#136: The challenge for government


The underpinning assumption of continuous growth has framed the entirety of the economic debate in politics since long before current systems of Western governance came into being.

Now, with the economies of the West characterised by an ongoing deterioration in prosperity, wholly new rules apply. Whilst sharing out the benefits of growth has seldom been easy, allocating hardship is going to be a very much harder call. As things stand, the incumbent elites have no answer to a question that they do not even know they need to ask – how do we govern societies that are getting poorer?

This puts us in a strange situation in which the general public knows more than the political elites. The official line is that people are continuing to enjoy growing prosperity, but people themselves recognise increasingly that this isn’t the case. The elites believe that traditional parties, and established ideologies and methods of conducting government, remain valid, but the public is well advanced in the process of repudiating all of them. Where elections are conducted proportionately, insurgent parties are making huge inroads – but where, most obviously in America and Britain, the system is structured in ways which entrench established parties, those parties are becoming the target for capture from within

Two humdrum issues in fiscal policy illustrate quite how dramatic the economic change is going to be. For a start, there’s no point in anyone proposing to increase public spending, because this is ceasing to be affordable. Likewise, there’s no point in asking whether or not governments should “tax the rich” more than they do now, because doing so is becoming unavoidable.

This change invalidates much of the economic thinking of the respective ‘conservative’ and ‘Left’ political persuasions. Additionally, the conservative side is now about to discover the price of two disastrous mistakes made within the last decade, whilst the Left is losing the ability to present a viable alternative to “austerity”.

Politics and government – the children of growth   

Although the American Constitution dates from 1787, most forms of government operating around the world today are of much more recent origin – and, even in the United States, governance has undergone huge changes since the Founding Fathers put quill to paper.

What this means is that virtually all Western systems of government and politics are products of an age of growth, and this history frames the policy debate, in economics and in much else. The Industrial Revolution is generally dated from about 1760 and, though it took a long time to spread around what we now call ‘the West’, it’s fair to say that no system of government in the advanced economies pre-dates the start of growth.

This is not to assert that there has been an uninterrupted continuity of growth because, of course, there have been periodic downturns, some of them deep and protracted. However, even in the midst of the best-known slump – the Great Depression of the 1930s – the assumption of expansion remained, stated in a consensus faith in the eventual restoration of growth.

The dominance of distribution

If, for now, we ignore the purely ideological dimension, economic management in an era of expansion becomes fundamentally a question of distribution. This poses one basic question: ‘if economic output is going to grow by X over the coming Y number of years, how are we going to share out this growth?’

Generally speaking, those on what we might term the ‘conservative’ side have tended to favour letting the fruits of growth fall where they may, which is to say in an unequal and somewhat haphazard fashion, not unrelated to the ‘lottery of life’. Those on the ‘Left’, on the other hand, have favoured skewing the distribution to favour those at the lower end of the prosperity spectrum. For the Left, this then poses a subsidiary question. Should redistribution mean taking from the better off and handing it to the less prosperous, much as Robin Hood is said to have done? Or are the resources to be redistributed better bestowed in kind (in the form of public services) rather than as a simple financial transfer?

It’s in the nature of popular discourse that both sides have endeavoured to construct a moral case buttressing their persuasions. For the Left, allowing extreme wealth for some in the midst of grinding poverty for others is morally unacceptable. For conservatives, taking money from the energetic, successful or simply lucky and handing it to those who may lack ability, or may be feckless, or are just plain unfortunate, encroaches unacceptably into private preference.

The aim here is to avoid this moral stand-off, not because it doesn’t matter, but because it’s largely insoluble. If someone feels that it’s morally wrong for the state to take his money and give it to others – or, conversely, if he finds it offensive that some people own multiple palatial dwellings whilst home for others is a cardboard box under a railway bridge – it is unlikely that he or she is persuadable to the other point of view.

Moreover, it’s of diminishing relevance if, as is argued here, ‘sharing out growth’ has ceased to be the decisive political issue in politics.

With growth come choices – but de-growth replaces them with imperatives.

The game-changer

As you’ll know if you’re a regular visitor to this site, a central finding of Surplus Energy Economics is that two centuries and more of increasing prosperity are in the process of going into reverse. The main reason why this is happening is that the energy-based economy is being undercut by an upwards trend in ECoE (the Energy Cost of Energy). To observe how this is taking place, it’s necessary to see past financial gimmicks which are designed, if not to affect, then at least to disguise what is going on.

This, it must be stressed, is an interpretation, not a prediction, at least as far as almost all Western economies are concerned. According to SEEDS, prosperity has already declined markedly in most advanced economies, having peaked at various points between 2000 and 2007. Italian prosperity, for example, has declined by 13% since 2001, British people are typically 11% poorer now than they were in 2003, and Americans have become 7.5% less prosperous since 2005.

America, the United Kingdom and Italy are used as exemplars here because of circumstances specific to each. In Britain, where prosperity is deteriorating particularly rapidly, voters have decided to defy the establishment and pull their country out of the European Union. Nationalism has certainly come to the fore in the United States, where it’s plausible that the Trump administration is the first government to understand that prosperity is becoming a zero-sum game. Italy’s new insurgent coalition clearly plans to challenge EU strictures on spending and deficits.

Trends in prosperity and GDP per capita for these economies are illustrated in the first set of charts. In each case, the official line is that GDP is growing, but, in each instance, this perception has been sustained only by the spending of huge amounts of borrowed money. People in all three countries are getting poorer, and, politically, this is exerting mounting pressure for change.

Critically, this downturn isn’t temporary, so there’s no point in waiting for prosperity growth to resume.

#136 prosperity & governmentjpg_Page1

The authorities in these and other countries have tried to circumvent the deterioration in prosperity using credit and monetary adventurism. But all that this has done has been to create a first global financial crisis in 2008 (GFC I) and, now, to set in motion a process that will bring about a second and much larger crash (GFC II) in the near future.

Where politics is concerned, the ending and reversal of the upwards trend in prosperity is a game-changer – instead of debating the sharing out of growth, politics is now becoming the much tougher matter of allocating hardship.

The establishment’s existential errors

The ending of prosperity growth is something that the existing structure of politics will struggle to address, even when the reality of shrinking prosperity becomes so obvious that it can no longer be denied or ignored. The problem for incumbent regimes is exacerbated because, during and after GFC I, the establishment managed to shoot itself in both feet.

First, the powers-that-be underestimated the popular anger that would be triggered when they combined the necessary rescue of the banks with the arguably unnecessary rescue of the bankers. Second, they introduced monetary policies which handed huge gains to those who already owned assets in 2008, and made asset accumulation very much harder for those – a majority – not in that fortunate position.

Both problems were compounded by supplementary errors. Where inflating asset values was concerned, no measures were introduced to even try to capture at least some of the winners’ upside in order to compensate the losers. Since the winners tended to come from an older demographic than the losers, this gaffe set in motion a process of change that is corroding away popular support for the established system.

The compounding problem with rescuing the bankers was that this was done by governments whose default position is opposition to intervention, which is why they find reasons not to act whenever the idea of rescuing, say, steel-workers or retail employees is proposed. Bankers, apparently, are worthier of rescue than manual or clerical workers. This is a view for which there is little or no popular support.

Put simply, then, the authorities made two existentially bad calls in 2008. If these mistakes are added to a deterioration in prosperity – denied by the authorities, but experienced by ‘ordinary’ voters – it becomes very easy indeed to see why insurgent or “populist” parties are enjoying steadily growing support. Part, at least, of the explanation for this shift lies in the establishment’s spectacular failure to recognise the consequences of making itself unpopulist.

How bad?

As we’ve seen, prosperity is declining markedly in Britain, America, Italy and most other Western economies. By 2025, people are likely to be a further 6.0% poorer than they are now in Britain, 5.4% poorer in America and 3.1% poorer in Italy.

This necessarily impinges on the ability to pay tax. Though taxes tend to be levied on incomes, consumption and returns on investment, the only thing that can really be taxed is prosperity.

To understand why, picture somebody whose income is £30,000, but whose prosperity is only £22,000. (In SEEDS terms, two components explain the difference between these numbers. One is the proportion of income financed by financial adventurism, and the other is the trend cost of ECoE, experienced by the individual primarily through the cost of household essentials).

If the state imposes taxes totalling 40% of this person’s income, the resulting £12,000 tax represents 55% of his or her prosperity. Now, move this on to a point where income has increased to £35,000, but prosperity has deteriorated to £20,000. If tax is still being levied at 40% of income, the proportion of prosperity now going in tax has climbed to 70%.

The starting figures are not dissimilar to the actual situation in Britain. In 2017, government primary expenditures (which exclude interest on debt) totalled 37% of GDP, but this was already more than half (52%) of aggregate prosperity. If the government is, in 2025, still spending 37% of GDP, it will need to tax 60% of prosperity to finance it. The numbers for Italy are similar, and, whilst America has rather more fiscal elbow-room, the trend towards the government seeking an ever-growing share of national prosperity is just as firmly in place there.

Another way to look at this is that, taking the UK as an example, tax equated to 51.8% of national aggregate prosperity in 2017. If that ratio is maintained, the tax take (at constant values) in 2025 is likely to be about £736bn, rather less than the £760bn likely to be raised this year.

These points are illustrated by the next charts, which illustrate government primary expenditures as percentages both of GDP and of prosperity.

#136 prosperity & government 2jpg_Page1

Less room for choice

A clear implication of SEEDS analysis is that no government, irrespective of its political colour, is going to be able to increase public spending to any material extent – and, in the longer term, is going to have to push expenditures down, not up – unless it wants to appropriate an unacceptably large proportion of national prosperity. Yet both the Left and much of the insurgent sides of politics predicate their policies on higher state spending, whilst the only parties favouring restraint seem already to be heading towards political irrelevance.

Before conservatives draw any comfort from the conclusion that public spending cannot realistically be pushed upwards as prosperity falls, they need to recognise that their own resistance to higher taxes on “the rich” is becoming equally untenable.

The reason for this is that, whilst the deterioration in prosperity is a generalised phenomenon, its effects are felt from the bottom up. This observation is already writ large in the visible widening of hardship, not so much amongst those in absolute poverty but amongst the large and growing numbers variously described as “just about managing” and “struggling to keep their heads above water”. As the number struggling increases, the ability to collect taxes from these people declines. Before very long, only those described in varying degrees as “rich” will be able to pay much in the way of tax.

Lastly, there is a nasty budgetary sting in the tail contained within the ECoE process and the consequent deterioration in prosperity. Ultimately, these processes mean that each pound, dollar or euro delivers a declining quantity of discretionary spending capability over time, as the cost of essentials absorbs a growing proportion of income.

But this doesn’t just affect households – it affects government as well. Accordingly, the amount of activity that public services can deliver from any given budget is on a decreasing trend.


If SEEDS is correct in identifying diminishing prosperity, the implication is a total game-changer in politics and government. Increasing government spending is ceasing to be a viable option, whilst “the rich” are going to have to pay much more in tax, however just, or unjust, one happens to think this is.

No existing party is equipped to handle this new reality, and neither, for that matter, are the insurgent movements sometimes dubbed “populist”. Political conservatives cannot hope to preserve the economic status quo, whilst the Left’s dreams of bigger state spending are becoming ever less realistic.

If “populism” means anything, it means giving the voters what they want – but this, too, in hard economic terms, is ceasing to be plausible. The spread of insurgent politics is likely to put a growing emphasis on “taxing the rich”, which, apart from being something that government can do, is going to become inevitable in the future. Conversely, though, insurgent promises to counter “austerity” by increases in public spending are rapidly ceasing to dwell in the realms of the possible.

This in turn suggests that insurgent, “populist” politicians are likely to put greater emphasis, not just on “taxing the rich”, but on non-fiscal issues including nationalism and immigration. As both the ‘Left’ and the ‘conservative’ persuasions struggle to come to terms with new realities, the insurgents can be expected to move in new and more radical directions.


428 thoughts on “#136: The challenge for government

  1. I think I’ve mentioned that my step-mother is an MP in Spain: I have to say, they seem always to have more than half an eye on internal party rivals – so much so that I am amazed they have any energy left for longer-term policy. The pettiness of it all is dismaying.

  2. For someone who “get’s it” as far as what SEEDS has to say about our future, here in the UK, the question that returns to my mind is, “now that I know this, what do I do?” Or should that be, “as an individual, a couple or as a family can we do anything to be better prepared?”

    The answer to thoses question depends on multiple issues to do with your circumstances.

    It seems to me that those between 40 and 60 say, may have different issues to those aged 60 plus. Those who’s income comes, in some form, from the state may have different issues to those who’s income comes from other sources.

    Tim, have you considered a more focused up to date article and a debate on, “Now you know, what can you do?”

    • ladydog,
      As someone who is 60+, but who has 3 children ages 30 – 35, I don’t consider the issues different, because I want to help my children adapt, so I consider your question THE question. There is no right answer, not only because each person’s circumstances are different, but also because no one knows exactly how it is going to play out. However, we don’t lack for very thoughtful people who offer a range of recommendations, varying based on their assessments of (1) how bad, how fast, and (2) how much we (with our local communities) are on our own vs. how much we might be able to sway the ship of state to prepare for and ease the transition. I apologize if you already know about the following, but here is a list of those I have found offer thoughtful viewpoints regarding preparation:

      The following three expect a fairly rapid, “seneca cliff” collapse:
      Nicole Foss /aka “stoneleigh” of The Automatic Earth. In addition to numerous articles, she may be found in a few good youtube videos. Nicole is very much oriented to individual and community prep, and is of the view that highly centralized, nation-state level efforts are not in the “solution space.” That ship has sailed.

      Dmitry Orlov, ClubOrlovdotcom, numerous books, including one on homesteading that he didn’t write but published, various youtube interview videos and podcasts – very much oriented to individual prep, with very snarky but cogent commentary.

      “C5”, darkgreenmountainsurvivalresearchcentredotwordpressdotcom – emphasis on food security, getting to know your neighbors and changing your mindset and expectations to deal with what’s coming – 100% individual and community prep. He and his wife own a 100 acre farm in Nova Scotia and are “prepping,” which includes preparation for the effects of climate change. Here’s a quote:
      “C5 Rule of Survival- The single greatest survival skill set is… envelope please… The Dinner Party.
      Creating community is The Holy Grail, The Philosophers Stone, The Alchemists Gold. Easy to identify as the problem. Nearly impossible to produce. I’ve know survivalists that gave up on prepping because they understood the only way for people to survive the catastrophic changes about to happen was to be part of a rather large and complex group of diverse skills. Faced with that they could not bring it about, no matter what they tried, no matter how much effort they put into it, they gave up on future survival.”

      The following two don’t rule out a rapid collapse, but expect a more grinding descent, so their recommendations are geared more to that expectation:

      Chris Martenson, PeakProsperitydotcom. See, e.g., the big tab marked “Prepare” near the top of the website.

      John Michael Greer, Ecosophia and the Archdruid Report. Very much of the long view regarding descent. Rome didn’t fall in a day, it took centuries, and it’s going to take a long time for us to grind down as well. If you can take the suave certainty with which he describes the future and makes pronouncements (I can’t), he has many interesting things to say. Personally, I think he is in the religion business – promoting visions of a future life that aren’t frightening, showing how it could be much better- humanly speaking – appealing to our better natures, etc., which many maybe need to be able to face and deal with what we know is coming, so there is definitely a place for it, but it doesn’t work for me. Here’s a quote:
      “As long as we are looking at making money, making wealth, becoming richer than we are today, we are taking a very long walk off a very short pier. All our expectations of economic growth, betterment, of improvement, all that stuff that is hardwired into our imaginations, that was relevant to a time that is already past. We are now facing a situation where those of us that are relatively privileged, relatively well off, have to face the most difficult task we have ever faced which is to be poor with some level of dignity. Now that is terrifying for a lot of white people. Most people of colour know how to be poor. They have had plenty of practice… Most of us have no clue. We are terrified of being poor. We have never done it. The thought of rubbing elbows with someone that is poor will make a lot of people in the Salary Class wet themselves.
      …So, the question is, are you willing to learn to be poor with some level of dignity and skill. And it takes skill. You have to learn how to do it.”

    • This is a very helpful summary.

      My own view is that we need to start by distinguishing between two things. One is the “real economy” of goods and services. The other is the “financial economy” of money and credit.

      The real economy is an energy system. Literally everything that forms part of the economy is a product of energy. Four criteria – three of them physical – determine how much goods and services we can produce. The first of these is the amount of energy to which we have access. The second is how much energy is consumed in the access process (measured here as ECoE). The third is the number of people between whom the resulting “surplus” (ex-ECoE) energy is divided. The fourth is how sensibly we organise ourselves within these parameters.

      Logically, changes in the real economy take place gradually. Each of the three physical criteria changes slowly.

      But the “financial” economy is capable of rapid change. Since money is a “claim” on the physical economy, the “two economies” are linked. In practice, though, it is all too easy for the financial economy to create “claims” (money and credit) which exceed what the real economy can honour. These “excess claims” can be destroyed very quickly. I estimate that the “excess claims” requiring destruction in 2008 totalled about $100tn. But we didn’t let this process of destruction occur. So we carried forward this $100tn, and have been adding to it at an accelerating pace. I put the current figure for “excess claims” at over $400tn.

      These characteristics suggest that the financial system can collapse very quickly – indeed, it is hard to picture it failing slowly. The question then becomes: how much damage does this do to the “real” economy of goods and services?

    • The decline of the Roman Empire did take centuries, but forget not that news in those days travelled at horse speed, and not by Broadband.
      Money, although debased by clipping and alloying, it was still in circulation and a gold based barter system still functioned quite well.
      Today we have global news at lightning speed, and a financial system based on nothing tangible. In fact today’s financial system is based on one thing – trust. Although US coins state that “In God we trust”, the reality should read, ” In the Fed we trust”.
      I’m not religious, but I really do think that the world was better served by trusting the former.
      Trust is an elusive quantity, it takes a long time to build up, yet only a fraction of a second to destroy completely.
      Once trust is gone, people all over the world will be running around like headless chickens. Nobody will know what anything is worth, and unless you have a few gold or silver coins, you will not be able to buy / pay for anything.
      World trade will grind to a halt overnight.
      For a nation like the UK that imports almost all of its food, that will have serious consequences. Sure there is plenty of arable land in the UK, but like the European harvest in 1945, there will not be that much there to reap when there was nothing sown.
      If you can maintain a stockpile of food for yourself and your family to survive 2-3 months, then you will already have made it into the second level.
      If you live one TV dinner to the next and are reliant on Asda and Tesco being open on Monday morning, – Goodbye.

    • Johan I have to correct you because latest figures say the UK produced 61% of all the food it eats.

    • The incompatibility of using an economic system based on sole ownership and use of private property utilising finite energy and resources within a non-finite financial paradigm and with a growing (albeit) ageing population seems to be the motivation behind this article published by the World Economic Forum.


      It posits that by 2030 urban society will have forgone notions of privacy and ownership of assets in exchange for rented access of almost everything. This proposition may be more palatable to the younger ‘millennial’ generation than the baby boomers and Gen. Xs who still retain strong attachments to notions of ownership and private property, while they have grown up immersed in information technology and its effects on individual psychology and social relationships.
      The world described sounds absolutely hellish to me, but it does seem to correlate quite well with a) the direction of current technological development, particularly in the field of IT – i.e. the Internet of Things – ‘smart’ technology, Social Media, AI, ecommerce and cashless transactions etc, b) a concomitant shift in societal attitudes among the young: the rise of the ‘post-modernists’ [i.e. social Marxists] so prevalent on US and, soon-to-be, other Western university campuses, c) a decoupling of the metabolic throughput of physical resources and accompanying wastes (e.g. resources and energy used in primary and secondary industries) from the financial economy whilst retaining an ‘acceptable’ [i.e. uniform] standard of living based on the consumption of rented services, d) the withdrawal from nature and the further urbanisation of society e) the ongoing demise of traditional forms of business that have a physical presence – high-street shops etc.
      Transitioning from sole ownership and use of private property to the rental and shared use of a producer’s output would seem to be an attempt to buy time while slower, longer-term cycles are allowed to play out, e.g. decline of ageing populations, energy descent.
      From a SEEDS perspective, I wonder if this utopia/dystopia is plausible? What the economic implications of this are for GMO and ICS and therefore, world trade?

    • I think the steps people can take in a societal collapse will largely be constrained by their geographical location. Even for a relatively benign climate like northern Europe, if you’re in a city (or large town) then you’re going to be competing against millions for food and freshwater over a relatively small area (which is likely to become even more polluted); there’s not much arable land in the concrete jungles. Sense of community also feels quite absent in these places. It might sound drastic, but surely the best preparation would be to relocate somewhere rural, where there is more land and freshwater to go around. A lot of this goes back to resource versus population, which is a recurring theme in Tim’s work.

      Those in the villages and small towns are probably much better equipped to survive, where already established ‘communities’ are more likely to enable transaction systems based on bartering or trust. Xabier makes some good points below about getting to know your neighbors. Those able to offer skilled trades, or services, are more likely to prosper – so this could be a starting point. Lifetime chair-spinners could be in for a struggle….

      A guy I used to row with with once questioned why we spent so much time training, joking that at least it might make us harder to kill in an apocalypse., maybe he had a point….

    • @Donald,
      Really ?
      Well that does surprise me ! ( Surprise as to the point of disbelief ).
      Does “produce” actually mean grow ?
      or does it mean making TV dinners in large factories using ingredients supplied from abroad ?

    • @Donald
      Thanks for the info, that is quite enlightening for me.
      I have just been looking at the govt. food statistics pocketbook, and it more or less corroborates, your figures. They claim here that the UK produces 50% (2017 figures ) of its food requirements, which is not too far from the 60% you say the farmers are claiming.

    • I’m not sure why there’s a difference in figures – perhaps the NUF were blowing their own trumpet so to speak.

      However – critically – it means we’re not self sufficient and might have to rely on France not causing trouble at the ports after Brexit (we get around 30% of our food from the EU apparently if the Gov website is accurate)

    • Re food production in the UK, 50% of what we ‘consume’ originates from the UK, BUT we export some, actual production is higher.
      (a) UK origin consists of UK domestic production minus UK exports
      We would just have less choice eg we would have less access to fruit and veg and would have to drink more whiskey😁 if supply issues became a problem, every cloud has a silver lining. We also waste a lot of food and consume far too much food out of season requiring imports.
      We really should produce far more fruit and veg and develop a taste ( by re balancing the critters in our guts) for the types of veg we grow well here like cabbage and turnips, pottage could be back on the menu and would be a lot healthier than a lot of the sugar and hydrogenated fat laden processed foods we eat. Good idea to grow some of your own if you can or at least have a go. Veg boxes are more seasonal and often contain more UK produce, we need to encourage UK producers to produce more by demanding more, but surplus energy may play a role in this area, along with a declining £. Cookery would have to be put back on the curriculum. A friend works with young children who are obese and diabetic and she said the families generally own nothing to prepare healthy meals with eg pans, knives, chopping boards etc and don’t know where to start preparing food. Quite shocking we have sunk to this level.

    • One thing that was in the headlines – although many established high street chains are going bust there has been a massive growth in fast food outlets.

      Personally I think most fast food is disgusting – one of the funniest – and alarming – films I’ve ever seen was ‘Supersize me’ where a brave guy sees if he can live on McDonald’s food. He was quickly on his way to being morbidly obese.

      Regarding the obese and diabetic children – it’s very sad – even Supermarkets have played their part in this by putting sweets near the checkout.

      You’ll know that Americans were made fat by the need to produce cheap food in the 1970’s and they did this by adding corn syrup to many things. You could almost imagine a conspiracy theorist stating that the US Government had been take over by aliens and were fattening the population up for consumption.

      I agree with you about growing more fruit and veg although their might not be enough hands to pick them. To be honest I ate so much salad and veg during the last hot Summer that I grew a little tired of it at times and allowed my myself a treat of a Magnum now and again.

      In general my weight just fell off – just what many children need.

  3. Has anyone read the works of Mancur Olson (“The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities” and “The Logic of Collective Action”? The first is based on the second.

    In the first he comes up with the idea of “distributional coalitions”. As societies become more complex they accumulate more special interests and, eventually, stability gives way to rigidity. As he puts it:

    “the larger the number of individuals or firms that would benefit from a collective good, the smaller the share of the gains from action in the group interest that will accrue to the individual or firm that undertakes the action. Thus, in the absence of selective incentives, the incentive for group action diminishes as group size increases, so that large groups are less able to act in their common interest than small ones.”

    Perhaps this is cogent explanation.

    • While the corresponding penalty of expulsion – from the inflexible group – is a severe one.

      Certainly applies to politicians who go against the party line and find themselves ‘in the wilderness’.

      Maybe in the bureaucracy too: although in that case don’t they usually get sidelined and marked ‘not-for-promotion’ rather than expelled?

  4. ‘Getting to know one’s neighbours’ is often recommended as a survival strategy.

    I heartily endorse it: after nearly 20 years in this village, I know very well who the drug addicts and low-life criminals,petty thieves and people who are simply without any ethics, are – never to be trusted in any circumstances.

    In a real crisis, one would actually wish to clear them all away before they cause any harm.

    It’s really very healthy community here, and the nicer people are lacking in the ruthlessness often necessary in hard times.

    Although I think my new Israeli neighbour has the necessary qualities and seems very civil, too.

    The village next door is even worse: packed with ne’er-do-wells from town by the Council to get them out of the way. Equally you know just where you stand with them!

  5. Some connections between cells, Mancur Olson, David Korowitz, the Odums, Seneca Cliffs, SEEDS, Phase Transitions, Dmitry Orlov, butterflies and mosquitoes

    When the student is ready, the teacher appears….that certainly seems true for me. Due to a chain of circumstances, I happened to be reading two book about cells:
    Cells, Gels, and the Engines of Life
    The Fourth Phase of Water
    both written by Professor Gerald H. Pollack of the University of Washington in Seattle. The basic philosophy underlying his books is that cellular processes should follow simple rules rather than complex rules. Parsimony. Just the way planets orbiting the sun replaced the complicated epicycle theories of how everything revolved around the Earth. Pollack shows, citing experimental evidence at every step, just how the workings of a gel can replace the complicated ways humans have tried to explain cellular function in terms of a myriad of pumps and channels operating in a cell filled with conventional water. Briefly, in a gel, the various ions arrange themselves to minimize free energy…gradients do not need to be maintained by exogenously powered pumps.

    What is interesting for those of us interested in how industrial society is currently unraveling is the principle of parsimony. Can it be that all of fossil fuel powered civilization has been about efforts to minimize (i.e., use up) free energy? And what happens when the energy from fossil fuels begins to decline?

    At this point, I have to note something about the books, and refer you to a wonderful drawing. Pollack says this in his introduction Cells and Gels:
    ‘The artwork that fills this volume was created entirely by David Olsen. I knew David was the right man when he first smiled at my doorstep. David was one of those rare students of art who was also a student of biochemistry….Often times I could merely outline a concept and David would appear in a few days with an insightful first draft design.’

    If you look in Cells and Gels on page 79, you will see the wonderful drawing. It shows a butterfly entangled in a spider web, while two mosquitos flit about. The illustration is an analogy to the reason that large ions are excluded from a gel, while small ions can more easily navigate in the cells. (Which disposes of much of the 19th century ‘pumps and channels’ thinking about cells). Now, following the principle of parsimony, think about how a huge butterfly (e.g., the United States) which is entangled in the web of fossil fuel dependence is trapped, while those small mosquitos are still free to navigate. I submit that you have a picture of what Mancur Olson, David Horowitz, Ugo Bardi, and Dmitry Orlov have been talking about.

    If you look at page 114, you can read this:
    ‘When the ratio just crosses a threshold, gel volume changes by two orders of magnitude’
    I would just add that the change can be an increase in volume or a decrease in volume. If we think of the fossil fueled economy as a gel, we should also be alert to phase transitions. There is no reason to believe that we will experience a linear transition. SEEDS becomes relevant…but it doesn’t venture too far into phase transition territory.

    And if the next phase transition experienced by humans is going to be a 2 orders of magnitude shrinkage in the size of our gel containing the fossil fueled economy, then the comparison between the butterfly and the mosquitoes becomes relevant. (Whether the phase transition happens in seconds or over decades is an important question for those alive today, but one that my analogies cannot immediately answer. On a geological scale, the two are roughly equivalent.)

    One can extend the phase transition scenario to all of the other threats to planetary stability which have been identified, including climate change and the exhaustion of fresh water supplies and the unbalancing of the nitrogen cycle and the production of toxins and numerous other threats.

    So the question on the table in terms of survival is ‘how do I become more like a mosquito, and less like a butterfly?’

    Don Stewart

    • The ‘barbarian’ Turkmen nomads simply rode away from the Mongols, whereas the civilized Persian town-dwellers were slaughtered, and their heads piled up in pyramids……

  6. Apologies to all those consumed by Brexit. News from the Colonies:
    Peter Schiff tweets:
    ‘The 2020 presidential election will be all about which party is to blame for the stock and real estate market collapse and the worst recession in U.S. history. Trump will blame the Democratic Congress and the Fed; Democrats will blame Trump, tax cuts, deregulation, and tariffs.’

    Don Stewart, who is way to wise to waste his time blathering to the unwashed over twitter (even if he could figure out how it all works!), claims that it is all about the failure to distinguish between water and gels, and how they react to changes in free energy…e.g., linear vs. phase change.

    Don Stewart

  7. Donald, others re: UK food production sufficiency:

    See maps in Section 3.1 in the scientific publication, “Spatial decoupling of agricultural production and consumption: quantifying dependences of countries on food imports due to domestic land and water constraints”:
    From which you will be able to somewhat guess at where the migrations will be emanating from. From the publication:
    “Currently, 950 million people (16% of world population) use the opportunities of international trade for covering their demand of agricultural products. The spatial pattern is pronounced—North African, Arabic and Andean countries display the highest shares (>50%) of dependent population ”

    Related National Geographic article discussing the publication, “Is your country food independent? – https://www.nationalgeographic.com/people-and-culture/onward/2014/04/13/is-your-country-food-independent/ This article also indicates by implication that the UK is currently producing about 62% of what it needs:
    “Now people from England, Wales, Northern Ireland, and Scotland import 38 percent of all food they eat.” Which might not be that bad considering the UK is probably able to import quite a bit from quite nearby, namely, Ireland and France, but ruh-roh!, Brexit! If I lived in England watching the ongoing Brexit debacle, I’d be laying in a 6 month supply of rice, beans and wheat for my family and some more to help the neighbors right now. Were I a priest in a UK church, I’d be making food and non-prescription meds stockpiling – at the church – for parishioners and the community a priority and goal starting 6 months ago.

    From the Nat. Geo article: “So self sufficiency comes down to whether a country could feed its people with its own production, not whether it actually is.
    By that measure, which is the one used by the U.N. Food and Agriculture Organization, very few countries qualify. The only country in Europe that’s self-sufficient is France. Other countries in the exclusive club of self sufficiency: Canada, Australia, Russia, India, Argentina, Burma, Thailand, the U.S. and a few small others.”

    • My main reason for wanting to stay in the EU was the closeness of its markets. With energy costs increasing all the time you would want the shortest distance available to transport goods.

      For me this transcends any ‘we’ve got our country back’ nonsense. Even if we do ‘get our country back’ there my way be a week of wild celebrations – people wearing Union jack T-Shirts and shorts – but then what? I doubt most people will even notice except those who lose their jobs.

    • @Donald


      Brexit doesn’t mean the suspension of trade between ourselves and Europe; Brexit and trading with the closest markets is not mutually exclusive. I suspect that for some time after Brexit (assuming that’s what we get) very little will change. We will have tariff free trade with the EU just as we do now.

      However, the result of the Common Agricultural Policy is generally acknowledged to have raised food prices significantly (by some calculations 17%) and this has affected many developing countries who would like to export to us. Never forget that, although the EU is a customs union, it is a protectionist bloc against the rest of the World.

      I voted Leave but am under no illusions about Brexit; it will be a huge challenge for even a capable political class and a united nation and, right now, we manifestly have neither.

      But I believe that the biggest risk to Brexit is the EU because I believe that the Euro will come under huge strain come the next recession and that populist forces are growing to the point where it is on the cards that the EU may be entering a period of fundamental change and instability and it is at that point that your “trading with nations that are closest” is going to have a major effect on us and not in a good way.

    • Thanks for reply Bob – I guess it’s not really to possible to make provisions for everything that might happen during the next recession. My concern is having no customs agreement which could hinder trade between us and the EU.

      In the long term – perhaps our own gas reserves (from fracking) will become our saviour. Regarding food I don’t know how much arable land we have to left to grow food.

      I also think that we should limit the size of all families to a maximum of two. Of course this cannot happen until after the next general election as it would not exactly be a vote winner – but we’re already overpopulated.

      I still harbour dreams of living in France – I can’t move at the moment and fear if Brexit goes badly I won’t be welcome.

    • What I’m working on now is the downturn in global prosperity, but prosperity deteriorating in Europe is nothing new – it’s just taken time for this phenomenon to manifest itself politically.

      Whilst I don’t think limiting family sizes is feasible, there seems no doubt that we cannot afford further growth in population numbers without worsening the deterioration in prosperity. My guess is that politicians opposed to immigration will carry on making gains. Established parties seem to favour continued net immigration – for reasons that I don’t fully understand – but this looks increasingly like a voter-loser.

      I wouldn’t pin hopes on fracking. Even in the US, fracking is a loss-maker, never covering its capex from cash flows, mainly because well output falls by as much as 65% in the first year of production, putting operators on a “drilling treadmill”.

    • I’ve read that only 20% of the available gas made by viable for fracking although that could be wildly optimistic or pessimistic.

      Let’s see how the initial drilling unfolds – we could perhaps see all the equipmentment being packed up and transported away pretty quickly if the economics do not work – although investors may fall for the same ruse as they have done in the States where it’s been alleged that some debt may never be repaid.

      Regarding immigration perhaps Governments are now so reliant on tight seats that they cannot afford stop immigration from certain countries because they’d lose votes.

    • @Donald


      You have to bear in mind that the UK is a major customer for the EU; the German car industry is already making ominous noises. At the end of the day what happens if you alienate your biggest customer? Nothing good.

      Also, with the current political situation in a number of countries in the EU is it really in their interests for disruption to occur? If Brexit goes badly who will get the blame? Brussels and the Euro oligarchy. This will show yet again the dysfunctionality of the EU. I can imagine the Italians saying: “they’re screwing us about the budget, telling us what we can and can’t do, and now they’ve made a mess of Brexit which has made things worse. We need root and branch reform of the EU.” Is that so fanciful? I think it’s highly likely.

      The dangers of a bad Brexit are far worse than what is talked about – for the EU.

    • Time will tell if the EU gives way on any major sticking points of Brexit – but their attitude is almost that of a religious sect that won’t budge an inch in their beliefs.

  8. Oh please, not Brits wearing t-shirts and shorts -Union Jack or not – such a hideous sight and one reason to be glad of the onset of winter.

    Seriously, Britain’s very fragile economy cannot possibly survive any interruptions in either energy or food supplies.

    The Continent and the Irish Republic are vital suppliers of the first order, something the Free Trade Brexit fantasists don’t seem able to grasp.

    Not to mention the aspect of quality: cheap foodstuffs from the US, India or South America? God help us……

    • Regarding disruption etc I’m sure May grasps this but is getting a lot of – in my opinion – unfair criticism by clueless fools in her own party.

      I feel the notion of ‘getting our own country back’ in the light of the problems the World is going to face is very small minded especially as we cannot currently supply all the food and energy we need.

      Regarding energy though if this fracking for gas proves successful we could have plenty of energy for decades – but this time it has to be invested properly and not be used to fund one big party,

  9. When talking about domestic production capacity, it should be remembered that historically foodstuffs have still been exported in times of crisis in order to earn foreign currency, and the agricultural workers left to half-starve.

    Something of the kind occurred in the Argentine crisis, I believe.

    The city republics and tyrannies of Renaissance Italy made their peasants produce wheat for fine white bread to be consumed in town, took it all away and left them to eat bean and barley bred.

  10. For those of you with access to the Daily Telegraph there’a a good article from Jeremy arner about how out of step current business rates are and how they are destroying the high street and small businesses.

    Again happy to copy across for any without access who would like to read it. It’s well written and to the point.

  11. While it is true that the EU is a protectionist bloc, it is also true that the countries which wish to export their foodstuffs post-Brexit to us have very poor or even non-existent standards in terms of animal welfare and the use of chemicals and drugs – even worse than those which prevail with the EU.

    This is a very serious matter, which Brexiters never take seriously.

    For instance, the family business of a Russian friend of mine imports from those countries,and his mother ( a food scientist ) told him not to eat their products, because – although they passed Russian standards as’ fit for consumption’ – she thought them unfit due to excessive chemical and drug use in production…….

    Developing countries, desperate for revenue, have to maximise crop yield, etc, and so use any amount and type of chemicals in order to get the best crops.

    • @Xabier

      I wouldn’t deny anything you say but outside the CAP we have a choice to impose our standards; they are unlikely to be less than the EU. Can we get cheaper food of an acceptable standard.? I don’t know but I don’t think we can assume that these two conditions are mutually exclusive.

    • In general – with meat substitutes improving – we maybe able to move away from meat production altogether in the future to limit damage to the environment.

    • @Will!

      I think what some are concerned about is that we may be obliged to import things like chlorinated chicken from the US.

      One thing that does concern me is that the TPP might rise up again and we may be tempted to join, or pressure may be brought to bear to join, and I’m not at all sure this is a good thing.

  12. Regarding fracking in the UK, our host is no doubt spot on: and I have already mentioned that most of the ‘potential’ sites are already known to be non-viable – I have this from the son of friend who is a key academic in this field at a major University (can’t specify more for obvious reasons, as he was indiscreet enough in revealing this).

  13. Donald, regarding your comment, “My main reason for wanting to stay in the EU was the closeness of its markets.” I quite appreciate the viewpoint. When the National Geographic article and scientific studies indicate that a country as large as the United States is “food self-sufficient,”, it really lays bare the underlying BAU fossil fuel assumptions that they rely on and don’t even see. With declining prosperity, it is not advisable, when planning, to think in terms of “countries” in evaluating whether you and your community is likely to have a food problem. I live in the Northeast U.S. There are local sources but in general, poultry and meat supply chains are generally 1 – 1,500 miles (the South and the Midwest) long, and fruit and vegetable supply chains are 3,000 miles long (California) – or longer – Central and Latin America. Delivery is by truck, rail, airplane and ocean-going vessels. Some food is now even coming from China! Meanwhile, “food insufficient” England is within several hundred miles of both the Republic of Ireland and France, accessible by short-distance water travel. Who’s really worse off?

    • Yes so with diminishing energy closeness is the thing – especially beneficial if you have rail links (running off electricity) – although growing stuff in your own back garden is hard to beat.

  14. Jeremy Warner

    ASSISTANT EDITOR26 Oct 2018 9:43AM the Telegraph

    @sue Norminton Forgive me, but has this problem really got anything to do with the EU? If you really have to make a Brexit point out of it, it is, as I say, that Brexit has sucked out the oxygen for almost everything else. While the Cabinet ties itself up in knots over Brexit, the economy burns.

    He’s spot on with this comment

  15. A few notes for would-be modelers.

    Much of the writing about collapse seems to be ad hoc. There isn’t too much theory. I will suggest a source for theory which represents an array of solutions invented by Mother Nature. The solutions are described in Gerald Pollack’s book, Cells, Gels, and the Engines of Life. The book is written, and especially illustrated, so that the non-specialist reader can grasp the principles. It is also meticulously supported with evidence, where such exists…there are, of course, still plenty of speculations.

    My speculation is that the models described fit amazingly well with the world’s current socio-political-economic problems. I’ll not beat this subject to death, but just give a couple of examples. Those wishing to follow up can buy the book. You won’t be disappointed.

    The concluding paragraphs:
    Finally, we return to the feature with which this book began: simplicity. Simplicity is a virtue to which engineers strive—it is practically hard-wired into their genome. Complicated mechanisms certainly have their charm but seasoned engineers understand that for reliable operation, mechanisms must be kept as simple as possible. The question is whether this principle should hold for mechanisms which are engineered celestially. If cellular mechanisms are to work reliably, should they not be based on simple—even beautiful—principles.

    Within such a framework lies the phase-transition, an amply powerful process triggered by a small environmental shift. Whether indeed this process is simple enough and powerful enough to reduce the currently bewildering array of intracellular epicycles to a few functional orbits remains to be seen. Please stay tuned.

    Back to me. For context, a phase change in a gel-like substance can result in multiple orders of magnitude changes. If our social-political-economic system is a gel-like structure, then what disturbances can cause the gel to expand by orders of magnitude, or shine by orders of magnitude? And how rapidly can the growth or reset occur?

    One simple model is a substance on a wire between two attractors, perfectly balanced. Add a small additional charge to one side or the other and the substance in the middle shifts dramatically toward the additional charge.

    Another model is the explosion. The components are held in a tightly packed and highly ordered array, when some disturbance triggers an explosion…perhaps a little like the fluff from a dandelion reacting to a puff of wind.

    A third model is the zipper. Components in a disordered array are suddenly moved into a tightly packed and highly ordered array by a small disturbance.

    To just hint at the possibilities, the first model explains false flag attacks. Suppose the pro-war faction and the anti-war faction are finely balanced. A false flag event can swing the public strongly into the pro-war camp.

    I’ll deal with the zipper model next. When the Saudi’s butchered the journalist in their Embassy, the initial reaction among ‘conservatives’ was disarray. Similarly with the bombs mailed to prominent Democrats. But Social Media to the rescue. Narratives justifying the Saudi action, or at least proving that selling arms to Saudi is a really good idea, were quickly generated and propagated to the self-selected group most likely to believe. The zipper came together…and far more quickly than it would have in the days of Lincoln and Douglas, and with much less diversity of opinion, reflection, or willingness to consider evidence. The ‘new’ element is Social Media, which permits the sort of rationalizing and outright lies, which have always been with us, to ‘go viral’.

    Now consider the explosion. The current social/ political/ economic model is based on the presumption that money motivates behavior which, when free of restrictions, results in personal and social flourishing. If we look at the potential factors which might upset that model, we can list many, but I select these:
    *Oil…from cheap to dear
    *Metals…from cheap to dear
    *Fresh water…from abundant to scarce
    *Climate…from stable to chaotic
    *Political…from slow moving groups to social media chaos
    *Toxins…from rare to ubiquitous

    A wild card factor would be the widespread recognition that money cannot actually buy flourishing…billionaires are not really happy people.

    The case for explosion has an embarrassingly long list of good suspects available to pull the trigger. The illustration most applicable is perhaps the drawing on page 136 of a Jack in the Box…collapse is already spring loaded, just waiting for a trigger sufficient to start it all. We can also imagine that governments and other sources of power are keeping their fingers on the lid to prevent Jack from emerging with his message of chaos.

    For an example of an analysis which fits the Jack in the Box model, I suggest the second half of this Max and Stacy show, where a Brit proposes that the US dollar is about to collapse. Why now? When so many failed predictions of the timing of such an event have led them to be called widow-makers. Tune in and see if you are convinced.

    A number of additional useful models invented by Mother Nature.
    Don Stewart

    • @DonStewart


      Alastair McLeod is talking about timing. However, if you talk fundamentals we’ve had increasing debt now over many years and debt levels, both public and private, have increased substantially even since 2008. But debt levels can’t increase ad infinitum; if prosperity was just a matter of possession of a printing press the World would look very different. If you carry on printing money and increasing debt levels at some point the debt becomes unserviceable and then the whole thing collapses because the debts are bad.

  16. Pingback: Liberty in the Anthropocene – First draft – Navigators of the Anthropocene

  17. A very good piece has just been published on world population and food supply at Ugo Bardi’s ‘Cassandra Legacy’ blog: itself well-worth looking in on for thought-provoking articles.

  18. If UK food standards were to be even higher after leaving the EU (theoretically quite possible, but not very likely in practice – cost, and entrenched opposition from the Treasury and other vested interests), then UK producers would surely be at a grave disadvantage relative to the inferior cheap food imports that the Free Traders dream of. Guess which products increasingly impoverished UK consumers will opt for, and those who process food for consumption?

    • Quite agree, and very concerned for resulting increased pressure on the NHS (already sounding alarm bells about soaring cost of diabetes and cancer due to obesity caused by the cheap, sugar and fat-laden foods we currently encourage pre-Brexit).

  19. Tim,
    May I make a request: I would be very interested in an updated ranking of the countries you have evaluated with SEEDs so far. No need for any data, just a list naming the best to worst.

    • I’ll get on to this on Monday.

      But best seems likely to be Russia. Most risky to the global financial system are 1. China and 2. Britain. Others – such as Ireland – are very risky, but small in global terms.

    • The SEEDS risk matrix shows the following at highest risk:
      1. Ireland
      2. China
      3. United Kingdom
      4. Canada
      5. Australia
      6. France

      Ireland’s financial risk, though masked by inflation of reported GDP number, is extreme. China’s debt creation dependency is unsustainable.The UK economy is crumbling, yet is shackled to extreme financial exposure. Canada has an extreme property bubble, as does Australia.

      And at lowest risk:
      1. Saudi Arabia (but purely statistically)
      2. Russia
      3. Germany

      These are ranked for economic and financial crash risk. With Saudi, there are political risks not captured statistically. Germany has a c EUR 1 trn credit with Target2, owed by Italy and Spain, and not included here.

    • Many thanks Tim.

      I recall previously you were also looking at: Mexico, Brazil, Argentina, Turkey, Iran, South Africa, India and Indonesia.

      How do these fit into the above?

    • With most of these, financial asset exposure is modest, and few have huge debts, so we really have to focus on prosperity trends and components.

      Mexican prosperity is falling markedly, suggesting instability.
      Brazil and Argentina are even worse.
      Turkey is tricky – had been doing very well, but the political changes are disconcerting.
      For Iran, data is partial, but doesn’t look too bad.
      India and Indonesia look pretty good – prosperity growth record not too different from China, but much less debt dependency – both look low risk on SEEDS.
      I am VERY worried about South Africa, where prosperity is plunging.

    • South Africa, yes doc. Desparate moves we can see already by confiscating white farmers land. As if that would produce more crops.

      Watch it all burn.

      Like the green vote in Germany today.

      From greed to hopium, to dust.

    • Tim,
      It seems the SEEDs assessment of declining prosperity leading to ‘unpredictable’ political change has been proven correct again: I read the Brazilian political establishment originally dismissed Bolsonaro’s candidacy as a joke, anode course he has now just been elected.

    • “Unpredictable” has to be qualified as “unpredictable by whom?”

      The Brazil outcome was wholly predictable, in my opinion, based on prosperity data as well as other indicators.

      That “expert” opinion keeps getting blind-sided by insurgents (aka “populists”) reflects the failure of the “experts” to realise quite how rapidly the political establishment is making itself unpopulist.

  20. @Bob J
    May I make a suggestion relevant to evaluating McLeod’s prediction? There is no question that Jack is in the Box in terms of the soundness of the US dollar.

    But now let me make an analogy. Many of the girls I went to high school with are now dying, and I read the obituaries. A not untypical girl married a farmer right out of high school and raised 3.2 children on the farm. Engaged in the usual social activities farm wives did in those days…churches and social clubs and so forth. When the children were gone, she divorced the husband and went back to school, got a degree in something, and went to work in another town, typically a city.

    Now we can model that the marriage featured a loaded Jack in the Box for perhaps a decade before it broke up. But the trigger was the reduction in domestic responsibilities (i.e., raising children) and a recognition that the world offered hitherto upsampled opportunities.

    McLeod can show that the dollar is not sound. He can talk about the understated level of inflation. But what he hasn’t shown to my satisfaction is the presence of ‘upsampled opportunities’. I understand him on the temptation for Europeans to make 25 percent on their money by borrowing in Europe and investing in the US. But virtually the whole world is in poor shape according to SEEDS. Going back to the farm wife analogy, if the list of opportunities is limited to marrying another divorced or widowed farmer in the neighborhood, then staying with the problem she knows and understands is likely to be the default choice. It is only the existence of a wide and glittery world outside the farm that is a powerful trigger.

    Back in 2009, a lot of people in the US thought that investing in real assets like farmland or small businesses serving essential needs was smarter than investing in big corporations or corporate and government debt. But the supply of real assets was quickly bid up to nosebleed levels, and the Fed just continued to run the printing presses. So there were no really attractive alternatives.

    Has Alister shown that there is a truly attractive alternative which can trigger Jack in the Box?

    Don Stewart

    • It’s easy to have reservations about USD. But, in search of comparative safety, would you prefer:

      – GBP – economy crumbling, massive financial exposure?
      – JPY – monetising debt, now seemingly conceding failure of ‘Abenomics’ by putting QE into slow reverse?
      – EUR – spat over Italy, incumbent elites under attack?

      The USD might still be “the prettiest horse in the knackers’ yard”…..

      And yes, low risk is extremely hard to find, with most of the world economy in a mess….

    • @Don Stewart


      Alastair McLeod is talking about the external value of the dollar. However, the external and internal values are connected.

      If the dollar collapses then imports cost more which then pushes up US inflation (even above the 10% level he is talking about ) and this will push up interest rates to counter the inflationary threat.

      If you hold cash the inflationary threat will eat away at the value over time. However, in the high debt environment in which we now exist the rise in rates will impact on asset values very quickly and those “nose bleed” levels are likely to come down at a faster rate than your dollars are being impacted by inflation. In those circumstances wouldn’t you be better waiting and buying assets in dollars after prices have been impacted by any higher rates?

      If you go into other currencies or assets you have the same problems as with dollar assets and, in addition, an exchange rate risk.

    • @Don S. Interesting post, but . . .
      I do not quite buy into your farm wife analogy. I don’t think that Alistair Mcleod is saying that there are Unsampled Opportunities, I read into it that there are no opportunities left at all, simply because our present way of life itself is unsustainable. The jack-in-the-box will simply trigger from within when the rusty clip holding it together snaps of its own accord.
      In today’s over-financialised world, prices have just went doo-lally altogether, and there is no value for money to be found anywhere, other than in Gold and Silver, maybe.
      Dr. Morgan has subtitled this post as “The politics of declining prosperity”, and the big question behind all of this is :
      ” Who is going to take the hit ? ”
      Because nobody wants to get poorer.
      As the pie is gets smaller, there is less to share and Asset prices need to be trimmed back in order for them to fit back into the declining size of the overall pie.
      So your farm wife can forget divorcing her husband and moving to the glitzy lights, she can even forget about maintaining her present way of life. Her farm has just got smaller, its output is lower, and very soon she will have her 3.2 children back staying with her, and she will need to do their washing too.

  21. Buses and phone boxes in my home town (Coventry) are currently sporting posters for a doorstep lender (“you deal with real people”) offering loans at a representative APR of 535%. This may be how many people will be financing the family Christmas this year. Not looking good at the bottom end of the UK economy, is it?

  22. @Johan
    I would have to review the podcast to see whether Alister is predicting the demise of the dollar specifically (the way I initially interpreted it) or as ‘everything will fail’ (the way you apparent interpreted it).

    Since I agree with you that the whole world is in pretty bad shape financially, I won’t dissect the cadaver.

    Don Stewart

    • @Don S.
      Yes, we are agreed upon that.
      I don’t know if you have read Alistair McLeods article over on Zerohedge.
      It is also very worthwhile read.

      I won’t link it, so you will need to copy-paste into your browser.

  23. Johan
    Thanks for link. I had not read article. Alistair’s logic is a lot more intelligible to me now.
    Don Stewart

  24. Johan
    Another model springs to mind: the most energy efficient usually win. See this Bloomberg analysis of efficiency of medical services. Hong Kong on top, US near bottom. Incidentally, Russia near bottom also. China not at the level of northern Europe, but not too bad.

    Counting GDP doesn’t tell us anything about efficiency…except to watch long enough and those producing GDP inefficiently go extinct.

    Don Stewart

    • Thanks, Don.
      Dr. Morgan talked about GDP in some earlier work,
      I think it was in “Project Armagedon – Life after Growth”, but I am not sure now.
      Anyway, he exposes GDP to be nothing more than a GFS ( a “Government Fiddles Statistic” ) totally out of touch with the real economy, and hence a poor indicator of anything relevant.

    • GDP is increasingly misleading, because it reflects pouring ever larger amounts of cheap money into the system. As you’ll know, I think of money as simply a “claim” on the goods and services produced by the ‘real’ economy.

      Bearing this in mind, here’s a comparison between US GDP in 2007 and 2017, expressed in constant 2017 dollars:

      Growth in GDP: +$2,521bn

      of which:
      – Agriculture + extractive industries + construction + manufacturing: +$48bn (1.9% of all recorded “growth”)
      – Services which Americans sell to each other: +$2,472bn (98.1% of growth)
      [including Imputations (created by statisticians): +$419bn (16.6%)]

      So there hasn’t even been ‘normal’ (demographic-equivalent) growth in hard-priced output from farmers, miners, construction or manufacturing………..

  25. Second half of Max and Stacey with Alister McLoud

    First half is a lesson in how to strip assets from a business you own without going to jail. Second half is the interview with Alister.

    Don Stewart

  26. Tim asked the question earlier – how long will it be before the British state starts simply helping itself to the wealth of individuals to cover the books?

    Not long it would seem. It is happening right now. Unexplained Wealth Orders (UWOs) became law early in January 2018. This incredible piece of legislation seems to have slipped into legal stature with hardly a notice from the mainstream press.



    The state can now challenge any individual to explain how they were able to afford an asset or where any personal wealth came from. The burden of proof is on the individual to explain how the money was earned and if Inland Revenue are in any way dissatisfied or unconvinced with the explanation, the property can simply be confiscated by the state. They don’t have to prove that the money came from ill-gotten gains. You have to prove that it did not. And it is apparently down to them whether they accept the explanation and allow you to keep your own property!

    Britain’s journey to a gangster state would appear to be complete. There is now no right to property or presumption of innocence under UK law; nor any right to privacy. This law will ultimately be used to harass anyone that opposes state orthodoxy and lift assets from anyone that the state decides that it does not like. No criminal charges will be needed.

    • I used to be an accountant in a past life (still am but on the retired list). I seem to remember that the Inland Revenue could, in “suspicious” cases ask for a statement of affairs (a balance sheet) and if there was inconsistency between wealth and work they could assess people for more tax., unless you could explain how you could live in a six bedroom house with two Rolls Royces on the drive with only a shop assistants wages coming in!

    • I know there was one criminal who – when asked in court where his enormous wealth came from – said that he couldn’t remember.

      A read diamond geezer.

    • As with all of these initiatives, it is initially pitched as only aimed at the mega rich and their (supposedly) ill gotten gains

      Just wait once it has been used a few times it will start creeping down the wealth pyramid (an example has been the use of the ‘joint enterprise’ laws to basically target anyone even remotely associated with a gang, not necessarily a bad thing but not what the law was intended to prevent).

      Once on the statute books it is incredibly hard to get rid of and the power it hands to the state is huge

    • I had thought that “joint enterprise” had at long last been thrown out by the UK Supreme Court in 2016.

      It had been notorious since 1953 (!), when a policeman was murdered in the course of a burglary. Although it was known that Christopher Craig (aged 16) actually killed the officer, his associate, Derek Bentley, was hanged for murder under a “joint enterprise” conviction. Bentley, who reportedly told Craig to “let him have it” – meaning ‘shoot him’, or ‘surrender your weapon’? – was pardoned posthumously in 1998.

  27. Dear Dr. Tim,
    you have told your readers that the global energy balance is about 13 and falling. My question is how that number is found. Is it global GPD divided with global energy costs (prices at the well head/mine mouth without taxes)?
    If that is so, it can be quite misleading as the oil and the coal at this point has still not been converted into work, i.e. a working engine or motor.
    Approximately 40 % of the thermal energy in coal can be converted into electricity in well functioning coal plants.
    Gasoline and diesel cannot do much better than 25 % in engines, I suppose.
    Following calculation is false but is the principle correct?
    Median value of conversion efficiency into ‘work’ for coal + oil 30 %. If so, the global energy balance of ‘working’ energy (i.e. through coal plants, motors) is only 4!

    • Quotation from The ECoE Trap:

      The ECoE trap
      What really matters to prosperity isn’t how much energy we can access, but how much energy is consumed in the process of accessing it. This is measured here as ECoE (the energy cost of energy).
      Some figures will illustrate the nature of this trap. For starters, the ECoE of the existing energy mix is rising exponentially, because it remains biased overwhelmingly towards oil, gas and coal. Over the fourteen years between 2002 and 2016, the estimated trend ECoE of fossil fuels rose from 4.4% to 8.4%, but this increase is just a mild foretaste of what’s to come – over the next fourteen years, fossil fuel ECoEs are set to rise to over 13%.

      With an ECoE of today of approx. 8 % I just ‘turn this value around’ into the ‘global energy balance of fossil fuels’ (100/8 = ‘global energy balance about 12 to 13’)

      I should have asked: With an ECoE of fossil fuels of approx. 8 % at the well head/mine mouth …… the ECoE of fossil fuels when converted into ‘work’ in coal plants og gasoline/diesel engines is approx. 26 % and rising.

    • Thanks, with you now – hadn’t realised you were using ECoE as a fraction rather than a percentage.

      I think this is an issue we need to address in general discussion here. This is the right time to do this, not least because SEEDS has called the peak on global prosperity per person, something I’ll be writing about. This will probably be article #138, draft title Inflexion Point.

      Meanwhile, an authoritative report has suggested that we won’t be able to meet global food needs in 2050, a date which to me looks further in the future than I think it should be.

  28. Ironically – for somebody so interested in energy – I’ve been without power (and internet, phone, the lot) since a freak tornado took out the Island’s entire power supply on Sunday morning. Apologies if you’ve been waiting for reply, moderation etc.. I shall work through the backlog today – barring more tornadoes……

    • Hi Tim – welcome back – perhaps a taste of an energy short future. In the Telegraph one of the commentators said it was too risky for Hammond’s ‘giveaway’ budget.

      He put forward World debt – oil prices amongst other things.

    • Hi Tim

      Looks like a race between climate change and energy depletion! Which apocalypse will be first?

    • Mr Hammond’s budget is one of the things I’ve missed during the power outage.

      My next article here is likely to be about the peaking of world prosperity per capita, which has reached the end of a ten-year plateau and is now turning down. This poses numerous questions, including debt (and other forward obligations), energy supply, population numbers, migration, climate change……but probably not Mr H’s budget!

    • Regarding World debt I think the fuse has now been lit – even the Telegraph (as I’ve previously mentioned) is now having the wobbles about debt and oil prices.

      But for most people it’s BAU

  29. I’m just beginning to wonder if Hammond wants the High street to go under – Evans Bicycles and Crawshaw butchers are both in very serious trouble joining the ever growing list of casualties.

    Perhaps there’s method in his madness – if we eventually rely far more on home deliveries then it means less traffic on the roads – hence less energy used and less pollution.

    • He’ll just be relying on the mantra that the better and more efficient will take the place of the failed businesses in the marketplace, and take the business rate revenue in the short-term.

      Unfortunately, the situation in UK retail s graver than that.

  30. “Dad’s TUI nightmare after being left in the dark eating cold sandwiches for two days”, says The Sun (online, I wouldn’t buy the thing). I take it you endured the tornado -induced power cut with more humour and willingness to observe and learn. How resilient did your community show itself to be? It might make an interesting blog post.

    • People often criticise Ryanair – and I’m not a fan – but my worst ever flight was with TUI.

      The circumstances here have been bizarre. On the day the power went out, the temperature fell from 25C to 11C. For four days, winds seldom dropped below gale force, and torrential rain was almost continuous. Even horses, which usually prefer to be outdoors in all weathers, were happy to stay in their stables.

      On Sunday evening, I found a bar with a generator – no hot food, but at least the satisfaction of watching Barcelona (our local side here) thrash Real Madrid. By Tuesday, much of our local town had been equipped with generators.

      Even though I always put energy first and foremost, I was shocked at how a simple power outage stopped literally everything, even running water. How well people coped was hard to discern with everyone sheltering indoors from the atrocious weather, but people I did meet seemed cheerful.

    • We’re expecting hurricane ‘No deal’ to strike the UK very soon. Wish us well as we’re bit short of generators.

  31. On mysterious income, my favourite was the a political corruption trial in Spain: on being asked about the origin of 100k or so euros in an account, the defendant (a party fixer) replied: ‘100k? ! You tell me! It’s the first I’ve heard about it!’

  32. Quaint political stories from the US.
    As compared to the oceans of money flowing through state capitals and Washington DC at the present time, here are two stories from a simpler time:
    *Orville Faubus, the pro-segregation governor of Arkansas was a poor boy who retired with a mansion on a hill, while earning no more than 5 thousand dollars per year during his 3 or 4 terms as governor. When asked how he paid for the mansion out of a governor’s salary, he said ‘I was very frugal’.
    *In Texas, where governors typically retired with a ranch…never mind their humble origins…Sissy Farenholdt ran for governor on the platform ‘If elected, I will retire without a ranch’.

    Farenholdt did not win. I remember stories from my very early childhood in Texas lauding those governors who were ‘smart enough to steal a little’.

    Don Stewart

    • @DonStewart


      Wasn’t Harry Truman given his first entree into politics by the Tom Pendergast machine in Kansas City? Pendergast was the epitome of the “machine” and I believe that Truman himself was quite open about the “division of the spoils”.

    • No more than a continuation of the British (aristocratic) tradition until the mid-19th century: if you held office and didn’t leave richer than you entered it, you were held to be a bit of a fool. (An Italian friend told me that this is pretty much how Italians tend to view corruption – I would if i could……)

      Also, if you had a big public contract – supply of the Royal Navy. making uniforms for the redcoats, etc, no one was at all surprised to see you build a magnificent country ,mansion.

      Courtiers, too, took away lots of loot as ‘perquisites’ of office – see the treasures of Knole house in Kent, the seat of the Sackvilles – and one can discern in this the Anglo-Saxon tradition of the lord rewarding his personal household with horses, armour, gold, etc.

      Of oourse, they did it all with so much more style than our politicians, and -unintentionally – left us all much to enjoy in this twilight of our civilization their treasures represent the peak of Western culture and they were also able to loot the best from around the world.

  33. Like you Tim, I have been off line for about two weeks having just moved house. I’m now living 200 metres from the Sydney Harbour Bridge steel framed approaches. Seeing it is a reminder of what can be achieved with forward thinking. Sydney was 1/10 the size when it was built and even today it stands up effectively, 10 lanes wide would have seemed extreme back then.

    Anyway I am taking issue with your thoughts in the 4th paragraph, that welfare cannot grow due to its affordability issue. I do not believe this is true except that will only become an issue when every other measure of the economy has exhausted its resources. An end game event.

    To measure inflation as a determinant of the state of the economy means how much of an output gap do we have before unaffordable inflation will occur? The output gap limit is when there is full employment and all resources are optimally consumed. That is US $Trillions off into the future. Even for Australia it would be about $1Trillion. Unemployment is a wasted resource. It’s more likely resources will dry up well before financial conditions intrude. Hard to say.

    So until such times affordability is not an issue. Australia is one of those nations that have total commend over their currency. They can spend virtually forever their own currency. and fund all the entitlements the population is due. This includes free education, K-16, and healthcare, and welfare. Even job creation has a role to play. Getting it down to 2% unemployment should be a fundamental goal. It is eminently achievable. Only old and outdated mindsets obstruct it. Governments have NO debt bombs, not one!

    Re the private sector debt bomb, Steve Keen proposed [proposes?] a private debt jubilee. Instead of using it to wipe out the banking sector, he would get the government to buy up at some agreed fraction all housing debts. Those careful citizens who are debt free would get a bonus. The banking sector would have to forego all their derivative trades and wipe them out of existence. They have no intrinsic value anyway, It’s just gambling money.

    So debt is not necessarily the trigger for chaos it might be thought inevitable.

    • Debt it would appear, can be fudged and extended for far longer than most would have anticipated in 2007.

      But there are Ecological (in which I would include growing resource constraints) and Demographic ‘bombs’, which will blow things up as surely as the great mines of WW1 sent trench systems and their occupants sky-high……

    • The private debts are the assets of insurance companies and pension plans and, to some extent, banks. Keen’s proposal would preplace those assets with cash, but the insurance companies and pension plans need assets that produce income and/or growth, not mere cash, because without their growth and income flow assumptions, they have nowhere near enough to meet their obligations.

      There is ALREADY nothing for these companies to invest in, which is why investment is now just speculation on bidding up asset values and making bets on financial outcomes in the form of derivatives. Price to earnings ratios of many stocks are ridiculously high. For example, the average P/E of the S&P 500 is currently around 21, meaning that if the company dividended 100% of its earnings (a logical impossibility, since it would then not be able to pay its operating costs), it would take it 21 years to repay the investor’s purchase price. The only thing that keeps this level of insanity going is that “investors” keep bidding up the price (let’s not say “value”) on the back of ultra-cheap debt, but that game also has its limits.

      Western economies have aging populations = less consumption = less productive capacity needed.

      Having cash in lieu of debt, per Keen’s proposal, does not solve the problem of generating income or appreciation in value. The holders of debt obligations do not want to let those obligations go, because they need the flow, not just stock. It wasn’t done in 2009/2009, far more than likely, it will not be done next time either. Classic monkey trap.

    • I visited just two shopping centres on my recent trip to England, but both were in a pretty sad state – far fewer shoppers than I’d expected, and many vacant units.

    • Same in mine with promised units still not opening after over a year. I can almost imagine a scenario where the bulk of our resources go into the NHS – keeping warm – food and a few clothes,

  34. The retail problem is certainly worth watching: prime units in Cambridge -just off the market square – are still empty after a year, which is simply unprecendented here.

    M&S offers 15% off all food all the time now, whereas before it was used only as stimulation in dead periods, such as post-Xmas.

    We shall see what happens in the New Year when, if things are bad, leases are not renewed.

    Hollowed-out town centres, with large empty units impossible to let, seem a real possiblity if the national chains decide to retrench even more.

    I saw something about Brits eating more trash (sorry ‘fast’) food than ever before: indicates tight budgets perhaps? Also, drop in consumption of meat. – another indicator.

    • This is consistent with the SEEDS view, of course, which is that prosperity per person in the UK peaked at £24,550 in 2003, and has since fallen by 10.3%, to £22,020.

    • I can see why airlines are continually reducing leg pitch in an effort to squeeze more and more passengers and I would guess hoteliers having to reduce room prices.

      Mathematically there won’t be enough spare money in our incomes to pay for holidays in the future after essentials are paid for – although Jeff Bezos probably has a while before he has to cut back.

      At this rate I can see HS2 ending up as a barely used white Elephant.

      Interestingly the development funds for my local town centre were finally signed off in August after a delay of 9 years during which time we’ve had delightful boarding covering a one side of a street.

    • Connecting the dots on all this is not something most folk are inclined to do and neither is the MSM but I do wonder if there won’t reach a tipping point where people suddenly realise that things are on the slide. Tim has shown that prosperity has declined 10% in a relatively few years which I would have thought is enough to wake people up but apparently not.

    • You’re right there, Bob – and I also suspect that people are blaming their own worsening prosperity on the wrong causes.

      My prosperity calculation – for the UK, -10.3% since 2003 – is of course based on a methodology, SEEDS, which differs radically from the ‘conventional’. But I think there’s abundant ‘observational’ evidence to support the SEEDS interpretation.

      Well, deteriorating prosperity spreads from the bottom up, a process clearly evident in Britain. But those afflicted might think their own experience isn’t the norm – they see high house prices, watch the antics of “the rich”, and are told by government and the MSM that there is “growth” in the economy.

      So they might conclude that ‘the country seems to be prospering, but I’m getting poorer’, and might still believe this if we alter it to ‘..but I and most people I know are getting poorer”.

      How, then, do they reconcile the apparent contradiction? My guess is they blame it on “the rich”, “the bankers”, “the Tories”, etc, etc.. In that, they’d be wrong, not realising that the country as a whole is getting poorer.

      Such beliefs, though, even when mistaken, have consequences. Just one such could be the election of Jeremy Corbyn…..

  35. My cousins in Spain (swimming pools and jacuzzis) recently lost two of their shops located in long-established shopping malls, which has left them in a bit of a fix as to meeting customers on the high street. I believe some other key stores had pulled out due to retrenchment.

  36. Declining Prosperity Brings Existential Questions to Center Stage

    A gasoline engine is about 30 percent efficient, with 70 percent waste heat. A eukaryotic cell is about 39 percent efficient, with 61 percent being used as heat to keep the bird or animal warm. Quantum tunneling at work.

    No eukaryote ever evolved ‘needing’ gasoline engines. An example is the sunlight and infra-red from the ‘waste heat’. The solar energy creates ‘structured water’, or a gel, in our cells which has an electrical charge which functions as a battery by connection to extra-cellular materials with an opposite charge. The gel sorts intra-cellular assets into harvestable gradients, without ‘pumping’. The solar battery happens when a near naked ‘savage’ lives in the sunshine. The ‘civilized’ alternative is an expensive sauna. As prosperity declines, those who understand will make more use of the sunlight, as fossil fueled saunas disappear. Unfortunately, mid-day sun baths for employees are not on the agenda of the Global Corporations.

    Sun bathing is one of the more reliable methods we know to generate the feeling of contentment and generosity. Therefore, as prosperity declines, one possibility is that we regain contentment and generosity even as fossil fueled civilization crashes. I found it curious to see the crowded beaches in Britain last summer. Everyone looked so happy and content. Of course, being the reader of Doomer material that I am, I read mostly complaints that they just didn’t understand Climate Change…they should have been miserable. My guess is that only a small percentage of humans will be intelligent or lucky enough to make a smooth transition. Or maybe, as Putin has recently said, the US will kill all of us striving for a First Strike.

    Don Stewart

    • The ‘first-strike’ whispers emanating from the US are indeed alarming, bearing in mind that he historical record indicates that states which sense their foundations heaving and disintegrating not infrequently make insane, panicked, grabs for power, and subconscious fantasies of annihilating The Enemy once and for all come to the fore.

      The Brits certainly had their lobster-red moment this last summer: although I observed that young Chinese women went to great lengths to avoid any sunlight falling on their faces, with parasols and even large umbrellas – they prefer an appearance of higher status and sexual desirability, as European aristocrats once did. Think of the great Spanish ladies in Velasquez’s paintings: as pale as in-breeding and cosmetics could make them….

    • Allen Dulles when he was head of the CIA took a first strike plan to Kennedy but Kennedy threw him out in disgust so this is not the first time that first strike is being talked about.

      I cannot understand how anyone can think that they will survive a nuclear exchange.

      I blame Herman Kahn!

    • Just before the start of WWI, Admiral Lord Fisher proposed to the King that the RN destroy the German fleet in harbour, without any declaration of war – just what Nelson did at Copenhagen. “Fisher, you must be mad!” replied the King.

      But could the Kaiser have taken on Britain without a fleet? Presumably not – so might this have prevented WWI?

    • John von Neumann (of von Neumann computer architecture fame) was a key figure. Look for the 27 page paper “Schelling, von Neumann, and the Event that Didn’t Occur”. from page 5:
      “Von Neumann believed that inasmuch as the US-Soviet standoff was a Prisoner’s Dilemma, and inasmuch as both actors were rational and self-regarding, the only defensible policy was immediate attack. Since there was some chance of destroying an adversary’s offensive capability and/or will to retaliate by attacking, the best course of action was to launch now. Many others argued in a similar fashion. As the Joint Chiefs of Staff maintained in 1947, “Offense,
      recognized in the past as the best means of defense, in atomic warfare will be the only general means of defense”

    • Some more quotations from the paper which was published in 2014.

      / quotes
      In 1948, William Laurence, the New York Times’ science correspondent, recommended an ultimatum to the Soviets: shut down their atomic plants or the U.S. would launch an all-out nuclear war.

      Winston Churchill favored threatening the Soviets: get out of East Germany or the Western powers would destroy their atomic facilities.

      Leo Szilard pressed for preventive war against the Soviets, simply to wipe out their atomic capability, and at RAND, John Williams was a forceful advocate for similar action. The conservative political thinker (and former Trotskyite) James Burnham was as well.

      Most remarkably, so was Bertrand Russell, in an address at the New Commonwealth School in London on 20 November 1948.

      In August of 1950, Secretary of the Navy Francis Mathews gave a speech arguing memorably that the U.S. should become the first “aggressor for peace”.

      In May 1954 the Joint Chiefs of Staff Advanced Study Group recommended that the U.S. consider “deliberately precipitating war with the Soviet Union in the near future”

      What the declassification of archival information has underlined is not that the U.S. refrained from attacking the Soviet Union (we knew that), but rather how close the country came to doing otherwise, and how forcefully and persistently advocates of preemption pressed their case.


    • @Robert

      Notwithstanding your quotes there was a horror of nuclear war among the general population (not, as you say among the policy making elite) for obvious reasons.

      However Herman Kahn, the director of the Hudson Institute, said that nuclear war could be discussed rationally and there was a difference between twenty million deaths and two hundred million (See: Thinking about the Unthinkable and On Nuclear War). In this way Kahn perhaps dragged the discussion into the mainstream policy channel and away from the “nutjob” fringe. Dr Strangelove, who was modeled on Kahn, shows this very well.

      There is a continuing theme of a paranoid style in American politics (see the writings of Richard Hofstadter) and one wonders if this is a manifestation of that.

    • Bob, Talking of “the nutjob fringe”, here are some more to add to your collection:
      In early April, a study group in the Pentagon examined the possibility of using atomic weapons at Dien Bien Phu and concluded that three tactical A-bombs, properly employed, would be sufficient to obliterate the Viet Minh effort there. Admiral Arthur Radford used this finding to suggest the use of the A-bomb to the National Security Council on April 7. According to Air Force Chief of Staff Nathan Twining, “You could take all day to drop a bomb, make sure you put it in the right place…and clean those Commies out of there and the band could play the Marseillaise and the French could come marching out…in great shape.”


      There are now books on Operation Vulture and the deliberations that went on. Part of the reluctance by the politicians was simple optics in not wanting to be seen as having used the weapon against Asians again, particularly to support empire retention.

    • Bob, and a last diversion on this topic.

      Here is General Macarthur’s plan for Korea:

      “The enemy’s air would first have been taken out. I would have dropped between 30 to 50 tactical atomic bombs on his air bases and other depots strung across the neck of Manchuria from just across the Yalu at Antung (northwest tip of Korea) to the neighborhood of Hunchun (northeast tip of Korea near the border of the USSR).


      And the consideration that counted against the plan?

      “In any event, the Joint Chiefs of Staff, headed by Omar Bradley, did not pursue it. One possible reason: weather may have carried radioactive debris from explosions and waste from MacArthur’s proposed cordon sanitaire to Allied-occupied Japan.”

      Now, back to your normal scheduled viewing. 🙂

    • @Robert

      It’s interesting as most of these senior military would have witnessed nuclear tests and were perfectly capable of understanding what an awesome weapon they are.

      Robert Oppenheimer became an anti nuclear campaigner and he of course knew what the power of these weapons meant and yet the military remained gung ho and, as you illustrate, were in favour of using these weapons. Unbelievable.

  37. The proof of the pudding is in the eating: and one (crude) test as to the validity of SEEDS as a methodology is to ask whether it better explains what one sees and reads about from day to day than conventional economics, and the usual metrics relied upon by politicians and their advisors? I believe in many ways it does.

    • @Xabier

      The most interesting word in your comment is “relied”.

      They do rely on this (inadequate) view as a matter of fact but is that through necessity or choice?

      After all most politicians are educated to some degree and, to me, one of the hallmarks of education is abiding curiosity so they might well be aware of more heterodox views that explain things better. The reason I raise this point is that Tim’s analysis is bad news which points to awkward decisions and is not welcome to the average politician. So they “rely” on conventional metrics because they give convenient answers not because they explain things well. Confirmation bias?

    • I, of course, believe SEEDS to be proven both intellectually and logically, but that’s only my opinion – so I always look for corroboration in the course of events.

  38. One of the things which has changed radically since 1948 or 1988 is that Russia (all that is actually left of the Soviet Empire) is not following any offensive strategy. Putin can do arithmetic and knows that offense costs 10 times as much as defense, and that Russia can never outspend Europe plus the US. So Mutually Assured Destruction was the strategy Putin and the Russian military agreed upon. Putin said ‘there will never be a conventional war with NATO’. There CAN be conventional wars against ‘terrorists’…as in Syria…but not with nuclear armed opponents such as NATO.

    The arguments for seeking an American First Strike capability boil down to two:
    *Megalomania. We Americans were selected by God to rule not only Earth but also outer space. And Donald Trump is God’s messenger.
    *Defense Budget. Since more spending counts as ‘prosperity’, and since offense costs 10 times as much as defense, more offense is good for the arms industry and its lobbying largesse and good for politicians seeking increased local employment in the defense industry. Also feeds the ‘Mars solution’ delusions which grip an amazing number of the intelligentsia.

    I never know whether Dmitry Orlov actually knows what he is talking about. But if you read his current post, he says that, as we discuss these matters, Russia is manufacturing and deploying the weapons that Putin described a couple of years ago which insure Mutually Assured Destruction.

    Putin’s outburst that ‘If the Americans launch a First Strike, the Russians will go to heaven but the Americans will go to hell because they won’t have time to repent before they die like dogs’ is, I think, indicative of the current situation.

    Don Stewart

    • Dear Don, what do you think, does mr Putin have enough surplus energy to fuel his ICBM’s?

      Or would he consider to power those with Tesla batteries?

      Now THAT would be an interesting discussion to distract us from real issues, won’t it?

  39. The new normal:

    And now, just like in 2008, the FED’s balance sheet is shrinking:


    ECB is tightening, and China is suffering a debt overload.

    So, pumping financial assets makes few richer, while the bailout (or -in) is for the masses to cough up.

    Indeed, dear doc, will GFC2 crash trust in currencies? And what about trust in those currencies by the masses? What needs to happen to the masses to make them recognize the difference between money and currency? People won’t understand. But they will be angry. Again. And after that they will become greedy. Again.

  40. @houtskool
    I think Russia has plenty of surplus energy to power a retaliatory strike. To their credit, they understand that a First Strike is insane.

    As near as I can tell from thousands of miles away, Russia’s problems are:
    *Possibly unstable trading partners. While Russia may be more self-sufficient than most countries, they will not prosper without trade. They don’t need to trade with hostile powers such as the US and the UK, but they have to trade with someone. And China could collapse, as Dr. Morgan predicts. And the gas pipeline to Japan may come ashore in a post-industrial country with no credit.
    *Internal reform is needed. While Putin made a start on this during his last annual video conference with the nation, they seem to have a long way to go. Many of the local officials seem to behave like an Alabama sheriff with an out of town speeder. An American NGO worker recently wrote some reminiscences of the collapse of the Soviet Union. She had to do some kind of business with the government, and the mid-level bureaucrat turned out to be Vladimir Putin. She was shocked when he explained the law to her, and did not even hint that a bribe could smooth it all away. The fact that she was shocked almost 30 years ago and that, from what I hear, bribes are not unknown today indicates considerable internal friction which is a drag on the economy and social attitudes.

    Another potential threat is that IF the West and China and South Africa and Brazil are able to turn the money machines up and seemingly achieve some sort of prosperity, then the impatience of the Russian people and the government with their central banker who is averse to money printing may boil over. If everyone else is doing it, why can’t we? If Russia is selling oil and wheat as its basic export products, then will it be willing to accept inflated fiat currency in exchange?

    So, while Dr. Morgan may rate Russia as one of the ‘least threatened’ countries, it is not clear that Russia could thrive if the whole rest of the world goes down. Kansas City achieved a sort of notoriety in the US when, along with Hollywood, it prospered right through the Depression. The only explanation I have ever heard for Kansas City is that vice might as well have been legal, since there was no repression at all. The prosperity in Hollywood was well-captured in Woody Allen’s movie Purple Rose of Cairo…fantasy escapes from reality for one thin dime.

    Don Stewart

    • We all need to trade, indeed. Trade goes through our ‘money’ system, which is debt based. So both will go at the same time. Russia tries to grab its pieces of the ever shrinking pie. Through its energy policy, and by buying gold and selling debt. Russia is a hardcore nation. But they, too, cannot survive without trade. The west should cooperate with Russia and drown the rest. Or is that selfish?

  41. China, Agriculture, Cuba
    This is from Albert Bates’ blog today. Albert is in Cuba.

    ‘However, you need to remember that the Chinese are now able to produce a bag of biochar fertilizer that costs $1 less than a comparable bag of chemical fertilizer and produces 15% better results, on average. Because a Beijing Sanju biofertilizer factory uses crop residues previously burned as feedstock, in the process converting labile photosynthetic carbon — temporary soil carbon — into mineralized carbon — permanent soil carbon — each factory effectively removes 66 kilotons of carbon dioxide from the atmosphere per year. The price-to-yield factor disposes of Wadhams’ complaint. Just ask any farmer if he would like to get something much better for less than what he is paying now.

    China had constructed 5 of these factories when I toured one in September. Another 20 were under construction, with 200 more planned. By 2020 they will likely be exporting the technology all along the New Silk Road, to Indochina, India, Africa and Latin America. It is simple, scalable and shovel ready. It does not need to change any economic paradigms to get going. It does not require approval by the White House or Senate. It does not require either the Aquarian Age or the collapse of industrial civilization. It is a strategy that can re-green the desert and turn the tide.’

    Albert notes, first, that late in Obama’s tenure there was a thaw in US/ Cuba relations which seemed as if it were going to result in some of the things we take for granted, such as internet access. However, the US has now resorted to a blockade mentality again…with no action at all on the Cuban side.

    If you look at the example that Albert cites above, you see that it is Chinese technology applied to a real world problem. Albert is in Cuba to materially assist the transfer of the solution to the much-abused soils of Cuba. Why would the US care?

    I submit that it derives from two sources:
    *The end of Climate Denial by the US government. In legal proceedings, the US government has admitted to multi-degree warming by the end of this century, with the attendant rise in sea levels.
    *The development of Carbon Sequestration business plans by US corporations, including those currently dependent on fossil fuels.

    So the position (unstated) of the US government is that curbing emissions is hopeless (true enough), but also that emissions are going to decline anyway (also quite probably true) and that technologies which preserve the current power structure (and especially American dominance) can be funded by tax revenues. In other words, the taxpayers get to make sure that Exxon-Mobil ‘remains great’.

    The Chinese biochar plants (which also produce electricity) are a direct threat to what I perceive the unstated position of the US government to be. The biochar plants are modular and relatively inexpensive and are particularly adapted to developing countries. They also do not involve taxpayer funded boondoggles which benefit the current power structure.

    Now I think you may understand why the US attitude toward Cuba has hardened.

    Don Stewart

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