#156. Actual fantasy


Everyone knows the quotation, of course, which says that “when it gets serious, you have to lie”.

Actually, when it gets even more serious, we have to face the facts.

I’m indebted to Dutch rock music genius Arjen Lucassen for the observation that the counterpart to “virtual reality” is actual fantasy – and that’s where the world economy seems to be right now.

You may think it’s imminent, or you might believe that it still lies some distance in the future, but I’m pretty sure you know that we’re heading, inescapably, for “GFC II”, the much larger (and very different) sequel to the 2008 global financial crisis (GFC).

SEEDS 20 – the latest iteration of the Surplus Energy Economics Data System – has a new module which calculates the scale of exposure to “value destruction”. This exposure now stands at $320 trillion, compared with $67tn (at 2018 values) on the eve of GFC I at the end of 2007.

How this number is reached, and what it means, can be discussed later. Additionally, potential for value destruction needn’t mean that this is the quantity of value which actually will be destroyed when a crash happens. Rather, it gives us a starting order-of-magnitude.

For now, though, we can simply note that risk exposure seems now to be at least four times what it was back in 2008. Moreover, interest rates, now at or close to zero, cannot be slashed again, as they were in 2008-09. Neither can governments again put their now-stretched balance sheets behind their banking systems, even if global interconnectedness didn’t render such actions by individual countries largely ineffective.

Finally – in this litany of risk – two further points need to be borne in mind. First, global prosperity is weakening, and has been falling in most Western economies for at least a decade, so any new crash will test an already-weakened economic resilience.

Second, and relatedly, any attempt to repeat the rescues of 2008 would be unlikely to be accepted by a general public which now – and, in general, correctly – characterises those rescues as ‘bail-outs for the wealthy, and austerity for everyone else’.

The high price of ignorance

It’s tempting – looking at a world divided between struggling, often angry majorities, and tiny minorities rich beyond the dreams of avarice – to think the surreal state of the world’s financial system reflects some grand scheme, driven by greed. Alternatively, you might feel that far too many countries are run by people who simply aren’t up to the job.

Ultimately, though – and whilst greed, arrogance, incompetence and ambition have all been present in abundance – the factor driving most of what has gone wrong in recent years has been simple ignorance. For the most part, disastrous decisions have been made in good faith, because thinking has been conditioned by the false paradigm which states that ‘economics is the study of money’, and which adds, to compound folly still further, that energy is ‘just another input’.

I don’t want to labour a point familiar to most regular readers, so let’s wrap up recent history very briefly.

From the late 1990s, as “secular stagnation” kicked in (for reasons which very few actually understood, then or now), the siren voices of conventional economics argued that this could be ‘fixed’ by making it easier for people to borrow than it had ever been before. This created, not just debt escalation, but a lethal proliferation and dispersal of risk, which led directly to 2008.

In response, the same wise people, those whose insights caused the crisis in the first place, now counselled yet more bizarre gimmicks, the worst of which was that we should pay people to borrow, whilst simultaneously destroying the ability to earn returns on capital. Nobody seems to have wondered (still less explained) how we were supposed to operate a capitalist economy without returns on capital – and that, by the way, is why what we have now isn’t remotely a capitalist system based on properly-functioning markets.

When GFC II turns up, it’s as predictable as night following day that the zealots of the ‘economics is money’ fraternity will come up with yet more hare-brained follies. We already know what some of these are likely to be. There are certain to be strident calls for yet more money creation (but this time with a label saying that “it’s not QE – honest”). Some will advocate ‘helicopter money’, perhaps calling it ‘peoples’ QE’. There will be calls for negative nominal interest rates, with the necessary concomitant of the banning of cash. Ideas even more barking mad than these are likely to turn up, too.

Ultimately, what’s likely to happen is that the authorities will respond to GFC II by pouring into the system more additional money than the credibility of fiat currencies can withstand.

We know, of course, that any new gimmicks, just like the old ones, won’t ‘fix’ anything, and can be expected to make a bad situation even worse.

So the question facing everyone now – but especially decision-makers in government, business and finance, and those who influence their decisions – is whether we abandon conventional economics before, or after, the next mad turn of the roulette wheel.

Put another way, should the creators of “deregulation”, QE and ZIRP – and the facilitators of sub-prime and “cash-back” mortgages, collateralised debt obligations and the alphabet soup of “financial weapons of mass destruction” – be allowed to introduce yet more insanity into the system?

Before making this decision, there’s one further point that everyone needs to bear in mind. In 2008, financial gimmickry nearly, but not quite, destroyed the banking system. The only reason why this didn’t happen was that fiat money retained its credibility. But, whilst the follies which preceded the GFC imperilled only the credit (banking) system, those which have followed have put the credibility of money itself at risk.

This is perhaps the most powerful reason of all for not letting the practitioners of ‘conventional’ economics have another swing at the wrecking-ball.

I hope that, reflecting on this, you’ll agree with me that we can no longer afford the folly of financial economics.

Moreover, we need to say so, making fundamental points forcefully, and resisting any temptation to wander off into esoteric by-ways.

A scientific alternative?

If there can be no doubt at all that money-based interpretation of the economy has ended in abject failure, there can be very little doubt that a workable alternative is ready and waiting. That alternative is the recognition that the economy is an energy system.

This idea is by no means a new one and, though I’d prefer not to particularize, it’s been pioneered by some truly brilliant people. If those of us who base our interpretations on the energy-economics paradigm can see a long way into the future, it’s because we’re “standing on the shoulders of giants”.

Moreover, much of the work of the pioneers is rooted in solid science, meaning that, for the first time, there is the prospect of a genuine science of economics, firmly located within the laws of thermodynamics. This has to be a more rational option than continuing to rely on economic ‘laws’ which try to impute immutable patterns to the behaviour of money – something which is, after all, no more, than a human construct.

I like to think that my much more modest role in this direction of travel has been to recognize that, if energy economics is going to transition from the side-lines of the debate to its centre, it needs to tackle conventional economics on its own turf.  That means that, whilst as purists we might prefer to set out our findings in calories, BTUs and joules, we have to talk in dollars, euros and yen if we’re to secure a hearing. It also means that we need models of the economy based firmly on energy principles.

If you’re a regular visitor to this site then the basics of what I call surplus energy economics will be familiar. Even so, and with new visitors in mind, a brief summary of its main principles seems apposite.

Core principles

The first principle of surplus energy economics is that everything that constitutes the economy is a function of energy. Literally nothing – goods, services, infrastructure, travel, information – can be supplied without it. Even in the most basic aspects of our lives, everything that we need – including somewhere to live, food and water – is a product of the application of energy. The more complex a society becomes, the more energy it requires, even if this is sometimes masked when energy-intensive activities are outsourced to other countries. The idea that we can somehow “decouple” economic activity from the use of energy has been debunked comprehensively by the European Environmental Bureau as “a haystack without a needle”.

You need only picture a society even temporarily deprived of energy to see the reality of this. Without energy, food cannot be grown, processed or delivered, water fails when the pumps stop working, our homes and places of work become cold and dark, and schools and hospitals cease to function. Without continuity of energy, machinery falls silent, nothing can move from where it is to where it is needed, individuals lose the mobility that we take for granted, and, in a pretty short time, social order fails and chaos reigns.

Ironically, financial systems are amongst the first to collapse when the energy plug is pulled. People cannot even write learned papers telling us that energy is ‘just another input’ when their computer screens have just gone down.

The second principle of surplus energy economics is that, whenever energy is accessed, some of that energy is always consumed in the access process. Stated at its simplest, you cannot drill an oil or gas well, excavate a mine, or manufacture a wind turbine or a solar panel without using energy. Much of this energy goes into the provision of materials, of which just one example is copper. This is now extracted at ratios as low as one tonne of copper from five hundred tonnes of rock. Supplying copper, then, cannot be done with human or animal labour – and, of course, even if this were possible, the need for nutritional energy would keep the circular, ‘in-out’ energy linkage wholly in place.

Taken together, these principles dictate a division of available energy into two streams or components.

The first is the energy consumed in the access process, known here as the Energy Cost of Energy (ECoE).

The second – constituting all available energy other than ECoE – is known as surplus energy. This powers all economic activity, other than the supply of energy itself.

This makes ECoE an extremely important component, because, the higher ECoE is, the less surplus energy remains for those activities which constitute prosperity.

Four main factors drive trends in ECoEs. Taking oil, gas and coal as examples, these energy sources benefited in their early stages from economies of scale and expanding geographic reach. Latterly, though, with these drivers exhausted – and as a consequence of the natural process of using the most attractive sources first, and leaving costlier alternatives for later – ECoEs have been driven upwards relentlessly by depletion.

A fourth factor, technology, accelerates movement along the early, downwards ECoE trajectory, and then acts to mitigate subsequent increases. Mitigation, though, is all that technology can accomplish, because the scope for technological improvement is bounded by the envelope of the physical properties of the energy resource itself.

Lastly on this, because the four factors driving ECoEs – reach, scale, depletion and technology – all act gradually, ECoEs evolve, and need to be measured as trends.

Application – the money complication

With the basic principles established, and the role of ECoE understood, it might seem that, to arrive at a measure of prosperity, all we need do now is to subtract ECoE from economic activity. That would indeed be the case – if we had a reliable data series for output.

But this is something that we simply don’t possess, least of all in reported GDP. Essentially, GDP has been manipulated for the best part of two decades, and, arguably, for even longer than that.

By manipulation, I’m not referring to tinkering at the production boundary, or understating the deflator necessary for making comparisons over time.

The kind of manipulation I have in mind is the simple matter of pillaging the future to inflate perceptions of the present.

Expressed in PPP-converted dollars at constant 2018 values, reported world GDP increased by 36% between 2000 and 2008, and has grown by a further 34% since then. During those same periods, though, world debt increased by, respectively, 50% and 58%. Each $1 of incremental GDP between 2000 and 2008 was accompanied by $2.30 of net new borrowing, a number that has increased to more than $3 in the decade since then. Sustaining annual “growth” of about 3.5% in recent years has required annual borrowing of about 9% of GDP.

In short, GDP and growth have been faked by the simple spending of borrowed money. This exercise in cannibalising the future to sustain the present would look even more extreme were we to include in the equation the creation of huge holes in pension provision.

In this context, we need to answer two questions before we can calculate a useful output metric against which ECoE can be applied.

First, what would happen now, if we stopped piling on yet more debt?

Second, where would GDP be today if we hadn’t embarked on a massive borrowing spree?

You’ll understand, I’m sure – with government, business and finance still hamstrung by the failed economic methodologies of the past – why I won’t go into details here about the SEEDS algorithms which provide answers to these questions.

What I can say, though, is that, in the absence of further net borrowing, growth in world GDP would fall from a reported level of around 3.5%, to about 1.2% now, decreasing to just 0.6% by 2030.

On the second question, setting growth since 2000 of $61tn against borrowing of $167tn over the same period puts in context quite how far reported GDP has been inflated by the spending of borrowed money – and, if this borrowing binge hadn’t happened, GDP now would be 30% below the numbers actually recorded. Instead of “GDP of $135tn PPP, growing at 3.5% annually”, we’d have “GDP of $94tn, growing at barely 1%”.

Prosperity – the ECoE connection

When we set growth in real, “clean” GDP (C-GDP) of 31% since 2000 against a global trend ECoE that has risen from 4.1% to 7.9% over the same period – and stir a 23% increase in population numbers into the pot as well – you’ll readily understand why people have started to become poorer.

This is set out in fig. 1. In the left-hand chart, the gap between reported GDP (in blue) and C-GDP (black) represents the compound rate of divergence in a period when debt of $167tn has been injected into the system, together with large amounts of ultra-cheap liquidity.

If we were now to unwind these injections, GDP would fall to (or below) the black C-GDP line, over whatever period of time the debt reduction was spread. The gap between C-GDP (black) and prosperity (red) shows the impact of rising ECoEs, and illustrates how the worsening ECoE trend is set to turn low (and faltering) growth in C-GDP into a deteriorating prosperity trend.

The middle chart adds debt, to set these trends in context. In the right-hand chart, per capita equivalents illustrate how the average person has been getting poorer, albeit – so far – pretty gradually.

Fig. 1

#1567 Global

Comparing 2000 with 2018 (in constant PPP dollars), a rise of 31% in C-GDP has been offset by an ECoE deduction that has soared from $2.7tn to $7.4tn. Aggregate prosperity has thus increased from $69tn ($71.9tn minus ECoE of $2.7tn) in 2000 to $86tn ($93.5tn minus $7.4tn) last year.

This is a rise of 26%, only slightly greater than the increase (of 23%) in world population numbers between those years. In fact, SEEDS indicates that global prosperity per capita peaked in 2007, at $11,720, and had fallen to $11,570 by last year.

On the cusp of degrowth

This, to be sure, has been a very small decrease, essentially meaning that per capita prosperity has plateaued for slightly more than a decade. Before drawing any comfort at all from this observation, though, the following points need to be noted.

First, the post-2007 plateau contrasts starkly with historic improvements in prosperity. The robust growth of the first two decades after 1945, for instance, coincided with a continuing downwards trend in overall ECoE, as the ECoEs of oil, gas and coal moved towards the lowest points on their respective parabolas.

Second, the deterioration in prosperity, though gradual, has taken place at the same time that debt has escalated. Back in 2007, and expressed at 2018 values, the prosperity of the average person was $11,720, and his or her debt was $27,000. Now, though prosperity is only $140 lower now than it was then, debt has soared to $39,000.

Third, these are aggregated numbers, combining Western economies – where prosperity has been falling over an extended period – with emerging market (EM) countries, where prosperity continues to improve. Once EM economies, too, pass the climacteric into deteriorating prosperity – and that is about to start happening – the global average will fall far more rapidly than the gradual erosion of recent years.

Fourth, as these trends unfold we can expect the rate of deterioration to accelerate, not least because our economic system is predicated on perpetual expansion, and is ill-suited to managing degrowth. In a degrowth phase, in which utilization rates slump and trade volumes fall, increasing numbers of activity-types will cease to be viable (a process that has already commenced). Additionally, of course, we ought to expect the process of degrowth to damage the financial system and this, amongst other adverse effects, will put the “wealth effect” – such as it is – into reverse.

The differences between Western and EM economies is illustrated in fig. 2, which compares the United States with China. On both charts, prosperity per person is shown in blue, and ECoE in red.

In America, prosperity turned down from 2005, when ECoE was 5.6%. In China, on the other hand, SEEDS projects a peaking of prosperity in 2021, by which time ECoE is expected to have reached 8.8%. The reason for this difference is that complex Western economies have far less ECoE-tolerance than less sophisticated EM countries.

As a rule of thumb, prosperity turns downwards in advanced economies at ECoEs of between 3.5% and 5.5%, with the United States far more resilient than weaker Western countries, most notably in Europe. The equivalent band for EM countries seems to lie between 8% and 10%, a threshold that most of these countries are set to cross within the next five or so years.

Where China is concerned, it’s noteworthy that, with ECoE now hitting 8%, there are very evident signs of economic deterioration, including debt dependency, increasing liquidity injections, and falling demand for everything from cars and smartphones to chips and components.

Fig. 2

#1567 US vs China

The energy implications

In conjunction with the SEEDS 20 iteration, the system has adopted a new energy scenario which differs significantly from those set out by institutions such as the U.S. Energy Information Administration and the International Energy Agency.

Essentially, SEEDS broadly agrees with EIA and IEA projections showing increases, between now and 2040, of about 38% for nuclear and 58% for renewables, with the latter defined to include hydroelectricity.

Where SEEDS differs from these institutions is over the outlook for fossil fuels. Using the median expectations of the EIA and the IEA, oil consumption is set to be 11% higher in 2040 than it is now, gas consumption is projected to grow by 32%, and the use of coal is expected to be little changed.

Given the strongly upwards trajectories of the ECoEs of these energy sources, it’s becoming ever harder to see where such increases in supply are supposed to come from. With the US shale liquids sector an established cash-burner, and with most non-OPEC countries now at or beyond their production peaks, it may well be that far too much is being expected of Russia and the Middle East. The oil industry may, in the past, have ‘cried wolf’ over the kind of prices required to finance replacement capacity, but we cannot assume that this is still the case.

The implication for fossil fuels isn’t, necessarily, that worsening scarcity will cause prices to soar but, rather, that it will become increasingly difficult to set prices that are at once both high enough for producers (whose costs are rising) and low enough for consumers (whose prosperity is deteriorating). It’s becoming an increasingly plausible scenario that the supply of oil, gas and coal may cease to be activities suited to for-profit private operators, and that some form of direct subsidy may become inescapable.


It is to be hoped that this discussion has persuaded you of two things – the abject failure of ‘conventional’, money-based economics, and the imperative need to adopt interpretations based on a recognition of the (surely obvious) fact that the economy is an energy system.

Until and unless this happens, we’re going to carry on telling ourselves pretty lies about prosperity, and acting in ways characterised by an increasingly desperate impulse towards denial. Many governments are already taxing their citizens to an extent that, whilst it might seem reasonable in the context of overstated GDP, causes real hardship and discontent when set against the steady deterioration of prosperity.

Meanwhile, risk, as measured financially, keeps rising, and the cumulative gap between assumed GDP and underlying prosperity has reached epic proportions. Expressed in market (rather than PPP) dollars, scope for value destruction has now reached $320tn.

Only part of this is likely to take the form of debt defaults, though these could take on a compounding, domino-like progression. Just as seriously, asset valuations look set to tumble, when we are forced to realise that unleashing tides of cheap debt and cheaper money provides no genuine “fix” to an economy in degrowth, but serves only to compound the illusions on which economic assumptions and decisions are based.


391 thoughts on “#156. Actual fantasy

  1. Crystallization and SEEDS
    One way to look at the SEEDS data is to figure out what the macro ratios were the last time the economy was growing and stable. Then look at the same macro ratios today (e.g., debt to GDP was 60 percent and now it is 125 percent). Assume that the monetary adventurism is the equivalent of the physical restrictions used to keep cold water from freezing. Now assume that some disturbance causes the system to crystallize at ‘normal’. Figure the difference in the macro

    We might label the crystallization event as GFCII or The End of Fiat or WWIII.

    Don Stewart

  2. Just been watching Storyville about the Lehman collapse.

    Nothing changes

    In 2017 Wall Street bonuses soared to $31bn

    Subprime loans have returned to the American Mortgage market – but this time they’re called ‘Non prime loans’

    The DOJ stopped investigating Lehman brothers a few months after Trump was elected.

    And in 2018Trump rolled back the 2010 Dodd-Frank act which protected consumers from abusive lending practices.

    It’s a good thing that nothing can possibly go wrong.


    • Something is clearly afoot in the Repo Market – as discussed here:https://mronline.org/2019/11/01/another-look-at-the-federal-reserves-panic-in-september-2019-and-solutions-to-the-crisis/
      Also Max ‘n’ Stacey discuss it in the latest episode of the Keiser Report here:


      What started off as a limited operation that would only last a short time has morphed into a full blown printing frenzy just to keep an as yet unidentified bank(s) from going under.
      This won’t get airtime on Corporate MSM because if it did there would be bank runs and a complete systemic collapse.

    • “This won’t get airtime on Corporate MSM because if it did there would be bank runs and a complete systemic collapse.”

      It was covered in The Economist yesterday under the headline “Why the repo market went awry…”

    • The whole financial edifice rests on two theories, both false, but believed because any alternative is unthinkable.

      The first theory is that any financial crisis can be countered effectively by injecting enough new money into the system. The second, related theory is that doing this will neither trigger high inflation nor put the credibility of currencies at risk.

      Neither theory is tenable, but that observation, in itself, isn’t new. What IS new is that (a) we’re now very close to needing to try it out, and (b) expert opinion within the consensus is shifting towards the view that it won’t work.

      You can liken this to someone standing on a ship heading for disaster, and holding a life-raft. When someone points out that his life-raft is so full of holes that it cannot possibly float, his answer is: ‘maybe my life-raft is full of holes – but it’s the only one I’ve got!’

  3. Another Iconic Collapse Function
    When a brain begins to lose connections, it finds new routes from neuron to neuron to accomplish the same thing. In fact, the brain you are born with is largely a result of pruning connections while you were still in the womb.

    But if we begin to lose connections as an adult, then things begin to go wrong after probably 30 or 40 years. At that point, the brain no longer has enough raw materials to construct the connections it needs for the functions we expect it to perform. So what has been declining, unnoticed, for decades suddenly begins a very rapid collapse.

    Intervention early in life can halt or greatly slow the decline and ultimate collapse. But intervention once the disease has been diagnosed in response to unmistakable malfunction is either very difficult or impossible (stay tuned on that subject).

    So Alzheimer’s looks like a Seneca Cliff or else a long decline finished off by a Seneca Cliff, however you want to look at it. An economy may be similar. In an energy and resource rich economy, there are lots of paths to achieve a particular function (e.g., food on the table or clean water). But as degeneration of energy or other resources occurs, there is a final collapse which can happen very fast.

    The moral of the story is that businesses, economists, and politicians who expect a long linear decline, given the symptoms everyone can plainly see, are probably making a very foolish assumption.

    Don Stewart

    • A truly excellent analogy, worth contemplating!

      Escaping from the monetary delusion, economies are best seen in the light of the natural order of things.

      At this late stage of industrial civilization, the principal question posed by classical economics when energy flows and complexity were increasing -what preoccupied the 18th and 19th centuries – ‘How do we accumulate and increase capital, ie get rich? – is now no longer relevant in the era of declining flows of inferior quality.

      What matters?

      Stabilising the patient, reducing general pain and distress, and easing their passing…..

    • Alzheimer’s is a metabolic issue which makes it even more relevant to the topic of this site than even your framing suggests. The decay of the Alzheimer’s brain is a Seneca Cliff collapse due to lack of available surplus energy.

      Look into the Johns Hopkins team that investigate it; they’ve said it is basically Type 3 Diabetes. The etiology of Alzheimer’s is the exact same thing as T2 Diabetes: insulin resistance in tissue. The difference is that in T2 diabetes the tissue that becomes insulin resistant is muscle tissue but in Alzheimer’s it is the Blood-Brain Barrier cells that become insulin resistant.

      The Alzheimer’s afflicted brain is thus deprived of energy availability, which is a perfect analog for the post peak oil world economy. It attempts to remodel to just conserve primary functions initially but as you say the progression follows the Seneca Cliff model, as the collapse of all complex systems fundamentally does.

  4. @Xabier
    Another analog which may provoke some thought…Why does the fetus prune neural connections? I’m not exactly sure, but the brain is a metabolically expensive organ. It comprises about 3 percent of body weight, but uses 20 percent of the oxygen…which is our energy source (oxidation). So pruning connections most likely conserves oxygen for the neural connections which really matter.

    What is the analog in the economy? Think how the money economy prunes away all connections which are not immediately productive in terms of money. If taking care of land and water do not produce cash, then people degrade land and water. (And economists assure us that there is an infinite supply of them.). There is no thought that energy supply may reverse, and productive land and clean water may once again be keys to survival, much less thriving. Similarly, Albert Bates (search on PeakSurfer) will post on Sunday an analysis of the connection between whales and plastic and the tiny green plants which float on tropical oceans and the production of oxygen and the sinking of carbon deep into the ocean. Economics has seen whales as simply sources of immediate income…definitely not as a flywheel which keeps the Earth habitable. Have we pruned away our flywheel?

    Don Stewart

    • There is least thought at all in the University of Cambridge, busy wrecking its long-stewarded (800 years) farmland for ever, with concrete.

      If you imagine that land and water are ‘so yesterday’, you will probably have no tomorrow.

  5. @ Xabier. re:GrowBaby
    You can also see how the GrowBaby initiative can be so helpful. If the fetus in the womb senses that the world is a cold and forbidding place (e.g., the hunger winter of 1944-5, or a strife-torn household, or a famine), then it will prune accordingly. If GrowBaby intervenes to give the fetus a sense that it is a friendly world, then the baby’s brain will develop differently.

    Now one form is not necessarily better than the other. IF the hunger winter had persisted to the present day in the Netherlands, then that sort of brain would probably be adaptive. But the hunger winter lasted only one winter. So the brain adapted to food shortages became Mal-adaptive in a world of food surplus…resulting in higher rates of metabolic diseases.

    Same logic can be applied to to economic concepts such as ‘lean’ and ‘just in time’…they may be adaptive to a world awash in energy and natural resources, and deadly in a world where financial mechanisms have failed.
    Don Stewart

    • JIT is not long for this world, I would agree, above all when the 24/7 electricity supply starts to fracture and fail -as it must.

      Isn’t it absurd to fund Defence departments when JIT and The Cloud increase national vulnerability to a staggering level?

    • Xabier wrote
      Isn’t it absurd to fund Defence departments when JIT and The Cloud increase national vulnerability to a staggering level?
      The U.S Department of Defence is purely a cash milking cow for the Military Industrial Complex. They are providing weapons, warplanes and warships of ever increasing complexity and ever decreasing actual military worth – all so that the Generals and Admirals are in the prime position of fighting the last war. There are so many examples of this: the F-35 Flying Lemon, the Littoral Combat Vessels that have been renamed Little Crappy Vessels by the US naval personnel, the Gerald Ford class aircraft carriers – I could go on ad nausem. All of this actually echoes what was going on in Edwardian Britain in the run up to WW1. There was a mass hysteria, whipped up by the complicit British Tabloid press that said that Britain needed to build more Dreadnaughts to deal with a German build up. This German build up was blown out of all proportions – needless to say – and the only people who really benefitted from this were the wealthy elite who had shares in armaments and shipbuilders such as Armstrong Witworth, Cammel Laird and Vickers.. See Gerry Docherty and Jim McGregor’s Hidden History: The Secret Origins of the First World War for details – this is discussed in detail in Chapter 9.
      I had a post come through on my Faceache feed this morning – it was a long and detailed prose about the current situation in California. It was painting a picture of the idyllic American Dream approaching a full blown breakdown. Wildfires, blackouts caused by years of Corporate plunder and neglect by PG & E – I could go on. It didn’t mention a story on Naked Capitalism about Californian care home residents who have been turfed out because their health plan providers won’t pay out any more.
      Point being – the Corporate state are engaged in Rentier economics – milking it for all its worth by extracting as much as they can for as little as they can get away with. What is happening now is that the infrastructure, which needs updating and maintenance, has been systematically starved of funds to the point that things are now beyond breaking point. There is no redundancy left in the system – this only adds to the fragility of it. More and more things are failing. The US military may find itself being involved more in domestic issues as things deteriorate further.

      “And as things fell apart, No-one paid much attention” (Nothing But) Flowers Talking Heads

    • You’ve got this right. As if on cue, the US admin. is in the process of reversing a corporate tax policy. The rot is everywhere. Perhaps this contributed to the current new highs in the stock market.


      President Donald Trump’s Treasury Department on Thursday took the first step toward eliminating remaining regulations designed to prevent corporations from avoiding U.S. taxes by storing profits overseas, a move critics decried as yet another harmful giveaway to big business.

    • Along with the rollback of financial regulations that were designed to protect customers after 2008 this is pretty disgraceful behaviour.

      Perhaps these appalling people know that the present boom can’t go on and are doing everything they can to get rich quick before the inevitable.

      As long as you can pay for them he US will stand up to human rights.

      Yet there are so many good people in the US who must be appalled too.

  6. @djerek
    Thanks. I was aware of the Type 3 Diabetes theory, but didn’t make the whole connection.
    Don Stewart

  7. Interesting that Corbyn appears to believe that if he goes after a handful of supremely wicked rich men, he will save Britain.

    Moral narrative, adopted in utter ignorance of fundamental energy issues.

    This is the kind of crude demagoguery we can expect….

    • As I’ve said before, I just don’t understand what Mr Corbyn is doing.

      Early on, he won growing support by moving Labour back to the Left, abandoning ‘New’ Labour’s adoption of neoliberal economics, promoting nationalisation and seemingly starting to get rid of the ‘Blairites’. Labour was at last offering voters something different.

      Then this all stopped, and he’s failed to get a grip on “Brexit” policy.

      So the UK is in the odd position that, despite “Brexit” divisions, inequality, public discontent and deteriorating prosperity, the Conservatives are likely to win handsomely.


  8. Nafeez Ahmed; XR; ECoE

    Nafeez Ahmed, in a very long article, describes the likely failure of Extinction Rebellion to move the needle with climate change activism. A lot of what he says is particular to Britain, and especially London. If I remember correctly, Ahmed has written frequently on the subject of oil depletion.

    But it still strikes me that much of this article is detached from reality. He makes the point that roughly half of the people in London are not descended from the Angles and the Saxons. That tells me that half the people either came to London directly seeking a better life, or are descendants of people who came to London seeking a better life.

    And now….they are being told that XR is going to offer them a worse life than the sub-standard way many of them are living. Not to mention the indignity of having one’s means of getting to work disrupted.

    My first reaction is that this is hopeless. The relentless forces of rising ECoE are likely to force all of us to make some unpleasant (and maybe a better adjective is ‘wrenching’) adjustments.

    Art Berman, in a recent twitter, thinks that oil shortages will appear in the second half of 2020. That may be when we learn firsthand whether oil prices can rise, or will not rise enough to make the oil companies profitable…whether the Russians investing money in the Arctic is smart or foolish. And whether the whole system has collapsed from monetary dysfunction.

    My guess is that real change will only happen when we are all in the lifeboat together…and some of the lifeboats will sink in the heavy seas. But I would like to see Dr. Morgan describe in more detail his plan for transitioning to wind and solar…we need reasons for optimism of some sort.

    Don Stewart

    • This covers some extremely complex (but hugely important) subjects, so much so that we need to dedicate a whole discussion to them. Just a few comments, though, for now.

      Let’s start with what I might call ‘the facts’ of the situation, things which seem pretty clear, though we can discuss them later.

      These facts are we’re at the end of a long chapter, which has spanned two centuries. This has been a chapter of growth, propelled by fossil fuels. This has now hit two buffers. The one, characterised by ECoE trends, is an end and reversal of growth. The other is environmental danger.

      The elites
      Ignorance and self-interest are rendering the elites incapable of effective responses. Blind to what’s really happening to the economy, they have chosen to believe what they want to believe:

      – ‘Growth can continue indefinitely, albeit needing some financial manipulation’.

      ‘ ‘We can transition to clean energy, seamlessly, without interrupting growth or BAU’

      The environmentalists
      XR is a generally well-intentionned, if often ill-informed, reaction to elite inaction over the environment. As a single-issue movement, XR doesn’t think about the economy, or some of the related consequences.

      The public
      ‘Ordinary’ people are bewildered by much of the above, but know that their prosperity is deteriorating, don’t know why, and blame a lot of it on self-serving elites indifferent to their plight. This is why public unrest is rising, and feeds, in part, into the anger that helps fuel XR.

      The reality
      The FF-powered growth era has gone into reverse. The elites neither understand this nor know what to do about it.

      This process is going to have nasty consequences, not just in impoverishment but in a wide range of issues including nationalism, immigration and so on.

      Our role, as realists, is to understand, explain and promote not just the economic processes at work but also some of the ‘least bad’ responses.

    • This is wishful thinking (from NTV Germany, translated to english by google)
      I believe, there will be no transitioning to solar and wind without cheap fossil fuels.
      Additionaly world dept is to high. So we will face the seneca cliff.

      Denial and wishful thinking:
      The fight against climate change requires the consistent farewell of fossil fuels. Researchers have now determined the gigantic costs for German climate targets. But from their point of view, it should be worthwhile in the end.

      If Germany really put its ambitious climate goals into action, the future in 2050 could look something like this: huge wind farms at sea supply electricity to the mainland, which is distributed over large routes in the country. On the North Sea coast are dozens of large-scale facilities in which hydrogen is produced. The gas is stored in underground salt caverns in northern Germany or fed into a branched hydrogen network throughout Europe.

      Slump by 82 percent
      Expansion of wind turbines falter
      Large tankers fueled with wind-generated hydrogen in Patagonia are entering German coastal ports. Electric cars and trucks almost noiselessly rush across Germany’s highways, fueled with hydrogen from fuel cells or electricity from batteries, through landscapes dotted with rotors. Thousands of photovoltaic systems are sparkling in the cities on the roofs of the houses, which are thermally insulated to the limits of what is feasible.

      These scenarios do not spring from the fantasy of dreamy climate activists, but are the result of complicated calculations in powerful computers at Forschungszentrum Jülich, a member of the Helmholtz Association. The researchers have now presented their analysis . The special feature of their approach: The goal was to find the most cost-effective way to an almost CO2-free energy industry in Germany in 2050.

      Computer calculates the future
      How they did it: The data of today’s available climate-friendly technologies and other framework conditions were fed into the computer. “All measures compete with each other and the model is looking for cost-effective solutions,” says co-author of the study, Peter Markewitz, to n-tv.de. The result was a computer in the world, which could resemble the initially described. “The model ultimately decides which techniques to take,” says Markewitz.

      However, even with the “cost-optimal” path that the computer has determined, it will still be quite expensive, the researchers found. According to the study, nearly two trillion euros would have to be spent over the next three decades to reduce CO2 emissions by 95 percent by 2050. Thus, the costs would amount to 2.8 percent of the total German economic output per year. But: “That’s possible, that’s a very positive message,” says co-author Detlef Stolten.

      pale windräder.jpg
      “They will dominate the village”
      Vlatten “runs storm” against new wind turbines
      It is already factored in that the costs for oil and gas imports in the scenario are practically zero. But replacing oil and gas is a big challenge. According to the study, it will not work without synthetic fuels. However, their production is particularly expensive and requires a lot of power. This is one of the reasons why Germany’s demand for electricity will almost double by 2050. As a result, the capacity of wind and solar energy has to be nearly quadrupled, which in turn consumes a lot of money.

      Only radical reconstruction makes sense
      Why not put the goal a little lower and save costs? The idea of ​​the Jülich researchers is thwarted by this idea. For if you wanted to save only 80 percent CO2 instead of 95 percent in 2050, a completely different composition of the energy sources. For example, natural gas would then play a role for cost reasons, which in turn would require the construction of gas-fired power plants. Once these are up and running, they must continue to be operated – making a subsequent reduction in CO2 emissions difficult and expensive.

      So it’s just: either or. This is another reason why the study recommends: if already rebuild, then correct. It only makes sense to aim at the goal of 95 percent CO2 savings, which is almost equivalent to a climate neutrality in Germany.

      Energy turnaround runs out of steam
      Wind farm operators complain about bureaucratic hurdles
      However, this does not quite fit with the previous plans of the Federal Government. Although some points of the Climate Protection Program 2030 point in the right direction, says study co-author Martin Robinius. But about the planned measures to expand wind power should not be sufficient. But especially wind power is seen by researchers as the “backbone of future power supply”. For an annual expansion of about seven gigawatts of power is necessary. Currently, however, the expansion corridors set by the Federal Government allow just three gigawatts.

      Lower dependence on foreign countries
      In the face of higher costs, the scientists also stress the benefits of a radical change: for example, a lower dependence on energy imports. Germany now has to import around 70 percent of its energy from abroad. By 2050, that would be just 20 percent in the almost climate-neutral scenario. In addition, the conversion would be cheaper in the end, says Robinius. After all, the costs of a climate crisis could amount to 5 or even 25 percent of economic output annually.

      In addition, Germany could become something like the “battery of Europe” through a consistent conversion. In the north of Germany, the existing salt caverns in the earth offer a lot of potential for storing the hydrogen produced by wind power as an energy source – also for the whole of Europe. “You do not have to consider the energy transition as a danger,” stresses Robinius. Because it would also result in completely new business areas.

      Source: n-tv.de


    • This comment is appropriate for many posts. Just picked one:

      The Guardian:

      Decision coincides with net-zero emissions review and is branded ‘backwards step’
      Helen Pidd North of England editor

      Sun 3 Nov 2019 07.36 EST Last modified on Sun 3 Nov 2019 15.05 EST

      The Conservative MP Trudy Harrison called the approval ‘fantastic news’.
      A new coalmine in Cumbria has been given the green light by the government in the same week that the Treasury launched a review into how the UK can end its contribution to global heating.

      The developer, West Cumbria Mining, said the £165m mine would create 500 jobs.

      The Cumbrian MP Tim Farron called the decision “a kick in the teeth in the fight to tackle climate change”.

      Farron had asked the government to “call in” the decision after it received unanimous planning approval by Cumbria county council in March.

      But his application has been rejected, with the local Conservative MP Trudy Harrison saying “sense has prevailed”.

      Farron, the Liberal Democrat MP for Westmorland and Lonsdale, expressed his dismay, saying the government should “invest fully in zero-carbon energy” instead.

      He said: “Cumbria has so many renewable resources to provide energy – water, wind and solar – and we should most definitely not be taking the backwards step of opening a new coalmine.”

      The news came as the government announced its net zero review, which will assess “how we can cut our emissions without seeing them exported elsewhere”.

      The mine, called Woodhouse Colliery, will be situated on the former Marchon industrial site near Whitehaven. It will extract coking coal from under the sea nearby, with access via the existing Sandwith Anhydrite mine portals, according to West Cumbria Mining.

      The company said site work should begin in early 2020, with coal production commencing two years later. It hopes to develop a mine that will produce 2m to 3m tonnes of hard metallurgical coal a year for around 50 years.

      Harrison said: “This is fantastic news. It is vital that this development goes ahead and I am pleased that common sense has prevailed. Woodhouse colliery has been recognised for its importance to the steel industry and to UK export. Coking coal is essential for the steel industry and this has been rightly recognised.”

      Deep coalmining in the UK, a sector that employed more than 1 million people across several thousand pits a century ago, ceased in December 2015 with the closure of Kellingley colliery in North Yorkshire.

      After Cumbria county council approved the mine in March, Geoff Cook, chair of the council’s development control and regulation committee, said it had not been an easy decision.

      “All of us would prefer to reduce our reliance on fossil fuels and we recognise that during construction there will be disruption to many local residents,” he said.

      “However, we felt that the need for coking coal, the number of jobs on offer and the chance to remove contamination outweighed concerns about climate change and local amenity.”

    • I would add to the list that even if the elites where to recognize the issues and quit their consensual hallucination bubble, they would have to face that inequalities will have to go down in order to avoid unrest. I cannot see that happening, especially considering that quite a few of the elites have adopted the idea that their wealth will allow to smooth sail the troubles ahead. As for many elite castes before, such thinking can only end in tears and blood.

      Let’s face it, the situation is rather dire, and time is growing short. The plan of keeping BAU while switching to RWE is a complete fantasy, and a dangerous one at that.

      I think that on top of rising ECoE and rising environmental damage related costs (as in energy required to compensate for lost harvests, damaged infrastructure and so on…) there is a third factor pilling on : the transition energy overhead.

      What I mean by transition energy overhead is that while fossils ECoE is rising, their related support infrastructure is already built, offering the possibility of letting it fall behind in maintenance as a way to compensate for the ECoE increase.

      On the other hand RWE need a brand new infrastructure to support them on top of their own cost. RWE costs are also nearly fully front loaded : the energy needed to make solar power happen is concentrated in the solar panel manufacturing process. OTOH, oil gas and coal have a mix continuous extraction costs plus front loaded (the powerplant, already built). A full 1:1 replacement is probably impossible in the imparted timeframe to avoid “really bad” AGW, so there is an implied cut in net energy flow (prosperity) available.

      As far as net energy available (prosperity), one is better off staying on fossil power (use existing infrastructure, “low” continuous fuel costs) rather than going into RWE (new infrastructure + large front loaded costs).

      Off course, on the longer time scale RWE give you better net energy, as they have no ongoing fuel costs, and their ECoE should be constant over their lifetime. If everyone goes with RWE, they also reduce future costs from environemental damages.

      In short : to avoid “really bad” AGW, we will need a war economy type of period paired with a reduction of inequalities to soften the blow of the net energy flow reduction (that is, if one aims at keeping society in a somwhat stable state). I don’t see any way around it.

      “Growth in our time !” is the rallying cheer of the modern Chamberlains.

  9. Realists may well be prophets dishonoured in their own country.

    Just look at the trouble our friend Donald runs into trying to get people reading the Telegraph, and elsewhere I think, to grasp even the most basic propositions regarding this decisive change for our civilisation by sharing our host’s ideas: indifference, dismissal, even abuse – all emotional responses. They haven’t the intellectual tools to understand the situation in which the UK economy is placed, and I suspect they don’t want them….

    Something else I would add to the above. Neo-Liberalism has become the default global orthodox ideology in economic matters: we can see that global institutions, think-tanks, parties, still cling to it as their narrative and policy-guide – largely discredited now among the masses, I would say, if it ever had any support at all, as it has failed to deliver what they want from life, which is a reliable basic prosperity, and now seems to promise only cuts and austerity for most. But as an official narrative it is going to go down fighting.

    In contrast, Neo-Marxists ( I am very familiar with them from Spain where my family is immersed in politics on the Left) seem to believe that their moment of supreme vindication has come, as Capitalism collapses on itself. The purely ideological narrative is still very much alive for them and offers a full and satisfactory explanation of the events we see unfolding – lessening of prosperity, even limited real poverty, in the advanced economies (although I have little patience with too much self-indulgent talk of poverty given how most of the rest of the world has to struggle to even eat!).

    Their assumption is that mere ideological change, the removal of current elites and ‘less inequality’ will be sufficient to address the situation and restore prosperity, growth, and well-funded public institutions and services , etc. They are not baffled at all, having the supreme assurance of ideologists, but they will be if they try their policies and see them fail.

    Corbyn’s recent and utterly puerile list of Five Evil Rich Men who need to be taught a lesson is an excellent example of this way of thinking. Removing their fortunes obviously won’t change the energy situation one jot! Nor will greater restrictions on inheritance, wealth taxes, etc. We might as well cast magic spells to banish demons…..

    Those who are reminded of the state of things in the 1930’s will not be so mistaken: the difference being that the social and economic experiments which came after WW2 -produced by revolutionary sentiments, or seeking to avert them (Welfare States) – relied on an expanding energy and resource base which we can no longer take for granted, and which may shrink very rapidly indeed in the short to medium term, making the complex economies and societies which all these groups take for granted no longer viable.

    All ideologies, including the Green ones, will find the energy rug pulled out from under their feet. Will anyone be able to keep their – mental -balance? A balance exemplified so well in this blog, in the best rational tradition of the Enlightenment.

    • I haven’t searched the archives, and I suspect I’ve mentioned this before. Redistribution of the savings of the wealthy (real estate, money, assets of all kinds) would turn mostly latent consumption into immediate consumption. Throughput and pollution would rise. Resources would deplete more rapidly. Wilderness and large estates would be cut up, and wildlife (including pollinators), wetlands incl. streams, ponds, lakes, rivers..would all suffer. Homo rapacious-superstitious would hit the wall faster.

    • I agree in principle, but there are several complications here.

      For a start, many of the wealthiest aren’t really anywhere near as wealthy as they appear to be. Often their theoretical wealth depends on stock valuations, and/or debts owed to them (e.g. bond holdings) and property. Even now, much of this couldn’t be monetized.

      When the crash comes, a huge amount of this purely theoretical wealth will disappear. For example, if you’d owned 10% of WeWork at its summer valuation, you’d have been “worth” $4.7bn. Now, that’s fallen to somewhere between $0.8bn and zero. This is a template for what happens in the crash. When stock prices collapse, there are mass defaults and property prices crash, much of this “wealth” will be gone, without any government “taking it” from them.

      Second, take a family who borrowed money to go on a holiday that they couldn’t otherwise afford. With redistribution, the same holiday (=consumption, activity) would have happened, but without the addition to debt.

    • I wasn’t thinking after a system crash. The leftists want to redistribute *now.* They think that is a solution to economic hardship. They make multiple errors.

      Cornucopian Fallacy: there is plenty of we only share.

      Techno-optimist fallacy: if everyone had ample money, they could buy the highest efficiency devices, homes, cars, health care, etc. (as if ample supply would magically appear, along with the energy to run them)

      They also miss that redistribution would drive down the prices of paper and collectible wealth as it was liquidated. That in itself would cause a crash. Even if it was done via very heavy wealth taxation (real property too), the wealthy would need to liquidate holdings to pay it.

      Only[temporary] option I can think of for government is to print and distribute “helicopter” money to to the 95% or so, while raising taxes on the wealthy. Of course the currency would eventually turn to toilet paper. Meanwhile, as population grows, and demand from the new money grows, the energy and resources would likely hit limits faster than current rates.

    • As I see it, today’s extreme inequalities are products of conditions – i.e. growth – rapidly ceasing to apply. It’s one thing for some people to be extremely wealthy when most are ‘about OK’, but when extreme and worsening hardship afflicts most people, tolerance for inequality will vanish, turning into anger and desperation.

      This can be pre-empted using redistribution, or allowed to run its course.

  10. Angles and Saxons? Wot about the Celts?! 🙂

    People in lifeboats for too long, what do they do?

    Fend off others to avoid over-crowding; hallucinate; and eat one another, of course. This does not augur at all well.

    One understands the old sailors who did not learn to swim so that they went down quickly rather than linger.

  11. Message in a Bottle
    It so happened this morning that two objects came into my view:
    *Dan Siegel and Elissa Epel (of telomere fame), both psychiatrists or psychologists, give a talk on dealing with climate change. The event is a conference on Stress. I will interject that the same talk could have been given with the subject of ‘the end of growth’. In any event, the talk reminds us that humans are emotional by design…emotion is the way evolution prepares us to make our way in the world.

    *John Mauceri’s book For the Love of Music: A. Conductor’s Guide to the Art of Listening. Mauceri makes the point that the western music which has made its way into the canon of frequently performed works almost always tells a story. Understanding the story requires us to remember what went before, which gives us a sense of participation and pleasure.

    Now a very quick observation on my part. Is not our pleasure in living in large part about the same sort of thing that happens in music? We remember the time we took the children sailing in the West Indies, and the intense period of living close together on a sailboat, and the adventures we had. But the problem is that nobody alive today can call up pleasant memories of coping with climate change. Some of us are old enough to call up pleasant memories from the time when we had very little in the way of fossil fuels: e.g., rationing time during WWII. People in their 90s can call up pleasant memories of life during the 1930s when, if one had food and shelter, life could be pretty darn good. The oldest people still alive can call up memories of walking 5 miles to a barn dance and meeting their lifelong partner. But I doubt that the reminiscences of the old codger’s would impress Nafeez Ahmed. And it is not at all clear how we can physically recreate those pleasant scenes in today’s much more crowded and stressful world…Elissa Epel states that the young people have never been more stressed.

    As a first thought, I would say that society is going to have to create good memories on the fly, and as we adjust to a very different world than that of the last 70 years. A very tall challenge…scientifically, engineering, political, social.

    Don Stewart

  12. That sounds about right: the premise of the redistribution of wealth from the ultra-wealthy or even the upper middle-class is surely, after all, that it would immediately increase mass consumption (and I suppose we might add state infrastructure expenditure -new schools, motorways, hospitals, etc ) – which is what people generally understand to be ‘prosperity’.

    A brief peak in the sensation and appearance of prosperity, a bump in consumption, and then even closer to ecological collapse with scarce resources still further diminished…..

    Perhaps there comes a point when we have absolutely no room for manoeuvre?

    • We’re getting to the point of ‘nowhere to turn’ about now, I suspect. We’re seeing waves of popular unrest around the world.

      SEEDS numbers for France are instructive. Prosperity in France peaked very early (2000). Since then, at 2018 values, prosperity per capita has fallen from €29,530 to €27,260. That’s very gradual – a decrease of €2,270, or 7.7%, spread over eighteen years.

      But taxes have increased by €3,400 over the same period. Discretionary, ‘in your pocket’ prosperity has thus fallen by €5,670, or 42%, from €13,470 to just €7,810. That really hurts.

      Then along comes an administration which wants to hand tax cuts to the wealthiest, increase taxes for everyone else, and worsen protections for working people.

      In this situation, is resentment and anger addressed at the government and ‘the rich’ anything other than wholly predictable?

  13. Zero Sum Games; Negative Sum Games
    It seems to me that the relationships between nations and trading blocks has undergone a sea change, led by Trump. When Trump intervenes in the British elections, and states that a Farage/ Johnson partnership would be ‘unstoppable’…I don’t think we should think he is trying to do Britain a favor. I suggest he is trying to hurt the EU. I wouldn’t be surprised if he attempts to lure Ireland and Britain into a new ‘Celtic/ Anglo Saxon’ partnership….with, of course, the US calling the important shots. Some US diplomats have remarked that they are having to deal with ‘foreign cultures’ when negotiating with China…I suppose they think that Ireland and Britain are ‘relatives’.

    The business with Russia and China is similarly not so much helping the US, but hurting those countries. Russia is a threat because it can’t be attacked directly, and has shown itself to be resistant to damage from sanctions. And so Trump threatens Denmark with sanctions if it buys natural gas from Nordstream. I witnessed the ‘hurt the other guy before he can hurt you’ in industry, when a growing industry mostly operated with a ‘live and let live’ set of practices and efforts to grow the total industry shifted very suddenly into ‘burn down the barn but save your own horse’. The industry eventually imploded.

    The China threat comes from the evidence that central planning can actually work, perhaps better than the chaos of capitalism. So career diplomats in the US now see their charge as disrupting ‘socialist’ countries…not matter if the socialist country is no threat to anyone.

    The danger is that, with the situation portrayed in SEEDS, the pie really is getting smaller and the cut-throat tactics lead to a global collapse…like the industry I alluded to above. The global situation is made all the more dangerous because it is highly financialized (with the notable exception of Russia).

    I suggest we may be in a negative sum game…whether Trump knows that or not, or whether it would make any difference in his calculations, I have no idea.

    Oddly enough, the ‘bridge builders’ seem to me to be China and Russia. I think the US will do everything in its power to stop that bridge building.

    Don Stewart

    • Re: “I suggest we may be in a negative sum game…whether Trump knows that or not, or whether it would make any difference in his calculations, I have no idea.”

      I think you give more credit to his intellect than is merited by his behavioral history. He listens to a few advisors, and then reacts with his fear/greed/ego hormones. If the flag he flies brings negative responses from a majority, he quickly retraces himself with little concern to internal inconsistency. Bullies can get away with that until they lose power.

    • I’m less inclined than many others to underestimate Mr Trump – first, he got elected (which all the ‘experts’ said was impossible), and, second, he hasn’t got America mired in foreign wars. He may be no genius, but he’s a rocket-scientist by comparison with (in my opinion) America’s worst president, George W. Idiot.

      This said, circumstances clearly favoured Mr Trump, and still do. The social and economic ‘liberal’ establishment, typified by the Clintons and many others, is finished. The Dems might have beaten Trump if they’d fielded Bernie Sanders, but ‘establishment’ candidates like Hillary C. have become no-hopers. In this context, I cannot understand why Trump would dream of doing anything to undermine Joe Biden, a near-perfect opponent for him in 2020.

    • Re: “I cannot understand why Trump would dream of doing anything to undermine Joe Biden, a near-perfect opponent for him in 2020. ”
      It isn’t Trump who is doing this – it is all self-inflicted by the Democrats. The nonsensical Russiagate hoax has now been replaced with Ukrainegate – which is even more suicidal for the Democrats. Because they have a lot of “skin in the game” here and would certainly backfire catastrophically on Joe Biden as the activities of his son Hunter would come under scrutiny. The blog Moon of Alabama posits the view that the Democrats secretly want Trump to win in 2020 – one is left with that distinct impression.
      There is no functioning democracy any more – it is debatable whether there ever was a functioning democracy in the first place. Does this mean that the next GFC is around the corner and will make recent events in California seem like a cakewalk in comparison?

    • Re:
      “Does this mean that the next GFC is around the corner and will make recent events in California seem like a cakewalk in comparison?”

      If the economy tanks before Nov 2020, the public would blame DJT and the Repugs. Better than fiction…

    • There is a core percentage of the electorate who will vote for Trump no matter what – who by and large live in Flyover America and this demographic is beginning to die out.
      There is a percentage who will vote Democrat or anyone-but-Trump of all denominations.
      I am currently of the opinion it is Trump to lose the 2020 Presidential election
      A GFC before the next presidential election may result in such widespread chaos that it may get cancelled – this is something Kunstler among others has pointed out as a realistic scenario

  14. The crucial question must be, then, to what extent can aggressive redistribution policies really promote a general feeling of renewed prosperity – viewing it principally as a kind of social tranquiliser and restorer of mass consumer demand?

    I am inclined to be highly sceptical, as the energy vice we are trapped in will be further tightening all the while, and it seem to me that alone must defeat all efforts to restore prosperity to the degree that those who have been feeling the pinch would wish and recognise.

    Interesting article in The Guardian today on the plans of the super-rich to leave Britain asap in the event of Corbyn’s Labour party winning the election. I know two people who certainly have such plans in place.

    Curiously, no comment at all in that article on the limits to un-taxed inheritance (a mere £125,000, which is really nothing at all, today) which he and the other 1940’s-style zealots seek to impose, which would affect not the ultra-high-net-worth people at all, but average, completely unprivileged people who have worked and saved over 40 years or so.

    A clever plumber or builder could accomplish that level of wealth, and would be surprised to find themselves in the category of the rich and privileged who need to be soaked….

    Redistribution will come to be the dominant theme, certainly, and the issue over which the fiercest struggles will take place, but I am not sanguine about its effectiveness.

    • In the US, there are various trust structures which can shelter inheritances. The wealthy ($2 million plus net assets?) generally have these set up by a tax attorney. If income taxes get ramped up for incomes over say 200,000/year, with steep rises for 500,000, 750,000, and up, I can see incentives for an exodus.

    • I’m honestly slightly surprised that we haven’t seen UBI / helicopter money pushed more rather than redistribution. It both seems like the only option left and probably the last best option to get the last gasps out of the global economy based on oil before it all comes crashing down.

    • Is it me or is UBI a backdoor redistributive sheme (one without the word socialist tied to it). Because if I understand things correctly, this would inflate the money supply in a regrssive manner : the lower the income, the larger the effect.

      It’s not really redistribution, but more like selective inflatory measure. It could have a positive effect if it happens at a time of paper wealth deflation (i.e. bubble crash).

      But then again, it seems terribly unimaginative. I guess the sheme is something like a last ditch effort to kick up consumer spending, but given the nature of the problem, this is being very silly at best. In a sense it would be a sure way to hit the energy limits in short order, which is the reverse of what we should be aiming for.

      Large scale public work investment into infrastructure hardening against climate change and energy efficiency measures seem way better use of the remaining energy surplus. (Since such measure would help increase net energy available without increasing the raw energy used).

      As for taxing the very wealthy : you would have to tax capital gains, only taxing income would prove futile (well, it would tax the very high earning professionals, but not top of the crust rentiers).

  15. Leaving Britain
    In the US, it is not easy to leave. US citizens are taxed wherever they live in the world. And to give up citizenship, one is subjected to a thorough review of old tax returns by the Internal Revenue. Since the tax code for rich people is byzantine, the risks are high.
    Don Stewart

  16. It is being widely reported that the UK government is banning new oil wells using hydraulic fracturing technology. The reported reason is concern about seismic activity and even the financial media doesn’t mention that fracking is cash flow negative, but nevertheless this appears to be the end of fracking in the UK.

    Meanwhile across the Channel, EDF are continuing to have expensive problems building their nuclear EPR in Flamanville as reported by Bloomberg under the headline “World’s Largest Nuclear Power Producer Confronts Serial Glitches”. This does not bode well for Hinkley Point C.

    Perhaps it will take some blackouts to focus the political parties’ attention on the economic importance of energy.

    • Quite a few of us have been rattling on about the folly of Hinkley Point for many years

      It’s turning into a technical and financial disaster.

      Here in the UK we don’t have to bear the cost if it never gets switched on but being without power won’t be very nice.

  17. Must Watch
    Rich Roll and Paul Hawken talk Drawdown. The Stupidity of the conversation so far, how much carbon we can take out of the atmosphere and put into the soil, the forests, and the ocean. Why food is by far the number one solution. Putting the power into the hands of the people.

    I was in a barn talking agriculture when the original work came out. I objected that the group that Hawken assembled really had no conception of the potential of life to take back the carbon humans had burned. I think they get it now.

    If you have been listening to the same tired old conversations, this will sound like the Man From Mars.


    Don Stewart
    PS. We probably need the same conversation on rising ECoE and financial exhaustion.

  18. Sea Level rise by 2050

    You can search on the city of your choice. This page takes you to London.

    The new studies are a result of refining satellite data. The satellite data actually measured the distance from the satellite to the tops of trees and building and so forth. New measurements get to ground level. (One report I read said that there is still no good data for Florida. And I believe that the Netherlands is excluded because of the extensive system of dykes.). Consequently, some relatively minor problems become much bigger problems. This is all beside the point that sea level projections are widely expected to be too conservative.

    The impact on prosperity, forced migration, social conflict, and so forth I will leave to your imagination. Likewise, if we try to solve the problem with Netherlands style infrastructure, where will we get the surplus energy?

    Don Stewart

    • I have been reading about the imminent rapid increase in sea level for at least 20 years now. But when I look at actual sea level records I don’t see it. Yes, sea level is rising. Here in UK by 2 to 3mm per year. And has been for as long as we have records – 200 years – and probably since the last ice age. But there has been no rapid increase in the last few years, so when are these models going to kick in? Or are the models put back a few years each time reality does not fit? https://tidesandcurrents.noaa.gov/sltrends/sltrends_station.shtml?id=170-101

  19. Just One More Observation
    Trump last year tweeted that the state of California was simply stupid to allow the fires, and that cleaning up the forest floor was the right thing to do. As everyone pointed out at the time, the Federal Government, which reports to Trump, actually controls vastly more land in California than does the State of California.

    Trump either never listened last year, or forgot the explanation, because he is now again tweeting threats against the Governor of California for failing to clean up the forest floors…doubtless, in his opinion, because of the bad advice the Governor is getting from environmentalists. And, of course, the facts are that the Federal Government is still in charge of most of the land and has done zero in terms of cleaning up their forest floors.

    Do we have an idiot for President or simply a typical politician. Either way, things look grim.

    But if you look at the current pictures of the air pollution in New Delhi, things could get worse. One calculation I saw puts the pollution as equivalent to smoking 33 cigarettes per day.

    Don Stewart

    • The Federal government may own much more land – but who sets the rules on what landowners should or should not do? (“Two sides to every story”).

      The situation in Delhi (and many other cities) is truly appalling. I just wish there was some way we in the ‘affluent’ West could help.

    • West can help: unlimited free condoms, make ample family planning education available, and fight patriarchal religions.

  20. I see the Aramco float has been put on ice again.

    Here’s a small extract from today’s Daily Telegraph.

    One potential investor, who asked not to be named, said: “From a demand perspective, a lot of people think we have hit peak oil.

    “These are not assets you want to own long term, which is probably partly why Saudi is selling them.

    Looks like the penny has dropped

    • The experts (such as the EIA and the IEA) don’t think we’ve hit peak oil demand at all – they think demand will be c10% higher in 2040 than it is now.

      There are only three ways in which we could be at peak demand:

      – Renewables grow so rapidly that they displace demand for oil (and that’s simply not going to happen)

      – The world economy goes into deep and long-lasting recession/depression

      – The industry cannot supply sufficient oil at prices that consumers can afford

      The Saudis are selling a small percentage of Aramco for the simple reason that they need the money! They’ve suffered from low oil prices, spending plans have risen, and MBS has ambitious plans. Their war in Yemen is costly, and I think they want to spend big on arms.

      Also, via Softbank, they’ve lost serious money in WeWork!

    • They are also remaining coy about their reserves and don’t want them audited – another reason for investors to be wary


  21. @Dr. Morgan
    ‘who sets the rules’?
    The State does not have the power to force the Federal Government to ‘clean up the forest floor’ in National Forests. The huge fire in and near Yosemite a couple of years ago was almost entirely on Federal land.

    As for private land, California has rules about clearing underbrush near houses.

    I don’t know what California does on the small amount of land in state parks and state forests.

    It would cost a lot of money to do controlled burns of sufficient size to impact fire danger. For one thing, the burns needs to happen during periods when there is not much wind and relative humidity is fairly high. A few years ago, the National Forest Service was widely criticized when a controlled burn at Los Alamos, NM, when conditions were marginal, got out of control and burned into the Atomic City. In rich sections such as west LA, the residents object to the smoke from controlled burns. The smoke might happen every 3 years while a hot burn might be expected once every 50 years…so the human preference may be to avoid the smoke and take their chances so long as they can buy insurance…and also get the Governor on the phone to insure the artillery is called in. The Governor does that and sends the bill to Washington.

    People who study it carefully cite two overriding issues which have created the current situation:
    *People like to live in a forested area, purely for the scenic value
    *People who cannot afford to live in the coastal area move to the foothills (such as Paradise) in order to avoid big city zoning and enforcement of laws and high taxes.

    Trump would surely object if his MAGA voters were required to submit to the sorts of regulations and taxes which would be necessary to avoid fires in what is, naturally, a periodic fire zone. And Rupert Murdoch probably wouldn’t welcome too much State supervision of his use of his own land (part of which burned last year).

    Don Stewart

  22. Another of “Strategian”s occasional videos has appeared. https://www.youtube.com/watch?v=vRQ1xVL09Wc This time he is highlighting the proportion of “Repo” that is MBS and the sudden appearance in September of a high Repo level compared with Reverse Repo. Are there any commentators here who can simplify the significance of this for those of us with very little insight into the ways of Central Banks? I notice the comments do not seem surprised that there has been no coverage in mainstream media.

    • A bit frightening Tim. I’m not convinced the real World wouldn’t be affected – but I don’t know what protection real homeowners have and how their loans are now structured after 2008 ( Although Trump reduced the financial restraints to allow abuse of the markets again).

      So effectively if there is a crash the cost is spread across the whole of the US as such by printing more money and diluting its worth.

      On the video the voice came across as slightly disconnected like a narrator of a science fiction film.

      In the film you have these groups of investors – speculators all moving massive sums of digital money around thinking that its going to bring them fabulous wealth.

      But in fact it’s all a con by a group in charge as in fact they just live in massive domes – living a very basic existance – because most of what remains outside is a financial wasteland with limited production of tangible goods except for the privileged few.

      The film could be called ‘The Trump Show’ as the going ons are televised as entertainment to stop the poor getting restless.


    • Thank you. I may need to watch the Wolfstreet explanation again a few times and study the comments. It is interesting to see the conspiracy thinkers and the moral hazard searchers consider how the game might be made to end or end naturally. Perhaps the Hong Kong gambling syndicates were actually more moral players than even they realised.

  23. @Dr. Morgan
    I personally would be in favor of Trump starting a conversation about ending Federal Disaster Aid programs. After all, the money goes to the usual suspects: flooding, which is predictable, hurricanes, which are predictable, and fires, which are predictable. Those who choose to build in disaster-prone areas should either buy commercial insurance or else absorb the risk. But such a move would be politically toxic. All of the states along the Atlantic Seaboard have both benefitted from turning beaches into condos, and also seen commercial insurers pull out because of the risk. And so, each state sets up a state backed company to insure the properties. The citizens who don’t live on the beach are essentially subsidizing those who do live on the beach. It’a a classic case of those from whom the subsidy is being extracted are diffuse and unorganized, while those who get the subsidy are. highly motivated and organized.

    When rising sea levels make it impossible to rebuild, then the federal government steps in and buys the property…which will soon enough be under water.

    It is not ‘environmentalists’ who favor these arrangements. Environmentalists talk about restoration of wetlands…not protection for condos and hauling in sand to rebuild beaches.

    So, if Trump were really trying to solve a problem, he would start a conversation which would be very unpleasant for a lot of people who vote for him and contribute lots of dollars to his campaigns. But for now, it is convenient to use California as a whipping boy.

    Don Stewart

  24. Deflation?

    Current Keiser Report contains a discussion of the ongoing Federal Reserve intervention in the Repo market. They ask whether it could be that one or more major banks are collapsing. And whether we might be on the verge of a deflationary shock as the money supply has been collapsing, reminiscent of the deflation of 1920-21. If it is deflation the winners are likely to hold gold. And a big question is how much gold is actually held in China.

    We do know that all Central Bankers are sworn enemies of deflation. They will do ‘whatever it takes’ to stop the deflation. Which could lead to hyper-inflation and the destruction of currencies.

    Their guest distinguishes between gold backed currencies, which are susceptible to deflation, and fiat currencies, which can be manipulated in ways that gold backed currencies cannot be. The guest thinks hyperinflation is more likely. Which implies, I suppose, that the Fed will do what it needs to do in order to increase the supply of base money and funnel it to the banks.

    It might be worth your while to tune in to the Keiser Report, if only because so few other venues would feature this kind of talk. (I’m not taking sides, and may have misinterpreted what was said.)

    It seems to me that for the person with some, but not enormous, financial assets, the following is probably true:
    *This collapse (if it occurs) will be unlike 1920-21 and 1929-32 in that there is no gold backing the currency (except perhaps in Russia and China)
    *This collapse will occur in an environment of high ECoE. Therefore, amassing shale leases is probably a bad idea because it costs too much energy to turn them into money. Similarly with conventional farm land…it takes more energy going in than one gets going out.
    *Physical gold will probably retain its historical role as a medium of exchange.
    *Cheap to extract oil (e.g., Saudi Aramco if the IPO gets off the ground) would retain its relative value
    *A self-sufficient plantation (as depicted in Jim Kunstler’s ‘World Made by Hand’ novels, would be a valuable asset to own

    I’ll conclude with that short list, without trying to be encyclopedic. But my list illustrates that the search for assets which can produce surplus energy may play a role which they did not play in previous collapses. For example, Kansas City during the Depression never felt any pangs of pain because it became a boss-ruled ‘sin city’ where people came to spend whatever they had. That strategy probably won’t work in a world struggling to find surplus energy…so the outlook for Las Vegas is dismal. And even Saudi Aramco oil may have limited value to foreigners IF the Saudi royal family uses it to pacify a restive population.

    Just some thoughts….Don Stewart

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