#170. At the end of “new abnormality”


As soon as it became clear that the Wuhan coronavirus pandemic was going to have profound economic consequences, the aim here was to scope (since it is impossible for anyone to forecast) the implications for the financial system, and for the economy itself. Both have subsequently been converted into downloadable reports which can be accessed at the resources page of this site.

There’s no denying that both reports, stats-rich and based on the SEEDS model, are complex, even though every effort was made to combine clarity with a minimum of jargon. Indeed, ‘complicated’ might well define the whole situation with the coronavirus crisis.

Where once we might have said that ‘whole rainforests are being pulped’ to feed the appetite for comment and expression about the crisis, the 2020 equivalent is that the internet is becoming saturated with information-and-opinion overload.

The aim here is to take the issues ‘on the volley’, in hopes that this might tease out the nuggets of the important from the overburden of sprawl.

First, then, the pandemic itself. There seems no reason to doubt the severity of the health crisis, since neither governments nor businesses are prone to this kind of over-reaction – far from going out of their way to create panic, shake public confidence and cripple the economy, the political and economic ‘high command’ is likelier to promote false reassurance than to whip up unnecessary panic.

Neither do conspiracy theories seem particularly convincing. It seems pretty clear that the virus originated in China, but the idea of spill-over from dangerous experimentation seems far less plausible than the simpler explanation, which is that the virus jumped the species barrier in one of China’s dangerous, insanitary and, frankly, bizarre ‘wet markets’. Equally, it seems logical that an authoritarian, one-party state would react to an unknown threat with a habitual (rather than a pre-planned) denial, and with a bureaucratic, almost instinctive silencing of dissenting opinions.

Likewise, Mr Trump’s apparent belief that the World Health Organisation kowtowed to China by labelling the crisis ‘covid-19’ (rather than, say, ‘Wuhan flu’) seems less likely than the simpler explanation, which is that the WHO conformed to that same contemporary preference for euphemism which has presented the erosion of working conditions as the “gig economy”.

This isn’t to say, of course, that China isn’t looking for ‘the main chance’ where the pandemic is concerned. But it’s only fair to say that such opportunism is by no means a uniquely Chinese preserve. People from all shades of opinion, from every political persuasion and from all points of self-interest are trying to find their own silver linings in the coronavirus cloud. From calls for a world government to demands that “Brexit” be put on ice, we’re seeing hobbyhorses, even of the most irrelevant kind, being ridden to exhaustion.

By the same token, the use of lock-downs seems, on the whole, to have been a sensible response, because a distinguishing feature of the Wuhan virus is its rapidity of spread. The only real mystery about this is why, in an age of digital communication, a policy of physical separation is being mislabelled ‘social distancing’.

Of course, lock-downs come at a huge economic and broader cost, automatically prompting the public to wonder how much longer this situation will prevail. It’s a fair bet that governments around the world are contemplating ‘exit strategies’, but only the rash would insist on governments going public on what those strategies might be.

The priority now has to be to ensure that the public adheres to the principles of lock-down, and that resolve could only be weakened by premature speculation about how this might end.

For their part, economists and others are trying to gauge the possible or probable extent of the damage that the coronavirus and the consequent reductions in activity are going to inflict on the economy. Though Britain’s OBR has presciently warned of the risk of longer-term “scarring” of the economy, the general supposition seems to be that, whatever the severity and the duration of the crisis turn out to be, it will be followed by a “recovery”, involving both the eventual restoration of pre-crisis levels of activity, and a reinstatement of the belief in “growth”.

The view expressed here is that trust in a full economic “recovery” – irrespective of the time that is allowed for this to happen – owes more to obstinacy and wishful-thinking than it does to logic. The very word “recovery” presupposes that the economy pre-virus was robust, was continuing to deliver meaningful “growth”, and constituted some form of “normality”.

It’s worth remembering that, long before the crisis, world trade in goods, and sales of everything from cars and smartphones to chips and electronic components, had already turned down. Financially, extreme strains were already emerging right across the system. Investors had already started turning their backs on shale, and the “unicorn” absurdity – the bizarre delusion that any company combining an “app” with a cash incinerator must come good in the end – was already going the same way as the Emperor’s New Clothes.

There is, after all, precious little “normality” to be found in a system which pays people to borrow, and which places an almost mystical faith in the ability of central banks to ensure that asset prices only ever move upwards.

No apology need be made for saying that a lot of us had already realised that the “new normal” – of ever-rising asset prices, and of an unending tide of cheap credit and cheaper money – had become absurd to the point of the surreal. The best reason, in addition to simple observation, for questioning the validity of this “new normal” mindset was a recognition that the economy is an energy system, and that the energy equation driving prosperity had already turned against us.

Rather than going into the technicalities of the energy-based interpretation, we can simply state that the relentless rise in the Energy Cost of Energy (ECoE) was applying a tightening squeeze to the surplus energy which determines prosperity.

The very extent of the financial adventurism happening in plain sight attests to the scale of bafflement and denial being required of the adherents of the dogma of perpetual growth. It doesn’t help, of course, that our entire financial system is wholly predicated on the implausible proposition that there need be no limits to economic expansion on a finite planet.

The reality, then, is that an ending of growth – and a consequent destabilising of the financial system – were lying in wait for us, needing only a catalyst, which the coronavirus has now supplied.

What this means is that “de-growth” has now arrived. This is not something that we have chosen, however compelling may have been the environmental or the human case for kicking our growth addiction. There’s nothing noble, voluntary or selected about the onset of de-growth which, rather, is a straightforward consequence of the unwinding of an energy dynamic which, courtesy of fossil fuels, has powered dramatic expansion ever since the first efficient heat-engine was unveiled back in 1760.

The necessity now is to understand de-growth, and to make the best of it. Those who have considered this likelihood have started to understand processes such as loss of critical mass, the threat posed by falling utilization rates, the inevitability both of simplification and of de-layering, and the equal inevitability that, just as economies became more complex as they expanded, they will be subject to a process of de-complexification now that prior growth in prosperity has gone into reverse. As shown below, these components of de-growth give us an outline taxonomy of the very different economic world of the future.

It doesn’t require a Pollyanna approach to understand that, just as “growth” has been a mixed blessing, de-growth offers opportunities as well as threats.

If you really valued ‘business as usual’, were looking forward to a world of widening inequalities and worsening insecurity of employment, enjoyed the glitz of promotion-drenched consumerism, and were unconcerned about what a never-ending pursuit of “growth” might do to the environment, you might find the onset of de-growth a cause for lament.

If, on the other hand, you understand that our world is not defined by material values alone, you might see opportunities where others see only regrets.

Degrowth diagram

= = = = = = = = = = = = = = =

Shapes V Z ADG

Scatter transport

278 thoughts on “#170. At the end of “new abnormality”

  1. If anyone on this list doesn’t yet grasp this analysis, I’d be very surprised. The prior few blog posts laid it out sequentially. The powers that be are throwing money at various sectors, including to consumers in the US. It is likely that they won’t stop doing more of the same anytime soon. It may support some asset prices, but is a long shot, in my opinion, to short circuit a recession this year

    • Thanks.

      The previous two articles dealt with (a) financial and (b) economic issues in some depth, so the aim here was brevity, and a look at some parts of the broader picture. It can’t be emphasised too strongly that, whilst nobody could foresee the virus, de-growth and a financial crash had long been inevitable – indeed, we’ve been discussing them here over a lengthy period. That’s why we already have what I might call ‘templates’ for what has now started.

  2. Hi Tim,
    I largely agree with your sentiments, but I do wonder how effectively governments can keep markets artificially propped up. In the lead-up to this downturn, we saw markets soaring despite being over-valued by traditional metrics and degrowth potentially having started in more than a few countries. I still expect the dynamite in the foundations to explode, but what comes after? Will we still see the business cycle of old repeat itself in degrowth, even as most people become poorer? Will QE Unlimited prop up asset prices regardless of the underlying reality for another decade after GFC II?

    • Thanks – this is very useful article, which I recommend to everyone. I would add that the term ‘peak travel’ was proposed here before the virus occured.

      I’ve been looking at this economic issue in a ‘layered’ way.

      1. At the top is the basic issue of de-growth and its energy causation.

      2. The second ‘layer’ is issues like critical mass, utilization, simplification, de-layering and the other issues mentioned here, and discussed in detail in posts #168 and #169.

      3. The third layer, not published yet, is the sector-by-sector picture.

      The linked article overlaps with my working list for level three. One that it doesn’t include (or else I missed it) is the slump of the ad-funded business model. Print (and some on-line) newspapers are already folding (so to speak) as ad revenues collapse, and it isn’t going to stop there. We could add the term ‘peak advertising’ to ‘peak’ travel.

  3. Tim,
    Thanks for another good post and for sharing your (and other commenters) insides through this page. Im a mechanical engineer by profession and had very limited economic knowledge until I started learning how money is created a few years ago. It spiked my general economic interest, a interest that has peaked over the last year as I’ve felt a growing mismatch between financial data and my perception of the real world, and stumbling over this page has really helped me putting some of the puzzle together. In that regard, I hope you (or someone else here) could help me with a couple of fundamental questions. Sorry if this is obvious to most, but I just want to make sure I have the core understanding right.

    a) Is it right to say that, theoretically, even though we have a rising ECoE, an even higher increase in productivity and energy efficiency would mean that real world economic growth is still possible?

    Now I understand there are several reason why that is very difficult or even physically impossible, or desirable for that matter, but it does change the argumentation to some extent. Which lead me to the second question.

    b) How to think about quality in all this? Is quality also as heavily tied to energy consumption, or can those be decoupled in a way so that prosperity can be less negatively affected in a de-growth development?

    Quality is to some extent a subjective matter so valuing it is difficult of course, but I struggle to generally fit it into the whole economic development picture so any thoughts on this would be greatly appreciated.


    • Thanks Tom.

      On your first point, there’s certainly scope for greater efficiency – indeed, inefficiencies are amongst the ‘luxuries’ in which we’ve indulged courtesy of low ECoEs in the past. Addressing these issues might blunt the rate at which prosperity declines. It’s possible that the pandemic may push us towards greater efficiencies.

      But the basic problem, which cannot be overcome, is that efficiency gains are linear, but the increase in ECoEs is exponential.

      Quality is a tricky issue, and bound up with how inflation (and GDP) is measured.

      “Hedonic adjustment” is supposed to capture this, but it doesn’t do it very well.

      For instance, if a phone today has twice as many features, at the same price, as a phone of twenty years ago, hedonic adjustment says the real price has halved. But if, say, the phone of twenty years ago lasted twice as long as the one today, that’s ignored. The tendency is to measure functionality per $/£ etc, but not quality.

      There’s a gadget that I use in my hobby, sold by a firm in the US. I recently had to replace it. The new one looks just the same as the old one, and does the same things. But it doesn’t do them very well, because quality is way lower. It’s still sold by the US firm, but is now made in China. If both versions were available, I’d have opted for the previous, US-made one like a shot, even at a higher price.

    • @Tom Tromborg
      This won’t be a complete reply to your question about ‘quality’, and I can’t post the video I refer to because it hasn’t been posted yet. But perhaps some things to think about.

      Begin with a few scattered bands of hunters and gatherers roaming around a fertile land near the ocean. Moderate climate…not to hot and not too cold. Sort of like the Georgia Bight in the South Carolina/ Georgia area. The people grew to be 7 feet tall, lived a long time if they survived infancy, and had perfect teeth when they died. But things went wrong and population grew and doubtless sanitation and clean drinking water became problematic and sometimes there wasn’t enough food and then the Spanish came and forced them to live in close quarters near a church. Unless you define quality as ‘close to the True Religion’, their quality of life got a lot worse. Much of what we would now call GDP (sanitation, clean water, farmed food, military, priesthood, etc.) grew out of the attempt to adjust to the loss of the ‘Edenic lifestyle’.

      The talk last night was about the inborn immunity systems and how we have overwhelmed them with bad environments (such as the Spanish occupation of the Georgia Bight) and novel viruses and bad habits which produce our chronic diseases.

      It is not true that the world is especially favorable to humans. We have multiple protection layers built in to ward off disease. And we have an infancy steeped in mother’s milk which allows the infant to develop their own immune system over about a 3 year period. Of course, in the 20th century we tried to substitute commercial formula for mother’s milk, and we know that went badly despite the extra GDP. The gut microbes are separated from our body proper by a single layer of cells. The bulk of our immune system sits on the inside and analyzes what is on the other side and ‘learns’ how to keep the human safe. Unfortunately, eating bad food and sleeping poorly and being under unresolved stress weakens the single layer of cells and bad stuff leaks into the body proper. And periodically killing the microbes with antibiotics wreaks havoc with the balance. We now know that the problems with Covid 19 affect the gut, which, if it is ‘leaky’, will recirculate the virus throughout the body.

      I’ll cut the story short, but you get the idea. Humans are a balancing act. We need some stress (known as Hormesis) to strengthen our muscles and our wellness muscles. But our system was also designed by natural selection to favor the kind of environment that the early people in the Georgia Bight lived in. Our human history has featured growth of population far beyond the scattered bands, which resulted in things like the cholera epidemics in London and the Black Death in the 13th century. We fought back with technology….which was given a huge boost by fossil fuels. But fossil fuels also enabled us to live lives which are sedentary and feature bad food and too much drink and synthetic drugs. The ‘unnatural’ lifestyle results in the auto-immune diseases which kill most people now in the developed world. The deaths from Covid 19 are actually auto-immune as the cytokine storm kills people…not the virus. The same as vascular diseases are auto-immune and cancer has an auto-immune component.

      The challenge is to use our technology wisely…which one might say is ‘using with quality’. If we want to live in large communities, we have to take care of the ancient issues of sanitation and clean water and we have to figure out where the food is supposed to come from. But we also need to avoid the deadly habits that people fall into when they have abundant energy just because it ‘felt good at the time’.

      Don Stewart

    • Tom,
      You asked “a) Is it right to say that, theoretically, even though we have a rising ECoE, an even higher increase in productivity and energy efficiency would mean that real world economic growth is still possible?”

      You phrase question a) as current or possible. Most of the discussion here accepts these notions of higher productivity and increased energy efficiency as historic ideas from the days of the cheap conventional oil upon which the vast majority of our 21st century infrastructure and current economic processes rely – or should it be – have relied.
      ECoE is coming the other way. It’s a finite world, and despite Trump and Musk’s visionary hopes, I today announce a supplement to Tim’s ‘peak travel’ – peak space travel. Shining the bright lights on the cutting edge of technological development allows a view of progress, allied to the ‘trickle down’ myth, that lets us all in on the act.
      For decades, and for hundreds of millions of people (not billions note) this was a quality of life beyond historic imaginations. The productivity and efficiency came at the cost of ignoring the despoilation of the earth, the land the sea and the sky of this beautiful planet.
      It would be great to accelerate out of danger as you suggest. Taking 8 billion people with you is asking simply too much.
      Our discussion has turned to the downward slope. Can we get quality back into our economy, our lives, our planet? Can we manoeuvre delayering, falling utilisation rates, eroded critical masses in such a way as to keep people happy, the youth sustained by realistic visions of resource production, allocation and consumption as the old world (of both old people and old ideas) decays away?

    • @JeremyT
      Maybe I should have phrased it better, but you seem to have taken my first question a bit out of context. It was simply meant as a question to confirm my fundamental understanding. I do not endorse the continuation of the current exploitation of our resources or the way which our culture is seemingly obsessed with material growth at all cost. And I’m absolutely not suggesting the solution is to accelerate our way out.

      With that said, I find the notion that higher productivity and increased energy efficiency should be seen as historic ideas somewhat counter intuitive. I don’t see how higher productivity is a problem in itself, but rather the value framework around how we pursue higher productivity at the cost of other things is what’s causing it to be problematic.

    • Tom

      Part of the problem is that declining volumes act to reduce productivity, in all areas where fixed costs are significant. As numbers of customers fall, fixed costs (including the fixed labour component) increase per customer.

      Say you have a bridge, employing 50 people to maintain and operate it, and 500,000 people use it in a year. If that number falls to 200,000, but you still need the same 50 people to run it, output (sales) per employee have slumped. You might try to raise the charge per user, but this risks an even steeper fall in customer numbers. This is what I call the utilization effect.

      In other areas, downsizing might be easier. You might halve the size of a factory now selling only half as many widgets. But there are still, in most cases, fixed overheads that are hard to scale down.

      The basic principle might be stated as ‘reduced capacity use reduces productivity’.

    • Thank you for the link, Raphael. I have shared it widely amongst my population-environment contacts.

  4. ” . . . (since it is impossible for anyone to forecast) the implications for the financial system, and for the economy itself. ”

    Here: https://mcusercontent.com/78302034f23041fbbcab0ac6d/files/d9dee8cc-40e5-4056-8730-238382f4b387/iimr.special_e_mail_2004_US_money_growth.pdf
    is some who thinks that the measurement of the growth in M3 is all that is required?
    “The annual rate of broad money growth could continue to accelerate in summer and autumn 2020, to move into the 15% – 20% band. US money growth in 2020 may be the highest ever in peacetime.
    Variations in the ratio of money to nominal GDP (or “velocity”) do occur, but large variations are unusual. In the medium term they are ironed out as the underlying stability of agents’ money holding behaviour takes over. It follows that – at some point in the next two/three years – the growth rate of US nominal GDP will accelerate towards a figure in the teens per cent. Given that the trend growth rate of real output is not much more than 3% a year, a big resurgence in inflation is implied by our analysis. The only way to prevent this is for the Fed not just to end its current stance as ready financier of the government deficit, but to withdraw the money stimulus (i.e., to cause the quantity of money to fall by the “excess over normal growth” now being recorded.). In a Presidential election year, that seems very unlikely.”

    • (not an economist, but here are some thoughts) I think (US) inflation in necessities is likely in a year or two, but mainly from the decline I expect in the $US. There also could be a number of bottlenecks in supplies from the usual suspects such as weather, pests, fungi, and disruptions in harvests/transportation/processing. With oil already at multi-decade lows, it seems more likely to rise long term, which affects many prices.

      Frivoloties/discretionary items would require plentiful excess funds in the hands of consumers. With an oversupply of labor likely to continue, that seems unlikely.

      Lastly the record amounts of debt at all levels of the economy suck up much of the growth in the money supply.

    • It seems to me that most firms, and most households, are going to come out of this (a) financially impaired, and (b) psychologically more cautious.

      Businesses, which are likely to have higher net debt and reduced cash flows, will be more cautious/selective about expenditures. This is likely to boost processes of de-layering and simplification.

      Households, meanwhile, will have reduced savings, increased debts and, generally, lower incomes. This, plus the shock effect (nobody thought anything like this could ever happen) is likely to reduce expenditures on discretionary purchases.

      In the colloquial sense of “hanging on to each dollar for longer”, both sectors’ new circumstances and mind-sets point towards lower velocity.

      This said, I find it harder to see why USD should weaken, because weaken “relative to what?” The dysfunctionality of the Euro Area is being blazoned like a neon sign. GBP is hampered by the UK’s disproportionate exposure to the financial system. The monetisation of debt might at last take its toll on perceptions of JPY. China, already facing severe financial stresses before this even began, is facing a bit of a PR disaster.

      I can see reasons for not wanting to hold USD – but I can’t see what, beyond CHF, people might buy instead.

    • Au contraire, he may well be getting a Christmas card from Beijing. But he would be wise not to open it or, if he does, to wash his hands and anything else that touches the card!

  5. The numbers of deaths so far attributed to this latest virus (even if we accept the diagnoses as accurate) are nowhere near the annual combined preventable tally for factors such as smoking, alcohol, obesity and various other addictions including legal, as well as from pollution or traffic accidents. Most of those could be easily avoided if ruling elites legislated against them or properly enforced existing legislation. The truth is that they don’t because they value profits above human lives in general. Yet the economy is not shut down for this higher annual total, which could be spun into an epidemic at any given time, so why now?

    They scent imminent total economic collapse and fear losing the grip they have on their people. So effectively condemning people to house arrest, rolling back democratic freedoms and encouraging neighbours to report each other for new crimes of what were until recently normal acts of life ensures maximum control. the system is resetting and most don’t understand this, while those that do are intimidated into silence. The era of pseudo-democracy is over now. Once the economy is broken, assets devalued and currencies destroyed, being independent as an individual will be impossible, so we will do as told.

    • On your first point, I think governments would say that none of these other causes of death is contagious, whereas Wuhan virus is virulently so. Physical (aka “social”) distancing wouldn’t reduce any of these fatalities, but this situation is different. We could, to be sure, ban alcohol, smoking and even driving if we wanted to, but there’s a balance to be struck in terms of liberties.

      I don’t know whether the authorities do scent economic collapse, or even the accelerating deterioration that I and others anticipate.

      The ‘powers that be’ don’t listen to the energy-based interpretation of the economy, but still believe that economics is ‘the study of money’, and energy is ‘just another input’. They believe (perhaps because they have to believe) in the dogma of ‘perpetual growth’, on a finite planet which, as well as finite energy-value resources, also has finite environmental capacities.

      Their belief in ‘perpetual growth’ is as absolute and as blinkered as the long-ago belief in a flat earth. It doesn’t matter how demonstrably logical the energy-economy interpretation is, how far we model it, how far outcomes conform to what the thesis anticipates.

  6. @Tom Tronborg
    A little more on quality. With some enforced sitting time this morning, I had a chance to read some more in Brian Greene’s book Until The End of Time. On page 271 he begins a discussion of the connection between thinking and entropy and energy (heat). Freeman Dyson “leveraged the mathematical version of the links between each to quantify the heat that the Thinker needs to expel based on the thought the Thinker has”. Now if we equate quality of life to the thoughts a person has, then one interesting question is “do more (faster) thoughts equate to increased quality of life. And the answer is “No”. I’ll leave it to the book to explain in detail.

    Suffice to say that just because we are metabolizing energy faster does not imply that we are thinking better musical thoughts than Mozart and Beethoven.

    One of the key points is the entropy. You may remember that the Limits to Growth was a model which used pollution (closely allied to Entropy) as a limiting variable. We could similarly model energy throughput with toxins produced and come out with models of human metabolism and health span or civilizations duration and pollution (including social dysfunction).

    As one example, some of the highest levels of ambient toxicity measured in Wuhan were in the toilet. As I mentioned earlier, the toxins enter the large intestine and some are excreted. Our flush toilets are notorious for aerosolizing waste and spreading it over a wide area. So a higher quality of toilets would materially improve our well-being. The hypothetical toilets might well cost more, but could produce a net gain in human well-being.

    Don Stewart

    • Yes Don, i, too, am convinced a toilet upgrade would solve the worlds problems and overpopulation. Glad we all have our paper surplus by now. In toiletpaper as well as in currencies.

  7. Commenting over at the Moon of Alabama blog, Brian Davey makes exactly the same line of reasoning as Dr Tim:
    ” However, ecological economists like myself have been warning that justice over distribution was important but had to be seen against another looming danger that the growth was unsustainable and uneconomic and heading to a collapse because we have been degrading the carrying capacity of the ecological system. Now we are there – at the point of collapse. The future is not V shaped – it is degrowth. Managing resources again as commons in the interests of all – some limited central planning maybe…maybe…but the more important issues are ecological design of cultivation and production systems and of residential arrangements. A radical reduction in incomes because less can be produced – has, of course, to come from the top down. What the economy must offer people in the future is not “more stuff” but we must aim for more security and safety for people in a world in turmoil. Management for resilience and community not growth. Either that or it is extinction. ”

    Question is: will this come from the top down? Given the entrenched view of Neoliberal dogma with its economic growth forever on a finite planet, i am not optimistic, putting it mildly

    • The future is most likely to be V-shaped’: just invert the V and you will see!

      The period pre-2020 will seem a Golden Age in retrospect – of full stomachs, ample clothing and comparative peace and freedom.

      Talking about Collapse is rather like raising the topic of AIDS at a gay party – but that’s exactly what we will be dealing with.

      Just how it proceeds is the only question. It’s all as plain as a pike staff, wonderful old expression.

      And every pike staff had a nasty point at the end……

    • We find ourselves in the rather odd position in which both the ‘elites’ and the general public assume a “recovery” and a restoration of “normality”, with our contrary interpretation, for all its logic and evidence, largely dismissed and unrecognised.

      Moreover, one can see scenarios in which,. even if wholesale collapse isn’t the outcome, our economic, social and political worlds still go through upheavels unprecedented in living memory.

      And this is three decades on from the proclamation that history was ‘over’, final victory being handed to social and economic ‘liberalism’!

  8. Dr. Murray Replay
    Dr. Murray has posted the replay of his presentation here:

    (I have no idea what evidence he is looking at in terms of the origins of the virus. It is a very peculiar twist to ordinary corona viruses, which led to early speculation about bio-warfare. A scholarly paper looked at it, and concluded that the changes were too intricate to be attractive to bio-warfare people. Their conclusion was that Nature probably figured it out. What Murray seems to be saying that it was leakage from a research experiment gone bad…perhaps funded by a US company. I suppose the Wuhan lab is looking for funded projects like all other labs. At any rate, is is probably protected by non-disclosure agreements.).

    The gist of his arguments I don’t have any quarrel with. The key to resistance to disease is a strong immune system. We don’t have that in the bulk of the US population.

    Don Stewart

  9. Note on Dr. Murray’s theory of laboratory origin
    Here is the current agreed upon timeline:
    3rd week of November…human becomes infected
    Wuhan wet market probable vector of infection spread among humans
    Dec 26… 4 unusual pneumonia cases
    Dec 27….Reported to local CDC
    Dec 28-9…3 more unusual cases
    Dec 30…Active case finding begins in Wuhan
    Dec 31…Wuhan Health Commission alerts National Health Commission and China CDC. WHO alerted
    Jan 1…Wuhan fish market closed
    Jan 7…nCov identified
    Jan 12…2019-nCov sequence first shared
    Jan 13…First test kits available
    Jan 20…Covid19 a class B notifiable condition
    Jan 23…Start of Lunar New Year, a National Holiday
    Jan 23…Wuhan City shut down
    Jan 24…Another 15 cities shut down
    Jan 30…WHO declares a Public Health Emergency of International Concern
    Feb 1-10…China declares a nationwide Extended Holiday
    Feb 4…>3500 cases reported

    During the epidemic, workers in Wuhan were collecting most of the data which is currently available. For example, the toilet as a source of concentration of contaminants. But they could not tell how many people were asymptomatic. Consequently, no one knew whether the disease was killing 1 in a hundred or 1 in a thousand. Dividing the deaths by those who showed up for treatment gave very high fatality rates…consistent with 1 in a hundred. Italian numbers, when they became available, were somewhat consistent at 1 in a hundred. At that point the US was saying that a potential of 2 million people could die. Later work showed that if one adjusted for the number of people infected but who did not show up for treatment, the numbers was more like 1 in a thousand…consistent with previous experiences of somewhat similar viruses. The US adjusted its numbers down to 100K to 200K deaths.

    March 13…President Trump declares National State of Emergency in US.
    April 17…US is preparing to test 10,000 people for antibodies created in response to infection. This may finally answer the question about the infection to death ratio. And give us a guide to people who may have at least partial immunity. We still may not know about re-infection risks and mutation rates.

    In terms of political maneuvering, it should be noted that the WHO declaration of January 30 should have been ample warning. At that point, nobody knew whether the virus only thrived in cold weather. The spread to the tropics put that theory to rest, I think. So medical professionals and political enemies of Mr. Trump will point to Six Lost Weeks. As we can see from the data in Wuhan, six weeks is a long time in terms of this virus.

    When China was shutting down, I remember reading lots of people saying ‘it can’t happen here…we are a democracy’ or ‘Americans have guns’ and similar comments.

    So…could the virus have originated in the Wuhan lab? If so, the virus infected a worker who took it home with him. He may have visited the Wuhan wet market and the market became the vector of disease. Much as the pork processing plant in South Dakota with a couple of hundred infected workers may have been a vector of infection in the US. If we rule out bioterrorism, why would the lab be working on the genetics of a coronavirus? There have been other coronaviruses, but immunization has not worked very well. Some pharmaceutical company may have wanted to understand the genetics better, and hired the Wuhan lab to do some structural work. According to the previously published paper debunking the bioterrorism theory, it is very clever genetic engineering…which the authors attributed to Mother Nature. But maybe humans did it?

    I’ll also compare the New Orleans actions as compared to Wuhan. Wuhan shut down at the beginning of a National Holiday. New Orleans did not cancel Mardi Gras. I can imagine that there were many people in Wuhan who were quite unhappy about the shut-down. The doctor who discovered the novel disease was treated badly. I understand that he is now a national hero and the police who arrested him are under arrest. I don’t know what would have happened in New Orleans if officials had tried to cancel Mardi Gras. People now are very scared…but they were not scared back then, having been assured by the highest levels that ‘it is contained’….not a problem.

    Don Stewart

  10. @Tim @Don
    Thank you both for you extensive answers! I especially like the idea that using our technology wisely is to ‘using it with quality’.

    It seems to me then that, especially as we’re entering a time of de-growth, reforming our goals and how we value and measure quality in our culture is essential for us to have a sustainable technological development. And that some of these changes goes all the way down to the core of how we interact with each other as social animals, how we obtain status and value in our communities. That is a monumental task, but one that we have to face to some extent, and I find that both scary while also being very exciting and fascinating!

  11. This article is very interesting. Though the focus is largely on the print media, it notes that advertising rates have fallen by 70%, adding that “[in] the present circumstances, retaining even 30% of advertising revenue is a heroic performance”.

    This goes way beyond your local free ads paper, because advertising funds huge swathes of business activity, from elite sports to much of the “tech” sector, as well as the news media itself.

    It seems likely that, to ‘peak travel’, we might add ‘peak advertising’ – after all, it’s one of the easiest things for cash-strapped businesses to slash, especially when customers aren’t buying. And, unless you believe in a full “recovery”, it’s not likely to make much of a come-back.

    • Another contributor to the persistent mass unemployment which will characterise the near-term future.

    • If people available for work are going to be abundant, but energy to power machinery is not, what’s the future of automation?

      Some years ago I looked into this, in regard to car parks. At that time, ‘pay and display’ ticket machines were very expensive to install, and someone still had to walk around seeing if cars were displaying tickets, whilst machines cannot keep an eye out for theft, vandalism and so on. It seemed to me that employing car park attendants offered much better value for money.

  12. What is collapsing?
    Is our modern world a single thing or does it have facets which may collapse independently?

    “Chloroquine or hydroxychloroquine, when used in combination with metformin, increased risk of death in mice”

    Chloroquine and hydroxychloroquine are antimalarial drugs currently being used under Emergency Use Authorization as treatments for COVID-19. Recently published data from a mouse study suggest that these drugs carry a significant risk of death when either is given in combination with metformin. (My note: metformin is a ubiquitous drug prescribed for diabetics. Diabetics are one of the high-risk groups who tend to die with Covid-19 added on to their diabetes and probably other problems such as vascular diseases).

    Dr. Murray (who is hard to listen to for a long time…so you are forgiven for not persisting) promoted quercetin, a natural ingredient found in onions and garlic, but which is also available in high dose supplements, rather than chloroquine. It has long been known that chloroquine is toxic. While overuse of high dose supplements can definitely cause problems, history shows that natural compounds are usually far less problematic than pharmaceuticals. There is a reason why society chose to limit access to pharmaceuticals to licensed medical professionals. At the present time, the huge and unregulated supplement industry is under attack from the pharmaceutical companies. Whether in the name of ‘consumer protection’ or simply greed and fear of erosion of drug revenue I’ll leave to you to decide.

    But a deeper issue is whether natural compounds found in food WOULD be adequate if our overall health were better. There are a number of doctors who advocate for using natural foods such as onions and garlic to get a daily dose of quercetin. These doctors pay attention to preparation methods: either ‘chop and stop’ for 10 minutes to allow the quercetin to form before cooking, or ‘eat raw’ to allow the quercetin to form in the mouth and not be degraded by cooking. I buy (or grow in my garden) bags of onions and garlic and use both methods every day.

    So what is collapsing, using the coronavirus as an example? Is it the pharmaceutical model for treating viral infections (as Dr. Murray hopes)? Is it the notion that if we use simple lifestyle methods we can be basically healthy and won’t need high dose supplements or prescription drugs and we won’t be dead from viral infections? Is it common sense, as everyone loses their mind? Is it the profitable exploitation of both high dose supplements and prescription drugs and over-hyped vaccinations? Is it our freedom to talk freely about the options (as the pervasive social media censorship indicates)?

    I suggest that the first order of business is to decide those facets of the current situation which we would be well-served if they DID collapse.

    Don Stewart
    PS. This is back to the quality issue.

    • For many centuries in Southern Europe, a principle part of the diet of the poor was raw onion and garlic, with (good) bread.

      Of course the rich often ate a diet which could only make them ill – too much meat – and went to highly-trained physicians who prescribed ridiculously elaborate, useless and even poisonous drugs.

      Nothing new under the sun.

  13. My Catalan gypsy witch cousin (by marriage) makes a wonderful medicinal drink based on onions – very potent taken as a whole steaming mug

    I’ll ask for the details, I’m not entirely sure what else is in it.

    But being a witch, she might guard her trade secrets…..

    She is quite serene throughout all of this, saying that everything is the will of God and fated.

    • My French wife is a great advocate of garlic for good health. My belief is that it works very well but not for the reason she supposes. With a high intake of garlic, physical distancing is guaranteed!

  14. Dr Tim. An excellent and succinct analysis as usual. Thank you. Whilst a few people are imagining an end to lockdown over the coming weeks, the reality is likely to be as follows: gradual easing of lockdown, further rise in cases, another lockdown, gradual easing, further rise in cases…. ad infinitum – or, at least, over many cycles. The issue is, what will this do to peoples’ behaviour? Whilst a few may party as though there is no tomorrow (because for many there is no tomorrow) most will presumably put money aside for a ‘rainy day’ rather than the borrowing binge we have witnessed over the last few years/decades. The reality is that most of us will not know a Coronavirus patient (still only 1 in 600 in the UK) but probably all of us will know someone who has suffered financially from Coronavirus (e.g. due to unemployment, reduction in small business turnover). This will reduce consumption amongst the workforce (though maybe not the pensioners) dramatically for many years, in turn producing more unemployment. Positive feedback into a very frightening downward spiral? Perhaps even deflation.

    • I think your assumptions regarding deflation are persuasive. Perhaps a burst of deflation for a year or two followed by rising inflation for ‘essentials’ like food?

    • Cost inflation
      A CEO recently addressed headquarters employees on the subject of budget cuts. The particular corporation is vertically integrated. They contract for supplies, manufacture, distribute, and actively promote their products. They have been doing all the ‘work from home’ stuff, as well as social distancing at work, wiping down machinery, etc.

      During the call, a marketing guy asked ‘why has my marketing budget been drastically reduced?’. (If you are a marketing guy and can’t do any promotions, what are you supposed to do???). The CEO, evidently exasperated, said “we are spending so much money on the front line, we simply can’t afford promotional spending”. He went on the explain how the virus has greatly increased the cost of manufacturing and distribution.

      What he is describing is “cost push” inflation… very similar to rising ECoE. In the case of the virus, it is not possible to even live off the investment and stop cap ex. The problem is operating expense. If airplanes start flying again, but have to be wiped down for every new passenger sitting in a seat, then the fundamental cost of flying has been increased very significantly.

      But won’t the virus simply disappear in another few weeks? We don’t know that for a fact. Dave Pollard has a convenient summary of our present knowledge. One of the points he makes is that immunity for other corona viruses only lasts about 3 months…and then the person can be re-infected. We know that South Korea is experiencing re-infections. I wouldn’t want to invest my money in airplanes based on the assumption that Covid 19 will just disappear sometime in the next few months.

      We could see ‘deflation’ in the sense that asset values decline and incomes decline. But coupled with an increase in the cost and price of anything we produce. It’s kind of like the situation where gravity suddenly got 25 percent stronger…movement just becomes harder.

      Don Stewart

    • First off, I suspect we’re at ‘peak advertising’. I’ve mentioned one source where prices have fallen by 70%. I suspect overall the fall is lower than this. But let’s say it’s 50%. That doesn’t mean that revenues fall by 50% – it means a price fall of 50%, multiplied by whatever the fall in volume is. If the virus situation is resolved, prices and volumes could recover – but not, as I see it, back to pre-Wuhan levels.

      As for aircraft, it’s worth noting that airline bankruptcies won’t destroy capacity. Bankruptcy simply wipes out shareholders, with ownership passing to creditors. If we are, as I had suggested before this crisis, already at or near ‘peak travel’, we’ll be left with excess capacity – but that would be eliminated by normal market processes.

      Going through consensus data, it looks like air passenger miles were expected to grow by c90% between now and 2040. That already looked extremely implausible…………..

    • @Dr. Morgan
      I agree with what you say. My point is that if we continue with the hyper-vigilance in terms of the virus (at least as practiced in the US) we are looking at an increase in the price which must be charged for many goods and services. For example, my food co-op, under the watchful supervision of the Health Department, has stationed an employee at the front door. He keeps count of the number of people in the store, and doesn’t let it increase above a pre-determined number. He also wipes down every shopping cart which is returned. This adds to the cost of the groceries. Since profit margins cannot absorb that extra cost, it means that the co-op will be forced to raise prices if the practice continues.

      The Smithfield company which produces pork products is steadily closing its plants as workers are infected. While a manufacturer of, say, crackers, can simply wipe down the machines, the messy assembly lines in a meat-packing operation are far more complicated to dis-infect. The choice has been to close down. Which leads to the lament from the Smithfield CEO that ‘we are going to have to choose whether to continue to produce food’. It’s like ‘we have to accept some contamination’. In the case of chickens, the public in the US now accepts that fecal contamination on that beautiful chicken breast can be covered up with radiation and chlorine and taste delicious when fried. But if new regulations prevented the sale of chicken with fecal contamination, then the existing chicken processing lines would become unworkable.

      So we have a scissors effect:
      *Costs go up, leading to high prices
      *Revenues do not, because everyone is getting poorer
      *Earning go down, and may become losses
      *Asset values decrease (absent insane money printing)

      So we can label it as ‘inflation’ by looking at prices, or ‘deflation’ by looking at asset values. The end result is a decline in prosperity.

      Don Stewart

    • One way to look at this is rebalancing. Since 2008-09, asset prices have soared, but incomes (and CPI, which is income-related) have not. I’ve long contended that rebalancing has to happen.

  15. Rhetorical Question

    Suppose that we had invested the money that the Covid 19 is going to cost us in preventive care (or health promoting care, if you prefer)? One of the many things we would have done is make sure that everyone has enough Vitamin D. From Dr. Rhonda Patrick:

    “Somewhat alarmingly, this is actually another way of saying that possibly as much as 70% of people, which is the percentage of people in the United States that have a vitamin D status that the Endocrine Society refers to insufficient, may be experiencing at least partial dysregulation in up to 5% of their protein-encoding genome!
    A ton of evidence suggests that vitamin D is protective against respiratory tract infections. Data from 25 randomized controlled trials from around the world demonstrate that vitamin D supplementation reduced the risk of acute respiratory infection by more than 50 percent, especially in people with low baseline vitamin D levels. ”

    Don Stewart

  16. Hi Tim

    Thanks for another thought provoking and sombre posting.

    Like you, and most, I can’t see a return to BAU after this pandemic has run its course. It seems to be the catalyst which transformed the already deteriorating economic situation into something with potentially more fundamental implications going forward.

    In a debt based economic system the vulnerabilities of people will be shown up starkly and I can’t see anything but a far more cautious approach to debt going forward. This in itself will impact mightily on the economic system and simply compound the other drags which we will see over the next few years.

    However, in some ways you could see it as an unfortunate scapegoat for the current system. As you imply, and which I agree with, we were heading towards a GFC2 and recession before Cvid 19 took hold so the virus might turn into an excuse for attempting to prolong the current dysfunctional system. I can’t see this because it seems that the scale of damage is shaping up to be so considerable that any thoughts about returning to the status quo ante seem very unlikely.

    • The tragedy is that, while a reinvigorating purge of senseless debt and ludicrous company/real estate valuations has been anticipated by many – the end of the ‘Everything Bubble’ – the reality, as it is shaping up at really quite terrifying speed, is one of profound and perhaps irreparable supply-chain disruption and the elimination of many quite well-founded smaller businesses, and troubled but still viable retail and manufacturing companies, which do not deserve to go under.

      They will have been wantonly destroyed by these ill-advised lock-down measures -or rather, by their extension beyond the month or so which is as much as most businesses can possibly bear.

      The political, social and psychological effects of this will be enormous, long-lasting and probably deeply destabilising.

    • Governments would say – and it seems a valid point – that, if we end the lock-downs too soon, we’d get a renewed spike in cases, anything achieved in the first wave of lockdowns would be lost, and we’d face a second and longer period of lock-down.

      On companies, we shouldn’t swallow the narrative that airlines, for instance, would be “destroyed” by bankruptcy. They wouldn’t. In reality, the assets would still exist, and all that bankruptcy really does is wipe out shareholders, and hand the assets to new owners, i.e. the creditors. I’m far more concerned about real losses, i.e. small and medium firms that might be gone forever.

      Propping up asset prices is a mistake, seems destined to fail, and hopefully will.

      For instance, imagine a company earning $10 per share, and regarded by investors as a “growth” stock, so trades on a multiple of 30x, i.e. $300.

      Now, say, EPS halves to $5, and the company no longer has “growth” credentials, making an appropriate rating 20x, or lower. That gives a stock price of $100. If we try to push that back up to $300, we’re into the realms of absurdity, trading on 60x non-growing earnings.

      As for property prices, if these fall, it benefits younger people. It also means that (a) the cost of housing has fallen, and (b) less capital is tied up in the unproductive ‘capital sink’ of property. Doesn’t seem too bad to me.

    • The powers that be (behind most politicians in the US, and many other countries) have major stakes in large banks, insurance companies, real estate companies, agribusiness, etc. If share prices decline 50%, and real estate declines as well, many institutions and individuals will feel extreme pain. They are currently doing all possible to prevent a stock market and real estate meltdown.

      The power elite fear that if pension funds, insurers portfolios, bank collateral (both physical and paper), etc. decrease in value, then retirees can’t make ends meet, and mortgage defaults exceed underlying property values. Then it would be likely that the redistribution crowd wins more and more seats in legislatures.

      Biden isn’t anti-establishment, but he may get swept up by the trend. Not an issue for me, but it certainly looks to be so for the power elite. Their income taxes would likely head back up, with wealth taxes possible.

      The increasing pauperization of the middle class increases the likelihood that incumbents lose the next election. They get squeezed on wages , property, and pension values. The lower 20%, (mainly renters) with few (if any) pensions, stand to gain expanded social security income, disability income, maybe universal basic incomes, and maybe single payer health care. Both groups would likely vote for regime change…to the left.

    • I don’t see there’s much they can do to prevent stocks and property settling at much lower levels. Of course, the Fed could keep pouring in money on the principle of “whatever it takes”, but even that approach is unlikely to work.

      With pensions, the issue is the return on invested capital. The collapse in rates since 2008-09 is the real cause of the huge gaps in the adequacy of provision. One off gains in prices aren’t enough to offset the low-returns problem – the real issue is that ZIRP has killed adequate pension provision. Obviously, the added problem now is the probable fall in saver contributions.

      Higher taxes on the wealthy, and taxes on wealth, have now become inescapable, in most countries. I just hope that the elites make the wise choice on this, because I shudder to contemplate what might happen if there’s any attempt to repeat ‘rescue for rich, austerity for the rest’.

    • It is likely that the US has intervened in the US stock market already. They likely use a “beard” by doing swaps of some kind with an ally, and having orders come from outside the US. The Fed has openly said that it might do so in the future. 😉

      Japan’s CB has been directly purchasing shares for decades.

      India too:

      The Swiss CB began “investing” in global shares more recently. Norway has its national oil wealth fund doing so as well. China too


      When the Chinese stock market bubble popped in 2015, sending shares into an even deeper tailspin, the government stepped in with a rescue plan. Using a state-owned financing company and its sovereign wealth fund, China spent more than 1.2 trillion yuan ($170 billion) buying shares to shore up prices.

    • @Xabier

      I agree with you that the “collateral damage” from this crisis will affect many small and viable businesses and many will unfortunately go under.

      As to whether the lock down was “ill advised” it’s difficult to judge. Hindsight is a wonderful thing but we’re nowhere near the end of this crisis and it will be some years I suspect before we can get a balanced judgement on this. It is axiomatic that with earlier government action we would not be where we are but that doesn’t mean that government was negligent or insouciant about the dangers; hindsight is a wonderful thing.

      Having just finished reading a biography of Thomas Cromwell you are struck by how contingent life was a few hundred years ago; London was regularly affected by the plague and illness generally and social and political tumult was the norm. We’ve become insulated from all these things but occasionally we are reminded that there are still the Four Horsemen of the Aplocalypse.

    • Xabier

      I agree that the “political, social and psychological effects” are likely to be profound. In fact, how people’s thinking changes is probably even more important than the pure’mechanics’ of what happens to the economy and finance.

      My hunch is that this is the end of social and economic “liberalism”, the duopoly that has ruled the roost ever since history supposedly ‘ended’ (ha ha) in a victory for “liberal” economics and “liberal” social democracy. Neither was remotely “liberal” in any layperson’s use of the word – “liberal” economics has worsened unfairness and inequality, whilst social “liberalism” has given us a ‘new puritanism’ based on censorship.

      The public simply won’t wear any attempt to reinstate this sort of stuff. The public sector will be valued more, for one thing, and I already expected deteriorating prosperity to fuel demands for redistribution, and for tight migration policies.

      Ironically, this might have favoured Bernie Sanders in the US, and someone like John McDonnell in the UK. Instead, Mr Trump and Mr Johnson get a free ride against irrelevant ‘centrists’…..

  17. Two Items of Interest in terms of Recovery from Covid 19
    *The normal curve of steeply rising followed by steeply falling cases was true in China, but has not been true in subsequent places. Italy and New York are seeing a fat tail. What will happen when restrictions are loosened is uncertain.
    *A study from Shanghai indicates that people who were infected and then recovered do not necessarily display a lot of anti-bodies. Some of the people had no measured anti-bodies at all. The authors cautioned about the uncertainties of vaccines which rely on low levels of infection to produce high levels of anti-bodies.

    I’ll add my own gloss on that study. If you listened to Dr. Murray, you know that the first line of defense is your skin and your mucus membranes. The second line of defense is the innate immune system. The third line is the acquired immunity, which includes anti-bodies generated either by the disease itself or deliberately by a vaccine. Dr. Murray gave his opinion that the third line of defense gets too much attention, while the first two are the most important. Suppose a healthy person in Shanghai becomes infected. Their first two defenses do their job and a week later they are symptom-free. My hunch is that they never produce a lot of anti-bodies. So…if they are picked for study, they show up as either zero or low anti-bodies. We know that the immune response is layered…because the last resort is the cytokine storm. If we look at recovery as best facilitated by simply being a healthy person, many otherwise opaque observations come into focus.

    But how can a healthy, 25 year old, health worker contract the infection and die from their own auto-immune response? And the answer is the notion of ‘viral load’. Think of it as a weight or volume of viruses. The viruses multiply exponentially, and the immune response multiplies exponentially. So a race happens in your body. Obviously, the larger the initial load, the harder it will be for the immune system to overwhelm the exponential of the virus. So a doctor going from sick patient to sick patient, with inadequate PPE, is subjected to a huge load and their immune system will have a hard time….particularly if they are under a lot of stress.

    My sour comment on ‘lack of quality’ is that all the political attention and commercial focus seems to go to ‘magic vaccines’ and heroic measures such as ‘shutting down the city’. These may be delusional and are certainly destructive in the case of the shut-downs. Yet, as I hear people say, the mainstream media keeps denying that the first two lines of defense even exist, much less operate effectively when the person is healthy. For the first time in history, poor people are worse fed and exercised than rich people…and the fatalities mirror that fact. Yet the only politically correct thing to say is ‘we are all in this together’ and the rich should shelter in place on their yachts.

    Don Stewart

  18. Trump and the Professionals

    ‘We face a doleful future’ vs. Happy Days are Here Again

    Don Stewart
    PS. What is most interesting about this is that the professionals (unlike the politicians) are willing to get crosswise with Trump. Aren’t they afraid that they will get “WHOed”?

  19. In today’s Guardian there is an article suggesting that up to 200 oil tankers could be required to store surplus oil during this downturn. This is clear proof of the energy basis of the economy that Mr Tim Morgan has been claiming so correctly for some time.

    • In my email version, the link “This Article” isn’t live. I went to comment, and it is live on the web version.

      pasted from email post:

      “As of 19 March 2020, COVID-19 is no longer considered to be a high consequence infectious disease (HCID) in the UK”.

      That, astonishing as it might sound, is the official UK stance.

      This article is well worth reading on this issue.

  20. @Dr. Morgan
    “typically has a high case-fatality rate”

    If they are defining deaths per infection as the ‘case-fatality’, then it is far less damaging than some other viruses, such as Ebola which killed around half the infected people. Some people are putting the death per infection for Covid 19 at 1 in 3 or 4 thousand. Some of the bird viruses killed about a third, as I recall. What has made Covid 19 so damaging is the very high number of people one individual could infect, and thus an explosive exponential growth rate, and the sudden additional and unexpected and therefore not prepared for load in the ICUs.

    Some estimates put the number of deaths attributed to the virus (which means ‘added on to existing diseases the patient was suffering from’) at 2 percent of current death rates. Since most deaths in prosperous countries are from preventable chronic conditions, it becomes a misleading question when one tries to paint the picture in black and white.

    So, technically, they are probably correct. That, of course, doesn’t mean that their criteria are correct.

    Don Stewart

    • It may be that this reduced classification eases the requirement to supply PPE to those dealing with those infected – or is that too cynical?

    • @Dr. Morgan
      Maybe you are not cynical enough:
      “These prevalence estimates represent a range between 48,000 and 81,000 people infected in Santa Clara County by early April, 50-85-fold more than the number of confirmed cases. Conclusions The population prevalence of SARS-CoV-2 antibodies in Santa Clara County implies that the infection is much more widespread than indicated by the number of confirmed cases. Population prevalence estimates can now be used to calibrate epidemic and mortality projections.”

      The cynical will point to Bill Gates funding as reasons why many people do not want to admit that the vast majority of cases are resolved with no medical intervention at all.

      The original information from Wuhan was simply the number of deaths divided by the number of people who went to a doctor who identified them as having the virus. As you can see from the Stanford study, such a ratio vastly overstates the case prevalence as defined by deaths per infection. This is not to be critical of the hard work the medical people in Wuhan performed while collecting statistics and publishing them in the midst of a crisis. It IS critical of the WHO and the White House who used the ratio in really stupid ways (the US projection of deaths was initially 2 million people).

      The early information led me to, weeks ago in this blog, argue that shutting down the economy was a mistake. The step which should have been taken (IMHO) was to warn those who have chronic diseases to sequester themselves as best they could. Unfortunately, the great majority of Americans have those chronic diseases. So some sort of criteria might have been established. For example, if you have 2 of the 5 most prevalent co-morbidites, quarantine yourself.

      So far as I know, no country in the world has taken the self-quarantine route. Everybody is dumbly following the Wuhan example of shut-downs. Shut-downs work, but at a horrendous price. So now we get to the ‘global conspiracy’ rich soil. With all those seeds, a little bit of tillage causes all sorts of conspiracy plants to emerge. Are they trying to distract the public from the financial debacle? Establish a New World Order? Force everyone to get identity cards testifying that they are inoculated with one of the Gates Foundations’ vaccines? And so forth. I am sure there are some notions of the Bilderburg’s maneuvers.

      Trump is trying to re-open businesses. That is not (IMHO) an irrational move. Unfortunately, he has no credibility with professionals, who judge him based on his recent behavior. The Chinese DID NOT fail to warn the world. If anything, they over stated the threat (but not from nefarious motives). Trump has no one but himself to blame for the 6 weeks of doing nothing. But of course, he will never blame himself. He will point to his head and say ‘it is all in this massive brain’.

      Don Stewart

    • I must admit I’m surprised at the comment that China didn’t fail to warn the world. Doctors and others trying to disclose this were silenced, and the research institute which published the first scientific analysis of the virus was shut down the following day. And why do they still tolerate these “wet markets”, which seem pretty disgusting?

      I’m trying not to take sides here, but my hunch is that relationships between China and the US/West will be scarred permanently after this.

    • @Dr. Morgan
      China started out in denial, but did a 180 degree pretty quickly. Within a few days they had sequenced the virus, and very quickly decided to close Wuhan and 15 other cities. They produced the first test within a few days after sequencing the virus. The German doctor who I linked to weeks ago described it as ‘the virologists scared them’. The German correctly pointed out that we knew practically nothing about the virus at the time in terms of infectious behavior, how many required hospitalization, and how many would die. He was opposed to shutting down Wuhan in the absence of data. The Chinese DID get in under the window where containment was possible…whether misguided in hindsight or a wise move taken in a timely manner. The US did not get in under that window…so it was either let the virus run or shut down very large sectors of the economy.

      I think I misspoke about all other countries following the Wuhan example. My understanding is that South Korea, Taiwan, and Singapore followed a policy of tracing contacts rather than broad shut downs. The tracing mechanisms were still in place from the preceding epidemics. The US had no available resources to do tracing. We had some few thousand people, but they were dedicated to things like Sexually Transmitted Diseases and had been reduced in number.

      My guess is that the pandemic was certain to cause considerable economic damage, but that shut-downs were not the optimum strategy. In per capita terms, China has better results than the US. But, as I have also pointed out, if it is the nature of the beast that all of us will eventually become affected, then it is a mistake to think that China has avoided infections…they have just delayed them. The Lieutenant Governor of Texas looked at the ‘flattening the curve’ argument and speculated that it might be best to get it over with so the economy could begin to function again. We may look back on our experience from a future vantage point and have a different evaluation than we do today.

      My own opinion, which I get from doctors I happen to like, is that the best defense is the innate immune system. The fact that the US has so many sick people makes us highly exposed to a viral epidemic.

      Don Stewart

  21. @Dr. Morgan
    If you want to have some fun, try to rationalize spending a million dollars of the taxpayer’s money to save the life of one elderly, very sick person with half a dozen chronic diseases. Believe it or not, there is a sub-specialty which generates ‘value of life’ estimates. They project how much GDP will be generated by a person over the next 50 years and give it a present worth. It turns out spending a million dollars is very reasonable.

    Finding the stupidities in that calculation is left as an exercise for the student.

    Don Stewart

    • I studied this stuff of attaching value to life – under the loose title Cost Benefit Analysis – back in college. It’s also prompted interesting debates between leading philosophers over the years, including pro/anti utilitarian calculus.

      One example is six people on a hospital ward, each dying from the failure of a single organ. They urge the surgeon to kill one healthy person, using his organs to “save six lives at the price of one”.

      Our revulsion at this idea – it has been argued – expresses values that cannot be stated mathematically.

  22. Oh to be a $50 Billion hedge fund with a 501(c)(3) university attached to it for social justification and cover. See “Harvard And Other ‘Well Endowed’ Colleges Face Backlash For Tapping Tens Of Millions In Stimulus Funds,” at Zerohedge today.

    If you want to see someone tweeting the higher education and other outrages, check out the Twitter feed of Oilfield Rando.

  23. As I write WTI oil is $2.59, any comments on to what extent this is gambling and to what extent it is a comment on the future direction of the economy, at least in the US.

    • Just saw it print .89 a barrel. The US should buy it for the Strategic Reserve.

    • Steven
      It was not suitable for the Strategic Reserve, I believe. The reserve needs to be below 35 API, and shale is almost all above that. And I do not think the dumbbell crudes will work well. I’m not an expert, but this is what I understand.
      Don Stewart

    • WTI is West Texas Intermediate:

      FAQ: NYMEX Physically-Delivered Light Sweet Crude Oil Futures
      15 Dec 2017 By CME Group Topics: Energy
      1. What are the amendments to the WTI quality specifications?
      NYMEX announced it will amend the quality specifications in Rule Chapter 200 of its physically-delivered Light Sweet Crude Oil futures contract effective Tuesday, January 2, starting with deliveries against the January 2019 contract month and beyond.
      Specifically, CME Group is amending the contract specifications to include five additional quality test parameters which will provide assurance that the quality and integrity of West Texas Intermediate (WTI) is maintained.
      The current quality specifications in the Light Sweet Crude Oil futures contract will remain unchanged, and five additional quality parameters will be inserted for distillation, vanadium, nickel, total acid number (TAN) and micro carbon residue.
      Current NYMEX Light Sweet Crude Oil Contract Specifications
      Sulfur: 0.42% or less by weight as determined by A.S.T.M. Standard D-4294, or its latest revision
      Gravity: Not less than 37 degrees API, nor more than 42 degrees API as determined by A.S.T.M. Standard D-287, or its latest revision
      Viscosity: Maximum 60 Saybolt Universal Seconds at 100 degrees Fahrenheit as measured by A.S.T.M. Standard D-445 and as calculated for Saybolt Seconds by A.S.T.M. Standard D-2161
      Reid vapor pressure: Less than 9.5 pounds per square inch at 100 degrees Fahrenheit, as determined by A.S.T.M. Standard D-5191-96, or its latest revision
      Basic Sediment, water and other impurities: Less than 1% as determined by A.S.T.M. D-96-88 or D-4007, or their latest revisions
      Pour Point: Not to exceed 50 degrees Fahrenheit as determined by A.S.T.M. Standard D-97
      Amended NYMEX Light Sweet Crude Oil Contract Specifications – Beginning January 2019
      Five Additional Tests
      Micro Method Carbon Residue: 2.40% or less by mass; as determined by ASTM Standard D4530-15, or its latest revision
      Total Acid Number (TAN): 0.28 mg KOH/g or less as determined by the first inflection point; using ASTM Standard D664-11a (2017), or its latest revision
      Nickel: 8 parts per million (ppm) or less by mass; as determined by ASTM Standard D5708-15, Test Method B, or its latest revision
      Vanadium: 15 ppm or less by mass; as determined by ASTM Standard D5708-15, Test Method B, or its latest revision
      High-Temperature Simulated Distillation (HTSD) as determined by ASTM Standard D7169-16, or its latest revision, as follows:
      (a) Light Ends 1020°F by HTSD: Not more than 16% by mass

    • There’s no demand. Storage is almost full. No one wants it. So producers will have to stop producing, and the petrodollar comes under pressure, and they will start using the word “war” in tweet sessions. Because Saudi needs $80,- and US frackers are completely broke. This will get messy. Very dangerous shit.

  24. The low print was – $37.63 or down around $55 from the prior close.

    From Yahoo Finance:

    “The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory — minus $37.63 a barrel. That’s right, sellers were actually paying buyers to take the stuff off their hands. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.

    Underscoring just how acute the concern over the lack of storage is, the price on the futures contract due a month later settled at $20.43 per barrel. That gap between the two contracts is by far the biggest ever.”

  25. Art Berman this morning on the futures contracts for WTI

    It’s a contract roll issue…not a ‘storage is full’ issue.

    Don Stewart

    • Seems DJT and advisors might do something right for a change. From the Marketwatch website:
      Trump seeks to add 75 million barrels of oil to Strategic Petroleum Reserve amid historic price crash
      President Donald Trump said Monday the U.S. is “looking to” add as many as 75 million barrels of oil to the Strategic Petroleum Reserve, after an historic day for markets that saw crude prices turn negative.

  26. Bad Behavior
    The Chinese are doubtless guilty of bad behavior. Everyone is. Here is a link to a talk by T. Colin Campbell relating the character assassination which accompanied his publication of a massive study of rural China and, specifically, cancer. The study was done almost 40 years ago. He is very proud of the thoroughness of the study. It convinced him, a boy who grew up on a dairy farm, that animal products and dairy specifically were causes of cancer.

    He expected interest from the scientific community. Instead, he met with character assassination. You will hear him describe it. “It damaged me…I paid a high price”. If he had not had tenure, he is sure he would have been fired from Cornell. I had dinner with him shortly after he closed his lab at Cornell. He said ‘I am sure they are glad to see me go.” Much of the scientific community still refuses to acknowledge the study. Politically, the dairy industry is still subsidized. John Connally advised Richard Nixon not to go against the dairy industry.

    Do the bad actions by the dons of nutrition research indicate that Americans have an indelible stain? I don’t think so. People are just people.

    Don Stewart

  27. “I don’t see there’s much they can do to prevent stocks and property settling at much lower levels. Of course, the Fed could keep pouring in money on the principle of “whatever it takes”, but even that approach is unlikely to work.”

    Although the comment was related to the US, presumably your response applies to all developed economies?

    I find it almost inconceivable that the CB’s and/or Governments will just sit there as housing and stock markets collapse. They are too scared of being blamed for inaction like in the 1930s.

    I have long thought that the can will be kicked as long as possible and expect their response would be massive monetary expansion – thereby maintaining nominal asset values – and leading to run-away inflation and the inevitable destruction of the currencies, justifying the overhaul of the existing financial system.

    This would likely involve the USD being replaced as global reserve by the SDR or – if some have their way – digital CB issued crypto.

    There is also the possibility that gold underpins the new financial architecture.

    • Thanks for the link to Gail’s article Steven.

      What did you, and others who have read, it think about the article?

      Some of the points she makes that were a shock to me included;
      “These are a few of my ideas regarding what might be ahead:…Food in particular is likely to be in short supply by spring a year from now. India and Africa may start seeing starvation much sooner, perhaps within weeks.” and ” Europe, especially, looks ripe for a big step back. Its fossil fuel resources tend to be depleted. There may be parts that can continue with the use of animal labor, if such animal labor can be found. Big protests and failing debt are likely by this summer in some areas, including Italy.”

    • As I have read Gail’s work for some years, and find her a realist (not a wild-eyed doomer), I take her judgments to be reasoned opinion.

      “Prediction is difficult, especially about the future.” Niels Bohr, Yogi Berra, and others.

    • Thank you Steven,

      She does seem to be a bit more on the “wild-eyed doomer” side of things than I think Tim currently is, though that’s not to say that she’s wrong.

  28. Art Berman on Twitter
    “Would someone help me understand negative WTI &LLS SPOT prices yesterday? I understand the negative price for an expiring WTI futures contract but cannot imagine an analogue for negative prices in any wholesale market.”

    The explanation yesterday could have been that some speculators got caught in a squeeze. But how to explain the spot market? I’m no trading expert, but I don’t see too many brilliant insights in the comments section.

    Also one comment that the demand for diesel is dying. Diesel had been holding up better than gasoline. Very strange behavior.

    Don Stewart
    PS. LLS is Louisiana Light Sweet

  29. Poking Around Other Oil Websites
    The most logical explanation I heard about negative spot prices is that there is no available storage. There IS spare storage in Cushing, but somebody with deep pockets may have it leased. In other words, they have cornered the market for storage, at least in the short term. I believe is it SRS Rocco who points to the price curve which indicates you could get very rich by buying oil today and storing it for one month…unless there is no storage available.

    This is in contrast to all the stories over the last couple of weeks that ‘storage will fill up by August’.

    I also see that people are floating the idea that we can just stop the flotilla of tankers bringing oil from Saudi, which will make room for American oil in the refineries. The problem with that, according to Berman on twitter perhaps a week ago, is that the foreign oil is needed to blend with the very light fracked oil in order to fit the refineries on the Gulf Coast. He quoted a figure of an 80 percent shut-down of the refineries if foreign oil is excluded.

    It is curious that Trump now wants to loan federal money to the petroleum complex, announced during the negative price debacle, but the forward curve is not that much different than it was a couple of weeks ago. Oil several years out is currently selling for about 40 dollars. They may be trying to stop the collapse of the oil services companies, and the abrupt layoffs as fracking rigs are idled. You can look up Exxon-Mobil and Chevron stock prices and you don’t see a collapse. They are a lot lower than 5 years ago, but are not collapsing in the last few days. Exxon, in particular, has a very large chemical (downstream) business, which usually benefits from low crude prices. My guess is that the Feds will have a hard time sorting through all the conflicting interests.

    The bottom line for me is that I can’t actually separate out what is due to the ‘shelter in place’ effect, what may be due to market maneuvering, whether the markets will exhibit a V shaped recovery, whether things have changed irreversibly, and whether this is just another stage of a long collapse. If you know for sure, please clue me in.

    Don Stewart

  30. Latest Tweet from German
    “No one answered my question about how SPOT prices can be negative.

    Many told me what I already knew: how an expiring futures contract can have a negative settlement price.

    It’s not about electric power prices.

    SPOT is cash for oil RIGHT NOW. Cannot be for a negative price.”

    My comment….which is just speculation. IF someone really has cornered storage, and if a production company has oil coming out of the ground, they need to sell it for whatever they can get for it. There is a crude grade in Wyoming which pretty frequently brings a negative price…I think it is basically tar. A good well is expensive to shut down, and cannot be done for lots of wells simultaneously like turning a tap. So my candidate for the wrench in the cogs is that someone has cornered the market for storage. At any rate, both West Texas Intermediate and Louisiana Light Sweet are selling for 50 dollars less than Brent.

    Interesting times!
    Don Stewart

    • There seem to be two critical issues here.

      First, the vast majority of oil trading is in ‘paper’ barrels, between parties with no intention of taking delivery, and indeed no ability to do so. These traders have to sell paper contracts before the date of ‘nomination’ (of a physical delivery point). But there are no buyers, so they’re having to pay others to take this obligation off their hands.

      Relatedly, storage capacity is now in very short supply, meaning it’s ‘at a premium’ – this premium is seen in inverse form as a negative oil price.

  31. @Dr. Morgan
    Art Berman has been of the opinion that there IS physical storage available. It is true that it its filling fast…but he does not believe that all the tank farms are filled to the brim. See his tweets today. Hence my desperate suggestion that somebody has leased the empty storage. Whoever that is has executed a squeeze which is allowing them to hoover up oil and put it in the storage and get producers to pay them to do so. Since the forward prices are still up in the 40 dollar range, they can make an awful lot of money. If the storage which has been manipulated is at Cushing, since the contracts are for physical delivery, they have to do practically nothing to make the money except pay the monthly fee for the storage.

    As a side remark, Berman quotes and gives a link to a Raoul Paul article which mirrors a lot of your concerns for the future: destruction of currencies, etc. Paul predicts a Depression type trip to the abyss, followed by a New Deal type response with an eventual recovery.

    Don Stewart

    • Good points Don. Front leasing oil storage to make it look full and go short oil. Make a fortune. I don’t think we will ever know. But still, good points.

  32. In articles pubished here I’ve intentionally avoided making forecasts (because economic uncertainties are simply too big), and I don’t envy anyone who has to do so.

    This said, I’ve been looking at the outline projections issued earlier this week by the IMF, whose forecasts generally both reflect and influence consensus expectations.

    Here are some examples of GDP growth projections:

    2020 -3.0%
    2021 +5.8%
    2021 vs 2019 +2.6%
    2020 -5.9%
    2021 +4.7%
    2021 vs 2019 -1.4%
    2020 +1.2%
    2021 +9.2%
    2021 vs 2019 +10.5%

    I have to say that I find these implausible, even if, as assumed, activity gradually gets back to normal in the second half of 2020. Here are just some reasons why:

    – We’re at the point of “credit exhaustion” – households, and probably businesses, will be in no hirry to take on more debt (and that’s what’s driven most “growth” in recent years)

    – Consumer caution – I see no likelihood of much recovery in discretionary spending (holidays, new cars, ifads, etc)

    – Business caution – little or no rebound in advertising, expansionary investment, etc, and much greater determination to control costs.

    The energy industries (including renewables) will suffer from much reduced investment.

    Even investors are likely to be newly cautious, continuing to turn against cash-burners and airy “growth” promises

    The ad-based business model is unlikely ever to recover to its pre-crisis levels

    Companies supplying consumer discretionaries – including luxuries, travel etc – are going to experience very tough market conditions.

    Put this lot together and any kind of rebound – putting 2021 activity above 2019 – looks unlikely.

    • Amusing in a way, but also rather sad: I get regular emails from a very good English shoemaker. Well-made, wonderful leathers,and for the quality well-priced too.

      Their latest attempt to drum up sales – with a 15% discount across the board – appeals to the psychological benefits of dressing well in a lock-down isolation.

      I suppose it’s a bit like troops in WW2 shaving every day to try to hold things together.

      Now, I like and admire their shoes, and could do with another few pairs,especially their excellent walking boots which cause no blisters at all – and perhaps the last I will ever buy – but I’m certainly going to wait for the 25% discount or greater which is sure to come.

    • The thing is, if this shoemaker’s customers cease buying from him, his business could fail.

      Then, if and when some form of normality returns, will these customers regret the loss of his business?

  33. @Dr. Morgan
    The future may be more hazy than we can imagine. Nora Bateson says this in a tweet:
    “The fragility the virus has revealed, & the possibilities for systemic changes lie in the relationships between sectors, departments & ministries. People don’t live in sectors, they live in families.”

    As we enter into the era of ‘degrowth’ with many of our economic inputs becoming more expensive (e.g., rising ECoE), then some sort of shuffling becomes necessary. It is tempting for us to simply say something like ‘people will fly less and use that money and energy to buy groceries or pay the rent’.

    But I think Nora has a point. I am observing a family consisting of two 50ish parents, 2 children of college age, plus one dog. Since they are all quarantined at home, the dog is the central actor in organizing their days…it’s sort of like the way the parents of a new baby suddenly find that babies have a way of getting you to change your plans to fit into theirs.

    The children in this family are very unhappy about the lock-downs. Their world is about finding a mate in an intensely social species. Yet they are stuck at home. The kettle simmers. You could see this (in degenerate form) during spring break on the beaches. I saw a picture of a girl waiting for a beer at a kiosk wearing nothing at all. Where has subtlety fled?

    The family in traditional societies has been the subject of volumes of written stuff. The economic system in many societies was built around family centered enterprise. My guess is that we need to dust off those studies and look pretty seriously at the data on how societies thrived in that sort of world. (Personally, I like the part about ‘women obey your husbands’…we seem to have lost that somewhere in a ditch….tongue in cheek.)

    Don Stewart

    • Yes, The young and the restless…..I live in a college town, but the college is shut down. On the weekends, the apartments seem to be filled up with the kids that come back to town and have parties as the house two down had a Covid Cornhole* Tournament and seemingly defied the public health orders against more than 10. I could hear the kids laughing about the virus and fake coughing. Many of the police do not want to enforce these requirements as it is done to individuals to interpret what the Constitution means to them.

      In the end I think we are going to have to run a separate society for awhile and let college kids come back to town, if we can protect the workers and the staff (ie more vulnerable) with some tracing and testing? It seems like a monumental task, but the disruption associated with not letting kids free up will likely lead to infections anyway. I can see kids coming back to college faster than I can see barber shops, dentists and salons opening up?

      * Cornhole is game where bags are filled with corn and tossed onto a slanted board where points are achieved based on getting bag near or in the hole. Similar to horseshoes without all the iron and the games are mobile.

  34. @Dr. Morgan
    If you take a look at the stuff after Raul Paul’s main article, you will see some graphs which may be suggestive. Traffic in Beijing has recovered on week-days, but is very depressed on week-ends. This suggests to Paul that efforts to convince the Chinese that ‘happy days are here again’ is not working…at least not yet. Purchases of non-essentials are way down.

    On the other hand, somebody (maybe Paul) has published a picture of a beach in Florida. In one county, the lockdown on beaches is still in effect. Across the county line the lockdown has been lifted. Nobody on the one side, but lots of people on the other. It could be that the Chinese will be very slow to respond to stimulative efforts, but Americans will be raring to go.

    Don Stewart

  35. I am a subscriber to the Manhattan Enquirer (NYT Times) and this article seems to confirm the lack of mobility (declining prosperity) for those born since 1980. I do not know if it is paywalled. PS my lack of mobility has been by choice!

  36. Hi Tim,

    You point out in this article that “What this means is that “de-growth” has now arrived.”

    Interesting PMI for Europe today and for the UK I note this comment, “comparisons of the PMI with GDP indicate that the April survey reading is consistent with GDP falling at a quarterly rate of approximately 7%. The actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector, which have been especially hard-hit by the COVID-19 containment measures.”

    I wonder what GDP would look like if the self-employed and the retail sector were included?

    Also given that, the UK government’s chief medical adviser Prof Chris Whitty has said it was “wholly unrealistic” to expect life would suddenly return to normal soon, can we now start to sketch out a picture of the economic and consequent social landscape in the UK and Europe over the next few years or so?

    Chris Whitty is a medic but the implication for me as an ordinary member of the public in his comment is that, although it is “wholly unrealistic” to expect life to return to normal soon, it will eventually return to normal.

    To get to my question Tim, do you have in mind any rough timeframe for the unfolding of events in terms of de-growth and the more general realisation among the public that rather than a return to normal being possible soon it’s not going to be possible at all?

    • I’m glad you’ve asked this, because it touches on what I’m thinking through now.

      The IMF’s latest forecast is that world GDP will fall by -3.0% this year, and grow by +5.8% next, leaving GDP higher (by +2.6%) in 2021 than it was in 2019. Some countries, including China, will still achieve growth, albeit subdued, in 2020 itself. The underlying assumption seems to be that lockdowns and their associated effects will tail off during the second half of 2020, with some form of normality resuming by 2021. This seems to echo the ‘consensus’ view in government and business.

      I should stress that I don’t envy anyone whose job requires the making of forecasts. My own reports on the financial and economic outlook steered well clear of making forecasts, concentrating instead on issues of ‘scope’ or ‘structure’. There’s a great deal that is simply impossible to forecast as of now.

      This said, I’m not persuaded that ‘normality’ will be restored any time soon – to which it must be added that the pre-Wuhan situation could hardly be described as ‘normal’ anyway. Neither, though, am I prepared to accept the “end of the world” narrative without a lot more evidence.

      My own feeling is that effects of this crisis are going to be with us for a long time. There’s no need to rush to judgement.

      Getting a feel for the post-crisis situation is a bit like assembling a mosaic. It’s not like a jigsaw, because we don’t have all the parts dropped in our laps, but have to find the parts for ourselves.

      This is long-winded, but I believe that 2021 will see the “official” interpretation (a) baffled to explain the relative lack of “recovery”, and (b) unable, or unwilling, to recognise or admit to the onset of de-growth.

      Changes are going to be profound, not just in economics and finance, but in politics and society too.

      I should perhaps add that I’m working on this “mosaic” now. I feel I have a lot of the necessary pieces, but am still trying to work out others.

    • Thanks Tim,

      You say that, getting a feel for the post-crisis situation is a bit like assembling a mosaic. Thanks for doing that, I’ll still probably be trying to work out if the post-crisis situation is post-crisis!

      I was surprised by how shocked some of the professional economic commentators are at today’s PMI figures. It seems that shutting down the economy was bad for the economy! Who would have thought, certainly not the experts it seems.

    • Thanks.

      The way I’m looking at it is like this. I’ve set out the issues on ‘value destruction’ and ‘de-growth’, in two articles, both of which are also available as downloads at the resources page. I’m pretty confident about these as outlines of the issues involved, and as the ‘spine’ of the narrative on which to base further investigation.

      I’m not publishing forecasts, because we don’t, yet, know anywhere near enough to make these in a meaningful way. The world is already full of forecasts without me adding to them.

      I’m not coming out with ‘it’ll all be over by Christmas’ or ‘the end is nigh’ narratives, because (a) we honestly can’t know, and (b) I don’t think either extreme is proven. Temperamentally I prefer to reason things through. Plus, I’m no longer in a City/Wall St environment where one is pressed for instant answers. Hence the ‘mosaic’.

      This doesn’t mean I can’t mention ‘pointers’.

      The first of these is inequality. The worst hit by this crisis are the poor, those lacking job/housing security, the vulnerable, those living in crowded conditions. This has to be addressed, because the virus has forced us to be ‘all in this together’. We can’t beat this by keeping every affluent person (or nation) safe, and leaving the less affluent people or countries to their fate. Prosperous neighbourhoods can’t be safe if there are urban pockets of virus waiting to flood back in. Ridding the US and Europe of the virus would achieve nothing if, say, there remained large pools of infection in, say, Africa or Latin America.

      I’m not talking socialist/collectivist answers here, but I do think that the ‘I’m all right Jack, pull up the ladder’ ethos of “liberalism” is finished. Redistribution is going to be demanded, and insecurities such as homelessness, cramped housing and the “gig economy”, which put society at greater risk, have to be addressed. People will value public services more after this, and will demand more responsible behaviour from the prosperous.

      Economically, businesses and households – and governments, too – are going to be poorer after this (higher debts, depleted savings, impaired incomes), and they’re also going to have been shocked by it (reflected in more financial caution and a reduced propensity to borrow). This combines “credit exhaustion” with “de-growth”. Households will conserve cash (less discretionary expenditure), and so will businesses (less advertising, less investment in expansion).

      And these are just a small sample of ‘pieces in the mosaic’…………………

  37. Alice Friedemann at Energy Skeptic
    Take a look at her post today, featuring a reprint of a 2008 article Could a Pandemic Bring Down Civilization?

    We reassure ourselves that ‘nobody could have foreseen this’, when the truth is ‘we didn’t want to look at reality’.

    Don Stewart

  38. David Holmgren on Retrofitting Suburbia
    David gives a very good and brief overview explaining why the suburban yard is the ideal place to grow the vegetables and small animals which are essential to human health. He works out the details of how the largely self-reliant metropolitan area relates to broad acre agriculture, and why “families” need to grow in size (“families” aren’t just nuclear families).


    I’ll have a little more to say, but I need to work out how to condense a lot of relationships into something brief.

    Don Stewart

  39. Long and wordy
    Let’s begin with two poles:

    *David Holmgren’s Retrosuburbia concept and calculations
    *The physicist Paul Davies’ book The Demon in the Machine
    Holmgren works out a very practical way for many people to function and flourish in a downsized world. Davies works out, in the words of The Guardian review:

    “The big idea is that…understanding the information flow in organisms might be the missing part of our scientific jigsaw puzzle. The informational approach, in Davies’s elegant and lucid exposition, is extremely promising.” A quote from page 66: “Living organisms are not just bags of information: they are computers. It follows that a full understanding of life will come only from unravelling its computational mechanisms.”

    Now, if humans contain both the genetic (but not limited to only ‘human’ genes but also including the non-human genetic material upon which we depend or live alongside or fight against) and the software of computation, and if that software is very flexible, then change is entirely possible. As a sidebar, remember that there is no evidence that we are any happier today than was a Greek citizen of Athens. So the physical environment may change, but that doesn’t mean that we can’t adapt to it. What mechanisms prevent adaptation? There are many, but I think that going back to Thomas Paine’s essay which was instrumental in provoking the American Revolution makes pretty good reading:


    What ties us to the doomed status quo includes the legal and enforcement framework which would prevent Holmgren’s Retrosuburbia and instead land us in Serfdom. If Paine was correct in 1776, then something similar is probably true in these heavily indebted times. It seems to me that defaulting on debts is bound to happen, just as Paine thought that separation from the decadence of Europe was essential, and we should take Paine’s advice to make the process as thoughtful as possible. So we are probably looking at land reform and debt defaults.

    If you want to see what a Retrosuburbia looks like in the US, take a look at Kara Stiff’s recent series of posts on Resilience.org. The Latest is titled: 4 Things I Learned by NOT going to the Grocery Store for a Month. My wife has had a busy social schedule. But now she has not driven a car in about 3 weeks. She told me yesterday that she is enjoying the freedom. Kara and her husband were a two income, no children couple. Now they are a single income family, with much lower income and energy expenditure…and thriving to all appearances. That is part of the vision of Retrosuburbia. But I don’t think most people can get there with a huge debt load. One of the things that made the early US ‘work’ was the availability of free land on the frontier (of course that required the virtual eradication of the native cultures…but that’s another story). Suppose that, instead of a guaranteed income to purchase the essential from an unsustainable corporate system, the government guaranteed everyone the opportunity to work for their supper?

    Paul Davies: “Though Maxwell would doubtless have been delighted to see the advent of practical demonology, he could scarcely have guessed that the interplay of information and energy involved has been exploited by living organisms for billions of ears. Living cells…contain a host of exquisitely efficient and well-honed nano-machines, made mostly from proteins. The list includes motors, pumps, tubes, shears, rotors, levers, and ropes…”

    And a very important point: “How can we explain the astonishing thermodynamic efficiency of life? Organisms are awash in information, from DNA up to social organization, and it all comes with an entropy cost. No surprise, then, that evolution has refined life’s information management machinery to operate in a super-efficient manner. Organisms need to have perfected the art of storing and processing information, or they would literally cook themselves to death with waste heat.” That is why a human can so quickly and without much thought make most of life’s decisions. But I would add that Context constrains everything. The decision a person alone in the woods might make will have a very different context than someone working in a hierarchical corporation or military force. If we want behavior to change, we have to change the Context.

    The proposal for a return to Retrosuburbia leverages the extraordinarily high energy efficiency of biology to replace some of the inefficient machines of civilization. I don’t think anyone would choose to go back to Adam in the Garden, but we may very well be able to strike a happy medium if we can rid ourselves of the legal shackles and our own lack of ingenuity.

    Don Stewart

  40. While the internet is full of speculation these days about what our world is going to look like on the other side of this pandemic, I note that there is one topic that is not receiving a lot of attention. While a lot of the discussion of the argument over re-opening the economy focuses on the rural/coastal city and Red State/Blue State divides, I haven’t seen any real discussion of the generational divide. It seems a taboo subject. However, eventually we are going to have some good data about this pandemic, and if it turns out that we destroyed hundreds of thousands of small businesses and livelihoods, ended mid- and upper-level careers and reduced large numbers of people to permanently working in jobs that pay much much less and/or left them semi-permanently unemployed, all in order primarily to keep people aged 65 and older who already had other chronic health problems from dying a few months or years before they would otherwise have died, let’s just say that I think there’s going to be a huge pool of resentment out there that is not going to bode well for “facing the future together.”

    Ditto if the data shows that underclass minorities with chronic health problems because of poverty and the legacy of racism also bore the brunt of the pandemic.

    I am of course commenting about the West, the developed world. I understand that a different perspective may be in order for the undeveloped world.

    I also note that, in the U.S. at least, this is likely to be the last WW2 and “boomer” generational presidential race. Most boomers will exit their positions of power in government, finance and corporations stage left in the next 5 – 10 years. After that, the people who have been stiffed their whole lives will be in control. I guess we’ll see how that goes.

    If we want to have cooperation in transitioning to a lower-energy world, we definitely need the collective understanding that this was bound to happen anyway because of rising ECoE and resource depletion, whether or not the boomers accelerated the process by once again sacrificing the young in order to save themselves. I say “once again” because the primary modus operandi since 1970 has been to borrow from the future in ever larger amounts to pull consumption forward, leaving an un-repayable mountain of debt and vastly depleted resources for the grandchildren and future generations.

    Since politics is very much a “divide and rule” business that thrives on plying identity and resentments, I don’t hold out a lot of hope. My main point is that there is a good chance that Western societies come out of this with more division, more strife and far more animosity than before. Honesty about energy and resource depletion and the predatory nature of our economy could defuse that and lead to cooperation, but I think it is unlikely that we’ll develop a new politics based on honesty.

    • “If we want to have cooperation in transitioning to a lower-energy world, we definitely need the collective understanding that this was bound to happen anyway because of rising ECoE and resource depletion”

      I agree, but I’ve no idea how we’re going to promote that understanding.

      I mention this because it seems to me that all of those ‘conventional’ economic models so trusted by governments and business just exploded into fragments, and are still grinding out “growth” projections in a sort of ‘dialogue of the deaf’. ‘World GDP higher in 2021 than in 2019’ (IMF) – seriously?

      On the other hand, and whilst of course I need to change some of the inputs, SEEDS is working fine. The model had already identified “de-growth”, i.e. deteriorating prosperity, so all that really changes is timing, not directions.

    • The old boys club is still as active as ever, though. See:Shysters…


      Banks handling the government’s $349 billion loan program for small businesses made more than $10 billion in fees — even as tens of thousands of small businesses were shut out of the program, according to an analysis of financial records by NPR.

      The banks took in the fees while processing loans that required less vetting than regular bank loans and had little risk for the banks, the records show. Taxpayers provided the money for the loans, which were guaranteed by the Small Business Administration.

      According to a Department of Treasury fact sheet, all federally insured banks and credit unions could process the loans, which ranged in amount from tens of thousands to $10 million. The banks acted essentially as middlemen, sending clients’ loan applications to the SBA, which approved them.

      For every transaction made, banks took in 1% to 5% in fees, depending on the amount of the loan, according to government figures. Loans worth less than $350,000 brought in 5% in fees while loans worth anywhere from $2 million to $10 million brought in 1% in fees.

      For example, on April 7, RCSH Operations LLC, the parent company of Ruth’s Chris Steak House, received a loan of $10 million. JPMorgan Chase & Co., acting as the lender, took a $100,000 fee on the one-time transaction for which it assumed no risk and could pass through with fewer requirements than for a regular loan…

    • A co-operative transition – although desirable, I agree – is most unlikely: we will see an often painful collapse.

  41. @tagio
    I read somewhere yesterday that the black population of Chicago is about 30 percent. But 70 percent of the Covid cases have been black. Is it because of ‘systemic racism’? or ‘ghetto lifestyle’? or ‘an awful lot of black people are taking care of the people in hospitals?’ or some other explanation which one might propose. In any event, there may be explosive anger.

    I also note that the highest rates of Covid cases in Missouri are in the counties with big meat processing facilities. These are ‘red’ counties, far from the coast. How do they perceive this? The facilities are now mostly closed, as large numbers of employees are diagnosed with Covid.

    Don Stewart

    • I think we’re missing the big corellation here. Various governments are investigating levels of risk for ethnic minorities, the obese, women, the elderly, those with pre-existing medical conditions, and so on, but there’s one correlation that’s not being investigated.

      That omission is prosperity.

      If you’re prosperous, physical (aka “social”) distancing is easier (which isn’t hard if, say, one person or a couple lives in a large house). You’re less likely to have pre-existing medical conditions, and your diet is likely to be better. You’re also likelier to be less exposed to the stress that goes with financial insecurity. All of this is likely to result in below-average risk of infection. In some countries (including the US), the wealthiest are likely to have best access to medical care.

      If you’re poor, by contrast, perhaps living in a crowded hostel, a dense form of housing or a densely-populated neighbourhood, physical distancing is harder, and earning enough to get by might increase your contact with others. The poorer you are, the likelier it is that you’ll have diet deficiencies, pre-existing medical conditions, elevated levels of stress and inadequate access to health care.

      This applies, not just to medical vulnerability, but to financial vulnerability as well. Those in well-paid jobs are less vulnerable than those trapped in the “gig economy”.

      I don’t know why it is (though I have my suspicions) that the authorities aren’t investigating the corellations between poverty/prosperity and risk of infection/death. Because they aren’t doing this – but are reporting, for instance, racial corellation – we’re unlikely to develop an in-depth understanding of social risk factors.

      And, where knowledge is lacking, speculation (and conspiracy theories) thrive….

  42. Very true: but people also need to be rather more mature and recognise that if they suffer, it is because they are human, not principally because the system – or someone did something to them – and that ‘man born of woman hath but a short time to live’.

    It puts much into proper perspective.

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