#163. Tales from Mount Incomprehension


There was more than a grain of logic in the observation by US treasury secretary Steven Mnuchin that climate activist Greta Thunberg should save her advice until “[a]fter she goes and studies economics in college”. If the authorities were to consent to her demand for the immediate cessation of the use of fossil fuels, the economy would crash and, quite apart from the misery that this would inflict on millions, we would have abandoned any capability to invest in a more sustainable way of life.

This said, taking a course in economics, as it is understood and taught conventionally, would not enhance, in the slightest, her understanding of the critical issues. Conventional economics teaches that economics is ‘the study of money’, and that energy is ‘just another input’. These claims cannot be called ‘contentious’. They are simply wrong.

Worse still, her audience at Davos – the Alpine pow-wow of the world’s political and economic high command – are almost wholly persuaded by a false interpretation which states that action on climate risks carries a “cost”, meaning that doing what she asks would be costlier than carrying on as we are, with an economy powered by oil, gas and coal.

This is a folly every bit as absolute as the argument that we must immediately cease all use of the energy sources on which the economic growth of the past two centuries has been based. Continued reliance on fossil fuels might or might not destroy the environment, but it would certainly condemn the economy to collapse.

A commonality of interests

Because I have an extensive ‘to-do’ list – and in the hope that readers might appreciate some brevity on this issue – let me be absolutely clear that neither side of the debate over the economy and the environment understands how these processes really work. Worse still, it seems that neither side wants to understand this reality.

There’s a hugely damaging false dichotomy around the assumption that there’s some kind of trade-off between our environmental and our economic best interests. If “Davos man” thinks that the economy can prosper so long as we cherry-pick the profitable bits of the environmental agenda (like carbon trading, and forcing everyone to buy a new car), and pour bucket-loads of greenwash over the rest of it, he (or she) could not be more wrong

Because literally none of the goods and services which comprise the economy could be produced without energy, it should hardly be necessary to point out that the economy is an energy system. Equally, it should be obvious that, whenever energy is accessed for our use, some of that energy is always consumed in the access process. This access component is known here as the Energy Cost of Energy (ECoE), and it forms a critical part of the equation which determines our prosperity.

The third part of this ‘trilogy of the blindingly obvious’ is that money has no intrinsic worth, and commands value only as a ‘claim’ on the products of energy. I make no apology for repeating that air-dropping cash (or any other form of money) to a person stranded in the desert, or cast adrift in a lifeboat, would bring him or her no assistance whatsoever.

Money is simply a medium of exchange, valid only when there is something for which it can be exchanged.

The complexity trap

The modern industrial economy is not only enormous by historic standards, but is extraordinarily complex as well. Scale and complexity make the modern economy high-maintenance in energy terms. Output grew rapidly in the period (roughly between 1945 and 1965) when trend ECoEs were at their historic nadir, but has struggled since then, as ECoEs have risen.

Analysis undertaken using SEEDS (the Surplus Energy Economics Data System) indicates that prosperity in the Advanced Economies (AEs) of the West ceased to grow when ECoEs hit a range between 3.5% and 5%. Less complex Emerging Market (EM) economies have greater ECoE tolerance, but they, too, start to become less prosperous once ECoEs reach levels between 8% and 10%. Both China and India have now entered this ‘growth killing ground’.

Back in the high-growth post-War decades, ECoEs were between 1% and 2%. By 2000, though, global trend ECoE had reached 4.1%, which is why the advanced West was already encountering something which bewildered economists labelled “secular stagnation”, though they were at a loss to explain why it was happening. By 2008 – when ECoE had reached 5.6% – efforts at denial based on credit adventurism had achieved nothing other than an escalation in risk which brought the credit (banking) system perilously close to the brink.

Since then, and whilst futile exercises in denial have segued into monetary adventurism, ECoE has continued its relentless rise. Last year, world trend ECoE broke through the 8% threshold at which prior growth in EM prosperity goes into reverse. This, ultimately, explains why global trade in goods is deteriorating, and why sales of everything from cars and smartphones to chips and components are sliding.

The average person in the West has been getting poorer for more than a decade, and, increasingly, he or she knows it, whatever claims to the contrary are made by decision-makers who, for the most part, still don’t understand how the economy really works.

Something very similar now looms for EM countries and their citizens – and, when evidence of EM economic deterioration becomes irrefutable, the myth of “perpetual growth” in the world economy will be exploded once and for all.

When that happens, all of the false assumptions on which a bloated financial system relies will crumble away.

Tenacious irrationality

The irony here is that, far from avoiding economy-damaging “costs”, continued reliance on fossil fuels would be a recipe for economic oblivion. The destructive upwards ratchet in ECoEs is driven by fossil fuels, which still provide four-fifths of our energy supply, and whose costs are rising exponentially now that depletion has taken over from scale and reach as the primary driver of cost. Far from imposing “costs” that will push us towards economic impoverishment, transitioning away from fossil fuels is the best way of minimising future hardship.

This means that economic considerations, when they are properly understood, support, rather than undermine, the arguments put forward by environmentalists.

But we should be equally wary of claims that renewable energy (RE) can usher in some kind of economic nirvana. The ECoEs of REs are highly unlikely ever to fall below 10%, a point far above prosperity maintenance thresholds (of 3.5-5% in the West, and 8-10% in the EMs), let alone give us a return to the ultra-low ECoEs of the post-1945 era of high growth.

Critically, transition to REs would require vast amounts of inputs whose supply relies almost entirely on the use of FFs. The idea that we can somehow “de-couple” economic activity from the use of energy, meanwhile, is utterly asinine.

The only logical conclusion is that we should indeed transition towards REs, but should not delude ourselves that doing this can spare us from deteriorating prosperity, or from other processes (such as de-complexification and de-layering) associated with it. The one-off gift of vast surplus energy from fossil sources is fading away, which, from an environmental point of view, might be just as well. What matters now is that we manage, in a pragmatic and equitable way, the transition to lower levels of energy use and gradually eroding prosperity.

It’s a disturbing thought that our economic and environmental futures are trapped in a slanging match between green fanaticism and Davos-typified cynicism. It’s a truism, of course, that people tend to believe what they want to believe – but this is a point at which the reality of energy as the critical link between prosperity and the planet needs to force its way to the fore.

If there’s cause for optimism here, it is that reality usually triumphs over wishful thinking. The only real imponderables about this are the duration of the transition to reality, and the scale of the damage that protracted delusion will inflict.

800 thoughts on “#163. Tales from Mount Incomprehension

  1. Something that may be useful for grid energy storage in a high renewable scenario. Whilst I am sceptical of the efficacy of such a scenario, as an engineer I cannot help but tinker with stuff and look for ways of making it work.

    https://en.m.wikipedia.org/wiki/Nickel% … on_battery

    This battery tech has relatively low energy density and low charge-discharge efficiency; but NiFe batteries essentially last forever. They tolerate continuous deep cycling without damage for decades on end – cycling that would degrade most other battery types within a few thousand charge cycles. Many of Edison’s original battery units still work today. For stationary applications, low power density is less of a problem.

    In a hybrid electric vehicle, nickel iron batteries would essentially last the lifetime of the vehicle and standardised units could be reused over and over again. A hybrid needs only a small fraction of the battery capacity of a fully electric vehicle, making weight less of a problem. But that battery capacity is used far more intensively – something that would a ruin a Li-ion battery quickly.

    This would appear to be a very durable technology, based upon abundant and low embodied energy materials: iron, nickel oxide-hydroxide and potassium hydroxide. It is a technology that faces no serious materials bottlenecks here on Earth and is therefore suitable for mass production. On Mars, it should be relatively easy to make.

    Storing large amounts of electricity in batteries for grid applications is very expensive. But in this case, the problem can be tempered somewhat by the very long lifetime of the battery units. In a low interest rate environment, this allows a higher purchase cost to be amortised over a very large number of stored kWh’s over a very long operational lifetime, if batteries are carefully maintained.

    Using the UK as an example: Baseload electricity consumption is about 30GW. To store a whole day of electric power to cover deep lulls, we would need 720billionWh of battery capacity. This would have an upfront capital cost of about $500bn. That is a huge sum of money, but if we can produce a battery that lasts for fifty years, then the average cost per kWh stored may be quite modest. Lets say that each kWh of battery capacity goes through one charge-discharge cycle every few days on average and cost is $100/kWh. Over the course of a 50 year lifetime, the capital cost would $0.016 for each kWh stored. Not too much at all. Then again, anything with high capital costs looks good when interest rates are effectively zero.

    • $500billion to provide 720GWh of storage that lasts for 50 years. Enough to ensure that wind and solar can provide baseload power for the next two generations, especially if generation peaks are absorbed by grid connected water heaters. So really, $500bn isn’t such a bad deal.

      Still, in a sane and sensible world, it would buy enough light water reactors to power all of Europe. Back in the 1980s, the French really were building nuclear reactors that cheaply. The South Koreans still do.

      It would be interesting to see how modern nuclear power would do in one of Tim’s ECoE analyses.

    • Why choose one day for your battery capacity? It is well known that high pressure systems can be hard to shift and can become established over the UK for extended periods of time – 7 to 10 days are not uncommon. Just last month wind generation was well below 5GW for 4 days (look at the blue wind generation line on gridwatch: https://bit.ly/2OKCgA9).

      So if we want our house lights and central heating to work, our freezers not to defrost, trains to run (at all never mind on time), traffic lights to work, electronic tills to work, shops to be open – in short, life to go on – we would have to have more than one day of battery capacity. Even allowing a mere 5 day battery capacity takes your battery costs to £2,500bn. All for the odd times when the wind doesn’t blow.

      Relying on unreliables to power your electricity supply system is a short cut to high electricity costs and de-industrialisation. Where are our intensive energy industries? The steel mills, chemical plants, cement mfrs, paper producers, aluminium smelters, etc. Basic industries that have fled the UK because of high power prices. And it’s not as if the country has forsaken the use of steel, chemicals, aluminium, etc. oh no, it now imports all these goods.

      The old saying has it that there is no situation no bad that a politician cannot make worse. We need a new one along the lines that there is no situation so good that a politician cannot make bad.

    • Oldscouser, I do not disagree. For a high renewable electricity grid to work, there would need to be a mixture of backup and storage. I would propose grid connected storage heaters to absorb high peaks in renewable energy generation; batteries and pumped storage for smoothing hourly fluctuations and open cycle gas turbines to cover long-term lulls. These could be partially supplied with a mixture of biomass and hydrogen, with natural gas supplying the rest. That would appear to be a cost-optimum solution for high renewables. That involves a lot of infrastructure.

      Of course, a fleet of light water nuclear reactors would be a lot more cost optimum from a whole systems point of view. But for various reasons, unit costs and build times have exploded since the 1970s. And making nuclear power work, simply isn’t a priority for political leadership in the western world, who remain blissfully ignorant of the role that energy plays in the economy and the basic physics behind it.

    • We’ll end up like the characters in the dystopian film Soylent Green – furiously pedalling a bike attached to a dynamo to charge a clapped out battery.

  2. I see the UK Government is producing a White document proposing the phasing out of gas boilers to meet their emission targets by 2050.

    Of course there are green replacements of a kind but who can afford them?

    The bill would be astronomical in terms of replacement costs.

    Given that any benefits to the World’s environment would be dwarfed by China’s dash to coal and the new mine in Australia this doesn’t sound like joined up thinking.

    • Worldwide, gas consumption is projected to be 31% higher in 2040 than in 2018.

      At least this UK aspiration is very long-term – but there are better ways to spend any funds that might be available for such a project.

      This is all part of a worldwide “do something about the environment, but assume the economy keeps on growing” mind-set.

    • Hi according to the Telegraph the Government’s vision is to introduce the banning of boilers (and central heating) incrementally over the next decade.

      Surely this isn’t achievable

  3. Banning boilers as national strategy is pretty bad news for this start-up, as if the whole premise (particularly for residential gas-from-waste unit) didn’t give pause for thought. (Most glaringly, a stated benefit of solving fuel poverty with a unit that early adopters can get for a mere £19.8k, and that’s without replacing the boiler to the proprietary model that can accept the gas output).
    A neighbouring council & their MP have latched onto the idea with a vengeance, they don’t have an industrial incinerator for waste though so maybe they see an opportunity to reduce costs associated with waste disposal in times of diminishing central funding (by pushing responsibility for waste and the costs back onto the consumer household). More manufacturing to solve the waste problem (the units themselves and the new boilers to go with) meaning embedded energy that might well outweigh the an energy output of only ‘up to’ twice the energy used to process, and very little detail on the waste produced by the process given it expects householders can burn all their plastics etc in it (the company’s Wikipedia page has little more info). With government grant funding and well known corporations partnering them, the emphasis is still on coping with the effects of BAU rather than minimising energy use (& plastic packaging production etc) in the first place, surely a flawed focus for incentives and innovative thinking.

    • ….sorry, that should read ‘embedded energy that might well outweigh the point of installation, and an energy output’ etc

  4. I don’t know how many on here follow Kurt Cobb’s belongs – but his latest one under the below headline makes sombre reading.

    Note to EIA: Major shale operator sending cash elsewhere

    • Do a quick search on Exxon-Mobil Permian Basin and also Chevron Permian Basin and you will get glowing plans to keep the pedal to the metal. Exxon claims to still be in the market for acquisitions. Chevron HAS pulled out of the Appalachian shale gas business…probably because the associated gas produced by Permian oil wells has to be produced, and so can be sold for very little. The dedicated shale gas wells are dependent on being able to market the gas at a higher price.

      Don Stewart

    • Thanks Don although is there a typo in this sentence-

      the associated gas produced by Permian oil wells has to be produced, and so can be sold for very little.

      Instead of repeating the word produced did you mean another word?

    • ewaf88
      My point is that if one produces oil in the Permian, one gets gas whether one wants it or not. It is called ‘associated gas’ because, while it is not what you drilled the well to get, you get it anyway. Quite a significant amount of the associated gas in both the Bakken and the Permian is simply flared…burned at the well-head. Flaring is blamed for some of the recent increase in methane in the atmosphere.

      Don Stewart

  5. This article isn’t the easiest to follow, but it seems to raise an important issue.

    Essentially, China has experienced rising food price inflation, in part because of swine fever. The danger is that this could be made worse if the PBOC injects more liquidity into the system. It seems likely that the coronavirus shut-downs might, in any case, be affecting food processing and distribution, with implications for prices.

    So, might this be a point at which simply injecting newly-created money has ‘side effects worse than the ailment’?

  6. I feel that John Harris at The Guardian is currently posting some of the best articles on the decline and decay of the economy -and society – in Britain.

    Well worth keeping an eye on: good reporting, and not much ideology. He seems quite disgusted with the Labour party and its ideological wrangles and the attempt by the brain-dead, ideology-bound, unions to imprison it in radical Corbynism.

    Interesting to observe the travails of John Lewis: possible cut to the annual staff bonus, and store closures coming on top of recent Waitrose branch closures – even in quite prosperous areas.

    The fact that the firm now faces a 30% rise in the tax they must pay as Business Rates -whatever their profits – speaks amply as to my thesis that government will not adapt ‘do more for less’ -as our host sanely hopes – but instead bleed the system dry in the vain attempt to maintain itself, as have all civilisations in collapse, without exception.

    The proposals as to what to do with vacant retail space are absurd, given the certain decline in prosperity: turn them into hotels and gyms! The epitome of discretionary spending…..

    Beijing now on lock-down I see: are we to expect a severe supply-chain shock soon?

    • One of the big dangers of deteriorating prosperity is that ‘ordinary’ people will be bled dry, not just by governments but by others in a position to do so. Just one potential example is the energy utility sector – the profitability of energy supply is being undermined by rising costs and deteriorating consumer prosperity, but will companies accept that dividends and executive salaries need to fall? This is simply one example – whole sectors are going to be in big trouble, and few will let that happen without a scrap.

      My sense at the moment is that deterioration is accelerating. In China, of course, the virus is a special factor, but the Chinese economy was facing big problems even before this happened.

      I think it will be interesting to see if central banks will come to recognise that, with limited ammunition, there are far better things to do than prop up over-inflated asset markets. The virus situation, and the lack of big market reactions, seem indicative of how artificial market conditions have become.

    • “One of the big dangers of deteriorating prosperity is that ‘ordinary’ people will be bled dry, not just by governments but by others in a position to do so. Just one potential example is the energy utility sector – the profitability of energy supply is being undermined by rising costs and deteriorating consumer prosperity, but will companies accept that dividends and executive salaries need to fall?”

      I supposed energy generators with sunk energy costs of embedded energy of their plant may be OK for a while, but retail energy utilities appear to be hopelessly squeezed between the rising costs they’ll need to pass on to consumers and the decreased prosperity of those consumers.

      To me, SSE looks like a good example of the former and Centrica a good example of the latter.

    • Thanks for sharing this, Tim. The scenario is plausible IMHO, but there are variables which might alter timing and sequence. The powers that be will do all possible to stop it, including things we might not have considered.

  7. Well HS2 going ahead despite its dubious economics.

    However it may have its uses in the future in providing more capacity for frieght trains on the existing lives plus even take frieght trains itself when it finds it can’t attract enough passengers to pay its way due to stratospheric ticket prices.

    Another scenerio is that it quickly becomes bankrupt due to high maintenance costs so all the lines and overheads are ripped up and sold for scrap.

    In their place a concrete guide path could be constructed for semi automated coaches with a top speed of 90mph.

  8. Incomprehension
    I suggest reading a couple of recent articles which may shed some light:


    “That’s what is so interesting about the conversation between Greta and Macron. We are no longer in the territory of anonymous underlings wondering how to broach the unspeakable with their bosses. Once the incompatibility of economic growth and ecological viability has become speakable in a room like the one where that meeting took place, we are crossing an event horizon. I’m not sure anyone knows how things work on the far side.”


    The first article makes it plain that trying to square the circle is simply not possible. We are going to have to sacrifice some sacred cows. I’ve tried to note some of the biggest sacred cows in my comments here. The second article shows the utter disarray in Washington DC on the subject of climate change and the appropriate response. It is now clear to everyone except our Supreme Leader that climate change has to be dealt with, and fossil fuels are not forever. But the knee-jerk reaction is ‘carbon capture and storage’, which is vastly expensive, has never penciled out, and probably just won’t work. But since it promises jobs now and federal money spent locally, it is the preferred option. Meanwhile, the unions have strongly united behind Joe Biden, the elderly and self-serving apostle of doing something ‘after 2050’. NOBODY can assure the unions that any ameliorative action won’t reduce jobs.

    And so we find our luxury cruise ship sinking into the icy Atlantic, with too few lifeboats, and stormy seas with big waves cresting.

    Don Stewart

    • It’s interesting, in passing, to note how hard Democrats seem to be striving to get Mr Trump re-elected.

      With the possibile exceptions of Mr Sanders and Mrs Gabbard, none of the candidates seems remotely credible. Iowa suggests that, far from being able to run the country, they can’t even manage a simple primary in quite a small state. The party heirarchy seems to loathe Sanders, and instead supports Joe Biden, who seems to me almost to redefine the term “joke candidate”.

      Have these people been hypnotised by Mr Trump, or do they simply not want to beat him?

      P.S. Almost the only thing that might stop his re-election could be a market crash……

  9. Another piece in the declining prosperity jigsaw is the recent success of Sinn Fein in Ireland, due it seems to voter disenchantment with parties who think that stock-market booms and bubble property prices -ie pseudo-prosperity – will win elections for them.

    The masses, rather more realistic, only note the ever-rising cost of living, impossible housing expense and very inadequate wages.

    The pseudo-prosperity economy is like the central tower of William Beckford’s Fonthill Abbey: a fantastic structure but with no real foundations.

    Result? Large cracks, followed by a spectacular collapse. Bu when, just when……?

    • Bill Mitchell is presently in the UK.Perhaps you might like to attend a lecture ?
      Tomorrow: GIMMS, MMT education.-afternoon- “Unite the Union,” Held at the DiskusTheatre in Central London between 13:30 to 17:00
      Friday: at Manchester. Same event, held in the Barnes Wallis Building [the Harwood room] from 13:30 to 16:30.
      Saturday; MMTED – with help from GIMMS – will hold a 3 hour Masterclass , 2 Northdown Street,London, N1 9BG.2 pm to 5 pm Tickets ₤5.98



    • Re. Ireland, SEEDS shows the economy to be at very great risk – GDP is hugely inflated by the spending of borrowed money, ECoE is high and rising, debt is excessive and, riskiest of all, the sheer scale of the country’s financial system is ‘a bug in search of a windscreen’. I understand that, despite so much borrowing and spending, voters have been influenced by waiting lists both for housing and for health care.

      On the wider issue, my feeling is that we’re getting pretty near to some kind of climacteric. The current fdocus, for obvious reasons, is on China, where prosperity, already likely to turn down after next year, is obviously being affected by virus responses, and the extent of purely financial risk in China is still not generally recognised.

      It becomes an ever greater matter for regret that the authorities worldwide have done nothing to deflate asset price bubbles in an orderly manner. Just one result of this is that far too much debt is now tied to unsustainable asset prices. The idea that preventing a market correction should be a top priority for central banks seems insane.

    • This report appears to signal a rapid deterioration in employment rate in the US.

      Whereas declining prosperity results in people struggling with debt, lack of employment would appear to make hard defaults inevitable.

      This link shows the trends of increasing debt amongst US consumers.

      In practically cases, debt levels have risen far more rapidly than GDP. Interestingly, the article concludes that rising property related debt is not an issue because:

      ‘But keep in mind: household mortgage debt, which is not included in consumer credit, amounted to $10.5 trillion in Q4. It had plunged after the Financial Crisis and is now still a tad below where it had been at the peak in 2008, though the population, the economy, the housing stock, and home prices have grown since then. So, unless home prices crater again, Americans are in pretty good shape in terms of housing debt.’

      This is a dubious claim to make, given the rise in other forms of debt, the inequality in the distribution of economic growth, the lack of any real rise in per-hour productivity, declining wages when inflation is accounted for and existing home sales figures that appear to be weak.

  10. I don’t agree in detail with this diagnosis of a collapse. not to mention the wiful misuse of MMT to add to the mix. First off ,its every bit as likely that a food scare will set off a collapse. We are really close to the bone with food security. It is a vast enterprise but a couple of years of drought in vulnerable places might do it. FF ructions would dry up the machinery as well. After all Syria’s problems started with a drought plus government inaction. The “most important news is the forecast of the US harvest”
    Since Bill Mitchell is also a professor at Helsinki, he should get consulted before spreading stories about MMT clearly based in ignorance. MMT actually has a reserve of guidance that would be wise to follow, if the crash is a financial one.
    The other problem is that the losers in todays financial doings will react. Even though for now they remain docile. I wouldn’t assume it will stay that way, especially if they are hungry.

    • MMT can create fiat. That is not food, nor shelter, nor energy. My last partner in our currency option dept. 30 years ago (when I retired at 45) had a great saying: “You can’t make chicken salad out of chicken sh*t.” Fiat qualifies.

    • Every currency is Fiat today, Fiat depends on the nation’s oerformance anf general status, which is high for the USA, even though the figures are “massaged” So were you trying to say something?

    • When TSHTF, fiat will make good toilet paper. I will leave yellow metal to my grandchildren. Choose your legacy. When there are domino defaults, I hope to have already sold my bonds. Meanwhile as a retiree they provide the bulk of my income.

    • You won’t accomplish much with gold, unless you are buying whole buildings. You cannot eat gold any more than anything else metal. When the SHTF gold will be as useless as Fiat money. Gold will only be useful if you survive to get out the other side and can join a reset.

      It won’t be anything like we have ever known or imagined. If the government can get its act together it will introduce rationing, coupons for the essentials. It will still use Fiat money to pay for the Army, the police, hospitals and food. You will accept its money, or starve. It will be all on a war footing.

    • Thousands of years of history tells us that gold retains its value better than any other “currency.” Obviously fertile land, clean water, fishing and hunting grounds, etc can retain value. Enjoy your paper. It can be burned when you are cold. Digital credits fail there. Many of us live where trees are plentiful, and use wood for heat right now.

    • No obsession. Insurance. A hedge. Your certainty in predicting the future is religious-like. Niels Bohr and Yogi Berra: “Prediction is difficult, especially about the future.”

    • I’m not predicting the future. I leave it for you. I just say your obsession with gold won’t likely do you any good. The future will have no low hanging fruit to enjoy. That’s not a prediction it’s what we face already.

    • Please check a dictionary for the definition of “obsession.” I already stated that my physical bullion is a hedge (10% or so). Obsession applies more aptly to you with MMT! 😉

    • Gold is usually an obsession. You may not have gold fever, but you are totally committed to gold. As to MMT. that is just your ignorance coming to the fore. You need to get a grip and stop believing the nonsense from the mainstream.

    • This is now ad hominem. My ignorance is asserted by you after you openly accuse me of obsession. I’d love to debate you for charity in a forum with 6 seasoned financial pros as the jury. But you would likely claim that they weere all ignorant if they sided with my arguments.

      I recommended gold as a part of an investment mix in October 2001. It was in an invited guest commentary for the most successful (20+ years – documented buys/sells) investment letter in Canada. Dr. Morgan has seen this commentary, and it is still on-line. I’ve personally owned gold since that time. (under $300) You wish you were as “ignorant” as I am. 😉 When personal attacks and claims of perfect understanding are proferred, the subject is undressing himself to the public.

    • I have monitored your correspondence Steven and do not wish to get in between as you clearly can stand on your own. However, I do wish to support your view of PMs being an essential part of one’s portfolio, at a rate of approximately 10% depending on mix, as an insurance policy. It has proven effective for me over many years. But I do think it is a personal choice and and is not risk free.

      The way investment planning is going these days and the need to prepare first for deflation before the imbalance of financial and real economies yields a correction; it might result in higher inflation.

    • Peter,
      You should clarify that the currency(ies) being hedged is(are) critical to analyzing effectiveness. Currency A could decline vs a basket of others (they were rising vs A), with gold rising in its terms whilst declining vs the basket. Also, gold could rise vs A and rise significantly more against the basket. Examples of that are easy to see if one looks at the the current cycle of $US strength. Gold rose faster vs the Pound, Euro, $C, $AU, $NZ… than vs the $US. An investor in those countries saw their hedge outperform the $US hedge.

    • Thanks Steven, and noted. However I am not concerned as for me it is only insurance, it can go up or down, but regardless, I guess my children will get it in the end!

    • The starting point for me is that money has no intrinsic worth, and commands value only as a claim on the output of the ‘real’ (energy determined) economy. For this to function, there must be (a) something against which the monetary claim can be exercised, and (b) an acceptance by all concerned of the validity of the money in question as a medium of exchange.

      The danger now is that the effective quantity of fiat is increasing whilst economic output is not. As prosperity retreats, there’s likely to be ever greater pressure to increase the quantity of fiat, whether for ‘legitimate’ purposes (like subsidising energy and alleviating hardship), to the more dubious (filling govt revenue gaps) and the outright crazy (keeping asset prices over-inflated). I don’t see how fiat can survive in these circumstances.

      This said, it’s by no means certain that gold can function effectively as a medium of exchange. This suggests to me that there may be no way of getting through the coming crisis by hoarding any form of ‘claim token’.

      One might, from this, infer that stockpiling things might be a good idea. But I’m not at all sure that this can get people through a period of chaos.

      So maybe all we can do is try to “educate our masters” into new ways of doing things, and hope that some really sharp shocks (like market crashes) induce a change of thinking in good time.

    • ” . . . drought plus government inaction.” May have exacerbated the ‘conflict’.
      However, from the ‘horses mouth’?
      “You can’t understand the conflict without talking about natural gas
      By Maj. Rob Taylor
      Much of the media coverage suggests that the conflict in Syria is a civil war, in which the Alawite (Shia) Bashar al Assad regime is defending itself (and committing atrocities) against Sunni rebel factions (who are also committing atrocities). The real explanation is simpler: it is about money.
      In 2009, Qatar proposed to run a natural gas pipeline through Syria and Turkey to Europe. Instead, Assad forged a pact with Iraq and Iran to run a pipeline eastward, allowing those Shia-dominated countries access to the European natural gas market while denying access to Sunni Saudi Arabia and Qatar. The latter states, it appears, are now attempting to remove Assad so they can control Syria and run their own pipeline through Turkey.”

  11. Dr Tim, thank you for another excellent article; and much thanks to the many excellent posters that continue to educate my limited and rather poor understandings.
    Even if one rejects the hypothesis underpinning SEE (and I don’t) the economic situation of the UK is absolutely dire.
    We are faced with a financialised economy that is dangerously unbalanced. We are faced with Triple Deficits – trade gap, fiscal gap and negative overseas income account. We are faced with ‘wealth’ founded upon high asset prices. We are faced with a currency that is declining remorselessly.
    We are faced with mainstream political parties that, for want of a better phrase, simply don’t ‘get it’.
    I fear that we’re living through a real-life experience of ‘The King’s New Clothes’.
    We are a nation that can no longer face the economic truth even when looking at conventional, mainstream statistics, let alone the figures from SEEDS – and it sure terrifies me.

    • Thanks Kevin. You are right about the problems facing the UK, though, of course, many of the same weaknesses apply in other countries too.

      Mr Johnson does seem ‘a breath of fresh air’, and, though the HS2 decision is regrettable, it’s ‘par for the course’ for how these mistaken decisions are taken. Britain’s potentially lethal exposure to the financial sector is the single most worrying statistical indicator, in my analysis.

      Whatever one makes of the election outcome, it’s encouraging that whole areas of the country showed that voters cannot be taken for granted. Boris really does have to deliver for “the North”.

      It’s unfortunate that Labour has become incapable of offering constructive opposition. Ideally, Labour would be campaigning on issues of economic inequality, but the party seems to have wandered off instead into a cul-de-sac of irrelevance.

      The underlying problem is that the public have been subjected to four decades of neoliberal claptrap, which has had unpleasant consequences far beyond the purely economic. Much is made of divisiveness over “Brexit”, but the validation of greed, selfishness and a lack of concern for the well-being of others and the community are of more concern.

    • Tim – regarding your statement about Neoliberal clap trap I guess you may have read the below book – a summary of which appear in the Guardian in 2016.

      George Monbiot’s How Did We Get into This Mess?


  12. Hi Tim,
    Excellent post as usual. I don’t see many comments from your Irish readers. I’m sure there are quite a few out there. You’re probably aware of the seismic shift in politics that’s occurred here in the recent election for the Dail (Parliament).
    Sinn Fein who’ve been an outlier left-wing party for years are now firmly in the political driving seat having gained the majority of first preference votes (we have proportional representation here). They now have almost the same number of seats as largest mainstream centre right party (Fianna Fail) and will most likely enter a coaltion with them. The other main centre right party Fine Gael lost too many seats and are therefore out of office after 10 years.
    The talking heads on mainstream media are all scratchihg their heads as to why this has occurred now as in their view is that the “recovery” is well underway.
    Your previous analysis on our fragile finances offers some pointers as to what’s happened. Perhaps you can take another look as our so-called economic recovery and offer some further insights on why our citizens are turning to our version of leftist populist politicians.

    • Where Ireland is concerned, I cannot be aware of all of the issues driving the political debate – I was profoundly unimpressed by Mr Varadker’s handling of “Brexit”, but that’s only one area of policy, and probably pretty low amongst factors influencing voters’ choices. So my comments have to be wholly economic, and based on what the SEEDS model tells me.

      First of all, Ireland’s reported GDP is remarkably overstated, implying that per capita GDP is far higher than in other countries that we know are wealthier. You’ll know about ‘restatements’, and resulting discussion around “leprechaun economics”. One problem, though, is that many ratios are still expressed in relation to GDP, even though that number is widely known to be unrealistic.

      Comparing 2018 with 2008, real GDP in Ireland increased by 62%, including a one-off rise of 25% in 2015. Over the same decade, debt rose by 49%. Together, these movements stack up to an understatement of the debt/GDP ratio.

      Excluding adjustments and the spending of borrowed money, SEEDS puts clean GDP (C-GDP) for 2018 at E192bn, a long way below the reported GDP number of E324bn. This alone hikes the debt ratio from the reported 297% to 502% (and I would point out that aggregate debt is E197,000 per person).

      Then there’s ECoE, a particular problem for Ireland, as it’s already at a crippling 12.1%. In 2018, when ECoE was 11.2%, prosperity per capita was E34,840, nowhere near the reported per capita GDP of E66,300 (!). Debt per capita of E197,000 is more than hefty compared with prosperity of E34,840. The debt/prosperity ratio is 566%, and rising.

      Worse still, financial assets (a measure of exposure to the financial system) were stated most recently (2017) at 1,757% of GDP. Even as reported, that’s way too high – and corresponds to well over 3,200% of prosperity, worse than, say, the UK (about 1,650% of prosperity) or Holland (about 1,959%), let alone the US (just over 700%).

      This puts Ireland right in the firing line if (or, rather, when) GFC II turns up. Essentially, claims that Ireland is much less exposed now than she was in 2008 are bunkum. Banking exposure, and aggregate debt, too, needed to be reduced long before now.

      Finally, I’m concerned about Ireland’s dependency on multinationals, especially in the “tech” sector which, as I see it, is ‘riding for a fall’.

  13. Alice Friedemann on ‘Foxocracy’ in the US
    Check Energy Skeptic today for a few of Alice’s comments on a new book detailing the business plan and practices of Fox News. The book was written by a long time Fox insider.

    “The American Foxocracy is a $10 billion a year business model based solely on the fact that evolution failed to prepare our reptilian caveman brain to binge watch white tribal identity porn that activates and monetizes white tribal fear and hatred—and the $140 billion emotion surveillance and hyper-targeting social media industry then retargets and remonetizes that fear and hate to an audience thirty times bigger than Fox’s cable audience.”

    Politicians and corporations playing to the lowest common denominator is nothing new. What is new, I think, is the emergence of the supposedly ‘high tech’ Silicon Valley companies who have taken a relatively small cable TV operation (a descendent of Father Coughlin’s radio operation during the Depression), and used social media to multiply it enormously.

    But…it must be all good because count the GDP and the newly minted billionaires.

    Don Stewart

  14. Fox News. The only remaining media group in the US that is not owned by Globalist Jews. Fox refuses to tow the Globalist, Neoliberal and cultural Marxist line and instead represents the interests of White Americans. No wonder Alice Friedmann doesn’t like them.

  15. Notes from Alice about Alice

    Alice is an atheist, after abandoning some other belief systems. There is no indication that she was ever Jewish. It is worthwhile reading about her journey from renewable energy enthusiasm in college to hard edged pessimism today. She also recounts her experiences trying to evaluate evidence…and she obviously finds the Fox channel wanting.

    Don Stewart

    • Many thanks for the link Don and I will read it with interest later on. I always say that atheists should make sure that they are right! It might be a shock come the Judgement! Best to hedge bets methinks.

    • If you comprehend the Negative Fallacy, you’ll never again ask for proof of non-existence of anything in an open, complex system.

    • Perhaps I jumped to too many conclusions. I certainly do not question the value of Friedemanns contributions to the energy debate and have enjoyed her work. Unfortunately, she seems to be a mouthpiece for all of the paranoia of the US Democrat political class, demonising white Christians and spouting all sorts of nonsense about Russian propaganda. I for one take her writings with a pinch of salt.

    • “..all of the paranoia of the US Democrat political class, demonising white Christians ”

      You’ve been duped. There are more white Christian Democrats than any other demographic. This is from 2012, but I doubt the %s have changed significantly. Why would White Democrats demonize themselves?

      “PRINCETON, NJ — Non-Hispanic whites accounted for 89% of Republican self-identifiers nationwide in 2012, while accounting for 70% of independents and 60% of Democrats. Over one-fifth of Democrats (22%) were black, while 16% of independents were Hispanic.”

    • @Tony H
      I suggest that we focus on just a few items relative to Alice:
      *Is she correct that it is all about heavy transportation fuels, and that such fuels will be very scarce?
      *Is she correct that we face an ecological crisis?
      *Is she correct that wood will be our principal fuel in the near future?
      If one adds the Dr. Morgan corollary:
      *The financial system will not permit us to keep on doing what we are accustomed to doing

      then we can have some reasonable discussions. Important sub-topics such as horses replacing cows in grazing land, ways to use wood more efficiently (e.g., Bates and Draper), how to manage the psychology and sociology and political challenges, why grains are a key to survival (despite the current ‘gluten free’ hysteria.
      Don Stewart

  16. The February Oil Market Report from the International Energy Agency has been published. One of the highlights:

    “Global oil demand has been hit hard by the novel coronavirus (Covid-19) and the widespread shutdown of China’s economy. Demand is now expected to fall by 435 kb/d y-o-y in 1Q20, the first quarterly contraction in more than 10 years. We have cut our 2020 growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011. Lower-than-expected consumption in the OECD trimmed 2019 growth to 885 kb/d.”

    I think Covid-19 is going to prove that the Chinese bubble has bust to the rest of the world. However, considering China’s mercantilist trade policies, I don’t think this will be bad news for the United States, unless China finds itself in such a desperate position that it has to start selling its holdings of US Treasuries.

    • I’ve been explaining here for some time that, from a SEEDS perspective, the Chinese economy is in very big trouble.

      In order to slightly more than double GDP over ten years (+115%), China has almost quadrupled her debt (+290%).

      With the priority of supporting employment growth (because urban unrest is the spectre that haunts Beijing’s nightmares), the emphasis has always been on volume rather than profitability, with the financial system used in a role supportive of these objectives.

      Well before the virus emerged, defaults were rising, including some from SOEs long assumed by Western investors to be default-proof, whilst P2P lending has been a disaster. Sales of cars and smartphones have plunged, again long before the virus, as, more tellingly, have sales of chips and other components.

      There is always “noise” around such trend-shifts, with the blame first put on the trade war with the US, and now on the virus.

      But the fundamentals are adverse – ECoE has risen into growth-killing territory, and financial risk exposure is acute. SEEDS has long identified 2021 as the year after which Chinese prosperity per person turns downwards, an event likely to be accompanied by extreme financial uncertainty.

    • Doesn’t China owe these debts to itself? In a command economy the government has all the cards. Also It’s got a lot of assets overseas, like $1.4 trillion in the US fed. It can eliminate the local debts very simply, by jubileeing them. Who is going to complain?

    • Tim – I had mentioned in an earlier post about a massive new coal mine China is developing in Mongolia.

      If this site has a very good EROEI ratio then it might provide the cheap energy they need to meet the production capacity demanded by their debt and growth problems.

      However I’m not sure how we’d obtain the figures.


    • I think John has a point, External debt is what is the real enemy of a Nation with a Sovereign Currency. Of Course Access to Energy through the PetroDollar is a key matter of Geo-Political control and of course, China has been Through the Brics Bank and also direct deals with Russia and Previously India been trading in kind for resources. That said China does have rather a lot of Dollars from its Trade surpluses from Manufacturing.
      Embedded energy and therefore net resource Consumption or Conversion and re-export further complicate the picture.
      One final point on Energy as expressed through FInancial metrics is the huge slice of Taxation both at the production and consumption levels across all Energy Production, Upstream and downstream from Wellhead to Petrol pump, pr Gas stove or hob.
      The dynamic is really one of Net debt, we know that all debits and credits do not sum to zero as the Interest portion is not created when Loans are made. Debt is money and when an Economy expands so does debt by definition.
      I do think that you are over claiming Seeds crystal ball abilities in this instance Tim, The problem is not just about resource extraction costs but about Distribution and above all the politics of access to resources, not just energy but also raw materials.

    • I think a number of different issues are being conflated here.

      First, external debt. This is a problem because of exchange rates, which are outside national control. If you borrow in, say, USD, and your national currency slumps 75% against the USD, you debt has quadrupled, and so have your debt service costs. Default remains an option, and you may indeed have no choice about it.

      Debts denominated in sovereign currency can, of course, be monetized. But that runs the risk of causing not just the external value of the currency to slump, but its internal purchasing power as well.

      A jubilee isn’t all that feasible either. First, if your neighbour owes you $10,000, but if that is written off, you’re going to be both out of pocket and – rightly – angry. Not only have you lost the capital but, more importantly, you’ve lost any income stream associated with it.

      Second, you are mortgage-free, but your neighbour has a $100,000 mortgage, which then gets written off. I don’t think you’d be happy about that either.

      Third, if there has been one jubilee, it’s fair to assume that in due course there would be another – so, in the meantime, what’s to stop you bingeing on debt?

      Next, pensnion funds (for example) have a lot invested in government and corporate bonds, and other debt instruments – what happens to these funds if a jubilee wipes out these debt assets?

      Ultimately, what really matters about debt isn’t the capital amount, but the debt service (cost to the borrower, income to the lender).

      Finally, most fiat is “loaned into existence”. Undermining the validity of debt strikes a huge blow at the viability of money.

      Ultimately, the de-growth which is looming is likelier than not to destroy fiat currencies anyway (a subject I’m working on now). But I see no logic in hastening that process by bailing out the improvident.

    • Thank you, Tim, for shining light on the complexities and interconnections of credit/asset markets and vehicles. There is an old saying: “No good deed goes unpunished.”


      “Finally, most fiat is “loaned into existence”. Undermining the validity of debt strikes a huge blow at the viability of money.

      Ultimately, the de-growth which is looming is likelier than not to destroy fiat currencies anyway (a subject I’m working on now). But I see no logic in hastening that process by bailing out the improvident.”

    • I see you don’t get it, Tim. The Chinese debt jubilee is for debts owed to it. Not for loans between private parties. Are there that many of them? I don’t know, but the Steve Keen option can apply to them. He wants it to be fair The commercial banks lose debt that was worth zero anyway. It gets written off as if it was paid out. They still keep the interest which is the only money that is the banks anyway. The mortgagee gets an injection of cash to repay the debt, if that option is the chosen one.,and their debt is extinguished too. All bank loans are liabilities.

      Federal currency is totally without liability as it was extinguished at the moment the currency is created. China will have all its own debts in Yuan., Australia in $A, the USA in $US. They can never be sent broke in paying them out. You could write a whole book on this. My remarks just touch on the issues, but It’s all for when the SHTF comes. As Michael Hudson says. “Debts that cannot be repaid will not be repaid”.

      PS did you get my blog with Bill Mitchell’s lectures in the UK this w/e.?

    • Saying that Tim doesn’t get it is a real hoot.

      Who (China is what you say) is the “it” in “owed to it”? The Chinese Gov’t? To be “owed” means to the entity which loaned money via bonds, notes, etc. Investors loan money. To say that the commercial bank holdings of bonds are worth zero is BS. Those can be sold at any time into the actively traded debt market for cash.

      There are trade and account deficits between countries as well. Jubilee there is default by the party in deficit.

    • Tim needs to give you your comeuppance. But, alas, you think he’s wrong as is everyone else who disagrees with you. D-K t matches you to a T.

      I wager for charity on outcomes at long bets DOT org. To date only one chap and I had two wagers. (we split) Nobody else has the cahones to put up US $200 as they don’t want their bubbles burst. Let’s go, genius!

      Dunning-Kruger effect
      In the field of psychology, the Dunning–Kruger effect is a cognitive bias in which people assess their cognitive ability as greater than it is. It is related to the cognitive bias of illusory superiority and comes from the inability of people to recognize their lack of ability.Wikipedia

    • More waffle. I know what the Dunning-Kruger effect is which is why you copped it. As to your wager, let you answer this simple question ” Can you spend a budget surplus?” it is a yes or no question, simple.

    • Pour syrup on your waffle. Stuff a sausage. Then explain to the list the precise definition of “budget” and “surplus” in your question, and precisely how that relates to your addiction to MMT as a cure for the steadily declining value of fiat – BP from over $5/US to $1.30 in a century or so for example; and how energy/material throughput can sustainably increase as a result of MMT.

    • I knew you would squib answering! You are just trolling to waste everybody’.s time. I need not point out we speak of the federal government’s budget rhetoric, how we need balanced budgets and to cut the deficit. My question goes straight to the heart of the misinformation campaign. I’m still waiting for an answer.

    • Since you seem unfamiliar with market dynamics, here’s a tidbit about reality.

      Spending can be done whenever it is legally possible, even by indebted governments (which ones have no debt?) They can borrow more and/or print more credits. A “surplus “requires only current availability. You can spend using your credit card until the bank says “no more.” It is the global markets which put limits on governments. If you are OK with banana republic devaluation and inflation, spend to your hearts content. It is strictly a matter of definition. So, if you ask can a surplus (any possibility to spend more) be spent, the answer is yes…if you are willing to accept the possible consequences. I like toilet paper in the bathroom, not in my wallet. Your $A some years ago was at parity with the $US. It is now 1/3 devalued from there. Your purchasing power has declined accordingly. I hope you like that!

    • Thanks for trying but you are wrong in your answer. This is not MMT in particular. just accounting procedure. When politicians carry on about a “balanced” budget and shrinking the deficit they are totally wrong. A budget surplus is a surplus of Tax over what spending was budgeted for that year. Tax is currency destroyed, a cost to the economy, never revenue for the federal government. To arrive at at the annual zero balance the non government sector has to sell assets to match the difference, the “surplus”. So it is a debt. It often leads to a recession [or requires a boom] which allows the debt to be repaid. So the answer is NO.

    • Thanks for trying. 😉 You are repeating hogwash which you’ve been fed by “new” economists. I ask Dr. Morgan to straighten you out if he wants to bother. Try to use your credit card to buy Jeff Bezos’ new house and see how that goes! And enjoy your loss in PP (Purchasing Power) as you spend your way into oblivion.

      BTW, I expect the $US to crap out too in the next year or two, but I don’t know which currencies will rise against it. It is all relative toilet paper against energy and other necessary products and materials.

    • We have 4 on list objecting to MMT. Pay attention. I guess it’s too much stress to have your religion questioned. And thanks so much for your repeated ad homs. It cements your character and lack substance.

    • That is not surprising, 4 is barely any. It took a long time for the Copernican revolution to be accepted. And Galileo had to recant . But he was right. MMT is also right. I don’t have a religion, it’s all nonsense and you are guilty of that. There is evidence that it is right, but you just cannot see. Blind. Mired in hopeless swamps of vested interest obfuscation. You are too gullible to know. a way out.

    • You cannot win! MMT cannot be denied as it simply describes accurately the actual workings of the existing economy.!!! Approval is not a numbers game. 90+% of people,even educated ones including economists, don’t understand MMT, and the PTB want people like you to do their dirty work. So you don’t surprise me, your reaction is just irritating but comic.

    • Hi Tim,
      Conflation is a problem in any complex system, catching the dynamics is very tricky especially the Unknown unknowns.
      Steve Keen has written a fair bit on Jubilees and helicopter money, worth checking it out.
      Regarding the IBS, World Bank and IMF etc again a huge subject and much depends on one’s analytic viewpoint, Leitaers Integral Money Paper is well worth looking at in the respect of whose problems exactly we are trying to Solve.
      Bail Outs, Bail Ins, and SOvereign v Corporate v Private debt. The Growth comes from the Uncreated Interest Bit, Magrit Kennedy and others including Leitaer and Kreutz have all demonstrated this as has Grigon.
      Embodied energy is a key part of any stock-taking exercise as is the Circular economy, these are resource realities which Seeds needs to factor into its analysis of any future paradigms going forwards as things presently stand Tim, I think seeds, whilst being one of the better approaches in the wild is far to invested in the current FInancial Systems mindset, it will come as no surprise to you that that is my opinion, unusually for me, it is an opinion that has hardened rather than softened in the couple of years I have been reading your work here.

    • SEEDS has to present its conclusions in financial terms (rather than in energy units) to be relevant to the debate. I believe that it presents a view that is totally different from, and far more meaningful than, the plethora of models based on the ‘flat earth’, false paradigm of ‘the economy is money’.

      SEEDS tells us that Western prosperity has long been in decline, and that the same is now about to happen to those EMs (such as China and India) where it hasn’t happened yet. It further indicates that the financial system as we know it now is unlikely to survive efforts at denial over this.

      Let’s see which version is right! I’d back SEEDS, which has already predicted Trump, the “Brexit” vote and the ending of growth in China…

    • Hi Tim

      Steve Keen has advocated a debt jubilee but the jubilee would consist of giving everyone, indebted or not, a given amount. Those in debt would have the money applied against the debt and those in surplus would spend it.

      As I see it the problem with this is that, quite apart from the issue of moral hazard, it is likely to be too small to make any difference to a significant proportion of the indebted and too expensive to give to everyone.

    • Correct me if I’m wrong (and I suppose I could ask Steve), but it sounds to me as though it would be either too small to achieve anything or so big that it would destroy the currency.

    • “Steve Keen has advocated a debt jubilee but the jubilee would consist of giving everyone, indebted or not, a given amount.”

      Is that another version of the Universal Basic Income, and all the attendant arguments for and against?

    • “SEEDS has to present its conclusions in financial terms (rather than in energy units) ”
      You choose to present Seeds in those terms Tim and you have explained your reasons why. It is a choice all the same and not a compulsion.
      Seeds by defining its terms and boundaries in Energy Terms, would I contend benefit in terms of demonstrating its own insights, from defining its own Lexicon outside of the Established Lexicon of Financialised Capitalism.

      Of course, you could ask Steve yourself and indeed I would pay money to see you both discuss the question in Public whether in a Theatre or online.

      Michael Hudson is also mentioned above), he is of all the MMT names my favourite. Most of the others I have little time for although Randal Wray is a good writer, Bill Mitchell annoys me intensely as does Mosler.

      and Forgive Them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year (2018)

    • Hi Tim

      Re Steve Keen your views are exactly the same as mine.

      Other commenters have mentioned Michael Hudson who is also an advocate of a debt jubilee faute de mieux because as he says debts that can’t be repaid won’t be repaid.

      He puts debt jubilees in their historical context and in that context they make a great deal of sense both economically, politically and socially. I think they make much less sense today when the circumstances are completely different, although as he says – and to repeat – debts that can’t be repaid won’t be repaid.

    • It’s not been a great week for him – HS2, and now this.

      It’s disturbing to see good ministers (like Julian Smith and Theresa Villers) sacked, and a solid chancellor seemingly pressured into resignation on a matter of principle.

      But Mr Johnson has a solid majority, the kudos of having won, and an opposition in total disarray, trying to pick the least bad choice of leader from a depressing short-list of out-of-date candidates.

  17. Just watching a four year old program featuring Steven Reeve travelling around Greece. Obviously four year ago there was massive unemployment.

    One thing that struck me was the billions that Greece spent on new intercity railways that not many people use – or can afford to use.

    The staff are very highly paid and the network itself loses billions.

    I’m wondering if a similar fate awaits HS2.

    • If there’s any comfort in this, the economy (globally) is going to tip into de-growth long before this nonsense project is anywhere near completion.

      It’s a pity, though, to see the right idea (public transport) applied in very mistaken way.

      This said, when the airline industry starts claiming that it can become carbon neutral, almost anything, however daft, seems possible.

    • Well at least they’ve pledged £5bn for buses although it is over 5 years.

      We know how the Government should have spent the money on local transport infrastructure but it’s too late now.

      Perhaps as mentioned in an earlier post of mine if could end up being used for frieght.

      By the way I thoroughly enjoyed an appearance by Paul Krugman on Politics Live this morning.

      He clearly isn’t a fan of Trump but did see the the UK Government’s austerity measures from 2010 were totally unnecessary.

      Fine but the UK had borrowed to the hilt – real economic growth couldn’t happen – raising taxes would have been difficult so how could we have avoided the cuts ?

      I guess Paul still hasn’t wised up to the fact that organic growth is tiny and can’t fund large amounts of spending.

      Yet Boris has sacked Javid who was looking at Mansion tax and pension benefits cuts as a sensible way to raise money instead of yet more borrowing

      Boris may soon find that things are not adding up.

  18. Thanks Tim, appreciate you extensive comments on the situation here in Ireland. It is as you say pretty grim and all the more so when you view the willful blindness at every level of society here. Like politicians everywhere, ours lay claim to abilities to control and influence the economy that they simply do not possess. In response, the citizenry have deluded expectations that the incoming lot can “fix” the healthcare, housing and debt issues that concern them They are more than eager to believe whoever promises them the most stuff wiht both parties entirely unwilling to contenance their mutual impotence in the face of the relentless forces propelling us towards degrowth you so cogently

  19. describe. Thanks again for your efforts to bring some sanity to the collective delusions that pervade our lives. BM

  20. Tim, this note rather puts your SEEDs into perspective:
    “The short version is that oil prices are a reflection of supply and demand. Global demand has already been falling for the last several months, and oil prices are sending warnings that “market hopes” for a “global reflation” are likely not a reality. More importantly, falling oil prices are going to put the Fed in a very tough position in the next couple of months as deflationary pressures rise.”

    “Simply put, lower oil and gasoline prices may actually have a bigger detraction on the economy than the “savings” provided to consumers. Newton’s third law of motion states:

    “For every action, there is an equal and opposite reaction.”

    In any economy, nothing works in isolation. For every dollar increase that occurs in one part of the economy, there is a dollars’ worth of reduction somewhere else.”

  21. A few thoughts on heavy goods transport following on from Don Stewart’s post. Whilst we often hear that manufacturing is only a small part of GDP in ‘advanced economies’; real goods provide all of the tools needed for the service economy and they are tradable, tangible and a storable form of value in a way that services are not. Goods transport in all forms (road, rail, air and ship) is overwhelmingly dependant on diesel fuel or other heavier oils. These fuels inevitably face a future of more limited production, because of declining EROI on one side (increasing production cost) and declining affordability (prosperity) on the other. Because there is a certain energy intensity to GDP, there is a limit to how high the price of any energy source can rise before demand is destroyed.

    Whilst there may be other means of powering freight transport, diesel is overwhelmingly attractive. It is very energy dense; it is an easily transferable liquid that has high passive safety against spontaneous ignition. It does not evaporate or deteriorate when stored in tanks. There is a huge amount of infrastructure and sunken capital cost devoted to diesel-powered compression ignition engines that will be very difficult to replace quickly. This makes the job of supplanting diesel freight infrastructure very difficult, especially given that the crisis may arrive suddenly and few people will be aware of the problem beforehand. Whilst other options are available, all require significant new infrastructure. No rival portable energy source can surpass diesel in terms of energy density.

    Solution 1: Hydraulic freight pipelines (discussed in previous posts). Energy efficient, but slow. Can be powered by a stationary direct electric or mechanical power source. New infrastructure required and needs a lot of volume to achieve economies of scale. Rail faces the same problems.

    Solution 2: Non-compressed methane. This could be stored in a flexible bag atop an HGV trailer, probably shrouded by an aerodynamic canopy. Advantages: existing HGVs can be adapted to burn this in addition to diesel and it is drawn into the engine by suction along with intake air. This could halve the amount of diesel consumed per tonne-mile for existing vehicles. Newer vehicles could be produced to burn methane alone. There is a pre-existing natural gas infrastructure and biogas can substitute for fossil methane. Issues: (1) Truck stops will need a gas supply; (2) The energy density of methane is low and range will be limited; (3) The large gas container will increase drag coefficient.

    Some initial calcs: A 33t HGV carries a maximum of 19.1t of freight and has average fuel consumption of 7.8mpg (1.72m/litre). One litre of diesel = 38.6MJ. So energy consumption of the HGV is 22.5MJ/mile. Dimensions of HGV are limited by EU law: max length = 18.75m; width 2.55m. No restrictions on height, but motorway bridges impose an inherent limitation. Assume a shrouded methane bag some 18.75m x 2.55m x 1m mounted atop the HGV. Total volume = 47.8m3. Energy density of non-compressed methane is 37.8MJ/m3. So vehicle range on methane alone would be 47.8×37.8/22.5 = 80miles (129km). With 50/50 methane-diesel; 160miles.

    For methane only operation to be practicable, refilling stations would need to be located at separation no greater than 100km. Refilling will take place at low pressures, with gas stored in lightly pressurised tanks. Assuming that refilling hoses are 10cm in diameter and gas is transferred at 10m/s; refilling would take 10 minutes. For a vehicle travelling at 50mph (80kmh) this would increase journey times by ~15%. Non-compressed hydrogen could be used as well. But the much lower energy density (10.8MJ/m3) would result in either shorter range or a much smaller displacement of diesel, maybe 25/75 H2-diesel.

    Solution 3: Electric HGV with swappable batteries. In this scenario, the vehicle battery unit would be mounted on a separate trailer that is towed behind the vehicle and can be decoupled and changed at service stations. Assume 100km between stops with a 30% margin, so 130km (81mile) range. An HGV diesel engine is ~40% efficient. So a fuel consumption of 22.5MJ/mile provides 9MJ/mile of mechanical energy. Li-ion batteries coupled to DC motors will be ~80% efficient, so the electric HGV will require 11.25MJ/mile. So an 81mile range would require a 911MJ battery. The energy density of Li-ion batteries is 0.36–0.875MJ/kg; assume 0.5MJ/kg average and across lifecycle. The required mass of the battery pack would be 1822kg. That is about 10% of maximum freight capacity and 5.5% of total vehicle weight. Extending range to 500 miles would require a battery mass of 11tonnes, which would seriously eat into payload capacity. So battery electric HGVs only really work if battery units can be swapped easily at service stations. This gets around the charging time issue as well. If range does not need to exceed 80 miles between stops, there is a lot of flexibility in terms of what battery technology can be used.

    There are other solutions that might work, like onboard wood, coal or char gasification; thermal energy powered vehicles; catenary or ground-level assisted electric vehicles; compressed air; flywheel, etc. All have their own pros and cons.

    • Whatever it is needs to be done now.

      And it won’t be……

      As the Spanish saying goes, we’ll ‘see the Virgin Mary first’.

    • Another option for powering transport over relatively short distances is flywheel energy storage.

      Historically, this had limited success because the only practical flywheel materials available in the 1950s were alloy steels, with limited tensile strength and high density. Now we have Kevlar, carbon fibre, basalt fibre, etc. The energy density could ultimately rival batteries, but would not depend upon rare and expensive elements.

      Hydraulic cylinders are another option, though to store useful amounts of energy the pressures needed are quite scary.

  22. Boris reveals himself to be a Blairite social engineer.

    I begin to think that some sort of catastrophic collapse of society wouldn’t be a bad thing. It would weaken Britain’s rotten elite and deprive them of the resources needed to control and undermine their own people. None of this would be happening if Britain were actually run by the British, rather than the aforementioned ‘Globalists’.

    • Free speech and the press has only ever been a fugitive thing: criticize Henry the 8th for his break with Rome in the local tavern and you were on the block in no time; Hazlitt went to jail for calling the Prince Regent what he was, a fat spendthrift fool; say anything untoward about the local squire and you were evicted that day, and so on.

      Certainly the times are darkening, and we are also being immersed in propaganda of the crudest kind: we should fight it: but the right to free speech has been compromised and abused by too much really nasty imbecility on the net forums: racism, anti-semitism, vile comments about women, and so on, giving the censors their ideal opening – we should all be responsible in what we write so as not to hand the victory to them.

    • My hope is that as prosperity and tax revenues continue to decline and the pound collapses as a currency; the UK government will no longer have sufficient resources to abuse its own people with these sorts of authoritarian dictats. It certainly isn’t the worst thing that could happen, looking at what the ‘Globalists’ have in store for us.

      As central government loses its money stream and power, the opportunity will be open for private citizens to organise ‘underground movements’ that eventually replace the UK government with something more patriotic. For the time being, those people need to sit tight, plan and be patient.

    • My hope is that, as prosperity continues to deteriorate, the public take more of an interest in economic and political matters, and thus engage more with democracy.

      It would help if certain media organisations stopped pushing their particular slant on everything.

  23. “I think seeds, whilst being one of the better approaches in the wild is far to invested in the current FInancial Systems mindset,”

    I think that SEEDS gives good evidence that we cannot continue on with BAU very much longer.

    What comes after BAU? On that point, SEEDS gives us a few clues, but very little in the way of a roadmap.
    *Can we construct, out of the financial ruins of BAU, an economy which is able to function so that the dense energy of the remaining fossil fuels is utilized with ECoEs in the neighborhood of 25 percent? And with a continually declining supply of such fossil fuels?
    *What sort of infrastructure would be required to get valuable use from fossil fuels, subject to the preceding scenario, and is it a simple retrofit of what we have today or does it require wholesale destruction of what we have today?
    *Assuming that most financial values fall to zero, how do we mobilize the remaining capital to create the infrastructure…politically. socially, psychologically? The remaining capital being in the form of existing fossil fuel production facilities, human knowledge, human willingness to work, draft animals, etc. It seems likely to me that plasticity is required…the fact that X owns an acre of land does not take precedence over the fact that Y can make more productive use of it (the excuse Jefferson used to seize land ‘owned’ by Native Americans)? The world becomes more about ‘use value’ and less about ‘legal values and inheritance rights’.
    *Should any new infrastructure be built with assumptions about continued sea level rise, increased desertification, and northward migration of growing zones?
    *Are the problems with continued use of fossil fuels so severe that a reversion to coppice wood and carbon cascades (Bates and Draper) the best bet for a billion or so humans on this planet?

    That’s not an exhaustive list, but perhaps gives some idea of the scope of the problems. And saying that SEEDS doesn’t resolve the picture into a sharply pixelated image is certainly no criticism.

    Don Stewart

    • For the current fiat system to be replaced, most likely it must fail – implode to the extent that the credits and tokens become worthless. The powers that be will do all possible to avoid that, as their gravy train of interest, rents, and % of whatever profits still dribble in would end. Aside from that, they (and to a dressed degree maybe half of humanity) have only land and some buildings, which require work for material gain if rents aren’t available.

      Then a new system, perhaps joining barter which has always existed to some degree, might emerge. It seems to me that hierarchy and emotions dominate rationality. The realization that energy is the primary economic good will not likely pop into minds all at once.

    • Steve

      Thanks. I’m not expecting general public recognition of the energy basis of the economy any time soon. But this will start when those who do understand it find and use the competitive advantage of understanding.

      The fiat system is at huge risk. This risk includes the folly of trying to use monetary policy to prevent falls in asset prices. The real threat here is that monetary policy comes to be seen as “the cure for all ills”.

    • To add just a little here, I’ve set myself the following template for developing the SEEDS interpretation:

      Prosperity, including factors influencing the anticipated pace of decline (as things stand SEEDS is showing the world’s average person almost 10% poorer by 2030, and a further 10% poorer by 2040)

      Business in a de-growth economy

      Finance, where survival of the current system seems unlikely

      Government, where everything is likely to change as economic issues attain an unprecedented priority in the public debate, at the expense of most non-economic subjects

      – The environment

    • Dr. Morgan
      A wordy and long but perhaps useful note.

      I suggest that the task you are undertaking may benefit by an excursion into biology. Particularly this talk by Kara Fitzgerald on the subject of Methylation and Epigenetics. From this point on, you are getting an amateur’s attempt to extract takeaways. So buyer beware.


      Takeaway #1: We cannot change our genes, but we in our frontal lobes (or the environment which prompts the frontal lobes) have enormous control over the epigenetics…which genes are expressed and which are suppressed. Mostly, the biology works on the principle of balance…we have tumor suppressing genes, but they are not always expressed. Kara expresses early on her concern about just flooding the body with high-dose supplements or drugs which supposedly reinforce ‘good gene expression”. The body seeks homeostasis.

      Takeaway #2: Homeostasis is accomplished by marking genes with methyl groups, which methyl groups determine all sorts of things from whether the fertilized egg will become a male or a female, up to whether defensive paranoia is a good response in the current environment, or not. For example, the Dutch children in the womb in the hunger winter of 1944-5 were marked with methyl groups which would have been helpful if the hunger-winter had persisted for the next hundred years, but were dysfunctional in the actual post-war society of excessive energy.

      Takeaway #3: Note early in Kara’s talk that methylation is used to degrade dopamine. Dopamine is the hormone that marks something as pleasurable. Consider a group of hunter-gatherers with a colony of honey bees or a dog which gets fed reliably at a certain time. Dopamine is activated by the idea that ‘we can go back to the hive to get more honey’ and ‘my clock genes tell me to go to the pantry and beg for my food’. The dopamine response requires some negative experiences to extinguish. If the hunter-gatherers repeatedly find that the bees have stopped making honey, or if the dog does not get fed because the master has died, then the dopamine will not be triggered and behavior will change. This is directly relevant to the loss of fossil fuels.

      Takeaway #4: The invention of automobiles on credit in the mid-1950s is instructive. I grew up with a Depression mindset toward debt. I have never bought a car on credit. Alice Friedemann expresses the same sort of methyl markers on the genes which, as a group, influence our willingness to assume debts enforceable by the power of the State. However, credit WAS invented, and those who overcame any Depression era hangover and bought cars with a little money down and multi-year payments got shiny new cars (which were undergoing a design revolution…tail fins), and increased social status. While I didn’t buy into the ‘debt’ methylation patterns, I did think that the farmers who came into town with their ancient Model As were ‘quaint’. We can apply the same thinking to the financial people who have been seduced by schemes such as Rehypothecation. It works until it stops working. What will change the epigenetic markers is hard experience…with perhaps a few people being smart enough to change in advance of hard experience. But ‘you have to keep dancing as long as the music plays’ will control most people.

      Takeaway #5: Humans evolved in an environment of plenty. Hunters and gatherers lived in the ‘original leisure society’. Therefore, we think that ‘normal’ is abundance. Books have been written on the damage that an environment of poverty does to humans. The decline from the Bronze Age to the Iron Age left marks on human cultures. The decline from pastoral to agrarian societies formed the basic thought behind many of Daniel Quinn’s books…the struggle between the abundance of the pastoral lifestyle and the drudgery and enslavement of the agricultural model. One can trace the cycles, and now we are apparently at the point where the general population sees a decline from the golden age of fossil fuels and debt fueled consumption into a new age of drudgery and debt. And so depression is now an enormous public health problem.

      Takeaway #6: There are two groups currently offering pathways to a supposed ‘new age of abundance’. The ones with the money and official backing are the Cornucopians…onward to Mars!!! The second, and much smaller group, are those who advocate Permaculture villages with perhaps a veneer of coppice tree energy and carbon cascades of useful products. In terms of the latter, which I expect will find few adherents among the readers here, has actually been shown by some research out of North Texas University, in one village in Missouri, to yield the necessary sense of abundance at about 15 percent fossil fuel use of the average American. It is also notable that the village uses the same amount of air travel as the average American, as well as comparable levels of spending on education.

      In the final analysis, it is necessary to structure the environment so that humans are balanced and experiencing abundance. Elon Musk and Bill Gates offer one possibility, while Bates and Draper offer another radically different possibility. There may be points in the middle, but they need careful elucidation. As a footnote, Alice Friedemann is writing a new book on biomass for energy.

      Don Stewart

    • Don – I lived through WW2 and the 20 years afterwards, when the only domestic borrowing was from family. With hindsight the change in mindset from no-growth to growth, from petrol rationing for pre-war cars to new cars, et al was not noticeable at the time. I wonder if the change to de-growth now happening is turning out to be similarly not noticed, or rather not recognised for what it is.

    • @Barry
      I grew up in Oklahoma, which had a huge oil industry at the time. My small town had 2 refineries and a natural gas plant. Some people drove around in gas powered cars. The AVAILABILITY of fossil fuels was not on the radar. I still have a book about drawing Nature written by ‘an unemployed Texas oilman’ which was written when he was idled in 1933 because the price of oil had absolutely crashed.

      What changed, in my retrospective look in the mirror, is the difference between a 1953 Cadillac and the huge tailfin cars with boobs just a few years later. It was not about the fuel to power those 10 mpg vehicles. It was about the infrastructure, if you will. Cars got huge and two car garages replaced walking to work. High-school boys wanted to copy California teenagers and their cars. I had a friend whose father had a Buick dealership. We talked about the doubling of car sales when the General Motors Acceptance Corporation began to offer financing through the dealers.

      So, from my perspective among the ‘winners’ of WWII was the big increase in infrastructure. And when the Kansas Turnpike terminated just north of our town (dumping into a wheat field at the Oklahoma line), and one could get on a limited access highway and drive at top speed, it was amazing. Like Hitler’s autobahns must have felt in 1939 Germany. Eisenhower tapped into that feeling of abundance, inspired by the autobahns, in his Interstate Highway System…justified, at the time, as ‘military preparedness’.

      Don Stewart

    • @Don Stewart on 14 Feb

      What a difference between our two experiences.

      After the war the UK was heavily indebted to the USA – $2.7 billion. Spent on military commitments, running the British Empire and setting up the National Health Service. Food, furniture, petrol were all rationed, until around 1953, and thereafter the Government imposed strict control son our spending. Restrictions on how much money we could take out of the country were part of life. As a child I was not allowed to wear long trousers until 1949. Mortgages for house purchase were not avaialble until the late 1960s. The public transport networks were dismantled. The whole of the UK tram (light rail) transport system was abandoned and a third of the railway mileage was closed. No wonder as a teenager I could not begin to imagine growth.

      The point I am making that concepts of growth and decline were not understood then by us at the grass-roots. We adapted our behaviour to cope as best we could. I suspect this is still how things are.

      I suggest that when discussing the future we should distinguish between the top-down view – which inevitably dominates the views in this blog – and the bottom up view, which seems likely to become more important in the future, as delayering and decentralisation become dominant.

      Incidentally the last repayment of the debt was made in 2006.

    • Good piece, Don. The one thing that strikes me as premature is:

      ” One can trace the cycles, and now we are apparently at the point where the general population sees a decline from the golden age of fossil fuels and debt fueled consumption into a new age of drudgery and debt.”

      The US consumer confidence statistics are still strong, if we can believe them. Unemployment in the US is at a ~ 70 year low. And bankruptcies are the lowest in a decade, although there are multiple reasons – some have too few assets and no cash to pay an attorney. See:

      Debt fueled consumption might be peaking as Tim has written: debt exhaustion. But I wonder if there is much understanding of the drivers of slow wage growth and loss of buying power by stealth inflation. I agree that these ideas will grow as the economy continues slowing.

      “And so depression is now an enormous public health problem.”

      Yes. But it may not be “new.” It might have been cloaked by alcoholism and much shorter lifespans in the first half of the 20th Century and earlier. Also, mental health diagnosis was not as sophisticated then.

    • @Steven Kurtz
      I will agree that the current ‘age of pessimism’ is only my sense of the zeitgeist. But there are some solid indicators:
      *Higher per capita alcohol consumption
      *More time spent watching screens (which creates depression)
      *More highly educated people in low-paying jobs
      *More years before death spent in chronic diseases (Healthspan has not increased, but lifespan has increased)
      *More perception that there are so many ‘BS jobs”
      *Huge increase in auto-immune diseases

      Just a sampling, but indicative to me that it is not a statistical fluke.
      Don Stewart

    • I agree with your perceptions, Don. But whether or not: ” at the point where the general population sees a decline” is unknown in my view. The symptoms are there, but the awareness maybe not.

    • The societal response to all of this -demonstrated repeatedly in history – will be authoritarianism, increasing violence, crime, corruption, community fragmentation, and misguided policies with horrible – mostly unintended – consequences.

      But, first of all: denial.

      When the French absolute monarchy decayed at the end of the 18th century, all kinds of ‘benevolent and enlightened’ Utopian schemes were in the air.

      What did they get?

      The Terror, Napoleon’s empire, and decades of war which bled France dry and brought misery to millions of innocent people in Europe – above all Spain, as recorded by Goya in his etchings and paintings.

      I am a natural optimist: the study of history, archaeology and anthropology has made me a pessimist.

      Or even just scanning the daily headlines and looking around me…….

  24. Having said that, I greatly look forward to the coming essays!

    Disseminated, they might introduce a little more reason and foresight into the management of this great crisis.

  25. Let me just mention that, though we’ve experienced recessions and even depressions, we have absolutely NO prior experience of de-growth – so NONE of our systems have been designed (or have evolved) with this possibility in mind.

    • Tim,
      A reader of mine has commented about the situation on energy and seems to think that the monopolies have the market sown up; here is what he says:
      “Is energy scarcity because energy invested for energy consumed. Or because this group that controls 90% of global oil, wants to drive prices up.
      When they shutdown coal power plants in South Africa, people started using private diesel generators for electricity. Then South Africa had to import massive amounts of foreign diesel, instead of burning liquid coal. Rolling brown outs across Europe. And people will just import liquid fuels to generate electricity.
      Is the scarcity real or is it based upon physics? Or because the small producers have been driven out? Or because the easily accessible reserves have been depleted? For instance, why do you assume the energy cost for china to mine its coals energy resources is increasing?”

      Perhaps you would kindly elucidate for me so I might reply to him?

    • According to the Hackenthorp book of lies there are only 50m Barrels of oil left.

      Better face facts Peter – it’s the end of the World.

      Remember the information on the Internet is 100% true.

    • Quite so: we are both conceptually and institutionally not prepared for the realities of ‘de-growth’, aka collapse -or regression if that sounds too dramatic – of our system, so haphazardly pieced together over the last two centuries.

      ‘De-growth will be like trying to work in a forge with the tools used by a fine cabinet-maker. ……

  26. @TonyH,
    Regarding your statement that “As central government loses its money stream and power, the opportunity will be open for private citizens to organise ‘underground movements’ that eventually replace the UK government with something more patriotic. For the time being, those people need to sit tight, plan and be patient.”
    I hope the loosening of the central government’s reins will also open up the possibility for better government, but also know that, historically those “underground movements” you mention often take the form of what we call “criminal gangs,” and what are referred to in the history books and in failed Third World states as “warlords.” There is a good chance that the power vacuum left by a failing central government will invite new, even worse predators to step in, who see their chance.
    It is also not necessary to wait for the current government to begin collapsing, nor to prepare “underground.” It is possible to do this openly and now, and people should be encouraged to do so. The resilient towns movement is one potential way. People who see the writing on the wall and want to go further can also begin organizing themselves into communities that are relatively able to provide their own needs for water, food, shelter and clothing, minimizing ties to the money and industrial economy. A great example cited by Don not so long ago are the Hutterites, who own and manage land in common in relatively small communities. Search “America Loves the Idea of Family Farms. That’s Unfortunate” by Sara Taber, which appeared in The Intelligencer.

    • When central governments weaken, mafias, gangs and psychopaths of all kinds move in. Life actually becomes harder for good people.

      Old proverb:

      ‘Emperor against emperor; king v king; tribe v tribe; clan v clan; family v family.’

      This neatly describes the social and political consequences of the descent of the energy/prosperity arc if you think about it.

  27. Final note on the 50s in the US
    The Soviet’s nuclear explosions had crippled the notion that the US would maintain a monopoly on nuclear weapons. Eisenhower, in Europe, was aghast when he learned about the explosions in Japan. But as President, he presided over Atoms for Peace. The exhibition travelled around the country, and I remember parts of it vividly. There was the assurance that electricity would soon be ‘too cheap to meter’. Of course, the schools were doing atomic bomb drills where the students crouched under their desks. So the Atoms for Peace program featured 1950s housewives in high heels, those petticoat skirts that women wore back then, and a neat little apron with a broom and dust pan sweeping up the radiation and depositing it on the lawn.

    I was mowing the lawn of a local eye doctor at the time in order to pay for the glasses I needed, and I asked him about the radiation. He thought that the government was disseminating total BS. Since I came from a family that NEVER trusted the government, it just confirmed the epigenetic bias I was born with.

    But, overall, I think most people bought the message. It was a time of optimism. Oddly enough, I think the optimism culminated in the movie Bob and Carol and Ted and Alice, featuring the adorable Natalie Wood. Not only were we going to have electricity too cheap to meter, and be insulated from nuclear damage so long as we had a broom, we were also going to be able to have sex with California women like Natalie Wood with no repercussions. It’s been downhill since then.

    Don Stewart

  28. https://www.bloomberg.com/graphics/gas-prices/#20194:United-States:USD:g

    This is a very interesting comparison widget for Gasoline prices across the world.

    I was just watching this video on Comparison of fuel costs for EV’s and ICE Vehicles

    And the Stark contrast between US Gas Prices over European ones struck me.

    us. 2.91 per gallon
    Sweden 6.42 per gallon
    Germany 5.85 per gallon
    Russia 2.80 per gallon
    China 3.96 per gallon

    The Affordability ratios are very interesting
    1.63 % US and 14.81 % China
    % of income spent is also interesting
    1.93% US and 0.49% China

    Who gets What from a Gallon of Oil.

    OECD’S average
    31% Crude Price 20% Industry Margin 49% Tax.

    this excellent paper at the House of Commons online library the other day.


    15. Taxation comprises three fundamental economic parts:

    l Creation of the medium of taxation and issue into the economy

    l Distribution of the medium of taxation through the economy

    l Collection of the medium of taxation

    17. Modern taxation systems are still based around the creation, distribution and collection of tokens, but the tokens now take electronic rather than physical form. These tokens are bookkeeping entries in the banking system. The structure of the taxation system and the economy it controls is determined by the rules under which these electronic bookkeeping tokens are created, distributed and collected. Coins and notes are still issued in small quantity but are subsidiary to the banking system’s bookkeeping entries.

    19. “Contemporary governments grant the exclusive power to issue the medium of taxation to a state-sanctioned banking cartel. The banking cartel comprises a central bank and private member banks. The central bank is responsible for price-fixing, information sharing, promoting member interests and preventing member defaults. Serving the public interest is not a primary goal of a central bank. The cartel holds the exclusive power to set the price of and issue the medium of taxation. Governments generally prohibit the issue of alternative media for exchange and mandate payments of taxes only in the cartel-issued medium.”


    52. Development of the tax system has been constrained by political reality and driven by the demands of vested interests in finance and real estate. The fundamental principles of tax policy should explicitly incorporate the money system and the welfare system. The tax system is not fit for purpose and is beyond repair. It should be replaced by an efficient, neutral and distortion-free system based around clearly defined recurrent payments from owners of land, immovable property and natural resources based on contract law. Means-tested welfare should be replaced by a Citizens’ Dividend distributing the financial surpluses of government arising from such reforms.

    53. The transition to a new, principled tax system should be on an “opt-in” basis where people can choose to permanently leave the old system when they can benefit from so doing. The effect of such a transition would be an rapid and dramatic revival in economic performance without battling political headwinds.

    54. The principles outlined here fully meet all the objectives of the OECD tax report and the Mirrlees Review. They meet Smith’s canons of taxation and adhere to orthodox and common heterodox academic analysis. They are comprehensible and achievable.

    January 2011

    Carbon Taxation.


    It seems to me that The importance of Taxing Carbon is being treated as an elephant in the room.
    Fossil Fuels are hugely important and will remain so for at least the next 50 years or so.

    The debate is hampered by the political cowardice of our Elite owned political Class who are incapåable of calling a spade a spade, so much easier to talk in the Semi Religious riddles of Global warming.

    Regardless of Global Warming and Environmental issues, it is it seems to be important to be honest about what resources there are and how they are applied

    That is why I think that the Embedded energy concepts in this paper which I have posted before are so important.

  29. I’m hopelessly behind on this conversation although I note with particular interest genetics and epigenetics which I think will define social psychology to a much greater degree.
    See Charles Murray’s book on Human Diversity.

    That said, I find it almost incredible that “Based on BP’s Statistical Review of World Energy 2016, we have about 115 years of coal production, and roughly 50 years of both oil and natural gas remaining.”

    “Admittedly, these figures are only useful as a static measure; they will continue to vary with time as our capacity to economically source and extract fossil fuels changes, and our levels of consumption rise or fall.”


    This knowledge elicited a rather strange epigenetic insight, that climate alarmism/emergency is an indirect way of weaning people off the idea of fossil fuel consumption rather than the more direct strategy of fossil fuel scarcity.

    Is this deflection strategy also somehow compounding the denialism surrounding the fact that our economy is an energy system in that if fossil fuel scarcity was the main strategy rather than climate alarmism, people would quickly realise the intrinsic basis of fossil fuel energy to our economy.

  30. Edward Bernays
    Bernays was the father of media manipulation of the public both in the narrow sense of advertising but also in terms of political propaganda. I recently heard someone who never heard of Bernays attribute current political propaganda to ‘copying the Nazi methods’…but actually, the Nazis studied Bernays. So it all comes back to an American in the 1920s and 1930s who agreed with Marx that, left to its own devices, an industrial economy with its massive potential for mass production, would bankrupt itself unless it was managed. And the Bernays’ way to manage it was to create ever more demand through advertising to avoid a steep fall in profits due to competitive pricing. On the Democracy front, here is a quote from Bernays:

    “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.”

    I don’t know if our political leaders are smart enough to understand where their actions are coming from, or whether they just instinctively know that Bernays was ‘right’…but I am pretty sure that some of their advisers know. If the future is grim, we can expect the Bernays’ Noose to get tighter and tighter.

    Don Stewart

    • One irony of this is that ‘progressive’ Left school teachers, who regard pupils as blank slates to be formed by them as perfect citizens, are conforming to the methods of Bernays (and the Nazis and Soviets, Jesuits, and all those who seek or sought perfect conformity and uniformity of thought and action).

  31. Just to restate my position on this, the economy is an energy system, in which nothing with any economic utility at all can be produced without energy.

    Money has no intrinsic worth, but commands value only as ‘claim’ on the products of the real economy. Its only function is as a medium of exchange.

    Fulfilling this function requires that two preconditions are met:

    1. There is something for which money can be exchanged

    2. The kind of money in question is accepted by all parties as a medium of exchange

    Money (in any form) given to someone adrift in a lifeboat has no value, because it fails the first test.

    Somebody arriving from Mars with pockets full of Martian Zogs would find his money useless, because it fails the second test.

    Therefore, there is no monetary solution to the deterioration in prosperity caused by a fall in the supply of surplus energy.

    The authorities do not understand (or, at any rate, admit) this. They are using monetary manipulation to prop up inflated asset prices. The only reason why they haven’t been called on this is that we cannot monetise asset ownership, i.e. sell all stocks, bonds and properties and turn them into cash.

    In the future, the use of money manipulation might be extended into, for example:

    A. Financing government spending as the revenue base erodes

    B. Subsidising fossil fuel production

    C. Subsidising investment in renewables

    D. Helping the victims of falling prosperity

    ANY of these uses would be inflationary, quite possibly to the point at which the credibility of fiat currencies is destroyed.

    This means that the only way to achieve objectives A-D without destroying the currency has to involve redistribution.

    • Yes. Thank you. Excessive spending of newly created fiat risks inflation, the converse of which is currency degradation.

    • Impeccable logic.

      Calls for redistribution will become impossible to ignore and will define politics when growth can no longer be delivered, even by Bojo and his like throughout the world.

      It is already the default option of the Left, and more will join them as their prosperity ebbs away.

      Perhaps we need to discuss the possible Limits of Redistribution, just as we had the Limits of Growth?

      I’m inclined to see it as equivalent to the comforting bottle of port prescribed by the Victorian doctor faced with a terminal case – easing the end, but solving nothing.

      As the energetic system declines and crumbles, there will be less and less to redistribute.

    • how does one define ‘redistribution’

      critics seem to represent it as ‘stealing from the rich and gifting it to the undeserving poor’

      I see it more as a redefinition of the current distribution scheme, re-distribution,

      it does seem that all the new fiat money printed to keep propping up the ponzi scheme is distributed at the top of the pyramid,

      should we stop injecting it at the top and put it in at the bottom, or is it too late for this and we need to just stop printing floods of fiat currency and giving it to the least needy?

      if redistribution relates to taxation should we reduce the burden on the masses of unavoidable taxation like VAT, SME business rates, paye income tax & NI contributions?
      or should we be removing the tax exemptions and subsidies on the already wealthy,
      my belief is that the greatest tax exemption for the already wealthy is the ability to avoid taxation almost entirely via offshoring to tax havens, evasive transfer pricing arrangements and all manner of methods for wriggling out of tax obligations,

      I also question how gains are distributed within individual corporations, for the mass of workers their annual increment is linked to a manipulated CPI figure but the executives and management are rewarded based on the inflation of the company’s share price, achieved with the cheap credit so freely offered to the pinnacle class of the pyramid,

      I don’t think any of this is particularily controversial, probably the reason none of these actions have been followed is because the ponzi scheme has become so stressed that these distortions are required to keep it afloat, even the slightest reform could bring down the house of cards,

      I suspect the only way out of our current trap is GFC 2.0, something akin to a biblical flood that washes away everything financial and allows us to start rebuilding a fairer distribution system,

      I’m sure everything hinges on GFC 2.0 and how the authorities react, will they try vainly to prop up the ponzi scheme, yet again, or will they allow nature to take it’s course,
      a jolly good asset value crash would put a sizeable dent in the inequality that is generating much discontent,

      I’ve been listening to Ronald Wright’s 2014 Massey Lectures about progress traps,

      my takeaway is that all civilisations have become ponzi schemes that have exhausted their natural capital and then imploded with their populations dispersing to restart somewhere else,

      the hunter gatherers exhausted the prey that supported their lifestyle,

      the agricultural civilisations eroded the land that supported them,

      our industrial civilisation is exhausting it’s fossil fuel resources that support us,

      this time there will be nowhere else to go and not much else left to exploit,

      we have all become Easter Islanders now!

      how many of us will remain to greet the alien visitors when they eventually arrive?

    • “how does one define ‘redistribution’”

      The law of conservation of energy means that energy can neither be created nor destroyed; it can only be transformed from one form to another. If we define “wealth” as “useful energy” then the objective of redistribution is to redistribute claims on energy (i.e. money) in such as way that the energy claimed is transformed into the most useful form possible.

    • Which could mean a whole variety of solutions from car pools – more bus and coach travel – subsidised rail travel – your neighbour helping you out with shopping if you’re disabled so take the burden off the State.

      Real energy costs are going to force change on us all whether we like it or not.

    • ”Money has no intrinsic worth, but commands value only as ‘claim’ on the products of the real economy. Its only function is as a medium of exchange.“

      Maybe you should replace ‘money’ with ‘currency’ dear doc. Or ‘nature’ with ‘greed’.

      ‘Money’ as we know it today, is like Doctors without Borders throwing funds at boats bringing migrants to Europe to prevent pension funds collapsing and in that process undermining third world production and pollution aka perpetual growth (forever).

      Seeds tells us another story doesn’t it?

    • Tim I’m delighted that you’ve made contact with Martians and found out their currency.

      I would expect that it lost alot of value when the martian water started evaporating putting a strain on their resources.

      Perhaps we could learn something from them.

    • That comes from the old gag “a Martian walks into a pub……”

      The landlord and customers are delighted to have this gullible Martian, and persuade him that Earth conventions of hospitality require him, as a visitor, to buy drinks for everyone, again and again.

      At closing time, he is presented with a bill for £1,456.56 – to which he replies “certainly – have you got change for a Zog?”

    • Tim, I believe your diagnosis is pretty much on the money. MMT would modify a couple of points. e.g., point 1] “there is something for which money can be exchanged” becomes- “there must be resources for sale in the currency of issue”-. That says no debt = no currency. Money can never be just “printed” and it cannot be owned by the entity that prints it. That’s why the Government has only a fleeting congruence with debt, it pays it off and the payment goes directly into the non government sector as the nation’s money supply, free of liability. The mainstream has zero understanding here.
      The deterioration in the monetary value of an asset is just a book entry. If sold the reduced value cannot be monetised. One just marks down its new value, or offsets it as part of another transaction, such as a subsidy. I think this aligns with what you write here.
      Your points A-D are a bit different,IMO. A -Financing government spending as resources diminish. B – subsidising [as you say. but add a lot more necessary services etc] C – Subsidising investment in important services. D- Helping victims of failing prosperity. That will come up hard against the wall of self reliance and minimal government touted by today’s mainstream capitalists. a source of conflict, especially in the USA. Point D is social engineering. They won’t accept redistribution except at the end of a pike.

    • rogerglewis
      on February 15, 2020 at 3:41 pm said:
      Your comment is awaiting moderation.
      Redistribution of What to who and by which means?
      Energy is Ubiquitous, yet Value is an abstract concept and there are experiential values which exceed their Energy input where an abstract value, such as a monetary unit is allowed to reflect the Market determined price.
      The fact is that there are different levels of needs and wants and over an above fundamental survival requirements, Say 2500 Calories a day including embodied energy for Shelter and dietary requirements.
      What are the absolute bands of energy requirements, how much energy is Wasted and how much-embodied energy can be re-cycled that is currently wasted all have to factor into any ongoing Energy Based Distribution system and energy-based system for determining and energy-based into of account?

      What is the problem with having a different type of Currency, why does Destruction of the existing unfit for purpose system have to be taken as read?

      There have been successive efforts since the Nixon shock to replace the current international FInance model, that we are moving to a Multi-Polar world seems an inescapable conclusion, with all the potential problems this represents for the Dollar centric hegemony.

      If it ain’t broke don’t fix it is always a good maxim but if a new design is called for to replace an obsolete system then everything is on the table.

      I personally reject your four-point example and the inevitability of your conclusion Tim.

      The world has tremendous potential as does the industrial capacity and also cultural and technological potentials of current technology. Of course, there are fundamental changes which need to be made The single biggest problem is the mispricing inherent in the financialised late-stage capitalism which has morphed already into Fascism, otherwise known as Neo-Liberalism.

      Pierre Joseph Proudhon proposed a reform to banking which was quite simply to abolish the private monopoly on the creation of Currency as debt at interest. Peter Kropotkin describes Prouhdond Simple idea and its effect as follows,

      Now Proudhon advocated a society without government, and
      used the word Anarchy to describe it. Proudhon repudiated,
      as is known, all schemes of Communism, according to which
      mankind would be driven into communistic monasteries or
      barracks, as also all the schemes of state or state-aided socialism
      which were advocated by Louis Blanc and the Collectivists. When
      he proclaimed in his first memoir on property that ” Property
      is theft,” he meant only property in its present, Roman-law,
      sense of ” right of use and abuse ” ; in property-rights, on the other
      hand, understood in the limited sense of possession, he saw the
      best protection against the encroachments of the state. At the
      same time he did not want violently to dispossess the present
      owners of land, dwelling-houses, mines, factories and so on. He
      preferred to attain the same end by rendering capital incapable
      of earning interest; and this he proposed to obtain by means of
      a national bank, based on the mutual confidence of all those who
      are engaged in production, who would agree to exchange among
      themselves their produces at cost-value, by means of labour
      cheques representing the hours of labour required to produce
      every given commodity. Under such a system, which Proudhon
      described as ” Mutuellisme,” all the exchanges of services would be
      strictly equivalent. Besides, such a bank would be enabled to
      lend money without interest, levying only something like 1 %,
      or even less, for covering the cost of administration. Every one
      being thus enabled to borrow the money that would be required
      to buy a house, nobody would agree to pay any more a yearly
      rent for the use of it. A general ” social liquidation ” would
      thus be rendered easy, without violent expropriation. The same
      applied to mines, railways, factories and so on.

      In a society of this type the state would be useless. The chief
      relations between citizens would be based on free agreement and
      regulated by mere account keeping. The contests might be
      settled by arbitration. A penetrating criticism of the state and
      all possible forms of government, and a deep insight into all
      economic problems, were well-known characteristics of Proudhon’s

    • The application of capital requires a price, which can be interest, dividends or additional capital for eg. In any event what your fellow proposes is idealistic and impractical given unchanging human nature driven at its base by fear and greed IMHO. I would dismiss this for a future New Economy as easily as you dismiss Tim’s work.

  32. From Wikipedia

    Thomas I. Palley
    Born March 17, 1956 (age 63)
    Field Macroeconomics
    School or
    tradition Post-Keynesian economics
    Alma mater University of Oxford (B.A.)
    Yale University (M.A.)
    Yale University (Ph.D.)
    Information at IDEAS / RePEc
    Thomas Palley (born March 17, 1956) is an American economist who has served as the chief economist for the US–China Economic and Security Review Commission. He is currently Schwartz Economic Growth Fellow at the New America Foundation.

    1 Career
    2 Post-Keynesian work
    3 Selected works
    4 References
    5 External links
    Palley received his Bachelor of Arts degree from Oxford University in 1976. He earned a master’s degree in international relations and a PhD in economics from Yale University. Palley founded the Economics for Democratic & Open Societies project. He states its purpose is to “stimulate public discussion about what kinds of economic arrangements and conditions are needed to promote democracy and open society.” [1] Palley’s previous positions include director of the Open Society Institute’s Globalization Reform Project, and Assistant Director of Public Policy for the AFL-CIO.[1]

    His work has covered macroeconomic theory and policy, international finance and trade, economic development, and labor markets where his approach is Post Keynesian.[2]


    What’s Wrong With Modern Money Theory (MMT): A Critical Primer
    April 10th, 2019

    Recently, there has been a burst of interest in modern money theory (MMT). The essential claim of MMT is sovereign currency issuing governments do not need taxes or bonds to finance government spending and are financially unconstrained. MMT rests on a triad of arguments concerning: (i) the macroeconomics of money financed budget deficits, (ii) the employer of last resort or job guarantee program, and (iii) the history of money. This primer analyzes that triad and shows each element involves suspect economic arguments. That leads MMT to underestimate the economic costs and exaggerate the capabilities of money financed fiscal policy. MMT’s analytic shortcomings render it poor economics. However, its simplistic printing press economics is proving a popular political polemic, countering the equally simplistic and wrong-headed household economics of neoliberal austerity polemic. READ MORE

    Click to access p_fmm_imk_wp_44_2019.pdf

    • Monetary theory always has to deal with reality, in the end.

      One cannot assume the intermediate of exchange will keep its value in the eyes of the beholder forever.

    • Palley is just a niggle not important in MMT research. He goes to many of the meetings but has hitched his horse to unimportant stuff. He can be and is ignored. What you seem to misunderstand is that MMT is not an hypothesis type of theory. You cannot disprove it. It is an EXPLANATION of how economies work’ and instead of relying on models of human behaviour it relies on hard accounting and laws of the land, starting with the constitution. It is totally based on the REAL world. This is where the mainstream fails, and fails, and fails, and fails. Finally this is eating into the mainstream edivice awth all the halls of academia threatened now. It won’t be long before the “I knew it all along” comes through, including from Thomas Palley.

    • Ok missionary. We’ll all wait for MMT to save humanity. This is what I’ll wager you on longbets dot org
      10 yr bet: I say it will never achieve anything but inflation if it grows in usage, as fiat will degrade the more it is used.

      And, as usual, you demean anyone who critiques MMT without rebutting one point of his paper. All bluster.

    • I share you disdain for MMT Steven – there is not one example in history of fiat surviving for long. John Law is a good example for me.

      “Law was a gambler and brilliant at mental arithmetic. He was known to win at card
      games by calculating the odds in his head, not unlike high-powered bankers today and
      so well described in Michael Lewis’s book: Liar’s Poker.

      Law originated economic ideas such as “The Scarcity Theory of Value” and
      the “Real bills doctrine”. Law’s views held that money creation will stimulate the
      economy, that paper money is preferable to metallic money (gold and silver) which
      should be banned, and that corporate shares are a superior form of money since they
      pay dividends.”

      You know the rest!

    • You are a pot calling the kettle black! You have provided less than zero evidence that MMT is wrong. YOu couldn’t even muster an answer for the budget surplus!!! Your waffle will have to do without syrup. I can’t reach it from here. I am always listing what MMT can do. No one supports you in your opinions, as they are totally valueless. I can recommend a 570 page textbook to set you right, except it would be a waste of time. It’s called “Macroeconomics” by Prof Bill Mitchell et al.

      In 10 years time if you are still around I [and MMT] will embarrass you and your ignorance. a truly epic case!

    • Dr. Morgan and Peter have supported my position verbally, and I bet others do who have not posted. Meanwhile you are chicken to accept a $200 wager for charity on longbets dot org

      That informs the readers far more than your insults. And hominem is a mirror reflecting the subject using it. Slink away to your onanism.

  33. CT: You discuss the need for states to ensure consent: the need to pacify, hypnotize and align populations for continued globalization; more precisely, the need to divert attention from the structural violence of economic policies and the actual violence of militarism. Can you say something about how the issue of global warming relates to this?

    DR: Irrespective of whether the so-called ‘climate crisis’ is real, exaggerated or fabricated, it is clear, from the data in my report, that the ethos of global warming was engineered on a global scale and benefits the exploiters of the carbon-economy and, more indirectly, the state.

    • Hello Peter,
      I do not dismiss Tims Work I am a passionate advocate both for it and of it.
      I have a few minor quibbles with Tim regarding presenting of the underlying axioms of Seeds. Economic Prosperity and Surplus energy are Axiomatic my contention is that the Calculus of the Axioms should be calibrated in energy units and not monetary units.
      Dennis Rancourt is an academic whose work is widely quoted in the WikiSpooks Blog. I know the WikiSpooks people and their Work and that of Dennis is of a very high quality and from very able people, some in surprisingly influential positions others hailing from such establishment backgrounds, now retired.
      The Interview with Dennis is as set out on the page or screen Peter, the Source is irrelevant, the arguments are what one addresses and not the Per packaged prejudices of where they are published. Colin Todd Hunter ( The Interviewer) is a regular contributor to


      Heres the Same Article on Global Research, I think you linked to one of their articles yourself a few days back?


    • Ah Yes Roger, thank you, I did link that but didn’t connect it. My position is clear as I am a supporter of much of Austrian economics as a solution to our present out-of-control fiat system. Although Austrians advocate ‘sound money’ systems I am not a supporter of a return to the gold standard as I think we have moved on in our economic models.

      My friend, Gerry Brady at: http://boomfinanceandeconomics.com/#/ and I spend a great deal of time debating the virtues of sustainable financial and economic systems to meet contemporary demands. Our deliberations to date have resulted in his recent article:

      As a knowledgeable commentator I would value your feedback. I am not entirely convinced of Gerry’s solution but I have included it in my book as the best I have to date.

    • The “Democrats” are tied to global finance and push for a global carbon economy, and global “development”, in the image of their malicious interest. Their deep-state base is the CIA and they excel in media and entertainment-industry control.

      The “Republicans” are more tied to the USA domestic-energy sector (such as the exploded shale-oil economy), to the army, and to the armament industry. They are more nationalist in their power centre, more into the extraction and wage-slave-production industries in Latin America and Africa, via USA corporations, and have less use for the UN in their manipulations.
      Heres a starter for ten, Dennis’s second tectonic shift is in my own opinion off-target, As he raises the question My response is to seek out what he puts forward as evidence to support that view.
      Fast-forward to today: Two global tectonic shifts have and are occurring, which fundamentally threaten the USA/Western ruling elite, in that USA hegemony itself is challenged.

      The first global tectonic shift is the continuous rise of Eurasia, economically led by China, with strategic, diplomatic and organizational support from Russia. This coincides with Russian emergence in protecting its national interests in Syria and Venezuela, while offering military technology (S-400 air-defence missile system) that neutralizes USA air dominance, to Turkey and others.

      The second global tectonic shift is the increased global abundance of easily extractable fossil-fuel reserves. It turns out that shale-oil is everywhere, as is natural gas; and Chinese coal, not counting secure imports,[8] is plentiful enough to power China, using modern centralized generation and transformation stations, for decades. There is oil and gas in Venezuela, Russia, Syria, Iran… Canada, USA… more places than can easily be controlled to starve competitors, to ensure high prices for preferred producers, and to keep the petro-dollar alive.[6]

    • Hi Peter, Austrian Economics has several sub-schools, For instance, Schumpeter and Mises have differences not only of degree but of kind, Also Hayek is accepted by some but not all Austrians? What kind of Austrian are you? Wasn’t Adolph Hitler also Austrian? Yes of course he was, so Schact and Fitcsh should also factor into any debate on Austrian Economics which I contest as a School of Economics is widely misunderstood and misrepresented by those who adoipt it as a Political Stance absent the requirement of evidence as much as other Schools of Thought that morph into dogmatism.
      MMT has its factions also, I like Hudson but think Bill Mitchell is a Zealot hiding in Academic Clothes of pretended Objectivity.
      This Narrative on The Schumpeter Mises difference of opinion is I contend polish on an actual turd.

  34. John Doyle.

    I wondered if you can answer a few questions regarding MMT.

    1. How do you stop the devaluation of a fiat currency on international currency markets which if occurred would make imports progressively more expensive.

    2. How do you stop the race to the top regarding consumption expectations within the context of antago8 democratic systems.

    3. How do you cap energy and material consumption in order to operate within planetary boundaries.

    4. How do you cap asset inflation especially land and housing.

    5. How do you ensure issued money is distributed fairly across society.


    • Steve Gwynne,
      I am not an apologist for MMT, but I trust you recognize that the same questions can be asked of the current system, whatever it is. By all appearances it does not successfully do any of the things your questions are directed at. That’s the problem. If you think MMT is just the current system on steroids, yes it’s going to be a lot worse, i.e., will hasten monetary collapse.

  35. Tagio,

    Doyle claims :

    ” MMT is not an hypothesis type of theory. You cannot disprove it. It is an EXPLANATION of how economies work’ and instead of relying on models of human behaviour it relies on hard accounting and laws of the land.”

    There are theories re human behavior which yield statistically viable forecasts. These include Evolutionary Biology, Evolutionary Psychology, and are well elaborated in Biophysical Economics. People who believe that Economics is not about human behavior will likely fail in investing, trading, business management, advertising, and governance.

    This blog is about the shortcomings of fiat based economics. Doyle claims I have no supporters, yet there are 4 besides me who have spoken up questioning MMT which is 100% fiat based. You might make it 5. So far there is not a single comment supporting Doyle’s position that following MMT (more of the same, only faster, harder…) is a sound economic policy to follow. He claims the reverse, without one example.

    • I don’t have a problem with MMT as such, as a theory, because my view is that the economy is an energy system, with money acting simply as a set of claims on the output of the energy-based economy.

      This means that no monetary theory can explain anything beyond the behaviour of money itself. Likewise, the so-called “laws” of economics are simply observations of the behaviour of the human artefact of money – they are not “laws” in the sense that thermodynamics, gravity and so on are laws.

      With ECoE trending relentlessly upwards, prosperity is deteriorating. There are no financial ‘fixes’ for the deterioration of the physical (energy) parameters governing the performance of the economy. We’ve been trying various financial ‘solutions’ for two decades and counting, and they haven’t worked, because they can’t.

      What does worry me is that the authorities might use MMT as cover for what they want to do anyway – after all, neither Smith, Keynes or Marx would recognise much of what has been done in their names. So they might decide to claim MMT as a justification for even more reckless creation of money.

      The reality is that prosperity is deteriorating, and there is nothing we can do to stop that process. Trying to use monetary gimmickry, of any kind, to prevent this can achieve nothing other than the destruction of fiat currencies.

    • @Dr. Morgan
      While I agree that your statements are true as far as they go, if we widen the perspective we may still find a place for government policies and practices in terms of fiscal policy and monetary policy. Specifically monetary policy becomes a tool for rationing. I believe it is a true statement that creating money through a system of guaranteed annual incomes has a different outcome than creating money by giving banks reserves. The driver of increased indebtedness in the US is currently student loans, and particularly those for graduate students. Government policies are driving more students to borrow more money and to get advanced degrees. Whether those degrees will have any value in a world of rising ECoE is questionable. The second major factor in increased indebtedness in the US at the present time is auto loans. So, for example, the guaranteed annual income could be net of auto loans. In other words, if the GAI is 2000, and the person is paying 1000 for an auto loan, they only get 1000 in cash. Such a fiscal reform would drive down the purchase of new automobiles…which would be consistent with promoting more public transportation.

      The items I mentioned above are examples of trying to micromanage the US economy…which is abhorrent to many people. However, if in your analysis of what needs to be done to cope with the new reality, it turns out that some judicious micromanagement is necessary, then I suggest that the question of how money is created may be a crucial consideration.

      One can go further and question WHY the government is driven to encourage graduate student loans and auto loans. Oversimplified, both cater to the voting public’s belief that our path is Onward to Mars. Exactly how we get from Mars to a vegetable garden for every kitchen is a mystery to me.

      Don Stewart

    • Tim, what is a “theory” to you? Is it a body of work, an hypothesis,[testable].or something else? The so called laws of economics. just observations like you say?Are they laws governing legal behaviour or just convenient observations, not laws at all?
      “What worries me is that authorities might use MMT as cover for what they want to do anyway” They can do it already.They already have a line up of excuses and reasons for the behaviour in economics that is very poor. The old saw”How are you going to pay for it?” is actually code for ” we don’t want to do it and here’s a convenient excuse”. MMT knocks that one on the head, but it cannot protect the economy from political interference. MMT just offers a recipe for a vast improvement in the economy without adding more energy inputs than apply now.

      The current economic dysfunction is much more political than energy proscribed. Deteriorating prosperity is a function of the “landfill” economy of today. A cut in available energy would actually be good news but it’s not happening yet.

      In the meantime let’s get the economy sorted. MMT has the prescriptions for change. We don’t need any more predatory Capitalism, neo liberal Austerity. MMT cannot reverse the course, but it can slow the rush to destruction we face today. It is always up for political mischief and that is the true reason for where we are today, a far cry from an MMT world of full employment adequate recycling, to keep landfill sites underused etc.

    • Isn’t the truth perhaps that people are drawn to MMT because it enables them to breath a sigh of relief – which we all need as our economies seem to be rollercoasting towards disaster?

      Emotionally it’s in the same category as ‘What we need is more deregulation and innovation!’ or ‘What we need is an end to Austerity policies!’.

      I suspect it will simply become the theoretical dress to make more ‘money-printing’ (I use that as short-hand) acceptable.

      Just as Keyne’s has been grossly distorted to justify what governments wanted to do…..

    • I simply cannot emphasise too strongly that there are no financial fixes to problems with the energy-determined economy.

      Where we are now is a consequence of discovering, through the heat engine, the ability to tap vast amounts of energy from fossil fuels. This energy dwarfed the energy previously available from nutrition, primitive wind and water power, and fire-wood. The largesse of the fossil fuel ‘gift’ was such that growth – in population numbers, and their economic means of support – was always going to be huge. Charts clearly show the exponential take-offs of both population and energy consumption from the late 1700s.

      Now that the depletion has become a more powerful driver than scale or reach, this fossil fuel boost is fading. Fossil fuel viability is falling whilst renewables have yet to demonstrate an ability to replace them. We have built economies that, in energy terms, are high maintenance. There are NO financial solutions to these trends. Economists have always claimed that the economy is a financial system, and they have always been wrong about this.

    • Neat summary of our situation Tim , thank you. Economists have always been wrong – in everything they touch. Until we are relieved of this curse I fear our general prosperity will decline in line with SEEDs. We need a new set of leaders in command and not to be influenced by economists among other sociopathic parasites.

    • ‘The reality is that prosperity is deteriorating, and there is nothing we can do to stop that process. Trying to use monetary gimmickry, of any kind, to prevent this can achieve nothing other than the destruction of fiat currencies.’

      There is nothing we can do with monetary policy that will fix the problem. But if we did come across an alternative energy source with high ECoE that could be scaled up relatively quickly, and we enacted policies conducive to achieving that end; it would surely change the situation.

    • Yes – something offering energy at the same scale and cost as fossil fuels, without the environmental downside. It’s not likely to be renewables, and I very much doubt if it’ll be fusion.

      The second question is ‘when?’. Prosperity is turning down now, and will be around 20% lower per person (or worse) by 2040 – and even that assumes that we can work out how to manage the downwards trajectory far better than we’ve ever managed the up-slope.

    • I agree re energy buying humans time, Tony. But… most others species would be hurt by doing that. The sooner we shrink our throughput and externality generation, the better for there rest of the planet. And we don’t know with certainty the knock on feedback that will occur in either case.

      Note that the second quote you posted is by Dr. Morgan, not me:

      ‘The reality is that prosperity is deteriorating, and there is nothing we can do to stop that process. Trying to use monetary gimmickry, of any kind, to prevent this can achieve nothing other than the destruction of fiat currencies.’

  36. Probably correct. Humans desire hope rather than face probable futures. That’s why religions thrive, and afterlife visions endure.

    • Indeed.

      Defining the economy as a financial system gives us the illusion of control. Finance ministers and central bankers can deliver budgets or policy statements which they, and we, think are going to change things.

      Take any country you like as an example. ECoEs are rising, prosperity is deteriorating, and past efforts at denial have left us with huge financial obligations that we cannot meet, but must either repudiate or inflate away. There is nothing that ministers and officials can do about this.

      Likewise, take pensions as an unfixable issue. Looking at eight major economies, the WEF put the pensions gap at $67tn in 2015, and projected that this would exceed $400tn (real) by 2050. The harsh fact is that deteriorating prosperity is stripping the economy of the ability to provide pensions to the established extent.

      We are in the process of asset-stripping the future to sustain the present, be it in debts that can never be paid, or pension and other promises that can never be honoured.

      But how much nicer it is to think that finance ministers or central bankers can save us from all of this!

    • I’ll be 92 by 2050 – if alive – probably more worried about keeping warm and where by next bowl of soup is going to come from than a 400trn black hole.


      Nuclear fusion having been cracked in 2025 we have no energy shortages and have the much dreamed of hydrogen economy (although another 10 years to go until we’re fully converted).

      Gene editing has given me the body of a 60 year old and I’m hoping to reach 120.

    • You should be so lucky Don, you are likely to see the great reformation. I, on the other hand, will be 92 in 2036 but hope to see the beginnings of sanity returning to the human race.

    • Well sanity it a very tenous thing and it all depends how it’s defined in the future.

      By 2036 I’m sure we would have had quite a few serious economic shocks but I sense we’ll somehow come together as a race and muddle through

    • You would expect that economists define the economy in such a way to emphasise it’s central place in our lives. Neither they nor we understand what’s feeding it to us. Cheap. energy surplus. They do understand surplus.I read a book about surplus 60+ years ago in our school library and how you couldn’t eat coal but needed real food etc.
      The energy input is not invisible but more like a white noise you can sort of ignore. This surplus is gradually becoming a threat but we barely comprehend it. Even when we hear we need 4 more planets [it’s a song] it doesn’t really sink in.

      So yes we are preoccupied with the economy.It acts on us every hour of the day. What do you think will cause a change? I go for MMT because we can’t wait our fate passively. and getting the economy functioning better is worthwhile doing now. Regardless of how long we have left. It might carry on for another 30 years or more.

  37. Resource Depletion in the last decade or so

    “From 2008 through 2018, the world has consumed 371.2 billion additional barrels. Thus, in the space of just 11 years humans have burned through about one-third of all the oil ever consumed. Put another way, we have consumed half again as much oil in 11 years as was consumed by humanity in the first 148 years of the oil age since 1859 when Edwin Drake kicked off the modern oil age with his well in Titusville, Pennsylvania.

    The U.S. Geological Survey reports world production of rare earths in 1994 as 64,500 metric tons. In 2017 production reached a little more than twice that number at 132,000 metric tons. But production has started to accelerate abruptly in response to increasing demand, jumping to 190,000 metric tons in 2018 and 210,000 metric tons in 2019.”

    One can look at the accelerating ‘raping of of Mother Earth” from various perspectives:
    *Onward to Mars in humanity’s inevitable conquest of all the resources in the universe, including fusion
    *Horrible humans are looting our Blue Planet
    *Unrepayable debt has been the enabler, but Ugly Reality Awaits Us.
    *Hubbert Curves will strike in many places, more or less simultaneously, crashing everything

    I won’t be around in 2050, so will some of you young people arrange a seance and call my shade up and tell me what happened next?

    Don Stewart

  38. I think we should be a little more tolerant on MMT, although we all agree they are “wrong”!

    Problems will occur if we end up in a severe recession and could end up in serious international conflict.

    Solving the global warming crisis could be solved by cutting back on energy usage but at what cost to public unrest?

    Politicians and economists are all too aware of the previous world wars and anxious not to have a repeat. Consequently, they prefer to “kick the can down the road”.

  39. A little levity about a serious subject
    Humans have often been likened to yeast growing on a Petri dish. However, I do not think I have ever heard ‘true science’ applied to the analogy.

    For example, suppose some of the yeast go to Harvard and learn about geometry and how to observe the world and build models using mathematics. The newly educated young yeast go to the leading edge and find that the circumference of the yeast is increasing at a constant rate of 3.14 (from C equals pi times D) for every increment in the diameter. And since time and the diameter appear to be marching forward in lockstep, we can assume that time and the diameter will continue to march forward. And our empirically derived factor of 3.14 (ignoring all the ignorance and mysticism that the ignorant apply to the mystical number pi) implies that things are just going to expand forever in yeast land, and that our yeast children will have more and more of the world to support them, leading to ever greater wealth in yeast land, both absolutely and per capita.

    Alas, the yeast are actually just a diversion invented by the Goddess Gaia to amuse herself. She thought it might be fun to watch creatures with very small brains get themselves in big trouble. It was also an experiment of sorts, to see what sort of fanciful explanations for their own prowess in conquering Yeast World they would invent. But now she was tired of it, and was ready to move on to other amusements. And so she stopped providing them with sugar.

    Don Stewart

  40. Tim,

    “This means that no monetary theory can explain anything beyond the behaviour of money itself. Likewise, the so-called “laws” of economics are simply observations of the behaviour of the human artefact of money – they are not “laws” in the sense that thermodynamics, gravity and so on are laws.”

    “Behaviour of money” is human action, not disembodied artifact movement. Science continuously learns more about our behaviour as it does with other life forms. Lotka, Odum, Salthe, C. Hall, and others have applied energy “laws” to human economic behavior.

    “The significance of Odum’s approach was given greater support during the 1970s, amid times of oil crisis, where, as Gilliland (1978, pp. 100) observed, there was an emerging need for a new method of analysing the importance and value of energy resources to economic and environmental production. A field known as energy analysis, itself associated with net energy and EROEI, arose to fulfill this analytic need. However, in energy analysis intractable theoretical and practical difficulties arose when using the energy unit to understand, a) the conversion among concentrated fuel types (or energy types), b) the contribution of labour, and c) the contribution of the environment.”

    source: Wikipedia: Maximum Power Principle

    Predicting the future is difficult, but there are few known exceptions to MPP. I thought of voluntary simplicity and suicides, but surely others have as well. So while perhaps not as iron clad as Gravity and Thermodynamics, it looks to me to be close.

  41. Reflecting on the economic effects of the coronavirus, it’s interesting to note some of the consequences in this context of our discussions here.

    Supply chains are stretching and snapping. Production of cars and smartphones are reduced, though sales of both were falling anyway. The Chinese economy is faltering, though that, too, was already happening.

    People are reluctant to take flights, let alone book cruises. Tourist destinations, and property markets previously popular with Chinese investors, are under particular pressure.

    Pumping money into the system has been the first choice financial response. Markets are ignoring all of this, as has become their habit.

    The pressure-points are interconnectedness, the loss of critical mass, and falling utilization rates.

    In short, is this a dress rehearsal for de-growth?

    • Thanks.

      Two particular thoughts occur to me on this.

      First, if China doesn’t recover fairly quickly from this “one off economic setback” (ho hum) – and with the Indian economy already known to be in big trouble – is this the point where the myth of ‘perpetual growth on a finite planet’ is exploded?

      Second, how is China coping? Falling output of widgets doesn’t matter all that much, because we’re already buying less of them. But what about the supply of essentials to the Chinese public (and food price inflation has already moved up sharply)? And what happens to employment (since Chinese firms presumably can’t carry on paying people who are not producing anything)?

    • Add to that.

      HSBC to slash 35,000 jobs as part of £3.5bn savings drive
      HSBC is to axe 35,000 jobs over the next three years after profits plunged by a third. The bank is planning to make cuts of £3.5billion and scale back £70billion of assets by 2022 following the worse-than-expected results for 2019.

      Savers were dealt a fresh blow yesterday as National Savings (NS&I) cut rates to rock-bottom levels and slashed prizes, affecting 25 million customers.

      I literally just bought into premium bonds thinking that I might as well just gamble some of my savings with the hope of a decent payout. Irrational I know 😊.

    • Thanks for your note, Steve, and you are so right about where to invest. I have been looking for a long time and apart from some insurance in PMs (<10% of portfolio), equity and bonds are far too risky IMHO.

      So, have a look a Fannie Mae & Freddie Mac – a very different animal and guaranteed by Uncle Sam. With a 4.5+% dividend and capital growth – seems like a good one for me anyway – it's odd I know, but I need to be flexible these days.

      Click to access q42018.pdf

      I have prepared a summary report PDF which I am happy to email to you: peter@underco.co.uk

      NOTE, I do not offer investment advice – only reports for guidance.

    • @ Peter and Steve G. Keep in mind that the US cut them loose before. Politics can change things if administrations change.

    • Steve – Premium bonds are small fry – go for tonight’s £21m Euromillions jackpot.

      Alas not enough to buy a luxury Yacht – but plenty to build an energy sufficient home in a remote part of the World.

    • Another country to keep a close eye on is Japan. Its economy was already heading southwards – Q4 2019 was particularly bad. Now with there being cases of the Corona virus being recorded here (that cruise ship fiasco is most definitely a hinderance to say the least) Japan could be in for a prolonged period of economic decline.
      Don’t forget that Japan is ahead of the curve so to speak – the Nikkei peaked at 40,000 in 1989 and has never been to those stratospheric levels since then – even with the BoJ hoovering up as much equity and bonds as they can lay their hands on. Demographically too, Japan again leads where the West follows – its population declined by around 450,000 last year.

    • That’s a massive decline in population – surely it must include some migration.

      I know that Japan does have a demographic crisis as its birthrate has sunk.

      I guess many people are worried about the future and have decided not to have children.

      In the advent of the Internet there is so much more economic data ordinary people can get hold of so they can’t be easily fooled anymore.

    • Affordability presumably plays a role in this. SEEDS shows that prosperity per person in Japan turned down as far back as 1997. This explains a great deal about Japanese economic and financial trends – such as why the BoJ has been monetising government debt, and has now used newly-created money to acquire more than half of all bonds (JGBs) in issue.

    • Japan is going to end up with Ghost towns as this rate.

      With a rapidly aging population one heck of a headache for its Government.

      Unfortunately robots are still decades away from being of any real use around the hone. They can’t even hoover very well let alone look after an elderly person.

      Japan will have to rely on immigration.

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