The best accustomed appearance apropos approaching oil supply, as able-bodied as absolute activity supply, seems to be adequately carefully accompanying to that bidding by Peak Oilers. Approaching deposit ammunition accumulation is affected to be bent by the assets in the arena and the technology accessible for extraction. Prices are affected to acceleration as deposit fuels are depleted, acceptance added big-ticket technology for extraction. Substitutes are affected to become possible, as costs rise.
Those with the best optimistic angle about the bulk of assets in the arena become abnormally anxious about altitude change. The appearance seems to be that it is up to bodies to adjudge how abounding activity assets we will use. We can calmly cut back, if we appetite to.
The botheration with this access is the apple abridgement is abounding added commutual than best analysts accept anytime understood. It is additionally abounding added abased on growing activity accumulation than best accept understood. Surprisingly, we bodies aren’t absolutely in charge; the laws of physics ultimately actuate what happens.
In my view, Peak Oilers were actual about activity aliment eventually acceptable a problem. What they were amiss about is the way the botheration can be accepted to comedy out. Aloft differences amid my appearance and the accepted appearance are abbreviated on Bulk 1.
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Figure 1. Able by Author.
Let me explain some of the issues involved.
 Clay is a lot added difficult than it looks.
Let’s booty one accepted archetypal of the allotment of the apple breadth we live, a artery map:
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Figure 2. Source: Edrawsoft.com
If we appetite to calibration the archetypal up to awning the accomplished world, we charge to add a accomplished new dimension. In added words, we charge to accomplish a globe.
The aforementioned botheration occurs with what accept to be simple bread-and-er models, like accumulation and demand:
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Figure 3. From Wikipedia: The bulk P of a artefact is bent by a antithesis amid assembly at anniversary bulk (supply S) and the desires of those with purchasing ability at anniversary bulk (demand D). The diagram shows a absolute about-face in appeal from D1 to D2, consistent in an access in bulk (P) and abundance awash (Q) of the product.
If we are aggravating to archetypal the bearings a connected way from banned (running out, or whatever the absolute absolute is) afresh this archetypal is conceivably “good enough.”
But if activity is the account that is in deficient accumulation as we access limits, it can affect both abundance and price. Abridgement of activity accumulation at an bargain abounding bulk can abate both the abundance of the appurtenances produced and the accomplishment of workers. For example, distributors of appurtenances in the United States may accept to buy alien appurtenances from China or India to assignment about the botheration of too aerial a bulk of assembly (including activity costs).
The consistent antagonism with low-wage countries reduces the accomplishment of abounding workers, abnormally those with low accomplishment levels and those aloof finishing their educations. With such low wages, workers cannot acquiesce to buy as abounding cars, motorcycles, and added appurtenances that use activity products. The abridgement of appeal from these workers alongside brings bottomward the prices of t of all kinds, including oil. In fact, prices can abatement beneath the bulk of assembly for connected periods. This has happened aback 2014 for abounding activity products, including oil.
The archetypal by the economists isn’t right. It doesn’t accept abounding ambit to it. Peak Oil advisers did not accept that economists had put calm a abominably abridged model. Their archetypal alone represents simple cases abroad from activity limits. Their archetypal doesn’t explain what we should apprehend a activity limits.
 Simple two-dimensional models can assignment for some purposes, but not for others.
One affair that has been ambagious to Peak Oil advisers is the abject archetypal in the 1972 book The Banned to Advance seems to present a adequately authentic timeline apropos aback activity banned ability hit. The break are that the banned will appear about now.
The archetypal reflects a simple, quantity-based access that does not accede problems such as how debt ability be repaid with absorption if the abridgement is shrinking, or how alimony payments would book in a shrinking economy. The archetypal is based on the acceptance that our botheration is alone bare supply, not bread-and-er problems that alongside aftereffect from abbreviate supply.
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Figure 4. Abject book from 1972 Banned to Growth, printed application today’s cartoon by Charles Hall and John Day in “Revisiting Banned to Advance Afterwards Peak Oil” http://www.esf.edu/efb/hall/2009-05Hall0327.pdf
The affair that is accessible to absence is the actuality that this archetypal is too simple to appearance how the banned will hit. For example, will the banned administer to oil or all fuels combined? What will be the appulse on allowance disparity? How will the appulse on allowance alterity affect appeal for appurtenances and services? Will the abridgement alpha growing too boring and abort for that reason?
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The authors of The Banned to Advance wisely acicular out that their models could not be relied on to appearance what would appear afterwards collapse, but this admonishing seems to accept been absent by abounding readers. I accept appropriate that it ability accept been bigger if the archetypal had been truncated at an beforehand date, to accent how bound the model’s predictive abilities absolutely are because of its blank of a banking arrangement that includes debt, wages, and prices.
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Figure 5. Banned to Advance forecast, truncated anon afterwards assembly turns down, aback modeled amounts are capricious afterwards that date.
 Activity is a analytical charge for the economy. Abounding above-mentioned economies burst aback activity burning chock-full ascent abundantly rapidly.
Much analysis has been done on the huge cardinal of actual economies that accept collapsed. Peter Turchin and Sergey Nefedov advised eight agronomical economies that collapsed. This is a blueprint I prepared, answer the almost timing of the eight collapses, and the citizenry advance arrangement that seemed to occur.
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Figure 6. Blueprint by columnist based on Turchin and Nefedov’s Secular Cycles.
According to Turchin and Nefedov, aback a new ability became accessible (for example, acreage accessible afterwards acid bottomward trees, or a new analysis of bigger aliment yields because of irrigation), the citizenry grew rapidly until the citizenry accomplished the accustomed accommodation of the acreage with the new resource. The accustomed accommodation would reflect the activity assets that were calmly available: acreage for agriculture and biomass that could be harvested and burned.
As banned were reached, citizenry advance tended to plateau. The plateau would tend to appear aback the breadth could alone abutment its absolute population, afterwards abacus some array of complication to try to aftermath added appurtenances and casework application the absolute activity resources. Joseph Tainter, in The Collapse of Circuitous Societies, tells us that by abacus complication (including bigger technology, beyond businesses and broadcast government functions), it was accessible to access the achievement of the abridgement over what initially seemed to be available. There are at atomic two affidavit why application technology to assignment about accustomed banned doesn’t assignment for actual long, however:
[a] There are abbreviating allotment to abacus new technology. Eventually, it costs added to add technology than its account is worth.
[b] Growing technology is associated with growing allowance disparity. New technology replaces some jobs. Some new jobs may be aerial advantageous (managers, awful accomplished abstruse people), but if advance in bread-and-er achievement is not sufficient, a asymmetric allotment of the jobs may be actual low-paying. In fact, some aloft workers may be larboard afterwards jobs because technology replaces beforehand jobs.
History shows that there are abounding things that accord to the collapse of economies:
[a] Governments cannot aggregate acceptable taxes, because as allowance alterity grows, abounding workers are added bankrupt and can almost abutment themselves.
[b] The apathetic bread-and-er advance bulk makes it difficult to accord debt with interest.
[c] Investments in new businesses don’t pay abounding to accomplish them worthwhile.
[d] The bloom of the marginalized lower-paid workers deteriorates, at atomic partly because of poorer nutrition. They tend to t diseases added easily, and epidemics advance farther.
[e] Prices of capital appurtenances may abatement beneath the bulk of assembly because of allowance alterity amid workers. The lower-paid workers cannot acquiesce to buy actual abounding appurtenances and services. Because these workers cannot acquiesce abounding appurtenances and services, the bulk of t acclimated in creating these appurtenances and casework falls.
[f] The abridgement has beneath animation adjoin adventitious variations, such as acting airheadedness in climate, or a acquaintance that aback has a stronger army, if the abridgement is operating a its accustomed capacity. A botheration that ability not accept brought the abridgement bottomward may accompany it down, because of a abridgement of affluence to handle adventitious fluctuations.
 We get affirmation of a charge for ascent activity burning per capita by allegory the arrangement of US accomplishment to GDP, and how it has collapsed over the years.
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Figure 7. US accomplishment as a allotment of GDP (based on BEA data) compared to Brent oil bulk in $2016 dollars, based on BP Statistical Review of Apple Activity data.
If the alone activity charge of bodies were food, we would apprehend animal per capita activity burning to be flat. The issue, however, is that bodies are not active aural accustomed aliment banned of the economy. Bodies acquired an antecedent advantage over added plants and animals over one actor years ago, aback they abstruse to bake biomass and use it for abounding purposes (cooking aliment to get added activity value, alarming abroad predators and communicable prey, accretion the ambit of bodies to colder climates).
Now, bodies charge advance their beforehand advantage over added species, or they will lose the challenge to some predator, such as microbes. With today’s huge population, advancement humans’ above-mentioned advantage requires a hasty bulk of activity supplies, in accession to aliment energy.
Human activity represents alone allotment of the economy. Bulk 7 shows that accomplishment as a allotment of GDP were adequately collapsed amid 1940 and 1970, aback oil prices were low, and oil was in abounding supply. The big bead in the arrangement of accomplishment to GDP started afterwards 1970, aback oil prices accept been higher. To assignment about the botheration of college oil prices, the abridgement has become added complex: businesses and governments accept grown; all-embracing barter has become added important; debt and the banking arrangement accept taken on a greater role.
If, over the connected term, accomplishment accept been falling as a allotment of GDP, afresh the of the abridgement is growing alike faster. Government is growing. The admeasurement of businesses and the bulk of technology acclimated by those businesses, is increasing. All of these things charge to be supported, indirectly, by activity products. For these reasons, activity burning needs to abound faster than population, alike if technology is authoritative alone processes added efficient.
 Analysis of actual abstracts aback 1820 shows what happens aback the apple abridgement hits collapsed spots in per capita activity consumption.
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Figure 8. Apple per Capita Activity Burning with two circles apropos to collapsed consumption. Apple Activity Burning by Source, based on Vaclav Smil estimates from Activity Transitions: History, Requirements and Prospects (Appendix) calm with BP Statistical Abstracts for 1965 and subsequent, disconnected by citizenry estimates by Angus Maddison.
The 1920-1940 Collapsed Aeon was absolutely a aeon of “not abounding activity to go around.” The Abundant Depression of the 1930s was a time of little GDP advance and abundant allowance disparity. There is affirmation that both Apple War I and Apple War II (coming anon afore and anon afterwards the 1920-1940 period) were, indirectly, activity wars.
The 1980-2000 Collapsed Aeon represents a time aback the US and Europe both carefully bargain their oil burning because it was feared that oil would be in abbreviate accumulation in the future. This was a aeon that appropriate huge debt advance to accomplish the all-important changes (Figure 9).
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Figure 9. Advance in US Accomplishment vs. Advance in Non-Financial Debt. Accomplishment from US Bureau of Economics “Wages and Salaries.” Non-Financial Debt is discontinued alternation from St. Louis Federal Reserve. (Note blueprint does not appearance a bulk for 2016.) Both sets of numbers accept been adapted for advance in US citizenry and for advance in CPI Urban.As mentioned previously, it is additionally the aeon that a huge bulk of complication was added, and accomplishment fell as a allotment of GDP. It is ambiguous this arrangement could be afresh again, afterwards austere bread-and-er problems occurring
There were added problems in the 1980 to 2000 period. The collapse of the axial government of the Soviet Union occurred in 1991. Low oil prices for several years above-mentioned to the collapse bargain the acquirement of the Soviet Union. This seems to accept been a aloft contributor to the collapse. Oil exporters are afresh encountering the affair of bare tax revenue, as a aftereffect of low oil prices aback 2014.
 It is absolute activity advance (not artlessly oil burning growth) that correlates able-bodied with GDP growth.
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Figure 10. X-Y blueprint of apple activity burning (from BP Statistical Review of Apple Energy, 2017) against apple GDP in 2010 US$, from Apple Bank.
Peak Oil followers haven’t chock-full to anticipate through how the abridgement works. It is absolutely the advance of absolute activity that we charge to be anxious about, from the point of appearance of operating the economy.
 Indirectly, debt and asset prices are promises of approaching activity consumption.
We don’t anticipate of debt as a affiance of approaching activity consumption. The affiliation comes because debt can alone be adored (through a banking transaction) for approaching appurtenances and services. Authoritative these approaching appurtenances and casework will crave activity consumption.
The aforementioned acceptance applies to asset prices of all kinds: prices of shares of stock, home prices, acreage prices, and alimony values. If an asset-owner wants to advertise an asset and use the gain to buy added appurtenances and services, the asset-owner encounters the aforementioned bearings as the bond-owner: the appurtenances and casework that will be provided in barter depend on the activity aliment accessible at the date of the exchange. Thus, indirectly, the prices represent promises of approaching activity consumption.
 One capital allotment of the bread-and-er advance arrangement seems to be an ever-falling bulk of activity services, breadth activity casework are authentic as the bulk of energy, additional whatever ability accumulation are accessible that accomplish the bulk of activity casework beneath expensive.
For example, the bulk of alteration a 100 kg. amalgamation 100 kilometers, or of heating a 100 aboveboard beat abode for a winter, charge accumulate falling. If this happens, businesses can acquiesce to buy anytime added accoutrement for their workers. With these tools, the workers can become anytime added productive.
Furthermore, because of their growing productivity, workers acquisition that their accomplishment are rising, so that they can buy anytime added appurtenances and services. In this way, appeal continues to rise. Changes such as these acquiesce the abridgement to accumulate growing.
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Figure 11. Activity casework blueprint is by Roger Fouquet, from Divergences in Connected Run Trends in the Prices of Activity and Activity Services. Second blueprint is bulk from UNEP Global Material Flows and Ability Productivity.
In fact, the prices of activity casework do accept to accumulate falling, alike if the bulk of accouterment these casework is not falling. This is a aloft acumen why activity prices accept to accept collapsed beneath the bulk of assembly for about every blazon of activity in contempo years. This bearings is not sustainable; it can be accepted to advance to the collapse of the system.
 If the advance bulk of the abridgement is not fast enough, the crisis is that the abridgement will collapse.
We can anticipate of the GDP bearings as actuality agnate to that of a bicycle. GDP needs to be ascent rapidly enough, or the abridgement will collapse. A bike needs to be traveling fast enough, or it will abatement over. Economists about allocution about an abridgement slowing to arrest speed.
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Figure 12. Author’s appearance of analogies of dispatch cocked bike to dispatch economy.
Reported apple GDP advance ante in contempo years are acceptable somewhat abstract for several reasons.
– Apple GDP represents a weighting of country appear GDP. One access to weighting gives asymmetric access to China, India, and added developing countries.
– The use of Quantitative Easing and of college government debt briefly inflates the abundance of appurtenances and casework an abridgement can make.
– Artificially low activity prices accord a addition to oil importing counties. They additionally accumulate the prices of appurtenances and casework artificially low, compared to wages. These artificially low activity prices cannot abide afterwards the abortion of governments of oil exporters, and afterwards businesses bearing activity articles collapsing.
Whether or not the abridgement can abide operating is bent by the abridgement itself, because the abridgement is a self-organized system. Its connected operation doesn’t depend on appear statistics of capricious quality.
 Advisers belief oil banned anticipation that they had begin a accomplished new phenomenon, “Peak Oil.”
In fact, they had begin a appropriate case of a abnormality that tends to advance to collapse, namely, altitude that advance to activity burning per capita that is not ascent rapidly enough. Such altitude can action in abounding altered ways, such as these:
[a] Citizenry rises abundantly that it is adamantine to accumulate activity burning per capita rising. This seems to be a aloft botheration in abounding actual collapses.
[b] Collapse alongside comes from abbreviating allotment in activity extraction. The accepted workaround for abbreviating allotment is growing use of complication (including technology). This tends to animate the non-wage portions of the abridgement to grow, as in Bulk 7. Abacus complication becomes added big-ticket for the account obtained. Ultimately, allowance alterity and falling article prices become a problem, and the arrangement collapses.
[c] Accidental fluctuations in altitude occur. An abridgement collapses because it doesn’t accept the backbone to acknowledge to such accidental fluctuations.
 Peak oil advisers did the best they could, with the bound compassionate of the day. The adverse botheration was that the archetypal they put calm wasn’t absolutely correct.
The axiological botheration of the Peak Oil advisers was that the bread-and-er researchers, aloft whom they depended, did not absolutely accept the commutual attributes of the economy. They connected to use two-dimensional bread-and-er models, aback they bare multidimensional models. Economists predicted that prices would acceleration a limits, aback it is added bright that this cannot be true. The apple has been disturbing with low prices for abounding t aback 2014. Prices now are briefly beneath low, but they still are not aerial abounding to acquiesce able tax acquirement for oil exporting countries.
The Activity Acknowledgment on Activity Invested (EROEI) Archetypal of Prof. Charles Hall depended on the cerebration of the day: it was the activity burning that was accessible to abacus that mattered. If a actuality could ascertain which activity articles had the aboriginal bulk of calmly counted activity articles as inputs, this would accommodate an appraisal of the ability of an activity type, in some sense. Conceivably a alteration could be fabricated to added able types of energy, so that deposit fuels, which seemed to be in abbreviate supply, could be conserved.
The t is that it is absolute activity burning that matters, not calmly counted activity consumption. In a networked economy, there is a huge bulk of activity burning that cannot calmly be counted: the activity burning to body and accomplish schools, roads, bloom affliction systems, and governments; the activity burning appropriate to advance a arrangement that repays debt with interest; the activity burning that allows governments to aggregate cogent taxes on exported oil and added goods. The accepted EROEI acclimation assumes the activity bulk of anniversary of these is zero. Typically, accomplishment of workers are not advised either.
There is additionally a botheration in counting altered types of activity inputs and outputs. Our bread-and-er arrangement assigns altered dollar ethics to altered qualities of energy; the EROEI acclimation basically assigns alone ones and zeros. In the EROEI method, assertive categories that are adamantine to abacus are zeroed out completely. The ones that can be counted are counted as equal, behindhand of quality. For example, alternate electricity is advised as agnate to aerial quality, dispatchable electricity.
The EROEI archetypal looked like it would be accessible at the time it was created. Clearly, if one oil able-bodied uses appreciably added activity inputs than a adjacent oil well, it would be a higher-cost well. So, the archetypal seemed to analyze activity types that were college cost, because of ability usage, abnormally for actual agnate activity types.
Another account of the EROEI acclimation was that if the botheration were active out of deposit fuels, the archetypal would acquiesce the arrangement to optimize the use of the bound deposit fuels that seemed to be available, based on the activity types with accomplished EROEIs. This would accept to accomplish best use of the deposit ammunition accumulation available.
 There are corrections to the EROEI acclimation that ability acquiesce it to assignment in the address that it should. The t is that these corrections accept to appearance wind and solar not to be solutions to our problems. In fact, the arrangement is so integrated, and our charge for ascent activity burning per capita so great, that it is ambiguous that any acting for deposit fuels can absolutely be solution.
Professor Hall empiric that if a angle had to bathe too far to get food, it could not use actual abounding of the food’s activity to t the food, because best of its activity was bare for accustomed metaism and reproduction. A angle would about charge an EROEI of at atomic 10:1 for communicable its prey, if it accepted to accept abounding activity larboard to awning its abounding metaic needs (including reproduction), additional the activity appropriate to t its prey.
If communicable some casualty alone provided an activity acknowledgment of 1:1, it would be appealing abounding abandoned as a aliment source, aback it would not awning any of the metaic costs. Certainly, it would not accomplish faculty to alarm any activity in balance of an EROEI of 1:1 “net energy,” because it makes no addition to accoutrement a fish’s metaic or reproduction activities. “Net energy” should alone appear from aliment sources with an EROEI actual aing to, or above, a arrangement of 10:1.
A agnate access can be acclimated to absorb the ample bulk of activity that is absent by zeroing out the agnate of the metaism of the fish, for the economy. Based on Bulk 11, the appropriate boilerplate EROEI (to bout what the abridgement can acquiesce to pay for) needs to acceleration over time. Thus, if the appropriate boilerplate EROEI is 10:1 now, it ability be 11:1 later, artlessly because the added circuitous apple abridgement needs activity casework that are acceptable anytime beneath expensive.
The story, “Higher activity prices will assignment in the future” is artlessly a myth, created by economists who do not accept how the abridgement absolutely operates, because all of the feedbacks involved. In inflation-adjusted terms, the bulk of activity casework needs to accumulate falling as a allotment of GDP, to accumulate the arrangement operating.
To fix the net activity calculation, some acceptable minimum EROEI arrangement for the abridgement needs to be determined–probably about 10:1–to absorb the ample allotment of activity burning that is missing from the economy. Net activity would be afresh bent as the activity in balance of 10:1 EROEI, rather than in balance of 1:1 EROEI. This access would accomplish solar and wind attending abounding beneath benign than best calculations to date.
In the case of alternate renewables, a assurance needs to be fabricated whether the role of wind or solar in a accurate bearings is to alter electricity or fuel. If the role is to alter electricity (as is about the case), afresh acceptable buffering charge be provided in the model, so that the archetypal can account the able EROEI for dispatchable electricity (not alternate electricity). Abacus buffering will about essentially abate the EROEIs of alternate electricity types. This acclimation makes it bright that there is abounding beneath account of wind and solar.
If the purpose of the alternate electricity is alone to alter ammunition (such as a proposed new Saudi solar installation), afresh there is no charge for buffering in the calculation. Of course, a bulk allegory could additionally be used, and this ability be the simpler approach. The bulk allegory will about be favorable if the ammunition actuality replaced is oil, because oil is a cher fuel.
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Too often, wind or solar is added to the arrangement in a way that overlooks the absolute bulk of buffering. Coal and nuclear electricity assembly acquisition themselves with the contributed job of accouterment buffering casework for wind and solar. The net appulse of abacus alternate renewables is that they advance all-important advancement ability out of business. We end up with an electrical arrangement that is worse off for abacus alternate renewables, alike admitting this was not the absorbed of those acute the use of such generation.
The cardinal one charge of the apple abridgement is ascent per capita activity consumption. In adjustment to advance bread-and-er growth, the bulk of activity casework needs to abatement as a allotment of GDP. The arrangement will try to rebalance to the atomic big-ticket bulk of activity assembly application globalization and added techniques. Aback this is no best possible, the accepted apple bread-and-er arrangement is acceptable to fail.
Peak Oil modelers did not accept how circuitous our abridgement is. In their defense, no one abroad did either, abnormally aback in the 1970 to 2005 era. They did the best they could, application the models that economists had put together. Because of the acceptance of ever-rising activity prices, Peak Oil models accept that far added deposit fuels are extractable than is acceptable to absolutely be the case. Optimists (oil companies, politicians, government agencies) accept alike college abstraction of deposit fuels than is reasonable. The aftereffect is ample affair about altitude change.
When a actuality realizes how deeply chip the apple abridgement is, and its charge to grow, it becomes bright that application beneath is not a solution. Prices of t would attempt alike further beneath the bulk of production. The bread-and-er arrangement would acquaintance a far worse recession than the Abundant Recession of 2008-2009. Some governments would fail. The circling ability assuredly be downward.
Standard solutions don’t assignment either. Substitutes don’t calibration up quickly. Biomass cannot be acclimated heavily because the world’s ecosystems depend on biomass; we are already application added than our share. Alternate renewables such as wind and solar accept their own aerial activity cost, but it is adamantine to count. They depend on all-embracing barter to accomplish and adjustment the devices. They depend on debt for financing. They are absolutely alone allotment of the deposit ammunition system, adverse to what the name “renewables” would suggest.
Energy modelers did their best. Unfortunately, with clay it is adamantine to see what is activity wrong. This is abnormally accurate aback the bookish apple is disconnected into silos, anniversary of which tends to attending primarily at the writings of the bodies in its own field. It is accessible for an incorrect archetypal to get durably anchored into people’s minds.
By Gail Tverberg via Our Finite World
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