#140: Are yellow jackets the new fashion?


This weekend, the authorities plan to field 89,000 police officers across France in response to anticipated further mass protests by the ‘gilets jaunes’. In the capital, the Eiffel Tower will be closed and armoured cars deployed, whilst restaurateurs and shopkeepers are being urged to close their businesses at one of the most important times of their trading year.

Though the government has climbed down on the original cause célèbre – the rises in fuel taxes planned for next year – there seems to be no reduction in the worst protests experienced in the country since the 1960s. Reports suggest that as many as 70% of French citizens support the protestors, and that the movement may be spreading to Belgium and the Netherlands.

For the outside observer, the most striking features of the protests in France have been the anger clearly on display, and the rapid broadening of the campaign from fuel prices to a wider range of issues including wages, the cost of living and taxation.

The disturbances in France should be seen in a larger context. In France itself, Emmanuel Macron was elected president only after voters had repudiated all established political parties. Italians have entrusted their government to an insurgent coalition which is on a clear collision-course with the European Union over budgetary matters. The British have voted to leave the EU, and Americans have elected to the White House a man dismissed by ‘experts’ as a “joke candidate” throughout his campaign.

Obviously, something very important is going on – why?

Does economics explain popular anger?

There are, essentially, two different ways in which the events in France and beyond can be interpreted, and how you look at them depends a great deal on how you see the economic situation.

If you subscribe to the conventional and consensus interpretation, economic issues would seem to play only a supporting role in the wave of popular unrest sweeping much of the West. You would concede that the seemingly preferential treatment of a tiny minority of the very rich has angered the majority, and that some economic tendencies – amongst them, diminishing security of employment – have helped fuel popular unrest.

Beyond this, though, you would note that economies are continuing to grow, and this would force you to look for explanations outside the purely economic sphere. From this, you might conclude that ‘agitators’, from the right or left of the political spectrum, might be playing a part analogous to the role of “populist” politicians in fomenting public dissatisfaction with the status quo.

If, on the other hand, you subscribe to the surplus energy interpretation of the economy professed here, your view of the situation would concentrate firmly on economic issues.

Though GDP per capita may be continuing to improve, the same cannot be said of prosperity. According to SEEDS (the Surplus Energy Economics Data System), personal prosperity in France has deteriorated by 7% since 2000, a trend starkly at variance with the growth (of 12%) in reported GDP over the same period.

Not only is the average French person poorer now than he or she was back in 2000, but each person’s share of the aggregate of household, business and government debt has increased by almost 70% since 2000. These findings are summarised in the following table, sourced from SEEDS.

France prosperity snapshot

Two main factors explain the divergence between the conventional and the surplus energy interpretations of the economy. One of these is the pouring of enormous quantities of cheap debt and cheap money into the system, a process which boosts recorded GDP without improving prosperity (for the obvious reason that you can’t become more prosperous just by spending borrowed money). The other is the exponential rise in the energy cost of energy (ECoE), a process which impacts prosperity by reducing the share of output which can be used for all purposes other than the supply of energy itself.

In France, and with all sums expressed in euros at constant 2017 values, GDP grew by 23% between 2000 and 2017. But this growth, whilst adding €433bn to GDP, was accompanied by a €3.07tn increase in aggregate debt. This means that each €1 of reported growth in the French economy has come at a cost of more than €7 in net new debt. Put another way, whilst French GDP is growing at between 1.5% and 2.0%, annual borrowing is running at about 9.5% of GDP.

Cutting to the chase here, SEEDS concludes that very little (about €100bn) of the reported €433bn rise in GDP since 2000 has been sustainable and organic, with the rest being a simple function of the spending of borrowed money. Shorn of this credit effect, underlying or clean GDP per capita is lower now (at €29,550) than it was in 2000 (€30,777).

Meanwhile, trend ECoE in France is put at 7.8%. Though by no means the worst amongst comparable economies, this nevertheless represents a relentless increase, rising from 4.6% back in 2000. At the individual or household level, rising ECoE is experienced primarily in higher costs of household essentials. In the aggregate, ECoE acts as an economic rent deduction from clean GDP.

Between 2000 and 2017, clean GDP itself increased by only 5.7%, and the rise in ECoE left French aggregate prosperity only marginally (2.2%) higher in 2017 than it was back in 2000. Over that same period, population numbers increased by 10%, meaning that prosperity per person is 7.1% lower now than it was at the millennium.

In France, as elsewhere, the use of credit and monetary adventurism in an effort to deliver “growth” has added markedly to the aggregate debt burden, which is €3.1tn (86%) higher now than it was in 2000. The per capita equivalent has climbed by 69%, making the average person €41,800 (69%) more indebted than he or she was back in 2000.

The prosperity powder-keg

To summarise, then, we can state the economic circumstances of the average French citizen as follows.

First, and despite a rise in official GDP per capita, his or her personal prosperity is 7.1% (€2,095) lower now than it was as long ago as 2000.

Second, he or she has per capita debt of €102,200, up from €60,400 back in 2000.

Third, the deterioration in prosperity has been experienced most obviously in costs of household essentials, which have outpaced both wages and headline CPI inflation over an extended period.

This is the context in which we need to place changes in the workplace, and a perceived widening in inequality.

On this latter point, part of the explanation for the anger manifested in France can be grasped from this chart, published by the Institut des Politiques Publiques.

In the current budget, policy changes hurt the disposable incomes of the poorest 10% or so (on the left of the scale), but ought to be welcomed by most of the rest – and perhaps might be, were it not for the huge handouts seemingly being given to the very wealthiest. Moreover, these benefits aren’t being conferred on a large swathe of “the rich”, but accrue only to the wealthiest percentile.

French budget 2

This is part of a pattern visible throughout much of the West. Unfortunately, perceptions of hand-outs to a tiny minority of the super-rich have arisen in tandem with a deteriorating sense of security. Security is a multi-faceted concept, which extends beyond security of employment to embrace prosperity, wages, living costs and public services.

Even in the euphoric period immediately following his election, it seemed surprising that French voters would back as president a man committed to ‘reform’ of French labour laws, a process likely to reduce workers’ security of employment. Add in further deterioration in prosperity, and an apparent favouring of the super-rich, and the ingredients for disaffection become pretty obvious.

Where next?

The interpretation set out here strongly indicates that protests are unlikely to die down just because the government has made some concessions over fuel taxes – the ‘gilet jaunes’ movement might have found its catalyst in diesel prices, but now embraces much wider sources of discontent.

Given the context of deteriorating prosperity, it’s hard to see how the government can respond effectively. Even the imposition of swingeing new taxes on the super-rich – a wildly unlikely initiative in any case – might not suffice to assuage popular anger. It seems likelier that the authorities will ramp up law enforcement efforts in a bid to portray the demonstrators as extremists. The scale of apparent support for the movement – if not for some of its wilder excesses – suggests that such an approach is unlikely to succeed.

Of course, it cannot be stressed too strongly that the French predicament is by no means unique. Deteriorating prosperity, a sense of reduced security and resentment about the perceived favouring of the super-rich are pan-European trends.

In the longer term, trends both in prosperity and in politics suggest that the West’s incumbent elites are fighting a rear-guard action. The credibility of their market economics mantra suffered severe damage in 2008, when market forces were not allowed to run to their logical conclusions, the result being a widespread perception that the authorities responded to the global financial crisis with rescues for “the rich” and “austerity” for everyone else.

This problem is exacerbated by the quirks of the euro system. In times past, a country like Italy would have responded to hardship by devaluation, which would have protected employment at the cost of gradual increases in the cost of living. Denied this option, weaker Euro Area countries – meaning most of them – have been forced into a process of internal devaluation, which in practice means reducing costs (and, principally, wages) in a way popularly labelled “austerity”. The combination of a single monetary policy with a multiplicity of sovereign budget processes was always an exercise in economic illiteracy, and the lack of automatic stabilisers within the euro system is a further grave disadvantage.

Finally, the challenge posed by deteriorating prosperity is made much worse by governments’ lack of understanding of what is really happening to the economy. If you were to believe that rising GDP per capita equates to improving prosperity – and if you further believed that ultra-low rates mean that elevated debt is nothing to worry about – you might really fail to understand what millions of ordinary people are so upset about.

After all, as somebody might once have said, they can always eat brioche.

= = = = = = =Pop per capita #141 5

151 thoughts on “#140: Are yellow jackets the new fashion?

  1. I always re-iterate to friends and colleagues that the worst mistake made in 2008 (in particular in the UK) was to bail out the banks with a blank cheque. I understand the political motives; Labour not wanting to hand the conservatives a stick to beat them with, which they got anyway; and also the peculiarities of the fact that the two biggest failures, RBS and HBOS were both domiciled in Scotland. This would have devastated the Scottish economy and driven people into the arms of the SNP (and subsequent breaking up of the UK, which may still happen btw)

    Saying all of this does not mitigate the fact that the normal correction in things like the housing market (like in the nineties) simply did not happen. The resulting zombies of RBS and HBOS along with a myriad of smaller business’s have and continue to suck the lifeblood out of the real economy and the result is populism.

    Every day I meet more and more people (particularly the under 30’s) who are just switching off an dropping out and in many ways I don’t blame them. They are fertile ground for what we are seeing in France, so I expect more and more issues in the West going forward.

    • I think the then government made two really big mistakes in 2008. The first was rescuing the bankers as well as the banks. This really angered the public, who don’t expect to get rescued if, say, the family business fails, as many no doubt did at that time. The second was failing to change CGT to recoup some of the asset value gains handed out by QE and ZIRP more generally.

      I sometimes contemplate the circumstances of an imaginary person who, just before the GFC, owned half the shares in a company valued by the market at, say, $2bn. Needing money for some of life’s necessities (like a helicopter, something none of us can get by without), but unwilling to go below 50% ownership, this person might have borrowed, say, $600m secured against his shareholding. Then the stock price falls by 50%. This person is now insolvent – or would have been, if those nice people hadn’t come along with QE and ZIRP…..

    • Jason,
      the people of Scotland already were, ( and still are ) in the hands of the SNP.
      The UK as an entity is already over.
      Denial is not going to avoid the inevitable.

  2. Tim I remember buying your book (Life after Growth) nearly 5 years ago and hoping none of your predictions would come true although deep down I knew we were in trouble.

    So here we are – no quite at GFC 2 but stock markets have been adjusting – house prices are falling – crime soaring – protests have started.

    At some stage politicians are going to have admit the truth because these continual announcements about GDP growth are getting as monotonous as those in 1984 as well as the current day versions of alternative facts – untruths and doublespeak.

    • Thanks Donald. Even before I finished that book I hoped I might find a flaw in the logic – but, alas, I didn’t, and haven’t. Of course, there might be some things I’d change in the book, but very few.

      The scariest thing now might be the complete ignorance of TPTB about what’s really going on.

      On GFC II, most of the components are now in place.

      One of the things I worry about now in politics is the public discovering what has happened to pension provision – I mean, can you picture the response in somewhere like France or Italy?

    • Tim – I can’t believe that the bean counters in the Treasury don’t know about the pension time bomb although I’ve read that one politician dismissed the problem saying that growth would sort it all out.

      NB Very good article by Jeremy Warner in the Telegraph today about Huawei and China in general.

    • Indeed so. The mantra remains that growth is the norm, and is by definition perpetual – so economies, no less than children, can “grow out of” all their ills.

    • There is no pension time bomb until after a total breakdown in the economy occurs. As long as there are resources for sale the money can be found for pensions. It would take a brave and desperate state to stop pensions anyway, and a monetary sovereign state can always pay up. The state will take over all private pension schemes as they will all go to the wall first.

  3. I happened on a televised debate in the House of Commons. Corbyn asked Mrs. May how she intended to respond to the findings of the United Nations about the widespread poverty in the UK. Mrs. May rattled off a bunch of statistics which ‘proved’ that things have never been better, due to the government’s ‘balanced policies’.

    I wonder if Mrs. May and Mr. Macron really believe their own claims? Mr. Trump in the US was elected on the premise that things were bad and he would make them better…which leads to a different sort of political posturing. The giveaways to the very rich are common, however, to all three countries.

    Don Stewart

  4. Dr Tim,

    Pensions will be the thing. as Dr Moshe Milevsky wrote (in his book http://www.pensionizeyournestegg.com/): –

    1. The decline in pensions is real. And not only is it real – it’s likely to speed up. No new pensions are coming, existing pensions are disappearing, and it’s time for you to recognise and act from this new reality. You need to do something now to prepare for the years ahead, and take that responsibility for your own retirement income planning instead of waiting for politicians to bring back 1950s-style pensions.
    2. True pensions provide the guarantees and certainty retirees require. A true pension starts at some advanced age and guarantees predictable income that matches the increasing cost of living for retirees. These kinds of pensions are rare and expensive. Don’t underestimate the value of true pensions and the protection they provide, especially if you do not belong to a DB (‘final salary’) pension plan. As the life-cycle model shows, a true pension is worth its weight in gold.

    I don’t have a DB pension, like millions of others in the UK and the previous generation or two have stolen my retirement prospects (which, actually, I can cope with – I hope and believe), along with those of my children. My last grandparent died in 2017 aged nearly 97. She was a civil servant, as was her husband. They both enjoyed index-linked, unfunded, DB pensions and state pensions. My grandmother retired age 60 and had a very nearly ‘full’ civil service pension (and later acquired a spouse’s pension when my grandfather did in 2000. By my reckoning, she received more income from her pensions than she ever earned from actually working! Somewhere around £770,000 in pension payments of the near 37 years she lived after retirement. Sure, she ‘earned’ the pension whilst working, and paid income tax and national insurance, but we can see why these things are fast becoming unaffordable.

    I just had a meeting with a client who has, much to his delight, been made redundant and can take a very generous DB pension. He’s about the same age as me. I’m not jealous of his situation, but, along with millions of others, will NEVER be in that position.

    We have the DB ‘haves’ and the DC ‘have nots’ and the latter are beginning to stir.

    • I look at the pensions mess from two perspectives. In terms of economics, this is a situation in which we are plundering the future to subsidise the present. In that sense it’s similar to the massive ramp-up in debt.

      Politically, I think this is going to become a huge factor when the public tumbles to what has happened.

      People do have strange ideas about what they have ‘earned’. A very pleasant couple of my acquaintance waxed indignant when Mrs May suggested that they might have to give up some of the value of their property to fund their care in old age – the value of the house, of course, was “theirs”, and the government should keep its hands off! I didn’t ask them what they thought the value of their house might have been now if that same government (well, strictly the BoE) had equally kept its hands off interest rates, and left them at 5.75%.

    • As the bard might have said, “no homeowner is an island”.

      Interestingly, there’s a stage direction in one of Shakespeare’s plays which I always find droll – “Exit left – pursued by a Bear”.

    • Your client needs to keep in mind that If the trustees of a DB scheme do not have the assets to match their liabilities the ‘guarantees’ promised to their members are worthless. Its noticeable how many of them operate at less than 100% solvency. ZIRP continues to increase the cost of providing an annuity to new retirees. It cannot be too long therefore before we see a UK ‘Rolls Royce/gold plated’ pension scheme going the same way of similar schemes in the US..Where pensions in payment are cut and members still in work try to get to get access to their ‘pots’ before its too late e.g the Dallas police officers scheme. At the moment the state’s pensions liabilities are in excess of 200% of GDP so I would not rely picking up the basic state pension or a civil service one either if you are so entitled.

    • My state pension is due in 2024 – but I consider my chances of getting it as close to zero.

  5. Angry pensioners in the geriatric West have a potentially powerful vote, enough for politicians not to want to cross them; on the other hand, they aren’t going to riot and burn down the hood, are they? Not even on sunny days, when most would conk out in the heat fairly quickly.

    Would not the best way to deal with the pensions problem be to remove, little by little, those medical treatments which extend life into the 70’s and beyond? My elderly mother’s life was saved recently by the NHS, and, frankly, she would be much better dead: quality of life all gone,and there is no point to that at all.

    Circumstances may force this anyway as it becomes impossible to fund health services as before, am waiting lists grow and grow -already happening in the UK.

    Nor would this be tragic: if you haven’t lived a full life by 70, well, what on earth were you doing?

    One only needs a little time for reflection after retirement to set one’s soul in order. Any more is mere self-indulgence. Excessive prolongation of life is both a waking nightmare, and an unfair burden on the young.

    I suspect economic collapse will sort all of this out. I suspect voluntary euthanasia will become acceptable and, more or less, customary – much as Hemingway’s gutsy ex-wife Martha Gellhorn did herself in when she learned that she had a raft of nasty health issues and concluded it wasn’t worth the candle to struggle on, more or less a resident of operating theatres. Wise, and brave, lady.

    • Sorry to hear about your mother.
      I work at a nursing home and I observe daily the madness of treating people to death. Even if you are 90 years old, with chronic obstructive pulmonary disease and heart failure, not able to stand on your own feet, halfway in to dementia, you get sent to the hospital to treat every infection you come down with.

      But as you say, I think this will sort itself out as health budgets gets slashed. Today I read that my local hospital had to cut 100 staff or so, union leaders in disbelief since they thought they were rather in a position to hire 10-20 doctors and nurses.

    • It’s hard to generalise. One of my grandmothers ran away to sea in her sixties, spending about three years cooking on a cargo boat in the Far East – and the other took up shark-fishing in old age. My mother, in her early 80s, crossed the Nile in a balloon, and took a powerboat course.

      Generally, though, I agree that quality of life may be more important than simple longevity.

  6. Ruh-roh! “Viral Video Of French Students Lined Up Execution-Style Sparks Outrage; Protesters Want Macron’s “Scalp” ”
    “The video, released Thursday night by the Twitter account Violences Policières (Police Violence), has been viewed over 2 million times in less than 24 hours. Many of the replies suggested that it looked like “execution by firing squad” and “hostage taking.””
    Some particularly incendiary quotes here, it doesn’t bode well for tomorrow:
    Bloomberg quotes a taxi driver, “He ruined us, he broke our business,” the taxi driver said. “He wants everything new, digital, the new world, and he did it all without thinking of the cost for us. Replace everyone, have everything young, new? Yeah, well that’s not how you do things. Now it’s payback time.” ”

    • Actually, I’m not too averse to seeing the spoiled young taught some lessons about reality. And I’d rather see active police, than invisible (British0 ones (as it were). My father was beaten by the Guardia Civil, and it didn’t do him any harm. 🙂 But yes, fatal PR!

      The French taxi driver’s comment is very pertinent: prosperity is declining, but we are constantly having new – and expensive – technologies forced upon us by ‘creative change/destruction’ and also built-in obsolescence and short-product life.

      This acts to further erode prosperity and increase burdens (that monthly debit) still further.

      Also the damaging psychological, and social, effect of constant change to no obvious advantage.

    • Hi my belief is that we should build / manufacture things to last rather than waste energy to adhere to creative destruction.

      We can still progress on a technological level even though some of it may be in virtual reality.

    • One of the more depressing trends in recent years has been an increasing bias towards early obsolescence, with some manufacturers seemingly designing their products to fail early so that customers feel forced to buy replacements. This is utterly irresponsible, especially so if you accept the energy interpretation of the economy, and/or are concerned about the environment.

      Logically, and based on Adam Smith’s interpretation of the market, customers ought to avoid such suppliers, but, for some reason, market forces seem not to be working correctly over this.

  7. Tim, a couple of Questions. 1] Does your debt calculations include “Government Debt”?
    2] Pensions are not borrowing from the future. They are only todays problem. Government pensions are paid out of today’s new money. Private pensions are savings from when they were set up, a future fund, invested and hopefully will last till needed. Do you understand that?

    Regarding point 1] Government debt is book keeping speak for bonds sold by the Central Government, which are bought by investors, like China, who have a large deposit with reserve accounts at the CB which do not earn interest until converted to bonds. It’s not what one automatically considers a debt, borrowed money spent on something which has to be repaid. Monetary sovereign governments have zero need of the money as they create all they need by deficit spending.To repay, at maturity, the book entries are simply deducted from the savings account and transferred to a checking account. which extinguishes the debt. So it is really wealth, not debt .
    Private pensions are at great risk, as they grow exponentially and outstrip the corporate world to be repaid and Governments will have to step in and take over.

    • Unless otherwise stated, all debt numbers used here are the total of household, non-financial businesses (PNFC) and government. The latter is stated at nominal value, not market value.

      I understand your view that government debt isn’t the same thing as private debt, but I find it hard to see how that differs from monetizing debt.

      In Japan, for instance, the BoJ has used newly-created QE money to buy up about half of all JGBs in issue, issuing typically 50 trn JPY even though the deficit itself is less than 20tn. That is monetizing debt, ‘red in tooth and claw’. In Italy, meanwhile, government has to raise EUR 275bn in 2019, and won’t – this time – have it monetized for them by the ECB. They therefore need to persuade investors to lend them that sum.

      As discussed in the previous article, inflation is in essence a monetary phenomenon. If the monetary aggregate is $100, and there are 100 oranges for sale, the price of an orange is $1 – increase the money supply to $200, still with 100 oranges, and the price becomes $2. To be sure, there’s a qualification here about velocity, but the basic principle still applies.

      So if, say, the UK created £500bn – about 25% of GDP – logically prices would rise in the ratio 2500/2000 – or am I missing something?

    • It depends on where available energy is diverted to. I still somehow think that we’ll muddle through as there could be breakthroughs in energy usage and production.

    • Not sure what you say here [?]. Federal Government debt is a storage facility for excess savings in the non government sector. It is existing money. and not a liability except in central bank parlance. It does reduce the aggregate money supply which can have some effect on monetary policy. It is never spent. It does not pay for any goods or services.
      Private debt is liability money which gets spent and requires earnings to repay, like our mortgages.
      It’s usually set against something of value, like a car or a home or a business.
      I don’t see how you can list them in one category. I think you should deduct federal government debt from your total. State and local governments do have liability loans. It’s only a federal MS government that is unique.

    • @Dr. Morgan

      “So if, say, the UK created £500bn – about 25% of GDP – logically prices would rise in the ratio 2500/2000 – or am I missing something?”

      It depends on the underlying productive infrastructure. John and I believe (from past correspondence – sorry if I’m putting words in your mouth John)
      there is significant productive surplus in the economy. Certainly if only 100 oranges were available we would have a problem. If however, the orange producers could actually supply 125 oranges, or 200, were demand not constrained, there is less of a problem.

      All things being equal fear of inflation seems overblown when we are talking about the collapse of industrial civilization. Not all price increases are the result of inflation – which should rightly include wages.

      I think the amount production can be increased without significant inflation is probably bounded by the oil markets and in the end I think we are talking about trying to “ride the curve of prosperity” down in contrast to collapse – not suggesting that the future can really be bigger and brighter.

      We can always consume whatever it is we can produce. Have to keep productive capacity up – and it looks to me like capitalism is demand constrained before it is resource constrained. Whether we can get past the psychological/social implications of such policies is another matter – and I don’t think we can.

    • That is separate from my argument. Basically if government debt is included in SEEDS we have a gross distortion of the actual debt figures. Whatever the US debt figure is if you delete $21Trillion it makes a big difference! That will lead to a distortion of the debt vs equity equations and whatever else it may be required to explain. Federal government debt is SO different from normal debts it cannot count. Also we have the shadow banking debts which are just insurance gambling for the most part. They need a category of their own too.

    • “It depends on the underlying productive infrastructure. John and I believe (from past correspondence – sorry if I’m putting words in your mouth John)
      there is significant productive surplus in the economy. Certainly if only 100 oranges were available we would have a problem. If however, the orange producers could actually supply 125 oranges, or 200, were demand not constrained, there is less of a problem.”

      This view pretty much corresponds with my own take, but as you also state the change in mentality is unlikely to spread before the whole thing comes crashing down. I think the closest thing we’ll see is countries like the US nationalizing oil production, which will be done under the ostensible guise of “national security” to obscure the real growth-related issues.

    • I get that government funds raised through selling government bonds to investors is different to other things we call ‘Debt’, and that it to COULD be classed, or modelled, as a different type of debt.

      However, when modelling the world we need to decide how we ‘chunk up’ that conceptual description, what level of fidelity the model needs for things it represents, and if that is sufficient to answer the questions the model was designed to answer.

      My understanding is that SEE’s attempts, among other things, to model the level of POTENTIAL liabilities a region has, so that risk levels can be evaluated when compared with productive assets. Emphasis on “potential” is important here from a modelling perspective.

      The general insights that have been drawn so far, that for many countries they are growing liabilities faster than growing yielding assets and hence exposing themselves to a high level of risk from investor drawback, currency weakening both leading to regional purchasing power decline are still appropriate.

      If we wanted to answer a question like: “When might the situation become critical?” then we may want to model the liabilities at a higher level of fidelity, understanding how risk varies over time, and how different types if regional liability (i.e. Gov bond honouring and household debts) act as risk components over time.

      For the insights provided so far I don’t think the debt modelling approach is inappropriate. Assuming the government component still is perceived in the minds of potential investors as a liability, not an asset.

      Validating models (fitness for purpose) is only possible if the purpose of the model is clearly defined at the outset. Hence my previous queries to Tim on older posts regarding the intention of SEE and SEEDs.

      Keen to see where the questioning, the modelling, and the insights go next.

      (I spent many years trying to get models through verification and validation, or challenging them as a government scrutineer. Would really like to see ‘under the hood’ but understand why Tim doesn’t want to show everything right now)

    • As you know, Kevin – but others might not – I believe that conventional models are failing, suggesting the ‘big battalions’ in business, finance and government need something like SEEDS. I’ve found it’s possible to withhold some technical bits which, whilst not detracting from reader understanding of principles and results, effectively prevent the building of a copycat system. These are the bits I found hard (believe me) to crack – they aren’t matters of principle or logic, only of technical function.

    • Governments sell debt [bonds] because Congress orders them to sell bonds to match the fiscal deficit. But it is utterly upside down, Ridiculous even. Why? because the deficit extinguishes the debt at the same time as it spends the money to pay for it. That is what deficit spending actually is,
      a way to raise money and pay down debt at the same time. So if the debt is already extinguished, what reason is there to sell bonds? Obviously no reason – from the governments point of view.

      From the other side there is more reason. A lot of this debt money is looking for a home, QE distributed much largesse and the corporate world is looking for a home for their share. The Fed guarantees the deposit so it is a responsible offer to accept.

    • @John Doyle – Agreed – sovereign debt (a record of money created + a promise to make interest payments in some cases) is different than private debt and should be treated differently. Private sector debt can’t really shrink unless public expands – in our current window dressing that views them the same.

    • I’m afraid so. It all depends on the availability of resources to last even a few years extra.We are always behaving as though resources are infinite and our waste stream gets bigger every day. But nothing is going to happen until it becomes actually visible. As Dick Cheney said;”The American way of life is non negotiable”.

  8. Tim,

    But can Governments rely on their Security Services?

    Individual Police Officers and Servicemen & women are subject to the same stresses as the rest of us

    • This is indeed the case – and I’ve read that the ultra-rich sometimes worry about how to ensure the loyalty of their staff, presumably including their security people.

      Assuming the loyalty of the security forces is a mistake repeated by embattled regimes down the ages.

      Technically, your comment takes us into a complex ECoE-related issue. As ECoE pushes costs up, it acts indirectly as well as directly, pushing up not just organisations’ and individuals’ own costs but those of their suppliers and employees too. This is a compounding effect which would be a very interesting topic for research.

  9. Doc, thanks for another ‘fact check’, your experience over many years in thinking about, and working on, ‘our’ system comes in very handy as i might say.

    The yellow jackets is another sign of where we are heading. It will get crazier as time goes by, until martial law and implosion of the financial system. Leadership is far away. We all live on a skippy ball 7 feet under water.

    Very good analysis, again, thank you very much.

  10. If there is one nation in Europe that is first to throw its toys out of the pram when things don’t go their way, it’s the French.
    This would not happen in the UK.
    Things would have to get much worse before the English take to the streets.
    I have read your analysis of the situation Dr. Tim, and I do believe that you are right. All the pieces of the puzzle fit neatly together.
    This is definitely Option-II being played out, and as you have pointed out, our politicians are totally clueless. They really do not have one inkling as to what is really going on.
    Of course, if you are right Dr. Tim, and as I said I for one do believe that you are, then this is only the beginning, and things are only going to get worse from now on.
    It may however just be a straw fire, and it will all be over by Christmas, ( . . .where have I heard that line before ? ), but then again it may not, and the flames will be fanned in other European countries too.
    The UK with it’s Brexit mess may well join in the fun later, after all everybody can see where Brexit is going. ( It’s going to a place in which everybody, Leavers and Remainers, will be worse off than they were by staying in the EU ). Theresa May should really get a medal for this, I mean Why just upset some of the people, when you can upset everybody !

    I think that now is the time to start watching the price of physical Gold.

    • Gold has no price. It IS the price. Not that i promote it, i just like to take a blow at the ‘Fogs of Fiat’.

    • Houtskool,
      I concur.
      What I was eluding to was how many fiat $ or £ you will get in exchange for your real ounce of Au.

    • I have to add; we’re in trouble. Just look at the ‘tanks in the streets’ in Paris at the slightest touch of inconvenience….

      Poor basterds.

    • How does one watch the price of physical gold?

      It’s based on the paper market, which serves to water down demand substantially and allows those that can take delivery of physical.

      Only when this system breaks will we see what physical gold is really worth.

  11. About pensions and old people

    See the list of speakers at the upcoming Spring, 2019 Organic Grower’s School in Asheville, NC.

    John Todd is 80, and still in the saddle. Take a look at John Todd Designs:
    Be aware that yoga classes are taught immediately adjacent to the biological sewage system at the Omega Institute just north of New York City. Also be aware that Bill Gates has gotten interested in biological waste treatment. Of course, it will always be cheaper to just dump it in the river…but affordable, biological solutions have been built for decades.

    Take a look at Ira Wallace. Not in the best physical condition any more, but she pioneered intensive vegetable production in the Southeastern US and started and still maintains the Southern Exposure Seed Co-op. It is largely thanks to Ira that we are not dependent on Bayer/Monsanto’s tender mercies.

    I can’t find Peter Bane’s birthdate, but he shows a few miles on his face. Peter was already old when the fine people in Indiana decided that they had had enough of some unkempt guy growing food in suburbia, and Peter was forced to move to ‘deplorables’ country in Michigan.

    About 18 months ago somebody posted a photograph of a group of North Carolina farmers who had gone to Jamaica to try to help Jamaican farmers solve the problems they face. 3 of the people had died during the intervening two years or so. One of the deceased was Chuck Marsh. 3 years ago Chuck was teaching us how to build fences without wire, a result of his research on how peasants kept livestock where they belonged before they had wire fencing. The people in the UK might wish they had attended Chuck’s class before Brexit and the general collapse unwind.

    My point is that a lot of these people die pretty much with their boots in the stirrups. Maybe 3 bad months near the end, but they are not just parasites on civilization. Probably none of them had pensions to collect on…other than Social Security.

    The failure of pensions is serious, but it need not be fatal. Laherrere’s current article describes a peak oil expert who is so alarmed that he has gone back to India and bought 20 acres with the goal of establishing a regenerative lifestyle.

    In my opinion, it is good to separate the political problems from the real life problems. Not that, just like Peter Bane’s experience in Bloomington, Indiana, politics can’t make life very hard for people trying to do the right thing.

    Don Stewart

    • Donald,
      I must, respectfully, disagree with you.
      Bitcoin is being trashed by very powerful forces, central banks, IMF etc.
      A free independent currency / store of wealth is to them what green Kryptonite is to Superman.
      They are determined to kill it, so that they can then replace it with their own controlled version of it.
      The war is still being fought, and honestly I am quite surprised that Bitcoin is still holding up so well, despite the powerful onslaught of its opponents.
      I still think that Bitcoin will rebound from this to reach $25,000 or more. Of course, the central banks / IMF will not give up that easy, so we can expect another battle after Bitcoins next rise.

    • Well time will tell – someone I know will certainly be keeping his fingers cross for an upturn.

      I understand that there may well be other interests at stake here.

    • Donald,
      yes, sorry I should have declared my position on this.
      I do not hold Bitcoin as such, but I do hold Litecoin ( LTC ).
      Litecoin is cryptocurrency developed by Charlie Lee, formerly a Google engineer.
      he said at the time that he was making “Silver” ( cf Bitcoin being “gold” ).
      Litecoin is actually an improved version of Bitcoin, eg. there are 4x more coins available, and transaction times are much faster.
      I also “mine” LTC on my dedicated mining asic. I started in 2014 on my computer, mainly for the fun and a general interest in mathematics and programming.
      So far I have about US$ 2500 in coins at today’s value ( $25 each) so I will not be buying my Learjet any time soon, but hopefully I will still get a few cases of good wine out of it when I eventually do come to sell them.

    • Actually I do have a problem with Bitcoin – this being the amount of energy needed to mine it. This energy use is not creating anything of intrinsic value so therefore is an utter waste of precious resources.

      Litecoin sounds less energy intensive.

    • Hi Donald,
      This is an argument that we hear quite a lot.
      However, other sources of “Money” also require energy.
      Look at Visa or Mastercard. These systems do not run on fresh air either, just try to imagine the vast computing power behind these systems. Also the worldwide system of ATM’s.
      The fact that BTC mining can be calculated directly, ( LTC mining is less energy intensive because it is several orders of magnitude smaller than BTC ), it does not make the numbers excessive when we make a true comparison.

    • Well the differences between say Visa and Bitcoin is that Visa represents a way of allowing billions of transactions which are vital for a functioning economy.

      Bitcoin is just a speculative ‘currency’ which has few practical uses.

    • Hi Donald,
      Bitcoin is speculative for the time being, but it will eventually settle down. It may settle down to zero, but if that happens it’s only because it will have been replaced by another cryptocoin. ( In fact that is what interested me about Litecoin, it is basically an improved version of Bitcoin )
      Bitcoin also does have a very practical use.
      In fact it is the ideal payment mechanism for internet transactions. Much better that say Visa or Paypal etc.
      It is a method of sending funds over the internet almost instantaneously, where only the two parties doing the deal are involved. No intermediaries there to arrest or delay your funds or to take a slice of the pie each time.

  12. Dr. Morgan, does your model show the distribution of wealth at all? I think we all know that the distribution has become more uneven, but is it doing so at disparate rates across nations? Is France possibly suffering from worse wealth inequality than comparable nations?

    • It would be difficult to do this, though not impossible. Tools such as the Gini coefficient seem better at calibrating broad distributions (quintiles, say) than at isolating a bias towards a small (say 1%) cadre of super-rich.

      As things stand, SEEDS goes no further than per capita averages for the 27 economies (and global aggregates) on the system.

  13. Tim, As usual, thanks for this analysis on France’s context related to the “gilets jaunes”. Being a francophone living in Québec, I get detailed info on the “motivations” of the people living in France. And all of this reminds me of the Maslow Pyramid: a state must first ensure that basic needs to the population are fulfilled (housing, food, some basic education,…) and, secondly, that security (in a broader sense as you define it) is ensured then, thirdly, that the “environment” (urban environment, quality of food, medicare, pollution,…) is acted upon then… as one moves from a layer in the pyramid to the upper layer…

    As I see it, introducing a new tax on gasoline might respond to some “noble” imperatives (i.e. acting on the environment through lower carbon emissions,…) but, if a state doesn’t ensure that basic needs are fulfilled (or forgets about it) then you get what’s going on in France.

    As one of the “gilet jaune” stated:

    French: Comment voulez-vous qu’on parle d’environnement quand on a faim?
    English: How can someone talk/care about the environment when you’re hungry?

    My understanding is that what’s happening in France is much deeper than a reaction to a specific increase in the price of gasoline… Something really important is happening and if the “elite” doesn’t understand it, more trouble to come…

    • Thank you – I agree that this is a generalised state of discontent, by no means limited to fuel prices.

      The gist of my interpretation is that, indeed, the elites don’t understand this issue, partly because they are disconnected from everyday reality, but also because their economic interpretation is faulty.

      You can see this in the misplaced predictions of the “experts” upon whse advice the elites depend:

      – The FN would not reach the second round of voting in France
      – Mr Trump wouldn’t get the GOP nomination, let alone reach the White House
      – The British would vote decisively against “Brexit”
      – The British would give Mrs May a majority of over 100 seats

    • Great quote. You never see homeless, famished people demonstrating the streets with signs like “go green now!” or “no more carbon!”. The environmental movement is mainly run by priveliged people of EU/North America whom is afraid of losing their comfortable lifestyle due to claymate change.

      The poor have a lot less to lose in that respect and just want to climb up the ladder to a world of hot showers and cold beverage. Very interesting to see the yellow vests movement and I it could easily spread like the “arab spring”. Hopefully the elites will put 2+2 together and not just blame this on “restless youths” although it is part of the picture.

    • I really don’t think the elites will understand this, so long as they cling to mistaken economic interpretations and failed (or self-serving) ideologies.

      Even where “restless youth” is indeed a factor, what are the causes of their restlessness? My guess is the powers that be don’t understand this, either. Society, on the one hand, promotes a celebrity/consumption culture, and, on the other, slams the door to this ‘lifestyle’ in the faces of millions of the young – and is then surprised by the resulting discontent…….

  14. @drtimmmorgan @djerek “A journey from New York City to Montreal by train”

    A few years ago, while traveling by train from NY City to Montreal, I was surprised that, traveling through small town USA and the countryside, buildings seemed “old and neglected” and houses were neglected (paint peeling off, no flowers,…). And, as soon as the train crossed in Canada, houses were well maintained and freshly painted, flowers in the gardens, law in good condition, well maintained farming equipment,.. It raised the following question: since GDP per capita, in the US, is higher than in Canada (which translates as the “average American” being “richer” than the average Canadian), what’s going on since I was witnessing such discrepancies between the US and Canada?

    Looking more closely at the GDP as a metric and taking into account various comments from Jared Dillian and John Mauldin and others… Jared Dillian had subscribed a medicare program $19,000/year for himself and his 2 grown up sons, education costs in US much more expensive than in Canada, $7 max. daily rate for nursery here in Quebec,… which leads to the conclusion that the average Canadian gets more “net earnings” than the average American. I don’t mean to promote Canada as a better country but my conclusion was that GDP, as a metric, is a flawed metric that doesn’t translate properly the living conditions of the people living in any given country.

    And I got a better understanding of the “whole picture” when I was introduced to SEEDS and your own metric which makes sense on what’s happening… and which explains discrepancies in revenues for the average Frenchman, the average Italian,…

    • I know I can be accused of “blowing my own trumpet” here, but I think the SEEDS prosperity calculation really does address this issue, providing a better metric than GDP (or, for that matter, average earnings).

      It seems to me that, if prosperity rather than GDP gives us a better explanation for household-level differences like you describe, its aggregate equivalents give us a better insight at the macroeconomic level, too.

      It’s frustrating that this interpretation remains very much outside the mainstream – but it’s comforting to understand things that others, including government, do not.

  15. Regarding prosperity I would assume that at the moment it is still higher per capita in France than it was in 1990 – or is it that certain groups are actually poorer due to unfairer distribution of available wealth and / or population increases.

    I’m thinking about the UK too in this context.

    Perhaps there are other measures for example the physical deterioration of housing stock meaning that more people are living in substandard accommodation.

    • Yes, though there are a number of factors to consider.

      1. People in 1990 were more prosperous than they had ever been before, so couldn’t look back at better days – something which is not true now.

      2. Again unlike now, they had no reason to think things would stop progressing, not just for themselves but for their children too. Now, hope for a better future is low.

      3. Since 1990 there have been 28 years of “you are what you own” propaganda.

      4. The very rich can seem to be immune to the hardship faced by everyone else.

      5. Insecurity, of employment and more broadly, is worse now than then.

    • Yes looking forward to a better more prosperous future is a major factor especially as many jobs on offer now are very poor.

      I wouldn’t be optimistic about my future if I was forced to peddle around London delivering food to better off people.

    • Personally, I see nothing to commend the “gig” economy, a term itself perhaps borrowed from rock music in an attempt to put some glamour on what is really insecure casual work.

    • BTW, the per capita prosperity trend in the UK is as follows, in £000s at 2017 values:

      1980: £15.50
      1990: £20.18
      2000: £24.39
      2010: £23.19
      2017: £22.05
      2027: £20.44

    • Thanks interesting that we’re down to 1990 levels as that was the time of the Poll tax riots.

  16. Of course, priorities change with circumstances: I’m thinking of the young woman I chatted to in a garden centre in London: she said that she and her friends had no hope of getting anywhere, so concentrated on having a nice time when not working – mostly dirt cheap holidays, and eating out.

    She was qualified by her degree to train as a history teacher, but the example of her mother, a teacher in an unruly state school,exhausted and miserable, led her to dismiss that option as too awful! Maybe she will come around to it eventually.

    There is of course a significant risk of being attacked in those schools these days, as the ‘working’ class degenerate – we’ve all read the stories in The Guardian or got them first hand from (usually former) teachers, and now the knife problem seems to be unmanageable.

    Social decay makes what should be an attractive and secure profession a desperate last resort.

    Teachers are also having these problems in Spain, violent and abusive parents included. All part of the general breakdown of authority.

  17. Something which is often neglected is the cultural factor in the frequency, form and level of violence in protests.

    Spain is in a much worse state than France in many ways, above all the persistent high youth unemployment in some regions, but after a brief flurry of very big – but peaceful apart from state and police agents planted to provoke violence (caught on film!) and the usual ineffectual ‘anarchists’who do it all the time – protests in Madrid some years ago this has subsided.

    I would say young Spaniards have much more reason to try to over-throw the status quo, but so much for the famous Latin temperament….

    Perhaps the more or less lawless nature of the police in Spain – you know you will get very rough treatment, even torture, if taken back to a cell and you don’t have ‘connections’ – is suitable discouraging?

    The law courts are complicit in this: accusations of torture, display of injuries, will not go very far. In fact, civil liberties in Spain has been severely curtailed since 2008, nd there are signs that more may come with the resurgence of true Francoist parties, misnamed ‘Constitutionalist’. The idiotic, bungled, Catalan declaration of ‘independence’ has only hastened this process.

    France has a broad-based anti-authoritarian tradition based on street protests that Spain lacks.

    It has to recognised, too, that there is not just one ‘Populism’ as a Europe-wide phenomenon. In fact, some forms – such as the Brexit vote – are distinctly conservative, and attract the educated and well-off as much as the benighted masses.

    • @Xabier Yes, indeed, “cultural factors” vary from one nation to the other and some react more “sanguinely” than others. But there’s a basic fact that applies to all: if people are starving and feel they are mistreated then…

      For instance, the Russian revolution was fueled by people hungry and starving. I recall visiting a nearby park to the Ermitage Palace where hungry demonstrators, unarmed, where brutally charged by the police and killed on the premises. These people were demonstrating peacefully, had no tendency of demonstrating with violence. That’s how the elite responded and we know what happened afterwards.

      Which brings me back to the Maslow Pyramid: when basic needs are not fulfilled then…

      And, BTW, from Tim’s reference to the study released by the Institut des Politiques Publiques mentions something quite interesting:
      retirees will get – 1@2 % less revenues in 2019… more trouble to come in France…

  18. Hi Tim

    Thanks for a very topical piece on an event which might well herald significant changes.

    I don’t think it’s just about economics. We’ve had nearly forty years during which much of industry has been closed down and transferred to the Far East. I’m not complaining about this because it’s lifted many millions out of abject poverty and that is a great achievement.

    However, many millions in the West have “lost” and I don’t mean just economically. We’ve had the rise of monopolies which have decimated small businesses in innumerable small towns and the loss of industry has gutted these places as well. These small businesses were part of the local culture and there loss is not just economic; everything is just more impersonal.

    Trust in political structures has also declined and folk are just beginning to twig that a country may be described as a democracy but it is actually far from being democratic. We are today ruled it seems not by representatives but more by political bureaucrats with a toolbox dominated by spin and little else. You yourself write about issues which are the elephants in the room but which are never discussed by mainstream politicians.

    The gilets jaunes may be a motley crew but there is a lot of “motley” around!

    • Very good points Bob.

      I could be more positive about globalisation if the increase of production in the EM economies had been matched by a greater emphasis on consumption there. Instead, the aim has been to make goods cheaply to be sold to Western consumers made increasingly dependent on credit by the export of skilled jobs. This put profit before the interests of the economy – I don’t blame businesses for that, but I do blame governments for letting it happen.

      As you say, monopolistic behaviour has become rife, especially since 2008 – that’s not surprising, because the authorities gave up any pretence of really adhering to the laws of the market when they rescued those corporations and ultra-wealthy individuals who would otherwise have fallen victim to market forces.

      In a post-capitalist era, what we really have now is a system run by and for the big battalions.

      If you take a broad view, this does look like the opening phase of a revolution, and not just because France happens to be the current venue. The incumbent political and corporate elites have over-reached themselves, and will soon find themselves fighting a rear-guard action, and one that they’re not likely to win.

  19. The Guardian has a useful summary of the demands of the Yellow Jackets: in summary, Utopia – but restoration of purchasing power seems to be more or less central.

    • @Xabier

      All the cultural memes are about consumption, having a good life, self realisation and so on. There is no reflection on the inconsistency between a population growing faster than the resources to sustain them; the growth of monopoly power which means rent extraction by way of higher prices; the challenges posed by automation/AI; the huge increase in debt servitude and on and on…. The only real issue which has made any traction is climate change.

      Quite apart from the disconnect between the memes and what is really going on is the simpler issue of recent memory. The economy has grown; I’ve more “stuff”; why do I feel poorer? And why should I accept this? Somebody is to blame!

      Of course the political and power structure conspires to distract and provide pourboires but that is of limited efficacy. So, ultimately, the great unwashed twig what is actually going on and they don’t like it; but of course the utopian demands of the gilets jaunes are destined to fail because they have no notion of the basic economic concept of the trade off and no notion of the scarcity of resources.

    • Indeed so – the demands do look utopian, though I suspect those involved think their aims are modest, when compared with the situation of the rich minority…

      From the government’s perspective, they now have 23% who approve of Mr Macron, and about 70% who support the protestors. That’s not comforting arithmetic, especially as you cannot give the majority what they want, even if you were minded to do so. Historically, where the population splits roughly 75/25 against the incumbent regime, the omens are bad.

      More to the point, perhaps, what can the government (in France or elsewhere) do about this? That may be the topic for the next article here.

    • I suppose if the French police act intelligently and take out the right people -as they seem to be doing now – and it is seen to be fair, then only the criminal and semi-criminal element of society will be aggrieved.

      I sense that people in France have been shocked by the level of violence and will be relieved to see law and order restored. I certainly would be.

      Don’t French presidents have to live with being fantastically unpopular?

      Whereas in Spain, at the time of the big marches and protests, the police acted unjustly, provoked violence using agents and attacked entirely peaceful people, many of whom weren’t even demonstrating!

      Nonetheless, this was swallowed, and did not result in the downfall of the government: as, in a true authoritarian (almost police) state like Spain, you can’t argue with authority and win.

      When my (moderate Right-wing) cousins tried to vote in the Catalan referendum, they were shocked by the brutality of the police, having seen it up close for the first time.

      This, by the way, is why support for the EU remains strong on the Left, as they see European higher courts as the last court of appeal against the abuse of power one can only expect in Spain itself.

  20. Excellent observations, Bob: public discourse seems doomed to unreality and incomprehension, and in consequence growing frustration, despair and anger.

    One point I would make about European attitudes and the stubborn defence of ‘rights’ is that many people in the South at least know just how hard the lives of their grandparents were – above all those who lived in what appear to us to have been ‘rural idylls’ but were in reality haunted by cold, hunger, poverty and TB and typhus (for instance, my projected refuge in the mountains!) , and are afraid of going back to that – it lurks subconsciously.

    The great problem is that hardly anyone can grasp that the welfare state – itself a noble ideal of which Europeans can be proud- was born of a brief interlude of unprecedented energy abundance, and not just the product of idealistic political struggle (‘social conquests’ as the Left say in Spain).

    We’re dealing with hard physical reality, but the discourse is moral and political. Like asking a dangerous mountain to be nice to us so that we can climb it without risk of dying: the mountain is indifferent to our aspirations…….

    • Industrialisation brought on the welfare state and having plenty of spare energy capacity has allowed it to survive, although politically it has seen a lot of right wing opposition even today. I think it will survive because you can’t unsee it and it will be there as long as resources exist sufficient to keep it going, at least in part. The hard physical reality will be what happens to a government that attempts to demolish it
      We live on a knife edge. Have you ever seen programs on factories and airports etc, how close they work to chaos? The one on Atlanta airport I saw has 63,000 staff to deal with 2,700 flights daily and 104 million passengers every year, without mishap. We skim over that when we go flying but an outing or hitch would have chaos take over in a minute. There are 16,000 planes and a million passengers in the air at any one time. The energy cost is remarkable. This is what we consume today with hundreds of such operations keeping us moving.It cannot keep growing, but welfare will not be an early casualty.

    • It’s an oddity that economic progress, while good in so many ways, seems to distance us more and more from the inherent unpredictability and even the nature of the World; it comforts and enhances for sure but also insulates.

      A couple of small examples. I used to shell the peas for Sunday lunch when I was a child; if you asked the average eight year old today where peas come from they’d probably say the supermarket; there is no notion of a long process behind the product. One hundred years ago life expectancy was much lower than today and death was much more of an everyday occurrence to be dealt with; today modern medicine has improved that hugely to the point where death is almost a taboo subject; it’s almost as if people now implicitly expect immortality, despite many indulging in risky behavior.

      The point in all this is this: do we get more insulated from the World as we get richer and simply lose the appreciation of earlier ages of the contingent nature of life? In a curious way, and pushing the point, is there an inverse relationship between prosperity and knowledge? Although we may have the means to greater knowledge it doesn’t seem that people are smarter; in fact because they are so insulated from the vagaries of life they need to think less.

      If people do think less then they are obviously more easily swayed by whatever snake oil is being sold at the time and, by and large, are little more than puppets. By the way I do not exempt myself from herd like behavior.

    • As well as remembering shelling peas (and stirring cake-mix), there are other things present in my rural upbringing that seem not to exist now. Yellowhammers and tree sparrows were commonplace. Meanwhile, how many youngsters today have never fished for, or even seen, sticklebacks, minnows or bleaks?

    • What is the difference between “Welfare” and “Charity” ?
      In our modern Welfare States, I constantly hear people talking about their Rights and their Entitlements.
      If we are living in a system of sound monetary policy, and not in one by which Money is created ex-nihilo, then somebody somewhere is paying for all these benefits.
      Now I for one ( as a tax-payer ) am particularly upset by the high pensions paid to the Public Sector, and I am particularly upset by cosmetic operations carried out by the health service. ( just two examples )
      So when the financial bubble that we inhabit today finally gets burst on the pin of reality, then Welfare and “unnecessary” operations will be the first under the microscope. If we are forced to “Cut our coat according to our cloth”, then the people who pay will demand a bigger say in where there hard earned is spent.
      Call me a bad person if you will, but if I have worked and saved hard all my life, then I do not want to see my money being spent on things that I deem to be either excessive or useless. ( and that is not just Trident and HMS QE-II, but also putting knobbly kerb stones on every street corner ).
      Welfare must be reduced to covering Absolute poverty, as opposed to supplying a lifestyle on benefits which is not much different to the lifestyle of many who are in work.
      As I said, if I was paying for it, ( and as taxpayers, we all are ) then I would be much more discerning as to who gets my Charity.

    • You need to get the macro economics right,Johan. Otherwise you can’t make good sense. Welfare is government funded, Charity is private via donations etc. If the government was doing its job correctly, charity would hardly be necessary. We wouldn’t have to donate tax paid cash to someone entitled to welfare.

      We are living in a sound monetary system. It’s just that it’s very much misunderstood. Few know how money is created. Ask yourselves, do you really know? Did the dollar exist before there was a constitution. Etc
      Your [federal] taxes are just a cut to your spending power, but it’s not passed on, just extinguished. The Government creates enough to make up the losses. It may sound weird, but it is the only way it can work!

    • Hello John D.
      We have been here before.
      I am Austrian, ( well at least on my mother’s side. )
      I do not believe that MMT is a valid description of how an economy works.
      I believe that it is a fundamentally flawed concept. I know that people claim that, because it is said to be to be counter-intuitive and that only the enlightened understand it, I still prefer to hold on to my intuition.
      My Macro-economics is doing all right, thank you.

    • Call it what ever you like Johan, it is what actually happens. There is no fundamental flaw. That’s its strength. I can’t care that you don’t believe. It’s your problem. And you can’t point out the flaw anyway.

    • John D.
      I can point out the flaws of MMT, but I am not going to Hijack Dr Tim’s blog here to do so.

    • I’m sure you cannot make a case, so Tim’s blog is in the clear. Just 1 question: where does money come from, the US dollar for example. It can be answered in one line.

    • John,
      As I recall, most US$ are loaned into existence by private commercial banks.
      How does this support MMT?

    • Yes, most new money is spent by banks. That currency is not a different to look at but it is liability money. Adding to zero means the liability free Federal money is the only money that counts in the government’s fiscal budget calculations. It compares with the destroyed money called taxation, If taxes exceed spending then you have a budget surplus. If not and spending dominates it is galled a budget deficit. This is the existing workings and thus MMT covers it.

      The erroneous theories from the mainstream would have the government borrowing its own money and taxing before spending, which is just ludicrous, impossible in fact.

    • “What is the difference between “Welfare” and “Charity” ?”

      The former is funded with implicit consent and the latter is funded with explicit consent. In either case, obtaining such consents in a world in which the economy which has ceased to grow will require much greater accountability and transparency regarding how the money is spent.

    • Thank you Will! !
      That is exactly the point that I was trying to make !

      As the Pie gets smaller, the dividing up is going to be under much closer scrutiny.

  21. I will have a few things to say about France, the Paris Agreement, Donald Trump, and Scarcity.

    Let me start by analyzing this message from Australia:
    ‘While most farmers are struggling to achieve the yields and profits they want there’s a new generation of innovative, ultra-profitable farmers who have been transforming the ecological farming industry naturally and inexpensively to improve soil fertility without using inputs.

    Alan Broughton’s Ecological Soil Management program enables you to join this new generation of farmers. Based on countless years of working and teaching and advising farmers just like you, the course is comprehensive and broad-based covering all facets of ecological farming and designed to help you to discover new ways to build a healthy soil.

    Puts you back in the driver’s seat on your farm.’


    *It’s about abundance, not scarcity

    *But it is built on the ashes of the failed industrial model of agriculture

    *Alan Broughton can show you the way, which many other farmers are using in the real world

    *While you have to pay for the course, we will give you a free introduction

    Trump’s taunts at Macron are using similar psychology: How stupid of Macron to try to sell hardship, when there is no pressing need for hardship.

    Could Macron have sold some version of The Boating Party. (Search on the Renoir picture if you aren’t familiar with it.)

    I happen to be reading The Nature Instinct: Relearning Our Lost Intuition for the Inner Workings of the Natural World by Tristan Gooley, an Englishman. One of the points he makes is that the creatures of the world pay attention to only a few things…the things which are important to their survival and flourishing. E.O. Wilson makes a similar observation when he notes that even a trained naturalist notices only about one thousandth of one percent of what is happening around them and in them. Tim Wu wrote The Attention Merchants about the rise of supposedly ‘high-tech’ ways of capturing the public’s attention. Max Keiser and Stacey Herbert concluded from their recent road trip across the US that people want ‘simple solutions’.

    One conclusion is that industrial humans are trying to live in a world that they were not designed by Natural Selection to live in. No animal or plant is smart enough to live life in such a way that climate change will be avoided in future generations. It is probably only our religious creation stories which place humans (or some particular segment of humans) on a pinnacle that gives us the illusion that we won’t collectively behave like the other plants and animals.

    A second conclusion is that, because we are not living in the world we were designed to live in, we are bombarded with information overload. And a lot of the information is the Real Fake News…concocted by people who want to sell us something. A psychologist at the U of North Carolina coined the phrase ‘safe and sated’ a few years ago to describe the condition that people have to be in if we want them to consider change. I would add ‘not frazzled’ to that list. Yet politicians pursue policies at odds with ‘safe and sated’ and the media are addicted to ‘if it bleeds it leads’. As one example of the media, a local TV weatherman has been trying to inject some reality into rain forecasts. His point is that by saying ‘there is a high chance of rain’ the media are acting like attention merchants, but they are ruining perfectly good opportunities for people. They ruin opportunities because ‘rain’ is defined as barely enough to wet a sidewalk…which isn’t nearly enough to upset 99 percent of whatever plans you had made. He has not gotten support. Apparently, the media is wedded to the bleeding and leading.

    A third conclusion is that it’s hard now to reconstruct The Boating Party…unless one has a yacht. I was living in New Jersey when the Puerto Ricans started frequenting the local public park. They had enormous families engaged in the activities portrayed in Renoir’s painting. Not at all the sedate outings of the local gentry. This led to conflict. A governor of New Jersey closed a public lake to fishing…and I am convinced it was because Puerto Rican and African Americans had started fishing there with simple bamboo poles while sitting on the bank eating beanie-weenies.

    A fourth conclusion is that debt is the enemy of a Boating Party. If one can’t make the rent or the payments on the car, then one hasn’t got the time or energy to engage in Boating Parties. Additionally, if one is commuting long distances to work in rush hour traffic, one’s life is filled with scarcity rather than plenty. If SEEDS shows that, financially, things are getting worse, one can confidently assume that most people are feeling scarcity, not plenty. They are not safe and they are not sated and they are frazzled.

    The people in The Boating Party had only a tiny fraction of the ‘stuff’ that we have today. But the girls were just as beautiful and the wine flowed just as sweetly. If I were smart enough to be the President of France, I would try to find a way to promote Boating Parties. Perhaps by bringing Alan Broughton over from Australia to show the rural people that a relaxed, civilized, ecologically based lifestyle is achievable.

    Don Stewart

    • ‘Boating parties’ sounds nice Don as we need to get away from the culture of say having a better car than our neighbours.

  22. Health spending can be cut, as no one will riot over the death of a granny, someone who doesn’t get an appendix dealt with in time, or even of a baby: people suffer pain and die one by one.

    Pensions can be cut in real terms, for the same reasons it – just results in a higher mortality rate, not in riots.

    Although, since 2008, we have seen in Southern Europe that pensions have been the lifeline for a stressed younger generation, and a vital part of total family income.

    Of course, there can be the obvious electoral consequences, such as the rise of parties making silly promises like pensions at 55, free care for the elderly, a wave of public sector recruitment in secure jobs, etc.

    But adequate spending on the lowest and youngest strata of society has to be maintained in some form and be a priority, as they can and do riot…..

    The Neo-Liberals seem to imagine that they can dodge the issue of redistribution of (their) wealth – which is a logical answer to declining prosperity – and collapse the welfare state bit by bit; but one doubts they can do this safely, not least because their ideology has no emotional appeal to counter-balance the pain, and no one now believes their claim that they have made the best of all possible worlds.

    • It’s one thing for “the rich” to go on adding to their wealth when everyone else is getting at least a little better off year after year – but quite another when the majority is getting poorer, as I now believe to be the case.

      To me, this points to the rise of pressure for redistribution, implying that, in the not-too-distant future, only parties committed to it will win elections.

      At this point, the smart move for the elites would be to recognise this, and try to shape it rather than simply resisting it. In other words, try to be a bit smarter than Nicholas II or Louis XVI….

  23. My parents generation is probably the last to enjoy widespread final salary pensions, along with reasonably lengthy retirements. Amongst my friends I know almost none whom have a final salary pension. Those that did a few years ago, the scheme has closed and all new accrual are in a money purchase scheme.

    When I look around at a lot of the ‘consumption’ (meals out, holidays, new/neatly new cars that are not PCP) I conclude that a large amount of enabled by the final salary pensions spending. So as these taper out in the next couple of decades, it seems logical that this big chunk of consumption will disappear too.

    • Thank you David.

      Your first point is consistent with my (macroeconomic, stats-based) view that we’re destroying pension provision to subsidise the present.

      Your comments linking this to consumption are insightful. Here in my part of Spain, we have most tourists numerically in July and August, but tourist businesses fare better in June and September, when older people, not tied to school holidays and wanting to avoid the peaks of humidity and heat, prefer to come – and have a lot more spending-power.

  24. Don,
    Excellent and hopeful analysis and recommendations . So much of this was understood and predicted back in the 70s when the west first hit the energy wall. I am thinking not only of the Limits to Growth but the works of Ivan Illich. Your boating party analogy harkens strongly to Illich’s critique of technology, industrialism, education and institutions as unnatural, and his recommendations that we need a society and outlook that promotes conviviality- a very strong theme in his works. See, e.g., Tools for Conviviality, and his critique of the automobile society in Energy and Equity.

  25. Here are some numbers, sourced from SEEDS, which I think might startle you as much as they’ve startled me.

    Back in 2000, prosperity per capita in France was €29,350. The figure for 2017 was €27,250 (-7%)

    Of these respective totals, the government spent €16,310 per person in 2000, and €19,940 last year (+22%).

    Prosperity remaining in the hands of the individual was therefore €13,040 in 2000, but only €7,320 (-44%) last year!

    Essentially, this means that prosperity in the hands of the average person – not funded from debt, required for essentials or spent on his or her behalf by the state – has collapsed.

    • Tim,
      Please can you explain what are included under the Prosperity and Government columns on the table you posted?

    • The table is based on prosperity, as discussed in this and (especially) the preceding article. The government piece is public spending, per capita. What remains is the part of the prosperity calculation left to the individual. I could and perhaps should have used tax rather than public spending, but the differences tend to be very small.

  26. Very true about elderly tourism in September: Cambridge empties out in September – extending into October these days – as the retired are noticeably absent from their large houses on the west side of town.

    The restaurant (formerly a proper country pub) in the next village is full of grey hairs all the time – the only ones who can afford it!

  27. I wonder how many apparently well-off UK pensioners have released equity from their property?

    An ad popped up on my screen for one of these schemes, and out of curiosity I clicked on it.

    Rather shocked, in that it encouraged a hapless couple who ‘weren’t as well off as they thought they’d be in retirement’ and were in debt already (!!) to ‘unlock’ their wealth so they could, basically, pay off the debt and splurge on holidays.

    No doubt getting back to square one pretty quickly….

    Idiots to do that; and immoral to lure them into it.

    • People who perfectly understand what they’re getting when they buy a refrigerator or a washing-machine are easily bamboozled when they are in the market for financial products.

      It is hardly surprising – though it is reprehensible – that the elderly, in particular, are exploited in this way. As well as tending to have more assets, older people may have limited knowledge of modern financial ‘innovation’, and may be over-inclined to trust.

      Quite a few years ago, my mother needed to replace her car. We went to a showroom where a scheme was explained to her. I forget the details, but it involved a guaranteed trade-in price for the car. Anyway, I’d brought a calculator and, in front of her and the salesman, I went through the numbers and she was shocked by what it really meant. The salesman ruefully admitted it, and said he was glad that most customers’ sons weren’t financial analysts!!

  28. Xavier, a few years ago my wife’s parents were downsizing and looking to realise some of the house equity as a pension provision via equity release. The sales lady did a very good job on them. Thankfully at the last minute they realised it was not the deal it was dressed up to be. The equity release would have meant a cash lump up front followed by an income, but with the full value of the house being ‘lost”. Instead they moved to a smaller house that released a lump of cash. This should last them 10 years and now they still have a house that is appreciating (somewhat). This can be sold later if needed.

    The product they were offered looked very much like a ‘reverse mortgage’ – first we give you your deposit back and then we give you back your mortgage repayments. The killer is the percentage! It was about twice what you would have expected and this is how they take your money (above what would be fair for the lending service they provide).

    • What’s the old saying: ‘Man is the Wolf that preys on Man’ ?

      I work on the rule of thumb that if someone really, really wants to sell me something, ‘to make my life better and more fun’ then it would actually be of any real advantage to me is at best a secondary consideration for them.

      I once exhibited some paintings in the foyer of a firm of sharp pensions advisors, knowing their boss: two paintings were stolen…..

  29. I’ve found it’s possible to withhold some technical bits which, whilst not detracting from reader understanding of principles and results, effectively prevent the building of a copycat system.

    I still don’t understand your concern about copycats. Are the “technical bits” of SEEDS necessary to your income? If mainstream economists or TPTB had any interest in duplicating the basics of SEEDS they could do so in an instant. I think many of your readership could help you with a quite valuable technical critique if you let them.

    On government debt… If a country runs a big trade deficit, funded by money injected into that country’s economy by government debt, the items purchased from abroad with that money could lead to permanent prosperity if the debt (of the trade deficit country) held by the producing countries is abrogated or rapidly devalued by inflation. Real goods are acquired and prosperity increased, all through the issuance and later repudiation of debt. Some might call it theft, but theft of resources has historically been one of the principle preoccupations of governments, hence the number of walled towns all over the world, perhaps even in Mallorca.

    • Unfortunately, ‘real goods’ are subject to devaluation and physical decay,a and require viable energy flows to maintain, repair, and rebuild -even to demolish and recycle. A civilization is its energy flows.

    • You have government debt all wrong. It is investor assets stored as bonds in the Central bank. The government cannot use the money as they don’t “own” the bonds.They just look after them, and pay interest.] A trade deficit is a good thing because the debtor nation has obtained worthwhile goods and survives in exchange for the number representing the debt figure. marked up in their account at the CB. Who gets the better deal? in any case that account also has say China’s dollars representing the total trade but which doesn’t earn anything for the holder. So they invest some of it in bonds. The USA runs an enormous trade deficit and it’s highly profitable for them.

  30. Looking at he table, would the higher per capita government spending in most Continental countries compared to the UK be partly a result of heavily-subsidised public transport,as well as the notoriously superior provision of public health care?

    I noticed in comments about France that people seem to find it very cheap to get around, especially in Paris, and in a 2018 survey of European and British customers of an online bank, which looked at basic living costs, the UK stood out as crushing disposable income with horrendous travel costs (as well as, ahem, housing).

    • Continental countries don’t spend that much more on healthcare than the UK.


      Converted to US$ to allow easier comparison, the UK spends $4,246 per capita and France spends $4,902. However, the french number includes the pensions of healthcare workers where as the british number does not.

  31. Hi Tim

    Excellent work as always and there are lots of extremely important things here that everyone desperate needs to understand and discuss. Outside of the main stream media, on the internet there is a good deal of worthy critique of our current state of affairs but one only comes across them by chance. In this respect it would be highly useful if you could provide a curriculum or syllabus of your articles so people could effectively educate themselves about these things in a more structured manner as these subjects are so phenomenally complicated and shouldn’t be left to chance discovery.

  32. My condolences to the British. It seems, to the observer across the Atlantic, to be a three ring circus without a ringleader. It also seems that the British WANT strong leadership.

    In the US, we seem to do better with divided governments which are ineffective. Dmitry Orlov has observed that Russia seems to prosper more under moderately authoritarian governments (but not anything like the Soviet system). Years ago I read some pundit claiming that Italy prospered under hopelessly corrupt governments.

    Maybe there is no One Size Fits All.

    Don Stewart

    • The irony about this is that the Conservatives, under David Cameron, only called the “Brexit” vote in the first place to tackle internal divisions within their own party. Then, the public having voted Leave, they appointed a Remain supporter to negotiate it.

    • I would say that wanting a Strong Leader is not terribly British – that can be left to more primitive societies with different psychologies and a less well-developed sense of the ridiculous (it’s why Mosley failed in his silly blak uniform): but there is, perhaps, an overwhelming and unfulfilled yearning for something like competence, and other than purely farcical…….

      Life’s a Jest

      I always thought it:

      Now watching Brexit,

      I know it!

  33. Al Jazeera quotes a British university professor:
    “We end up with a zombie government: unable to get its key policy through parliament but unable to be killed off … in short, no one’s in charge.”

    Reminds me of Will Rogers affirmation: ‘I am a member of no organized political party…I’m a Democrat’. Of course, when Will said it, perhaps while twirling his rope, it was funny.

    Don Stewart

    • Right now, it also reminds me of France. Mr Macron’s announcements will do little or nothing to win over the c70% who support the protestors, and ruling out higher taxes on the ultra-wealthy is, politically, a blunder.

  34. Quite right about Macron: people will accept a high taxes/efficient state services trade-off, with an acceptable if not lavish way of life (in Europe, that means plenty of money to spend on the sacred August break): what they will not swallow is higher taxes, declining way of life, and relief for the super-rich – who on earth swallows trickle down these days?

    People like Macron seem to be operating in a vacuum: like Teresa May’s awful ‘Capitalism is good’ speech, it just doesn’t wash.

    Increasingly, too, in Spain I see comments which question high general taxes and the extension of welfare paid for by those taxes to newly-arrived immigrants: this will become an ever hotter topic as prosperity declines or wage stagnation continues.

    In our province of Navarre, immigrants make up 45% of the claimants, and some groups are 100% unemployed: the Neo-Libs say the migrants are vital to the economy -disproved by the high unemployment rate – and the radical Left say that society has to show ‘solidarity’, which goes down badly with their working-class voters who may only be earning 1k euros per month themselves, welfare dishing out more for doing nothing at all.

    The working-class are also getting restive with the lunatic radical feminist policies which are now the mode : what’s that got to do with our need for higher wages they ask…..

    • Macron’s case illustrates what I think is an almost iron law: that welfare spending only grows; it never diminishes.

      As welfare spending grows it creates a constituencies and these constituencies only grow; they never become fewer. If an attempt is made to cut welfare spending the constituency revolts and the government backpedals. Even creating different priorities within the same spending limits will cause a revolt because there will be losers who will shout while those who gain say nothing.

      Hence the extraordinary difficulty in reforming welfare systems let alone cutting spending on welfare beyond the marginal. Where you have a historically strong and extensive state as in France it is almost impossible this side of revolution.

    • Indeed – and there is what we might call the ‘reverse productivity paradox, too.

      In the private sector, things are said to improve if a business produces, say, more widgets per employee. But the reverse applies in public services. Schooling might be deemed better if there are fewer, not more, pupils per teacher, and health care better where there are fewer, not more, patients per doctor. Over time, and assuming that both progress towards their objectives, the split will move towards a larger public and a smaller private share of resources.

      I recall that, in 2010, the civilian workforce of the Ministry of Defence exceeded the combined uniformed strength of the Royal Navy and RAF – yet the MoD was formed (by amalgamating the Admiralty, War Office and Air Ministry) to reduce administrative overheads! Parkinson’s Law is s pot on, yet again.

      There are indeed many ‘interested constituencies’, a big enough problem even when prosperity was still growing – now that it’s turned down, the ‘turf wars’ will gain even greater intensity.

    • I think you should rethink welfare and not treat it as a perjorative. Dependency is a separate issue and needs its own solutions. Don’t confuse the two.

  35. Christmas Carols; Hard Times; The Nature Instinct
    For those with some time over the holidays, and no inclination to listen to the sickly sweet parade of Christmas Carols which are everywhere, and who are thinking that times may get a lot harder before they get better….

    I suggest reading The Nature Instinct: Relearning Our Lost Intuition for the Inner Workings of the Natural World, by Tristan Gooley. Gooley is an Englishman, who holds the distinction of being the only person to both fly and sail across the Atlantic single-handed.

    Several things make the book interesting. First, it highlights energy balance. Predator and prey behavior are explained in terms of energy balance. For example, lions do not successfully capture and eat most of the prey they chase, so they must choose the individual to pursue carefully. And the prey may engage in displays of fitness, such as jumping around, to convince the lion that chasing some old and infirm individual is going to be more rewarding. Each species is exquisitely adapted to survive in a world where only a minuscule of all the young which are birthed or eggs which hatch or seeds which sprout or bacteria which divide ever survive to die of old age. The book helps us to consider all the tricks of the trade. Humans used to know these tricks, partly because our success as hunters depended upon it. A hunter can predict where a spooked animal will go next with some degree of accuracy. A human hunter may also be able to leverage the presence of a carnivore to assist their own efforts.

    As one simple example, consider a gamekeeper who meets a stoat while walking across a field. It is a mistake to kill the stoat, although the stoat is know to kill domesticated livestock. The correct response is to follow the stoat back to its den and kill the whole family.

    I don’t think they teach these kinds of lessons in proper English schools in London….nor in Hollywood. If the population of humans is due to go from perhaps 8 billion to perhaps 1 billion, it makes sense to begin to think differently.

    Which is not to downplay the role of cooperation. Humans are a social species, and we urgently need to cooperate with other humans. The circumference of cooperation, however, is not likely to be global and may well be very much smaller than that. Gooley gives an energy based explanation for herd behavior, which you will find interesting.

    Don Stewart

    • Viking thoughts on co-operation, very much pre-fossil fuel real life:

      ‘How shall I treat my friend?’

      ‘Treat him well, make him gifts, defend him, assist him – for your own sake, as well as his’.

      ‘And how shall I treat the friend of my enemy?’

      ‘Smile, be pleasant: and, when you can……kill him.’

      Rather calls to mind the destruction of Gaddafi after his brief reconciliation with the West.

  36. The most depressing thing, IMO, about Macron’s “offerings” to the French deplorables is that it indicates that TPTB really have no clue about what is happening, from the rising ECoE perspective, finite resources vs. infinite growth economy. They are still trying to buy people off with a few additional crumbs while leaving the fundamentals of the economic system that funnel outsized financial rewards to a very small group of plutocrats. Or, like May, they are still making appeals to ideology (how great “capitalism” is). Neither of these strategies is working so well anymore, and TPTB really have no clue what to do, because they start with the very Dick Cheney-like viewpoint (“the American way of life is non-negotiable”) that the existing system must be preserved. A few must continue to get what they want, i.e., MORE, so others will have to bear the increasing costs of making that happen for them, and disproportionately bear the effects of the shrinking economic pie. Labor (and nature) must continue to be the sink for the externalities of the system so that capital / finance may thrive.

    We’ll have to wait till Saturday to see how much dissent has been quelled by these latest promises, but meanwhile, the folks over at Zerohedge are already having fun inquiring how Brussels is going to “rationalize why one of its favorite core members is allowed to pursue populist measures to blow out its budget deficit to ease domestic unrest while another is threatened with fines potentially amounting to billions of euros.” The article notes that Macron’s proposed “massive tax cuts that could blow the French budget out beyond the 3% budget threshold outlined in the bloc’s fiscal rules,” while “By comparison, Italy’s initial projections put its deficit target at 2.4%, a number which Europe has repeatedly refused to consider.” See”Europe Has A New Problem: Macron’s “Populism” To Blow Out French Budget Deficit Far Beyond Italy’s ”

    I guess Italy should declare a social state of emergency, like Macron did, and then budget deficits will be okay. We know that raising taxes on corporations and the truly rich to meet deficit spending target are NOT on the table.

    Do these people really think that their actions, and the attitudes that underlie them, are not transparent to the deplorables?

    • My amateur comments on energy collapse and the response of the PTB
      I can’t vouch for what Macron or May may understand or not understand. I think I understand Russia and the US to some extent. My Exhibit One is the loud response of US Secretary of State Mike Pompeo to Russia flying a couple of bombers to Venezuela to participate in a joint exercise. Just a few days ago US Secretary of the Interior Zinke was proclaiming that ‘Christmas came early this year’ as he announced huge reserves in the Delaware Basin in western Texas and New Mexico. Zinke proclaimed that the US is well on its way toward ‘Energy Dominance’.

      If I understand the North American oil situation correctly, both Canadian heavy oil and Venezuelan heavy oil are needed to pair with the ultra-light oil produced by fracking. So Pompeo understands the Russian gesture as messing in what Pompeo perceives as a US colony which will dutifully supply the heavy oil needed by the refineries on the Gulf Coast.

      So I think that Ahmed is not correctly assessing the knowledge and attitudes of the US PTB. Remember that Candidate Trump told the TV audience that ‘if we need the oil, we will take it’.

      Whether the Military understands the declining EROI (or increasing ECoE) issue and wants to do something to reformulate civilian society is something I don’t know. One straw in the wind is that Silicon Valley, which was founded by people who wanted no part of the Defense Establishment, is now currying favor with the Defense Establishment. It may well be that official Washington thinks that Google and Facebook and Amazon can be used to reformulate the economy.

      Don Stewart

    • By the way Don I tried out the Link in the Telegraph saying that – apart from Brexit there are serious problems on the horizon

      Some responses –

      Another project fear
      I lost the will to leave after reading a few lines
      What a Durge.

      Well I’m not going to convince mainstream readers

  37. Some follow-up work on this suggests that, statistically, Holland and Britain are the likeliest places for the next ‘yellow jacket’ protests. I like someone’s quip that Britain would have a “string vest” protest.

    I also think Macron’s concessions give France a bigger fiscal deficit than Italy – but I somehow doubt that France will get the same hostile treatment from the EU………..

    • Hi Tim

      You’re right about the disparity in treatment; in fact D Maio said: “If the deficit-to-GDP rules are valid for Italy, then I expect them to be valid for Macron,”.

      I fully realise that the Growth and Stability Pact was entered into voluntarily by members of the EU but there is something incongruous about a nation like France or Italy having to submit their plans to outside bureaucrats for approval. Although entered into for good reasons it has the air about it, not so much that it abrogates national sovereignty, but of something that just won’t work in the real world. There must be an assumption that it will change behavior but it’s clear that there are circumstances where such rules are inappropriate and are just too inflexible and remote.

  38. Pingback: The Yellow Vests: Is Europe seeing the world's first climate riot? - Ecologise

  39. Merry Christmas and Happy New year 🙂

    I have been looking into the French debt situation, and considering the problem, their are surprisingly few articles.

    Is this something everyone is overlooking?

    Could this come in from left field and cause a major fracture to the EU?

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