X22 REPORT SRSrocco Interview: Why The Global Economy Will Disintegrate Rapidly

I sat down with Dave at the X22 Report and discussed why the global economy is likely to disintegrate rapidly.  The key to the upcoming collapse will be due to falling energy production.  Unfortunately, many in the Mainstream media and precious metals community disregard energy as just another sector in the market.

As I stated in the interview, all other sectors and industries in the economy are powered by energy.  To understand gold and silver, one must understand energy.  Precious metals investors who do not understand the energy predicament we are soon to face, may sell their gold and silver prematurely… believing business as usual will continue for many years in our highly manipulated markets.

According to the contact I receive via my website, more and more individuals are waking up to the dire energy predicament we are facing.  However, most continue to be oblivious because they only read information that just pertains to the precious metals, manipulation or the market.

Without understanding energy, individuals may believe that the manipulation of the markets will continue indefinitely.

I really enjoyed talking with Dave at the X22 Report as he has an excellent website and X22 Report Spotlight youtube channel.

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38 Comments on "X22 REPORT SRSrocco Interview: Why The Global Economy Will Disintegrate Rapidly"

  1. Steve, there are some flaws in your conclusions despite flawless basic facts.

    1. Price of oil during collapse. As net energy from oil drops, the price of net energy must rise – in all forms, from the price at the pump, to the price of energy-intense products. It means much of demand will be priced out, but the remaining supply will be priced higher, not lower — there is and there will be no equality in access to energy, especially in such a versatile form as liquid fuel. Another aspect of that is geography and politics. Once the net energy falls into deficit, and some markets get priced out, the world market will inevitably fracture. Russia will have sustained supply of conventional oil, going flat or declining after 2020, but they will supply themselves, and they will supply their allies — China and such. The price of oil already has, and definitely will have a political discount for friends, and may have a political premium for others once the deficit is recognised. Same for Arabian oil: whoever is in control there at that time, will have priority access to their cheap oil. And if their domestic needs have to be moderated in order to maintain exports to important customers, that is doable too: some of those absurd petroleum-powered aluminium smelters will have to switch to nuclear. UAE starts up its first reactor in 2016, built by S.Korea, and the first group of four will be online by 2020, providing about 25% of their entire comsumption, which includes aluminium smelting. Saudis have been shopping around for nuclear for a while now, and the only vendors that can in principle provide that are in the East: Russia, China, S.Korea. Any non-industrial supply they need can be easily provided by the vast Chinese solar and wind power industry, in exchange for oil supply of course. So as their goods (oil) become scarcer, the real price will increase, not decrease, no matter what the currency amount that translates to. In order to put any disagreements to rest, this dynamic can best be measured with a quantitative model based on the right principles.

    2. When you refer collapse and EROI, based on Hirsch report of 2005, you imply the USA situation, perhaps Europe by extension. But that is different for other regions of the world, and on other regions economies prepare for that differently. Nuclear has vastly advanced from the level where USA stepped off: the EROI of the full NPP lifecycle of the latest Russian design (VVER-1200, construction price $3B per 1GWe capacity) is around 50, not 15 as in USA, due to advances in all aspects of the cycle. They resolved the waste problem, and no-one really noticed! China is close behind them, but unlike Russia, they pursue almost every kind of advanced nuclear (He-cooled high-T, Pb-Bi-cooled, MSR) with massive investment, and S.Korea nuclear industry is held back only by political ties with USA that forbids them enrichment and reprocessing, perhaps soon to change, putting them at disadvantage that China and Russia do not have. Overall the East took that Hirsch report to heart years ago, and they have both supply of cheap oil, and the substitutions in the development and investment pipeline. They will be OK.

    • Do you have any recommended reading on the real state of nuke tech? It seems a bit difficult to get sober facts about it. Lots of marketing material.

      • I cannot think of anything like ‘Current state of the art in nuclear energy’ – it is all scattered, and mostly not in English, as the state of the art is in the East. But I can write it myself. 🙂
        The best deals today are from Rosatom, the Russian nuclear-everything state company. The ‘best’ part of it is the basic principle of ‘build, own, operate’ — they build it, own it and operate it, take the fuel in and out, and the buyer only pays for electricity. In Russian wholesale market the price is 1.5-1.6 US cents per kilowatt-hour. Their best commercial unit at this time is VVER-1200, with 1.2 gigawatt electrical power, priced 7 billion US per station with two units (under construction in Belarus now), which makes it about 3 billion per gigawatt. This unit has all the latest safety features (‘post-Fukushima’). The earlier model, simpler and cheaper, caller VVER-1000, is dominant in Russia and has been exported to China, India, Iran and Eastern Europe. For strictly domestic use, Russia has developed advanced nuclear: liquid-metal-cooled breeder that solves the nuclear waste problem: essentially, it burns uranium-238 (which does not burn in other reactors), minor actinides that make nuclear waste such a problem, and plutonium that is naturally produced in all reactors and freaks the daylight out of some people. Having such reactors (currently they have two, the third is under construction) allows them to eliminate the nuclear waste problem. What radioative material is left after going though all that is much more manageable, and has to be stored for a few hundred years at most before the radioactivity and radiotoxicity drops to the levels of originally mined natural uranium. There are lots of fascinating details, but here I keep only the economically pertinent information. As the electricity prices and the reactor life (60 years by design, possibly 80 with extension) are known, it is possible to calculate or at least estimate the EROI of the entire operation.
        China has two designs comparable to the Russian commercial one, but they have not exported any, and the first purely Chinese has only just been built. S.Korea is building a four-unit station in UAE (Barakah NPP), very powerful: 4×1.4 gigawatt for 20-30 billion US, which makes it about 3.5-5.5 billion per gigawatt, not bad.
        And then there are small and medium size units. Russia has built a floating nuclear power plant for remote arctic areas, as a substitute for diesel generators. These are tens of megawatts only, but they substitute for a very expensive (once delivered) diesel fuel, so economically it makes sense. China has started building similar units, but at Chinese scale: mass production, tens of units planned from the start. They want to put them on islands and offshore installations. Also China is building a lead-bismuth-cooled reactor, which is obviously a derivative of Soviet submarine reactors. Russian project of a 100-megawatt commercial reactor (SVBR-100) of the same kind has stalled for financial reasons — unlike the usual Russian state-funded nuclear work, that one was privately-funded. Also China is building two high-temperature helium-cooled reactors, with combined electric power of 210 megawatt. That is derived from German work that was abandoned for ‘green reasons’ only, now China is far ahead of everyone else in that. High temperature has direct effect on efficiency of the generator.
        As for everyone else (France, US, UK), it is not worth mentioning — the result of 30 years of doing pretty much nothing but demonising nuclear technology. All the hype about thorium and molten salt reactors does not take into account the colossal technological difficulties and lack of knowledge that stand between now and the bright thorium future. Russians had lead-bismuth-cooled reactors for decades, now they are building a lead-cooled reactor (without bismuth) and the technical obstacles are everywhere where liquid lead goes: it dissolves steel and many other structural alloys commonly used in nuclear industry, so new ones have to be developed and tested inside other reactors for stability. In a molten salt reactor there is literally every element floating around, so corrosion is inevitable — that is why they are not at every corner today. Uncontrolled corrosion in a nuclear reactor is pretty much a deal killer for state regulators. Also that soup has to be purified of all waste, in real-time while reactor is powered, otherwise it will poison itself or corrode itself. How is that expected to be done one can only wonder, but it re-defines the meaning of ‘hot’ in the ‘hot cell’ that processes irradiated fuel. Without years of extensive and successful testing, regulators will not even bother listening to such claims. So marketing part of MSR must be good, but the technical part is a quagmire of death. Russians do not even bother touching it, as until about 2100 they are good with technology currently operating or undergoing testing. The economy and fuel availability is very good, and will take them through to 2100 at the very least, and naturally China will follow. Basically, the conservative solution for the nuclear power of the future is a cluster of three water-cooled reactors plus one sodium-cooled breeder reactor. A more advanced type, with a prototype currently being built, is all lead-cooled, which can dispose of water-cooled reactor waste and burn any uranium-derived fuel, but that remains to be seen if the prototype works out well.

        • Interesting stuff. Thanks for sharing. My concern has always been around the U.S. Just in time delivery system and the high energy usage in today’s agricultural system. We use trucking for everything. I’m not sure how much petroleum we use to power infrastructure. I know some is used for electrical peak periods but mostly to smooth out the demand bumps. What are your thoughts around trucking? The other concern I have is with agriculture. The soil is mostly dead. We mine the fertilizers, haul them to where they are needed, and run huge machines on very specialized farms. How do we fix this? I seem to recall we only have until 2022 until our petrol dependencies start eating into the system.

          • Trucking in US has already tested LNG as a substitute fuel. Handling cryogenic liquids is definitely not for blondes, but trucking can adapt to it, and US natural gas producers and US LNG plants can fill US trucks. The vehicle price is comparable, and LNG itself is rather cheap. You can look this up as “LNG trucks USA”. One problem with LNG is it cannot be stored for long, so once a vehicle is filled it has to start moving. It suits trucks, trains, buses, even aircraft, but not your car or genset.

        • excellent post. thank you.

        • Do you have a nice enough voice and accent to do an interview? You should talk to James Kunstler or this X22Report guy and get the view out there that modern uranium nuke stations can be truly scaled up for ubiquitous cheap electricity.

          I follow this energy subject casually and really never see a serious breakdown on the question of nuclear. It’s all just about how solar and wind and tidal power don’t work, so we’re doomed because oil and coal are running out.

          The other thing I’m curious about is space-based solar power. It apparently pencils out with today’s tech, but nobody ever talks about it.

          If extremely high EROI can be achieved by nuclear or space-based solar then all the shale and tar sands oil becomes viable and the trucks can keep running. Set up a nuke station or a microwave converter receptor by the tar sands to power extraction and refining.

          Maybe this is kicking the can another 30 years, but the coverage in these circles seems too built on selling gold coins and freeze dried food to talk about potentially optimistic intermediate futures.

          It tends to be finance guys doing the doom preaching. Well, finance is a bloated pig about to get slaughtered. So what. Talk to some smart engineers about what might be possible with the huge capital stores we have, even following a bloodbath.

          • Thanks. I like an interesting discussion on subjects I am concerned about, such as this one, but I do not do interviews.

            Space solar is a good old idea, but there is one serious obstacle, more serious than thousands of tons of plutonium isotopes mix going through breeder fuel cycle. For space solar to have high EROI, it has to be a focusing mirror and a concentrated photovoltaic station on the ground. The problem is such a mirror is as good as a directed energy weapon. At a concervative concentration factor of 500, it would deliver a light flux of about 500 kilowatts per square meter. One can burn entire cities with that, not to mention high-value infrastructure, and there is nothing stopping such a mirror from pointing slightly at ‘the wrong direction’ at any time. Beside that, the development level of the space segment of that technology is zero, and today investors seem to be most apprehensive about taking such cosmic risks. But Japan seems to like that idea.

            You are right, if the source of energy is nuclear, all the tar and shale becomes just a hydrocarbon ore to which EROI does not apply, as it is no longer a source of energy, but a source of material. Today and 30 years from now liquid fuel will be unsurpassed in energy density, which no kind of electric battery can even approach. Also, until the pig is dead and burried, it will continue making decisions on what is and is not to be. The fate of whatever project engineers put on the table, is decided by financial institutions who do not give a flying rat about anything that is not on Bloomberg terminal. That is why Russia and China got ahead in nuclear — they do these things differently, with a 50-100 year plan. Actually, Russian nuclear-everything state company Rosatom likes to say something like: “we offer a 100-year contract: 5 years construction, 60 years planned operation, 20 years extended operation, 15 years decommissioning”. If one tries to get finance for a 100-year contract from financial institutions, they would be laughed all the way to the door.

          • “I like an interesting discussion on subjects I am concerned about, such as this one, but I do not do interviews.”

            perhaps interviews on subjects you are concerned about? it is so very pleasing to find informed views of a subject matter.

  2. vlad the impaler | December 12, 2016 at 5:28 am | Reply

    “As net energy from oil drops, the price of net energy must rise” that is a good point from Reader. The price of PMs is correlated to the price of crude oil. As a result, as crude oil becomes scarse the price of PMs will increase. Other theories trying to explain PMs prices are flawed. Another factor is the scarsity of PMs. What is highly appreciated and hardly available at the same time, becomes precious.

  3. What is the timeline for collapse, I never get an answer from anyone online yet.. I have been hearing this (reading newsletters before internet for over thirty yrs) and hasn’t happened yet, all were predicting same thing in “82, then again y2k, etc. on and on. Debt is high and direvities (credit swap) is over the top.

    • DisappearingCulture | December 12, 2016 at 9:37 am | Reply

      2017 will most certainly be the year lol

    • “What is the timeline for collapse”

      no-one will ever tell you.

      for now it’s not a step-change, it’s a process. in detroit, it already has happened. in new york, not for a while yet. in the northwest where vast herds of former lumber industry workers have been forced onto welfare, long ago. in hollywood where the movie industry is looking at permanently declining income, it’s just getting started.

      in my opinion when significant numbers of pension funds are collapsing then we’ll be pretty close to the step-change. when you see atms run out of money or gas stations run out of gas or police stop patrolling or arresting, and the official fake news agencies say nothing about it, then we’ll be at full inflection.

      heh. if you want a sign, it will be this. one morning the federal reserve building will be deserted. the parking lot will be empty, all the doors will be open, no-one will be in their offices except for a few bewildered secretaries and janitors. they won’t answer their private phones, there will be no message forwarding service, their private planes will be gone from their airports. that will be your sign.

      • What you posted makes sense, it is incremental, and many who predicted way back, wrote books, newsletters, were focused on another 1929 event (bank closings, bank runs only).

        • DisappearingCulture | December 12, 2016 at 3:33 pm | Reply

          It’s slow and incremental until it isn’t any longer. Decline can be like a slope that leads to a cliff. Adaptation and adjustment can happen in incremental.

          • see the same dynamic in those tourist videos of tsunami’s. the wave is not some towering wall, it’s just quickly rising water. you can see it in the peoples’ reactions – it rises, “I can handle this,” it rises more, “I can still handle this”, it rises more and sweeps them away. the others around them see this happen and clearly are thinking “yeah, he’s gone, but I can handle this”, the water rises, “I can still handle this”, the water rises and sweeps them away.

            watch the videos. great life lesson.

          • “Decline can be like a slope that leads to a cliff.”

            when the trucks stop rolling. that’ll be the cliff. but even that will be gradual in the sense that it won’t happen everywhere all at once. least I don’t think it will ….

            there may be other shut-down events as well. e.g. if los angeles were to have its big san andreas earthquake now, I doubt it would be rebuilt anywhere near what it used to be.

        • The collapse already happened. Most people cannot see through the fogs of fiat and debt. Peak conventional oil in 2005? Or abandoning the gold standard in 1971? Or worldwide debt crossing the 80% rubicon? Its already behind us. Junkie is on free crack and it feels good.

    • For worst case timeline one recommends Guy McPherson’s essay on Abrupt Climate Change and Near-Term Human Extinction.
      In a nut shell? we, large mammals, have 10-years.
      No Kidding Around.

      • Plenty of info on web disputing McPherson’s claims; but personally I reject them because it is not Biblical.
        Funny how folks throw weight at things like the writings of Nostradamus while overlooking the Bible which has a 100% accuracy rating.

        Get right with God and the timeline thing will become insignificant.

        • As if ‘God’ gives a damn.

          • There is more truth in what you said than you may know.
            I’m going to tell you something you probably have never been told before.
            According to the Bible God is at enmity with anyone who is not right with Him.

      • Yes, I’ve watched his detailed presentation. Even if he’s only half right, it’s very disturbing. Basically, what he says is that once the Artic becomes ice free in summer, there will be a massive release of methane from exposed soil and peat, so that within a relatively short time, temperatures will increase exponentially and weather patterns will be changed worldwide affecting food and water availability. There will be great waves of refugees and millions will die.

  4. DisappearingCulture | December 12, 2016 at 9:35 am | Reply

    “The price of PMs is correlated to the price of crude oil”

    Currently it is only correleated to futures market manipulations.

    It will break free of that only whene there is massive physical demand. Another reason TPTB have to keep the stock markets propped up. Now I hear 2017 will be “the” year for explosive price increases. We will see.

    • “only whene there is massive physical demand.”

      heh. haven’t you noticed those big billboard signs everywhere? “private investor wants to buy your gold! call 1-800-something!” is that not massive physical demand?

  5. “The key to the upcoming collapse will be due to falling energy production.”

    nope. the keys to the upcoming collapse are:

    1) demographic. the age of the average white american taxpaying citizen is 58, while the age of the average welfare-rioting ghetto blm supporter is 23, the age of the average “make America mexicon again” welfare-demanding mestizo is 9 (yes, 9, you read that right, 9).

    2) monetary. the federal reserve dollar is a fiat debt instrument – a ponzi scheme – that has entrained the economy and financial system of the entire world just as it is peaking.

    these two factors will crest considerably before oil depletion becomes an issue.

  6. My first comment here:

    I am a musician with 7 years in Electrical Engineering.

    Energy is not a material. Economically it is labor. It is what gets the work done. Economists put it in the wrong category. Physically we have matter, energy, and information. They are all different with different characteristics. One cannot substitute one for another. Where is money? It is in information. It cannot substitute for materials or energy/labor.

    I find that some of the worst logical flaws in economics are based on poorly organized categories like this one. With this in mind, once you start looking, they are everywhere.

  7. Good interview Steve your best one imo. Since the system is built on a debt based fiat currency it’s needs constant energy to be burned to give it value. Currency is nothing more than a representation of energy money is store of energy and net energy decline will impact debt/currency In a destructive matter bc it has less energy giving it value. Which will cause major deflation and bc there is so much leverage in the system. It’s not a coincidence the Dow and debt increased at roughly the same pace. The central banks can bend the laws a physics for a while but not forever they need asset inflation to survive but they’re battling thermodynamics and will eventually lose

  8. A store of PM’s is insurance like insurance in case your home burns down.
    Seems everyone wants the fire, including myself.

    IMO this is not because we think we’ll be wealthy after the fire; but we all know the fire storm is coming and ready to just get it over.

    Humans yearn for certainty and stability.

    • DisappearingCulture | December 13, 2016 at 8:12 am | Reply

      Good comment olegig.

      I don’t think of gold, silver [and to a lesser extent platinum, etc.] as an investment. I just see it as a for of savings. Cash in a bank, CD, or mutual fund? Not enough interest to equal inflation probably.

  9. I’m confused by your analysis.
    I think you are saying that prices of commodities which include oil, silver and gold are very highly correlated with the costs of production of those commodities with the actual costs of these commodities fluctuating around these costs of production based on supply and demand.
    I’m not sure the price action of commodities supports this conclusion.
    There have been dramatic price spikes in almost all commodities that look to me to be more speculative frenzies than fundamental supply and demand for commodities.

    Never the less, how do you get from that logic to: the price of oil will fall to say $10 dollars per barrel and the price of gold and silver will skyrocket.
    Especially when you say that the cost of oil is actually much higher than current prices as evidenced by the rising debt levels and lack of profits of oil companies.
    And by extension, since the cost of oil, one of the major input costs to extract gold and silver will fall dramatically, the cost to extract and prices of gold and silver should fall.

    I suspect that what is happening is that high oil prices and debt kill the economies of the world and we have reached a point where the price the world can afford for oil is now lower than the actual cost to produce it.

    How that resolves, (holding everything else constant) I would guess would be by a lower and lower standard of living for everyone with oil prices rising (but not oil company profitability rising) until an alternative transportation fuel is found to replace it, and most commodity demand falling as economies slow (with the profitability of commodity extraction businesses being severely squeezed).

    That seems to be bad news for gold, and silver and gold and silver miners.
    However, based on history, it appears that governments that can, always will print money to debase their currencies and disguise these problems as long as possible.
    (no longer holding everything else constant)
    The end result of this is hyperinflation usually with a new monetary system based on gold and/or silver.
    Gold and silver and the gold and silver miners are usually the biggest beneficiary.
    Based on all the gold accumulation in the East, I suspect that is their plan this time.

    • Did you listen to the interview? In the interview Steve said that the Hills Group have a model that has a 98 percent correlation to the price of oil. Their model predicts that the price of oil will decline due to the laws of Thermal Dynamics. In this case the law of supply and demand will take a back seat to oil that cannot be brought to market. He said something like 75 percent of our gas stations will close down. My advice: Get enough walking shoes to last a life time. Its all about the availability of easy oil. The signs are all around us. Steve used the earnings of Exxon and ConocoPhillips as examples of declining easy oil. It takes more energy to get oil today, at some point in the near future it won’t be an economically viable source of energy. Nothing can replace oil, our world will change.

  10. Oil was in a bubble, it seems this led to significant investment which has to unwind or pay off 🙂 It’s a very important input commodity to the economic models that are highly dependent on it, it makes us what we are today, i.e. plastic economy, car needed to go to work to get money to put oil in the car to etc. vicious circle. Then, it’s a big piece of the equities markets and investment circle as well.

    YES, the rich’s newest safe havens are in New Zealand, when it all falls apart they have their escape plans.

    And, yes the pensions, social security, even the stock market, all ladder or pyramid schemes. Even debt, as the more you procure .. your essentially shorting the dollar, hoping the value will diminish via inflation that of which would seem inevitable as that is the fed policy with QE monetary policy.

    I don’t see us using less energy, just trying to harvest it from wind/solar, etc. vs. carbon, it’s a slow change over, not an easy ride. We are no less dependent on oil itself, oil prices can literally bring us to our knees due to over reliance.

  11. “Why The Global Economy Will Disintegrate Rapidly”

    well the price of SLV is disintegrating rapidly. heh. 5% down this morning. bet that’s a big surprise, idn’t?

  12. In an earlier article on the problems with Exon Mobil you exposed the cash flow problems in the oil production model. Since production costs are based on a combination of fixed costs and variable costs, the oil companies can and will kick the can down the road and produce all the oil they can at some price that is below their total production cost. This model requires low or interest free debt and would in a “real” world continue until the individual company could no longer borrow money at a rate low enough to continue this Ponzi scheme. At that point its stock holders and holders of debt would lose most of their money, the company would reorganize, the fixed costs would drop to some lower level, and at least the lower cost producers, would continue to produce oil. The supply of oil would drop, demand would drive the price up, and the remaining producers would expand production at some higher price, the higher price would reduce demand, and a balance would be reached.

    In the world we now live in this is all a dream. In the US, the government and the banks have given the companies nearly free money, the “greens” hope to destroy oil as they have coal, stop all the pipelines, all new production in the arctic, in the shale fields, under the sea, and sit around and sing folk songs as the society collapses due to high input prices and thus lead to the end of global warming.. Russia, the Arabian fields, China, etc are all willing to use low cost oil as a political tool and supply and demand curves mean little. This is all leading to a perfect storm and mother nature, or trying to mess with controlling the real price and real cost of production can lead to some variations that are truly spectacular. The real problem is that the tipping point can not be calculated, the clearing process may not be very pretty, and we can not calculate who will be left standing. At this time in the US alternative energy sources do not include coal, hydro, or nuclear, as our present political system will not allow them to be considered. Thus a transformation from an oil based energy economy to some other source of energy does not look promising. So far we have avoided any real change in the system by either printing or borrowing money, or transferring income from one group to another, and neither seem to be viable in the long run for the present energy system. The political system at some time in the near future has to make a decision to either continue to kick the energy and production problems down the road or to continue to kick the entitlements down the road. The US is running out of resources, ie $20 trillion government debt, entitlements promised with no way of funding, and can’t even estimate Fed and private debt That may well lead to some interesting impacts on our present society and they may be sudden and have grave impacts on our economic and social future. We are in an overcrowded life boat, there are several other boats around us, they are not willing to give us room in their boats, and at some point we either have to start conserving our resources, throw someone overboard, or take over one of the other lifeboats.

    All economics as well as our society in the end break down to macro and to micro, I have no way of changing the macro, so I am putting all my resources into the micro and hope that they will not be destroyed by the macro.

  13. SilverBullRider | December 20, 2016 at 3:38 pm | Reply

    Steve stated silver investment is 4-5 times gold?

    I believe (at least U.S. Mint stats) that that the DOLLAR AMOUNT going into each is EQUAL. Meaning 65-70 ounces silver sell for every 1 ounce of gold. Not just 4-5 times silver over gold More like 70X silver in ounces. .

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