#68. The Ponzi economy, part 4


What we are witnessing now is the unravelling of a global economic system that has been turned into a giant Ponzi scheme. Collapse is the only way in which such schemes can ever end.

Current turmoil in the financial markets might presage this event. To be sure, more time might yet be bought, albeit at huge and futile expense.

This, however, is simply a matter of when. The if of collapse is not in doubt.

Technically, this is a financial system disaster rather than an economic one, though this distinction will do nothing to shield the real economy from the consequences.

This unfolding disaster can be traced to many causes. Economies have been undermined by structural weaknesses, some of them traceable to globalisation, others to capitalism debased into corporatism. The financial tail has been allowed to wag the economic dog. Political leadership has been clueless and cowardly – the same political ideologues who trumpeted the virtues of “deregulation” have abdicated responsibility, dropping a problem of their own making into the laps of hapless central bankers, with the result that a failure to fix a debt problem has simply compounded it with a monetary one.

Surreal ideas like negative interest rates, permanent QE and the banning of cash serve only to confirm that the policy cupboard is devoid of anything practical. Passing off the spending of borrowed money as “growth” has ceased to persuade. The idea that “debt doesn’t matter” has been exposed as one of the Big Lies of our era, ranking alongside “globalisation benefits everyone” and “inequality isn’t harmful”.

The intellectual and political leadership cadre is scrabbling around for solutions to a problem that it cannot understand, let alone fix.

But what is the real heart of this problem? There are two answers to this.

The first answer lies in a system which has no reverse gear, dodgy steering, and very little in the way of brakes. Our system is so predicated on growth that it is being overwhelmed by a stagnation that could yet turn into something even worse.

But why, then, is the economy failing to deliver growth? The answer to this second question is simplicity itself. Money is the token of the economy, not its substance. The substance itself is energy, and our (and our leaders’) ignorance of this simple fact denies us the only sane transition to a post-Ponzi world.

Fixing a pot-plant with a spanner

As most readers will know, my approach to economic and financial issues is rooted in a very clear (and unashamedly radical) way of looking at the economy. I call this Surplus Energy Economics, or ‘SEE’.

This states that the economy is, always has been, and always will be an energy system.

For anyone unfamiliar with this, I’ll start with a brief introduction to SEE. But my main aim in this discussion is to relate SEE to the issues that (a) are bewildering policymakers and economists, and (b) are prodding them down to the road towards policy disaster.

Unless you grasp the energy basis of the real economy, you cannot understand why a lethal gap has opened up between the “financial economy” and the real one.

If I’m right about the energy basis of the economy, then it follows that those who make the big decisions from a completely different perspective are grappling to cope with something that they simply do not understand.

Imagine that you were trying to fix some piece of machinery, believing – quite wrongly – that you understood how it worked.

That false understanding would frame how you went about trying to fix it. Your solutions would not work, because they could not work.

It would like trying to fix an ailing pot-plant with a spanner, or to repair a stuttering engine with fertiliser.

Each failure would prompt you into trying more and more radical solutions, all of them still based in the same misunderstanding. You would draw false lessons from each successive failure. Ultimately, your piece of machinery, only slightly malfunctioning when you started, would turn into a pile of junk.

With no apology for repetition, let me make my conclusion quite clear.

What I call “the global economic Ponzi” is moving ever nearer to the precipice because the powers that be are trying, with increasing desperation, to fix something that they simply do not understand.

The energy dimension

My thesis was encapsulated in Life After Growth, a book whose title tells you where I think we are. Economic growth has resulted from a supply of energy which has been readily-accessible, abundant and (in a rather special sense) “cheap”. For some years now, though, that essential precondition for growth has been ceasing to apply.

The word “energy” does not just mean fuels like oil, gas and renewables. Human labour is energy, as is the nutrition that makes labour possible. For all but two hundred years of our history, nutrition and labour accounted for the overwhelming majority of the energy in the economy.

The Industrial Revolution changed this fundamentally, giving us access to vast reserves of accumulated energy, but this pool has been depleted, not quantitatively but qualitatively.

No-one should rule out the possibility that new technologies will give the energy economy a new lease of life, but the limiting factor here may lie not in a failure of ingenuity, but rather in limits imposed by the laws of physics.

Energy has never been “free”. In the agrarian age, there was no “free lunch” – you had to you to hunt or farm to get nutritional energy. Today, you have to drill wells, build refineries and pipelines, or manufacture solar panels. All of this has a cost, but it is fundamentally an energy cost rather than a financial cost.

This really means that, however we access energy, we consume some of that energy in the process. From this come the concepts of “net energy” and “energy returns on energy invested” (EROEI). My preferred measure is ECoE (the Energy Cost of Energy).

So what matters isn’t the total amount of energy that you have, but the free-to-use surplus energy that you can unlock. 100 units of energy have no value if you have to use up all 100 to get at it. Here, ECoE is 100%, and surplus energy is nil. On the other hand, if you can get 100 units of energy by consuming only 5 units in the process, your ECoE is 5%. The sheer abundance of fossil fuels has given us more than two centuries of energy that has had an even cheaper ECoE than that.

As we all know, it would be absurdly cumbersome to run any economy on barter alone, so we created the concept of money to make things more practical. In doing this, we created a parallel or proxy system and, until recently, this has served us pretty well.

But this must prompt two observations of which our decision-makers are dangerously ignorant. First, there are “two economies”, which I call the “real” economy and the “financial” one. The real economy is the substance, and the financial economy is the proxy.

Second, money has no intrinsic worth. Its only value lies in what it can be exchanged for.

Therefore, the “financial economy” is an accumulation of “claims” on the real economy. If we misjudge the relationship between the two economies, the result is that we create “excess claims”.

The real hole at the heart of the Ponzi – excess claims

“Excess claims” are not the same as “debt”. Someone may take on a debt that he is perfectly capable of repaying in due course. There is nothing wrong with that. An “excess claim” arises when debts are created that cannot be repaid by the real (energy) economy.

An excess claim, since by definition it cannot be met, must be destroyed, in one form or another. Reneging on it, or “going bust”, is one way of doing this, but “debasing” the debt (perhaps through inflation) can accomplish the same thing.

Though debt is a handy indicator, the overhang that is really going to take down the system is “excess claims”. Over fifteen years or so, the accumulated stock of “excess claims” has grown from a minor and manageable drawback into a mountain. Worse still, our system has become addicted to adding to this mountain, at ever-increasing rates.

The creation of a money and credit in a “financial” economy proxying the real one introduced a new factor which “hand-to-mouth” and barter could not supply. This is the “anticipatory” element which can enable us to plan ahead. This has been extremely useful, but its viability depends upon using forecasts for the future which are realistic.

That essential realism has broken down in a system which assumes perpetual growth without ever really understanding where growth actually comes from.

The energy explanation – a harder sell?

Paradoxically – since we live in an energy-based economy – few topics are more misunderstood and misrepresented than energy. At the moment, energy prices are very low, with the price of oil in particular having fallen by more than 75% over less than eighteen months. The oil market is characterised by excess supply and burgeoning inventories.

Even those who really ought to know better assure us that the threat of scarcity has gone away for good, even supposing that it ever existed in the first place.

This is idiocy of the highest order. Propelled by a combination of brisk demand growth and the time-lag necessarily involved in responding to it, energy prices soared between 2000 and 2007, then remained high for a further seven years despite the economic hiatus that followed the banking crisis. Sustained high prices funded huge investment in capacity, much of which was of dubious economic viability in anything other than boom conditions.

Now that demand growth has slackened, capacity substantially exceeds the requirements of the consumer. This situation could continue for another year, or maybe two, possibly even three,

But to proclaim it as the start of a new era of abundance is fatuous in the extreme.

The biggest component of the supply increase over a decade has been the arrival of shale oil and gas in the United States. But, and even before the slump in prices, the US authorities themselves expected shale oil output to peak and then start to decline within a decade. The output from shale wells deteriorates very rapidly indeed – decline rates of 70% in the first year of production are not untypical. This means that output in the aggregate can only grow, or even be maintained, by continuous activity which has been dubbed “the drilling treadmill”.

The industry can fall off this treadmill if it runs out of capital investment or exhausts its highest-potential locations. The first has already happened, and the second is inevitable, the only question being “when?”

In the rest of the non-OPEC world, output from existing oil fields declines, such that output would deteriorate by about 8% annually in the absence of new investment. The collapse in prices – from an artificial high to an equally unsustainable low – has killed off at least $400bn of new investment, making the prospect of falling output very real indeed. Whole mature provinces – such as the UK North Sea – have been dealt a blow from which they may never recover.

The lifting of sanctions on Iran should enable OPEC to deliver more supplies, but not even Saudi Arabia has limitless supplies of low-cost oil. There is abundant evidence to show that the ECoE (surplus-to-cost) ratio of new developments has been deteriorating relentlessly for decades. Huge reserves of oil do indeed remain in the ground, but their value – on a net-of-ECoE basis – has been declining rapidly. The big growth areas of recent years have been capital-intensive US shales and even costlier bitumen sources.

Much progress has been made by renewables, and their share of the global energy market is likely to go on increasing despite the body-blow to their economics dealt by the collapse in hydrocarbon prices. But they may not be a transformative technology and, even if they are, it would be a transformation to be measured in decades. If, as BP has suggested, supplies of renewables grow at a compound rate of 6.6% annually, they will still account for just 9% of all energy consumed in 2035.

Technology has made huge strides in renewables, but to extrapolate this indefinitely is to ignore the envelope imposed by the laws of physics. The idea of a 747-sized aircraft being powered by electricity is a pipedream.

Renewables may give us a safe and sustainable supply of energy. They may well do so at a lower ECoE cost than today’s replacement sources of fossil fuels.

But they are not going to take us back to the high-surplus, ultra-cheap energy on which today’s economy was built.

From here to the Ponzi

Before we turn to the financial, let me pause here to ensure that the fundamental economic issues are clear.

1. The economy is an energy system, propelled by the surplus energy which exists after the access cost of energy has been deducted.

2. That cost element – EcoE – has been on a rising trend for decades, and is indeed rising exponentially.

3. We do not have a shortage of energy in the absolute, but we do have a shortage of high-margin, input-cheap energy.

To deny this, on the basis of a temporary glut, would be like saying that “because it’s raining this morning, I don’t believe in climate change”.

Not measured, not managed

Our methods of measuring the economy do not incorporate ECoE. They embrace the saleable value of gross energy, and they also incorporate the costs that we incur, but they exclude the “economic rent” component imposed by the resource set.

Until relatively recently, this didn’t seem to matter. My estimates are that, in the halcyon days of the 1950s and 1960s, ECoE was well below 2% anyway, which is easily within the general margin of error implicit in any GDP computation. If I’m right about the ECoE trend, it had still only reached just over 4% in 2000. By ignoring it, then, we were inflating our estimate of global economic output to $46.7trn (at 2015 values) from an underlying $44.7trn.

As the exponential rise in underlying ECoE continued, however, two nasty things started happening, neither of them captured in figures which ignore economic rent.

First, the gap between the financial and the real economies widened, from less than $2trn in 2000 (at 2015 values), to $3.8trn in 2007 and $5.9trn in 2014.

That’s pretty bad, but what is far worse is that the accumulated stock of excess claims had soared from $24trn (51% of GDP) in 2000 to $78trn (99% of GDP) by the end of 2014.

An updated “excess claims” figure for end-2015, by the way, is likely about 115% of GDP. From this rate of accumulation, you will appreciate why I do not believe that the global economic Ponzi can last much longer.

“Excess claims” are not the same as debt. Global debt, excluding the inter-bank sector, currently stands at about $160trn, but much of this could, at least under normal circumstances, be repaid when it falls due. “Excess claims”, on the other hand, cannot be repaid, because they are based on the accumulated fiction that our economy, now and in the future, is and will be far bigger than it really is.

Beyond the global debt mountain there are quasi-debt welfare promises made by governments. Many governments – the US and the UK most obviously – have entered into enormous such commitments, and it is already becoming clear that these cannot be delivered. Quasi-debts do not count as debt in the strictest sense, because a state could, for instance, reduce future payment levels on public sector pensions, or raise the age at which entitlements begin.

The bottom line

Many factors have come together to turn the global economy into a giant Ponzi scheme. But my concern here is that we may be missing the biggest one of the lot, simply because we are failing to notice, let alone to account for, the “economic rent” implicit in any finite resource set.

Contrary to purely temporary tales of glut and abundance – and irrespective of purely quantitative estimates of remaining “reserves” – the qualitative value of the resource set, on a net-of-ECoE basis, is continuing to erode.

It is doing so in ways that are completely unrelated either to investment patterns or to assumptions that technology can repeal the laws of physics.

My hope is that, when we sift through what remains after the global Ponzi has detonated, the very searching nature of the post-mortem will enable us to find the real cause of the disaster.

If we can do that, we can rebuild in ways that are sustainable.

#67. The Ponzi economy, part 3


I’ve never been a believer in the macabre, and have certainly never taken witchcraft more seriously than any other folk-tale. I’m beginning to wonder about this now, though, as I watch the great and the good of the economic debate as they peer into the cauldron of the next downturn.

The people entrusted with our economic futures, you see, are sitting around a bubbling pot, wondering quite how many more bizarre ingredients they can stir into the witches’ brew before it boils over. Though (so far as I’m aware) no policymaker, central banker or economist has yet proposed adding “eye of dog” or “wool of newt” to the mix, the ingredients that they are proposing are every bit as morbidly bizarre.

You don’t have to be a pessimist to know that a recession is coming – as we shall see, the evidence for some kind of impending downturn is becoming overwhelming.

In fact, if you don’t know by now that a recession is looming, you must have been either in a coma or in Davos.

But the morbid fascination of the coming downturn lies in the range of solutions being discussed by those who, whilst anticipating a coming recession, are also aware that the traditional policy tools for countering downturns will not be available this time around.

As a result, really serious consideration is being paid to ideas that in that not-too-distant past would have been dismissed as barking mad.

The issue isn’t about prediction, then, but about preparation.

And this is where inquiry quickly turns up something pretty akin to a witches’ Sabbath.

Cue the pointy hats and the black felines.

The avowed and the disavowed – the twin problems

As I’m sure you know, there are two sorts of problem looming. The first of these is an economic downturn, conventionally called “a recession”. The second is a far more fundamental challenge, posed by excessive debt, and by a dependency on adding to this debt pile in order to sustain the illusion of “growth”.

For now, let’s start with the recession threat, because the sheer idiocy of a global economy built on ever-expanding debt isn’t discussed in polite society.

Recession risk is pretty undeniable. Growth (or what passes for “growth” in an age of Ponzi economics) is slowing markedly, even in America and Britain. Japan has started experimenting with negative interest rates as the latest twist in the monetary and fiscal kamikaze that goes by the name of “Abenomics”.

Global movements in money flag up a big part of what is happening. Reversing the trend of decades, capital is flowing out of the emerging market economies (EMEs) at an unprecedented and accelerating rate (some $740bn last year), partly reflecting sharply slower growth in China and in other EMEs. In January alone, China spent almost $100bn staving off a currency slump. Low commodity prices are cutting a swathe through resource-exporting economies without, thus far anyway, doing much to help importers.

That the spectre of deflation is haunting a world awash with newly-created money demonstrates quite how weak global demand has become.

This being so, it’s hardly surprising that the prospect of recession is rising up the economic agenda. Indeed, so obvious has this become that the possibility of a downturn seems even to have penetrated Davos, the latter-day Versailles behind whose marble walls (and mass security) today’s bewildered and beleaguered Ançien Regime desperately tries to keep reality at bay whilst discussing things that are either pure eyewash (“the fourth industrial revolution”), sheer diversion (“these canapés are tasty”) or deeply malign (“I know, why don’t we ban cash?”).

When we talk about recession, what we are really talking about is growth going into reverse. This simply means that output, generally considered as GDP adjusted for changes in prices (inflation or deflation), is getting smaller.

There are plenty of reasons why this is beginning to happen. For a start, hardly any economy of any significance is expanding now that China, previously almost the only growth-engine, is slowing rapidly. China is slowing for several reasons, but by far the most important of these is that the country’s “growth” since 2007 has really amounted to nothing more than the spending of borrowed money. Like America, Britain and many others before her, China has fallen into a trap that has resulted in “growth” (of $5trn) coming at a price of $21trn in new debt.

Debt acts as a terrible drag on growth. For a start, it tends to be channelled into building capacity that nobody needs, which in turns drives down returns on existing capacity.

Excessive debt can make people cautious, which is bad, or it can make them reckless, which is even worse. If caution takes over, activity shrinks, and prices can start falling – no bad thing, you might think, except that it makes debt grow even bigger in real terms, triggering a vicious circle.

If recklessness prevails, asset prices (including capital markets and property) can soar. Bonds and equities can correct this by slumping, but it is failure to come to grips with property price inflation that is really damaging, because it prompts people to buy property and sit on it for easy profit, rather than innovating and investing in new products and services.

This, incidentally, is one reason why only an idiot would shackle the fortunes of a country’s economy to its property market.

It also, of course, ties up potential investment in a “capital sink” rather than putting it to productive use – that is, soaring property prices both drive debt upwards and stifle creativity.

Taking Britain just as one of the more extreme examples, can you imagine what today’s infrastructure and economy might look like if, under successive governments, trillions of potential investment hadn’t been channelled into inflating property values instead?

The blight of misguided policy

Of course, nothing is so bad that politicians and central bankers cannot make it worse if they really put their minds to it. There have been grave economic failures throughout history, but policymaking since the 2008 crash takes the biscuit for sheer craven fear and incompetence.

It would be nice to think that today’s policymakers are being watched with awed respect by the shades not just of Charles Ponzi but also of John Law (who confined himself to wrecking just one national economy).

In 2008, we looked over a precipice from a mountain of debt, a mountain that had been built by lax monetary policies, ideological or self-serving deregulation, and a political preference for buying popularity.

Then, and instead of encouraging restraint, central bankers – egged on by politicians – responded to excessive debt by engaging in all sorts of gimmicks to make borrowing cheaper than at any point in history. The result was that we borrowed even more ($49trn) in the seven years after the crisis than in the seven years before it ($38trn).

Along the way, we have been inundated by “unconventional” (generally meaning “ill-thought-out”) initiatives designed to tinker with the monetary system rather than face the reality of excessive debt.

The most worrying thing of the lot is that, instead of looking at fundamentals, the powers that be are now busy creating a new set of gimmicks, thereby conforming to the Einstein maxim that insanity lies in doing the same thing over and over again and expecting the result to be different.

Losing Mr Keynes’ umbrella

What they have also done, of course, is to mislay the tools that their predecessors had used to good effect over decades.

When a downturn looms, long-proven practice has been to stimulate demand, which is done in two main ways. “Fiscal stimulus” means governments boost demand in the economy by running deficits, either by reducing taxes, by increasing public spending, or a mixture of the two. “Monetary stimulus”, meanwhile, means cutting interest rates to encourage borrowing and discourage saving, both of which increase demand.

(You don’t have to be a Keynesian to understand this, by the way. You just need basic numeracy).

Of course, when you’ve done these things, and the recession has been countered, you have to reverse them, reducing or eliminating the deficit, and putting interest rates back up again.

If you don’t do this, two consequences follow, both of which are blindingly obvious to anyone outside the policy elite.

First, the economy can overheat if too much stimulus is applied for too long. An overheating economy leads to a subsequent downturn just as certainly as the sunset is followed by the dawn.

Second, unless you restore budgetary balance and normalise interest rates, you will not be able to apply stimulus the next time you need it.

This is the tool-kit that generations of central bankers have used to counter recessions.

Today’s central bankers, assisted by governments, have lost this tool-kit, about as carelessly as an old lady might mislay an umbrella in a crowded railway-station.

Most amazingly of all, they seem to have learned nothing from all of this. If you find such behaviour hard to credit, just consider the ideas now being canvassed.

The abandonment of rational thinking

For a start, forget doing anything that might be tainted by common sense. One very distinguished economist has spoken for much of the policy establishment by saying that it would be “crazy” simply to accept the coming recession, and make the best of it.

In fact, so long as those in greatest need are taken care of, a recession can be cathartic, driving excesses out of the system and triggering the “creative destruction” from which new and better ways of doing things can result. Whisper it who dares, but we could fund a much-improved welfare safety-net just by getting the wealthy to pay tax on some of the huge gains doled out to them gratis through QE.

So, and whilst no-one would actually welcome a recession, it is surely the height of folly to go into denial over it.

Then there’s another idea which might seem sensible – to reduce debt, for which the jargon is “deleveraging”. Though this idea is certainly practicable, mainstream economists don’t favour it, mainly it because it increases the likelihood of recession.

Here, once again, is the “denial factor”, which is doing more than anything else to build a bigger and longer catastrophe. Ostriches are known for burying their heads in the sand at the first sight of trouble, and it’s become clear beyond a doubt that, for central bankers, and politicians too, doing exactly this has become a matter of instinct.

Don’t worry though, because ruling out anything sensible doesn’t leave the policy cupboard completely bare. There’s always the mad, the bad and the dangerous to fall back on.

The chamber of policy horrors

Assume, just for the moment, that you are a central banker or an economic policymaker. You have mislaid your predecessors’ perfectly effective tool-kit. You have ruled out anything which might address the fundamentals (such as managing recession, or reducing debt) because these might court short-term unpopularity. You cannot realistically (or at least ideologically) run deficits bigger than the ones you already have, and neither can you – theoretically, anyway – cut interest rates that are already at zero.

What might you do instead? Well, an increasing body of thought suggests that you can run negative interest rates. Instead of the bank paying customers a fee for the use of their money, the customer instead pays the bank for holding on to it. Switzerland, and a few other smallish and rather specialist economies, have indeed done this. The Swiss have done it for a perfectly sensible reason – they do not want their currency to soar as a consequence of safe-haven attractions, so they levy a small fee for the assurance that they provide.

Now, though, say many economists, negative interest rates can be adopted on what would amount to a global basis.

Negative interest rates are possible, we are told, and this is true, though only in strictly theoretical, technical terms. And, as the late great Yogi Berra put it, “[i]n theory there is no difference between theory and practice. In practice, there is”.

Start by imagining, if you can, the feelings of the customer who puts $1,000 dollars in the bank and sees it decline to $950 after a year of bank custodianship. If anything is guaranteed to exacerbate public contempt for the banking industry, this is surely it.

Of course, if the idea of banks helping themselves to his money doesn’t appeal, the customer might consider alternatives. He might put his money into artificially-inflated bond or equity markets, where his loss may be deferred (but is likely to prove even bigger in due course). He might put his money into property, again depending on his attitude to buying vulnerably-inflated assets. He might turn to the unlicensed “banks” which would surely proliferate. Or he might just stuff the money under the proverbial mattress. This – or buying gold – might be the most popular route for avoiding what he would see as the straight filching of his money by bankers.

The policy wonks have thought of this, of course, and many of them think that they can solve it by banning cash.

It is really, really hard to think of anything more dangerous than depriving people of access to their money, and forcing them to leave every penny of it in a banking system which – already widely perceived either as dishonest, the tool of control-freak governments, or both – may now be licensed to make regular deductions from customer accounts.

Banning cash would summon up the spectre of “bail-ins” – where banks dip into customer deposits to cover bad loan losses – in the minds of rightly-suspicious customers.

After much thought, I would even go so far as to say that a state which banned cash, or a banking system which connived in this, would have stripped itself of any vestige of legitimacy.

Then there is the idea of making QE (quantitative easing) a perpetual feature of the system. One can readily perceive the attraction of this to the official mind because, after all, about $40trn of QE has achieved nothing much so far except the enrichment of the already mega-wealthy. QE is already virtually permanent in Japan, where it forms one wing of the aeroplane of kamikaze economics.

Apart from failing to revive a moribund economy, and threatening to start a forex race to the bottom, its only real effect in Japan has been to make the central bank the sole buyer of Japanese government debt.

I don’t think I need to labour the point about governments borrowing newly-minted money from themselves.

Then there is “helicopter money”, which is fast becoming the pet project of economists who really ought to have grown out of the “kiddie in the sweetie factory” stage by now.

Of course, the money wouldn’t literally be pushed out of the cargo-doors of an old Westland Wessex – it would have to be put into everyone’s bank account, especially if owning actual cash had been made illegal. But the whole point about “helicopter money” is that it began life, not as a serious suggestion, but as a joke.

Well, the joke may be about to get even more morbid. Just think of it – the government puts money into your account, the bank then trousers some of it, and the only person who can’t get his hands on it is the customer to whom it (supposedly) belongs.

Then there’s the idea of changing official targets, dropping the targeting of inflation or growth in favour of something esoteric or irrelevant, such as nominal GDP. This calls to mind the concept of “core inflation”, which was the idea of excluding energy and food from the measurement of inflation at a time in the 1970s when the prices of both were going through the roof. One wag called this “inflation ex-inflation”, but it looks positively sane when compared with some of the gimmicks now being given serious consideration.

So here we are….

We have now reached a point that has gone far beyond the surreal. In fact, were it possible for us replace today’s policy wonks with figures from the past, we would have to disqualify the likes of Heath Robinson, Salvador Dalí and Lewis Carroll on grounds of excessive practicality, though Lady Macbeth and the witches might still get a look-in.

So here’s your choice, though sadly with the proviso that you will not be the one who gets to make it.

We can accept the likelihood of a downturn, and make the best of it, and we can start reducing debt, accepting that overvalued asset markets would thereby be subjected to the law of gravity and the fate of bubbles. Much of the debt mountain could be converted to equity and, after all, if the value of your home has to plunge, it might help if your mortgage was written down at the same time.

Instead, though, it seems far likelier that the gimmick-pedlars will be allowed to get on with completing the task of engulfing the economy in debt, undermining the credibility of money, and cutting away the waning credibility of the social and political order.

Like the witches of the Middle Ages, the gimmick-sages are already warming the pot and collecting the ingredients for “toil and trouble”. The cauldron is already bubbling away nicely, of course – and anyway, who needs “eye of dog and wool of newt” when you can ban cash, and then order banks to take money out of everyone’s locked-in account?

After all, to opt for sanity now would be to leave the witches’ cauldron incomplete – and we can’t have that, can we?