#149: The big challenges

HOW THE ECONOMICS OF ENERGY VIEWS THE AGENDA

As regular readers will know, this site is driven by the understanding that the economy is an energy system, and not (as conventional thinking assumes) a financial one. Though we explore a wide range of related issues (such as the conclusion that energy supply is going to need monetary subsidy), it’s important that we never lose sight of the central thesis. So I hope you’ll understand the need for a periodic restatement of the essentials.

If you’re new to Surplus Energy Economics, what this site offers is a coherent interpretation of economic and financial trends from a radically different standpoint. This enables us to understand issues that increasingly baffle conventional explanations.

This perspective is a practical one – nobody conversant with the energy-based interpretation was much surprised, for instance, when Donald Trump was elected to the White House, when British voters opted for “Brexit”, or when a coalition of insurgents (aka “populists”) took power in Rome. The SEE interpretation of prosperity trends also goes a long way towards explaining the gilets jaunes protests in France, protests than can be expected in due course to be replicated in countries such as the Netherlands. We’re also unpersuaded by the exuberant consensus narrative of the Chinese economy. The proprietary SEEDS model has proved a powerful tool for the interpretation of critical trends in economics, finance and government.

The aim here, though, isn’t simply to restate the core interpretation. Rather, there are three trends to be considered, each of which is absolutely critical, and each of which is gathering momentum. The aim here is to explore these trends, and share and discuss the interpretations of them made possible by surplus energy economics.

The first such trend is the growing inevitability of a second financial crisis (GFC II), which will dwarf the 2008 global financial crisis (GFC), whilst differing radically from it in nature.

The second is the progressive undermining of political incumbencies and systems, a process resulting from the widening divergence between policy assumption and economic reality.

The third is the clear danger that the current, gradual deterioration in global prosperity could accelerate into something far more damaging, disruptive and dangerous.

The vital insight

The centrality of the economy is the delivery of goods and services, literally none of which can be supplied without energy. It follows that the economy is an energy system (and not a financial one), with money acting simply as a claim on output which is itself made possible only by the availability of energy. Money has no intrinsic worth, and commands ‘value’ only in relation to the things for which it can be exchanged – and all of those things rely entirely on energy.

Critically, all economic output (other than the supply of energy itself) is the product of surplus energy – whenever energy is accessed, some energy is always consumed in the access process, and surplus energy is what remains after the energy cost of energy (ECoE) has been deducted from the total (or ‘gross’) amount that is accessed.

This makes ECoE a critical determinant of prosperity. The distinguishing feature of the world economy over the last two decades has been the relentless rise in ECoE. This process necessarily undermines prosperity, because it erodes the available quantity of surplus energy. We’re already seeing this happen – Western prosperity growth has gone into reverse, and progress in emerging market (EM) economies is petering out. Global average prosperity has already turned down.

The trend in ECoE is determined by four main factors. Historically, ECoE has been pushed downwards by broadening geographical reach and increasing economies of scale. Where oil, natural gas and coal are concerned, these positive factors have been exhausted, so the dominating driver of ECoE now is depletion, a process which occurs because we have, quite naturally, accessed the most profitable (lowest ECoE) resources first, leaving costlier alternatives for later.

The fourth driver of ECoE is technology, which accelerates downwards tendencies in ECoE, and mitigates upwards movements. Technology, though, operates within the physical properties of the resource envelope, and cannot ‘overrule’ the laws of physics. This needs to be understood as a counter to some of the more glib and misleading extrapolatory assumptions about our energy future.

The nature of the factors driving ECoE indicates that this critical factor should be interpreted as a trend. According to SEEDS – the Surplus Energy Economics Data System – the trend ECoE of fossil fuels has risen exponentially, from 2.6% in 1990 to 4.1% in 2000, 6.7% in 2010 and 9.9% today. Since fossil fuels continue to account for four-fifths of energy supply, the trend in overall world ECoE has followed a similarly exponential path, and has now reached 8.0%, compared with 5.9% in 2010 and 3.9% in 2000.

For fossil fuels alone, trend ECoE is projected to reach 11.8% by 2025, and 13.5% by 2030. SEEDS interpretation demonstrates that an ECoE of 5% has been enough to put prosperity growth into reverse in highly complex Western economies, whilst less complex emerging market (EM) economies hit a similar climacteric at ECoEs of about 10%. A world economy dependent on fossil fuels thus faces deteriorating prosperity and diminishing complexity, both of which pose grave managerial challenges because they lie wholly outside our prior experience.

Mitigation, not salvation

This interpretation – reinforced by climate change considerations – forces us to regard a transition towards renewables as a priority. It should not be assumed, however, that renewables offer an assured escape from the implications of rising ECoEs, still less that they offer a solution that is free either of pain or of a necessity for social adaption.

There are three main cautionary factors around the ECoE capabilities of solar, wind and other renewable sources of energy.

The first cautionary factor is “the fallacy of extrapolation”, the natural – but often mistaken – human tendency to assume that what happens in the future will be an indefinite continuation of the recent past. It’s easy to assume that, because the ECoEs of renewables have been falling over an extended period, they must carry on falling indefinitely, at a broadly similar pace. But the reality is much more likely to be that cost-reducing progress in renewables will slow when it starts to collide with the limits imposed by physics.

Second, projections for cost reduction ignore the derivative nature of renewables. Building, say, a solar panel, a wind turbine or an electrical distribution system requires inputs currently only available courtesy of the use of fossil fuels. In this specialised sense, solar and wind are not so much ‘primary renewables’ as ‘secondary applications of primary fossil input’.

We may reach the point where these technologies become ‘truly renewable’, in that their inputs (such as minerals and plastics) can be supplied without help from oil, gas or coal.

But we are certainly, at present, nowhere near such a breakthrough. Until and unless this point is reached, the danger exists that that the ECoE of renewables may start to rise, pushed back upwards by the rising ECoE of the fossil fuel sources on which so many of their inputs rely.

The third critical consideration is that, even if renewables were able to stabilise ECoE at, say, 8% or so, that would not be anywhere near low enough.

Global prosperity stopped growing before ECoE hit 6%. British prosperity has been in decline ever since ECoE reached 3.6%, and an ECoE of 5.5% has been enough to push Western prosperity growth into reverse. As recently as the 1960s, in what we might call a “golden age” of prosperity growth, ECoE was well below 2%. Even if renewables could stabilise ECoE at, say, 8% – and that’s an assumption which owes much more to hope than calculation – it wouldn’t be low enough to enable prosperity to stabilise, let alone start to grow again.

SEEDS projections are that overall world ECoE will reach 9% by 2025, 9.7% by 2030 and 11% by 2040. These projections are comparatively optimistic, in that progress with renewables is expected to blunt the rate of increase in trend ECoE. But we should labour under no illusion that the downwards tendency in prosperity can be stemmed, less still reversed. Renewables can give us time to prepare and respond, but are not going to take us back to a nirvana of low-cost energy.

This brings us to the three critical issues driven by rising ECoE and diminishing prosperity.

Challenge #1 – financial shock

An understanding of the energy basis of the economy puts us in possession of a coherent narrative of recent and continuing tendencies in economics and finance. Financially, in particular, the implications are disquieting. There is overwhelming evidence pointing towards a repetition of the 2008 global financial crisis (GFC), in a different form and at a very much larger scale.

From the late 1990s, with ECoEs rising beyond 4%, growth in Western prosperity began to peter out. Though “secular stagnation” was (and remains) the nearest that conventional interpretation has approached to understanding this issue, deceleration was noticed sufficiently to prompt the response known here as “credit adventurism”.

This took the form of making credit not only progressively cheaper to service but also much easier to obtain. This policy was also, in part, aimed at boosting demand undermined by the outsourcing of highly-skilled, well-paid jobs as a by-product of ‘globalization’. “Credit adventurism” was facilitated by economic doctrines which were favourable to deregulation, and which depicted debt as being of little importance.

The results, of course, are now well known. Between 2000 and 2007, each $1 of reported growth in GDP was accompanied by $2.08 of net new borrowing, though ratios were far higher in those Western economies at the forefront of credit adventurism. The deregulatory process also facilitated a dangerous weakening of the relationship between risk and return. These trends led directly to the 2008 global financial crisis.

Responses to the GFC had the effect of hard-wiring a second, far more serious crash into the system. Though public funds were used to rescue banks, monetary policy was the primary instrument. This involved slashing policy rates to sub-inflation levels, and using newly-created money to drive bond prices up, and yields down.

This policy cocktail added “monetary adventurism” to the credit variety already being practiced. Since 2007, each dollar of reported growth has come at a cost of almost $3.30 in new debt. Practices previously confined largely to the West have now spread to most EM economies. For example, over a ten-year period in which growth has averaged 6.5%, China has typically borrowed 23% of GDP annually.

Most of the “growth” supposedly created by monetary adventurism has been statistically cosmetic, consisting of nothing more substantial than the simple spending of borrowed money. According to SEEDS, 66% of all “growth” since 2007 has fallen into this category, meaning that this growth would cease were the credit impulse to slacken, and would reverse if we ever attempted balance sheet retrenchment. As a result, policies said to have been “emergency” and “temporary” in nature have, de facto, become permanent. We can be certain that tentative efforts at restoring monetary normality would be thrown overboard at the first sign of squalls.

Advocates of ultra-loose monetary policy have argued that the creation of new money, and the subsidizing of borrowing, are not inflationary, and point at subdued consumer prices in support of this contention. However, inflation ensuing from the injection of cheap money can be expected to appear at the point at which the new liquidity is injected, which is why the years since 2008 have been characterised by rampant inflation in asset prices. Price and wage inflation have been subdued, meanwhile, by consumer caution – reflected in reduced monetary velocity – and by the deflationary pressures of deteriorating prosperity. The current situation can best be described as a combination of latent (potential) inflation and dangerously over-inflated asset prices.

All of the above points directly to a second financial crisis (GFC II), though this is likely to differ in nature, as well as in scale, from GFC I. Because “credit adventurism” was the prime cause of the 2008 crash, its effects were concentrated in the credit (banking) system. But GFC II, resulting instead from “monetary adventurism”, will this time put the monetary system at risk, hazarding the viability of fiat currencies.

In addition to mass defaults, and collapses in asset prices, we should anticipate that currency crises, accompanied by breakdowns of trust in currencies, will be at the centre of GFC II. The take-off of inflation should be considered likely, not least because no other process exists for the destruction of the real value of gargantuan levels of debt.

Finally on this topic, it should be noted that policies used in response to 2008 will not work in the context of GFC II. Monetary policy can be used to combat debt excesses, but problems of monetary credibility cannot, by definition, be countered by increasing the quantity of money. Estimates based on SEEDS suggest that GFC II will be at least four orders of magnitude larger than GFC I.

Challenge #2 – breakdown of government

Until about 2000, the failure of conventional economics to understand the energy basis of economic activity didn’t matter too much, because ECoE wasn’t large enough to introduce serious distortions into its conclusions. Put another way, the exclusion of ECoE gave results which remained within accepted margins of error.

The subsequent surge in ECoEs, however, has caused the progressive invalidation of all interpretations from which it is excluded.

What applies to conventional economics itself applies equally to organisations, and most obviously to governments, which use it as the basis of their interpretations of policy.

The consequence has been to drive a wedge between policy assumptions made by governments, and underlying reality as experienced by individuals and households. Even at the best of times – which these are not – this sort of ‘perception gap’ between governing and governed has appreciable dangers.

Recent experience in the United Kingdom illustrates this process. Between 2008 and 2018, GDP per capita increased by 4%, implying that the average person had become better off, albeit not by very much. Over the same period, however, most (85%) of the recorded “growth” in the British economy had been the cosmetic effect of credit injection, whilst ECoE had risen markedly. For the average person, then, SEEDS calculates that prosperity has fallen, by £2,220 (9%), to £22,040 last year from £24,260 ten years previously. At the same time, individual indebtedness has risen markedly.

With this understood, neither the outcome of the 2016 “Brexit” referendum nor the result of the 2017 general election was much of a surprise, since voters neither (a) reward governments which preside over deteriorating prosperity, nor (b) appreciate those which are ignorant of their plight. This was why SEEDS analysis saw a strong likelihood both of a “Leave” victory and of a hung Parliament, outcomes dismissed as highly improbable by conventional interpretation.

Simply put, if political leaders had understood the mechanics of prosperity as they are understood here, neither the 2016 referendum nor the 2017 election might have been triggered at all.

Much the same can be said of other political “shocks”. When Mr Trump was elected in 2016, the average American was already $3,450 (7%) poorer than he or she had been back in 2005. The rise to power of insurgent parties in Italy cannot be unrelated to a 7.9% deterioration in personal prosperity since 2000.

As well as reframing interpretations of prosperity, SEEDS analysis also puts taxation in a different context. Between 2008 and 2018, per capita prosperity in France deteriorated by €1,650 which, at 5.8%, isn’t a particularly severe fall by Western standards. Over the same period, however, taxation increased, by almost €2,000 per person. At the level of discretionary, ‘left-in-your-pocket’ prosperity, then, the average French person is €3,640 (32%) worse off now than he or she was back in 2008.

This makes widespread popular support for the gilets jaunes protestors’ aims extremely understandable. Though no other country has quite matched the 32% deterioration in discretionary prosperity experienced in France, the Netherlands (with a fall of 25%) comes closest, which is why SEEDS identifies Holland as one of the likeliest locales for future protests along similar lines. It is far from surprising that insurgent (aka “populist”) parties have now stripped the Dutch governing coalition of its Parliamentary majority. Britain, where discretionary prosperity has fallen by 23% since 2008, isn’t far behind the Netherlands.

These considerations complicate political calculations. To be sure, the ‘centre right’ cadres that have dominated Western governments for more than three decades are heading for oblivion. Quite apart from deteriorating prosperity – something for which incumbencies are likely to get the blame – the popular perception has become one in which “austerity” has been inflicted on “the many” as the price of rescuing a wealthy “few”. It doesn’t help that many ‘conservatives’ continue to adhere to a ‘liberal’ economic philosophy whose abject failure has become obvious to almost everyone else.

This situation ought to favour the collectivist “left”, not least because higher taxation of “the rich” has been made inescapable by deteriorating prosperity. But the “left” continues to advocate higher levels of taxation and public spending, an agenda which is being invalidated by the erosion of the tax base which is a concomitant of deteriorating prosperity.

Moreover, the “left” seems unable to adapt to a shift towards prosperity issues and, in consequence, away from ideologically “liberal” social policy. Immigration, for example, is coming to be seen by the public as a prosperity issue, because of the perceived dilutionary effects of increases in population numbers.

The overall effect is that the political “establishment”, whether of “the right” or of the “the left”, is being left behind by trends to which that establishment is blinded by faulty economic interpretation.

The discrediting of established parties is paralleled by an erosion of trust in institutions and mechanisms, because these systems cannot keep pace with the rate at which popular priorities are changing. To give just one example, politicians who better understood the why of the “Brexit” referendum result would have been better equipped to recognize the dangers implicit in being perceived as trying to thwart or divert it.

The final point to be considered under the political and governmental heading is the destruction of pension provision. One of the little-noted side effects of “monetary adventurism” has been a collapse in rates of return on invested capital. According to the World Economic Forum, forward returns on American equities have fallen to 3.45% from a historic 8.6%, whilst returns on bonds have slumped from 3.6% to just 0.15%. It is small wonder, then, that the WEF identifies a gigantic, and rapidly worsening, “global pension timebomb”. As and when this becomes known to the public – and is contrasted by them with the favourable circumstances of a tiny minority of the wealthiest – popular discontent with established politics can be expected to reach new heights.

In short, established political elites are becoming an endangered species – and, far from knowing how to replace them, we have an institutionally-dangerous inability to appreciate the factors which have already made fundamental change inevitable.

Challenge #3 – an accelerating slump?

Everything described so far has been based on an interpretation which demonstrates an essentially gradual deterioration in prosperity. That, in itself, is serious enough – it threatens both a financial system predicated on perpetual growth, and political processes unable to recognise the implications of worsening public material well-being.

For context, SEEDS concludes that the average person in Britain, having become 11.5% less prosperous since 2003, is now getting poorer at rates of between 0.5% and 1.0% each year. EM economies, including both China and India, continue to enjoy growing prosperity, though this growth is now decreasing markedly, and is likely to go into reverse in the not-too-distant future.

Is it safe to assume, though, that prosperity will continue to erode gradually – or might be experience a rapid worsening in the rate of deterioration?

For now, no conclusive answer can be supplied on this point, but risk factors are considerable.

Here are just some of them:

1. The worsening trend in fossil fuel ECoEs is following a track that is exponential, not linear – and, as we have seen, there are likely to be limits to how far this can be countered by a switch to renewables.

2. The high probability of a financial crisis, differing both in magnitude and nature from GFC I, implies risks that there may be cross contamination to the real economy of goods, services, energy and labour.

3. Deteriorating prosperity poses a clear threat to rates of utilization, an important consideration given the extent to which both businesses and public services rely on high levels of capacity usage. Simple examples are a toll bridge or an airline, both of which spread fixed costs over a large number of users. Should utilization rates fall, continued viability would require increasing charges imposed on remaining users, since this is the only way in which fixed costs can be covered – but rising charges can be expected to worsen the rate at which utilization deteriorates.

4. Uncertainty in government, discussed above, may have destabilizing effects on economic activity.

There is a great deal more that could be said about “acceleration risk”, as indeed there is about the financial and governmental challenges posed by deteriorating prosperity.

But it is hoped that this discussion provides useful framing for some of the most important challenges ahead of us.

 

 

401 thoughts on “#149: The big challenges

  1. Thought provoking dissertation as always, thank you. 2 points come to mind immediately: given the logical predictive ability of your system, what does it indicate (as far as possible) the likely result to be of a second/confirmatory referendum or a general election …….at this time in the UK?

    Then, are there examples in history that could give us even a rough idea of how a managed deflation in prosperity could play out in a more complex society today? Perhaps the Soviet Union after their economic system imploded …..whereby there was an initial brutal shock, but after that gradual stabilisation and then a recovery to a level commensurate with contemporary resources. The sudden collapse would have given energy lack centre stage in driving the overall outcome even though Russia was and still is energy relatively rich – simply because of the chaos of political upheaval rippling though social upheaval and inevitably culminating in economic devastation.

    • Thank you.

      On “Brexit”, I hope against hope that the second referendum won’t happen, and draw slight encouragement from signs that European national leaders might be about to do what I called for before, viz. force Brussels to offer something that the UK can accept.

      It seems to me – having considered 1820, 1844, 1867 and 1926 as alternatives – that the country hasn’t been this rancorously divided since 1640.

      I think that Mrs May and Mr Corbyn do understand this, but I fear that many other politicians, wrapped up in their own self-importance, lack any appreciation of how dangerous this situation has already become. So, the public votes one way – Parliament votes another – and invites the public to keep on voting “until you get it right”?

      The best outcome now has to be a negotiated solution, facilitated by constructive contributions from European capitals. Put another way, I pin a lot of hope on Mrs Merkel…….

    • “Then, are there examples in history that could give us even a rough idea of how a managed deflation in prosperity could play out in a more complex society today?”
      Well, I for one don’t recall a single example of that. There are countless examples of unmanaged deflations, though. Among the things we can expect are wars (and things are already going in this direction, don’t they?)

      “Perhaps the Soviet Union”

      Soviet Union consisted of 15 countries (it was kind of like EU, except Soviet :). Russain SFSR was one of them. Another one was Ukrainian SSR. Let’s consider Ukraine’s physical economy: construction (of housing), in square meters per capita per year –
      1991 – 0.44
      2012 – 0.22
      As you know, massive reduction in energy supplies didn’t end well for Ukraine. We can also recall Armenian-Azeri war (and subsequent cold war), separatism in Moldova, civil war in Tajikistan, ethnic conflicts in Georgia, wars in Chechnya, revolution and ethnic cleansing of Uzbeks in Kyrgyzstan, and other such things.

      Oh, and don’t forget Yugoslavia, while you’re at it…

    • There are two possible pathways to deal with declining energy availability to run the economy.
      The first is deny the problem, subsidize and pray for the best. This is what the US is very busy doing with the shale oil bonzana, which is low ERoEI energy extraction operating at loss. The consequence is a seneca cliff, no preparation and public discontent (because expectations will not have been changed). Deregulation of the extractive industry can lower the costs in the short term at the expense of much higher costs down the line.

      A second path is planning and identifying low yield activities in term of $/Watt and cut into them aggressively, as well as find where fossils can be displaced effectively by electricity. In most cases these cuts need to pushed using legislation/regulations rather than volontarism. In the EU as much as 30% of liquid fuel use could be cut down with *limited* impact. Nearly no one is doing that.

      One thing to keep in mind is that RNE are very expensive to build and maintain. In the EU, ERoEI is about 10, with 25yr lifetime aka 2.5yr payback time with the investment upfront. It means that they are an energy sink in the short term, and after their 25yr lifetime, you have to do it all over again. The implication is that *if* one manage to run an industrial econ on RNE, the annual cost must be ~10% of GDP. In the case where one country would own the solar industry and enjoy first mover/scale advantage, it would be in a position similar to the Saudis in terms of export income from the RNE hardware (if the ressources to manufacture them are available…)

      So, they only make sense for stuff that makes effective use of the energy. Moving a 2T car with a single person inside is definitively not one of them.

      I think the Germans experienced that first hand.

      I leave out with this nice read :
      https://jancovici.com/en/energy-transition/societal-choices/what-transition-are-the-germans-up-to-exactly/

  2. Hi Tim

    Thanks for another thought provoking post.

    I’ve been following you for a number of years and there’s little doubt that the temperature is rising in terms of discontent. Almost everywhere in the developed economies there has been a rise in populism and it’s not a stretch of the imagination to see this as, at least in part, economically based.

    In all honesty if you look at the important themes that do need urgent attention most countries seem adept at avoiding giving them attention rather than tackling them head on. This may be in part because they see the electorate as being incapable of understanding these issues and unwilling to make any necessary sacrificies even if they did but it is the role of politics surely to identify and explain these issues rather than avoid them wholesale which appears to be the current modus operandi.

    All of this points to crisis as the necessary, but hardly sufficient, solvent of these issues. It’s obviously not a good way to proceed but it seems the only realistic one as it forces people to confront issues they might otherwise choose to ignore and accept unpalatable measures to alleviate them.

    The fear is that this avoidance, not lancing the boil early on, is driving us to a more extremist politics the end of which is difficult to see but which feels hardly pleasant. The shattering of the conventional wisdom appears to be down to the extremists rather than the moderates but that may be regarded as a Phyrric victory if it leads us to something more divisive politically.

    • It was, I think, Jean-Claude Juncker of all people who said, “We all know what to do, we just don’t know how to get re-elected after we’ve done it”

    • Thanks Bob, much appreciated, as indeed have been your comments all along. I can, of course, only really look at things in terms of economics, though history as well as logic suggest that this is critical.

      I think that, with your and others’ help, we’re going to need to sketch out some sort of viable political agenda, if only as a sort of score-card against which to assess what’s on offer.

      I agree that crisis may be a necessary solvent, as people in general (and politicians in particular!) seem unable to act effectively without it, certainly where serious situations are concerned.

      Extremism is indeed a likely product, both of deteriorating prosperity and of the need for changes of the sort which take people out of their ‘comfort zones’.

    • You are really down at the core of our problem here. A politician is just an occupation. People do not want to lose their jobs, so to keep theirs the politicians will say whatever appeases the voters. And they must work within a tight frame work of what ever is politically acceptable, therefore most of their days is working on trivialities compared to surplus energy issues.

      I wish I had a solution to propose, but to stare these difficult issues in the eyes are for the few brave souls on obscure internet blogs. Not for the general public.

  3. Tim

    Another good article

    What are your views in improving energy efficiency? As Amory Lovins pointed out it is often not just a free lunch but one you are paid to eat.

    The poor standard of new build homes in the UK is rapidly becoming legendary, all tying the purchaser into higher fuel bills. On the roads SUV’s remain popular despite the fact that most never even venture down a country lane let alone off road and result in higher fuel consumption that purchasing conventional cars.

    I can go on…………..

    • Thanks John, and of course you are right.

      In the past, abundant cheap energy gave us, so to speak, “a licence to be profligate”. The need now, as this “licence” is withdrawn, is for much more rational planning around energy.

      This, of course, does involve how homes are constructed, but I think we’ll also need to address where our homes are, where and how we work, and how and why we travel. These are all issues which we can no longer afford to duck.

  4. Thanks once again for a clear exposition of the dilemma. For the past decade or so I had thought that building resilience locally offered a way down as globalised systems ran out of steam (early FF metaphor!).
    I’ve even toyed with Brexit (despite the swivel-eyed deceit in its schemers), because it’s a response to “too many people(from over there)” with “not enough stuff(for us here)” – direct symptoms of accelerating ECoE. But Brexit won’t organise for less, share out the burdens of an energy system with decreasing rates of utilisation, deteriorating flows of utility. Pockets of system failure (Iraq, Puerto Rico, Ukraine), show slow rates of recovery dependent on both flows of energy and systems/ institutions that work. Plainly the UK is now slowly losing both.
    Tim, did your recent experience of grid failure in your island existence give you hope and faith in community in extremis, or have you got yourself a generator, a couple of m3 of water and container full of stores? A referendum type question!

    • Thanks Jeremy, agreed (though both sides of “Brexit” are at fault, I believe).

      The main lesson I learned (and discussed here) of that event was how utterly critical energy is, a shock even to those of us who, theoretically at least, already know this. I even wonder, sometimes, if brief energy outages might be a useful instructive tool for every economy….

  5. Current Problem Dominating My Attention and Your Paper
    An excellent paper as always.

    On Wednesday of next week I am meeting with a Land Trust to talk about their issues and my issues. My thinking has recently been dominated by an examination of the fundamentals of being a primate and the fundamentals of producing food, building materials, and fiber. In theory, we should be better able to live as primates than ever before. It’s true that there are way too many of us, but a little bit of science and engineering goes a long way to improve the conditions of primate life…and we have centuries of science and engineering readily available to us.

    The sticking point, to me, is that a primate needs about a third of a hectare of pretty good land and a predictable climate. Yet ‘prosperity’ has destroyed the ‘predictable climate’ and monetary adventurism has driven the cost of land to the point where ordinary people can’t afford it. And ordinary people could never pay off the debt using the fruits of photosynthesis, as we primates evolved to do.

    I can make up schemes about how the human primate might evolve to the photosynthetic world, but the existence of huge governments, with equally huge debts, and extraordinarily rich people enabled by the Central Bankers, and the resultant high price of land makes my schemes fall apart.

    Don Stewart

    • Well, Don, I once had something to do with a quite well-off but feckless and disunited family characterised by greed, narcissism and an inability to communicate. All pretty clever, apart from one dim brother.

      Tired of their quarrels, I sat down and worked out how their family assets could be fairly apportioned so as to satisfy all their petty egotisms and give each them what they said they wanted.

      But, of course, there was never any hope of this sensible plan being implemented, even with the greatest patience and extended negotiation, things being as they were.

      So, having satisfied myself intellectually, I tore the piece of paper up.

      This is surely the human tragedy in the 21st century: we cannot act -for the best of all – on what we now know, things being as they are…..

  6. More than a good article; masterly, and a delight to read in its lucidity. Although, given the subject, and the implications for our civilisation, it’s rather like praising a beautiful funeral oration…

    Wouldn’t it be wonderful if you could deliver lectures not to politicians, but to bright economics students who are being educated in the failed historical paradigms which -as you point out – ignore our fundamental energy predicament? It could make for some lively discussion and perhaps open some eyes, eyes which will have to face the future more so than those (elderly and middle aged) gathered here?

    On the question of ‘renewables’, it seems to me to be a complete misnomer, as you hint: I propose a definition that ‘Only that which regenerates without human agency can be considered to be truly renewable’.

    This, quite clearly, rules out all that we are doing under that head and all the renewable nostrums that are being pushed on us by the eager pimps in the industry – and so eagerly grasped at by politicians looking for The Next Big Thing (all those ‘Green jobs’) – solar parks, forests of wind and wave turbines, etc.

    Now, this definition can be qualified: for instance, it is demonstrable that a tree used for fuel and construction timber can have its life extended for many centuries by means of intelligent and timely pruning of various kinds (all perfected by the Middle Ages in Britain) and intelligent harvesting schedules.

    But I think the principle is clear. It is a return to the true solar budget, which requires a rich eco-system to support it.

    It is not a pessimistic definition. Human intervention and planning is, as in a well-managed wood, therefore, not always pernicious, and needn’t necessarily be short-termist: although, if successful, it does invariably lead to over-population problems. But, by and large I suggest it holds good as a definition of desirable, true, ‘renewables’.

    The current definition of ‘renewable’ that seems to have currency among those slack of thought, given to fashionable catch-phrases and looking to make a buck is, ‘All that which is not fossil fuels’.

    What we are discussing under a misleading name is, surely, just another form of rather clumsy, hi-tech, resource-degrading, industry: only viable in a globalised economy and definitely not self-renewing.

    How can anyone think that a MACHINE (of very limited life-span) such as a wind turbine is in any way ecologically more acceptable than oil and gas?! A machine that runs, in effect, on a constant stream of spare parts, again manufactured only by the use of fossil fuels in a globalised system.

    It confounds me, for one.

    By advancing into the future crisis with false defiintions, we will be like an army led by a general with not only inaccurate, but completely fantastical, maps.

    • You are too kind, Xabier. I can only say, at 4.15 on Friday afternoon, that I feel; justified in taking the rest of the week off!

    • Dear Xabier and possible others,

      Concerning your statement

      “Wouldn’t it be wonderful if you could deliver lectures not to politicians, but to bright economics students who are being educated in the failed historical paradigms which -as you point out – ignore our fundamental energy predicament? It could make for some lively discussion and perhaps open some eyes, eyes which will have to face the future more so than those (elderly and middle aged) gathered here?”

      It may be pleasing and a relief to note that there are at least some young people closely following dr. Morgan’s blog, having myself been at times mesmerized by it for some months now. I have recently pointed out the existence of this blog to some in my circles. At slightly under 30, I live in the Dutch capital, amongst what I consider our higher intellectual echelons. Which unfortunately isn’t saying much, but let us not get ensnared into that problem now. At least one of my friends, a physicist, is equally intrigued by dr. Morgan’s constructs here. I can add that much of my reflection on the state of civilization through time, to which I am, as a Classical archaeologist much inclined, has probably been transformed for the better by dr. Morgans’ texts, and this effect is much strengthened by (many) fruitful replies such as your own. To my own relative amazement, I do not believe the crashes coming will be as destructive as seems to be supposed within the consensus bandwidth of this blog, while I am aware that civilizational resilience is a slippery subject and value the judgement of most here highly. On the brightness of economics students as a group on another hand I must remain somewhat pessimistic, but I conjecture there are other forces, maybe like myself of youth, which certainly merit every sentence penned on this blog and in extenso to a greater extent than you may have supposed.

      All the best.

    • Thank you Wouterschiller, for sharing so honestly. I too promote the good Dr’s website and his ideas. I have only recently read his book, ‘Life after Growth’, and find that it is entierly in line with my book which was written after he completed his in 2013. It is remarkable that his predictions then have now come about, which is not only a feather in the Doc’s cap but underlines the accuracy of his model.

      A free pdf of my book is available on request to; peter@underco.co.uk

  7. Again thinking about trees and renewables: you can let an oak tree grow to a great size, and then fell it for timber, and you will get some impressive and lengthy pieces of wood for construction -maybe for the roof of a cathedral or great hall – and of course much to burn. But that will be that.

    Or you can harvest the tree regularly, obtaining numerous but much smaller pieces of wood for construction, and a regular supply of firewood also cut from the tree.

    Not to mention simply collecting dead branches from the ground for fuel in both cases.

    Two models of viable human agency in respect of true renewables, on different time-scales. In the second case, construction would have to exclude very large timbers as part of the scheme. So, cottages, more than great halls and cathedrals……

    How does a wind turbine compare to this?

  8. Hi Tim,

    I also once read a paper by, I think The Centre for Alternative Technology, in Wales.

    The paper argued for alternative and renewable technologies as part of a move to decarbonise, but was clear that this would require a reduction in demand to meet any reduction in supply through intermittency.

    The paper also suggested a need to change (electricity) demand from our current “always on” power systems that seeks to match supply to demand to a system that manages demand to intermittent supply.

    I wonder if I can develop on your comment that, “Estimates based on SEEDS suggest that GFC II will be at least four orders of magnitude larger than GFC I”

    I wonder what you and contributors think this will look an feel like to the ordinary person on the street in terms of things like;

    access to employment,
    salaries and pensions
    the provision of public and private services
    the cost and availability of everyday essentials
    the trust in the value of the currency they hold or are to accept in payment

    • Hi Keith

      The “GFC I x 4” is, of course, no more than an indicative order of magnitude. It’s arrived at by measuring the cumulative divergence between the financial economy of “claims” and the energy economy extent of what exists to meet those claims.

      Moreover, there are two distinct types of loss. A slump in the value of your shares or property, say, is a “notional” or “paper” loss, because no money actually leaves your bank account. If, though, this notional loss exceeds your prior equity (asset price less debt used to acquire it) then it’s a “real” or “tangible” loss.

      The likely extent of these types of loss are visible in the valuations of assets such as stocks, bonds and property (“paper losses”) and in debt and other obligations (“tangible losses”). The danger is that the authorities try to “fix” these losses, again, by creating money – this, on the sort of scale likely to be necessary, could destroy faith in money itself.

      J.S. Mill famously said that a crash does not, itself, destroy value, but lays bare destruction which has already taken place. As prosperity has deteriorated, we’ve used monetary manipulation to disguise these realities from ourselves.

      So your list of adverse happenings already exists, but in latent form. This ‘period of grace’ (for which we will ultimately have paid a high price) ought to have given us, as societies and as individuals, the opportunity to prepare, but individuals have done little of this, and most societies have done none at all. Social systems, including governments, have no ready plans for tackling this, because they have been, often willfully, blind to what has been coming.

      At the very least, we need new politics with new attitudes.

    • Tim,
      Do you mean
      4 times bigger than GFC 1?
      or 10,000 times bigger (4 orders of magnitude bigger) than GFC 1?

  9. Nice essay. It’s interesting to speculate if the social problems caused by government awareness that economic growth is over would be worse than those caused by energy ignorance. It’s not like the good old days when we could simply tighten our belts and row together. Our mountain of debt and other paper assets is a civility destroying bomb.

    • If this was just a temporary bad patch – or wasn’t going to carry on getting worse – there might be a case for keeping the public in ignorance. Unfortunately, though, neither condition applies…..

  10. Are ‘they’ working on consolidation of the masses; prevent Brexit, European army, Trumps border? So when the inevitable hammer comes down, we cannot go to war with eachother, but only with the powers that be? And the powers that be have their plans in place to introduce another currency they can control through force?

    Don’t make the mistake they don’t have plans on their shelves, plans they cannot share because that would mean instant collapse.

    Thank you doc. But remember, there’s another world upstairs. They, too, know China borrows 6 times GDP, and they know the true value of Aramco. Imho, its just a thought of course, but i have a sixth sense.

  11. This is an exceptionally clear explanation of our current predicament. Congratulations, and thank you.

    I do have a couple of quick comments about two concepts you discuss…

    the danger exists that that the ECoE of renewables may start to rise, pushed back upwards by the rising ECoE of the fossil fuel sources on which so many of their inputs rely

    This is the “receding horizons” situation, one that we can only combat by deliberately reducing the use of surplus fossil energy for typical uses in order to devote it to a renewable build-out. This would raise the ECoE for most uses and lower it for the those who use it to build renewable infrastructure. This is a task that is politically much easier when ECoE is declining, something we will never see again.

    The predicament is even worse than the political difficulty of diverting energy resources to renewables. I think we are past the point where we have enough carbon budget left to build out a renewable energy system (and associated infrastructure like electric transport) that would support an industrial economy, even if all other uses of carbon fuels were starved of energy to the point where people could be barely kept alive. If we could miraculously convince everyone to endure extreme suffering and actually convert our energy system, it would be a Pyrrhic miracle, since the carbon emissions required would guarantee extreme climate change.

    This situation ought to favour the collectivist “left”, not least because higher taxation of “the rich” has been made inescapable by deteriorating prosperity. But the “left” continues to advocate higher levels of taxation and public spending, an agenda which is being invalidated by the erosion of the tax base which is a concomitant of deteriorating prosperity.

    I am perplexed by the internal contradiction in this paragraph. If higher taxation of the rich is required by economic decline, why shouldn’t the left advocate that higher taxes be redistributed via public spending to mitigate deteriorating prosperity? The whole point of collective governance is to share the pain, or gain, of the economy widely and not let all the benefit go to one class and all the pain go to another. That “agenda” is valid whether an economy is thriving or whether it is suffering.

    It is an agenda that is especially pertinent to an industrial economy, where the elites are dependent on the consumption of the ordinary citizen for their wealth. One would think that even the owners of capital would always be keen to have government use taxation to find the sweet spot between excess capital concentration and too little, since everyone would be better off, even the rich.

    • Joe

      Good points, to which I’ll return after the weekend.

      On tax, there’s no contradiction between increasing taxes on the richest, but still having less aggregate tax income.

      As the prosperity of the average person declines, his or her ability to pay tax decreases. This generalised weakening in the tax base is far larger than the extra tax that can be raised from the richest minority – indeed, it’s the decline in the overall tax base which creates the need to increase taxes on the richest.

    • Higher taxation of the rich cannot by itself compensate for the decline of wealth in the overall population.

      It must be done for purely political reasons, however, in order to defuse growing anger: gross inequalities will not be tolerated.

      As for ‘convincing people to endure pain’ there are of course, certain political systems which do not have to do any convincing, depending on a mixture of coercion and revolutionary fervour.

      Will we see such systems put in place?

    • There are, as you say, political reasons for raising taxes on the richest – but it’s also true that governments will need the money….

  12. Dr. Morgan,
    it seems to me you’re attaching some additional importance to the ECOE number that goes beyond its place in the formula “surplus energy = gross energy – ecoe”. For example, let’s say we produce 100 units of energy and ECOE is 2%; our surplus energy is 98 units. Then our gross energy production has doubled while ECOE increased to 20%. Thus, the surplus energy is 160 units. Are we better off with that or not?
    I’d assume that the important number is surplus energy per capita, not ECOE per se.

    • In principle, that makes sense, and it’s exactly what we’ve been doing – increasing supply at the gross level, to increase surplus (net-of-ECoE) energy despite rising ECoE. You raise an important point, one that I have examined at length.

      There are, it transpires, a series of problems with this:

      1. There are limits of sheer practicality to how much gross energy we can access

      2. ECoE is rising exponentially, whereas the best we can achieve at the gross level is a linear rate of increase

      3. Climate change is linked to the gross number, not the net one

      4. Increasing the gross total means accessing progressively higher-cost resources, because we’re already accessing the lowest-cost ones – so ECoE is pushed upwards by pursuit of enough gross supply to counter it.

    • When I raised the very same point, Dr Morgan responded with this reply….https://surplusenergyeconomics.wordpress.com/2019/03/14/148-where-now-for-energy/comment-page-1/#comment-11866

      My take is that there must always be a balance between energy demand and surplus energy availability to keep the price of energy relatively stable for both producers and consumers. There are numerous feedbacks in a market economy that drive supply/demand stability. You are right that there is no physical limit to generating much larger energy surpluses regardless of ECoE, at least in the short term, but there are strong economic limits to doing so.

      As ECoE creeps up, the extra energy must be paid for even though it provides no benefit to anyone. That extra cost causes energy prices to also creep up, resulting in diminished prosperity for everyone outside the energy sector. The energy sector gets bigger, but just breaks even, producing the same surplus at a higher price.

    • The more gross energy you extract, the faster the ECOE will rise since the good stuff gets depleted first and faster. Seneca cliff and all that.
      When you consider that : Mexico became a net importer, shales are likely to go bust and Saudi’s are on the decline (otherwise they wouldn’t sell stakes in ARMCO), the picture is far from peachy.

      At the moment the GDP cost of energy imports in my country (Switzerland) is about 1-2%. Transitioning out of fossils and nuclear would cost about 5% GDP per year till 2045 and 7.5% afterward (my calculation, including full transport electrification). Under such an aggressive plan the fossile share in primary energy only goes from ~50% now to ~20% in 2050. Well short of the 0% emission in 2050 goal. That is a tough sell, and yet a necessary one.

      I would be very surprised if our right wing dominated parlement can even imagine such a plan without a popular initiative kicking butts in motion. Even then, any realistic plan will require serious energy savings/efficiency gains, at least in the range of 1% per year (which is completely doable, but hard to sell.)

      We are so unprepared.

  13. Increasing Gross Net Energy
    Search on Common Dreams People’s State of the Nation
    and you will find a review of the state of the American citizens. It is not a pretty picture. Yet Americans consume a whole lot more gross energy than the citizens of other OECD countries.

    IF gross energy were a stand-alone solution to a human problem, one would think that Americans ought to be stand-out flourishing in terms of the outcomes. Are Americans just stupid? Or does surplus energy generate more physical wealth than humans are able to deal with and yet preserve health? Or what?

    I want to relate a little story from Frans de Waal’s book Mama’s Last Hug (Mama was an elderly chimp in a zoo in the Netherlands). If a monkey is given a puzzle to solve, the result of which is being fed a piece of fruit, the monkey will pretty quickly solve the problem, and will continue to execute the solution ad infinitum to continue to get more fruit. An ape, on the other hand, wants to be intellectually stimulated. Once it has figured out the solution to the puzzle, it refuses to play that game any more…it wants a new and challenging puzzle. A puzzle worthy of an ape.

    But give the ape a tranquilizer drug and it goes back to doing the simple puzzle and getting the fruit. It has lost interest in being intellectually challenged.

    A very high percentage of Americans take tranquilizers, both the prescription kind and legal drugs such as alcohol and marijuana and illegal drugs such as illicit pain killers. And we are apes.

    The point is that one has to look at our situation in terms of The Limits To Growth model (or some modern version of it). Producing fossil fuel energy (or renewables) generates pollution…and it is not only CO2 pollution. Once humans get beyond the sweet spot where the exogenous energy is actually making life better, the GDP may go up but human flourishing goes down.

    Don Stewart

  14. Isn’t there another factor that will come in to play in hard times?

    As consumers of household energy seek desperately to cut their bills – using as little as possible to stay alive – the unit cost must surely rise so that providers can still meet their obligations to maintain networks.

    Attempts at economy on the personal level lead, perversely, to growing unaffordability – and will eventually manifest in political problems.

    Just as an elderly relation of mine now spends more on heating after having their house insulated, as it remains permanently chilly in the British climate, not warming up as it did on hotter days.

    And flushing toilets with less water in an attempt to be eco-friendly (and save money) makes it necessary for the water companies to use huge amounts to flush out systems periodically which have become blocked due to inadequate flow from daily usage as originally calculated when designing the system.

    • You’re right, of course, and you put an interesting light on part of the utilization risk that could contribute to an acceleration in the rate of deterioration.

    • Hi Tim

      Very interesting but what might happen if push comes to shove?

      The appeal is for something completely new but I think this is more a cry of angst than a desire for something new. that something new may be of doubtful competence in the real World. Now I know that raising a competence issue against the current lot means a pretty low bar but it is an issue. People want to know that they are governed by competents and that is part of the criticism of the current lot so would they really vote for a new party with little or no experience of government? If this Brexit party gets off the ground I might consider voting for it but, even if I liked the policies, I’d think twice because I ask myself the question: would I be happy if they got into power alone? The answer is probably not, because of the competency issue.

      What the article is perhaps hinting at is that more parties will emerge and that, over time, coalition government will emerge as the norm and we will get a more moderate “regression to the mean” which will take us away from the extremes we appear to be heading for.

    • Thanks. The thing that struck me most was the lack of mention of economics – the global system is afloat on a sea of liquidity, yet the economy gets no mention…..

    • I wouldn’t worry about thinly veiled threats to civil unrest by any extremists, they are just keyboard warriors or they’d have done it by now (like the French) also UK history teaches us appeasement of bullies doesn’t work anyway. Rioting by the English is rare, in recent history the only occasions of note were the poll tax and then the anti-austerity incidents in 2011, which were quickly crushed by the police alone, so petered out. Right now, the profile of those supposedly angered enough to resort to violence is mostly too old to be of much physical use or too poor to afford the transport to take it to where it would be noticed. It’s just not in character for the British in general to cause chaos.

    • @Norfolk

      You are right but what one does have to fear is precisely that “shrug of the shoulders”. As Tim has chronicled, we have fundamental issues quite apart from Brexit so is the very English “shrug of the shoulders” really an adequate response to thes issues in view of thefact that these things either run into sand or don’t surface anyway? I don’t think so. Somnolence isn’t always best despite the fact that on some occasions it does pay dividends.

      There’s some truth in the assertion that the people you want in power are the people who don’t want power but the question is: where is this new impetus to come from?

      It may well be that if one of the two parties does split – which I have considerable doubts about despite appearances – this will set off a chain reaction which will take us on a new track. In fact such a split is almost guaranteed to usher in coalition government which ipso facto is likely to grind away the extremist edges of the particular parties involved.

      This in itself would not guarantee a fundamental change in approach but it may well be enough as this would likely take place in an atmosphere of chaos and uncertainty brought on by problems in both the UK and the EU against a potential background of a financial crash and recession in both.

    • I don’t think the real danger – yet, anyway – is violent protest. Rather, it’s contempt, followed by passive withdrawal of consent. Governments in the West rule by consent, and this requires at least a measure of popular respect for government, institutions and laws.

  15. Thank you for your new analysis Tim – sobering reading.

    Regarding the financial (and energy) mess most of the World is in two news articles on the BBC caught my attention this morning..

    Firstly employees – the employer and the Government are going to have to increase their payments into the current pension pot. With negative interest rates and asset prices overblown this seems like a pretty futile attempt to reduce the pensions deficit.

    It’s only ‘beneficial’ use is to reduce current consumption level

    Next the number of complaints against new homes has risen with – in some cases – major defects being found – and whole kitchens and bathrooms having to be ripped out. Further to this some homes have major structural defects.

    Persimmon homes have been mentioned and the Government is considering removing them from their help to buy scheme. You may remember that their CEO Jeff Fairburn was inline to receive a £110m bonus and there was a pot of £500m for another 140 senior staff – yet they’re building rubbish. (They were also complicit in the leasehold scandal)

    What a terrible waste of energy and resources that any economy can ill afford.

    Donald

    • A customer of mine was senior in English Heritage: a very proper old gentleman, he calls the big property developers ‘scum’: startling to hear from him. And spot on! He has lost heart entirely.

  16. Cutting back on essentials; what actually is essential; cutting back on the harmful

    Should Facebook be first on the chopping block?

    The average person is behaving like a bored lab rat offered some cocaine….the person just keeps pushing the magic powder lever. But the second part of that experiment put the rats into ‘rat heaven’, with wheels to turn and rat ladies to court and puzzles to solve and so forth. Then the rats did not pursue the cocaine.

    Assuming that humans are as evolved as rats, perhaps there is some hope that we will sacrifice the dangerous and retain the actually useful?

    Don Stewart

    • Shocking

      Sharing you contacts with any App or media platform is not good idea – yet so many apps demand access to this and that before they will work. Asking for your email password is at a different level of intrusiveness.

      Perhaps many really will go back to delivering hand written notes – I’m sure you’ll remember Paul Cicero from the Goodfellas wouldn’t even have a telephone as he didn’t trust them

      Donald

    • It depresses me that so many people seem taken in by “social media” and other products of “tech”. Anyone with a reasonable education surely knows that “friend” is not a verb. Has the world becoming so frightening that millions prefer a vicarious existence to the real thing?

      To take this a stage further, I’ve never owned a smartphone, but have had the use of one – never again. As someone who does a lot on computers and so on, I found the thing utterly frustrating – slow, limited, and of course a tiny little screen prone to inducing eye-strain. How anyone would spend $1000 or more on one of these things baffles me – how much would he/she save by buying an ordinary functional phone and a high-powered laptop? Of course, you cannot wander about communing with your laptop – but the fact that you can’t seems life enhancing to me, not limiting.

  17. Fairness; Scarcity

    There are a couple of ideas which are frequently confused as we try to figure out what will happen in a world where ECoE is declining. Both ideas are present in this video, but one is unexamined:

    The focus is on the fairness aspect. As you can see, chimps have a ‘close to human’ concept of fairness. I think that the default assumption should be that a perceived lack of fairness on the part of the bottom 90 percent should be expected to produce the same reaction as we see in the monkey.

    The second aspect is buried in that ‘reciprocity’ requirement. Suppose that instead of having an endless supply of cucumbers and grapes, there is only one grape. (Same logic on the ‘pulling together’ tasks.) Does the cooperative effort fall apart. I am not aware of experiments to determine how scarcity affects the outcome. But we do know from the Scarcity book by Mullainathan that scarcity is a powerful shaper of behavior.

    If you were a politician (but not the venal and stupid kind of politician, but remained your own sweet self), how would you shape the government responses to the issues of fairness and scarcity. I suggest that most of us would work pretty hard on the fairness issue. But the scarcity issue is harder and less clear. Would you try to ensure the basics of life to all (a sort of guaranteed annual income approach), or would you continue to manage the aggregates and not try to engineer for ‘fairness’.? Politicians frequently try to square that circle by setting up an ‘enemies of the state’ category: racial minorities, recent immigrants, the rich, the feckless poor, or ‘the Russians’. I would not be surprised if a poll of homeless people blamed their state on ‘the Russians’ over ‘the Government’. I see very pitiful people begging on the street who take time to check their phones. I don’t doubt that they are poor (checking their Facebook account???). I don’t think there are any significant number of Ronald Reagan’s ‘Welfare Queens’. But they just don’t show good sense when it comes to spending the little that they do have. The rich can afford to make bad choices, the poor cannot. A Gordian Knot for a politician, I think.

    Don Stewart

    • Picking up on your last point, a rich society can get away with mistakes for which a poor society would suffer. So, with societies now getting poorer…..

    • Inuit behaviour is illuminating as to some basic human impulses in the face of inequalities of outcome or ability.

      A hunter who had a string of good luck – better than his peers – ran a grave risk of being stabbed from behind by someone who felt aggrieved at his obvious success, and felt that it diminished by implication his own manliness.

      So, successful hunters had to go to great lengths to emphasize how lucky they had been, and not exceptionally skilled.

      I was amused by the popular punishments inflicted in British mining communities on lazy people who expected to be able coast along at the expense of others: they were often stuffed in a wheelbarrow and wheeled down the main street while people jeered and threw rotten things at them.

    • @Dr. Morgan and Xabier
      The Hadza, who are hunters and gatherers today in eastern Africa, downplay the role of the individual in a successful hunt. The situation is as follows:
      *Humans are the only one of our relatives who hunts game larger than itself. So we are like lions which also routinely hunt game larger than themselves.
      *Both humans and lions and wolves hunt as packs. An individual human or lion or wolf would soon starve to death. (Excluding humans with guns or advanced bows and arrows.)
      *Therefore, paying attention to the social aspects of the pack pays big dividends.
      *If we look at farming and craft based societies, such as the Shakers in the US, they also saw the survival of the colony as heavily dependent on the success of the group as a whole. They also paid a lot of attention to social aspects, such as a dress code, communal sleeping and eating, and social events such as dances. As a small example, the Shaker’s put wooden pegs on the walls where everyone hung their chair up off the floor after a meal…which facilitated cleaning the floor.

      If you think about the hunting and the guns and bows and arrows, it is obvious that energy (gunpowder and processed metals) and technology (powerful bows and arrows) have made it possible for us to survive as an atomistic society rather than a social society. Which leads me to suspect that the future for us may look more like the Shakers. Rather than solve sexual problems with abstinence, as the Shaker’s did, I hope we can be promiscuous like the Bonobos.

      Don Stewart

    • The standard solution among the British and even French aristocracies for making bad choices and blowing their wealth was, notoriously, always to marry a Yankie heiress. A sufficient number were pretty enough to make this not at all painful.

  18. Tad Patzek; Art Berman; Green New Deal and Illusions

    Please note the 1896 article about the irrationality of crowds. In the late 1920s there was an excellent silent movie made about The Crowd. In the 1930s H.L. Mencken wrote about the failures of democracy in the 1920s through the 1940s. Typical quote:
    For every complex problem there is an answer that is clear, simple, and wrong.

    I don’t think any Hollywood Studio would make The Crowd today. I see movies with veteran actresses who should know better getting all excited about plots involving Tinder dates and getting laid in the back seat of a car.

    Doctors Patzek and Berman prescribe a strong dose of castor oil, but no bed rest for the weary and sick.

    The man in the street, I believe, thinks, ‘If they can make the rich richer, then they can send some of that good stuff my way’. How to explain the extravagant flotilla of private jets going to Davos, along with the need for tax cuts for the rich and poverty for the masses????

    • Hi Peter – not really what I wanted to wake up to on a Sunday morning – but better the mediciene now instead of a ‘complete’ shock later in the year.

      Looking at the bad assets of $20trn – each US worker would have to toil for 3 year without any pay to pay them off (based on the average wage).

      Donald

    • Yes Donald, good assessment – the crisis is growing by the day but the stock market is still in denial – amazing how these masters of the financial universe are so blind.

    • Yes Donald, I agree that this year is highly likely, especially the way politics are now so divided through Brexit. I am working hard to see us out as soon as possible.

  19. The original scarcity scenario
    Many social animals evolve dominance hierarchies to deal with sexual matters. For example, some captive primates were taught to use coins as a medium of exchange. They readily adopted them. Which led to prostitution. The females demanded coins from the males, and then used the coins to buy stuff from the human caretakers. By giving the females the coins, the males became impoverished. Primates in the wild have been observed using ‘pay to play’. A female will go with a male from the forest to the edge of a farm with fruit trees. She waits patiently while the male risks his life to steal fruit from the farmer. If successful, he brings the fruit back to her and she mates with him.

    The usual situation is that some male becomes dominant and has access to all the females, but lower ranking males make do with what they can sneak. Which led to the designation ‘sneaky f__kers’. The low status male and the object of his affections would go into the bushes where the bottom half of their bodies is hidden. The dominant male can see, but doesn’t see what is going on.

    In other cases, the dominant doesn’t care if he gets to mate with the female first, who then goes and mates again with a lower ranking male. One group was observed to halve sexual peace, but then one of the females rejected the dominant male and went to mate with a lower ranking male. The dominant went after the lower ranking male, with the evident intent to kill him. The females put on a show of power and prevented the dominant male from killing the lower ranking male. The two males then went through the ritual of reconciliation.

    Christianity tries to solve the problem with prohibitions on extra-marital flings.

    The Bonobos, being intelligent creatures, solve the problem with promiscuity. A young woman at Duke wrote about her adventures in bonobo-land…Bonobo Handshake. She had been in a nice hotel in Paris with her boyfriend (now husband) and thought she knew something about sex. Then the two of them went to a Bonobo preserve in Congo, and as she walked in a male Bonobo presented her his penis as a way of getting acquainted and cementing social bonds. The locals told her she needed to masturbate him. She described the experience as ‘mortifying’.

    I recommend Frans de Waal’s books for an exercise in (probably) broadening one’s horizons.

    Don Stewart

    • ‘He who tires of the Jungle, tires of Life’?

      It all sounds terribly, well, …… civilised.

  20. Masters of the Universe
    Think that ‘so long as the music is playing, you have to keep dancing’. And as the Central Banks keep printing money, it has to go somewhere. And the place it chooses to go is the stock market.

    Should some damned communist get elected and the Central Bankers steered the money toward ordinary citizens, then???
    Don Stewart

  21. If there was any sort of communist threat Trump would turn into ‘General Midwinter’ from the film – Billion Dollar Brain.

    Donald

  22. Thank you Tim for this “run-down” of your central thesis. When I tell “the uninitiated” about your work and website, I often wonder where I should send them first. From now on I will be providing them with a link to this essay.

  23. Suzannah Lessard: The Absent Hand
    This will consider many of the same concerns addressed by Dr. Morgan, but will come from a different angle. I have been reading the above referenced book. Lessard looks at rural and urban landscapes, and reads their history and meaning. In the Hudson Valley she reads the decline of the rural way of life, and the rise of the exurban New Yorkers. In Youngstown, Ohio, she reads the collapse of the industrial Midwest and the consequent worsening of race relations. In New York City, she reads the end of the industrial city and the flourishing of something new, to which she cannot give a name. She went to Wall Street in 1964 (I was in that neighborhood in 1965 and agree with her description). But Wall Street at that time was an extension of the farm lands and the factories and the mines. Now the financial business has morphed into something else which she cannot fully grasp.

    The financialization has coincided with the invention of a new New York City. Rents have escalated as gentrification has spread and jobs have become far more amorphous.

    She also astutely observes the magic of electronic communications and the internet and how they have changed our perception of space. She calls it ‘enclosure’, the same way a cathedral ‘encloses’ while a nature religion opens to the wide world. The same way Frans de Waal argues that traditional science struggles to cope with the realities of biology (which is open) while science seeks closure.

    How to explain an economy based on eyeballs? I suggest that it is the ‘eyeball’ economy which is producing billionaires, but that the economy of moving dirt is still there….just ignored. The facts are that we are moving more mass than ever before…it just doesn’t create billionaires the way it once did. The timber barons who built those magnificent houses in Michigan no longer exist.

    So how did the Eyeball Economy rise to the top of the heap. I suggest two answers:
    *Science has discovered more effective ways to manipulate naive humans.
    *The Central Banks have created trillions of dollars and poured it into the top tier.
    A combination of these two factors has led to a profound change in the social mores of at least the United States, and probably in many more countries.

    The Science factor is self-limiting. Thieves have to steal modestly, for the same reasons that parasites can’t kill their hosts. But the ponzi scheme of the Central Banks obscures the view sufficiently that Lessard and Economists fail to see the fragility of New York City and Silicon Valley.

    Don Stewart

  24. Hi Tim, I have been reading your work since Tullett Prebon days which I guess is now quite a long time. I have followed this blog and read almost every post and many of the comments. I spend too much time on the internet so limit where I comment but wanted to drop in and say what an excellent and insightful job you are doing. Also, to everybody else here, the comments section seems to me to be one of the best self-regulated ones on the internet – very little sniping or arguing.I have learned an awful lot here. My biggest bugbear is housing, having been priced out my whole life. My savings should allow me to get a place soon as house prices continue to drop – I am in my late 40s. I have an interest in sustainable building and have done a lot of research on Straw Bale houses – it will never happen in large developments because the large house-builders don’t want efficient cheap energy saving housing.

    Not related to your article exactly but this caught my eye today:

    https://www.bbc.co.uk/news/science-environment-47832920

    Quote: “In this most recent experiment, we’ve near-instantaneously transferred 1.5 Megawatts of heat energy – the equivalent of 1,000 homes’ worth of heat energy.”

    I presume that means into the atmosphere so that is good!

    I also follow a lot of Danny Dorling’s writing’s. Although he is quite left-wing i think you two would do well to spend a day with each other. If you don’t know, he is a professor of Geography at Oxford and has some novel techniques for looking at data with mapping in unusual and very effective ways. His latest book on Brexit shows that it was actually the middle classed, middle/old aged white people of the south of Britain that swung the Brexit vote and not the poor working-class in the North as seems to be the accepted case by the media: http://www.dannydorling.org/?p=5568.

    He also has some interesting work on world population and the likelihood that it will decrease or at least stabilise rather then grow exponentially as we are all lead to believe: http://www.dannydorling.org/books/10billion/

    From an energy point of view his assertion that it is a small proportion of mainly rich people driving climate change is interesting: https://www.theguardian.com/inequality/2017/jul/04/is-inequality-bad-for-the-environment

    Keep up the good work – I think one day you will be seen as an innovative thinker with a clarion call for action on energy missed by the dunce- like elite in control.

  25. Tim Jackson on DeGrowth and Getting to Zero Emissions
    https://www.cusp.ac.uk/themes/aetw/blog-tj-circular-conversations/

    Jackson is more optimistic about our ability to achieve a circular economy than many commenters on this blog. However, he points out that the key point is never to have made the object to begin with. Which implies either strong social sanctions or laws prohibiting the manufacture of hard to recycle products. Some years ago Jackson characterized civilization as a heat engine. He is now envisioning a civilization which still uses heat, but in a more benign way and absent the ‘profit at any cost’ stimulus.

    On a related note, both Chevron and BP have recently made investments in a company which proposes to take carbon dioxide out of the air with machines.

    What I see evolving is an effort by Jackson to use a blend of private enterprise with social restrictions and a fundamental rethinking of corporate charters, all the while the corporations have stopped denying that we have issues, but will do their best to preserve maximum corporate freedom along with shifting costs to consumers. Meanwhile, some ascendant politicians are strongly in the denial phase…the only problems we have are government restrictions (the US and Brazil, notably).

    Don Stewart

  26. And a Dark Perspective

    Tad Patzek, formerly at Berkeley and Austin, is now a professor in Saudi Arabia. He recently remarked that ‘concern about oil supply is hitting new lows in the US’. The US public is convinced that oil supply is simply not a problem. Tad, on the other hand, is still a fan of Hubbert curves and believes we are about to go over a supply cliff. He published some charts showing Texas and North Dakota shale oil production declining precipitously beginning about next year.

    Here are some notes about a speech he gave recently, giving the cheery prediction that a post-oil world can support 8 million people.

    https://un-denial.com/2019/02/02/by-tad-patzek-on-human-overshoot/

    I admit to not having a clue how to get any coherent human political and social strategy out of the situation we are in. If Brexit brings Britain to its knees, what hope for solving the energy and resource and population dilemmas?

    Don Stewart

    • I’m not sure where he gets 8 million from as there were already 1bn people around in 1800 in the pre oil World.

    • I think he is figuring 8 million hunter-gatherers. He is also considering the degraded state of the natural world, such as the loss of topsoil and the extent of desertification.

      If one is a real pessimist, one says that the 8 million will be more like rag-pickers, picking over the debris left by industrial societies. There sure won’t be herds of hundreds of thousands bison, or wooly mammoths. And it would take very long time for the American corn belt to revert to the abundant mixed forests and grasslands that fed the Native American tribes.

      I’m not necessarily siding with Patzek against Chu, just laying out some scenarios put forward by serious people.

      Don Stewart

    • Hi 8m scavengers sounds like a more likely scenario and off course petrol and diesel degrade over time so they’d be without any transport after a while

    • The article you link to indicates that Patzek thinks the earth is about “30 times” into overshoot, meaning a sustainable population would be about 250 million.

  27. Rounding Out a Brief Survey
    Steven Chu (Obama’s Secretary of Energy) talking at the University of Chicago:
    https://www.forbes.com/sites/jeffmcmahon/2019/04/05/the-world-economy-is-a-pyramid-scheme-steven-chu-says/#4d29f44f1782

    Renewables are now so cheap that we are on the verge of a hydrogen economy. We can solve our problems simply by giving women reproductive freedom along with education and growth in prosperity.

    Do you think that Patzek and Chu could have a civil conversations?

    Don Stewart

  28. Tim,

    German industry is very big on IC vehicles, coal, steel and manufacturing but politically seems to want to be seen as green and renewables friendly. What part does this all have to play in it’s current situation and to what extent is it a “victim” of the economic and political situation elsewhere?

    • ….and Europe’s top nine polluters are all power stations in Germany.

      The German economy is on my ‘to do’ list. Almost uniquely, prosperity per capita in Germany keeps on rising, albeit (a) very slowly, and (b) less rapidly than tax per person.

      The German economy has been a HUGE beneficiary of the Euro – but the downside, potentially, is that Germany is owed, by Spain and Italy, close to EUR 1 trillion through the Target2 clearing system, money which, I suspect, can never be collected.

      I’d like to look at Germany here, but my ‘to do’ list is long, and keeps getting longer!

    • I share your concern, Tim, my list is extending too. There is too much going on around the world at present and making sense of it all is complex to say the least.

      Here’s what I said to one of my mentors, Gerry in Brisbane at: http://boomfinanceandeconomics.com/#/ he said (read from the bottom up)
      In the meantime this seems to confirm your views:

      “Specifically, instead of using the inverted 3-month/10-year inverted Treasury yield difference that has stock traders on edge, he recommended looking at the spread between the 10-year and 2-year Treasury yields – which is about 18 basis points away from inversion – and which apparently is great news: “Far from being bearish, the current 10-year to 2-year spread of 18 basis points is consistent with 12 percent S&P 500 appreciation over the next 12 months.”

      Cheers
      Peter

      From: gerry@boomfinanceandeconomics.com
      Sent: 09 April 2019 04:17
      To: Peter Underwood
      Subject: Re: I know there’s lots of fear right now

      Hi Peter,
      I suspect strongly that we are the verge of a great expansion in asset prices and economic activity. It is as clear as day…… but very early.
      Cheers,
      Gerry

      On Tue, Apr 9, 2019 at 11:12 AM Peter Underwood wrote:
      Hi Gerry,
      You are a rare and calm voice in the midst of the storm that appears to be brewing, many are panicking; I’m not buying it and relying on your analysis of the global situation:
      https://usawatchdog.com/

      I do follow ‘Dollar Collapse’ and John Rubino has good things to say sometimes. So what’s you take so far?
      https://stockcharts.com/freecharts/yieldcurve.php Inversion is over hyped?
      http://www.harperpetersen.com/harpex/harpexVP.do This index is contrary to BDI and rising!
      https://fred.stlouisfed.org/series/M2V Velocity of money is rising
      https://fred.stlouisfed.org/series/MPU4910063 Productivity is beginning to gain ground

      Wages are rising and inflation is contained, so what’s the problem?

  29. Hi Tim,

    I saw the stat for German power stations that kind of thing just adds to my feeling that I live in a Matrix like world where the reality is very different to the marketing narrative version and I feel more and more like the little boy that knows that the emperor has no closes and can’t understand why nobody else has noticed or is talking about it.

    Have you or other contributors stopped to consider that we here could be the mad one’s?

    • From recollection, Germany supercharged renewables using attractive feed-in tariffs, but had to stop this as costs became excessive – with the result that renewables almost stopped expanding. We’ve had the same thing here in Spain. This takes us back to the issues discussed in the preceding article here.

      Yes, I for one have considered that, and might write about it soon. I’ve just been reading how investors have been net sellers of $1.1 trn of US equities over five years, but buy-backs, most of them debt-financed, have totaled $2.9tn, thus driving up stock prices – just as the companies people are invested in are replacing shock-absorbing sequity capital with inflexible debt, thereby becoming much riskier. But anyone with stock options or performance-linked pay is happy……..

      Crazy.

    • Hi Keith,

      We indeed live in a strange world where the marketed “facade” looks very different from the reality. Germany energy “transition” is a case in point. So far they have been replacing carbon free nuclear with carbon free RNE at a cost of about 300B eur.

      I often feel that a policy “packaging” matters more than the actual policy effectiveness as far as voters are concerned. Germany “green” policy was mainly about getting emotional about nukes rather than C02. Going full RNE would cost about 2T eur for germany, an investment that must be repeated every ~25 years. So we’re looking at about 80B (i.e. ~2.5% of GDP) annual in maintenance and costs. Going full on electric cars would likely add 50-100% investment and maintenance costs to that. This is all assuming that we keep the “good” ERoEI that we have now… which we won’t.

      Here is a very good piece (IMO) on the German experiment :

      https://jancovici.com/en/energy-transition/societal-choices/what-transition-are-the-germans-up-to-exactly/

    • Some time back we had an article here about conversion to EV, which concluded that it isn’t feasible unless we increase the use of fossil fuels for power generation.

      Electricity consumption worldwide, ex-EV, is growing at a trend rate of 2.5%.

      Of all world transport – land, sea and air – around 97% is powered by oil, with electrified rail (which doesn’t rely on batteries) the only significant exception.

      The idea that we can transition to EV and power most of it from renewables is cloud cuckoo land. Just a nice little tale to tell the voters.

      Renewables ECoEs are falling, and capacity is growing rapidly (but from a small base), but both rates of change are slowing. Renewables are derivatives of primary FF energy, and will remain so until we can make, for instance, steel, plastics and copper without using FF.

      The reality is that we need fewer cars, more public transport and a redesign of where and how we live and work. But don’t tell the public……….

    • Tim – doing my best to be a ‘model’ citizen I am using the bus more and more – my car can sit unused for days on end now.

      Donald

    • This is the thing about retired people Donald, we have the same thing. In fact I calculated that the car remains unused for 95% of the time; we are lucky to do 3,000 miles a year (and the insurance company lowered our premiums because of it).

      I think we might as well take a taxi when we need to go out of the village, although most of the time we have all the facitlities within walking distance.

    • My mileage has reduced by about 3000 miles a year – but my car is still a necessity as I have two very elderly (89 and 91) members of my family to help with shopping – trips to the hospital -Doctors etc and the occasional day out when they’re feeling well enough.

      Taxis with the capacity to take wheelchairs are in short supply where I live and getting them on to a bus would be very difficult.

      So as we’re all living longer what will happen to families that – in the near future – cannot afford to run a car yet need to get their elderly relatives to the doctor – hospital – dentist etc.

      My local hospital does run a pickup service but it’s prone to being cancelled at short notice and when it does run it’s so early that the patients have a long wait to see their consultant.

      Donald

    • I empathise Donald. We are fortunate where we live, doctors on hand, pharmacy even a mainline station, but still pop less than 3,000. As you say, under your circumstances you really do need a car.

    • Peter thank you for your reply. We can only hope that the Government has made some forward planning on transport for the elderly.

      Donald

    • @Tim

      EV’s are indeed pixie dust for the voters. It’s nice to sell the “sustainable growth” narrative. We should be talking about sustainable retreat.

      E-Bikes OTOH are great and can cover short distances very effectively. They are selling like hotcakes in my region, especially the cargo models.

  30. Are we mad?

    ‘Don’t worry yourself about how many of us are in here!’ said the asylum inmate.

    ‘Instead, shouldn’t we be worried about how many of you there are out there!’

  31. Politics and EVs
    Please take a took at Trump’s apparent 360 degree turn in about 24 hours on the issue of climate change:
    https://civilnotionblog.weebly.com/home/trumps-hypocritical-oaths-on-the-environment

    Over 24 hours, with no advice from his staff, Trump has reversed course on money for cleaning up the Great Lakes. He is also looking for examples of ‘climate change victories’ to use in the coming elections. Why? Because Greta Thunberg and others have tapped into people’s fears and daily experiences.

    Now I would like to make a leap to Brexit. There was no question that the establishment in Britain was moderately happy with the EU. They might quarrel with some of the policies and practices, but being part of a big common market was seen to increase the prosperity of the One Percent. But down below, Neoliberalism and Austerity were gnawing away at the 90 percent. And so, to everyone’s astonishment, Brexit won the referendum.

    My point is that when things go badly, politicians try risky maneuvers. I don’t think the politicians understand that falling ECoE was the problem that needed a response in Britain, and I don’t think that Trump understands the multiple problems facing the US: disintegrating social wellness measurements, climate change, falling prosperity for the 90 percent, bloated military spending, piles of money wasted on health care, etc. So will Trump invite Elon Musk to the White House and extend the subsidies for EVs???

    Stranger things have happened. And it is not about building a sustainable future in transportation. It is about winning the 2020 elections.

    Also, please note my comment a couple of years ago that the fossil fuel companies are jockeying to catch the next wave. And they don’t want that to be Reparations.

    Don Stewart

  32. ‘the reality is that we need to change our entire way of life/thinking to solve our energy problem ……but its politically unpalatable, particularly in an era of heightened popularism and ignorance’

    Maybe this is less intractable than realists assume. Populist politicians riding high right now are generally excellent salespeople, hence their seemingly unstoppable successes worldwide, but a newcomer may find an opportunity to upset the gatekeeping applecart that is the established encumbents’ stranglehold on the system of power.

    A new quality player could convince enough of the electorate to change their lifestyles for the prize of health and happiness, in a way that entailed energy efficiency. In return they would get the power they crave off the old order. Why would an electorate conditioned to wanting convenience 24/7 even consider this? Out of desperation for change. Anything looking different from the status quo gets given a go at some point when people are desperate enough. Remember Argentina pre-Kirchner when the ruling elite tried to install an assembly line of establishment apparatchiks over a few days, with the public continuing protests regardless until they had a genuinely different option?

  33. You say, “Estimates based on SEEDS suggest that GFC II will be at least four orders of magnitude larger than GFC I.”

    In my experience in the physical sciences, saying “four orders of magnitude larger” is the same as saying “10,000 times greater”. I don’t think that is what you meant.

    If it is, can you give some examples of how that would work.

  34. Sea Changes?
    Above I noted Trump’s 180 degree turn on the Great Lakes cleanup-project. Here is the latest missive from Duke Power…best known for dumping coal ash into rivers.
    https://mail.google.com/mail/u/0/#inbox/FMfcgxwCgCPCtXnKKNchdWNfTGJfsdWM

    ‘From hydro plants to solar farms and the power poles in between, innovations in renewable energy deliver cleaner and more reliable power to communities.’

    It wasn’t very long ago that a typical bulletin from Duke would assure us that ‘you don’t need to understand it, you just want the lights to come on when you flip the switch’.

    Trump is finely attuned to the whim of the public. Which way is the wind blowing? I doubt he is interested in reading a Gail Tverbeg analysis of the false promise of ‘renewables’.

    Don Stewart

  35. Just an selected extract from the Telegraph – article by Ambrose-Evans Pritchard

    Italy is one small shock away from a sovereign default of global scale. The International Monetary Fund is not allowed to state this openly but that is the import of its latest Fiscal Monitor.

    The public debt ratio is to ratchet up from 132.1pc of GDP in 2018, to 134.4pc in 2020, and 138.5pc in 2024. The final figure is academic. Bond vigilantes will take matters into their hands long before then.

    The budget deficit will blow through 3pc next year, reach 3.7pc by 2022, and approach 4pc by mid-decade in chronic violation of the Maastricht Treaty. This all assumes that the global economic cycle has been abolished and that nothing goes wrong.

    America is no pretty sight either. Donald Trump’s wasted fiscal stimulus pushes the US debt ratio from 105.8pc to 110pc over the next four years. But the US is a sovereign superpower with its own central bank and monetary instruments. It borrows in its own currency. Italy borrows in ‘D-Marks’ that it cannot print.

    Dizzy times ahead

    Donald

    • I think if a crisis occurs in the EZ, which I believe is inevitable, then all the rules will be ditched because it will be an existential crisis for the EU itself.

      I can’t see that it’s feasible for a country like Italy to exit the Euro; it would be catastrophic for both Italy and the EZ. What is almost inevitable is the the rules governing what the ECB can do and what the growth and stability pact says will be relaxed, formally or informally. Not to do this not only risks the Euro project but the EU itself and I’m sure those in power know this full well.

      The problem with all this is that it’s nothing more than can kicking. Until you get fiscal union, for which you need political union the problems of the Euro will never be resolved. The Germans will not have the former and very few in the EU want the latter.

  36. India and Renewables
    Chris Nelder has a fantastic interview with an Australian expert on coal and India. In brief, coal fired plants are just not competitive any more in most of India. The production of coal is centered in the Northeast part of the country, while the consumption is in the south and west. And power plants are controlled by the states, not the national government. So the states prefer home-grown renewables rather than importing electricity from a state far away, but still within India. So the states are creating large amounts of stranded investment with their purchasing decisions.

    The expert predicts a blistering rate of growth in the Indian economy, putting a strain on the ability to generate the required electricity. India has moved from chronic shortages of electricity to a small surplus, but the expert warns that keeping up with demand will be difficult.

    Taken at face value, the situation would indicate falling ECoE in India for electricity. The expert also says that transportation is being electrified. I had heard that large numbers of electrified motor scooters were being deployed.

    https://xenetwork.org/ets/episodes/episode-91-energy-transition-in-india-and-southeast-asia-part-1/

    Don Stewart

    • Regarding their push towards renewables / electrification I wonder if the power moguls have asked some of their brilliant mathematicians how much conventional fossil fuel energy will be needed to maintain and replace their renewables?

      Donald

    • Donald
      I’m certainly no expert on India. I know that Russia is interested in selling them nuclear power plants. Nuclear is a way to maintain base load with the fluctuating availability from wind and solar.

      There is also the issue of mine-mouth coal plants with long transmission lines. China is doing that, but the Australian says that India is not doing very much of it. He attributes it to China not being a democracy, while India is ruled by politicians with a short time horizon until the next election….which makes strategic planning very difficult. A very decentralized wind and solar program may avoid some of the problems with maintaining long distance transmission…but perhaps at the cost of more money up front???

      I read recently that India, which had purchased Russian anti-aircraft systems, told the US to buzz off when the US tried to pressure them to buy an American system. I also read in Dmitry Orlov that one of the states in the Russian federation recently sponsored a trade event. Both Pakistan and India participated…and relations were cordial despite the dispute over Kashmir and related military events. It may be that gas pipelines from central Asia are part of the mix???

      So…I don’t know. But this was like listening to an interview with the Man From Mars. Falling ECoE’s??? Reduced emissions??? No defense of coal???

      Don Stewart

    • Hi seems like I created a hybrid word mixing horribly with horrific – ‘horrically’ Perhaps one day it’ll enter the OED.

      Donald

  37. @Donald
    The India interview also tickled my interest because it is in the context of very low levels of energy consumption. For example, a few hundred million electric scooters is not at all like a few hundred million electric SUV’s with air conditioning. If the US switched from SUVs to scooters, its GDP would collapse and it’s industries would die. But India may pick up a new and flourishing industry, with rising GDP. In Europe, I note that Poland is still doing well in terms of GDP growth, while countries like Britain, Germany, France, and Italy are struggling. I am sure the latter are still ‘richer’, but their trajectory is not good relative to Poland. (Poland, of course, is following a ‘coal forever’ strategy.) So it may be that countries who follow a ‘low ECoE’ strategy still have room for growth, while countries which have followed a ‘high consumption of oil and coal’ are doomed to shrink???

    Don Stewart

    • Well if I had no responsibility towards two older members of my family an electric scooter could well suit my needs.

      Using the old saying of ‘what you never had you never miss; If just having small electric driven transport an ultra energy efficient home makes you happy then why want an upgrade?

      5 years ago I bought a nearly new Golf – but the franchise sent me letters after only 2 years urging me to upgrade to the newer version with a better infotainment unit and slightly (they claimed) more efficient engine. Why should I fork out thousands more when my present version is all I need,

      Same with mobile phones – we’re only seeing small incremental improvements now as the laws of physics have intervened transistor size – so why bother upgrading if your existing one still works well.

      Basically we need to be more content with what we’ve already got. In my case – when I was only 23 back in 1981 – buying my first colour 14″ TV for my bedsit was a really big thing – now look what we’ve got.

      Donald

    • It’s all down to our modern production engineering systems Donald. I once worked with a six-sigma, black belt (3 errors per million) production engineer in South Africa – stunning bloke – learned a lot. He had worked with Toshiba and applied the Jananese concepts of ‘continuous improvement’ and learned that: “If I don’t know, I can’t act”:
      https://www.asme.org/engineering-topics/articles/manufacturing-design/5-lean-principles-every-should-know

      I wrote it in my book as an example of the need to process information, learn and evolve knowledge which, when intelligently applied, turns into wisdom.

    • You’re right Peter – we do need to keep improving designs – knowledge etc otherwise we’ll just stagnate.

      Probably though – in order to have the resources to improve our scientific / medical abilities -compromises will have to be made in how resources are used meaning that all of us will have to economise if these scarce resources are going to be available for R&D.

      We’d all like to see cures for cancer – arthritis – highly intelligent robots helping our aging population and doing repetitive chores but there’s unlikely to be the energy available for the current level of mass consumerism and R&D.

      I have been thinking that by the 2030’s we may have the technology to get to Mars but there may not be the political will due to even scarcer resources.

      Donald

  38. Horse, Barn Door: OECD works out that we have to reverse the policies of the last 40 years. Nice discussion by Rabobank analyst, reprinted at Z/H
    “That’s right, folks. The rich man’s club of the OECD wants higher taxes on capital; higher taxes on the rich; stronger unions; more public spending; mortgage relief; more affordable housing; and better social services. A complete reversal of the socio-economic policies of the last 40 years. All they have to do now is work out that this is not compatible with central-bank asset-price inflation, which makes housing unaffordable, and with free trade, which makes higher state spending unaffordable and higher wages uncompetitive. Either that, or the OECD will have to embrace Modern Monetary Theory. Pick your black hole – or wait for populists to pick it for you, because when the middle-class goes, everything goes.”
    https://www.zerohedge.com/news/2019-04-11/rabobank-black-hole-has-appeared-our-eyes-its-now-arriving-31-october

    • Well I look at things this way in extremely simple terms. The availability of energy (mostly oil) allowed a certain percentage of the population to enjoy middle class living. nice home – probably two cars – and two main holidays a year together with long weekends away.

      With energy getting more and more expensive – the general population rising – more resources needed to look after the increasing number of elderly means there’s less wealth creating energy to support the current number of middle class incomes.

      Although there is a large number of super rich – diverting their huge savings to help the less well off may not work because if – for example – you are a very wealthy couple – you may have a whole driveway of very expensive cars but the maximum amount of cars you drive at anytime is two.

      Now say a billion pounds was taken from their savings / assets and used to buy 50,000 new cars at 20,000 pounds each for families who do not have a car but could afford to run one (but not buy). You’d potentially then have 50,000 extra cars on the road gobbling up scarce fossil fuels

      Therefore you could argue that all the wealth that goes to rich people is a way of reducing consumption because they simply cannot ever spend all their money. So if it’s spread out over many people overall consumption would go up.

      I stand ready to be shot down with this idea

      Donald

    • I like your idea Donald, thank you, but the rich generally put their surplus funds into investment assets like real estate and stock/bond markets. Hence the rapid increase in asset values from 2008 and this energy is all being stripped from the 95%; thus the depletion of the middle class across the developed world. That’s my hypothesis.

    • Hi Peter if the money was being put into existing estates assets as speculation this would not generate any economic activity (except perhaps the broker’s fees which they may well spend on fast cars and cocaine ).

      Therefore spreading their wealth around to the less wealthy could generate the production of tangible goods.

      I’ve probably over simplified things too much but I hope my point about the extra cars illustrates what could happen.

      Donald

    • Hi Donald. You are of course correct. The fastest car I ever drove was a brand new Aston Martin DBS in 1973, midnight blue with irvory upholstery, the MD ask me to look after it for him while he went on holiday for a month. After a week it frightened me to death (135mph up the M3) so I left it in the garage afterwards – too risky. Since then I have had nice, small and sober vehicles and now looking forward to an electric one when the price drops – if ever!

    • Wow obviously pre speed camera days – it must have been terrifying – no ABS – traction control – airbags – real driving by the seat of your pants.

      I currently have a 6 year old MK7 Golf – which I’ve owned for 5 years – it’s economical and very pleasant to drive – but I’d struggle to describe it as thrilling

      I did take it up to 120 on a section of a French motorway on my way back from Switzerland a few years back and it did it with a minimum of fuss – which I would assume was a far cry from how the Aston reacted when you took her – initially – over 70.

      (Yes we’re a bit off topic here Tim but we can’t discuss the end of our current World all the time 🙂 )

      Donald

  39. Visiting 2nd & 3rd world countries can show a person from the 1st how much waste we accept as normal in all aspects of life, not just energy consumption – mainly because the predominant economic system in most places is a variation of neoliberalism. This barely-regulated capitalism removes balance and controls, so the anything goes, scam-for-all, actually is designed for maximum possible consumption/profit as opposed to efficiency, resulting in high levels of waste.

    The easiest steps therefore to conserve energy via usage patterns alone are to eliminate corruption and ineptitude. In the few places where this has been tried, it suggests that up to 50% of use can be from energy that was previously ‘lost’ outright by various forms of waste. Then sensitive pricing alone can cut another huge % of waste, conjuring up more energy for serious purposes, like running a hospital, vs lighting up motorways few people actually use for kilometres at night for example. Changing mindsets is the first and key step, manage this and you can then conserve usage to only essential purposes – this can be done with psychology alone if people are persuaded with respect. From what I have seen on my travels, its conceivable that some countries generating/affording even only 25% of of their demand could be fully energy independent with intelligent, courageous and honest leadership. (you can see why it almost never happens) I’ve personally managed facilities where the buildings had lights on all night and most electrical equipment not switched off despite the entire site being unused at night. This was simply because staff didn’t care as they didn’t pay the bills and the top brass similarly saw the loss as on the shareholders, so not worth the hassle trying to enforce discipline. I calculated the budget and can promise you we could have cut our power bill in half with nobody inconvenienced at all.

    Extrapolated to a national economy, genuine needs can often probably be covered even with existing supplies if waste and merely wants are eliminated. Democratically, you could have a billing structure where the tariff is step-structured so log-changes in usage are charged commensurately higher as a waste tax effectively. All this is with existing technology and could be suggested by schoolkids, so the lack is political will.

  40. Tad Patzek on population after Seneca Cliff

    Go to the 50 minute mark and listen about 6 or 7 minutes. He makes the point that the global population of hunter-gatherers plus fishing tribes was 2.5 to 8 million. He also makes the point that the environment is now degraded relative to what it was 20,000 years ago.

    So maybe somewhere between 1/30th of todays 8 billion and a couple of million. He also makes the point, earlier in the talk, that we will never be able to reconstruct the civilization if it collapses, which it is sure to do. He applies the logic to every inhabited planet anywhere in the universe. The exhaustion of one critical resource is enough to bring about collapse, because of the complexity of production.

    I don’t think it is particularly productive to argue about the numbers. His logic is what should interest us. (By the way, there ARE subtitles if you have trouble understanding Polish-American.)

    Don Stewart

    • Hopefully with so few people around the Earth would slowly recover. Just imagine being one of only 8m people. If say there were around 200 in your commune you might never encounter another ‘tribe’

      Donald

    • Peter and others on population
      In a real collapse, the size of the cube of humans stacked on top of each other is a less relevant question than:
      By one week after D (disaster) Day, how many of the 8 billion will have died of dysentery due to polluted drinking water?

      While I am not an expert on the issue, I imagine the answer is that those very poor people with worms in their intestines wouldn’t notice anything out of the ordinary. Almost everyone in London would be dead.

      The US stocks an awful lot of plastic water bottles for use in hurricanes and so forth. But stupidity is hard to cure. Our small sewer system was just converted from gravity to a larger system which requires pumping the sewage over a hill to a centralized treatment plant. If the electricity fails, we are out of luck.

      Don Stewart

    • Thanks Don. The consideration of how we might fare after the crisis is of course speculation but I try to be circumspect on this subject. There are so many variables to consider it is impossible to plan a course for survival IMHO.

  41. Sorry, this is off topic, other than to show that our very degraded hour produces very degraded men, but the arrest of Julian Assange is a very sad event and a Rubicon of sorts. Every major institution that could act as the conscience of the nation and shame the political class into behaving is now corrupt – the political system itself, of course, which barely even bothers with a pretext of legality anymore, the courts, the armed forces, the media, the universities, the think tanks, the churches. My wife told me that on NPR today, they were busy splitting hairs about why Assange is not a journalist. No one will stand up for this man who told the truth about what the US did.
    As I’ve mentioned before, I fear that the most likely outcome of diminishing prosperity will be greater austerity, much greater repression, much greater violence, much greater irrationality and outright insanity. H/t to Ilargi at The Automatic Earth, I think he has really summed it up with his short essay today, The Day America Died. Of course, Morris Berman called it much earlier, but the arrest of Assange is definitely one of those crystallizing moments, a good place to “call it.” We’re done.

    • OT it might be, but mightily important tagio, and thank you for raising it.

      It goes to the heart of my own outrage. This is indeed a salient moment as the forces of good and honesty face up to the evil empire and its demons who are determined to silence a very brave and honourable man. He has my utmost support and I will not flinch in exposing these vampires of American culture. They are dying and in doing so will become very dangerous, infecting the world with their virus of moral degradation.

      Rant over, back to normality and topic I hope.

    • The poor guy looked to have gone a little mad. I think his intentions were laudable but if he put innocent people in danger with some of his posts then they were a misjudgement.

      Donald

    • I think Donald, that I would have gone a little mad if I had spent 7 years holed up in an embassy, if i’m not a little mad already. As a retired accountant, my pschiatrist said “there is no cure for accountancy” (I think you can guess where that came from?).

      Anyway, seriously, this attack against Julian strikes at the heart of free journalism IMO, although others say that he is a hacker. Nevertheless, the vassal UK state should not pander to USA demands:
      https://theintercept.com/2019/04/11/the-u-s-governments-indictment-of-julian-assange-poses-grave-threats-to-press-freedoms/

    • Hi I’m broadly in agreement that there should be an outlet for so called certain Government ‘secrets’ but not all. Free speech is in decline so it would be sad to see him imprisoned in the US which ironically describes itself as ‘The land of the free’ yet is anything but that.

      Donald

    • Julian Assange really is off-topic, but since we’re there, just a few thoughts.

      The crux of the matter seems to be extradition to Sweden. If the Swedes had offered, or the British has sought, a promise that extradition was solely to Sweden, and solely to face the stated charges – i.e., that there could be no onwards extradition, in this instance to the US – the issue could have been resolved satisfactorily. If, as I understand it, the Swedes have dropped the charges, skipping bail looks like a technical offence, in the sense of a breach of law but not necessarily of justice. A modest fine or short gaol term seems the most that’s appropriate.

      But the UK authorities have acted rather strangely over this all along. When he first took refuge in the Ecuadorian embassy, some idiot actually proposed taking him by force, thus breaching an important principle and thereby imperiling diplomats around the world, British diplomats included. Now it looks like they might try extradition to the US.

      Given the existing controversy over Parliament vs the referendum result, all of this is manna from heaven for anti-establishment politicians – a gift to Mr Corbyn, that is.

    • I was rather taken aback at the mockery directed at Assange by the judge: sneering at him as a ‘narcissist’ is both a psychological assessment quite beyond his competence, and rather nasty.

      Shades, I feel, of the show trials of Nazi Germany and the Soviet Union and the stream of insults directed at the accused.

      I very much doubt that he will be treated fairly and dispassionately.

      Institutional degradation is quite far advanced in Britain: but then ‘WMD’s in Iraq’ did set the tone for public life, did it not? And the ghastly man who propagated that outrageous untruth rolls in riches……

  42. Population of Hunter-Gatherers and Fisherpeople
    There is a wonderful book about tree crops…Sprout Lands by William Bryant Logan. His special interest is the practices of coppice and pollarding. These practices increase the life of the tree and multiply the production of wood especially suited to the needs of humans. Yet, when the author needed some guidance in constructing a pollard arbor for the Metropolitan Museum in New York, he could not find anyone in the US to help him. The practices which benefitted humans for many tens of thousands of years have been practically obliterated by ‘civilization’.

    On page 207 we begin a discussion of the California indians. There were 275,000 of them. They were regarded by the intelligentsia of the early Europeans as ‘stupid and backward’. They showed no interest in agriculture. Yet we now assess them as ‘the California Indians created the most affluent hunter-gatherer culture that the world has ever known.’ But we should note that the creation of that affluent culture took 12,000 years. The average tribe was about a thousand people. Most of them lived in one place in the winter and another place in the summer, to take advantage of the different harvestable plants and animals by season. They had very flat organizations and were, on the whole, living peaceful lives.

    To get some idea of the complexity of the culture, consider that an ordinary family might have no pottery at all, but more than 40 different specialized baskets. They had developed cooking methods for their water-tight baskets made out of tree material and other plants.

    So here is the conundrum: If industrial civilization collapsed tomorrow, how many of us could actually survive living as the California Indians lived? Don’t forget that at European contact, they were at the height of development of their culture…it must have evolved from much simpler origins. So did they begin with a couple of thousand humans in all of California, and then multiply over the millennia?

    And now one begins to understand how Tad Patzek can come out with very low numbers or considerably higher numbers of survivors in a crunch. It all depends. Considering the unknowns, it would be very hard to give good advice to one’s children. Other than that in a real crash, the other 30 million people in California are probably the greatest danger to one’s survival.

    Don Stewart

    • Don these Californian indians sound fascinating – I wonder how long it took to develop all their specialized baskets.

    • I spent time with a group of the First Nation in Texas in 1997. It was a fantastic experience and I still have the CD of their wonderful music which I play sometimes when I need to meditate. They are a wonderfully spiritual people and I would always recommend a visit – put it on your bucket list.

    • Buffy Ste-Marie’s album ‘Coincidence And Likely Stories’, which includes ‘Bury My Heart At Wounded Knee’, is an old favourite of mine.

    • Mine is: “Sacred Spirit” (Chants and dances of the Native Americans). They were selling them (asking for donations) to support their community. Nice to share with a kindred soul.

    • Pollarding and other sensible ways of managing woods fell into disuse in Britain from the 1850’s: precisely the time at which the railways made the wide distribution of coal easy and cheap.

      ‘Useless’ (because not ploughed) heathland was also obliterated by the enclosures of the 18th and 19th centuries: it had provided most of the fuel for bread ovens since time immemorial.

      The other enemies of hedgerows managed for fuel and timber were the cereal farmers, who cut (and still do) the hedgerows down viciously so as not to shade their crops. Leading of course to acclerated soil erosion.

      Dairy farmers were more tolerant of taller hedgerows and trees in them as they sheltered cattle very conveniently.

      Government subsidies for establishing, expanding and maintaining rich woodland, hedgerows and heaths would be the most far-sighted gift that could be made to the future inhabitants of Britain. And it would all grow comparatively rapidly.

      It will of course never be done. Instead, the building of masses of truly crappy (vulgar, but true!) housing will be subsidised through low interest rates.

      Old practices were always called ‘time out of mind’.

      We are the ones out of our tiny minds.

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