#177. Poorer, angrier, riskier

MODELLING THE CRUNCH

It became clear from a pretty early stage that the Wuhan coronavirus pandemic was going to have profoundly adverse consequences for the world economy. This discussion uses SEEDS to evaluate the immediate and lasting implications of the crisis, some of which may be explored in more detail – and perhaps at a regional or national level – in later articles.

Whilst it reinforces the view that a “V-shaped” rebound is improbable, this evaluation warns that we should beware of any purely cosmetic “recovery”, particularly where (a) unemployment remains highly elevated (there is no such thing as a “jobless recovery”), and (b) where extraordinary (and high-risk) financial manipulation is used to create purely statistical increases in headline GDP.

The bottom line is that the prosperity of the world’s average person, having turned down in 2018, is now set to deteriorate more rapidly than had previously been anticipated.

Governments, which for the most part have yet to understand this dynamic, are likely inadvertently to worsen this situation by setting unrealistic revenue expectations based on the increasingly misleading metric of GDP, resulting in a tightening squeeze on the discretionary (“left in your pocket”) prosperity of the average person.

Exacerbated by crisis effects, the average person’s share of aggregate government, household and business debt is poised to rise even more rapidly than had hitherto been the case.

These projections are summarised in the first set of charts.

Fig. 1

#177 Fig 1 personal

Consequences

The implication of this scenario for governments is that revenue and expenditure projections need to be scaled back, and priorities re-calibrated, amidst increasing popular dissatisfaction.

Businesses will need to be aware of deteriorating scope for consumer discretionary spending, and could benefit from front-running some of the tendencies (such as simplification and de-layering) which are likely to characterise “de-growth”.

The environmental focus will need to shift from ‘big ticket’ initiatives to incremental gains.

Amidst unsustainably high fiscal deficits, and the extreme use of newly-created QE money to monetise existing government debt, we need also to be aware of the risk that, in a reversal of the 2008 global financial crisis (GFC) sequence, a financial crash might follow, rather than precede, a severe economic downturn.

Methodology – the three challenges

Regular readers will be familiar with the principles of the surplus energy interpretation of the economy, but anyone needing an introduction to Surplus Energy Economics and the SEEDS system can find a briefing paper at the resources page of this site. What follows reflects detailed application of the model to the conditions and trends to be expected after the coronavirus crisis.

Simply put, SEE understands the economy as an energy system, in which money, lacking intrinsic value, plays a subsidiary (though important) role as a medium of exchange. A critical factor in the calibration of prosperity is ECoE (the Energy Cost of Energy), which determines, from any given quantity of accessed energy, how much is consumed (‘lost’) in the access process, and how much (‘surplus’) energy remains to power all economic activities other than the supply of energy itself.

Critically, the depletion process has long been exerting upwards pressure on the ECoEs of fossil fuel (FF) energy, which continues to account for more than four-fifths of the energy used in the economy. The ECoEs of renewable energy (RE) alternatives have been falling, but are unlikely ever to become low enough to restore prosperity growth made possible in the past by low-cost supplies of oil, gas and coal.

Accordingly, global prosperity per capita has turned downwards, a trend which can be disguised (but cannot be countered) by various forms of financial manipulation.

This means that, long before the coronavirus pandemic, the onset of “de-growth” was one of three main problems threatening the economy and the financial system. The others are (b) the threat of environmental degradation – which will never be tackled effectively until the economy is understood as an energy system – and (c) the over-extension of the financial system which has resulted from prolonged, futile and increasingly desperate efforts to overcome the physical, material deterioration in the economy by immaterial and artificial (monetary) means.

On these latter issues, the slump in economic activity has had some beneficial impact on climate change metrics, whilst we can expect a crisis to occur in the financial system because its essential predicate – perpetual growth – has been invalidated. The global financial system has long since taken on Ponzi characteristics and, like all such schemes, is wholly dependent on a continuity that has now been lost.

Top-line aggregates

With these parameters understood, the critical economic issue can be defined as the rate of deterioration in prosperity, for which the main aggregate projections from SEEDS are set out in fig. 2. Throughout this report, unless otherwise noted, all amounts are stated in constant international dollars, converted from other currencies using the PPP (purchasing power parity) convention.

During the current year, world GDP is projected to fall by 13%, recovering thereafter at rates of between 3% and 3.5%. This rebound trajectory, though, assumes extraordinary levels of credit and monetary support, reflected, in part, in an accelerated rate of increase in global debt.

Within debt projections, the greatest uncertainties are (a) the possible extent of defaults in the household and corporate sectors, and (b) the degree to which central banks will monetise new government issuance by the backdoor route of using newly-created QE money to buy up existing debt obligations.

This is a point of extreme risk in the financial system, where a cascade of defaults – and/or a slump in the credibility and purchasing power of fiat currencies – are very real possibilities, particularly if the ‘standard model’ of crisis response starts to assume permanent characteristics.

Fig.2

#177 Fig. 2 aggregates

Looking behind the distorting effects of monetary intervention, it’s likely that underlying or ‘clean’ output (C-GDP) will fall by about 17% this year and, after some measure of rebound during 2021 and 2022, will revert to a rate of growth which, at barely 0.2%, is appreciably lower than the rate (of just over 1.0%) at which world population numbers continue to increase. Additionally, ECoEs can be expected to continue their upwards path, driving a widening wedge between C-GDP and prosperity.

These effects are illustrated in fig. 3, which highlights, as a pink triangular wedge, the way in which ever-looser monetary policies have inflated apparent GDP to levels far above the underlying trajectory. This is the element of claimed “growth” that would cease if credit expansion stalled, and would go into reverse in the event of deleveraging. The gap between C-GDP and prosperity, meanwhile, reflects the relentless rise of trend ECoEs. This interpretation, as set out in the left-hand chart, is contextualised by the inclusion of debt in the centre chart.

Fig. 3

#177 Fig. 3 chart aggregates

Fig. 3 also highlights, in the right-hand chart, a major problem that cannot be identified using ‘conventional’ methods of economic interpretation. Essentially, rapid increases in debt serve artificially to inflate recorded GDP, such that ratios which compare debt with GDP have an intrinsic bias to the downside during periods of rapid expansion in debt.

Rebasing the debt metric to prosperity – which is not distorted by credit expansion – indicates that the debt ratio already stands at just over 350% of economic output, compared with slightly under 220% on a conventional GDP denominator. As the authorities ramp up deficit support – and, quite conceivably, make private borrowing even easier and cheaper than it already is – the true scale of indebtedness will become progressively higher, thus measured, than it appears on conventional metrics.

Personal prosperity – a worsening trend

The per capita equivalents of these projections are set out in fig. 4, which expresses global averages in thousands of constant PPP dollars per person. After a sharp (-18%) fall anticipated during the current year, prosperity per capita is expected to recover only partially before resuming the decline pattern that has been in evidence since the ‘long plateau’ ended in 2018, and the world’s average person started getting poorer.

Meanwhile, each person’s share of the aggregate of government, household and business debt is set to rise markedly, not just in 2020 but in subsequent years. By 2025, whilst prosperity per capita is set to be 17% ($1,930) lower than it was last year, the average person’s debt is projected to have risen by nearly $17,900 (45%).

These, in short, are prosperity and debt metrics which are set to worsen very rapidly indeed. The world’s average person, currently carrying a debt share of $40,000 on annual prosperity of $11,400, is likely, within five years, to be trying to carry debt of $58,000 on prosperity of only $9,450.

This may simply be too much of a burden for the system to withstand. We face a conundrum, posed by deteriorating prosperity, in which either debt becomes excessive in relation to the carrying capability of global prosperity, and/or a resort to larger-scale monetisation undermines the credibility and purchasing power of fiat currencies.

Fig. 4

#177 Fig. 4 per capita table

In fig. 5 – which sets out some per capita metrics in chart form – another adverse trend becomes apparent. This is the fact that taxation per capita has continued to rise even whilst the average person’s prosperity has flattened off and, latterly, has turned down.

What this means is that the discretionary (“left in your pocket”) prosperity of the average person has become subject to a squeeze, with top-line prosperity falling whilst the burden of tax continues to increase.

Fig. 5

#177 Fig. 5 per capita chart

This also means that, in addition to deteriorating prosperity itself, there are two leveraging processes which are accelerating the erosion of consumers’ ability to make non-essential purchases.

The first of these is the way in which taxation is absorbing an increasing proportion of household prosperity, and the second is the rising share of remaining (discretionary) prosperity that has to be allocated to essential categories of expenditure.

These are not wholly new trends – and they help explain the pre-crisis slumps in the sales of non-essentials such as cars and smartphones – but one of the clearest effects of the crisis is to increase the downwards pressure on consumers’ non-essential expenditures.

Governments – the hidden problem

This has implications for any business selling goods and services to the consumer, particularly where their product is non-essential. It also sets governments a fiscal problem of which most are, as yet, seemingly wholly unaware.

As can be seen in fig. 6, governments have, over an extended period, managed to slightly more than double tax revenues whilst maintaining the overall incidence of taxation at a remarkably consistent level of about 31% of GDP.

This has led them to conclude that the burden of taxation has not increased materially, even though their ability to fund public services has expanded at trend annual real rates of slightly over 3%. When – as has happened in France – the public expresses anger over taxation, governments seem genuinely surprised by popular discontent.

The problem, of course, is that, over time, GDP has become an ever less meaningful quantification of prosperity. When reassessed on the denominator of prosperity, the tax incidence worldwide has risen from 32% in 1999, and 39% in 2009, to 51% last year (and is higher still in some countries). On current trajectories, the tax ‘take’ from global prosperity per capita would reach almost 70% by 2030, a level which the public are unlikely to find acceptable, especially in those high-tax economies where the incidence would be even higher.

Conversely, if (as in the right-hand chart in fig. 6) taxation was to be pegged at the 51% of prosperity averaged in 2019, the resulting ‘sustainable’ path would see taxation fall from an estimated $43tn last year to $38tn (at constant values) by 2030. At -12%, this may not seem a huge fall in fiscal resources, but it is fully 27% ($14tn) lower than where, on the current trajectory, tax revenues otherwise would have been.

Fig. 6

#177 Fig. 6 world tax

Politically, there seems little doubt that the widespread popular discontent witnessed in many parts of the world during the coronavirus crisis has links to deteriorating prosperity. Historically, clear connections can be drawn between social unrest and the related factors of (a) material hardship and (b) perceived inequity.

At the same time, the sharp deterioration in prosperity seems certain to exacerbate international tensions, where countries competing for dwindling prosperity may also seek confrontation as a distraction technique. These are amongst the reasons why a world that is becoming poorer is also becoming both angrier and more dangerous.

323 thoughts on “#177. Poorer, angrier, riskier

  1. A couple of comments about Physics, Free Will, Economics
    Physics is seen as the bedrock of science, but the bedrock of physics is amazingly unstable:

    Since life is short and you have limited tolerance for using limited energy to try to make sense of it all, I suggest looking at the 18 minute mark and the work of Rolf Landauer on the nature and limitations of the computational model. Briefly (as I understand it), there is not the physical capacity for enough computation to actually guide all the billiard balls in the ‘billiard ball universe model’. Which suggests to me that the world is actually dominated by heuristics or, in the case of humans, by stories or scenarios. There is a lot of evidence, for example, that human emotions are generated as a result of a computation: does this situation call for anger, aggression, patience, play dead, seduction, or some other in our quiver of arrows of emotion? As to the question of whether the actual emotion selected has already been determined by previous history and our genetic (or holobiont) inheritance, I suggest that the computational theory shortcomings identified by Landauer argue that the decisions are not irrevocably fixed. But neither are we dealing with a ‘green field’. Whatever we decide to do has to be somewhat consistent with our holobiont assemblage of genetic material and our network of relationships both symbiotic and adversarial. For example, any business now needs to be looking at symbiosis with nitric oxide and its precursors, but also at the pathogen and its likely status as an endemic risk.

    If a business does decide to look at the world that way, then the stories or paradigms or scenarios available to it will be crucial. The same holds for my grandchild college students…I nag them about not letting college attendance interfere with their education (Feynman, I think). I’m pretty sure that have me put into a category which is less than adulatory.

    The stories, I believe, have to be broadly based. There is no such thing, in such an environment, as a ‘purely economic’ scenario which provides solutions. A ‘purely economic’ analysis serves the same purpose as Paul Davies’ descriptions of the ‘shut up and compute’ physicists who don’t ask embarrassing questions. The analyses are undoubtedly necessary, but they do not provide large answers. We can’t keep doing what we (in the West) have been doing…so what alternatives do we have?

    Don Stewart

  2. Most likely humans will keep doing what they have been doing for millennia, with only minor changes, likely due to technologies, environmental changes, and mutations. Models are rarely accurate and complete mirrors or predictors of reality. There are too many variables in complex systems. The “shut up and compute” dictum is nonsense IMO. But characterizing unknowns is nonsense too. Billiard ball universe is a dumb metaphor, because there are more unknown “balls” than the few we’ve tentatively identified. I agree that stories and cultural values are major inputs into human behavior.

  3. @Steve Gwynne and Raymond,

    Some very considered commentary above. I don’t pretend to have the depth of study or thought evinced by your posts, but I’d like to encourage all here to think beyond current politics and political structures, even idealized ones, in terms of helpful responses to our predicament. With respect, I don’t think that that approach or outlook goes far enough. I think that we have to tackle the “civilization” paradigm for our social structure and economy we’ve used for the last say 10,000 years. In that model, the primary producers (at first, of grain and other agricultural commodities) are pressured to produce as large surpluses as possible under conditions of slavery and/or a repressive pricing scheme and financial treadmill that keeps their compensation as low as possible, so that the surpluses will be as large as possible and can be harvested and maintained by gatekeepers, who then use that for social and wealth aggrandizement, predatory extraction from outside groups (wars for gold, slaves and other resources) rather than as a true trusteeship for the common good.

    I am drawing on the works of James Scott for this comment. At first, civilization existed side by side with pure or mixed groups of hunter-gathers, “gardeners” (instead of farmers), and pastoralists, but as the centuries rolled by civilization has taken over nearly every place in the world, because it is nearly impossible to resist the power it can muster to take and destroy, or the opportunities for selling out based on the visions of a better life and wealth to be obtained by siding with the (both inward and outward-bound) colonialists in the exploitation of one’s own people.

    At this point, and particularly in the West, we have now reached the point where almost the entirety of people do not even have the “right” and power that the lowest animal has – to live off of its natural environment. When you cut through all of the BS, this is the true accomplishment of our supposedly superior intellect, rationality, the scientific method, technology, “progress,” language, art and culture, and our ability to inhabit virtual constructs of the world instead of nature, or physical reality. Access to everything except the air one breathes is intermediated through a social and legal hierarchy of hairless monkeys above one’s own station in life, and the ideologies and other myths and constructs of the “world” used to normalize and naturalize that hierarchy. (“Naturalize” as in, present it as the inevitable reflection or outcome of God’s will, “natural law,” the “market,” etc., and not power relationships among hairless monkeys vying for whatever the hell they think they are getting by being richer than God – the freedom to do anything without consequence and access to better f**ks, maybe.

    Even this latter phase – of complete subjugation of everything to intermediation – is relatively recent, but does represent the pinnacle and end-result for the civilization model. In the Middle Ages, before enclosure, most rural inhabitants had access to a commons that could be used to feed, clothe and shelter themselves, including heat their tiny huts or cottages from wood lying on the ground. From Michael Hudson’s book on “forgive them their debts, we learn that when ancient kings declared a debt jubilee, they didn’t just wipe out the debts, they RETURNED THE LANDS TO THE FAMILIES THAT LOST THEM. In other words, the debt-freed ALSO received productive assets with which to support themselves AND provide a surplus to the king. When you realize this, you realize what a farce the “modern debt jubilee” is that is bandied about by some. It would wipe out the debt, but then what? The debt-freed have no greater ability to produce except in bondage to employers, “:job-creators,” than before. I.e., their barest subsistence remains fully subjugated to intermediation.

    Those kings still had power to subdue and subordinate the moneyed interests, in order to sustain their own independent power, unlike now, where the government is just the legal enforcement arm of the oligarchs. In contrast, you will note that the “modern jubilee” continues the authority of the moneyed classes over government, because it insures the continued primacy of finalization and a rentier economy instead of creating a very large independent productive class that can support a central government via taxation – the Jeffersonian idealized vision of an independent yeoman class essential to representative democracy, not a government taken over by oligarchs.

    I would go further and say nothing will change “for the better” and certainly that we cannot achieve “sustainability” unless humans make another epochal shift to abandon the civilization paradigm. I suspect Steve Kurtz will say this is impossible because of the MPP and because hierarchy is in our genes, but until we make things so bad for ourselves that we either kill ourselves off or certain genes “switch off” and enable a far more egalitarian human society, I think that the rallying cry and prime action directive for the tiny handful of humans that want to actually live and model sustainability – as opposed to waiting for leadership to accomplish something – has to be “End hairless monkey intermediation!”

    • Agree until the end, Tagio. As a non-absolutist, I’d say the probability of

      ” humans make another epochal shift to abandon the civilization paradigm.”[voluntarily]

      is minuscule.

      Pinker is fooling many with his thesis of improving relations between cultures/societies. Dennis Meadows has it about right IMHO. Voluntary abdication by the greed-power tail of the Bell Curve seems remote. Bill and Melinda Gates are rare exceptions in their Foundation efforts. There are a few other billionaires trying, but they are strongly opposed by the majority. And the Left tends to vilify Gates, Grantham, etc as conservative and anti-human.

    • Sorry, but if you look at Bill Gates’ Big Pharma associations and manipulations he is as dirty and greedy as they come. A good contestant for the most evil sh-t on the planet.

    • Correlation is not causation. The Foundation explores research to help the poor. Gates doesn’t need money. He and Melinda are giving most away. Buffett has chosen them to handle charitable usage of many billions of his wealth. Those accusing these folks of ulterior, profit motives require iron clad evidence of profiteering, or they are just ranting hatred and ideology.

    • Thanks for posting this Jackson. It’s a very insightful summary of our predicament, and not quite as gloomy as the worst Doom scenarios some of our contributors have posted. What I mean, is that Meadows thinks there will still be a world to live in at the end of the century.

  4. Automatic Earth
    Presents a picture from a street in the UK featuring a hand-written message on a chalkboard:
    All Americans Must Be Accompanied By An Adult
    Don Stewart
    PS. It does also contain a useful summary of recent Covid-19 craziness in the US.

    • Hi Don,

      I did see that sign but refrained on commenting upon it as it seemed unfair to rub salt into an already open wound,
      in reality the British are running out of people to laugh at, we aren’t a lot better at the moment,
      if need be I suggest you tell people you’re Canadian, I’m tempted to pretend I’m a New Zealander if confronted abroad!

    • @Matt
      Didn’t you see that our President is proclaiming us a model for the lesser countries of the world? We are on the verge of a ‘tremendous victory’. Just as debt ‘brings forward anticipated future prosperity’, I think bragging on our ‘about to be tremendous victory’ is just bringing forward the rewards that we truly deserve.
      Don Stewart

  5. In case of interest.

    ……..

    Be careful: global stimulus is running out before the pandemic has been defeated

    By Ambrose Evans-Pritchard,
    International Business Editor

    Global bond markets refuse to ratify a V-shaped economic recovery. Futures contracts in fixed income derivatives are even more bearish, signalling nothing less than a worldwide deflationary slump as far as the eye can see.

    “If markets are pricing a ‘V’, they’re going about it in an odd way,” says Andrew Sheets from Morgan Stanley.

    It is simply not true that investors are ignoring the massive economic shock of the pandemic. The picture is being distorted by equities, and within that by a clutch of US tech stocks in the grip of a parabolic spike all too like the final phase of the dotcom bubble in 2000. But debt markets are three times bigger and ultimately matter far more.

    Yields on 10-year US Treasuries have not rebounded as you would expect if the economy is genuinely healing. They are trading at 0.62pc, close to their all-time low during the panic flight to safety in late March.

    You can perhaps rationalise such low yields on the grounds that the Federal Reserve has repressed the Treasury market with its $3 trillion blast of pandemic QE, although be aware that the Fed balance sheet peaked at $7.2 trillion in early June and has since fallen by $200bn.

    What you cannot so easily rationalise is the long-range pricing of futures contracts. They imply that yields will remain pinned to the floor until the mid-2030s and that the Fed will not come close to meeting its inflation target by the middle of the century.

    Fixed income funds are telling us central banks will fail to generate more than a flicker of inflation despite heroic efforts. It is the portrait of a truncated recovery with corrosively high unemployment.

    Mr Sheets says a slew of market signals are disturbing. People are willing to pay nosebleed sums for disaster protection, the “skew” in hedge fund parlance. Volatility has refused to settle down. “Neither suggest a market that’s pricing a return to normal any time soon,” he said.

    A rising tide ought to be lifting all boats. Yet swaths of the US stock market remain in distress. David Rosenberg from Gluskin Sheff says the sectoral tally is: auto stocks (-23pc), advertising (-34pc), energy and regional banks (-37pc), hotels (-43pc), and airlines (-55pc).

    I notice a growing unease among the equity gurus at the big US banks. JP Morgan says the risk no longer justifies the reward. Tobias Levkovich from Citigroup says his “panic/euphoria” model is now signalling an 80pc chance of an equity correction. He has cut his year-end target for the S&P 500 to 2,900, a 10pc drop from current levels. Citigroup estimates that global profit forecasts for the next year are 30pc too high.

    The nagging worry is that US lending has rolled over. Bank credit has dropped by $170bn since May. Commercial paper has shrunk by $150bn.

    The $1.2 trillion market for leveraged loans is visibly fraying, especially the $600bn segment of speculative debt that is sliced and diced into CLO (collateralised loan obligation) packages.

    Moody’s has placed much of the sector on downgrade watch, warning of a 16pc default rate in a pessimistic scenario. That would wipe out the equity and speculative tranches.

  6. @Dr. Morgan
    You have to admit that the US has an embarrassing riches of political leaders!!!

    BTW…after claiming that his relationship with Fauci is ‘good’ despite the twitter attacks, and discounting the increase in the case load and running out of ICU beds, and being contradicted by the medical guys, Trump seems to me to be showing wear and tear.

    Don Stewart

  7. Interesting piece from the BBC today regarding the perils of population reduction. Yes that’s right…population reduction not population expansion. This is a totally mainstream economists view of the world, although the reporter describes himself as a “health and science” correspondent. Where do they get these guys?

    https://www.bbc.co.uk/news/health-53409521

    • Very interesting. Just before seeing this I was writing about the perils of population growth and how population growth within an increasingly resource constrained world will sustain structural inequalities, oligarchical power and capitalism because the global haves will seek to maintain their relative wealth in relation to the global have nots. I then argued that structural equality will only be likely under conditions of population degrowth as a result of democratic majorities feeling that they have enough.

      Interestingly, the researchers within this BBC reports seem to be suggesting something rather similar in that population degrowth will encourage free movement and open borders which I guess may encourage greater remittances abroad as well as reduce the likelihood of global conflict.

  8. Trump not well?
    I remarked above that he didn’t look right to me. I seldom see him on video, and I don’t watch television at all. So I’m not a good authority. But then he called a press conference and spent almost all of his time ranting instead of answering questions. Which led someone to this observation:
    “Even for those who follow Mr. Trump regularly and understand his shorthand, it became challenging to follow his train of thought.”
    If he was the President of Burkina Faso, it wouldn’t make any difference to the world. But for obvious reasons, the world does need someone in the White House who can think beyond his own re-election priorities.

    The question that the US should be asking itself, it seems to me, is how we ended up with two dysfunctional candidates for President. The scariest answer would be that there is no way out of our predicament, and that we are descending into Dmitry Orlov’s final stage of collapse. It seems like a crazy thought, but I wouldn’t put the chances at zero. We ARE deeply in ‘negative cash flow’ country, living on the willingness of the rest of the world to continue to ‘work for the Yankee dollar’.

    After the 2016 election, Stacey Herbert said that ‘the Democrats should be asking themselves how they managed to lose to an imbecile’. The Democratic National Committee (which is a private group of well-heeled contributors who control the party) has resolutely refused to ask that question, and has seemingly manipulated things so that a very weak Joe Biden is a stand-in for something. But what? I wouldn’t be shocked by a military coup.

    Don Stewart

    • @Dr. Morgan
      You and the level headed-populist mayor of Pittsboro, NC (pop about 5,000) think the same way. That’s what he told Max Keiser at the City Pub.

    • Old joke. Ignore the “efficient government.” (it’s relative)

      ——————————————–

      Donald Trump went to London and met with the Queen.

      “Your Queenship,” he asked her, “I am finding things way more
      difficult than I could have imagined. May I ask you – how do you run
      such an efficient government?
      Are there any tips you can give me?”

      “Well,” replied Her Majesty, “the most important thing is to surround
      yourself with intelligent people.”

      Trump frowned. “But how do you know the people around you are really
      intelligent?” he asked.

      “Oh, that’s easy” the Queen replied, “You just ask them to answer an
      intelligent riddle.”

      She pushed a button on her intercom. “Please send Theresa May in here.”

      The Prime Minister walked into the room. “You called for me, Your Majesty?”

      “Answer me this, if you would, Theresa,” the Queen said. “Your mother
      and father have a child. It is not your brother and it is not your
      sister. Who is it?”

      Without pausing for even a second, Theresa May answered, “That would be me.”

      “Yes! Very good,” said the Queen.

      Trump went back home, returned to the White House and the very next
      day called for Mike Pence to come and see him. Pence duly trotted in
      to the Oval Office.

      “Mike, answer this for me,” said the Donald. “Your mother and your
      father have a child. It’s not your brother and it’s not your sister.
      Who is it?”

      “I’m not sure,” said Pence. “Let me get back to you on that one.”

      Pence went panicking off to his advisers and asked everyone, but none
      of them could give him an answer.

      The next night, as it happened, Pence ran in to Hillary Clinton in a
      restaurant. By now, desperate for an answer to give to his tyrannical
      boss, he approached her – much to her surprise.

      “Hillary, I know we haven’t always seen eye to eye but I would really
      appreciate it if you could answer this riddle for me.”

      “Sure, Mike,” Hillary said. “I’m not one to hold a grudge. What is it?”

      “Thanks,” said Pence, “It’s this. Your mother and father have a child
      and it’s not your brother or your sister. Who is it?”

      Hillary answered right back, “That’s easy, it’s me!”

      Pence smiled, “Thanks!”

      Pence then went back to speak with Trump. “Say, boss, I did some
      research and I have the answer to that riddle. It’s Hillary Clinton.”

      Trump got up, stomped over to Pence, and angrily yelled at him. “No,
      you idiot! It’s Theresa May!”

      … AND THAT, MY FRIENDS, IS PRECISELY WHAT’S GOING ON AT THE WHITE HOUSE.

  9. @ Don
    “The Democratic National Committee (which is a private group of well-heeled contributors who control the party) has resolutely refused to ask that question, and has seemingly manipulated things so that a very weak Joe Biden is a stand-in for something. But what? ”

    According to Jim Rickards, Biden is the front for a full blown socialist power grab. These guys (Rickards et al) always have some interesting conspiracy theories to trot out, and this latest one is Biden playing the trojan horse for a left wing takeover. (No pun intended with the term “trot”, but chuckle if you wish)

    Anyway, the plot goes something like this. Biden wins office and is unable to complete the full presidential term due to failing mental faculties. Waiting in the wings is an ultra-socialist vice president, who grabs power due to Biden’s demise.

    An interesting theory, but it assumes that a president with failing mental capacity will be replaced.
    Isn’t it the case that Reagan was well into gaga land before his term in office ended?

    • This makes sense as far as it goes, but I can’t see why the DNC’s stand-in for Biden would be a socialist rather than, say, an establishment “liberal” in the Clinton mould.

  10. @ Dr Tim

    “This makes sense as far as it goes, but I can’t see why the DNC’s stand-in for Biden would be a socialist rather than, say, an establishment “liberal” in the Clinton mould.”

    The conspiracy plot goes something like this. American institutions have been progressively infiltrated (over a long period of time) by Neo-Marxists, to pave the way for the final act of political take over. They don’t want an establishment liberal in power, because they want to overthrow the establishment.

    This is a plot from the playbook of one Antonio Gramsci, an italian philosopher from the 1930’s who called for socialism by overtaking cultural institutions and rotting them slowly from within.

    Not an impossible scenario. Communist regimes are noted for playing the “long-game”

  11. @Don,
    congratulations on not watching TV, this is why you are still able to think objectively!

    @Steve Gwynne, surely an example of population reduction empowering the lower classes and resulting in a reduction in inequality is the medieval Black Death, 50% of the British population died and labour was in such high demand the feudal system collapsed as peasants were able to move around freely offering their labour to the highest bidder, feudal landlords were unable to control this insurrection due to lack of staff to enforce feudalism and other feudal landlords ceasing to follow the old rules and hiring labour instead of sending them back to their overlord in chains.

    @Steven B Kurtz, I’m not entirely sure that is an old joke and rather suspect you have a listening device planted in the White House,

    @Neill, I think you’ll find Jim Rickards is suffering from ‘Red Terror’ a common affliction that affects many people in America, probably a result of decades of Cold War propaganda,
    he’s half right,
    Biden is obviously a ‘shoe-in’ to grab the presidency and then be replaced by something ugly lurking in the shadows,
    but why on earth imagine it would be a full blown socialist?
    if even modest socialism was their ultimate goal they could have allowed Bernie Sanders to be the nominee and run for President in both 2016 and or today and I think it’s highly likely Bernie would be willingly elected by the population without resorting to any Machiavellian schemes,
    I think it’s much more plausable that the ‘ugly thing’ lurking in the shadows is ‘she who was thwarted before’ by people voting Trump in preference,
    Hillary has taken truck loads of money from donors on the assurance she would be the president and is committed to delivering on her promises, her entire credibility amongst the elites is on the line,
    Pol Pot, Mao and even Dr Evil in the Austin Powers movies all wore ‘pant suits’
    have you ever seen Bernie in a ‘pant suit’?

    @Don (again!) I find Dimity Orlov’s perspective on American collapse interesting because his reference is the collapse of the Soviet Union,
    the Soviet Union’s decline was long and drawn out, the leadership became increasingly geriatric, the central ideology was ossified and incapable of renewal or reinvention, the economy stagnated, the media was tightly controlled and increasingly unbelievable,

    the Soviet Union did collapse but the Russian people and their spirit have survived,
    Washington and the US Empire may well also collapse but again I expect the American people and their spirit to survive,
    elites and their power structures may fall but the largely ignored and seemingly invisible common people invariably endure and survive.

    • Matt
      I agree at least partially (because I am not sure). When Rome collapsed, it was the government of Empire which collapsed. The government of the Republic had collapsed centuries before. When the government collapsed, taxes declined and certainly some people were better off. One of the curious things about the US is that a quorum of states can simply pass a resolution that ‘the United States Government no longer has any legal presence in our State’, and the US government and its debt obligations cease to be enforceable. Would the average person be better off? Will the average Britain be better off with a clean break from the EU? Would Scotland be better off if it could walk away from the obligations of the British government?

      Don Stewart

  12. Full disclosure first, I’m a longterm doomer/prepper.

    Tim’s work is good and presents another useful perspective on the economic/resource crunch/dead end we’re in.

    It seems the audience of this site is mostly mainstream, non-doomers who sense something is wrong and are looking for answers, or perhaps hoping for solutions to our predicament. Unfortunately, there is no solution to our situation of too many people competing for too few resources.

    Peak oil 1 happened in 2005 and the GFC was a result of that. Peak oil 2 happened circa 2019 when the economy was already starting to collapse. In between 1 and 2 the illusion of economic growth was maintained primarily with financial chicanery. People became accustomed to living in a virtual (finance) world and lost sight of the real world of resources, ecology etc.

    Production-wise, peak oil 1 was mitigated by the US shale oil ‘revolution’, which filled a resource gap, but lost 10s of $billions i.e. the resource was not economically viable. I believe that most of the growth is debt is correlated with the decline in EROEI and is a way of masking that.

    All the hopium about the “green revolution” ignores physical realities that make it impossible for it to replace fossil fuels.

    Some commentators say the (fake) pandemic was orchestrated to obscure the collapse and provide a justification for reduced economic activity by getting rid of a lot of discretionary activity. Obviously the reaction to the virus caused/will cause way more damage than the virus itself, so draw your own conclusions.

    Running in parallel and exacerbating the overall situation, the US is clearly an empire in collapse.

    No government ever has been, or would be elected on a platform of de-growth and I don’t expect any politician to ever admit the situation we’re in. Instead we’ll get various flavours of extend and pretend until reality is undeniable, then things will become highly unpleasant. Refer to various 3rd world countries for how that looks.

    You might want to start thinking about ways to prepare yourself for coming times.

    • Fred:

      Some comments, obviously speaking only for myself, but I hope this clarifies things a bit.

      1. I’m glad you like my work. I believe that an energy interpretation is the only way to understand the economy. Many very good people have pioneered that view, and many others share it. But, so far as I’m aware, SEEDS is the only model which runs on that basis. It is designed to give its output in financial calibration (rather than, say, in joules or BTUs) because that’s the language in which economic and financial debate is conducted.

      2. This obliges me to be objective, so I’m not – in the research I produce and the conclusions drawn from it – either a doomster or an optimist. I prefer to try to be a realist.

      In terms of personal viewpoints:

      3. I’m not a “prepper”. I’ve written (though not published) a paper on why bunkers are a waste of time and money. I’m convinced that we’re ‘all in this together’, and society and systems need to change to accommodate the new reality of rising ECoEs and deteriorating prosperity.

      4. This, as I see it, requires that we share our knowledge, and are as inclusive as possible.

      5. I don’t believe that, of their own volition, governments will adopt energy principles. But a bad enough crisis (which I’m sure is inescapable) might force a change of mind.

      6. I’m more optimistic that business and financial leaderships might embrace this thinking – because those that do should be able to ‘run rings round’ those who don’t.

      7. Renewable energy is essential. The rise in the ECoEs, and the eventual fall in supplies, of fossil fuels doom the economy. Trying to stick to FFs might or might not wreck the environment, but would most certainly wreck the economy.

      8. But REs cannot replace the low-cost FFs which have been the historic basis of economic growth. For that you need ECoEs of less than 5%, preferably less than 3%. I can’t see ECoEs of REs falling below 10% or so.

    • Be concerned Fred, but don’t be worried. Worry does not help anything.
      Contrary to what you say, there is a very simple answer to your problem of too many people competing for too few resources.
      It is not a very palatable answer, unless you are Joseph Stalin who sees big numbers only as a statistic, but there is an answer.

      If we have passed Peak Oil, then how are we going to manage to feed a world population of 8 Billion without Fossil Fuels ?
      Great swathes of our farmland are now dependent of chemical fertilizers to produce crops. Our seas if not polluted, are fished clean. Our fresh water is running low.
      The World Elite will have done the sums already :
      They know the resources of planet Earth.
      They know their own numbers.
      They know how many skilled doctors, scientists, engineers and technicians they need to maintain and advance their own lifestyles.
      They will also need a pool of manual labour.
      Welcome back to Feudalism.

      So, the abolition of Welfare in the West, a virus in Asia and a famine in Africa should get our numbers down to a more manageable level ?
      – Maybe need to do a little more work on that virus, or just develop a killer vaccine.

      ( No, I am not a conspiracy theorist, – I’m just musing )

      In general terms, we can be prudent and try to prepare for a gradual decline, but there may come a point at which a precipitous collapse takes place, and I cannot see any amount of prepping being of any use in such a scenario.
      In such a case, the only advice I can offer is to keep a pack of Hamlet cigars on hand, along with a disk playing Bach’s “Air on the G string”,
      – for those final moments.

    • Asia oil production and consumption.

      Production is in decline, Asia needs a LOT of imported oil, and Opec shows a huge drop in production. Seems Covid is a sledge hammer on Asian economies.

  13. This is regarding degrowth and reducing inequality, as well as earlier discussions above about de-complexifying society, starting with a posit about how to create meaningful jobs for people to replace the bullshit jobs we have now (that are already disappearing without anything to replace them).

    I would suggest that the easiest way to provide meaningful productive jobs for most people is to (i) abandon the industrial mode of production, most particularly of agriculture, housing and clothing) and (ii) re localize production of food, clothing and shelter to the greatest extent possible.

    This cannot be done without (i) re-ruralization and (ii) eliminating property rights in land and resources or, if we are to retain property rights, land reform, involving redistribution of property rights in productive real property to the people at large. This would presumably be done with a view to creating a scheme of small scale private ownership a little more than reasonably sufficient for sustenance, as the absolute baseline, with large tracts held and managed in common by the “commoners”, the benefits of which are to redound to the commoners to which that commons “belongs” i.e. the local villages and towns. Note, NOT basic income, which leaves the mass of people with no productive assets and at the mercy of the “capitalists,” and gatekeeper politicians in charge of distributing the income. This would have to be coupled with a legal regime that confiscated for redistribution excess private productive capacity accumulating through successive generations and/or private transfers, because otherwise the inequality will return, as it always has.

    With regard to the feasibility of any such project, and for social engineers hoping to steer a course to a more utopian future, I highly recommend Walter Scheidel’s work, “The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century.” published by Princeton University and part of the PU series on the economic history of the world. I am only about half way through it, and it is dry, but quite sobering reading. Scheidel argues that only four things have ever drastically reduced inequality in mankind’s entire history: mass-mobilization warfare, of the type of the World Wars, total transformative revolutions, such as those of the Soviet Union and Chinese communism (Mao era), state collapse and catastrophic pandemics. Peaceful reform has NEVER resulted in a noteworthy and lasting leveling/equality. Other than catastrophic pandemics, such as the Black Plague, all leveling has occurred in conjunction with or as a result of massive violence.

    The 20th Century Soviet and Chinese communist revolutions had as one of their principal aims, and effected, massive land reform. In contrast, the revolutions and legal attempts at land reform in Latin America achieved very little and nothing lasting. Pre-20th Century, peasant and city revolts had no effect at all. Even the French Revolution achieved very little leveling; it appears that the mass mobilization for the Napoleonic Wars had a greater effect but again, nothing like the absolutely “transformative” revolutions of the 20th Century.

    The book is well worth reading to gain an understanding of the absolute intractability of human hierarchy or lust for power and greed, if you prefer moral terms, and it will give you a lot of historical examples you probably never heard of, at least it is doing that for me. Short of mass death like the Black Plague, the only thing that “works” to rein in “elites” is massive violence, historically speaking. As in the World Wars, it doesn’t have to be specifically directed at them; if it involves an absolute total societal commitment and effort, their wealth will be taken and/or decline dramatically as a result of the direction of resources to the existential threat, via rationing, effective nationalization of their industries, rent and price controls, much more progressive taxation, high wealth taxes, both as occasional one-offs and on death, and war and post-war high inflation.

    • Tagio,

      Forgive my cynicism towards your idealistic suggestions, but the chances are very high that a re-distribution of property rights would just create a new chapter of inequality. Look what happened after the Soviet Union collapsed. Out of its ruins, some remained poor, some became modestly wealthier, and the favoured few emerged to become billionaire Oligarchs.

      Where do equal societies actually exist? I think the nearest to a truly equal society must be the few remaining indigenous tribes in places such as the Amazon. Even there, from what I have seen, the tribal chief or elder will have something to set him apart from the rest of the tribe.

      That leads me to the question, do we actually want an equal society? I must confess that I don’t.
      What I want, is a much less unequal society, and one where inequality is conducted with ethics. I have no problem with people being wealthy, but I do have a problem with people being super wealthy. Especially if they are also corrupt. I really can’t see why the likes of Jeff Bezos need to add a few more billion to their bank balance.

    • Agree with you Neill. Equality is against nature. And to me, just another ‘ism we don’t know how to deal with. Or another burst of brain quantity.

      Before you know it you’re dancing around a fire with plastic bottles as shoes.

      As soon as the deer becomes a lion, we all die.

  14. Tim Garrett and SEEDS
    I’d like some explanation of how SEEDS compares to Garrett’s model.
    “even if the GDP is constant from year to year, the power capacity would still grow. The P in GDP really does stand for something. And whatever is produced has no value without continuous energy consumption to maintain the circulation that connect it to everything else.”

    The way I read Garrett’s model is that if energy availability begins to decline because, for example, the ECoE is increasing, then the built infrastructure (i.e., civilization) must be increasingly abandoned. If we substitute solar and wind for fossil fuels, then it would seem that some considerable percentage of the built infrastructure will not be compatible with the solar and wind, and must be abandoned.

    This is all confusing to me, involving derivatives which equate to growth, and I am uncertain how it is related to SEEDS…or if it is completely different than SEEDS and thus not comparable in terms of the questions it can address.

    Any help in terms of sorting this out is appreciated….Don Stewart

  15. Neill, I am not saying that is possible or that it will work. Personally, I don’t think it is possible. I am trying to introduce realism into various social engineering suggestions that appear from time to time in these comments by discussing the actual mechanisms that would be needed to achieve these stated desired goals or outcomes. And then pointing out historically that it’s never happened. Meaning that the plans are pretty much pure hopium.

    You are absolutely right about the short-term survival of the egalitarian regimes. IMO, the most depressing thing about Scheidel’s book is not that it takes massive violence and or massive death to achieve egalitarian results but the absolute short-livedness of the egalitarian leveling. Throughout entire human history, the norm is ever-rising and great inequality, with very few and limited setbacks. No one seems to have thought much of it, but please see my post above re: you have to tackle the civilization paradigm itself – nothing has so successfully plundered resources or so successfully enhanced human hierarchy.

    I am not a social engineer and I don’t think we can “plan” or “manage” or legally and politically regulate our way out of our predicament. I am no fan of Martin Heidegger, he deliberately wrote obfuscatory, mystical philosophy with supposedly poetic terms about “Dasein” Heidegger’s word for actual people, usually translated as “there-being”), man’s mode of being in the world and our metaphysical relationship to “being”. For me, life is too short and I am too busy to try to penetrate his impenetrable writings to glean a few insights. However, I think he was on the right track even if he said it in his usual annoying mystical way, when, in a Der Spiegel interview in 1966 (available on line) about our “technicity” and our technological relationship to reality, which Heidegger had written is essentially a kind of nihilism (Chris Hayes would call it a death cult from his theological perspective), he said that “only a god can save us.” What I take that to mean is that only a completely new cosmological view and relationship to our world in the nature of common, widespread religious belief that is reflected in the way we live and our orientation to the world can “save ” us. Ideology, and rule-based systems like laws are not deep enough, wide enough, unconscious enough to work. Rule-based systems rooted in rationality are not strong enough to counter human impulses; they in fact exist to be gamed for the benefit of hierarchy.

    Btw, in that interview, the interviewer made a very insightful claim (remember, this is 1966, when “progress” looked unstoppable) that the most apt story or metaphor that captured our actual relationship to and use of technology was The Sorcerer’s Apprentice. Kunstler expressed the absurdity once in a pithy statement that we operated under the perpetual outlook that the solution to the problems caused by technology was always more technology. We never seem to notice the absurdity or futility in this delusion.

  16. Thanks for the considered response Tim.

    Your model clearly shows the problems the economy faces, but I don’t believe it can forecast how the downward trajectory will look, because normal economic rules don’t work in that scenario. Economies are one way mechanisms that grow then collapse back to lower levels..

    More importantly, due to our genetic and social programming humans go ‘nuts’ when economic growth ceases, so a variety of black swans and non-linearities occur. There’s no historical precedent for expecting ‘sensible’ reactions to the predicament we face.

    I’m not really a prepper, more of a mitigator. If we have a stairstep, non-crazy decline then I believe I’ll be better off in this mid-north NSW rural setting than being in a city, even without a bunker and 10 years of ammo! For me it’s more enjoyable anyway and many of the people aroundabouts are also Sydney refugees.

    The lockdown had minimal effect here apart from knocking off larger social gatherings for a while.

    Small holding self sufficiency is grinding hard work even with Industrial Civilisation behind you. All the historical infrastructure that supported “the old ways” is gone, so if IC goes things will get extremely difficult. We’ve put all sorts of RE/maximum robustness infrastructure on our property, but if you can’t get a spare part in town it won’t last too long.

    Despite my tag name I’m not really worried, more of a fascinated observer doing my best to enjoy each day as it comes. Somebody younger and tougher is welcome to what we leave behind.

    • actually there is a recent historical precedent for how people have coped with a rapid decline in access to energy,
      when the Soviet Union collapsed in 1990 Cuba lost it’s main trade partner and faced acute energy shortages and economic collapse,
      there’s an interesting documentary looking at how they coped,

      https://en.wikipedia.org/wiki/The_Power_of_Community:_How_Cuba_Survived_Peak_Oil

      irrespective of how you might feel about Cuba it’s still interesting to see how they approached the challenge and how it worked out.

    • You’re welcome.

      There are, of course, factors now that make future forecasting unusually complex – I have a ‘taxonomy of degrowth’ which sets these out, and their effects (and especially their combined effects) are very hard to anticipate.

      This said, all modelling has its limitations. Conventional economic models, with their single focus on money and their assumption of perpetual growth, quite aside from being unable to project the future, can’t even tell us where we are now (or how we got here) and this, at least, SEEDS can do.

  17. Thanks Matt. Cuba had an enviable degree of social coherence and were already accustomed to a simpler lifestyle. T’will be interesting to see how the folks recently busy looting Footlocker stores adapt.

    Tim, is your “taxonomy of degrowth” forecasting/suggesting anything unexpected? I’m hoping for a stairstep decline into 3rd world conditions, but have no idea of the timeline.

    Extend and pretend also works fine for me, if that can keep going for a while longer (20 years would be great and should see me out).

  18. Fred,

    Extend and pretend is the “go to” option for most governments and central banks. They have been doing it for years (if not decades), and are well versed in it’s deployment. How long they can keep it spinning out, is another matter.
    The 20 years you hope for seems a big stretch from this juncture, but who knows. Holding senior positions in the business world, gave me a fascinating insight into just how long Zombie companies can delay the inevitable, and I think the same applies to nation states. Of course many of the shenanigan’s to keep things going are unethical, and often illegal, but that doesn’t usually deter desperate attempts to cling to power.

    There are signals when things are finally coming to an end. I know what to look for in the business world, but I don’t have the same experience for national economies. Does anyone have a take on that?

  19. Thinking About Collapse
    A couple of articles worth reading today at Resilence.org:

    Business-as-Usual Porn – or, We Need to Talk about Collapse

    Making And Keeping Soils Fertile: The Case of the Island Poel

    Chris Smaje’s article suggests that we need to look at things realistically. I heartily agree with that notion. The second article fits in with my view of ‘realistic’. Let me expand on that a little bit. The author talks about the time required to build good soil. The specific case of the Baltic island illustrates that it is not impossible, does not require ‘advanced technology’, and does not even require advanced science. What it does illustrate, in my opinion, is that observation of what is actually happening is important, and responding appropriately. A second point is that there are limits to what we can expect. Just as New York City could not have arisen in the Arctic of the Inuit, we aren’t going to build a river delta civilization in Nevada or Sicily. For example, my long and winding path to a kitchen garden has led me to a couple of (current) notions: focus on green leaves and focus on high fertility with an elevated BRIX reading. So…I am outsourcing the ’staff of life’ calorie dense grains to be shipped to me, already dried for storage. Definitely not ideal if the society around me collapses, but may make sense for some years into the future. And if I am successful in building the fertility, that soil will outlive me.

    In contrast, I received yesterday a flyer for a ‘meal service’ which promises the nutritional value I aspire to in my own kitchen garden, but from a combination hydroponic, year-round, farm in a greenhouse along with supplementary food grown in highly enriched soil, and shipped to me twice a week. From a nutritional standpoint, that may be ideal….but probably requires a thousand calories of energy to deliver one dietary calorie of energy. Not a good plan except in the very short term, I would think.

    Don Stewart

  20. FYI

    On the TMUKEPI – the Essentials Index – the cost of essentials increased by 4.1% in the first six months of this year.

    Broad inflation has been just 0.1% over that period.

    This suggests that the cost of essentials is rising, whilst the cost of everything else is falling – which makes perfect sense.

    • Yes, it does make sense.

      With essentials, consumers still have enough money, but supply has been reduced.

      For non-essentials, though, consumers are cautious, and their incomes have been impaired.

      To coin a phrase, ‘bakers will still make plenty of dough, but airlines are toast’…..

    • Tim,

      Is TMUKEPI your proprietary index? A search found nothing.

      Thanks,
      Steve

    • Yes.

      When I left Tullett Prebon, I was told I could carry on with the Index, which is now the TM (rather than the TP) UKEPI.

      It used to be produced each month, but I don’t have the time & resources for that. Now it’s calculated for December of each year, plus ‘latest month vs previous December’.

    • Perfect sense indeed. Seems we are approaching reality. I like that.

      Hollow eyes are made out of desperation or hunger. Or both.

  21. My Credit Union
    A ‘credit union’ in the US is a ‘customer owned bank’. It is oriented toward a local community, and sees itself as connecting savers and borrowers. And as a part of the larger group of co-operatives. We had a virtual conference call yesterday with the chief executive. First, he covered all the initiatives which the credit union is doing to ease the strain on people who are feeling the financial pinch, and also the anti-virus operating procedures as the branch offices re-open. Then he got into the financial situation of the credit union itself. Deposits are way up, as those with money are not spending it. Second, delinquent mortgages have skyrocketed. There are currently 550 million in delinquent mortgages, and the credit union has increased its loss reserves by 15 million. (Unlike the commercial banking sector, the credit union never sells a mortgage to be sliced and diced.). The situation with automobile loans is somewhat similar, but less problematic as most of them were for only 90 days.

    What we are seeing here, in my estimation:
    *The delinquent mortgages could bring down the credit union. Fortunately, we are federally insured.
    *People are saving rather than spending.
    *A high percentage of young families are experiencing financial debacles.
    *Things would be much worse were it not for all the magic money tree largesse which the federal government has been dispensing.
    *If there are a large number of repossessions, then housing and automobile prices will fall, triggering a cascade of depression-like events.

    I think the Virus was just the trigger for a much more fundamental crisis which had been brewing for decades. I suspect the credit union won’t survive. If other credit unions also fail, it will spell the end of the notion that local savers are connected to local borrowers (think Jimmy Stewart and the Building and Loan crisis in the old movie) and the complete turn to pure financialization through slicing and dicing. I don’t think slicing and dicing is magic, just the way financial speculation will choose to die.

    Don Stewart

    • Connecting savers and borrowers?

      Another equality mismatch or just a monetary discussion?

  22. Gail Tverberg at Our Finite World
    “We do indeed appear to be headed for a Great Reset. There is little chance that Green Energy can play more than a small role, however. Leaders are often confused because of the erroneous modeling that has been done. Given that the world’s oil and coal supply seem to be declining in the near term, the chance that fossil fuel production will ever rise as high as assumptions made in the IPCC reports seems very slim.

    It is true that some Green Energy devices may continue to operate for a time. But, as the world economy continues to head downhill, it will be increasingly difficult to make new renewable devices and to repair existing systems. Wholesale electricity prices can be expected to stay very low, leading to the need for continued subsidies for wind and solar.

    Figure 1 indicates that we can expect more revolutions and wars at this stage in the cycle. At least part of this unrest will be related to low commodity prices and low wages. Globalization will tend to disappear. Keeping transmission lines repaired will become an increasing problem, as will many other tasks associated with keeping energy supplies available.”
    Don Stewart

    • I like Gail’s work but she does tend to write some rather vague statements, in which one’s own version of truth can be read into like horoscopes. The above is a good example of that.

    • @thehalfhog
      No disagreement from me. I once tried to explain to her why Tim Garrett can be described as using ‘a model’ while her work cannot be elucidated that way. She rejected my characterization.
      Don Stewart
      PS. But frequently provocative…which is a good thing. In addition, always good to look at what other thoughtful people are saying, to try to guard against confirmation bias.

  23. Dr Tim, ah, it is finally dawning on some members of Britain’s political class that an economy that features a large element of internally consumed services – taking in each other’s washing as you so memorably describe it – has been blown off course.

    Senior Conservative Party member and former Party Leader Iain Duncan-Smith is reported to have said: ‘If we don’t get this economy opening, if people aren’t returning to work back to their offices, buying meals, getting coffee at the station – all that sort of stuff – then this economy is going to tank, and with it will come mass unemployment.’

    The current economic model is based upon: off-shoring manufacturing, increasing consumption using credit (debt), creating ‘wealth’ through shuffling paper, inflating asset prices (houses, and stocks and shares) and the ‘gig’ of manicures, serving lattes and delivering pizza to each other.

    It’s a pity Mr Duncan-Smith and his colleagues did not read your book in 2013. Had they done so, then they may have followed a different policy prescription and the country would be better placed.

    Two things that commentators are not picking-up: the real economic and financial significance on households of the ending of financial redress for the mis-selling of PPI and the steep rise in the price of essentials (which your EPI calculation has confirmed).

  24. Caution – virus attack from recently posted link

    I experienced a virus attack while viewing the fofoa blogspot from the link that houtskool sent on 17th July.

    • I have Sophos, which just renewed for a year at $42 [orig. 50.00], and covers up to 10 devices. It has warned me about many emails and some websites.

  25. Tim Garrett Retweet
    https://www.vice.com/en_us/article/qj4z9p/green-economic-growth-is-a-myth

    “In its place, we need to find ways to fundamentally restructure our economies and production relations to transition to new forms of prosperity that leave endless growth in the dust.”

    In the words of the BIOS team, this means that “more attention should be given to conceptualizations of economy that do not rely on economic growth as the key route towards ecological sustainability and human wellbeing.”

    My comments. The two articles referred to are a comprehensive rebuttal to the notion of ‘green growth’ as a result of simply tweaking BAU. I have been convinced of that for a long time. Which leads me down the path of looking carefully at the biology of ‘enough’. Dr. Zach Bush, MD, recently said something that struck me. While reviewing the enormous amount of genetic material flying around the planet on the jet streams, and the pitifully small amount of it encapsulated in the human genome, he commented that ‘our human bodies are on loan to us from the ecosystem’. As Marx made a fundamental error in defining classes (thanks to Houtskool), humans made a fundamental error in defining humans as ‘the crown of creation’ and by defining God as ‘made in the image of humans’.

    Don Stewart

  26. @thehalfhog
    No disagreement from me. I once tried to explain to her why Tim Garrett can be described as using ‘a model’ while her work cannot be elucidated that way. She rejected my characterization.
    Don Stewart
    PS. But frequently provocative…which is a good thing. In addition, always good to look at what other thoughtful people are saying, to try to guard against confirmation bias.

    • I respect, and seldom comment on, the views of others, but perhaps I can make a generic observation here.

      Some people think that conventional economic modelling works, though my view is that these models have long since ceased to work (starting to fail from the point at which ECoEs became large enough to matter). This leaves decision-makers stumbling through unknown territory with a dawning realisation that their maps are wrong.

      Others think that we don’t need models anyway, so it doesn’t really matter that the old ones are falling apart. That’s not a view I can subscribe to – it goes back to a phrase from naval history, about conducting battles “by guess and by God”, which I never believed could be a recipe for success.

      My own opinion is that, if we do need economic models (as indeed we do), but the old ones have turned out to be wrong, then we need new ones that do work.

    • “Some people think that conventional economic modelling works, . . . ”

      Usually the ‘economists’ who use ‘economic models’ ‘believe’ that the solution to the current economic problem is the implementation of the ‘correct’ type of demand side policies?
      Increase M0 or M3, cut r, or make it negative. Increase G and finance it by ‘borrowing’ from the central bank or by borrowing from the private sector. Or ensure that private credit is extended only for GDP transactions.
      All that is lacking is a ‘sufficient’ increase in aggregate demand!
      They fail to acknowledge, {or are ignorant of} what you have pointed out. That is, there has been a decrease in the ability of an economy to supply the goods and services that were produced when ECoE was much lower?
      Of course, the neoclassical economists, who believe that income/output is ‘supply determined’ will argue that all that is required to generate a large increase the growth of the underlying productive potential of an economy is for taxes to be cut and more ‘competition’ , etc be introduced!

    • Quite so.

      ‘Agriculture is 6% of world GDP. Everything else is 94%. So if we stop producing any food at all, 94% of the economy carries on unaffected’.

      This is a bit like ‘a cat is an animal, a dog is an animal, therefore a dog is a cat’.

    • Seriously, though, acceptable forecasting margin of error in conventional models might be, say, +2%/-2%.

      So, when ECoE was less than 2%, then its absence wasn’t noticed, because results seemed to be within acceptable margins of error.

      Now that ECoE is about 8%, and is still not included in models, these models cease to work for reasons that baffle those unaware of ECoE – which, of course, they are, because ECoE is not a financial component.

  27. Lateral Thinking
    Jim Kunstler interviews an architect/ neuroscientist on why traditional cities work and new cities do not work:
    https://kunstler.com/podcast/kunstlercast-331-chatting-with-architect-and-neuroscientist-ann-sussman-about-buildings-streets-and-cities/

    The reason why someone interested in the financial system might want to listen to this is that many of the neuroscience principles carry over into all of our relationships. Near the end of the interview, they discuss ‘what comes next?’. The answer from the architect is the painful overthrow of the current regime and a new (old) architecture of the city and dwelling which takes into account the human’s needs as shown by neuroscience. Will the same thing happen in politics and business and finance? How did Walt Disney build something in Florida which people pay a lot of money to experience which used to be in our common heritage? Is there any chance that we will end up poorer but more satisfied with life?

    Don Stewart

    • Also…check her website by clicking through in the article and you will see some beautiful, and horrible, examples.
      Don Stewart

    • Quite so,Tim. I don’t think Boris’s comments added much value to the debate, did they?
      His comments coincided with the the day we had a record number of infections worldwide. It seems completely “arse about face” that countries are opening up international borders and relaxing travel restrictions, at a time when outbreaks are ramping up to new highs. Am I missing something here.?

      The fact is, Boris might have no acceptable option, other than a second national lockdown. Personally, from what I’ve seen first hand and through the media, I think another big spike is quite likely. And what tools do we have to tackle it? I don’t know what happened to the track and trace initiative in the UK. Is it dead? And what about clinical solutions. I’m astounded there’s not an “all in” international effort on vaccines and anti-viral treatment.
      I mean, if it gets (more) out of hand, this is an existential threat to the economic and financial system. Instead of full cooperation, we have despairing headlines such as the allegations that Russian hackers are trying to steal Vaccine IP. Surely it’s time for full international sharing and cooperation on every aspect of this crisis?

      I know that we all want to get back to economic and social normality, but wishful thinking is not going to contain and control the virus. I repeat what I said on this forum a few months ago when the Covid-19 was unfolding. It’s hard to see any lasting economic and social solution until there’s an effective scientific/medical solution.

    • Whilst I’m not suggesting that others have got this right (though Japan, S. Korea and Taiwan do seem to have done so), few countries, other than the US, have made such a mess of this as the UK.

      The aspect that worries me the most is the financial, where enormous problems could emerge in September/October. Though I hope I’m wrong, I don’t think the Treasury (or many other Western finance ministries) see the pitfalls in the ‘standard model‘ response.

      First off, international travel should have been shut down as soon as problems in northern Italy became apparent. Instead, Parliament was told that aviation wasn’t a very important means of virus transmission. This makes no sense, and aviation is, in financial terms, a small industry.

      Test and trace has been a shambles – not least by including ‘track’, which must have put huge numbers off. Apparently, the addresses of people tested were not recorded.

      I have no idea why beaches were opened, or mass demonstrations were permitted.

      As for re-imposing lockdowns, the best way – as practised in South Korea – is to shut down sectors where a reinfection wave is happening, not geographic areas – whereas the UK shut down Leicester, S. Korea traced the second wave in Seoul to nightclubs, so just shut those.

      No comment from me on Dominic Cummings’ eye test, or Boris’s father’s reported trip to Greece.

      But I will mention that hospital staff, so recently acclaimed as ‘heroes’, now have to re-start paying up to £3.50 per hour to park at their places of work.

    • The Neuroscience of Boris
      I hazard a speculation. If you listen to what the neuroscientist/ architect has to say about what eye movements tell us about human behavior, we find that people want to feel that they are in control and to feel comfortably safe. Boris feels ‘in control and comfortably safe’ when he is manipulating business as usual political controls. But one cannot solve the virus problem with the usual political maneuvers. Boris is feeling pain because of what is happening, both from any empathy he has toward those suffering, but also because it imperils his control of the political machinery. So he wants to do something to relieve the pain. He will grasp at straws as a last resort.

      The way you describe the response in South Korea is leadership which understands the levers of control for the spread of a virus. If nightclubs are a vector or infection, then close them down. They will confidently feel that they are in control and, once the nightclubs are shuttered, will feel relatively safe, particularly in comparison to countries which are poorly managed.

      So the critical missing link in the UK is that Boris simply doesn’t have the smarts to behave like the South Korean leadership.

      One should be skeptical of any amateur talking about something beyond his pay grade.

      Don Stewart

    • Dr Tim. Boris has a very useful ‘get-out clause’. Something like “It is with regret that I am announcing my resignation. It has been a great privilege to serve the British people through this dark hour, but my viral infection earlier this year has taken a greater toll on my physical and mental health than first realised and, due to post-viral symptoms, I am no longer able to carry out the role of PM as well as I should be. I owe it to the British people to allow someone else to give the leadership required and I owe it to my wife and baby son to devote more time to them. Thank you very much”. Resignation with apparent dignity, with wording designed to cover up shambolic leadership! Maybe as early as late August?

    • Fair enough, and I should add that I’ve nothing against Boris personally. It doesn’t help that a significant number of his colleagues aren’t up to the job.

      What worries me more is the extent of failure in the system. One or more inadequate ministers in departments X, Y and Z shouldn’t cripple the ability of government (as distinct from the government) to act effectively. I recall a long-ago Transport Secretary making an absolutely daft pronouncement on television, but his civil servants then ‘explained’ what the minister had ‘really meant’ which, of course, was the opposite of what he’d actually said.

      Why isn’t this happening now?

      I’m concerned, particularly, about the handling of the financial situation. A huge problem looms in the autumn, and nothing that I’ve seen persuades me that the Treasury even recognises this, still less has a plan for tackling it.

  28. Addendum to my speculation on Boris
    This from Dave Pollard in British Columbia…note ‘nobody in charge’
    Don Stewart
    “One of the signs of social collapse is, ironically, the simultaneous emergence of autocratic demagogues and a soaring distrust of perceived ‘leaders’ of all kinds — politicians, CEOs, priests, the mainstream media hegemony, the social media oligopoly, and ‘experts’ in every field. What we’re seeing in many countries now is a complete power vacuum as so-called world leaders whine and yell on social media like spoiled children instead of actually doing anything to improve the lot of citizens struggling with an increasingly desperate and teetering culture. This has the value of rather baldly showing us that no one is really in control, and that if we want things done we’ll have to self-organize and do them ourselves. My sense is that this self-organization in a power vacuum will be a hallmark of the coming decades, and I’ll be writing about it further soon. There couldn’t be a stronger symbolic demonstration of this shift than the large-scale toppling of statues of historical ‘leaders’ who are now seen not as heroes but as symptoms of a systemic and still-present disease that must now, urgently, be abolished — not by new ‘leaders’ but by all of us in self-organizing communities. “

  29. Tim,
    Would you mind elaborating on “the huge problem looming in the autumn” ?

    • Sure. It’s a little complicated, but here’s the gist. It isn’t unique to the UK, but afffects countries using the ‘standard model’ crisis response.

      There are two main problems posed by the crisis:

      A. Interruption to household incomes

      B. Inability of households and businesses to pay interest and rent.

      Thus far, the answer to A has been support payments (‘furlough’).

      The answer to B is deferral (granting interest & rent ‘holidays’).

      Support is hugely expensive. During April & May, the UK government borrowed £103bn, but for which GDP would have fallen by c50%, rather than the reported 20%. The BoE has monetised this borrowing, using £100bn of QE money.

      This support programme is time limited – this much borrowing (and this much monetisation) is highly dangerous (to the currency) if continued for more than, say, four or five months.

      Deferral, too, is time-limited – if prolonged much longer it will break lenders and landlords.

      So:

      Support needs to be tapered off quickly
      and
      – An exit route from deferral is imperative, and urgent

      The danger is that (a) support is still ongoing and required, at the same time that (b) further deferral becomes untenable.

      If this happens, government will be spending big sums on support and also has to bail out lenders and landlords.

      In such a conjunction, govt borrowing would become enormous, and monetising it would threaten the currency at least as much as the borrowing itself.

    • @Dr. Morgan
      Again, with some qualms, referring to the Architect/ Neuroscientist. At the end of the talk they discuss why the Architecture Departments in the Universities continue to train students to make ugly buildings, when across the campus the brain scanner people are looking at what people really want in a building. Why don’t the two get together…after all, aren’t college and collegial related ideas? And the answer is the impermeability of the silos. As I see it, silos work find so long as each silo is dealing with the same sorts of problems they have always faced and using a well understood set of tools to intervene in the system. But when circumstances demand a very different response, which would force the experts out of their silos, the system tends to fail catastrophically.

      I don’t see the daily symptoms of dysfunction you detect in the British governance system (because I don’t live there and have no particular interest in it), but I will hazard a guess. The British government is constructed of silos which are incapable of coming up with solutions for the challenge posed by the virus. I will give an example from a corporation I am familiar with. The executive team, to their credit, understood that the virus changed everything. But the people in the silos were resistant to change and did not come up with very much in the way of helpful actions. For example, the marketing people could not (or would not) understand why the advertising budget had to be slashed to near zero.

      If we look at the dysfunction in the Trump administration, we can see similar silo effects. There is a recent story in the New York Times which details what happened. Trump started out in denial, then did a 180 and tried to put himself in front of the parade (telling State Governors to do what he told them to do, and be quick about it). Then he decided to put himself in front of the parade of ‘freeing the people to get about their business’, and found a willing expert who came up with projections that everything was getting better and better. (Remember the ‘tremendous victory’ tweet?). He marginalized anyone who said that his chosen course was risky (like Fauci). Now it seems that the US and Britain have fallen back on the time-tested remedy for screw-ups…blame China and Russia.

      In my own opinion, it is unlikely that any combination of monetary adventurism and lockdowns can solve the problem. I have thought from the beginning that enhancing resistance to infection through diet and lifestyle was the solution most likely to work. I agree that changes in diet and lifestyle are destructive to large segments of the economy, but I think we are at the end of the road in terms of extraordinarily wasteful habits. So we need a Churchill moment. There are people who could give sound advice, but they have been systematically excluded from government offices and influence.

      So I think the corporation that I referred to may make it through because the executives seem to understand the issues and are willing to do some hard work themselves in order to figure out a new business plan. Trump, I am pretty sure, only thinks about re-election…his idea of solving the new infection curve is to stop counting. Which puts the survival of the US government at risk.

      Don Stewart

  30. Hi Dr. Morgan, I found your blog in the last few months and I find your arguments very easy to understand and logically sound. However, I am by no means very educated in physics or economics, I’m a biologist by profession. Perhaps that’s why this is all so logical for me, in biology a species or group or organism using up its energy source and having a massive die off is pretty easy to understand, it’s a pretty common phenomenon. If you put yeast cells into a flask with sugar, they’ll consume it and eventually all die.

    Anyway, you often state that policy makers / world leaders / etc are not aware or don’t understand the underlying problems with rising energy cost and declining energy surplus but I find this incredibly hard to believe, if even a layman like me can understand it. Perhaps politicians don’t get it immediately but they have advisors, scientists, industrialists, etc around them all the time. I mean hell, Donald Trump had a former Exxon CEO as his Secretary of State. I can’t fathom that these people don’t realize and accept such a simple logical conclusion.

    I get that it’s possible that they do but they can’t come out and admit it or sell the idea of de-growth as practically nobody would buy it. So then what is their strategy, if any? To just allow a crash to happen? Both scenarios are not appealing but thinking about it, a slow gradual controlled decline is much better than a hard crash and reset. Could some sort of propaganda be implemented to make the public understand these concepts or would it just be an exercise in futility?

    Another thing that comes to mind for me is nuclear power and whether or not that could have helped at least stall the rising cost of energy somewhat. Why did nuclear power not take off as much as it could have? The safety issues? Incidents like Three Mile Island and Chernobyl? I have a feeling though that even if it had, fossil fuels would have just been burned up at the same rate for other endeavors. Is it even possible to consciously limit humanity’s energy usage? To hoard and store energy for the future and ration it out like gasoline during WW2? Or are we just like the yeast in the flask?

    Thanks for the articles, I’m sure I’ll have more questions in the future.

    • Let me illustrate this by example.

      In the latest (late 2019) versions of their forecasts, the three leading institutions in the field – the IEA, the US EIA and OPEC – all forecast oil consumption in 2040 being 10-12% higher than in 2018.

      My interpretation is that this isn’t feasible. Rising ECoEs have two relevant effects – they increase oil producers’ costs, and reduce consumers’ prosperity.

      This is why, in the version of SEEDS now being finalised, I’m abandoning consensus energy volume forecasts and using my own.

      If these august bodies understood ECoE – and the related issues discussed here, and modelled by SEEDS – they would not be forecasting continuing rises in the supply of oil and gas.

      Their approach, pretty clearly, is to accept the economic outlook as projected by ‘conventional’ economists, and then work out the quantity and mix of energy supplies required to support those projected levels of economic activity.

  31. Dr Tim,

    I have been thinking about “what might happen” later this year and into 2021 in the UK and have come to believe that stagflation is a real risk. I’m sure that you would agree that a sudden drop in economic activity should be deflationary in impact? However, there seems to be some evidence of “cost push inflation” because of social distancing and other health regulations. According to a paper published by the IFS, average prices increased between March and May by 2.4%. This paper looked at was actually bought by a representative sample of consumers. That works out to a ‘real world’ inflation rate of 12%! If this is accompanied by spiralling unemployment, we may see a period of stagflation.

    Others will argue that deflation is very likely and, I have a hunch that might well be the case in a year or so’s time.

    Few of my clients are rushing out to spend money; many are, quite rightly, still most concerned about the virus; others have been deleveraging – all deflationary.

    We shall see.

    IFS paper
    https://www.ifs.org.uk/publications/14873

    • My view on the immediate outlook is that the prices of essentials rise pretty quickly, whilst the prices of non-essentials fall.

      For essentials, government payments (such as “furlough”) support demand, but do not restore lost supply.

      For non-essentials, this demand support doesn’t operate, because consumers have turned cautious, have seen their incomes impaired, their savings reduced and their debts increase.

  32. Exactly so, Tim. This article previously cited by Don lays out the best way forward that has any chance of avoiding a fiat collapse although that is not his focus. his focus is on saving people and avoiding an economic armageddon. Support jobs and write down the real property values and cancel debt while saving banks https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-wealth-the-government-has-to-decide-which-to-prioritise-and-there-is-only-one-right-answer.html

    • Tagio and all,

      I might have responded when Don S posted the link. It is a well thought out, systemic piece. Unfortunately, in my experience most political leaders beyond the [very] local level don’t evaluate advice and studies with the common good as the #1 filter. Perhaps sufficient governors (US States) will surprise us and rebel against the Republican Party and back Biden. John Kasich, a former governor of Ohio, just did that today.

  33. Re: your oil example. Demand is already being crushed/adjusted due to Covid, whether because of Illuminati conspiracy plans, never letting a crisis go to waste or pure happenstance. By my complete guess, at least 50% of restaurants will never return. Same with similar exercise entertainment and personal grooming or service businesses, like movies, plays, concerts, gyms, etc.

    The restaurants opening here in Boston have only half the seating they formerly had, and almost all are now geared to take away, with orders being placed by phone apps. My son runs baking operations for a bagel and coffee chain in Boston. This weekend he told me labor costs are 40% of pre-covid levels, while revenues, which are increasing each week and will return full force when college students return, are 66% of normal and rising as we enter into Phase 4 of re-opening here.

    Businesses that survive are learning to do more with less labor and without the need to “pack them in.” This will mostly affect the amount of jobs available. Interesting tidbit: during the gradual opening, my son’s employer simplified the menu by limiting it to foods and drinks that sold the most and were the most popular but allowed customers to choose optional changes to their orders with a list that you can just click the box onr . The simplified menu greatly reduces labor costs, but get this, the business discovered that by letting people choose to make adjustments to their food items – easy to do when the orders are submitted to the kitchen by app – no wasting time talking to the person at the cash register, writing things down, remembering, the average amount spent by customer for their order noticeably increased, along with profit margins. Guess what the new business model is.

    The travel industry will be a shadow of its former self. The permanent reduction in demand from crushing air travel and tourism will alone move the needle significantly.

    • This is true, though there’s one thing I’d add.

      If something like the Wuhan virus had happened back when ECoE was, say, just 2%, and real growth was still possible, I’m sure we’d have lost the jobs, businesses, travel and so on, but I’m also pretty sure they would have come back.

      The reason why that can’t happen this time has, I believe, a lot to do with ECoE at 8% and “growth” a thing of the past.

  34. Truer words were never spoken. It’s the same reason we can’t keep up with replacing aging infrastructure, some of which is just going to fail catastrophically. Just imagine if the tunnel through which trains pass into and out of NYC, already quite old and which was badly damaged by Hurricane Sandy, goes. Triage is not going to work forever.

  35. Tim,
    Looking at the behaviour of economies, they progress in a linear-ish way during growth, but are non-linear when they decline. In decline they step down to a succession of plateaus and do not follow a steady downward trajectory.

    COVID has triggered a step down. There may be another step down when the current subsidies are discontinued, or we may limp along this plateau for a while before the next step down.

    Any way of modeling the timing and size of the step downs?

    • The processes involved in de-growth were a topic of discussion here just before the pandemic, and are on long (and lengthening) list of topics to be addressed ASAP.

  36. Warren Buffet has bet against the herd on natural gas being dominant and crucial for the rest of our lifetimes, so it seems he gets that renewable energy isn’t going to pick up the slack, he’s more often right than wrong:

    https://www.zerohedge.com/energy/will-buffetts-10-billion-bet-natural-gas-go-bust

    On inflation for essentials but deflation for luxuries, that makes a lot of sense, a relative in the UK midlands has a persistent sewer line problem at their home and over the last 3 years, the drain unblocking company has increased its fee by 33% in 3 significant jumps. Needless to say, this is a service you can’t do without and this relative hasn’t bought any unnecessary things in that time period because they believe in an impending savage recession.

    • Buffet is probably correct. CCGT powerplants have low capital costs and can be built very quickly. They are also the obvious choice for backup of renewable energy sources, because a gas turbine can be brought on load very quickly and the low capital cost makes reduced load factor less of an issue. A gas turbine can also burn hydrogen yielded by electrolysis. Hence, CCGTs with an electrolysis stack and gasometer next door, are a likely option for energy storage.

  37. Update

    A lot of extremely good questions are being posed here, and I’m doing my best to answer as many of them as possible in the next article.

    The more I look into things, the more shocked I am by how a misunderstanding of the economy misinforms so many other areas.

    One example is energy supply forecasting, which works on the basis of “this will be the size of the economy in 20XX, according to the economistsnow, how much energy (oil/gas/coal/nuke/hydro/RE) will an economy of that size require?

    Environmental planning starts on this same basis (conventional economics), and then asks “how much of that energy required in 20XX can we source from RE instead of FFs?”

    Government planning is based on wholly mistaken assumptions of “recovery” and “resumed growth in perpetuity“.

    Businesses assess the future market for their products on a similarly misleading basis.

    The same applies to finance and investment.

    So the misunderstanding of the economy is now causing huge mistakes to be made, right across the piste.

    It seems to me that we really need to get the energy interpretation of the economy as widely and as influentially understood as soon as possible.

    • @ Dr Tim,
      “…we really need to get the energy interpretation of the economy as widely and as influentially understood as soon as possible.”

      Where to start, is the first big question.

      I’m tempted to say, start with the big hitters who can shape a new agenda
      The trouble is, the movers and shakers are likely to be net beneficiaries of government largesse.
      Maybe there are notable exceptions. From what I’ve seen Ray Dalio seems to get it to a certain extent. He’s acutely aware of the inequality time-bomb, which is a start. Whether or not he would be a voice to stand up and declare “it’s all over for growth… rip up the rule book and find a real world solution”, is another matter. It would take more than one dissenting voice. For a swift and effective change of course, there needs to be a critical mass of change agents. Look at the climate change debate (or debacle?) to witness inertia on the global stage.

      Grass roots organisations are more likely to buy in, but their voice can be ignored for a very long time. Also, I wouldn’t see environmental groups as being obvious allies. Many of them are touchy in the extreme regarding the overpopulation issue, and they often revert to social justice as the solution to every problem. I know this through first hand involvement with certain environmental groups.

      For years I have tried to persuade businesses to engage with the issue of resource depletion. Generally I find that they are interested in the analysis, but don’t take any substantial action. Multiple knock-backs haven’t stopped me trying, but the prevailing discourse (growth is everything) means that it’s like swimming through treacle.

      It’s a hell of a challenge, but maybe the time is nigh. Let’s hope so.

    • Thanks.

      As I see it, the more mistaken economics leads us astray, the greater the likelihood of alternatives getting a hearing.

      It seems highly unlikely that governments would look at it.

      But in the private sector – and in finance – with money to be made by outsmarting competitors, things could be more promising.

  38. F1 Warrior

    Ref: Drain Blocking Cost:

    I have experienced this sort of price inflation many times.

    Some exploitative service providers try it on.

    The only answer is getting several quotes; and, anyway, there will soon be many unemployed good workers to take on the job once furlough is ended.

    I have experienced ridiculous price inflation in supermarkets. Just select alternative, on offer, products.

    I am still of the opinion that prices can be brought down and high inflation avoided for necessities.

  39. @Wally, I fully agree and go out of my way to do the same, switching most suppliers annually, but they still get an apathy tax out of a surprising amount of probably older, certainly more reticent people like my relatives there, their passivity irks me a lot but you just can’t change some people.
    To add insult to injury, the standard of work is generally poor and regulations easy to evade, it really is a minefield for those who can’t fight back. The UK is sliding further into kleptocracy.

  40. Let’s take a look at the existential problem facing us. One could begin with Kate Raworth’s doughnut, or the End of Debt, or Psycopaths with Nukes, but I will stick to something very concrete. Consider these two studies which, together, show that the insulin resistance which is a major factor in all metabolic diseases from Alzheimer’s to Heart Disease to Diabetes to Cancer, is a function of eating inadequate amounts of high fiber plants. Let’s look at some basic facts about the US:
    *Around 2 percent of the population is actually disposed toward doing anything about their health.
    *70 percent of the calories that Americans consume are ‘hyper-processed’ and contain little to no fiber
    *Of the ‘not hyper-processed’ segment, much of it is animal flesh which contains no fiber, or nitrate deficient plants which cannot produce Nitric Oxide for people over 40.
    *Food production in the US, combined with the cost of treating the diseases caused by that food, is around 30 percent of our energy expenditures.

    Now look at two recent research publications (which I won’t quote from here)…just enough that you get the idea that I am not talking fairy-dust:
    ” If you actually look at the microbial shifts that took place they found progressive reductions in butyrate-producing bacteria that became worse and worse as the severity of illness progressed from pre-diabetes to full-blown diabetes. In other words, the severity of insulin resistance was inversely related to the populations of butyrate-producers in the microbiome. Less butyrate-producers, more insulin resistance…..you know that my book is called Fiber Fueled for a reason. When we feed our microbes their preferred food, prebiotic fiber, we naturally cultivate more of these precious butyrate-producing microbes. One of my favorite microbiome studies by Dr. Liping Zhao shows this directly—no ifs, ands or buts. The connection is direct.”

    So, for purposes of thinking about the collapse of our current system, we need to note that the collapse of one very large segment of it might actually make life better for any survivors of the turmoil. We might also note that the PTB are determined that there be no collapse of this particular system. (See Sam Baker’s talk which includes a discussion of rigidity as indicative of an end-stage.) The number of people willing to take action on their own initiative is tiny relative to the total population.

    But I suggest that people might like to take a look at this (long but important, I think):
    http://www.youtube.com/watch?v=zHYRl8W6ya0

    Sam Baker of Thermodynamics 2.0 takes apart traditional applications of the gas theory of thermodynamics and instead looks at life and far from equilibrium systems. Near the end of the talk he speculates about the potential for a new system to arise while the old system is disintegrating. Which raises the interesting question of whether the 2 percent in the US will just be a survival remnant (or maybe all dead in the turmoil) or, instead, the 2 percent can seed the birth of a replacement system which is less destructive and wasteful and rises as the old system fails.

    Don Stewart

    • “Nitric Oxide for people over 40.”?
      ARGININE ‘MIRACLE’ {sic}.
      The only natural NITRIC OXIDE BOOSTING remedy to naturally reduce high blood pressure & cholesterol. ?

  41. A bit off topic, but anyway…
    Some time ago we discussed internet censorship. So I just typed “craig murray” (without quotes) into Google and got a bunch of links, but no link to the Craig Murray’s blog. I then typed “craig murray” (also without quotes) into another search engine (Duckduckgo) and the first link after advertisement was to his blog.
    Interesting.

    • Other people also noticed, but I see the search results are restored now. I find it pretty interesting nonetheless.

    • “Existing thinking amongst policy makers would see this as being positive for GDP growth, so it’s a good thing in their book.”

      It was positive under NuLab?

      “But this is evasion and deception. The mass immigration of the past decade wasn’t caused just by the absence of transitional controls on new EU member states. It was the result of a policy of encouraging immigration to generate economic growth – a policy NuLab copied from Bill Clinton’s America. In a speech about the policy, then Home Office minister Barbara Roche said:
      ‘The evidence shows that economically driven migration can bring substantial overall benefits both for growth and the economy. In the United States, as Federal Reserve Chairman Alan Greenspan has commented, the huge recent inflow of migrants – 11 million in the 1990s – has been key to sustaining America’s longest-ever economic boom.’”

      Click to access lob68-view-from-the-bridge.pdf

    • I’m not quite sure of the ‘hows?’ and ‘whys?’, but the UK now finds itself in major spats with Russia, China and (of course) the EU, all at the same time, as well as trying to cope with the coronavirus.

    • It’s a strange situation. If London has indeed become a ‘laundromat’ for dirty money, then Russians may well have used it, but that doesn’t mean they created it.

      As for spying and interference, that’s not new, it’s what the USSR used to do, what other countries doubtless still do, and that’s what governments have internal security agencies for.

  42. Progress in fiat destruction: 1) Federal Reserve M2 money supply grows 25% YoY. See the vertical spike in the FRED chart at this article: https://confoundedinterest.net/2020/07/20/one-central-bank-is-not-like-the-others-fed-erupts-with-asset-purchases-m2-money-grows-at-24-9-yoy/
    The Fed is surpassing all other CBs in this endeavor, consistent with its role of bailing out the world (Eurodollars).

    2) Then there is this: “The world’s major central banks aren’t purchasing debt fast enough, leaving almost $1 trillion of new sovereign bonds looking for buyers in the months ahead. The flood of fresh debt, sold by governments to fund pandemic-rescue packages, threatens to dwarf central-bank buying and swamp markets in many countries, according to Bloomberg calculations.”
    https://confoundedinterest.net/2020/07/21/cleanup-on-constitution-avenue-a-1-trillion-glut-of-bonds-is-dwarfing-central-bank-demand/

    Au is currently at 1845/oz as of this writing.

    For some reason, when I saw these two articles, I thought of Cat Stevens’ old song, “I’m on the road to find out.” I think we soon will. Find Out.

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