Regarding who said that line about it hard to predict, especially about the future, most attribute that to former New York Yankees catcher, Yogi Berra. He is famous for many other odd sayings, among them, “It is deja vu all over again,” “If you come to a fork in the road, pick it up,” and “Nobody goes to that restaurant anymore; it is too crowded.”

    Bitcoin may well go down the tubes, but that will probably not be the end of cryptocurrencies. Several of its competitors are far superior to it on numerous grounds. It had a first mover advantage, but that is rapidly disappreaing as it collapses. Watch its most serious rival, the rising Ripple, now at 20% of bitcoin’s market cap. It has zero mining costs and is being used for transactions, and it is much easier to do so. Bitcoin may be going, but Ripple is likely to be here to stay.

  4. @Barkley Rosser

    I thought Yogi Berra too, but he’s a default choice for this kind of attribution

    A lot of the rival cryptos have done even worse than Bitcoin. For example, Litecoin has gone from a peak of $40 to a current price of $1.30, a drop of around 97 per cent.

  5. My favourite Yogi Berra quote is “In theory there is no difference between theory and practice. In practice there is.” – something many economists should take note of 🙂

  6. Yogi Berra is a legend.

    I predict Australia will sell its soul at the next climate fest, in the same manner as John Howard managed to do, namely late at night on the final day. Robb and McFarlane will attend, Julie Bishop might, but I’m sure Abbott will manufacture a reason for her to be on the other side of the world from the climate fest, if at all possible. Our ministers and senators seem to think a 4C rise in Australian average temperatures is a pleasant thing to dream of…so long as the coal gets sold. I wonder if they could drag Nick Minchin back into the fight for no action on AGW: I’m sure he would be happy to take some taxpayer money in return for a couple of days in Paris.

    I predict the security at the climate fest will be unrivalled in modern history. Even a total ban on protesting in the city limits, perhaps.

    I predict Australia’s a lot of computer networks will get slower internet speeds, and less reliable service, for more money, than 50 other countries. Dec 2015. Thanks, Mr Copper network.

    I predict that the international producers of digital content will continue to gouge the Antipodes, and will by default only offer HD at best. No ultra-HD for us yobs.

    I predict we will continue to dither with ISIL, doing the odd drone strike or bombing, killing innocent and guilty alike. We should either go in as an army and defeat them, or accept we have no useful part to play in that theatre of war.

    And hipsters are definitely in the out-tray.

  7. Where a good cryptocurrency might succeed in fitting into the financial system is not all the grandiose things so many of their more ideological advocates push, such as free banking. Where they might have an edge, and it might be Ripple that can pull it off, is in replacing or at least sharply competing with credit cards. Stores like them because they do not charge the fees the cards do, so that provides an opening.

    The problem so far has been with bitcoin transactions taking a long time to complete, usually many minutes. This is because it is set up so that to complete any transaction, the entire history of all bitcoin transactions must be scrolled through. Obviously this is silly. Ripple is a lot faster, although i think still slower than the several seconds it takes to complete a credit card transaction. But if Ripple, or some other cryptocurrency, can get its speed of transaction completion to about the same as for credit cards, stores will prefer one of them (and probably in the end, one will come to dominate) because of the lower fees involved.

  8. That is a great linked article on driving trends. But as I have only basic intuitions on fossil fuel trends I immediately refer to Robert Rapier who is also making cautious, non binding, predictions.

    Predicting (attempting to) the future is one of the most valid forms of gambling and i fully endorse the attempt. I particularly like to predict a future life for my friend’s kids based on how I see them do things, and I am happy to be both wrong and right, it is more about the pleasure of anticipating future adventures. I really don’t think, JQ, that you should be restrained in predictions, there is as much to be learned from either outcome.

    Indirectly I know someone (Libertarian) with a huge wealth from bitcoin, it will be interesting to see how that plays out.

    I will be barracking for you to be wrong on the third punt, though this is wishful thinking on my part.

  9. On $oil while the cost of extraction has increased the cost of production has decreased, mainly because the cost of crude has dropped. Big vertically integrated companies like BP have an edge over single producers.

  10. I predict more of the same with occasional glimpses of storms, droughts, floods, fire and famine.

  11. Quote: “A theory is something nobody believes, except the person who made it. An experiment is something everybody believes, except the person who made it.” ? Albert Einstein

    I predict Saudi Arabia will be the flashpoint this year.

  12. I confidently predict 2016 will occur some time next year. If not then, then at some other time.

  13. @Barkley Rosser
    I’ve read that Yogi said “When you come to a fork in the road, take it,” not “pick it up” (witty as that might be). Berra says this is part of driving directions to his house in Montclair, New Jersey. There is a fork in the road, and whichever way you take, you will get to his house.

  14. He does need to rolled- in briar.

    Peak oil interested me because I’ve already seen reports of the “collapse” in gas fracking and shale processing, elsewhere. But more to the point, these antics with prices have occured in the past a few times, wiped out marginal sources and left a monopoly for remaining suppliers with skies the limit for prices.

  15. That is almost too much to wish for, Fran. I like Paul Walters version, rolled in tar and then feathers, by his own party,….delightfully ridiculous.

  16. I have just discerned the fact that fully six months have elapsed since I last encountered a teenage boy with halitosis jabbering ecstatically about how Bitcoin will save the world, cure cancer, and outdo Beethoven in compositional genius.

    Half a year ago such boys appeared to be everywhere.

  17. @bjb

    Actually in good theory there is a difference between theory and practice. Good theory recognises both the applications and the limitations of theory.

  18. Listening to Dick Smith on ABC RN Breakfast just now, talking about the importance of moving to a zero-growth economy – I missed any reference to where he might have discussed this recently – and he asserted that the ABC, universities and economists generally are all spruiking growth, despite the obvious fact that unending growth is impossible – mentioned Alan Kohler specifically.
    Dick Smith also asserted that Australians overwhelmingly acknowledged the impossibility of continuing growth, but he is pessimistic that anything will be done before events make the end to growth inescapable.

  19. I am not sure what will happen at Paris – but expect climate activism to ramp up this year in the lead up to the meeting. Among other things have a global divestment day planned for February and will presumably have other actions throughout the year. The Pope is releasing an encyclical on the environment, which many parishes will have study groups about and will be having an interfaith council on the environment and speak to the UN in September.

    And the United Nations have linked the summit on climate change to another summit this year that seems to be the follow up to the millennium development goals on poverty and inequality – to encourage community pressure on governments for both summits –

    “Today, more than 1,000 organizations from around the world are coming together to launch “action/2015,” a global coalition calling for pivotal change in 2015 for people and the planet.

    Join us, and tell world leaders that you want ambitious agreements to tackle poverty, inequality, and climate change this year.

    Share this graphic, and learn more at ?#?action2015? “

  20. Groups like the IEA are going to look like wallies if liquid fuels peak at 100 mbpd not the 135 they predict. Perhaps the initial effect will be that a bit of belt tightening will save the day or new technology will come along. The outcome may be excessive belt tightening and disappointing technology. That may take until 2020 or so to sink in even if say 2014-2016 is the apex of the production curve.

  21. – Chinese coal consumption will fall for a second year, confirming the peaking.
    – Indian plans for coal expansion will hit major difficulties.
    – Global solar pv demand will be above 55 GW, quite likely over 60GW.
    – Utility solar system prices will fall below €1/watt in several countries, and $1/watt in at least one.
    – Polycrystalline solar panels will be marketed at 20% efficiency. Prices will start falling slowly again.
    – A research team will present a working tandem cell, perovskite on silicon, made using industrial methods, with an efficiency well over 25%. It won’t be stable enough for production yet.
    – Numerous reports will be issued confirming that the energy transition is cheaper than sticking with fossil fuels, on current national income accounting (that is, including health externalities but not climate risks.)

  22. @John Quiggin

    I have had the requisite confidence since before June of 2013. There are no certainties in life of course, and this is a great deal less certain than many other things one could predict. His party rolling him would be a huge gamble, given the dearth of measurably better alternatives (by which I mean ‘Murdoch-acceptable’) and the inability of any new leader to depart sharply and with credibility from the culture war policies of this regime of course.

    Considerations of this kind predispose me to the view that an early election with Abbott as leader might be the less risky course. The party would certainly expect a more hostile senate (which would rebalance the appetites of the party room in favour of a less aggressively reactionary policy especially given the thinning of the ranks) and create a window of opportunity for more mainstream liberals to shape their public policy.

    They’d be kidding themselves about winning though, even with Murdoch’s backing, and so one suspects that a large swathe of LNP lower house members would be given tacit licence to distance themselves from Abbott in order to save themselves, which would destroy the election for them and probably still not save many coalitionistas. Abbott would probably still win Warringah — it would be a turnup for the books if successive LNP PMs were defeated in their own seats and Warringah is a lot more blue-ribbon than Bennelong was in 2007 — but if a strong anti-Abbott conservative Indie stood — a kind of Ted Mack/Cathy McGowan character — one can indulge the thought.

  23. I predict
    – That terrorists and militarised democracies will continue to enhance each others power fast. We will continue to surrender our freedoms and bear productivity, dollar ,and goodwill costs as the security state grows rapidly .Most Aussies wont care much.
    – Richmond will win the AFL.

  24. @Ron E Joggles
    Dick Smith made a doco which aired on ABC last year, in which he talked about zero growth economies. Technically, what he is really talking about (as I understand it) is the situation where economic growth is not through finite resource exploitation or population growth, but through technological change. In other words, we stop our relentless population growth, we find other ways of doing things so as not to exhaust finite resources, and we live in a stable fashion. Plenty of scope for innovation in a “zero-growth” economy.

    Thing is, we are in a new wave of capitalism, one where the means of production are increasing automated, and where the prospect of individualised manufacture (e.g. by additive manufacturing, aka 3D printing) creates a new world of opportunity. The question is whether there will be sufficient new types of jobs to replace the ones lost, and whether people can cope with the cognitive demands of those new jobs.

    The new wave capitalism isn’t necessarily at odds with zero-growth economy, but a clash is certainly possible.

    Finally, while a lot of companies are pushing the wearable tek idea, there is going to be a backlash—soon. Once employers attempt to track their employees using such tek, I think the consumer interest in it will abruptly decline. I hope that people simply won’t accept employers doing this—tracking heartrate, location, movement—and will draw the line, arguing that a person has some rights to privacy which trump an employer’s rights. If there is no backlash, we’ll rue that day we just meekly put on the tek bracelet. [Obviously there are some jobs where the tek is unequivocally good, e.g. police on the beat; I’m talking about standard white-collar/blue-collar employment.]

  25. @Donald Oats
    Oh, and I’ll make the prediction that if the Freedom Commissioner has the case of employers demanding employees adopt wearable tek, the “Freedom” Kommisar will say “Oh, if you are employed you must do what your (infallible master) employer commands.” instead of saying “People have the right to privacy, even when at work. Unless it is a matter of personal safety (e.g. police on the beat), no employer has the right to demand employees wear trackable tek.”

    Freedom, until employed—bonded.

  26. @Fran Barlow Re: Warringah challengers for TA

    You’d probably be dreaming of Peter Macdonald who was a Ted Mack contemporary – but he’s taken on Tony Abbott before. You might also dream of Godfrey Bigot who went against Bronwyn Bishop at every opportunity.

  27. @Donald Oats

    We can expect world population to stop growing some time this century. It would happen a lot faster, if we eliminated poverty faster, and got women into the workforce faster – but it is happening in most of the world already. See Hans Rosling’s TED talk on youtube

    So if we can survive the next few decades of population growth, we’ve got a chance to see what a no-growth world looks like. I’ll be dead by then, but I reckon it will do just fine.

  28. I predict every single economic indicator worth mentioning will be worse at some time in 2015 under Tony’s leadership??? than they were at any time under Julia.
    And I will pick which ones are worth mentioning.

  29. David Allen

    @Fran Barlow
    In your last comment you mention “mainstream liberals”. What kind of beast is this? Are they like “good Germans”?

    1. You left out the qualifier ‘more’ before ‘mainstream liberals’. 😉

    2. There were good Germans — but they were brutally repressed.

  30. I thought I should make a less certain one so – I predict that the appointment of Scott Morrison to the Social Services portfolio will be a disaster for him and the Coalition. I cant imagine how someone of his basic (repulsive) personality type could succeed there.

  31. I predict that after each disruptive event one or more people will say “I told you so”. This applies especially to financial markets where bets are made on anything and everything.

  32. @Jordan

    I assume that is 33% per annum? How will we measure the acceptance rate of MMT? Can I assume someone has the 2014 acceptance level already measured as a baseline?

  33. rog :
    I predict that after each disruptive event one or more people will say “I told you so”. .

    Including Marx from his grave ????

  34. @Uncle Milton

    So long as Bitcoin remains a useful medium of exchange, it isn’t going to go away. Being useful as a medium of exchange means that people accept it in exchange for goods and/or services; if people won’t accept it in exchange for goods and/or services, then it ceases being useful as a medium of exchange.

    As long as people accept Bitcoin in exchange for goods and/or services, it won’t go away. How long will people continue to accept Bitcoin in exchange for goods and/or services?

  35. @Ikonoclast
    My prediction is all arbitrary, it only presents my optimism that MMT acceptance will continue at ever faster rate.

    I am noticing that “many” leftish economic blogs are having more and more MMT comentators, that one US senator took a major MMTer as economic adviser a month ago, that more blogs are openly discusing MMT concepts, even some prominent economists. gathers ever more posts about MMT based discusions and increase of it in a last year is very visible.

    Alternet, Yves Smith, FLK, truthdig are posting MMT discusions while that was very rare a year ago. Even the blogs that banned me a year ago now talk some Keynesian.
    Some guardian articles have comentariat by mostly MMTers which is huge change from a year ago. Youtube MMT viewing has increased dramaticaly, it almost doubled in a year even tough the numbers are still small.

    And sure, my attempt to join absurd and optimistic predictions for this post is visible.

  36. @Jordan

    I am hoping to get hold of an MMT textbook or two soon so I can understand exactly what it is. It cannot be just;

    (A) A description of Modern Monetary Systems (MMS);

    therefore it must be

    (B) A Macroeconomic theory within the setting of Modern Monetary Systems;

    because it seems explicitly to not be;

    (C) A Microeconomic theory of any kind.

    As such (meaning it is B) MMT must be a system-dependent and institution-dependent macroeconomics dependent for its existence as a valid field on the existence of;

    (1) Capitalism (which the current MMS serves);
    (2) Government operations;
    (3) A mixed economy (Point 2 being greater than a minimalist state).

    This is not to minimise the possible importance of and useful advances in MMT. I don’t think the capitalist world or mixed economies are disappearing anytime soon short of a major world wide collapse or cataclysm. MMTs buffer stock employment model looks like an excellent idea to me but then I am not an economist of any kind.

  37. @Ikonoclast

    MMT is only a description of fiat monetary system A)

    and only FIAT. It is not a description of other monetary systems. I asked leaders of MMT many times to help me describe other systems like those under the Gold Standard (Croatia has fixed exchange rate) or of those that have flexible exchange rate but debts in foreign currency. They responded that then Mundell-Fleming model applys, so called IS-LM-BoP model not MMT.

    The Mundell–Fleming model has been used to argue that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. This principle is frequently called the “impossible trinity,” “unholy trinity,” “irreconcilable trinity,” “inconsistent trinity” or the “Mundell–Fleming trilemma.”

    Fiat basicaly means power-the right of decision/ sovereignity.

    The term derives from the Latin fiat (“let it be done”, “it shall be”)

    WIkipedia quotes

    So, MMT describes basicaly that outcome of economic results will be fully dependant on governmental decisions. That there is no free market but the one that depends on governmental decisions. It is not for sole capitalist or for sole communist use, any kind of economic set-up can use it, it is decision of government how they will use money on which they have fiat.

    Basically it tells you that where government decides to move money to, the resources will move there too. It describes the power of government and if they decided to use it properly.
    It is the non-moral description of money flows that then you can use your moral standing to create policy. Policy options are endless and moraly determined. While other economic theories use moral biased assumptions and then build upon it.

    MMT helps me understand that there is private money creation too, allmost at will, not only government creation.
    If you need to buy something now, you take out credit and get it and inflation will eat the burden down.

    Banks can create credits only when clients ask them to. This is private creation of money for your needs when wage doesn’t allow for you to buy.
    It is almost like communist idea within capitalism itself. “To all according to needs”. Except that the differences in wages which sets the limits for credits is the cause of rising inequality. Those with higher wages can take out larger credits (can print more money) and with it take out larger benefits-> growing inequality.

    This is where i say that Pikkety could describe his 600 pages onto one page using MMT to pinpoint the source of rising inequality in capitalism.

    And when predicting the future it is where money evolution is going to-: private money creation not limited by wages on much larger levels then now. There will be different limiting factor for credit limit. Credit terms will further evolve to be more of ‘according to needs’.
    Credit is huge benefit to you on fixed low rate with moderate inflation and then add interest tax deduction too – very positive real terms. If the credit has to be paid off in constant real terms, then it is not much of a benefit.

    To me, MMT helps me understand how the present problems of secular stagnation, globalization, automatization are the solutions too to environmental problems. Problems have solutions inside them using FIAT power as a motivation factor in cooperation to solve problems-> Dynamic system.

  38. @ Ikonoclast

    Joe Guinan

    Modern monetary theory destroys the intellectual basis for austerity but needs a more robust political economy.

    ‘The study of money, above all other fields in economics’, John Kenneth Galbraith wrote, ‘is the one in which complexity is used to disguise truth or to evade truth, not to reveal it … The process by which banks create money is so simple that the mind is repelled’ (Galbraith, 1976, 15-29).

    My mind was repelled by MMT untill i realised that debt forgivness is the basis for economic growth in capitalism. Debt forgivness by mechanism of fixed rate with inflation (positive real rate) and bankrupcy procedings.
    I was clearly biased by exponential quality of growing debt and belief in ‘all debts must be paid’ which by careful investigation of reality was shown that is not true at all-> Machiavelian reality.
    Debt forgivness that allows for getting out of mistakes and start over and everyone is better off-> Pareto efficiency.

    Neoliberalism is cutting us from debt forgivness, the basis for growth, inviting adjustable rates for loans and limiting bankrupcy processes. But that is only the zeitgeist of peoples morality; do not let anyone get from under the debts. EU is an example of selfdestruction caused by “all debts must be paid”. No forgivness – every individua is responsible- individuality, it is acctually a false morality of ‘all debts must be paid’. MMT is giving me the way out of it.

  39. @Jordan

    I will wait until I read “Modern Money Theory – A Primer on Macroeconomics for Sovereign Monetary Systems” – By L. Randall Wray and also Bill Mitchell’s textbook book which comes out this year I believe.

    However, I hold to my position that a mere description of an extant fiat money system cannot be economics on its own. It must be developed at least to the point of macroeconomics. If, for example, it asserts (as it does) that unutilised capacity (labour and plant) can be put into action via deficit spending and that this will not be inflationary provided there are no economic “bottlenecks” then this is a macroeconomic statement at least.

    I think MMT does assert that the Modern Monetary System (MMS) has changed some of the parameters of macroeconomics especially in changing what one might call the “possibility-space” in macroeconomics. A sovereign fiat currency issuing government has new possibilties in how it can order its economy according to how it orders its budget. This seems to me to be the central claim of MMT.

    A central problem in economics (in my layperson’s view) is that some schools want to argue that only (some) real systems matter and other schools (like MMT and finance economics) want to argue that only formal systems matter. When you pin them down they deny it but in essence their models make those very simplifications and abstractions.

    Even the schools that talk about real systems (human agents, resources and products) tend to ignore the real natural systems behind the real economy systems. Somebody or some interdisciplinary team needs to unify economics by unifying biophysical economics, microeconomics, macroeconomics and the study of formal systems. (And unifying only the valid parts thereof I might add.) A full systems approach is needed included a unification of how formal systems interact with real systems.

    If the above is too big an ask then tough… the theoretical economics project has failed.

  40. @Ikonoclast

    I agree with you on almost every point except on real-formal systems. You gave the answer to it.

    A sovereign fiat currency issuing government has new possibilties in how it can order its economy according to how it orders its budget.

    That is how formal and real system interact. By the process of choosing its budget it afects the real system, everything else has evolved to follow such decisions and produce the desired outcome.

    MMT started first as a tool to invest, to help investors decide what matters. Mosler did this. MMT was initially called Mosler economics. A banker and very succesfull investor. To know what matters for better investing, we need to know how the system functions. This is the description of the system as it is.
    Lately it is developing into economic policy prescriptions as many more are understanding it and then applying it to present problems.
    Present problems to reach real solutions are misconceptions about the system so MMTers are reacting to false solutions and offering alternatives, they are not proactive yet and not offering the solutions to all problems that other theories had time to develop for.

    Also MMT is dabling in analysis of why formal systems are not reacting properly to conditions in real system and correct it. It is going into sociology and psychology to find causes of such problems. But it is always using dynamic system as a model, as a template to view the world.

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