#173. The affordability crisis


In the previous article, we looked at what our handling of the Wuhan coronavirus crisis might tell us about our ability to tackle the looming, even greater challenges of de-growth and environmental risk.

The focus now shifts to the nearer-term, and to the nuts and bolts of economies trying to emerge from crisis. Though faith in a rapid ‘V-shaped recovery’ may have faded, it seems that governments, and many businesses and investors, are still pinning their hopes on over-optimistic expectations. If there’s a consensus now, it might be ‘flatter and longer than it used to be, but it’s still a V’ – and which still places unswerving belief in an eventual return to pre-crisis levels of output and “growth”.

In particular, it seems still to be an article of faith that monetary stimulus can boost economic activity, through and after the pandemic. Though monetary largesse can, of course, be used to inflate capital markets, its effectiveness at the level of the ‘real’ economy is falling ever further into question. Specifically, any realistic appraisal of the probable circumstances of households and businesses in the aftermath of the crisis ought to highlight the nearing of ‘credit exhaustion’, after which point further monetary stimulus becomes tantamount to ‘pushing on a string’.

As you’d expect, the investigation summarised here is conducted from the radically different interpretation that the economy is an energy system, not a financial one. This provides a much more realistic basis of appraisal, not least because it looks beyond the cosmetic “growth” manufactured by compounding monetary gimmickry.

Set out here are the interim conclusions of an analysis undertaken using SEEDS (the Surplus Energy Economics Data System). After addressing the critical issue of prosperity, we look at some regional variations, macroeconomic trends, and some of the implications for households, businesses and governments.


Here are the chief conclusions reached in this analysis:

  1. Average prosperity per person is poised to fall very sharply, and to remain at depressed and worsening levels.
  2. Despite a sharp fall in governments’ current-year tax ‘take’, the medium-term outlook is that discretionary (‘left in your pocket’) prosperity will fall even more rapidly than top-line prosperity.
  3. Households’ financial circumstances will be worsened further by increases in debt, erosion of savings, and falls in asset values.
  4. Consumer ‘discretionary’ (non-essential) purchases can be expected to decrease very sharply, and are unlikely to stage any meaningful recovery.
  5. Popular demands for lower overall taxation are likely to be accompanied by intensifying calls for much more redistribution.
  6. Governments will struggle to match diminished revenues with popular demands for greater spending on essential public services.
  7. Further challenges for governments will include pensions affordability and the need to address worsening impoverishment.
  8. Leadership in government and business may have no real idea of what the post-crisis world is going to look like.

It should be added that what follows assumes that there’s no serious “second wave” of coronavirus infections, not least because any such outcome could have devastating economic and broader consequences. In those countries which have handled the initial wave particularly badly, this may turn out to have been an over-optimistic assumption.


As the first set of charts illustrates, the most important conclusion of the lot is that people are going to have experienced a sharp fall in their prosperity this year, and it’s not really going to get any better after that. Despite relentless voter pressure for reductions in taxation, global average discretionary prosperity is set to fall even more rapidly in the medium-term.

In short, what we’re facing is a full-blown affordability crisis, for households and governments alike.

Additionally, though this is not shown in these charts, people are going to emerge from the crisis with their savings reduced and the value of their assets seriously impaired, and with average levels of indebtedness a great deal higher than they were before the pandemic.

Summary global prosperity numbers, stated in thousands of PPP dollars per person at constant values, are set out in the table accompanying the charts.

Fig. 1

1. Prosperity metrics

Fig. 1A

1A prosperity metrics

Regional prosperity

The next set of charts sets out some regional comparisons, at both the total and the discretionary levels of prosperity per capita.

During 2020, top-line prosperity is projected to fall by between -10% (China) and -18% (United Kingdom). By 2024, the average person is expected to remain poorer than in 2019 by 11% in China, 16% in Germany, 17% in America and 18% in Britain.

At the discretionary level, rapid falls in tax collection are expected to cushion this year’s slump in prosperity. By 2024, though, and, in comparison with 2019, the ‘left in your pocket’ prosperity of the average person is projected to be lower by 19% in the United States, 20% in Germany, 22% in Britain and – perhaps surprisingly – by 23% in China. Again, supplementary data is summarised in the accompanying tables.

Fig. 2

2. Regional prosp

Fig. 2A

2A Stats regional prosp

Fig. 2B

2B Stats regional disc

Broad economic trends

From a macroeconomic perspective, the current SEEDS working scenario equates to a fall of 18% in world GDP this year, followed by recoveries of about 4% in subsequent years, leaving the number for 2024 still some 5% lower than it was in 2019.

Even this, though, would mean that GDP had become a still less meaningful metric than it already is, because the only way in which even this kind of modest rebound could be engineered would be via enormous exercises in monetary stimulus. In other words, it’s possible to massage reported GDP using monetary adventurism, but this simply piles up forward commitments, and inflates nominal wealth, without boosting underlying conditions.

At the much more meaningful level of prosperity – a measure which excludes monetary manipulation, and is stated net of the trend energy cost of energy (ECoE) – global aggregate real economic output is projected to fall by 14% this year, and to remain 13% below the 2019 level in 2024 (by which time the world’s population is likely to have grown by a further 5%).

Although levels of private sector borrowing (and defaults) are almost impossible to quantify at present, surges in government borrowing (and in state underwriting of private debts) imply that debt aggregates are set to go on escalating at least as rapidly as they have in the recent past.

By 2024, world debt stated as a percentage of GDP is projected to have risen to 300%, compared with a provisional 217% at the end of 2019. Critically, though, global debt as a multiple of prosperity is projected to soar from 350% now to a frightening 540% over the same short period.

Since prosperity is the most appropriate measure of the economy’s ability to carry its debt burden, this projection implies financial stresses far exceeding anything in our previous experience.

The aggregate of governments’ estimated tax revenues is projected to fall by 21% ($9tn) this year, and to remain 6% lower in 2024 than it was in 2019. Historic and projected debt, GDP and prosperity aggregates are summarised in fig. 3, with supplementary data again provided.

Fig. 3

3 Metrics macro

Fig. 3A

3A Stats macro


The single most important macroeconomic conclusion to emerge from this analysis is that households are going to be much poorer than they used to be, both in 2020 and in subsequent years. Falls in prosperity are likely to have been accompanied by a severe erosion of savings and, in the absence of quite extraordinary levels of monetary intervention, it should be assumed that most countries will experience a sharp correction in property prices, where affordability issues are likely to outweigh efforts at monetary support.

Additionally, of course, the behaviour of consumers is going to be affected by fears and uncertainties. At the basic level, and even if the coronavirus recedes without a “second wave” of infections, people have now encountered a crisis of which most, in the West at least, had no prior experience. The severe deterioration in their financial circumstances will be exacerbated by broader feelings of insecurity. We should therefore assume that the numerical deterioration in prosperity will be fully reflected in new levels of consumer caution.

Moreover, it’s likely that we have reached the point of ‘credit exhaustion, after which households are unwilling to go even further into debt, almost irrespective of how cheap (and how accessible) credit has become.

This would mean that further efforts at monetary stimulus would equate to ‘pushing on a string’.

These trends indicate sharp falls in households’ discretionary (non-essential) expenditures. It also suggests that affordability issues will start to exert downwards pressures on variable expenses such as rents.


To the extent that they continue to anticipate some kind of ‘flattened V’ recovery, businesses could be in for some very unpleasant surprises in the aftermath of the coronavirus hiatus. This said, some sectors are implementing capacity cuts which seem consistent with assumptions of long-lasting impairment in their markets.

A major new reality for businesses is likely to be a sharp downturn in consumer discretionary spending. Sectors which supply consumers with things that are ‘wants, but not needs’ may find themselves waiting for demand improvements which fail to materialise.

Like households, many businesses will emerge from this crisis forced into more conservative behaviour by impaired cash flows, increased debts and changed perceptions of risk. Many are likely, in any case, to try to prolong cost savings implemented during lockdowns.

This suggests that B2B (business to business) expenditures may remain much lower than they were before the crisis, and that companies will be reluctant to return capital investment programmes to pre-crisis levels.


As remarked earlier, governments’ estimated tax revenues are projected to have fallen by $9bn (21%) this year, whilst expenditures will have soared. In many instances, fiscal deficits could be in excess of 20% of countries’ (reduced) GDPs, dwarfing the deficits incurred during the 2008-09 global financial crisis (GFC).

Unfortunately, the protracted divergence between GDP and prosperity has led governments to underestimate the true burden of taxation as it is experienced by the average person.

As the following charts show, global taxation has remained at around 31% of GDP over a very lengthy period, leading governments to assume that the fiscal burden on the public has not increased. But tax has increased relentlessly as a proportion of prosperity, reaching an estimated 50% worldwide by this measure in 2019, compared with 41% in 2010, and 33% in 2000. In countries (such as France), where the incidence of taxation as a fraction of prosperity is far above global averages, this has already given rise to significant popular discontent.

During 2020, most governments will experience a sharp fall in tax revenues, but are likely to endeavour to push their incomes back upwards in subsequent years. This is likely to encounter popular opposition to an extent which governments may fail to understand, for so long as they persist in the mistaken belief that GDP is an accurate reflection of public prosperity, and hence of the real burden of taxation on individuals.

Fig. 4

4 Tax charts

Fig. 4A

4A Tax table

Voters are, of course, at liberty to act inconsistently – demanding higher expenditure on health care and other public services at the same time as they call for a lower burden of taxation – and this divergence might well characterise public opinion in the coming years.

It will, moreover, be assumed by many taxpayers that their tax burden would be lower if “the rich” and “big business” paid a larger proportion of the total. It will not have helped public perceptions that governments have appeared able to conjure huge sums out of thin air, particularly where investors and large corporates have required (or requested) taxpayer or central bank support.

As we’ve seen, the public are likely to have been shocked, not just by the coronavirus itself but by what has happened to their financial circumstances, and to their sense of economic security. This is likely to mean that the public’s order of priorities undergoes major change, lifting issues of economic concern to, or near, the top of voters’ agendas. Rightly or wrongly, the popular narrative of 2008-09 has become one of ‘bail-outs for the few, and austerity for everyone else’, making the public preternaturally sensitive to any apparent signs of a repetition of this narrative.

Problems don’t, unfortunately, end there for governments. The current crisis will have exacerbated longer-term issues (such as pensions affordability), and shone a new spotlight on topics such as employment insecurity and the plight of the poorest.

Governments might well, of course, be tempted to ask central banks to monetise their debt, a policy which could have catastrophic financial consequences.

In theory, these conditions could be fertile territory for politicians of the traditional ‘Left’, so long as they re-order their policy agendas onto economic affairs, promising greater redistribution and, quite possibly, the taking of important sectors into public ownership. This, though, would mean reversing the main thrust of centre-left policy over an extended period in which they have, to a large extent, accepted the ‘liberal’ ideology of economics.

This makes it quite conceivable that new insurgent (“populist”) parties will make inroads, this time promising left-leaning policy agendas which include redistribution and nationalisation.


124 thoughts on “#173. The affordability crisis

  1. Dr. Morgan
    A frightening projection, which I find credible.

    Your work implies the necessity for some fundamental changes in how Industrial Man thinks about the world. As a prod to such a change, I recommend that people spend an hour with Dr. Christine Jones working through the implications of our present method of managing the physical world and the allure of new methods as we are learning to understand the microbial world:

    I particularly suggest that people think about the future of fossil fuels. A barrel of oil contains the work capacity of 4.5 years of human labor. What real difference does it make if the energy cost is 3 percent of 4.5 years or 10 percent of 4.5 years? And the answer may be that we are trying to do so many stupid things enabled by the fossil fuels. If we can rethink our relationship to some of the major industries that are actually not productive in light of our new understandings, then a lower prosperity as measured by money may not be such a bad thing.

    Don Stewart

    • Thanks Don.

      I’d no intention of frightening anyone with this, simply setting out a statistical interpretation.

      On the energy cost point, there’s enormous leverage in the system. The first calls on each unit of energy are made by the essentials, and what we regard as ‘essential’, especially in the West, is extensive (we have created ‘high maintenance’ societies in energy terms).

      So it’s not like we have 97 (100-3) or 92 (100-8) units to play with when we think ‘shall I drive to the beach today?’ Say (for example) 90 units are already ‘spoken for’ by the system. Our ‘discretionary’ choices (like driving to the beach) come out of what’s left – out of the 7 units in the 100-3 situation, or out of 2 units in the 100-8 example.

    • @Dr. Morgan
      I will offer this flawed note that I wrote yesterday. I think that the 20 percent efficiency of the average internal combustion engine is also a factor, and the fact that an internal combustion engine itself is usually worth nothing. E.g., we still have to build cars and trucks and chain saws and tractors and we still have to build roads and buildings and educate people and so forth and so on. And I’m not accounting for pollution and stupid uses of oil such as destructive wars. GDP (at least in its Shadow Stats form) is an excellent indicator of ability to service debt…but doesn’t tell us very much about human welfare. I thought about trying to cover those topics (which relates to your comment about leverage)…but I don’t think I can do that in the short term….and maybe I’m not qualified to do it anyway. Anyway, here is what I jotted down yesterday:

      In 2019, the United States consumed an average of about 20.46 million barrels of petroleum per day, or a total of about 7.47 billion barrels of petroleum products.

      The US population is currently 330 million

      So petroleum products per capita is 23 barrels of oil per year.

      If each barrel of oil is worth 4.5 years of human labor, that means that the average US citizen has access to roughly 100 years of human labor each year.

      Now suppose that each citizen had to pay for those 100 years of labor by returning 3 percent of it in order to produce the oil. That reduces the net to 97 years of human labor each year per person.

      But suppose that the cost of the human labor rises to 10 percent. That reduces the net to 90 years of human labor per person.

      Why is this a crisis? It is like a billionaire losing a couple of million in the stock market. Why a ‘crisis of capitalism’?

      I suggest that the answer is that we have constructed a system which is enormously inefficient in its use of the magic liquid. We need to adjust down to a still extravagant 90 years of human labor…but our Magical Thinking has convinced us that we can not only continue to behave as if we have 97 years of human labor, or will in the future have even more. Part of the explanation must involve our decision, 70 years ago, to count expenses as useful products. Nature takes care to use energy parsimoniously. GDP pretends that squandered energy is ‘growth’.

      I also suggest that oil is by far the densest, least costly energy source we are likely to have for the next few decades. ‘Green solutions’ are a mirage in the short term…but will likely be essential in the long term. Therefore, rather than pursue delusions about magical energy solutions, we should set about making our usage of energy actually serve human needs as efficiently as possible. Which implies junking the GDP and related measurements. We will have to measure something like human and ecological well-being. And we will have to stop the insane money printing.

      Don Stewart
      PS. ‘Magical Thinking’ was the favorite explanation that the psychologist Harry Levinson resorted to in my MBA class, many years ago. He wrote a book called The Jackass Fallacy…management had the Magical Thinking delusion that just because high stock prices were important to them, they were also important to the workers, so management could just put a carrot on a stick so that the jackass continued to pull the load trying to get to the carrot which was always just slightly out of reach. The broader point was that just because we want something doesn’t mean it is likely to appear.

    • A simple solution would be – for the US at least – to build cars as efficient as Europe does and ban the manufacture of SUVs.

      There would be howls of protest – but it’s no use having a big shiny car on your drive if you can’t afford to fill her up.

  2. Excellent work, Tim.

    The stock and bond markets traditionally ‘predict’ the economic future. The lead time used to be estimated at six months. I suspect that has shrunk. Currently the expectation in the stock markets is for a rapid V. Bonds have been supported by Central bank buying, but low yields seem to be getting itchy.

    Currently the 10-30 year curve of the US Treasury market is showing early signs that higher long term rates are coming. This may be due to massive issuances of new debt – at record levels – despite much of it being on the shorter part of the curve. It also appears that commodity prices have, on average, stopped declining. If the $US weakens, the CRB index will be pressured higher in dollar terms. Stagflation is a distinct possibility, excluding discretionary items as you indicate.

    • Thanks.

      To be sure, markets used to give us a ‘consensus forecast’ of the future, with prices crystalising the collective opinions of market participants.

      But that cannot work when markets become a tool of monetary policy. That’s largely negated the predictive capacity of equity markets. There may still be some life left in bond markets’ predictive function but, when I saw Greek bond yields turn negative, I lost much of my remaining faith in that idea…..

    • No indicator is perfect. And I’d wait for a 6 month trend before using markets as guidance of any sort. The 3 month V is stock markets isn’t a trend.

  3. although a realistic and possibly gloomy appraisal of where we are and where we’re heading we should never forget that in this modern world everyone has access to housing, comforts, luxury, a varied diet, medical care, transport, education, information, clothing and recreation that were only available to Royalty in the pre industrial era,

    I’m not scared by degrowth because although I might lose access to some of the fripperies of modernity such as ultra cheap air travel I know that I will still retain access to a vast panoply of the advantages of progress,

    we won’t be flung back into the stone age overnight,

    the pain is only evident with those that adamantly refuse to relinquish even a tiny trinket or bauble of what they’ve become accustomed to during the era of peak everything.

    in terms of The 5 Stages of Grief & Loss govt’s seem trapped at the first stage being denial,
    whilst I’m pretty much at the 5th and last stage; acceptance.

    the future is what you make, let’s not make it a cockup!

    the meek can find the world they inherit acceptable.

    • It’s all about how well we manage it, and you’re right about the meek.

      Unfortunately, I’m not seeing many of them in decision-making positions or, for that matter, ignoring covid precautions because it stands in the way of ‘what I want!

    • The Bargaining phase might be problematic – exchanging the loss of trinkets, and real things like a secure middle class life, for a greatly elevated sense of mission and purpose, in other words tribal politics and religious movements, violent scapegoating and who knows what helter skelter.

    • in this modern world everyone has access to housing, comforts, luxury, a varied diet, medical care, transport, education, information, clothing and recreation

      Keep in mind that there is a minority of people, even in rich countries, that don’t have all that, but you are substantially correct. And many of these benefits are provided by collective effort as mediated by taxes through all levels of government.

      This is why even though taxation can reduce per capita discretionary funds, if the tax money is spent on things that directly benefit people, those people won’t care that their income has been reduced. For example, if the government is delivering food to your door, why worry about not having any money to shop for food? High levels of taxation are perfectly acceptable to most people if they get good results for their money.

      It will thus become even more important that government expenditures and the injections of liquidity by central banks be seen as benefiting the public at large and not just the wealthy. Dr Morgan is right that people will become poorer, but if a basic level of necessary goods and support is still available to everyone, they won’t complain too much. If, as is more likely, governments and central banks concentrate on protecting the prices of assets, most of which are held by the wealthy, then not only will inequality become more and more blatant, but everyone but the wealthy will see a great increase in suffering.

      I think that essential goods and services will eventually be redistributed to support the general population, either by mutual consent and collective agreement or by revolution. Income support in the US is set to dramatically decline at the end of July. If the economy is still depressed by then, household pain will become considerable. The US election of 2020 and its aftermath have the potential of being very interesting, especially if Trump refuses to cede power despite losing the election.

    • Good points, Joe, but are you underestimating how much resentment people will feel at having their “trinkets” taken away?

      The lockdown period has put this to the test. Most people (in the West) have had the essentials underwritten, but have really resented losing things like overseas holidays (which surely counts as a trinket rather than an essential).

      Additionally, there are some societies in which people measure their self-worth by how many trinkets they have.

      This can make us less than rational. Few of us really need a big car, but I can almost hear the anger if governments decided (on environmental grounds) to limit all engine sizes to a maximum of 1.5 litres.

  4. An Example of a Second Wave
    Emphasizing, to my mind, the ‘new gaussian’ when the regulations change and the fact that it is metropolitan areas which are the vectors of infection…not very large geographic areas such as a state as large as Texas. Story is accompanied by a photograph of a crowded beach in Galveston on the Gulf of Mexico…Don Stewart
    “Three weeks after it stood out as the urban exception to the state’s spiking COVID-19 crisis, the Houston region has begun seeing a significant increase in cases and hospitalizations.

    The upturn, which began two weeks ago and accelerated this week, comes a month after Gov. Greg Abbott began allowing businesses to reopen and a week and a half after the Memorial Day weekend, both of which health officials think led people to let their guard down and come into closer contact with others. The hike followed a roughly month-long plateau the area had settled into.”

    • My hunch is that some countries will avoid a serious second wave, and others won’t. I suspect that the UK and the US are amongst those at greatest risk.

  5. “This makes it quite conceivable that new insurgent (“populist”) parties will make inroads, this time promising left-leaning policy agendas which include redistribution and nationalisation.”

    I agree, but there is another kind of redistribution: the right wing kind, which is redistributing things between societies (as opposed to redistribution that takes place within the same society). WW2 provided very clear examples of both; Soviet Unioun did the “internal” kind of redistribution, which the Third Reich tried the “external” one (point 3 of the NSDAP Manifesto).

    I’m more and more conviced that WW3 is coming fast (and I’m reducing my estimate to “no later than 2030”). If someone thinks it’s unlikely, I’m very interested in hearing your opinion – by now I’m actually having some trouble with finding people who would really disagree about that…

    • There are historic precedents for wars resulting from resource squeezes, and as distractions from internal instability. A very cogent and influential paper, published a few years before 1914, argued that a war between Germany and Britain would be disastrous for both, but it didn’t stop the rush to war.

      If anything is different now, it might be the magnitude of the destructive power of modern weaponry. This said, of course, Baldwin’s remark that “the bomber will always get through” didn’t change things in the 1930s.

      Most of us, I think, have always believed (or at least hoped) that “common sense will prevail”. But the handling of recent events surely calls that assumption into question.

    • Even a limited nuclear war, between India and Pakistan say, would put enough dust into the atmosphere to significantly reduce global food production for several years. What would happen to a global population of 8 billion people, if global crop yields were to drop by half?

    • Yes, the question of the nuclear weapons is a central one. The methods of warfare have changed, but they have changed many times in history. We can perhaps draw some lessons from the Cold War, by viewing “the containment”, for example, as a kind of siege warfare (among other things). Perhaps we should expect something roughly along the same lines, except “hotter”. I do expect the nuclear weapons to be used in some manner, but not necessarily on large population centers. Note that in siege warfare (and in general), population is not just an asset, but also a liability, a drain on resources.

      “Even a limited nuclear war, between India and Pakistan say, would put enough dust into the atmosphere to significantly reduce global food production for several years. What would happen to a global population of 8 billion people, if global crop yields were to drop by half?”

      If that’s the case, many will die. That can also happen for other reasons, e.g., the complete breakdown of international trade. Many regions seem to critically depend on imports of food, fertilizer, equipment, energy to power agricultural equipment and other such things.

  6. While I have followed your essays enthusiastically for some time now, and have a middling comprehension of your focus, I would like to call you out on your use of what many now call “alphabet salads”; in this case, ‘PPP’. Those who do not know what this means are unlikely to follow your thoughts, nor are they going to turn to previous discussions to find out. This certainly distracts from the importance of what you write, and it is too important to dismiss. Thank you.

    • Thanks, point taken.

      It refers to Purchasing Power Parity, an alternative (and, many of us believe, more meaningful) way of converting between currencies, in this instance conversion into “international dollars”.

      Apologies – I use this term so often I forget that not everyone does!

    • For a good tutorial on PPP, Google the “Bic Mac Index”, which was created by The Economist magazine years ago to illustrate PPP and provide a ready measurement of it.

    • I’ve mentioned PPP before, and opined that the Euro was significantly undervalued when it was trading around 1.07 (PPP is around 1.30 I think). The Pound is also undervalued, and I think PPP is near 1.40. The Yen is in a similar situation. The $US is weakening now. Don’t be surprised if it overshoots on the downside as it did on the upside. The current financial markets are excessively emotional, which is exacerbated by algo trading.

    • This seems to me a case of which is ‘the prettiest horse in the knackers’ yard’?

      The Euro system is dysfunctional, for reasons we’ve discussed before. The UK is making a mess of this situation, and I would now regard a “second wave” of infections there as likelier than not. I’m baffled about what’s going on in the US, where monetary policy seems to be ‘whatever we can do to help the wealthiest’, and mass protests seem (whatever their justification) to increase second wave risk.

      An economically literate visitor from Mars would probably answer ‘none of the above’ to the question!

    • Fundamental analysis is for economists. 😉 Technical analysis is for traders. PPP is somewhere in between. Look at the 15 year $US cycles (round trip) of the past 50 years. It appears that a down cycle began a couple of years ago, but it has been grudging slow to kickoff the second leg. Looks to me that it has begun.

      As to dysfunctional fundamentals: A Democratic Presidential win in Nov, with The Senate joining the House with Dem. majority, and the move could gather speed. Note that I’m a Green.

    • PPP is where we look at what the same item (such as a Big Mac, hence the term) costs in different countries, and convert exchange rates accordingly. So, if something is $3 in the US and the same thing is £2 in Britain, £1 = $1.50.

      Market rates tend, by comparison, to understate the comparative sizes of economies like China and Russia, whose currencies are disliked by FX markets. Not long ago I read somewhere that Russia only had an economy ‘the same size as Holland’, which is what market rates conversion might indeed say, but is nonsense nevertheless.

      In 2018, GDP at market rates was $2.8tn in the UK, and only $1.66tn in Russia. In PPP dollars, the UK was $3tn and Russia $4.2tn. The Chinese economy in 2018 was $13.4tn market but $25.3tn PPP.

  7. Tim,

    One obvious strain on family budgets that isnt mentioned is Housing Costs.

    Historically average UK house prices have been about 3x average earnings, these days its 6-7. This means that while interest rates may have dropped, lower interest rates are replaced by higher prices, while the actual house costs in real terms no more to build than it did 50 years ago.

    Basically home owners or tenants are as a result having to pay a large proportion of their income simply to have somewhere to live, as George Monbiot pointed out, in effect aprivate tax

    • Actually, property prices are in an inverse relationship with interest rates.

      Say rates are 5%, and an average person can afford mortgage interest payments of £10,000 per year. He or she can afford to service a mortgage of £200,000.

      Cut rates to 2.5% and that same £10,000 will service a £400,000 loan. This is true of all potential buyers in the market, so it re-prices houses upwards.

      There are complications to this, but basically that’s how the equation works. Of course, if rates rise, not only does affordability fall, but those who borrowed at the lower rate are now unable to service their mortgages, so are forced sellers.

    • True,

      BUT if the price of a house was the building cost plus (say) 10% or so for the land then future buyers, and indeed tenants would be able to have more disposable income.

      It would be perfectly possible to curb ‘Irrational Exuberance’ in the Housing Market as amongst others The Bow Group have proposed

  8. According to your Figure 1, by the end of this decade, discretionary prosperity for the average human being will be half what it was in 1999.

    At what point are governments going to notice and realise what is going on? Why has it taken so long for our leaders to understand the seemingly obvious fact that the economy is a thermodynamic machine? If it were not to work in that way, it would be the only thing in nature that didn’t. It should be an easy thing to understand and yet very few people in government seem to have the slightest clue. What gives?

    • You’re right – global average discretionary prosperity is projected at $3,390 in 2030, vs $7,330 in 1999. Total prosperity is put at $8,630 (vs $10,820), and tax at $5,240 (vs $3,490).

      It does indeed seem obvious that the economy is an energy system. But governments continue to rely on a conventional economic interpretation whose origins date back 200 years and more, to the start of the industrial era.

    • There are many people with the requisite science background working in governments, who appreciate this.

      UK’s Department for International Development looked at EROEI in other countries in 2013. Although there didn’t seem to be a similar study for ‘at home’ (?)

      My experience is that there is an Overton Window of what is considered to be acceptable to study, or even propose to spend some of the policy research pot on.

      It’s not that they don’t get it. There is just no appetite/incentive to work on these issues.

      Arguing for consideration of ECOE as a factor in scenario development work, and hence gaining an understanding of our surplus energy envelope, didn’t go down well for me.

      In hindsight I was arguing in a science and tech (S&T) research culture that was obsessed with empowering ‘innovation’ and supporting “UK Plc”, believing that we could do anything if we just found the next Steve Jobs or Elon Musk to make it happen.

      This is noble, but it isn’t the only use of the S&T research budget.

      Studying ‘pessimistic’ ideas like upward trending ECOE and the limits it imposes, just doesn’t look good at the next S&T research programme launch event when the ministers need to be impressed. 😜

    • Oh, and even if we did study it in the S&T research programme where all the physics bods sat, there are policy research ‘stove-pipes’ between departments.

      Good work can be done by the research pot in one department that just doesn’t cross over into the economic or business policy areas.

      We called this ‘stove-piping’.

    • Thanks Kevin.

      I was aware of the DfID study at the time, and hoped that something might come of it, though seemingly it didn’t.

      Of course, governments do things in their own way, but this apparent profound ignorance about the real nature of the economy has to be worrying, because it seems to ensure that mistakes will carry on being made.

      In the current crisis, the stakes are higher than ever, and all this ‘world-beating’ science (etc) that ministers keep telling the public about doesn’t seem to be having much of an effect.

      It’s interesting, by contrast, to see that New Zealand, now free of coronavirus cases, can lift virtually all lockdowns, but is going to keep its borders closed, and quarantine anyone entering the country – all of whom are returning NZ nationals – for two weeks.

      In the UK, though, the latter measure is somehow controversial, whilst borders weren’t even partially closed until long after events in Lombardy showed everyone what was coming.

    • I don’t think an energy interpretation of the economy is automatically pessimistic. But I accept that government ministers will naturally ignore predictions that they find inconvenient or depressing, especially if the methodology is different to what they are accustomed to. It is easy to stick one’s head in the sand, especially if you know you will be out of office when the real crisis hits and even more so, if there are contrary voices reassuring you of the opposite, as there always are. Exxon were amongst the most ardent voices opposing the idea of peak oil. There is a sort of poetic justice to their impending bankruptcy.

      The political mainstream ignored peak oil warnings 10 years ago for the same reasons as they are ignoring peak surplus energy. Now, peak oil is here and only zero interest rates and low corporate bond rates, have prevented its arrival before now. Had they accepted the warnings and made an earnest effort to prepare industrial society for the imminent peak in liquid fuel production, we would all be a lot better off now. Instead, we are being bombarded with pathetic reassurances that it is demand rather than supply that is peaking, in other words, we are oh-so-clever that we no longer need as much, thanks to electric cars.

      A government that is fully aware of the surplus energy problem would be spending heavily on energy research and infrastructure. This suggests to me that the Chinese and Russians understand what is going on. Both are pouring lots of money into developing new nuclear reactor technologies and both have active nuclear build programmes. For the simple reason that this is the only remaining high EROI energy source capable of significant expansion. If western governments understood the ECOE problem, similar things would be happening here.

  9. Dr. Tim,

    As I understand, the prospects / forecasts presented in your presentation reflect BAU-light scenario from purely energetic perspective translated into prosperity / GDP / debt.
    In this narrative the governments are are governing, the plants are producing, people are commuting to work, everything works as previously. Only the global economic machine is a little slower, smaller and non-discretionary oriented.

    I see the current situation as “the boiling frog” type scenario. The masses all over the world are exhausted, frustrated, depressed and/or angry, desperate, aggressive – choose your flavor. It is all over in the news. This will – sooner or later – translate into aggression (like in US) in the form of revolutions and revolts (internal / domestic violence). Or – there is alternative – into the wars (external aggression). The tensions one day will somehow explode. The frog might jump out of the pot, I belive.
    And the potential ignitable places are plenty: Persian Gulf as usual, Israel-Palestine, Pakistan-India-China borders, China South Sea, N. Korea, etc.
    As for countries on the brink of revolt – which do you see as close candidates? US, France, UK, South Africa, India, African countries?

    So my questions are:
    – are these potential blow-ups accommodated in your forecasts?
    – or do you see them further in the future?
    – how would they impact the charts in your opinion?

    Great work, thanks for the last 2 articles.

    • Thanks, and yes, your assumptions are correct. We cannot predict flare-ups, and put them into the model.

      In previous articles we’ve discussed compounding effects, such as slumping utilization rates, and loss of critical mass across businesses and sectors. These would accelerate the rate of decline, and are hard to put into the model.

      I think you’re very probably right, particularly about internal unrest.

      In defence of my approach, though, there are two things I’d point out.

      First, whilst we cannot predict unrest itself, we can analyse the factors likely to cause it (for instance, falling prosperity). By looking at the rate at which discretionary prosperity has been falling in France, for instance, we could anticipate the gilets jaunes situation, even if we couldn’t predict specifics such as ‘who?’, ‘where?’ and ‘when?’

      Second, conventional economic modelling cannot do any of this.

      SEEDS has the merit of looking at the system in energy terms, so it does not accept the conventional assumption of perpetual growth, but instead puts some quantification on where and how these assumptions are mistaken. So it’s not remotely ideal, but a lot better than the alternatives.

    • By falling utilisation rates, I take it you mean something like this: – prosperity declines, meaning that the population able to afford a car declines by half. So the maintenance cost of the roads (per road user) effectively doubles. At the same time, the wealth of the average road user declines, hence the affordability of a car would have declined even if costs had somehow remained the same. So the cost doubles, just as their prosperity drops by half. A positive feedback that results in rapid collapse in car ownership, unless some sort of subsidy is introduced, I.e debt.

      We might estimate that the probability of systematic collapse in any given year, is proportional to 1/u^2 for the average piece of essential infrastructure. In other words, if utilisation rate drops by half, the risk of societal collapse (a sudden reduction in civilisation complexity) increases four fold. Other exponents are possible.

      This would appear to be root of what Tainter refered to as a maintenance crisis. Because society is an interconnected, complex system, falling utilisation rates explain why systematic collapse occurs far faster than most people expect and many don’t see it coming. They expect the system to react to stresses linearly, with some negative feedbacks mitigating the effects further. But the reality of collapse tends to be non-linear, with positive feedback effects actually pushing the system away from stability. The protests and race riots that we are seeing are positive feedback effects, which hamper the ability of the system to cope with worsening circumstances. Likewise, food prices have generally risen, just as unemployment is reducing food affordability. Systematic failure is never a linear process.

    • Indeed so.

      Looking at de-growth, where we start is with a trend, which is downwards, because of rising ECoEs.

      Falling utilization rates, as you describe them, exacerbate the rate of decline. So does loss of critical mass – where we can’t make product X because we can no longer source component Y. These two factors – utilization rates and critical mass – can be expected to act together, compounding the rate of deterioration.

      Inevitable corollaries include simplification (producing a smaller range of products, and/or simplifying production processes ) and de-layering (eliminating whole layers from supply processes).

      Here are the reasons why de-growth won’t be linear – because (a) ECoE increases are exponential, and (b) these various processes are compounding.

      This means that de-growth wouldn’t be linear even if we managed it rationally, and equitably. The improbability of this turns orderly compounding de-growth into chaotic de-growth.

  10. @ Dr. Morgan
    An addendum to my admittedly flawed and incomplete and probably incoherent note:
    Suppose that the Energy Slaves are distributed in an 80/20 ratio. The top half get 80 percent and the bottom half get 20 percent. But the cost of living is largely determined by the preferences and spending patterns of the top half (e.g., cost of housing, education, medical care, transportation, etc.). Then the bottom half have far fewer energy slaves at their disposal, and their ‘disposable energy slaves’ are likely to be minuscule or negative (i.e., going into debt). I think that was the phenomena Macron ran into, without any clue as to what he was up against.

    Don Stewart

    • Also
      Note the incoherent rage of Trump:
      “I have saved the stock market, and look at these ungrateful hooligans breaking glass windows and looting”. He has the same lack of perception as Macron.

      I can just imagine his fury if, at a fancy dinner party in the Trump Tower, someone mentioned that impoverished Cuba has managed to rein-in the Covid-19 cases…not exactly eliminated…but far better than the US.
      Don Stewart
      PS. I doubt that Joe Biden could put a sentence together if asked about Cuba. At least Trump would have a colorful tweet-like response.

  11. Nafeez Ahmed in a long article (30 minutes)
    View at Medium.com

    I’m not sure I agree with all he says. I tend to put more emphasis on how the distribution of money affect the ability of people on the bottom to function. For example, by giving 95 percent of the assets to the top half of the social structure, the cost of land becomes impossible for the bottom half. So even if they would like to start a little garden, they can’t afford the space. And then they have to work 3 jobs in order to pay the rent that Black Rock and similar financial organizations (who are directly supported by the Fed) demand from them. I tend to point to this ‘circle of hopelessness’ as the root cause of the problems. Why was the black retired police chief killed? He ‘went over to the other side’…I suppose. IF everyone had an opportunity to prosper, then I think that the construction of the idea of ‘race’ would fade away rapidly. The burning question would be:
    “Who can I find to co-operate with in order to live a good life?”. The skin color would become irrelevant except for the ever-present issue of appearance…I’d still be a sucker for black skinned women wearing red…especially if they have a colorful turban or a scarf. Humans have weaknesses.

    Don Stewart

  12. An interesting technology that is presently under development in Russia and China.

    The main advantage that the fusion-fission hybrid has over a fast breeder reactor, is a much shorter doubling time. A sodium cooled fast breeder, would need about 3 decades to produce enough surplus plutonium to start a second reactor. The fusion-fission hybrid cuts this time down dramatically, because each fusion neutron results in 3 fission events in the blanket and several downstream neutron absorption events in fertile material. In a scenario where society needs a rapid buildup of high EROI alternative energy, that can replace the declining surplus energy from fossil fuels, this may be a promising solution.

  13. Dave Pollard essay
    Dave writes some provocative essays, which are a patented blend of activism and resignation:

    “The whole system is collapsing; every part of it is in crisis, and even when you can get people to stop and focus on any particular set of outrages, you’ll get about 10 seconds of their time, they’ll sympathize, most of them, and then they’ll get on with their lives and it’ll all be forgotten. We’re all doing our best to cope with a civilization in free fall collapse, even those that’re in denial of that fact.”

    Don Stewart

  14. The ‘V’ of victory. The perpetual growth narrative will haunt us until physical limits prevent us from rational thinking. Rational thinking within the growth persective that is. Rational thinking in de-growth is still rational, but not in a way we are used to.

    As soon as the banana’s run out, don’t forget “When chimpansees go to war” on youtube.

    You’ll need an account because they don’t want you to watch it.

    • btw, the real racism is in the difference between assets and liabilities. That’s no ones fault, just where you were born on the timescale of surplus energy, and the region of first adopters of powerful fiat currencies.

      And no, crypto currencies won’t be the next tectonic shift.

  15. Consilence and Universology (from Wikipedia)

    E. O. Wilson held that with the rise of the modern sciences, the sense of unity gradually was lost in the increasing fragmentation and specialization of knowledge in the last two centuries. He asserted that the sciences, humanities, and arts have a common goal: to give a purpose to understanding the details, to lend to all inquirers “a conviction, far deeper than a mere working proposition, that the world is orderly and can be explained by a small number of natural laws.”

    A parallel view lies in the term universology, which literally means “the science of the universe.” Universology was first promoted for the study of the interconnecting principles and truths of all domains of knowledge by Stephen Pearl Andrews, a 19th-century utopian futurist and anarchist.[1]

    My Little Attempt to Put Some Pieces Together

    *Sometimes it is easier to understand what is going on among that strange clan called the Homo Sapiens if we look at what happens in Physics, Chemistry, and Biology.

    *A principle of Biology is that if something is to be built, then something else must be decayed in order to build the new. Fungi both deconstruct a pile of autumn leaves and also build mushrooms and new mycelial networks from the disaggregated parts.

    *”Some people just like to make artificial dichotomies”. (Biology historian Jan Sapp). Thus, in one’s silo, the prospects for a Degrowth phase with the fungi tearing apart the pile of dead leaves (already a metaphor) has nothing to do with whether money-printing can keep the rickety structure together because Money Economics is disconnected from the real world of decay and the construction of something new.

    **”It is impossible to do the work of science without using metaphors, given that almost the entire body of modern science is an attempt to explain phenomena that cannot be experienced directly by human beings.” (Richard Lewontin, biologist)

    *The currently influential work by Farnam Street is an example of Consilence thinking and analogies. (See the blog)

    *The biochemist Joseph Needham describes an analogy as a ‘net of coordinates’ which can be used to give shape to an otherwise formless mass of data.

    *Consider a lichen. Lichens don’t seem to be the product of a fixed partnership. Rather they arise out of an array of possible relationships between a number of different players.

    *Consider the relationship between mycorrhizal fungi and plants: Shared mycorrhizal networks can facilitate cooperation and also competition. Nutrients can move through the soil via fungal connections, but so can poisons. The narrative possibilities are much broader than reductionist theories such as the principle of maximum cooperation or the theory of Nature Red in Tooth and Claw. We have to shift perspective and find comfort in—or just endure—uncertainty. (Richard Sheldrake)

    My Conclusions:

    *As we move deeper into rising ECoE, the economic and social world we know will necessarily be destroyed. Something new will arise to replace it. If we can grasp the general nature of the change, we may be able to minimize suffering.

    *All of us microbe-dependent and social creatures labeled “homo” should be thinking about how lichens explore ‘the possible relationships’.

    *It’s OK to have a grief session, but then we need to get on with life…and ditch both doomerism and rose colored glasses. But we have to understand that the dead leaves must decompose. Energy, Information, and Possible Relationships are likely to be crucial to whatever comes next.

    Don Stewart

    • @houtskool
      I think the point about lichens is that we have discovered that a variety of different relationships are possible. But not all at the same time, which might introduce conflict. An analogy might be a love affair. You can pick from a lot of different people, but trying to have a relationship with multiple people ends badly most of the time.

      In terms of the collapse most of us here expect, then the selection of new relationships becomes essential. To stay with the sexual relation theme, you might have selected a beauty queen or a body builder, but those skills turn out not to be so useful in a world of scarcity, and so you fall back on the criteria which very likely guided your grandfather and grandmother. I distinctly remember, at the end of the Depression in the US, my elders critiquing the choice of partners by the young people based on very fundamental questions such as ‘can she bake a cherry pie, charming Billy?’ (that’s from an old song). Any transition we have to go through can be eased, perhaps, if we begin to re-examine our relationships. Do you want an excellent relationship with a banker, or a farmer?

      I recognize that the way I have framed that is antithetical to ‘we are all in this together’. But that’s the way I see it, and the way the lichen see it.

      Don Stewart

    • Good points Don. Tribalism, churches. Examples of new relations in bad times. Interests i mostly call them. And, opportunists as we all are, our interests will change as time goes by.

      The pendulum swings. From the left to the right. From money to currency. From wealth effect to scarcity.

      The pendulum swings. For thousands of years.

      No one cares, but most will get hit trying to run through.

      The pendulum is on its way again. I can hear the roar, i can feel the wind, i can see the clouds. I can smell the rain already. New seeds will arise.

  16. Re: redistribution, I’m not convinced the elites think they have to save their skins at this point or ever. Feudalism existed for hundreds of years in Europe until relatively recently, because ultimately human nature allows it, the tiny elite remained unified for self-preservation, had control of most all resources and a monopoly on violence almost all of the time to hold the system all together. Slavery in the US and genocidal clearance of the original peoples was more or less the same thing, so with resources suddenly and drastically reducing, why wouldn’t the same result occur again now? When the music stopped in the collapse of the Soviet Union, those at the top sitting on a chair who recognised the opportunity grabbed the spoils and because the de-facto rulers as the newly minted robber barons.

    As for the more immediate term return of a viral threat soon, there’ll be a second wave in countries where the leadership want a second wave to exist and the populace are willing to believe it.

    • Indeed. In France after 1789, the abolition of the Church was followed by a lot of former clergy popping up on committees deciding who to send to the guillotine.

      But the situation looks pretty ugly right now, I think, whether it’s the Fed bailing out investors, or the UK giving near-free loans to corporates (some of which aren’t even British) and their stockholders. This risks re-igniting the post-2008 narrative of ‘bailouts for the wealthy, austerity for the rest’, which would be a big opportunity for the traditional Left.

  17. Yes, the impotence of the left globally is an enduring mystery, given half of any given population should be their base on the political spectrum. I just don’t get why they can’t win other than when they use the tactics ad verbatim of the right, to wit ‘New labour’ or the Chinese ‘communist’ party.
    Maybe it goes to fundamental human nature again and greed, selfishness and disunity being stronger drivers than empathy, desire for justice and peace. One for psychologists or philosophers.

    • Back in the 1990s, when history was supposed to have ‘ended’, a new pact was struck, where much of the Left adopted the Right’s neoliberal agenda, and much of the Right adopted social ‘liberalism’.

      This, which I call “double liberalism” (though a better term would be welcome!), was typified by “New” Labour in the UK, the Clinton-era Democrats in the US and various “social democratic” parties in Europe. Campaigning for a better deal for “the workers” or “the poor” was quietly dropped, as was support for socially “conservative” points of view. This was the new “centrist” politics of a ‘world after history’.

      Amongst other adverse effects, this took away the “mixed economy”, because nobody could now vote for redistribution, nationalisation or support for organised labour.

      This bargain or pact gave us the current “liberal” elites. It’s been challenged, of course, notably by Jeremy Corbyn in Britain, Bernie Sanders in the US and Jean Luc Mellenchon in France, from the Left, and from the Right, with greater success, by people like Donald Trump.

      Events as dramatic as those happening now might well weaken the ruling centre – we shall see.

  18. Dr. Tim, your article makes very sobering reading.
    As one comment above points ou, WW-III may not be too far off. There were Nutcases in charge during 1914, and it appears that they are still in charge today. History certainly does lend support to his argument.
    On the economic front, I was reading on Reuters, ” How will Britain pay for its Coronavirus bill ? “.
    The general outcome of the article was that tax increases are on the way. Considering what you say about Governments being unaware of the true levels burden of taxation, this may well cause them a big problem.
    I am now asking myself the question : “at which point do governments realise that they too need to ‘downsize’ ?”
    De-growth is not just something that affects the private sector. We need to see de-growth within Government too !

    • Thanks Johan

      Because governments don’t understand how the economy works, they cannot understand the circumstances of most citizens. This can only lead to trouble, especially when times are hard for the ordinary person, in ways that governments cannot understand.

      Taxes will have fallen this year – many taxes cannot be collected – but in the future governments will try to push them back up to previous levels, or even raise them, to pay off new increases in debt. The public will be very angry about this.

      The principle of the economy as an energy system is not difficult to understand. It is logical, even obvious. Traditional economics, and policies based on it, have failed, time and again, over twenty and more years, ever since ECoEs became high enough to make a difference. But still governments act as if the economy is a financial system!

      The UK outlook is grim – and will get much worse if there’s a second wave, as seems likely.

  19. Surely one of the greatest problems is how do we find work for the people well to the left of the er, Gaussian distribution, of cognitive ability? When I first started work, there were many roles which are quite rare now in the UK: miners, secretaries, typists, switchboard operators, numerous metal-bashing jobs (lathe/milling machine operators, draughtsmen), carpenters (nowadays few wooden windows to make or replace) assemblers of white goods and cars etc. In 1960, two navvies spent a week of hard work digging a trench by hand to connect my parents’ bungalow to the main sewerage system – maybe a day’s work nowadays by machine.

    Many of the semi-manual jobs have now been up-skilled: ambulancemen are now paramedics, plumbers and perhaps electricians require degree-level skills (although they don’t actually study for a degree). And the trend is working its way up the skill ladder. I can’t believe that we have radiographers, for instance.

    So we are going to have an increasing number of people at the bottom who can find no useful work; de-growth is going to exacerbate this since it will destroy many of the service jobs – delivery drivers, beauty therapists, gardeners and waiters, for example. This seems a recipe for frightening social tensions and may partially explain the disorder in the USA and UK over the last week.

    • This is a very important point – perhaps not impossible to resolve but, like so many things, impossible if we don’t see it coming and prepare for it!

      I think we could benefit here from me writing and us discussing something like ‘are governments failing?’

    • Let me rub some salt into this wound, and say that social tensions are being fueled not only by the destruction of menial jobs, but also by increasing immigration into EU countries, ( incl. the UK ).
      Not by the way, Polish Plumbers, -these are skilled tradesmen filling jobs which are needed and which the locals are not able to fill-, but immigrants with no skills and with different cultures.
      The US has its own racial problem which are well known, and which have sparked recent events. ( although I am at a loss to explain UK and Germany demonstrations supporting what is essentially a US domestic problem )

      As Dr. Tim pointed out in his reply to my above post, “Governments still act as if the Economy is a financial system”.
      So with that in mind, it is clear that Governments ARE failing !
      Because they simply do not understand the real world, and there is little hope that they will experience a ‘Eureka’ moment any time soon either.

    • Yes. Government leaders will be flabbergasted to find out the hard way that there are no solutions to “the end of growth.” Humans are programmed to replicate and expand niches as are all lifeforms. Our grandchildren (ages 7 & 4) are headed for difficult times.

    • My view is that governments can’t find answers because they don’t understand the question.

      From a surplus energy perspective, we’re at the end of an era of growth powered by low-cost energy. Over 250 or so years, we’ve come to assume that “growth” is never-ending. We’ve come up with mistaken interpretations to ‘prove’ the perpetuity of “growth”.

      During the growth era, the problem of government has been distributional, one of how we ‘share out the pie’. We’ve not been very good at that, but at least the pie has kept getting bigger. How to share out a shrinking pie is proving to be beyond us.

    • I would recommend ‘In Praise of Hard Industries’ by Eamonn Fingleton. Fingleton noted that manufacturing industries tend to pay good wages to blue collar workers. It is these wages that pay taxes. Manufacturing also produces easily exportable products and is therefore essential to maintaining a positive balance of payments. Countries like Britain, with service dominated economies, suffer from high inequality, low average incomes and must sell their assets to foreign buyers to maintain balance of payments. Britain has become the whore of the world, selling her own body for table scraps.

      It is Germany’s dominance in high tech manufacturing that has allowed it to resist the downward pressure of rising ECOE for so long. It has even allowed them to absorb the enormous costs associated with a truly disastrous energy policy. Japanese manufacturing dominance has partially mitigated problems associated with falling working age population. Whilst this is a financial disaster for any country, a strong manufacturing sector at least allows the government to draw taxes from a strong wage base.

      It has been some time since I read this book. I may reread it.

  20. The extent to which there will be popular demand to fund essential public services will, in part, be a function as to the definition of “essential public services”

    Until the last few days most people would have agreed that the Police are an essential public service. Such agreement no longer holds. There are allegedly popular demands to defund the police. Happy days for those wishing to cut public expenditure.

    Housing prices are insane – especially in large global cities. The pandemic may result in a move to more permanent working from home. Perhaps social life in cities will be restricted for an extended period, and perhaps crime levels will rise with either no police or a severely demoralised police left to fight a losing battle. In such circumstances it is not hard to envision those with money leaving large cities. This should drive urban housing prices down and perhaps increase more rural housing prices – in such a scenario aggregate property prices would fall, but not all property prices. This would enable the rich to maintain their gains and all losses could be attributed to politicians merely enacting the will of the people or acting to maintain public health.

  21. I stumbled upon Nate Hagens annual presentation for Earth Day,
    it’s his usual shtick plus a tweak to accomodate covid-19

    he seems to think we’ve reached the point where it all has to change and I rather agree.

    • Matt & all,

      Nate is among the best. He understands (besides biophysical economics) that the money system must be held together somehow, or civilization as we know it crashes immediately.

      Seems UK government is ahead of the pack in recognizing that redistribution is necessary, and that taxes on the wealthy must rise. See:


      Britain’s finance ministry is canvassing private bankers over how the country’s richest citizens might help pay for the soaring cost of coronavirus relief packages, with potential tax hikes likely to sit high on the agenda.

      Government officials are contacting executives at major banks and wealth management firms to sound them out on options to replenish depleted public coffers, according to one senior banker invited to share their views.

      Britain’s emergency public spending surge and tax cuts in response to the pandemic are forecast to cost around £133 billion this financial year and lift its budget deficit to wartime levels, the country’s fiscal watchdog has said.

      The government is weighing whether Britain’s rich – who on some measures have got wealthier while many lower income citizens have suffered hardship in the crisis – should pay more to plug the gap.

      Some wealth managers and economists speculate the government could look to raise money via tax hikes on savings, capital gains, Value Added Tax (VAT) or property, although the banker had not been provided with any detail on the exact policies under review.

      “[The government] is reaching out. Have decisions already been made before this? I would hope not. I hope the reaching out is bona fide and there’s a willingness to listen and for dialogue and to change position if necessary,” the banker said.

  22. Posing a Challenge
    I’d like to pose a challenge to this statement:
    “So we are going to have an increasing number of people at the bottom who can find no useful work; de-growth is going to exacerbate this since it will destroy many of the service jobs – delivery drivers, beauty therapists, gardeners and waiters, for example. This seems a recipe for frightening social tensions and may partially explain the disorder in the USA and UK over the last week.”

    If we take 3 months from now as our end point, perhaps so. But if we take Dr. Morgan’s energy and income scenario and use 2030 as the end point, then I believe the answer is quite different. Howard Odum thought that a professor with a piece of chalk and a blackboard was one of the most energy intensive occupations. He estimated the energy that it took to produce the professor and the students and the university to come to that conclusion. If energy scarcity is our problem in 2030, I would think that we will have a lot fewer jobs which require high levels of education. We will probably also have far fewer machines which require a lot of energy. And there will be vastly fewer rich people requiring servants to deliver to them, to do their hair, to garden their useless but attractive lawn, and to wait on them at expensive restaurants.

    If we adopt the ‘fungal strategy’ I described above, we would look at what resources we think we will need in 2030, figure out where those resources are today, and then plan on destroying the structure they are currently part of and repurposing the resource. I suggest that we would start with essentials such as food, water, sanitation, shelter, basic education, basic medical care, etc. That sounds like Cuba, to me. If we look at basic education and basic medical care, for example, we would expect that in 2030 people will understand the role of the microbes in the world and we would know how to treat them in order to produce food and health. The education and the medical care would likely be provided by the equivalent of Cuban doctors and apprenticeship programs.

    The challenge, of course, is trying to do that in 2020 when everyone expects to soon be living in a Martian colony and pushing dots around screens for a living. So my suggestion is that we should ‘not let an emergency go to waste’ and begin repurposing the resources we think need to be repurposed. Which will, of necessity, involve the destruction of many of the structures which currently control those resources. This sounds like the Communist revolutions of the 20th century. We should remember that the Soviet System grew quite rapidly from the time of the revolution until WWII…many US industrial magnates were alarmed. Some thought the 5 Year Plans should be adopted in the US. In the 1950s US business magazines were focused on things like the increasing steel production in the Soviet Union, and what a threat that was to our hegemony. As late as 1980 there were many US industrialists who favored a ‘business plan’ approach to the national economy. I’m not suggesting Communism. For one thing, we are going backward, not forward to greater energy availability. I’m just pointing out that both the Soviets and the Chinese repurposed a lot of resources…and broke some eggs in the process making their omelet.

    If I was the King I would want some advice on how to make the resources available to the right people and how to incent them to do the right thing with the resources. For example, converting farmland to dependence on microbes and well managed rain water and away from industrial agriculture. I would incent food for people, and discourage food for confined animals.
    Don Stewart

    • If ‘E’ increases in price and there is less energy input, then this will reduce the marginal productivity of labour {and capital}. This will lead to a fall in the demand for labour, a shift to the left of the maximum potential of the economy, and an increase in voluntary unemployment.

  23. Latest projections from the World Bank show global GDP falling by -5.2% this year, and recovering by +4.2% in 2021. This would leave GDP -1.2% lower in 2021 than it was in 2019.

    Comparing 2021 with 2019, projections are as follows:

    US: -2.3%
    Euro Area: -5.0%
    Advanced Economies: -3.4%

    China: +8.0%
    Brazil: -6.0%
    Russia: -3.5%
    Emerging and developing economies: +2.0%

  24. The OECD has forecast that world GDP will fall by 6% this year, or by 7.6% if there’s a second wave (which it calls a “double hit”).

    On a single/double hit basis, forecasts include the following:

    US: -7.3%/-8.5%
    UK: -11.5%/-14%
    France: -11.4%/-14.1%
    Euro Area: -9.1%/-11.5%
    China: -2.6%/-3.7%
    Spain: -11.1%/-14.4%

    Here’s a link to the numbers:


  25. On “Tumbling Prosperity”,
    I have arrived at the conclusion that very few people are actually aware of this, despite the mayhem going on all around us.
    I can see that the great unwashed masses buy into this growing GDP nonsense, and that covid-19 is just a hiccup on the road.
    Very few people ( none of whom are politicians ) are actually standing back and taking a look at this from a broader perspective.
    I now think that my fears of a GBP collapse have been misplaced. It will collapse, but not as soon as I thought. I am now thinking along the lines that it will take a US $ collapse to usher in the new era. When the US$ collapses it will take GBP, EUR, and Yen with it.
    I believe that most governments and financial institutions are convinced that the US$ is infallible, hence they see monetary adventurism as being the solution to all problems.
    I think that they are totally and utterly convinced of this and believe it with the true and unquestioning conviction of a cult follower.
    The US$ may still have some runway left, but its, “the Emperor has no clothes on” moment is close at hand. After that, it is toast – along with Gbp, Eur and Yen.
    So as Eroi slowly declines unnoticed in the background, Governments will continue to try to solve all problems with money. They will become increasingly ingenious in their efforts, but of course they will ultimately fail. That is when the gates of Hell will be flung open, it may be a few short years from now, or it may be only a few short months away.
    The outcome of the US presidential election in November may well light the fuse for what is coming.

    • Until now, I’ve always believed that the US would always pull through, and make fools of those who’ve been too quick to write the obituaries.

      Now, for the first time, I’m having my doubts.

    • On: https://www.themoneyillusion.com/happy-days-are-here-again-never-underestimate-the-stock-market/#comments
      I drew ‘Gene’s’ attention to your blog.
      He replied:
      “Gene Frenkle
      7. June 2020 at 10:57
      Postkey, that is an interesting blog post. I will say going forward for the foreseeable future America’s energy problem has been solved. So even before fracking for oil was proven economically viable around 2012 fracking for natural gas meant that at worst America could have $75 barrel oil with investments that were actually being lined up as fracking for oil was being developed. So natural gas could have replaced oil to such a degree that high oil prices would no longer be a threat to undermine the economy.
      So with respect to 2001-2008 energy crisis the Greenspan and Raymond quotes bookend the economic climate Fortune 500 company CEOs were making decisions in from 2001-2008. So with respect to ECofE the American elite were witnessing increased energy costs along with Americans buying Ford Explorers (gas guzzlers) and plasma TVs (electricity guzzlers) while American natural gas production plateaued (even after Greenspan said it was a big problem) AND global oil production had plateaued while the price continued to rise. In addition to fracking we now have popular autos that run on electricity and consumer electronic devices are much more efficient with iPhones that barely use any electricity replacing desktop computers and plasma TVs and cable boxes that many people were still turning on once they got home from work in 2007.”

      He doesn’t seem to ‘believe’, at least for the US, that there is any short term problem?

    • The difference here seems to be ‘cost’ versus ‘price’.

      The price of oil has been kept low by the subsidy of investors and lenders prepared to hand capital to cash-burning shalecos. Without this, we wouldn’t have had the big increases in shale output, so prices would have been higher, and/or economic activity would have been reduced.

  26. Charles Smith

    Just in case you saw any glimmers of hope…..

    It’s pretty much what I have been saying, except I approach it from a thermodynamic exhaustion perspective. How can a barrel of oil which contains 4.5 years of human labor be worth practically nothing? The explanation has to include colossal dysfunction. As I said to houtskool above, the wise will look around for new relationships. Anybody want an 80 year old partner (with poor typing skills)?

    Don Stewart

    • CHS is always good, and this one is outstanding.

      What we can do here, with SEEDS, is to put numbers on a lot of these interpretations, so much so that a SEEDS-based analysis of the US situation would probably raise a lot of eyebrows.

      I confess to being baffled by what the Fed is doing, something which Wolf Richter recently addressed in detail.

      The aim does indeed seem to be to bail out America’s wealthiest, including underpinning equity prices, which are the bulk of the value owned by the wealthiest.

      But this is purely notional wealth, as we could never turn the market valuations of corporate America into cash. So real money is being used to inflate notional value. If you were a billionaire, you’d have at least a billion reasons for not wanting risks to be taken with the value of the dollar.

      I can picture a future conversation a bit like this:

      “You know, I was once worth a billion dollars”
      “Wow!…….tell me, grandad, what was a ‘dollar’?”

    • “But this is purely notional wealth, as we could never turn the market valuations of corporate America into cash.”

      Is that actually true? Can’t people who own assets use these assets as a collateral when borrowing money, and get cash this way?
      Imagine that there is a country, the population of which is two people. The country uses two joules of energy per year, and the income of each citizen is one rupee per year (thus, nominal GDP is two rupees). Then each citizen can make economic decisions on how to use one joule. If the income of one of the citizens increases to 2 rupees, but the overall “physical GDP” (joules/year) stays the same, and the income of another one doesn’t change, the first citizen can make economic decisions that are worth 1.33 joules, leaving only 0.67 for another one.
      If I understand correctly, your position is that increasing valuation of assets cannot be translated to income, therefore there is no redistribution. But I think it (in effect) can be, by borrowing?

    • You can always turn part of it into cash, by selling stocks, or borrowing against them, but never the whole market – who, other than those who own it already, is going to buy it?

      For instance, imagine that everyone who owned shares in Google, Apple, Facebook, Amazon and Microsoft decided to cash in – who is the buyer?

      The same applies to, for example, a nation’s entire stock of housing – again, who are the buyers, if all owners want to sell?

      What we’re doing, when we talk about the value or market cap of the entire market – or, for that matter, of the sum added to, or “wiped off”, the “value of shares” – is using the most recent marginal transaction to value the aggregate.

      It gives nice headline numbers for the media, but it’s meaningless in practical terms.

      This might sound a purely technical distinction, but it’s critical – it tells us why the Fed’s efforts to ‘support the richest’ isn’t going to work.

    • As to borrowing against assets, margin calls occur if securities in an account decline in which borrowings occurred to purchase them. If owned outright, borrowing can occur. Ditto real estate. If there is a waterfall decline in those assets, lenders will not step up aggressively in my opinion. Margin requirements might be made more stringent by exchanges and/or firms for example.

    • Hello Don

      Well if you don’t have the equipment to burn the oil, and turn the energy contained into useful work it’s not going to be worth a lot! The cost of oil is largely externalised to the cost of the equipment to use it. To fill up the tank on my van costs approximately £50 currently (COVID prices), but I had to spend £8000 on the purchase of the van before I could spend the £50 on diesel fuel. Using fossil fuels is expensive once you factor in the cost of equipment (+taxes) to use it and finance costs if required. We discount the cost of the equipment from our fossil fuel use costs because we treat the equipment as an asset not a cost. It was revealed to me many years ago when I first ran a small business that the cost of the depreciation in value of the vehicles I used was greater than the cost of fuel annually! Ouch. However if you are using legacy equipment who’s cost have been paid off, like the lawn mower I inherited from my father, the cost per year is a few pounds in fuel. So legacy equipment has a great future, not so much the new stuff. If you can do without fossil fuels in your life, you get a double+ saving, you save the cost of the fuel and the cost of equipment (+ finance costs and taxes). I think a lot of people will be heading in the that direction. As an example I now use a scythe for cutting long grass, the 33cc petrol strimmer went a long time ago!
      Reasons; the scythe lighter, very quiet, quicker, no PPE required, no cost in fuel or plastic line, cheaper to purchase and longer lasting, + better exercise that does not do you back in, and gives you the pleasure in the skilled use of a hand tool!

      Regards Philip

    • @Philip
      I agree with you. Especially about the scythe. Plus if you carry one down the street, people give you a wide berth…which is comforting in the time of the Virus. As for your point about capital equipment. One of my points is that the undeniable energy density and portability of oil gets dissipated pretty rapidly in internal combustion engines. The ‘end use’ efficiency is frequently quite small. And, as you point out, if we also subtract the costs of sedentary living, likely negative benefits. We have, as a human race, not been particularly wise in figuring out when oil and coal and natural gas are really valuable and when they are a distraction.

      Don Stewart

  27. Leaving aside the financial and monetary aspect of things lately (which are clearly out of whack more so than usual given the Dow having a record rally as millions of Americans go unemployed), I’m curious, Dr. Morgan, of your take on the 2018 oil peak. As someone posted above, Nate Hagens had an updated talk of his with October 2018 being the undisputed global peak output for oil production, something that coronavirus has almost certainly sealed as being so now.

    Cost of energy we can all appreciate, however, I’m wondering what your thoughts are on how the world will react when we come out of the other side of the pandemic, and industry slowly picks up, only to then rub up against production limits. A 6% decline of conventional will have been eating away even as shale was ramping up to the tune of billions of naïve investor dollars, so having fracking production, notoriously short lived per well, now be impacted by this pandemic, it would spell the quite obvious end for aspirations in the oil sector for meeting new demand. I mean, if the economy doesn’t basically muddle along, then stairstep down instead of recovering and hitting a new limit.

    • First off, I don’t make a big thing about the timing of peak oil – as understand it, though, peak conventional oil happened back in 2005, and 2018 looks a reasonable pick for peak all oil.

      It’s worth remembering that three of the most authoritative agencies predict that oil consumption in 2040 will be 10-12% more than it was in 2018. I didn’t believe that even before the current crisis, and I certainly don’t believe it now.

      My view is that there won’t be a big rebound after the virus. This doesn’t mean ‘peak GDP’, because that metric has been manipulated to the point of being meaningless, and can be further ‘increased’ by monetary gimmickry.

      SEEDS has for some time identified 2018 as the year after which the world’s average person starts getting poorer. If that’s right, then we can nominate 8% ECoE as the point at which prosperity turned down. This makes sense, as the SEEDS downturn range for Western economies is 3.5-5.0%, and for EM countries 8-10%.

      With “growth” having gone into reverse, the financial system is now horribly exposed.

  28. Tim, been away awhile but re: your comment above that you are no longer so sure that America will “pull through” the coming crisis, IMO the proper outlook is that, due to America’s cultural DNA, it almost certainly will not. I highly recommend Morris Berman’s book, Why America Failed, for an overview and analysis of this cultural DNA, and a strong case for why America has already failed. If you don’t want to read the book, or want a quick overview of Berman’s take on this, his youtube presentation is worth the time. https://www.youtube.com/watch?v=Rn1sHrhCjTI

    • hi taigo,
      I watched this, I recognised all of his observations, I broadly agree with his analysis,
      I found myself ironically laughing with him about the folly of America and then feeling really uncomfortable because the UK is, and has been, following closely in America’s footsteps,
      I think it’s important to read history and gain insight into sociological behaviour to see how we got to where we are today and recognise human nature hasn’t changed much in 10,000 years and that history does indeed repeat somewhat, certainly there are recurring motifs,
      but even if you do gain a good understanding you’re still damned to watch everyone around you repeat history, yet again!

      sometimes I wonder if I’d be much happier if I was a dumbass,
      blissfully ignorant instead of painfully aware.

    • Thanks Tagio, welcome back.

      My study of the US situation isn’t looking good. The Fed has now thrown a $2.9 trillion lifeline at the wealthiest, and the irony is that it won’t (and can’t) work. If they carry on indefinitely, the dollar’s purchasing power will slump, and if they stop then asset prices crater.

      If I were that wealthy, I’d rather have $1bn of full value dollars than $5bn of crushed-value dollars. I also wonder what the future looks like to the ultra-wealthy – living in gated communities or in security-guarded campuses whilst chaos reigns beyond the gates? Doesn’t sound like fun, to me anyway.

      Meanwhile, I’ve been amused by the how the BBC, which is fanatically anti-Trump, has been reporting Seattle, making it sound like the 60s ‘summer of love’ reborn, with poetry readings, free music concerts and so on. Pity they’ve run out of food.

  29. America Collapsing?
    If one want to get a close look at dysfunction, I suggest that rather than read the WSJ, one can take a look at the daily police blotter. This is from a small midwestern town I lived in 70 years ago. It is hard to recognize that it is the same place. What is missing in this account is the horrifying epidemic of drugs…Don Stewart

    Assault — A 911 call was received at 4:04 a.m. Tuesday in the 100 block of Fairview reporting a stabbing victim. Dispatch was unable to get much information. An officer responded and advised no blood was located and there were conflicting stories of whether the subject was stabbed.
    Suspicious Subject — At 7:42 a.m. Tuesday a subject in the 2900 block of North 14th Street advised a door was open and a window was possibly broken out of a vehicle. An officer responded and advised the door was open because a passenger was asleep inside.
    Burglary — A subject in the 400 block of North Palm reported a vehicle burglary at 9:36 a.m. Tuesday. An officer was assigned and a report was taken.
    Fraud — At 10:12 a.m. Tuesday a subject in the 1600 block of Hudson reported unemployment fraud. An officer was assigned and a report was taken.
    Disturbance — A business in the 500 block of West Highland contacted police at 10:26 a.m. Tuesday to report an intoxicated female was at the business and wouldn’t leave. An officer responded and advised the subject was not intoxicated but asked to move along.
    Welfare Check — At 11:25 a.m. Tuesday a subject in the 900 block of South Eighth Street reported a welfare check after her 11-year-old grandson advised his dad was physically abusing him. An officer responded and advised it was a child disciplinary issue.
    Fraud — Another unemployment fraud report was taken at 11:29 a.m. Tuesday from the 200 block of South Washington.
    Disturbance — A subject in the 400 block of South 14th Street contacted police at 12:44 p.m. Tuesday to report a male subject was refusing to leave after he had vandalized the property. The caller declined to press charges for damages.
    Disturbance — At 2:56 p.m. Tuesday a subject in the 700 block of Edgewood advised someone was racing up and down the street on a dirt bike. An officer responded and told the subject to stop.
    Assault — A 911 call was received at 3:17 p.m. Tuesday in the 700 block of Monument advising a subject broke into the residence and attacked him with a bat. An officer responded and advised it was a verbal argument over property.
    Disturbance — The emergency room of the hospital contacted police at 5:19 p.m. Tuesday to report a female patient was refusing to leave and causing a disturbance. An officer responded and the female was transported to another location.
    Accident — At 6:06 p.m. a business in the 3500 block of North 14th Street requested options after a subject was out test driving a vehicle that wrecked it. An officer responded and options were given.
    Theft — A subject in the 1500 block of East Walnut contacted police at 9:41 p.m. Tuesday to report someone stolen an air compressor from his front yard. An officer was assigned and a report was taken.
    Theft — A subject contacted police at 10:29 p.m. Tuesday to report identity theft in the 9500 block of North Pecan. An officer was assigned and a report was taken.
    Theft — At 10:47 p.m. Tuesday a subject in the 500 block of North Osage reported someone stole a part from a grill. An officer responded and a report was taken.
    Domestic — An officer advised he was out with a possible domestic at 12:35 a.m. Wednesday at Oak and Grand Avenue. The officer advised the subjects were arguing over a cell phone. No report was taken.
    Fake Money — A clerk in the 500 block of West Highland contacted police at 1:03 a.m. Wednesday to report receiving a fake $20 bill. The subject left the store and did not try to buy anything. The money was confiscated.

  30. @Philip
    I find an article about the decline of the Western (e.g., California) Monarch butterfly to be amusing. The populations of the iconic species have declined 99 percent. Some research out of the University of Nevada looked at the milkweeds which are essential to the butterflies. Every single sample in the Central Valley of California was contaminated with pesticides of various flavors. While toxic levels have been identified for only a few of the identified pesticides, the results indicate that the use of toxic chemicals in food production is likely going to make the butterflies extinct. The Xerces society had this to say:

    “We can all play a role in restoring habitat for monarchs,” said Sarah Hoyle, Pesticide Program Specialist at the Xerces Society for Invertebrate Conservation and coauthor of the paper. “But it is imperative that farmers, land managers and gardeners protect habitat from pesticides if we hope to recover populations of this iconic animal.”

    That sounds like “it’s fine to continue poisoning the humans, but please, let’s save some preserves for thebutterflies”. The Trump administration would continue to boast about eliminating any regulation on pesticides at all. Meanwhile, in underfunded experiments by individual farmers we find that good growing practices increase the BRIX score of food plants to the point that predators are simply not a problem requiring pesticides. Cheerleaders for fossil fuels continue to claim that we will all starve unless subsidies to fossil fuel companies are increased so they can continue to pump out the pesticides. Why are we so stupid we cannot connect the dots? (I think it is the pesticides in the brain tissue.)
    Don Stewart

    • Don,
      It would be great if rationality ruled our species. Greed and power are in control in the top tiers, and somehow most there believe they and their clans are immune from unseen threats. They get little help from the super stressed out populace trying to survive. Overshoot does that. Collapse is the likely eventual outcome. Sad for our grandchildren…

    • Hello Don
      The reason to use pesticides is so that you don’t have do good farming practices and can still get a crop. Bad farming is a lot more profitable in the short run than good farming. But it only works while there is new land to move too, which there isn’t any more. Farming the land to exhaustion with cash crops and then moving on was the standard operating procedure of much of American agriculture from the first settlement.

      Why are we so stupid? The tale of Dr Faustus by Christopher Marlowe is a powerful insight into human self delusion; if I do this bad thing for a Little while I will get rich and then I can stop and be good. But they never stop, just keep on doubling down on the only thing the know, until a devil comes for them. Watching a whole civilisation waiting for the Devil to drag it off is depressing and frustrating.

      Regards Philip

  31. Matt,
    I recognize the sentiment, but dumbasses are not actually happier. The evidence of this is all around us.

    • Tagio,

      Ignorance is/has been bliss in many cases. Now, though, as material well being keeps increasingly tightening nooses, anger erupts in more and more individuals. We have a long hot summer ahead, and I expect we’ll see more violence. Plus, it appears the first wave hasn’t died down, so the state and Federal governments are going to be mightily tested to keep the peace.

    • I’m sure you know the old gag about this:

      “Look at the happy moron – he doesn’t give a damn
      I wish I was a moron – my God, perhaps I am!”

    • Howling at the moon
      Is a natural thing
      But not at noon
      Nor for you and me
      Only for the king
      That it is to be

  32. Was I right?
    This is about using reasonable models of the spread of Covid-19 (not only bragging on myself).
    I have said that using the US or the State of Texas as a geographic entity for applying gaussian curve models is not reasonable. Consider this headline today:
    Houston on ‘Precipice of Disaster’ With Virus Cases Spreading

    There are similar headlines about Arizona and California. My point has been that a gaussian is far more likely to apply to a metropolitan area (e.g., Houston or New York City or Phoenix) than to the US in total. One reasons is that lockdowns come from the State level, and thus the factors controlling the spread are not uniform across the US. The second is that, pace airplanes, most lateral infections will happen between people who are going about their business in the metropolitan area where they live and work. So if the Virus gets started in Dallas well before it gets started in Houston, and a lockdown is imposed, then Houston will have fewer cases relative to Dallas. But that leaves Houston exposed to what everyone wants to label a ‘second wave’…but it’s really just the genetic first wave which was temporarily delayed by a lockdown which has now been withdrawn. So if one thinks that gaussians are the best way to model, they must be applied at the metropolitan area level and be sensitive to exogenous factors such as lockdowns or technological developments such as masks and immunizations. In addition, it would help if the gaussian were applied to the ‘vulnerable population’, which has been estimated for US metropolitan areas using some data from the UK. We should have learned these lessons from trying to model Peak Oil, but it is amazing that some oil veterans fell into the trap of thinking that the entire US was the proper geography to model and total population as the potential.

    All IMHO…Don Stewart

  33. How to deal with network change?
    If we look at biology, we find that there are generally a lot of different ways to accomplish some goal, such as the manufacture of some protein. While there are mistakes in genes (Single Nucleotide Polymorphisms), few of them are actually fatal. Our body can usually work around the mistake because of redundancy. Yet much of science implicitly assumes that whatever is customary is the only way to get things done. E.g., the notion that civilization is a heat engine. That has been true now for several hundred years, but it is also pretty clear that it can’t be true in the future. Accepting what has been true in the past as a necessary ingredient for the future leads to profound pessimism and fatalism. Two recent tweets by Nora Bateson:

    “Say it so people understand = old language perpetuates old thinking. Say it in language & communication that is fresh = It’s “abstract” b/c existing habits of making sense wont track. Language matters. How are descriptions of current times forming pathways to the future?”

    “Systems Change is where this all goes now. One way or another. Many unraveling contexts are being revealed to all. It took time but now simultaneous crises are unleashed across health systems, racism, politics, wealth gap, tech mess, industrial extraction,climate/food & arms.”

    I have recently pointed to the fact that lichens can exist as a variety of partnerships in order to live on the inhospitable surface of rocks. We can think of a lichen as a network, consisting of some bundles of genetic material which have the ability to co-operate so that the totality can flourish. Try to think about how your specific bundle of genetic material (including your microbiome) might choose different relationships when push comes to shove on the inhospitable rock.

    A big problem is that our methods of discussing things don’t really lend themselves to discussions of networks. When the Economist gets up with his demand and supply graphs, and moves them around to illustrate some point, we can be almost certain that the economist is assuming rigidity in the relationships. He is talking about marginal changes. Not at all like a lichen.

    The Automatic Earth today features a hospital bill of a million dollars for a Covid 19 survivor, and a note about how medical practice will be irrevocably changed by the virus, and how everything is going to cost more. So will medical costs increase from roughly 20 percent of US GDP to 30 or 40 percent? Clearly, there is going to have to be some new combination of ingredients…the lichens are going to have to exhibit novel relationships if they want to survive. Those of us who are sane will certainly NOT believe that higher medical costs increase GDP…which is a good thing for everyone and can be financially underwritten by the Fed.

    Some people (not me) have the ability to illustrate networks. I suggest that the ability to think in terms of networks and also to communicate in network language is essential. Which gets us back to Nora’s point about old language and fresh language.

    Don Stewart

  34. Poverty of Language
    Yesterday I was walking in the woods when I heard some children noisily approaching. Running, jumping, laughing. Around the bend emerge 2 dark skinned children. Lagging behind a black man and white woman. In these racially charged times, how to describe the scene? It reminds me of a dinner party with an Indian national scientist 55 years ago. The scientist and I were working on a project in his lab. The subject got around to the fraught state of race in the US. I blurted ‘we can only solve this when we are all brown and have no religion’. He laughed and said ‘then I am the solution to the problem, I am brown and have no religion’.

    In the last 2 days I have seen two happy interracial families going about their business of being happy. I would have seen a lot more in the normal course of events, but Covid-19 has my social contacts restricted. If we think about this in network terms, both families have ‘kicked over the traces’ and have escaped from the old paradigms. The man and the woman involved have not escaped from sexual attraction and the lure of making babies, but they have escaped from so much baggage that our society tries to burden them with. Their particular lichen has been able to flourish while all around them ‘old thought’ rages on.

    In fact, when I use the word ‘inter-racial’ I am using some very peculiar language which shows how concepts embedded in the language channel our thoughts. Why don’t I describe them as a ‘tall man and a shorter woman’? That sort of language would at least tell you something which might be useful. When we say ‘black’ or ‘white’, we are calling up a whole bunch of stuff which may have little or nothing to do with these two people and their children…until they leave the woods and go back into the ‘real world’.

    Don Stewart

    • ‘When we say ‘black’ or ‘white’, we are calling up a whole bunch of stuff which may have little or nothing to do with these two people and their children…until they leave the woods and go back into the ‘real world’.’

      And yet it was the first the first thing you noticed about them, wasn’t it? Human beings are hard wired to see people of different ethnicity as foreigners. It makes no difference how many idealistic, deracinated white people think that the world should work differently. Evolution has baked certain characteristics into us. The BLM marches are the final nail in the coffin of the idea that we can build a society in which race doesn’t matter. Go and stand in central London and watch the dark hoards running amok and destroying the symbols of white European civilisation and then tell me that you still believe in the idea of a star trek style utopian future in which all differences are celebrated and none of them cause division. Human beings in the real world, simply do not work in this way.

    • @Tony H
      Wrong. I use the path through the woods, which is full of obstacles such as roots and rocks, as a way to keep my elderly brain young. I bounce from root to rock and twist and turn and do things to keep my neural connections alive and well. Children do it automatically, just for fun. I have fun doing it also. The very first thing I noticed was ‘fellow travelers’…despite our difference in age. Then I noticed the parents trailing behind. I’ve done that for decades in terms of children and grandchildren and puppies. Only upon reflection did I start thinking about all the stupid stuff I have been seeing lately about race…and ponder how ‘benign neglect’ worked out so badly.

      Don Stewart

    • Don, I guess I just don’t believe you. If what you are saying is true, then your brain works differently to the rest of humanity’s.

      This is why the Frankfurt School dream of a multiracial utopia was doomed from the start. Human beings are not interchangeable units that can be taken from one society and dropped into another like some standardised Lego brick. We are cells in a larger organism and form part of a collective social consciousness. And that consciousness is hardwired to detect and react against invasive foreign cells. What the left call racism is actually a social immune response.

      Of course, Frankfurt School Marxists will never accept that explanation. When their pet projects fail, they do what all idealists do – they double down. And you can expect them to burn all human freedom and enact the most brutal authoritarian control as they attempt to force humanity into their image of perfection – and brutally punish those that won’t play along.

    • @TonyH
      The evidence I have seen is that people who have a joint purpose do not make distinctions based on race over more than fractions of a second. I was just at my food co-op. On the front porch was a white woman and a black woman jointly conducting ‘home schooling’ with their respective children. If there was any race based animosity I sure couldn’t detect it. It was all about, respectively, learning and teaching. They had a clear purpose.
      I was a drill sergeant in the US army while much of America was still segregated. It was easy to get the mix of whites and blacks and Pacific Islanders and Native Americans to work toward common goals. When we went off the base into rural Louisiana, it was a shock to encounter naked racism. Of course, there were no common goals off the base.
      I am sorry you can’t see the evidence I see, as failure is likely to make you miss opportunities (IMHO).
      Don Stewart

  35. Editor of The Lancet (British medical journal) unloads on British Medical Establishment
    (from The Automatic Earth)…Don Stewart

    The Covid-19 Catastrophe: What’s Gone Wrong and How to Stop It Happening Again is a short polemical book, building on a series of excoriating columns Horton has written in the Lancet over the past few months. He lambasts the management of the virus as “the greatest science policy failure for a generation”, attacks the Scientific Advisory Group for Emergencies (Sage) for becoming “the public relations wing of a government that had failed its people”, calls out the medical Royal Colleges, the Academy of Medical Sciences, the British Medical Association (BMA) and Public Health England (PHE) for not reinforcing the WHO’s public health emergency warning back in February, and damns the UK’s response as “slow, complacent and flat-footed”, revealing a “glaringly unprepared” government and a “broken system of obsequious politico-scientific complicity”.

    On the page, Horton can sound strident, even arrogant, but that’s not his manner in person at all, at least not in our long Zoom conversation. He’s charming, open, self-critical and full of easy laughter. I suggest that, as bad as things look at the moment, surely people like the chief medical officer, Chris Whitty, and the chief scientific officer, Patrick Vallance, have been doing their best. “Individually, they’re great people,” he says. “I’m not criticising individuals, but the system was a catastrophic failure.” As editor of the Lancet, he’s particularly aggrieved that the series of five academic papers the journal published in late January first describing the novel coronavirus in disturbing detail went unheeded. “In several of the papers they talked about the importance of personal protective equipment,” he reminds me.

    “And the importance of testing, the importance of avoiding mass gatherings, the importance of considering school closure, the importance of lockdowns. All of the things that have happened in the last three months here, they’re all in those five papers.” He still can’t understand why the government’s scientific advisers didn’t consult their counterparts in China. The world of medicine is a small one, he says, and everyone knows the people responsible for coordinating the Chinese government’s response. “These are people they could have literally sent an email to, or picked the phone up to, and said, ‘Hey, we read your paper in the Lancet, can it really be as bad as that? What is going on in Wuhan?’ And if they’d done that they would have found out that this was indeed as bad as described.”

  36. Peter Hitchens has written an interesting piece on his Mail on Sunday blog. The BLM protesters are basically foot soldiers for the Far Left. These people have spent several decades taking over Britain’s institutions from within, including the police, the education system, the civil service and the judiciary. They are now poised to launch their own October revolution and turn Britain into a fully fledged socialist republic.


    Britain ceased to be a democratic state, when citizens lost freedom of speech in 1965. At that point, the imposition of an Orwellian socialist state was only a matter of time. The lockdown has allowed the state to assume unprecedented control over individual lives and is a dry run for the final and complete abolition of human freedom. If you are white, male and English, expect to be a whipping boy for all of the perceived injustices of the world according to your new socialist masters.

    For the record, I do not care what is done with Winston Churchill’s statue. He simply wasn’t the man that a lot of patriotically minded people think he was. But that is a discourse that is too lengthy for this post.

    Would anything happening now have turned out differently if global net energy was still on an upward trajectory? I doubt it. Whilst declining net energy has reduced prosperity and may be the spark that lit the blaze, it did not cause the mega trends leading up to this moment. The ‘March through the institutions’ by Jewish Frankfurt School academics had nothing to do with ECOE. Neither did laws oppressing freedom of speech, or mass immigration, or the demographic decline of the English middle and working class, or the asset stripping of British industry at the behest of a small but powerful global business elite. All of these factors were planned events that had nothing to do with ECOE and everything to do with a small, greedy and amoral elite that wanted to rob the British people of what they had and crush them out of spite. The same elite started WW2, aided by useful idiots in the British government that wanted to keep Germany contained.

    • turn Britain into a fully fledged socialist republic

      Thank goodness, it’s about time to let democracy prevail! Let Peter move to Brazil or the US if he wants to live in a state that comforts him while, as he says, “ignorant armies seek the final abolition of Britain” (as what, a racist oligarchy?).

      And if, as you say, “you are white, male and English, expect to be a whipping boy for all of the perceived injustices of the world according to your new socialist masters”, all I can say is turnabout is fair play. Cry me a river!

      It’s amazing how the slightest attack on white privilege brings out the hurt in those who don’t realize that a very similar, but far deeper, anguish has been part of the daily life of people of color for centuries. Get a grip.

    • @ Hitchens,Tony H, Joe C. and all

      Hierarchy within groups and between groups is biological in social mammals. The blame game also appears wired, but seems greatest at the apex of linguistic complexity with Homo superstitious. It is unlikely to disappear even in science fiction time frames. Accept it, or live in fantasy.

    • From Joe, “And if, as you say, “you are white, male and English, expect to be a whipping boy for all of the perceived injustices of the world according to your new socialist masters”, all I can say is turnabout is fair play. Cry me a river!

      It’s amazing how the slightest attack on white privilege brings out the hurt in those who don’t realize that a very similar, but far deeper, anguish has been part of the daily life of people of color for centuries. Get a grip.”

      I find this level of prejudice (and ignorance) deeply uphelpful. After what happened in Rotherham (UK) no one can use the term ‘white privilege’ and expect to be taken seriously. Also, white people don’t have any special privilege which allows them to circulate the laws of thermodynamics (which is what we are all here to talk about).

    • Thanks, a very readable article.

      There’s an irony for me here, in that my draft analysis of the US, likely to be published in the next few days, states that it is not an obituary, but an interpretation. Mine is an economic and financial analysis, which steers clear of party politics.

      Perhaps the biggest problem, as I see it, is an insistence that financial manipulation can stem deteriorating prosperity. In failing to do this, it has created a dangerous imbalance between asset prices and all form of income.

      A property market in which the “average” earner cannot afford the “average” home is dysfunctional, as are capital markets which fail to give investors a realistic return on their investments. This creates an inevitability, either that asset prices will crash, or that nominal incomes will be forced upwards by inflation. Worsening inequalities between those who own assets and those who don’t are a harmful by-product of building and sustaining these imbalances.

      The system is “one Fed blink” away from a crashing return to equilibrium.

    • In general I agree with Heinberg, but there is a problem with the essay. This depiction of US history is bogus if understood as “the rule” rather than as “the exception.”

      “If, as people, we wish to move forward, we must revert to the best of our early unifying values: hard work, thrift, generosity, fairness, honesty, ingenuity, and mutual respect.”

      The US was formed and run by landed white males. Women, slaves, imported laborers – Chinese and Mexican for example- had no votes. There wasn’t mutual respect even between white Europeans. The German, Italian, Irish, etc were disrespected for generations.

      Generosity and fairness mainly applied to one’s clan and religious group. Honesty? Well, who can judge? I doubt that has changed much in millennia.


    • A nice post by Heinberg except for the title. The US is still too much alive to need an Obituary, but it’s certainly the case that it’s Prognosis Negative, which I think would have been a more accurate header.

  37. One Addition to the discussion with Tony H. and the Heinberg article
    There have been a succession of former generals criticizing Trump. Now they are being threatened with a call to active duty with a Court Martial to try them for criticizing the Commander in Chief. From my time in the military (admittedly not a very prestigious position), I can see that the last thing a multi-racial military wants is division along racial lines. Trump is a master of the Dog-Whistle school of division. Therefore, military people in high-command positions are likely to have lots of misgivings about him. But it is characteristic of the man to view anyone who is not absolutely on his side as the ‘enemy’.

    Similarly, the Trump administration is considering using the 1917 Alien and Sedition Law, which is likely unconstitutional, to persecute ‘enemies’. Obama and the Democrats were not above such chicanery, either. For any sane citizen, this is a scary descent into authoritarianism.
    Don Stewart

    • What is often forgotten of course is that the ‘Security Services’ – which in the USA covers a wide range of agencies some of which are less racist and more thoughtful than others are no more than citizens in uniform.

      It seems to me that in many nations, not only the USA that from the top down the military might not want to get involved in oppressing its own citizens, or indeed might refuse to do so from the bottom up never seems to occur to Trump or for that matter Johnson.

  38. Phenotype is just a way to differentiate groups. There are countless other ways: religion (more precisely, sect) was probably the most common in history. Any group needs to find a way to figure out who’s “us” and who’s “them” (if there is no “us and them”, there is no separate group). So in American case “we, the People” was restricted to people of European phenotype. This is a bit unusual, but only on the surface.

    The point of diffirentiating groups is (in my opinion) this: suppose there are 10 people that have access to a source of energy providing 30000 kilocalories of energy. That would make 3000 kcals/person. However if 6 people decide that they’re a separate group and kill the other 4 (or otherwise deprive them of access to resources), they would then get 30000/6 = 5000 kcals/person. Much better. Race seems to be as good a way as any to figure out who’s who.

    As for “political correctness”, “wokeness”, and other such things: suppose there is a neighboring group of, say, 8 people who want access to resources of the first group. If the first group splits into two groups of 6 and 4 and these start fighting with each other, the second group can come and pwn everyone and get all energy for itself. “If a kingdom is divided against itself, it cannot stand”, so the first group should probably stick together and guard what they have.

    (As you see, I’m a proponent of warfare theory of state formation…)

    Thus, most of that virtue signaling, especially the more extreme forms, is motivated by fear (in my opinion). It might be a reasonable and justified fear, but it’s not a virtue and I personally have no respect for it.

    • Let’s try this way of looking at these issues.

      Aggregate prosperity is declining, for reasons well understood here. Meanwhile, the numbers sharing this prosperity continue to increase.

      The authorities have tried to ‘solve’ falling prosperity using financial manipulation.

      This has worsened the divide between the ‘haves’ and the ‘have-nots’.

      A history of discrimination has left some groups disproportionately amongst the ‘have-nots’.

      They, quite naturally, resent (a) hardship, (b) the contrast with a wealthy and indifferent elite, and (c) the discrimination which has helped put them where they are.

      Elitist “liberals” promote all kinds of equality except the one that would really help – that is, redistribution, which we might call ‘fairer shares’.

      Historically, the ‘haves’ have always relied on security forces retreated from the ‘have-nots’.

  39. Pingback: A rude awakening | Consciousness of Sheep

  40. So if you except that the 19th C. ended in 1914 are we now facing the end of the 20th C.?

    • Back at school we used to study “1815 to 1914” as a history paper, so yes, youngsters in the future might well study “1918-2020”.

  41. Great article. It could easily have been written 10 years ago, which is why I’m not expecting much of it to come to pass in the near term.

    You mention: “Households’ financial circumstances will be worsened further by increases in debt, erosion of savings, and falls in asset values.”

    I agree with all of that apart from the “falls in asset values”. Central banks have proven time after time they won’t allow that to happen. They are the market, either directly (bonds) or indirectly (everything else).

    Later in your article you identify the cause of this:

    “Governments might well, of course, be tempted to ask central banks to monetise their debt, a policy which could have catastrophic financial consequences.”

    I think this debt monetisation (QE) will continue forever. Or until the house of cards falls down. It will have catastrophic social consequences.

    QE, inflating asset prices, is effectively the redistribution of wealth from the “have nots” to the “haves”, from the salaried middle to the wealthy. It won’t end well.

    The genius of the system is the majority have no idea their purchasing power is being stolen – official inflation figures being an episode of jackanory the general public are happy to take in.

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