#184. The objective economy, part one

IN PURSUIT OF THE EVIDENCE

The title of this article has two meanings. First, it signifies that the economy is a physical entity – indeed, is an energy system – rather than an immaterial construct based on the human artefact of money.

Second, it underlines an imperative need to examine evidence objectively. This is particularly important at a time when both of the contentions that vie for our acceptance – ‘continuity’ and ‘collapse’ – are so very far from persuasive. The aim here is to apply the principles of the energy economy, and the SEEDS economic model, to examine the real economic situation, free from assumption, denial and wishful-thinking.

Enormous changes do indeed lie ahead, and were underway well before the coronavirus pandemic struck a body-blow at the economy. The narrative of continuity – of indefinite economic growth, and of the perpetual preservation of current assumptions, systems and power structures – has been holed below the waterline.

But it does not follow, from this, that economic and social collapse has become inevitable. Big changes can happen without amounting to ‘collapse’. After all, history is peppered with dramatic, supposedly ‘World-ending’ events – including financial crashes, revolutions and the ousting of entire established elites – which did not, in reality, amount to ‘collapse’.

Our imperatives now fall into two categories. First, we need to understand how the economy really works, abandoning notions that purely financial expedients can overcome physical realities, and basing our interpretations on the evidence.

Second, we need to anticipate, and to be prepared for, the challenges posed by the invalidation of the established (though unfounded) notion of ‘economic growth in perpetuity’.

Additionally, we need to accept that the changes which lie ahead dwarf party politics into comparative irrelevance. To this end, the aim here is to leave discussion of politics and politicians to others, concentrating instead on economic and related fundamentals. Much as war-gamers enjoy re-fighting Waterloo or Jutland, there are places for debating the minutiae and meaning of elections – but these are not our priorities here. 

Introduction

In part one of Gulliver’s Travels, Jonathan Swift uses the neighbouring islands of Lilliput and Blefuscu to satirize the Europe of the early eighteenth century. The English political rivalry between Whigs and Tories is represented by people who favour shoes with low or high heels, whilst arguments about the right way to crack an egg (at the large end or the small?) correspond to the distinction between Catholicism and Protestantism. Matters of supposedly huge contemporary political and religious importance are thus reduced to trivialities at which readers are invited to laugh.

They have been doing so ever since 1726.

If a latter-day Swift was writing now, he could do worse than satirize the debate over ‘continuity’ or ‘collapse’ in much the same way. Continuity, of course, is the line taken by governments, business and much of the mainstream media. Collapse, though a fringe persuasion, is a remarkably widespread one. Even commentators who do not avowedly endorse the thesis of collapse often produce interpretations which point emphatically in that direction.

In a time of such polarized expectation, it’s as well to remember that continuity and collapse are not the only possibilities on the table. Whilst the continuity thesis owes a great deal to wishful thinking and denial, prophecies of collapse overlook the fact that, historically, such events have been extremely rare. Stock market crashes, national defaults, changes of governments and even the ousting of incumbent elites in their entirety have occurred pretty frequently, and haven’t resulted in economic or social collapse.

In short, the evidence either for continuity or for collapse is scant. Something new is happening, but we can only anticipate what that is likely to be by weighing the evidence. Doing so produces conclusions which, though they might be startling, are a long way short of collapse.

Taking ‘perpetual growth’ off the table will itself create profound changes. We can anticipate sharp downwards adjustments in asset prices, the fall from grace of many activities now regarded as gold-plated, and the overturning of many political arrangements and assumptions. But none of this, necessarily, amounts to collapse.

The economy – an energy system

To get anywhere at all with our investigation, we need to start by recognizing that the economy is an energy system, and not a financial one. Money is a human artefact used to exchange the goods and services that constitute economic output, but all of these are products of energy. Our economic history is a narrative of how we have applied energy to improve our material conditions.

This is illustrated by the way in which energy consumption, on the one hand, and, on the other, population numbers and their economic means of support, have related to each other over the centuries (fig. 1). It is no coincidence at all that population numbers took off exponentially when, from the 1760s, the discovery of the first efficient heat-engine enabled us to harness vast amounts of fossil fuel energy, starting with coal before moving on to oil and natural gas.

Just as importantly, the use of energy has grown even faster than population numbers throughout the Industrial Age. Expressed as tonnes of energy consumed per person, this ratio has moved steadily upwards, rising particularly quickly in the half-century before 1914, and in the years after 1945. This ratio flat-lined (but did not decrease) during the oil crises of the 1970s, and resumed its upwards trajectory in a period that correlates with the rise of China and other EM (emerging market) economies.

Fig. 1

Today, and pending further evidence to be considered here, we can postulate a decline in the quantity of energy consumed per person. Whilst prior trends of the growth in the use of oil, gas and coal are ceasing to look sustainable, it is by no means clear that renewable energy (RE) sources can grow rapidly enough to take up the baton from fossil fuels (FFs).

There’s a compelling case for believing that the aggregate supply of primary energy may not grow as rapidly in the future as it has in the past. Population numbers, meanwhile, are continuing to increase, albeit at decelerating rates.

The peaking of energy supply per capita is not recognized by believers in perpetual growth. Consensus supply expectations – as of late 2019, but probably not too different now – see us using about 20% more primary energy in 2040 than we did in 2018. Of course, RE supplies are projected to increase particularly rapidly, expanding by about 80%. But, because RE supply starts from a low base, this big percentage increment would still account for only about 16% of the assumed net increase in total energy supply.

If we are indeed to increase annual supply by about 2.8 bn tonnes of oil equivalent (toe) between 2018 (13.9 bn toe) and 2040 (16.6 bn toe), we are still going to need a projected 16% more fossil fuels, including an increase of between 10% and 12% in the supply of oil.

There are various reasons for supposing that this consensus view might be mistaken, but the main one is that the costs of fossil fuel supply are rising, an issue to which we shall return. The widely-canvassed view that REs can supplant FFs – such that the need for oil, gas and coal decreases rapidly – is very largely a product of wishful thinking. Independent estimates have put the cost of energy transition at between $95 trillion and $110tn, and even if such sums were affordable, numerous technical issues remain, amongst them the material resources required for such a programme.

This is put into context in fig. 2, from which you can see quite how much more RE (shown in green) would be required if we were to replace all or even most of our continued reliance on FFs (blue).

Fig. 2

As fig. 2 also shows, the SEEDS model has ceased using consensus projections for forward energy supply, employing instead a more cautious analysis in which declines in the availability of fossil fuels are, at best, matched by increases in supply from REs, nuclear power and hydroelectricity.

The resulting projection is that primary energy supply changes very little between now and 2040. SEEDS does not postulate a material decline in aggregate supplies of primary energy, but does suggest that energy use per capita may now be on a downwards trajectory.        

ECoE – of cost and quantity

The calculation of economic value at any particular time isn’t, unfortunately, a simple matter of dividing the quantity of energy supply by the number of people using it.

For one thing, the various sources of primary energy are unequal, in terms of the economic utility that they provide. A ton of feathers might, by definition, weigh the same as a ton of lead, but their characteristics are otherwise very different. Likewise, an oil-equivalent tonne of petroleum and an oe tonne of solar or wind power have quite different economic characteristics.    

For another, the supply of energy for economic use is never ‘free’ of cost. Rather, whenever energy is accessed for our use, some of that energy is always consumed in the access process. We need wells and refineries to put petroleum to use, pipelines and processing plants to access natural gas, mines and power-stations to make use of coal, and solar panels and wind turbines to channel the energy provided by the sun and the winds. Creating these facilities – and, just as important, maintaining them, and replacing them as they wear out – uses energy.

This equation divides any given stream of energy supply into two components. One of these, the ‘consumed in access’ part, is known here as the Energy Cost of Energy, or ECoE. What remains, and is available for all other economic purposes, is surplus energy.

Clearly, and within any given quantity of energy, the higher the ECoE, the lower the surplus. An ECoE of 1% leaves 99% of accessed energy available for us to use. If ECoE rises to 10%, however, the surplus shrinks to 90%.

Properly considered, the cost of energy supply isn’t measured by the number of dollars needed to bring energy to the consumer. What matters is the energetic equation between the ECoE cost, and the residual (surplus) utility, of energy that we access.

This has a direct bearing on the quantity of energy that can be supplied, which is why the rise in trend ECoEs is reflected in SEEDS projections that the aggregate supply of energy to the economy is unlikely to rise as rapidly in our higher-ECoE future than it did in our lower-ECoE past.

This is illustrated in fig. 3, which compares ECoE trends with projected supplies of primary energy in aggregate, and fossil fuels in particular. As overall ECoEs rise, growth in aggregate energy supply can be expected to taper off – and, as the ECoEs of fossil fuels rise particularly rapidly, available quantities are likely to decrease

Fig. 3

What emerges here is an equation in which the level of ECoE influences economic output in two ways, not one. First, ECoEs affect the economics of energy supply itself, influencing how much energy is available. Second, ECoEs determine, within that available quantity of energy, how much is absorbed in access cost, and how much remains for those economic purposes which constitute prosperity.

It should not concern us unduly that established interpretations of economics, and the methods used to forecast future energy availability, take no notice of ECoE. After all, spherical trigonometry, vital to navigators over the centuries, could not be understood or applied until Flat Earth interpretations had been confined to the history-books.

Where energy supply forecasting is concerned, the approach appears to be to take assumed levels of economic activity in the future and only then to calculate the energy required by an economy of that assumed future size. This, of course, is to put things in the wrong order – energy supply determines economic output, not the other way around.

ECoE trends – the relentless squeeze

These considerations make it imperative that we understand the ways in which ECoEs evolve.

In essence, four factors determine the evolution of ECoEs. Two of these act to reduce ECoEs; one pushes them upwards; and the fourth operates in ways which are, in general, misunderstood.

ECoEs are driven downwards by geographic reach and economies of scale. Until comparatively recently, the fossil fuel industries pursued the search for new, low-cost resources in locations which had not previously been explored, and which, in some cases, had been politically inaccessible. Economies of scale operate where increasing the size of operations enables the numerator of fixed costs to be spread over a larger denominator of units of output.

With both ‘reach’ and ‘scale’ exhausted, the driving factor now is depletion, which describes the way in which, quite naturally, lowest-cost energy sources are exploited first, leaving costlier alternatives for a ‘later’ which has now arrived.    

The potentialities of the fourth determinant, technology, are often overstated, because technological progress cannot change the physical characteristics of the resource.

Fracking, for instance, has reduced the cost of accessing shale hydrocarbons in comparison with the cost of accessing that same resource at an earlier time. What technology has not done is to put the economics of shales onto the same footing as giant, technically-straightforward fields in the sands of Arabia. This is rendered impossible by the starkly differing physical qualities of the two resources.

These principles can be presented diagrammatically as in fig. 4. The evolution of ECoEs follows a parabolic course, turning upwards as the downwards pressures of reach and scale are exhausted, and depletion takes over. Technology operates to accelerate the downwards trend in the early progress of ECoEs, and then to mitigate the upwards tendencies of depletion.

The right-hand, up-trending side of the parabola conforms to the observable exponential rate of increase in ECoEs since they reached their nadir in the immediate decades after 1945.     

Fig. 4

Measured in money

Thus far we have followed an interpretation of the economy which, though it lacks many of the complications of ‘conventional’ schools of thought, is surely far more persuasive. Describing the economy in solid, material terms – rather than in abstract, financial ones – accords with what we know about the importance of physical goods and services. Tying the economy to the demonstrable laws of thermodynamics makes far more sense than trying to link it to the behavioural observations of the artefact of money which conventional economics is pleased to call ‘laws’.

Thus presented, the economic history of the Industrial Age starts with the invention of the first heat-engine and the unlocking of the energy contained in fossil fuels. We have seen how – over time, and aided by technology – geographic reach and economies of scale have pushed ECoEs downwards, driving up material (meaning energy) economic output, and thereby enabling exponential increases in population numbers.

Latterly, as depletion has taken over from reach and scale, fossil fuel ECoEs have risen relentlessly, pushing us ever further into financial gimmickry in a futile effort to portray a continuation of ‘business [meaning growth] as usual’.   

When dealing with the World as it is, though, any case presented in thermodynamic terms must remain at the margins, excluded from debates which are conducted almost entirely in the idiom and nomenclature of money. To play any part in this debate, our conclusions need to be translated into financial language, and this is what the SEEDS model is designed to accomplish. 

We need to be clear from the outset that money has no intrinsic worth, commanding value only as a ‘claim’ on the physical output of the energy economy. Obviously, parachuting food or water to a person adrift in a lifeboat or lost in a desert would help them, but an air-drop of money would not alleviate their plight in the slightest degree. Money, as a medium of exchange, has no utility unless there are things for which it can be exchanged.

What is ‘output’?

The conventional measure of economic activity is GDP (gross domestic product), but one of the many problems with this metric is that it measures flow (the equivalent of a company’s income statement) in a way that is largely de-linked from stock (which corresponds to the balance sheet). You could not, in practice, manage a business by concentrating entirely on income, and treating the balance sheet as of little or no account.

This distorted interpretation means that, within certain prescribed (but very wide) limits, GDP can be pretty much ‘whatever you want it to be’, at least to the extent that you can push net new credit into the system.

The injection of credit has the effect, of course, of inflating asset prices, but such movements are excluded from definitions of inflation, which concentrate entirely on consumer (retail) prices. If the prices of food, cars, computers and other consumer purchases soar, we say that inflation has surged, but the same is not said of escalation in the prices of equities and property.

We can see some of these distorting effects in action if we compare, as examples, the United States and China over the past twenty years (fig. 5).

Between 1999 and 2019, Chinese GDP increased at an average annual rate of 8.3%, far higher than the 2.1% averaged in America. What is left out of this equation, though, is that annual borrowing averaged 23.7% of GDP in China, compared with 7.8% in America. The point here isn’t the absolute scale (or wisdom) of the borrowing undertaken in either country, but the direct relationship between borrowing and reported growth.

Fig. 5

The same analysis applied to the World economy – and calibrated in constant international dollars – is set out in fig. 6. Between 1999 and 2019, reported growth of $64.5 trillion (or 95%) in GDP was far exceeded by a $193tn (177%) increase in debt.

One way to look at this is that, during two decades in which reported GDP “growth” averaged 3.3%, annual borrowing averaged 9.9% of GDP. This, very obviously, is not a sustainable relationship. Another way to look at it is that each reported “growth” dollar was accompanied by $3 of net new debt, to which, for a fully rounded interpretation, might be added truly enormous increases in pension and other unfunded commitments.

We might choose to believe that debt – since we can default on it, or inflate it out of existence – ‘doesn’t matter all that much’. We might even extend such a rationale to pension promises, though that would be a hard sell to people whose pensions don’t turn up, or have been devalued enormously by inflation.

This dismissal of debt certainly seems to have been the policy logic during the decade before 2008, though the outcome of that state of mind can hardly be regarded as a positive one. The view taken here is that debt and pension commitments do matter, very much indeed, not least because one person’s liability is another person’s asset.

This debate over the meaningfulness of debt as a capital liability, though, misses the immediate point, which is that reported “growth” – and recorded GDP itself – are inflated artificially by the injection of credit.

If, for instance, annual net borrowing was to fall to zero, growth, too, would slump, to barely 1%. Likewise, if we actually paid down debt to its level at an earlier date, much of the intervening “growth” since that date would go into reverse, and recorded GDP would shrink.   

For our purposes, this ‘credit effect’ needs to be stripped out if we’re to arrive at a financial calibration that can be used in a meaningful appraisal of economic performance. The SEEDS model calculates that underlying or ‘clean’ output, known here as ‘C-GDP’, grew by an annual average rate of only 1.6% (rather than 3.3%) between 1999 and 2019. Furthermore, it reveals that even this lower rate of underlying growth has been fading, at the same time as ever more credit injection has been used to buttress reported “growth”.    

Fig. 6

There are three points to be noted from fig. 6. First, reported GDP has long been far exceeded by increments to debt. Second, exclusion of this credit effect reveals far lower levels of trend growth.

Third, these divergences have had compounding effects. The insertion of a wedge (shown in pink) between aggregate debt and recorded GDP has introduced a corresponding divergence between the reported (GDP) and the underlying (C-GDP) levels of economic output.

ECoE and prosperity

What emerges, then – from behind the smoke-and-mirrors of credit and monetary adventurism – is a deceleration in economic growth which accords with a deterioration in the energy equation that has driven the economy since the start of the Industrial Age, and was at its most dynamic in the decades immediately after the Second World War.

Deceleration has been particularly marked since the second half of the 1990s, when confidence in the “great moderation” turned pretty rapidly to concern about the onset of (seemingly inexplicable) “secular stagnation”.

This is where we need to bring in ECoE to complete the prosperity picture. By stripping out the ‘credit effect’ to identify underlying C-GDP, we have calibrated what might be thought of as ‘gross’ economic output, but, as we’ve seen, not all of the value obtained from the use of energy is ‘free and clear’ – some of it (ECoE) is consumed in the process of accessing energy, reducing what remains for all other economic purposes.

To express prosperity in financial terms, then, the required equation can be defined as C-GDP minus ECoE. This gives us an aggregate prosperity number that can then be divided by the population total to tell us the prosperity per capita of the average individual at any particular time.

When this calculation is undertaken on a consistent basis across the 30 national economies covered by the SEEDS model, a striking trend emerges.

In almost all Western advanced economies, prosperity per capita peaked and then turned down between 1997 (Japan) and 2007 (Canada and Greece). But, until quite recently, prosperity per person has continued to improve in the emerging market (EM) countries covered by the system.

This is not, of course, remotely coincidental.

In fig. 7, we compare prosperity per capita with national trend ECoE for America, China and the World as a whole. Where prosperity per person reaches its zenith (as referenced on the left-hand axis of each chart), a vertical line is taken down to ECoE at that time, and is read across to the scale on the right.

Thus, American prosperity reached its high-point back in 2000, when ECoE was 4.5%, whilst Chinese prosperity was still rising in 2019, at an ECoE of 8.2%. In the latter case, prosperity might, in the absence of the pandemic, have continued to improve, but not for much longer. Prior to the coronavirus crisis, SEEDS was indicating that Chinese prosperity was going to turn downwards during the period 2020-22.  

What emerges from SEEDS analysis is that Western and EM economies have different ECoE climacterics at which prosperity per capita ceases to grow and turns downwards. In the Advanced Economies, this climacteric occurs at ECoEs of between 3.5% and 5.0%. By virtue of their lesser complexity, which in turn means that energy maintenance costs are lower, EM countries can continue to expand prosperity per capita until ECoEs are between 8% and 10%.

This, incidentally, explains why EM economies have so often been described as being more ‘dynamic’ than Western countries. Many theories have been advanced in an effort to ‘explain’ the supposedly greater dynamism of, say, China or India in comparison with America and Europe.

The reality, though, is much simpler. It is that EM nations had yet to reach an ECoE threshold which, for them, was structurally higher than the one which had already put prosperity expansion in the West into reverse.

For many years now, global prosperity has reflected deterioration in the West, offset by continuing progress in the EM countries. As a result, World prosperity per capita has been on a long plateau – expressed in constant dollars converted on the PPP (purchasing power parity) convention, the average has seldom varied much from $11,000 per person since the early 2000s. This is why, in the right-hand chart in fig. 7, the climacteric in global prosperity, and the associated levels of ECoE, are shown as ranges rather than as a specific point.    

Now, though, it has become apparent that the long plateau has ended, such that the prosperity of the World’s average person has gone into decline. Even before the coronavirus crisis, it had looked likely that 2018-19 was going to be the turning-point in global prosperity. 

Fig. 7

The view from where we are

The aim in this analysis has been to move step by step along a logical path to reach conclusions which, whilst they invalidate the promise of ‘continuity of perpetual growth’, fall well short of endorsing prophecies of inevitable economic and social collapse.

We have seen how, as an energy system, the economy has grown rapidly on the basis of rising quantities of energy supply and – until relatively recently – falling ECoEs. Latterly, the rise in ECoEs has undermined the capability for further expansion, turning complex Western economies ex-growth before moving on to impose the same effects on lower-maintenance, less ECoE-sensitive EM countries.

Two expedients have been used, if not to halt this process, then at least to disguise it. First, we’ve been using ever-larger quantities of energy at the gross level to counteract a deterioration in the prosperity yielded by each unit of energy consumed.

Second, we’ve resorted to increasingly extreme exercises in financial gimmickry on the false premise that making money both cheaper and more abundant can somehow ‘fix’ trends that conventional, money-based interpretation cannot explain. Along the way, we’ve managed to persuade ourselves that policies such as ZIRP, NIRP and QE are somehow ‘normal’ and ‘sustainable’, when the obvious reality is that they are neither.

Looking ahead, we can anticipate that both of these expedients will fail.

It seems increasingly unlikely that we can carry on growing supplies of primary energy at rates that have been accomplished in the past, and are assumed to be possible in the future. The switch to renewable energy sources, imperative though it is on environmental and economic grounds, might not enable us to replace lost quantities of fossil fuels, and cannot be expected to push ECoEs back downwards to levels at which prior levels prosperity can be sustained.

At the same time, financial adventurism has rendered the financial economy very largely dysfunctional, introducing ever greater risk into the system.

Financial dislocation, which might well include slumps in asset prices, and/or the deliberate introduction of high inflation, has now moved from the ‘probable’ to the ‘virtually inescapable’. As hardship worsens, popular priorities can be expected to change, whilst political, commercial and financial models based on the false predicate of perpetual growth will come under increasing strains.

To be sure, the economy is an extensively interconnected system, and compounding effects – to be discussed in a subsequent instalment – are capable of accelerating the pace at which prosperity erodes. Indeed, the latest version of the SEEDS model now incorporates a facility for including these compounding effects into analysis and projection.

From where we are, though, we cannot assume that the outcome must be collapse. For those caught on the wrong side of fundamental changes in the past, it must have seemed that, for them, the World had ‘come to an end’. Examples from history are abundant, and include craft workers overtaken by the “dark satanic mills”, French and Russian aristocrats and functionaries swept aside by revolution, and investors destroyed by the Wall Street Crash.

Objectively, none of these events amounted to collapse. Each, moreover, included winners as well as losers, and gains, as well as losses, for the quality of life.

In the next instalment, we’ll start an analysis of how these ‘profound-but-short-of-collapse’ changes are likely to play out.

143 thoughts on “#184. The objective economy, part one

  1. Surprisingly, there actually already are occasional warnings from the mainstream media alluding to this ongoing, epochal reset, but even within their ‘lanes of interest and reach’, they tend to be the minority report. Let’s hear it from the UK Guardian:

    https://www.theguardian.com/commentisfree/2020/nov/11/the-covid-19-blunders-drive-home-a-harsh-truth-we-live-in-a-failed-state

    My guess is for an evolving global patchwork of decline, managed in some places, (and with varying success) freefall in others, a spectrum of civilisational levels, geographically interspersed.

    • Larry Elliott is a bit special in this respect – as reference his books, including Fantasy Island, The Gods That Failed and Going South – Why Britain will have a Third World Economy by 2014.

      The linked article is well up to his usual high standards.

    • I like Larry Elliott, but he does seem to get into trouble with Guardian readers for not being on message, frequently for putting up articles that seem to me to be well balanced and supported by the data..

      His articles that dare to point out that there are some problems with the economy and prosperity in Europe too seems to result in a particularly harsh response.

      For a publication that trumpets its editorial independence, it seems to me, that a significant number of it’s business and economy pages readers don’t like anyone making a noise in their narrative echo chamber.

    • Larry Elliott redeems the Guardian: excellent analysis, and real journalism on the ground in his city and regional reports, with no pronounced ideological axe-grinding, no fantasy.

      No surprise at all that he is ill-received by many of his readers – the British situation is simply dire and he tells it straight.

  2. “social collapse” has already happened, you were just to busy sheltering in place to notice. You need to read “the great reset” by the WEF Tim. They’ve got plans for you! What’s that you say, we ruined the last system and shouldn’t be allowed to run the new system let alone force it on you? Poppycock, look at all these degrees i have hanging on my wall, obviously i know more in my little pinky then someone of your mental capabilities could learn in a life time!

    https://www.weforum.org/great-reset/

  3. Food for thought

    “Suppose you were one of the evil geniuses who run the global economy. Of course, you would want to continue running it in a stable, secure, profitable manner in spite of any problems that might crop up now and again. You would want to solve these problems swiftly and efficiently without drawing any undue attention to yourself and your evil ways. What, then, would you currently see as the major problems crying out for a swift, preemptive solution, and how should you address them?

    First, you’d note that there is a major problem developing with the world’s energy supply. This has been endlessly predicted since the mid-1990s, but various technological advancements and geopolitical maneuverings have pushed the final crisis off by two decades. But now the final crisis is getting closer and closer. New resource discoveries have fallen so far behind production that there is no hope of ever catching up. The last great hope for the US and the world, which was fracking, is now failing, having never made much of a profit. Most of the companies involved have either gone bankrupt or are about to. Renewables, in the form of electricity from wind and solar, have proven to be too expensive and disruptive for electric grids because of their intermittency coupled with the impracticality of storing large amounts of electricity. Geopolitical gambits, such as trying to topple Venezuela’s government and steal its oil, or to sanction Russia into behaving like a gas station with its economy in shreds, have all failed. Energy returned on energy invested—a difficult to calculate but ultimately decisive measure of the feasibility of any energy venture—is continuing to decline.

    Being an evil genius rather than just some ignorant amateur armchair pilot, you would be fully cognizant of the fact that failure to do something to balance fossil fuel energy supply against demand would cause global economic collapse. Since the advent of coal-based industrialization, economic growth has always been accompanied by a proportional increase in the use of fossil fuels. But further such increases now appear to be impossible. The existing global economy relies on credit to sustain production, and on continuous growth to remain creditworthy. In this scheme, the only alternative to continuous economic growth is economic collapse. And so you start looking for ways to rebalance the energy equation by shutting down parts of the global economy while allowing others to continue to grow. Since nobody is particularly eager to stampede toward the abattoir, your task is to find a way to mislead them into doing so voluntarily, supposedly for their own good.

    The next question to decide is which industrialized nations are ready for the meathook. You would observe that certain countries have been continuously living beyond their means. They have been endlessly borrowing money far in excess of their economic growth potential and their ability to ever repay the debts they are now taking on is precisely nil. Chief among them is the United States, which has been living on borrowed time for decades now and whose mammoth debt dwarfs all previous excesses combined. Coupled with the gradual loss of reserve currency status by the US dollar and the concomitant loss by the US of the exorbitant privilege of printing money as needed, this has placed the US at the epicenter of the inevitable financial collapse. You would interpret the REPO panic of August 2019, when interest on overnight loans that used US federal debt as collateral spiked to 10%, as a crack in the carefully maintained Potemkin village façade of the US financial system.

    Turning attention to the fiscal situation in the US, you’d notice that the US is no longer able to finance its ever-growing budget deficits by borrowing from abroad because foreigners who are now net sellers of US debt instruments. You are shocked to discover that the US government is now borrowing close to half of what it spends, accumulating short-term debt twice as fast as it could possibly hope to repay it, and nonchalantly planning to roll it over into more short-term debt while borrowing even more in the years to come. An image comes to you of a particularly bullheaded bull standing in the middle of railroad tracks and attempting to stare down an oncoming train.

    Being a financial genius, you know all there is to know about pyramid schemes, and you readily identify this state of affairs as a pure pyramid scheme. Since pyramid schemes all fail, and since they tend to do so more or less instantaneously, you start looking for a way to front-run its collapse in order to maintain control of the situation. Your main short-term objective would be to avoid a worldwide panic by placing the global economy into something like a medically induced coma, feeding it an intravenous drip of free money. This pause would give you an opportunity to make some necessary changes, some of them cosmetic, some quite dramatic.”

    http://cluborlov.blogspot.com/

  4. I am more pessimistic than Dr. Tim. [US focus] A domino default scenario of mortgages, personal loans, business loans, and weak municipal loans could break the system. Banks would fail unless bailed out once again. States would be crippled and unable to bail out municipalities. Degrowth would be nasty. I can’t envision muddling through, and the $US could easily decline by 1/3.

    • real GDP is linked to the gross amount of energy utilised,

      at least 75% of energy utilised is extracted fossil fuels,

      a world without fossil fuels would have 75% less real GDP,

      the last time the world ran without fossil fuels it supported 1 billion people,

      the worst case scenario is a 75% drop in real GDP and the die-off of 6.5 billion people and possibly by 2100,

      I see little if no effort to offset or mitigate against this scale of decline so I’m forced to be somewhat pessimistic,

      the moment the PTB start to recognise the challenges and address the issues in a timely and proportionate manner my optimism will blossom,

      my optimism is currently held hostage by the stubborn denial and willful ignorance of our ‘Glorious Leaders’

      the truly bizarre thing is a US President warned me of this when I was 11 years old,
      now I’m the age that President was when he gave the warning,
      yet nothing much has happened in the interim 40 years.

      his timing might have been a bit off because he didn’t have a crystal ball, but the broad message is pretty indisputable now.

    • Steven, ‘they’ will print the currency du your into oblivion. Nothing and no one will ‘default’ in anything that doesn’t excist.

      One can always find shelves on the beach, until the tide rises beyond imagination.

  5. Dr. Morgan
    A good article. Let me pose a question. Let’s suppose an initial condition of ECoE at 5 percent, but increasing to 10 percent. Let’s also assume that internal combustion engines in private automobiles are 5 percent efficient (measured by payload moved…the payload being the passenger(s)). So of 100 units of petroleum products we spend 5 units to produce the petroleum products and 90 units for cars, roads, bridges, etc. which makes a total of 95 units to move a human across the landscape. But when we reach 10 percent, with stable technology, we must subtract 10 units to produce the petroleum products and we still need 90 units for cars, bridges, roads, etc. The amount left is zero. If ECoE rises to 15 percent, we will obviously be running a deficit of 5 units.

    I will note that the Ellen MacArthur project for a circular economy put the energy cost of private automobiles in Europe at 1 percent efficiency. Which means that there is no appreciable surplus. But it is a tricky question: should gasoline in cars be expected to produce a surplus to support prosperity? Or is it just final consumption whose fate is waste heat? What we seem to have done so far is to spend more on the infrastructure (bigger, more powerful cars; better roads and bridges; etc.) IF we had the surplus energy to build them. If we no longer have the surplus energy, then presumably we might go back to motor scooters and the like. A less extreme path would be the adoption of informal taxicab service, as is frequently practiced in poor countries. Somebody with an automobile aggregates the passengers and takes them to town, for example. In terms of energy expended per unit weight, the aggregate payload does not materially affect the energy consumption of the vehicle and infrastructure. Such strategies would involve reducing the 90 units of infrastructure by 5 units to offset the increased ECoE. (The rural ‘taxis’ replace a whole lot of private cars parked in garages in the first world, at much lower energy cost.)

    But moving industrial materials is something else. Consider, for example, shipping oil from the Gulf to Rotterdam. If there is plenty of surplus energy being produced in the combustion and drive train of the ship, we can simply build bigger ships and increase the efficiency of use. Thus more net energy gets to Rotterdam and is processed in the refineries and thus more energy products are available to a wide variety of industrial processes…we can make building materials and furniture and grow food and so forth and so on.

    At the present time, the distinction between automobiles and industrial transportation is the distinction between gasoline and diesel. But I have previously posted examples of Russian designed ships which can use natural gas for propulsion, and I assume that the technology of Stirling engines could be applied to increase efficiency…if we have the capital to build new infrastructure. All of which might lead to a re-examination of the spectrum of weights in crude oil and how they are turned into products and how the products are split between intermediate industrial uses and tertiary uses by consumers.

    If I have this approximately correct, then it seem that one path might be the suppression of personal mobility as declining energy supplies are diverted to processes which have prosperity promoting properties. We might become less mobile in order to preserve the built environment. For what it is worth, Richard Heinberg, who has been carefully managing his energy usage for 20 years, observed that his solar panels stopped producing enough electricity for his own use when he bought an electric automobile.

    If the dynamic I am describing is real, then it is important to note that GDP captures none of the nuances…final consumption is not the same as production of products which can be used to leverage more production.

    Don Stewart

  6. Dr. Morgan, your posts are always much appreciated. Looking forward to your next post also.
    I continue to wonder if a decline in fossil fuel production, in particular oil production, results in the rapid dissolution of the current economic and financial system, and a reset to a much lower level of economic activity because the new system will be unable to “pull forward” future economic activity into the present. I think this is sort of the common Peak Oil view of how economic collapse happens once we go over the cliff. No doubt I have absorbed that bias. Looking forward to fresh alternative view of ‘profound-but-short-of-collapse’ that might challenge this way of thinking. Regards.
    (I agree with Steven B Kurtz comment above , the U.S. seems set up for a painful changes in the coming years. Is a one-third decline an adjustment or a collapse?)
    Shawn

  7. Dr.Tim, another excellent article, thank you for sharing.
    Regarding the different values in ECoE between the Advanced economies and the Emerging economies on prosperity, would it be fair to say that the Advanced economies have overburdened themselves with regulations which negatively impacts their efficiency.
    Hence, Prosperity is hit much earlier on the ECoE curve, wrt their less regulated, and thereby more efficient EM counterparts ?

  8. Long time reader of the blog and I appreciate all of the insights it has given me regarding energy and economics but I am far more pessimistic than Dr. Morgan regarding the likelihood of collapse. The decline of cheap energy and its economic implications are only one problem, albeit a massive one. Climate change and its various effects and feedback loops (e.g. decline of fertile topsoil, ocean acidification and loss of fish stocks, permafrost melting, etc.) are a far greater threat to modern industrial human civilization. Combine the two and the appraisal of the overall situation is sobering, humanity will have to deal with ever increasing problems and at the same time have decreasing energy with which to solve them.
    Now we come to the social manifestations, what are billions of people going to do when their prosperity starts stagnating and declining? When their livelihoods are being destroyed by hurricanes, droughts, extreme heat, and pandemics? COVID-19 is no one-off black swan, we have had 2 previous coronavirus outbreaks already, SARS and MERS, and at this rate another will appear in 5-6 years. Add to that the potential release of ancient pathogens locked away in the permafrost, which is quickly melting, that we have no immunity to.
    What will governments and their armed forces do to obtain increasingly scarce resources in an ever worsening social climate? I fear our decades of relative peace since the Second World War are coming to an end.

    • Thank you.

      One of the things that surprises me is the widespread belief that our environmental and our economic interests are somehow in conflict. Once we understand that energy is the factor common to both, this false dischotomy disappears.

      If we continue consuming ever more fossil fuels, we risk environmental and ecological disaster. Likewise, though, continued reliance on fossil fuels, whose ECoEs are rising relentlessly, invites economic disaster.

      So the case for renewables has both environmental and economic logic on its side. From this, though, we cannot simply infer that REs can be a like-for-like replacement for FFs. It seems unlikely that the ECoEs of REs can ever be low enough to replicate the past economic characteristics of FFs. This, to me, makes de-growth inescapable.

  9. Things are worse than commonly known..in developed nations. See:

    https://cassandralegacy.blogspot.com/2020/11/hunger-in-italy-it-is-coming-faster.html

    Cassandra’s Legacy Nov 12, 2020 at 11:04 AM
    Hunger in Italy? It is Coming Faster than Expected
    A malnourished Dutch girl during the “hongerwinter” of 1945. It was the last famine recorded in Western Europe — but for how long?
    Olga Milanese, Italian lawyer living in Salerno, not far from Naples, wrote the post below as a comment in a Facebook group. I thought it was interesting enough to be reproduced here, and I do that with her kind permission. It seems that things are really collapsing in Italy. In a certain way, it was unavoidable, but it is amazing that it is happening so fast. The Covid crisis never was impossible to manage with a reasonable effort, but the Italian government bungled almost every aspect of the crisis, overreacting to it, using it as an excuse to terrorize people, while being totally ineffective at upgrading the health care system in such a way to handle the situation. In the process, the government managed to destroy the sources of income of the poor and of the most vulnerable sections of the Italian society — and with that wrecking the whole economic system. Now, things are getting worse every day. Eventually it will end, I figure, but not before we reach the bottom, and it may be a hard landing.
    By Olga Milanese
    Can I say something a little strong? Then I’ll really shut up, disappear and no longer speak, because I consider it useless by now. I understand all positions, really. Already in June I felt that the situation had not changed, that, at least in my opinion, the same mistakes continued to be made in the sanitary districts. (having visited some of them several times), that the health care units were absolutely unprepared, as were the general practitioners.
    Nothing, absolutely nothing has been done, not even by those same doctors who, first and foremost, should have denounced openly and without hesitation the disgusting inactivity of the government already before the summer not in the autumn crisis, those same doctors who today invoke the lockdown!!!
    I invite them to come to suburban homes, to popular buildings, for God’s sake, to the lower reaches of the city to see with their own eyes the misery that exists there!!! From the group that deals with helping the families who lost their jobs in my city, yesterday I had a young mother, whose husband, a pizza chef, was left without work, with two small children, a 3-year-old male and a 6-year-old girl, two gaunt creatures, like their mother, fragile, almost invisible, who lacked EVERYTHING, everything !!! From food, to soap for washing, to detergent for clothes. They are not the first and they will not be the last.
    I’m a drop in an advancing ocean. I really invite these doctors and all those who invoke general closures or even just the stop of work to come to these places and look them in the eyes of these children, these parents deprived of dignity, smile, desire to live, without feeling shame and disgust for that. that we are becoming. Sorry for the outburst, but these situations exist, they are one step away from the doors of our house. Is there a valid reason to ignore them without falling into inhumanity ???
    Do you choose to do something for them too or do they have to die forgotten by God, in the name of medicine and science? For me only the first way makes sense. In my view, there are no alternatives to humanity! And there is no fear of openly denouncing those measures that have reduced those children to hunger! This kind of appeals above, as I see it, must be condemned straight away, no hesitations!

    Olga Milanese is a civil lawyer. She mainly deals with aspects related to the protection of rights in business, family, and in relation to medical and professional responsibility, as well as the issue of the protection of human rights

    ———–

  10. Dear Tim,
    Thank you for such a clear outline of our predicament. Logically people in general will have to adapt to lower energy budgets, sumething we are not in the habit of doing. Te outcome of doing it badly are are too horrific to fully comprehend, and at the same time the options for doing it well are real and very good. The quality of our relationships will determine the outcome. Our capacity for creativity, cooperation and generosity will determine the outcome , along side our relationship with the evidence. It is here that SEEDs is an outstanding catalyst for change. Many thanks. Gordon

    • Thanks Gordon.

      It seems to me that we’re in an odd predicament.

      To explain, in a City/Wall Street or corporate situation – and, I assume, in government too – when one puts forward an idea, one is expected to back it up with stats, with modelling and with sensitivity analysis.

      Where we are now, though, is that ‘conventional’ economic modelling and interpretation is based on demonstrably false premises. Hardly a day goes by when I don’t read that X has gone up, or down, by Y%, yet the interpretation is faulty. Believers in continuity are using models which don’t work.

      On the other hand, collapse-niks (so to speak) seem not to be using modelling at all. Opponents of the ‘established’ point of view don’t seem minded to present alternatives in a way backed up with modelling and data.

      So the oddity is that neither side has the modelling or the data normally required to form conclusions.

      What I’m trying to do here is to put forward an interpretation based on modelling. We’ll take this forward in subsequent instalments. I aim to do this as objectively, and as impartially, as possible, letting readers reach their own conclusions. I might well supply downloads from SEEDS to give readers the same data that I’d have to provide if I was making an investment or strategy proposal.

    • Dr. Morgan,

      As Alfred Korzybski noted, “the map is not the territory.” Human constructed models are guides, and in complex systems like the economy and ecosphere, they can be quite useful. They are flexible, and need to be seen as probability views. The updated Limits to Growth (ecosphere) model shows increasing risks this decade. I expect the SEEDS model is similarly a probability model, as unknown intervening variables are possible, even likely.

    • Thanks – I recommend, also, his preceding eye-opener about vaccines. Indeed, I’d say it’s a ‘must-read’.

      CHS is excellent. His methods and mine are quite different but, I like to think, complementary.

  11. @Dr. Morgan
    China is posting record exports in the last couple of months, and is importing record amounts of oil (and I assume other raw materials). Many analysts think the current bump in oil prices is directly attributable to Chinese purchases. A commentator on RT’s Boom/ Bust said that ‘the only threat to China is that the resurgence of Covid 19 in the rest of the world may bring the rest of the world to its knees’.

    I realize this is very short term and your work is more long term, but do you have any comments on this extraordinary situation? Is the increase in Chinese debt financing real production? And thus perhaps a risk but not necessarily a sign of dysfunction?
    Don Stewart

    • Though I don’t have data to support it, I suspect that China is using a lot of fiscal stimulus.

      In other places (including the US), there is evidence of stimulus/support money and easy credit being used to finance a consumer spending binge – so much for prudence!

  12. @Dr. Morgan
    If China is using fiscal stimulus, then that should increase domestic spending in China. But what I am referring to is that since the Chinese economy bottomed out during the lockdowns in January and February, what we are seeing is almost a replay of Britain as the manufacturing hub for the world: import raw materials and export finished goods. One could say that it is really Southeast Asia, rather than China alone. In the US, the LNG people are rejoicing that China is importing the LNG which would otherwise be unmarketable. Now that Trump is gone, we will see if the agricultural exports from the US to China recover…meanwhile Brazil gets the China market.

    The financing required in the Rest of the World in order to buy the Chinese products is being produced by fiscal deficits and QE. The financing in China for the expanded production is coming from???QE or some combination of a high personal savings rate and QE? It’s my understanding that a lot of the factories also result in debt in the provinces…a sort of state/ capital partnership.

    If that picture is even partially correct, it implies a different perspective than many of us have. But on a global scale, there is a lot of risk in counting on stability in the rest of the world with rapidly increasing debt loads. It might all collapse tomorrow. I mentioned to one of my daughters that the Chinese might be insisting on raw materials in payment rather than IOUs in the form of additional Treasuries. She told me ‘everyone my age already knows that’. (My children don’t show much respect for my hard earned gray hairs.)

    Don Stewart

  13. Dr Morgan asserts, “On the other hand, collapse-niks (so to speak) seem not to be using modelling at all.” To which I can only point to one of the earliest and best models ever produced, the World3 model used as the basis for “The Limits to Growth”, published in 1972. It shows industrial production at early 19th century levels and present population halved by the end of this century. Those still living will struggling with extreme food poverty.

    Note that the World3 model is a purely physical one, not including any effects from monetary factors, and it still projects collapse. Add in the fact that the monetary system is the organizing system for the physical economy and the risk of an even more precipitous collapse increases dramatically.

    Money may only be a token for physical resources, but without money there would be no way to keep our complex global economy functioning at all. It remains to be seen how well the global financial system will cope with continuous decline in the size of the physical economy. I suspect that a financial crisis could have a very rapid onset and result in a dramatic deterioration of resource extraction and industrial production. A grinding, century-long collapse could turn into one that happens in weeks or months.

    But even without a financial collapse, pollution and resource depletion will continue to produce a collapse of the world economy and world population. I shudder to think what our children and grandchildren will have to live through in this century.

    • Thanks.

      You’re right about the LTG model, of course, but I’m not sure that it’s really being used to inform policy. As you point out, it excludes financial issues, which must limit its usefulness in policy terms. LTG in 1972 certainly indicated alternative courses of action which, unfortunately, have not been adopted.

      The financial system (a) is indeed critical to how systems operate, and (b) has become dysfunctional, introducing an added layer of risk on top of the hazards of ECoE, population numbers and the environment.

      I certainly don’t rule out collapse as impossible – indeed, it looks frighteningly plausible. But I don’t think we’re completely out of scope for a ‘managed decline’ in material prosperity. Some countries do now look very close to the edge, with Britain as the most obvious ‘canary in the coal mine’.

    • collapse is the end result of a series of compounding events, a perfect storm,

      it’s more a scenario that can play out, not really a model,

      we seem to be facing predicaments that have no easy solutions instead of problems that can be solved,

      there’s always scope to manage a decline up until it spirals out of control,

      I feel the plausability of a collapse continues to increase all the time there is no evidence of efforts to manage the obvious current decline.

      show me competent efforts to manage decline and I’ll likely conclude collapse is being averted.

    • Dr. Louis Arnoux believes ‘collapse’ is ‘imminent’?
      “ . . . our best estimate is that the net energy
      33:33 per barrel available for the global
      33:36 economy was about eight percent
      33:38 and that in over the next few years it
      33:42 will go down to zero percent
      33:44 uh best estimate at the moment is that
      33:46 actually the
      33:47 per average barrel of sweet crude
      33:51 uh we had the zero percent around 2022
      33:56 but there are ways and means of
      33:58 extending that so to be on the safe side
      34:00 here on our diagram
      34:02 we say that zero percent is definitely
      34:05 around 2030 . . .
      we
      34:43 need net energy from oil and [if] it goes
      34:46 down to zero
      34:48 uh well we have collapsed not just
      34:50 collapse of the oil industry
      34:52 we have collapsed globally of the global
      34:54 industrial civilization this is what we
      34:56 are looking at at the moment . . . “

    • @ James Charles
      Dr Arnoux is indeed articulate, but please explain to me how his nGeni “Green Box” is supposed to work and save us all.
      https://www.indiegogo.com/projects/ngeni-a-greenbox-powering-the-future#/

      @all
      “Collapse” is probably interpreted rather broadly by commenters here, so here is a definition from from Chris Smaje.

      “Trump and Johnson nominally lead polities that thoroughly penetrate and organise the lives of many millions of people, and that involve a highly specialised and urbanised division of labour supported by the availability of cheap fossil fuels. My feeling is that some or many parts of the world will soon be in for a dose of Tainter-style collapse, with ‘rapid’ (ie. over no more than a few decades, following Tainter) and ‘significant’ loss of sociopolitical complexity, in the sense that the political centres presided over by the likes of Trump and Johnson won’t be able to organise social life across their territories to the extent they presently do, nor sustain their present specialised divisions of labour.
      “That, in a nutshell, is what I mean by collapse.”

      What is everybody else meaning?

    • I won’t comment on Mr J or Mr T, as the plan with this article is to try to avoid party politics and politicians, in order to concentrate on the fundamentals and the evidence.

      Organizationally, though, it seems that the UK and the US are amongst the most badly-run countries in the developed world. Britain, in particular, is very near the precipice, and can be seen as ‘the canary in the coal mine’ for collapse.

    • A friend of mine in Sydney, AU. invented a kind of 2-stroke engine that is far more efficient and clean than the current models. After several years, he now has first phase financing (few million I think)

      see citsengineDOTcom

      If anyone wants to pursue it further, They can contact Basil or me. His personal website is linked to the engine one.

    • The masters will eat the children: in 19th c Britain, the capitalists – and economic theorists – often argued that the parents were so poor, and consequently ‘depraved’, that it was a moral duty to remove the children to factories so they would not be tainted by family life.

      Just as African slaves were lucky to be offered life in a Christian society…..

      What can one hope for from human nature tempted by vast wealth and power? Very little. Except hypocrisy and talk of ‘inevitable progress’.

      Just as we see playing out with the so-called ‘4th Industrial Revolution’ and the destruction of ‘legacy’ businesses and settled ways of life.

      I am deeply relieved to have to be a witness and participant in this for only another decade or so, if that.

      The subjection of everyone to the ‘fully-connected’ corporate Totalitarian state will be total and as inescapable as the Soviet Union or Nazi Germany.

      All one will be able to long for is the collapse of the whole system.

  14. Tim,

    Thanks for taking the time to write these articles – I genuinely find them educational. Not only for the content, but often the odd word you write that I haven’t heard before. You’re helping me grow my vocabulary.

    I keep thinking this subject would make a great podcast…

    • Without any flattery, these articles are always exceptionally well-written and lucid; not burdened with the mass of cliches, jargon, and uncouth barbarisms which so unfortunately characterise most writing on economics – and not just among the journalists.

      The Edith Wharton of economics, not the Henry James: athough I fear we are fast approaching Stephen King territory…… 🙂

    • Even on a consensus basis, China is expected to run big fiscal deficits – after 6.3% of GDP (hardly small) in 2019, these are projected at 11.9% this year, and still 10% in 2023.

    • China brings to mind that old saying about war: that you just have to hang on until your enemy has made more mistakes than you.

      Then again, how many apparent victors have been ruined by a superficially ‘successful’ war?

  15. Cynic,

    “The Great Rest” a/k/a “The Fourth Industrial Revolution” is another onanistic rentier fantasy from the fevered brains of the corporate and billionaire overlords. These guys are incapable, not only of thinking systemically, but of thinking one step beyond the immediate effect. They never learned the lesson of the game, Monopoly, that, although you “win” by owning everything or enough to drive all other players into bankruptcy, you are then left in the unenviable position that you no longer have any income stream (there’s no one left to pay you rent or to buy your properties!), so all your assets are immediately worthless. The guy that invented that game was genius, but his lesson is lost on almost everyone, because, like our corporate and billionaire overlords, they stop at “I win.”

    So their idea is that they will own everything and the rest of us will own nothing and pay for everything, and machines will do almost all the physical work, and the government will provide a guaranteed minimum income with which the great unemployed masses can pay the overlords.

    So the same government that gets its revenues from, and has an underpinning for the trust in the currency based on its power of, taxation, which is also the basis for its ability to borrow, is going to print nearly all of the money that it taxes to support yet more money printing, but don’t worry, the money will still have value and support the asset values and make the income stream paid to the overlords have value. Okay!

    This is just another sleight of hand like the one where the banks that are insolvent lend the money to the government with which to bail them out (by buying Treasuries with bank printed money). Put enough intervening steps in the process, and the rubes will never figure it out, and they’ll believe it is real! It has no foundation in physical reality and is doomed to fail, even assuming that we have the energy and resources to implement this plan.

    • By George, I think you’ve got it! Recall Henry Ford had to raise wages so employees could buy cars. Slippery slope approaching.

    • The board game ‘Monopoly’ was derived from a version known as ‘The Landlord’s Game’ that had been created with the intention of illustrating the economic importance of ownership, and the consequences of the rentier.
      A century later the game would undoubtedly benefit from retitling ‘New Monopoly’, along with a revision to the rules to reflect the current neo-feudalism in the united Kingdom.
      First, the player that is ‘Banker’ collects £2000 every time they pass ‘Go’, whereas the other players collect £200, but immediately have £20 deducted to pay for their student loan.
      Secondly, the Red, Yellow, Green and Purple Sets (Strand, Fleet Street and Trafalgar Square; Coventry Street, Leicester Square and Piccadilly; Regent, Oxford and Bond Streets; Mayfair and Park Lane) are already owned by overseas ‘players’ from the Far East, China, Russia etc.
      Thirdly, the Utilities and Stations (Electric and Water Companies; Kings Cross, Fenchurch Street, Marylebone and Liverpool Street) are in foreign ownership also – owned by ‘players’ from abroad.
      Rent must be paid on all the above property and companies by other players when they are on the property, but first the money goes to the Bank.
      The Bank has lent money in the form of bonds to some of the overseas ‘players’, and thus the Banker is entitled to interest that is at a rate of half of the rent collected from the companies. The money is paid direct to the Banker on demand.
      The rest of the rent money is then sent ‘overseas’.
      Fourthly, the price of all the remaining property (Brown, Blue, Purple and Orange sets (from Old Kent Road to Vine Street) is tripled.
      The Bank is permitted to create credit without limit which the Banker is allowed to access as money on demand.
      Finally, the Banker has an unlimited supply of ‘Get Out Of Jail Free’ cards.
      The game ‘New Monopoly’ would not last very long.
      Ordinary players (the citizens) lose, and the Banker would win – every time. Every time.
      No matter how many times the game is played the Banker wins.
      Ordinary players can never win – ever. Period.
      ‘New Monopoly’ is the game that Britain’s voters allowed the political class to create.
      The system can be summarised in nine simple words: ‘The game’s rigged – heads they win, tails you lose’.

  16. US Government Spending and Tax Revenue
    “The 2020 deficit, in terms of its relationship to the economy, represented 15.2% of total gross domestic product, the sum of all the goods and services produced by the country. That was the highest level since 1945, when the U.S. was borrowing heavily to finance World War II.

    Revenue was $3.42 trillion, less than the $6.55 trillion in spending, creating a record $3.13 trillion deficit.”

    This is just a cursory search on the internet. I don’t pretend to be a data expert on the federal fiscal matters. But the numbers do no make me feel very confident.

    Don Stewart
    PS. Shadowstats shows consumer inflation running at about 9 percent. The index adjustment to Social Security payments is less than 2 percent, so retirees are financing a considerable part of the deficit through ‘hedonic adjustments’.

    • Also keep in mind record trade deficit…despite heavy tariffs on Chinese goods which go to inflate the real cost of living.

  17. Have you considered reaching out to the degrowth movement, Dr. Tim? Jason Hickel et al.

    I feel that the degrowth movement is perhaps the civilian group most capable of utilising the explanatory power of the SEEDS model to bring about positive changes. Currently, they argue on the basis that degrowth is the most sensible way to mitigate the effects of global warming but they would get the wind in their sails if they could, on the basis of your model, argue that the contraction of the global economy is beginning in earnest due to net energy decline and that the only two options are an orderly retreat or a disorganised retreat (with the greater human suffering that entails).

  18. Dr. T …

    You frequently state that things are dire in the UK, and that we are approaching the cliff edge here. How do you see this manifesting in real terms – on the ground?

    Currency devaluation.
    Residential/commercial property bust.
    Mass unemployment/homelessness.
    Widespread hunger.
    Civil unrest.
    Power blackouts.
    Food/fuel/supply shortages.

    Just curious! Thanks.

    • All of the above are plausible, but the big danger is devaluation. That could pose a choice between letting inflation soar – and pushing up the local value of non-GBP debts – or raising rates, with obvious consequences for property prices. Commercial property is a separate risk category, greatly exacerbated by the covid crisis.

      A related problem is credit dependency – the UK economy runs on a diet of credit infusions, which is a serious vulnerability.

      There are specific factors in the UK instance. One of these is excessive exposure to the global financial system, in part a product of the madness that preceded 2008. Another, obviously, is “Brexit”. Third, government – by which I don’t mean just this government – has become incompetent, as witness the pandemic shambles. There is too much politics and cronyism, and too little statesmanship. The system runs on the same set of tired ideas, and is divisive.

      The likelihood now is that government finances become dysfunctional, with debt soaring and the BoE feeling pressured into too much QE.

    • As for power cuts in the UK, you may look up the recent statement by the suppliers that the only reason that there are likely to be no cuts this winter is reduced usage due to the lock-downs, etc!!! This is due to loss of capacity as old plants are shut down.

      And yet, we have just been told that increasing generation capacity to power EV’s will be no problem at all. This may be affected by the possibility of night-time demand using idle capacity,of course.

      Sometimes I am inclined to conclude, rather hopefully, that the Tech-totalitarian state can never be instituted in Britain, for the simple reason that they won’t be able to keep it plugged in…….

    • Indeed.

      It’s tempting to publish a SEEDS-based analysis of the UK, with a downloadable data summary. But I have to bear in mind that about 60% of visitors to the site are not from the UK, and that there’s a lot of other stuff to be tackled, including:

      – Risk factors that could accelerate de-growth into something a lot worse

      – Implications for business & the economy

      – Implications for politics and government

  19. Dr Tim, I agree there appears to have been an almost catastrophic decline in government competence, and the reasons are complex and varied; but I think this has been accompanied by an almost exponential rise in political delusion – a phenomenon explored by Dr Matts Alvesson in his book ‘The Triumph of Emptiness: consumption, higher education & work organisation’. The two phenomena together would seem to guarantee continuing strife and increasing general dissatisfaction and disaffection among the citizenry at large, and I regret to say is highly likely to encourage populism. When one adds a third ingredient to the mix of adherence to the growth narrative and ‘solutions’ that increase complexity then I really do begin to shudder at the path on which we are currently headed.

    • I take no party political line on this, but the current UK government looks shambolic. As an island nation, the UK could have benefited from closing down international travel as soon as events in Italy became clear, not postponing this decision, and then trying to re-open it too soon. The test and trace operation has been a shambles, I’ve no idea why they allowed people to flock to beaches, or attend mass events such as demonstrations. Regional lock-downs were a daft idea. Regulations do not appear to have been enforced equally, which sets a bad example. Now the public is treated to internal squabbling.

      Lest anyone think I’m anti-Conservatives, the worst damage was done under ‘New’ Labour.

      Obviously I can’t address the fundamentals here, but the UK has been governed incompetently since long before Mr Johnson.

    • All true, and the delusional state of those in government is perhaps as old as civilisation itself.

      Why condemn ‘populism’, though? It’s been coined as a term of reproach and even abuse, but surely it is simply the justified expression of protest at growing mass impoverishment, and also healthily sceptical towards the pretensions of governments and corporations.

      Of course, the implication is that populism is inherently ‘Right-wing’ , leads inevitably to dictatorship (false historical parallels with Hitler and Mussolini) and therefore has to be ridiculed and crushed. As if dictatorships can’t be of the Left, and as if populist voters don’t just want jobs and honest, capable politicians and state services more than to engage in ‘hate’ (another highly ideologised term).

      And abusing populists doesn’t restore decent jobs and living conditions to those who are on the slide, and can see clearly the economic and social decay of their countries.

      It is also a rather queer (old sense) term to be used by those who, in theory at least, seek to gain a majority of the votes of the people under a system of universal suffrage!

      More dangerous than populism, surely, is the governmental incompetence and corporate asset-stripping and arrogance that lie at the heart of protests?

      A successful, reasonable and competent, populist leader would in fact, go some way to calming politics and restoring faith in the system.

  20. A Populist Leader?
    In the US, the political divide has usually been interpreted as someone who reflected the ‘will of the people’ versus someone who ‘chooses wisely for the the benefit of the people’. The Declaration of Independence was a statement of the former, while the Constitution defined how the latter would be constrained by a series of checks and balances. I believe, at the time the Constitution was ratified, less than 20 percent of American adults were allowed to vote. George Washington and Alexander Hamilton had experiences during the Revolutionary War which turned them away from radical democracy and toward the republican system. When Thomas Jefferson was elected President, there was considerable resistance on the part of the republicans.

    In practice, it is very messy to try to untangle the obvious conflict between the two ideas. Do we want a referendum on how governments should respond to the Covid 19 problem? Should the budget be decided by referendum? We do know that the public’s ideas about how tax money should be spent are not consistent with how politicians actually spend the money. Typically, the public wants more for education, community health, parks and recreation and the like. In one city near where I live, 50 years ago the parks and rec budget was 5 times the police budget. The ratio is now 10 to 1 in favor of the police. Is the reversal ‘populist’ or more like what Charles Smith describes? The entrenched political structure actually funds a lot more grandiose boondoggles such as yet another aircraft carrier. Eisenhower’s speech about how many school’s could be built if we diverted money from yet more bombers reflects his understanding of how the divide between the ‘populist’ and the ‘representational democracy’ had widened.

    It would take volumes to begin to describe some system which rebalanced in favor of populist and away from cronyism and empire building. I agree that it is important to begin to figure it out…because Degrowth will force us to come to grips with it again…but it can’t be addressed here with slogans and labels.

    Don Stewart

    • Exactly: ‘populism’ is currently being used by the Left and the Establishment (UK, EU, US) as a derogatory label, where in fact it is going to be one of the prime factors in this age, and an opportunity to rebuild democracy enjoying popular consent, , not a threat.

      For instance, in the UK Nigel Farage is commonly identified as a populist: but if one reads comments left by supporters under his videos, they simply want honesty and competence in government, a Britain recognisable as such, which is not mere racism, and not to be living in a disaster zone, spiralling into disaster.

      Dismay and bewilderment is in the air.

  21. Sorry guys, I weary of these hopes for, or discussions of the possibility of, a restored, competent political system that has the trust of the people. Sounds very much like the beginning of a Hollywood trailer for a new wish-fulfillment movie coming near you – “At a time when . . . a leader will arise . . .”

    I think Kevin, COLNE, is very much onto something with his citation of Alvesson’s book. We have spent decades programming and institutionalizing an idiocracy, a systemic idiocracy, and there’s no quick fix for that.

    The only counterexample I have in my own life experience that could suggest otherwise, and I say this to indicate there may be some small possibility that people will “wake up” to reality, is the 3 – 4 weeks immediately after September 11 2001 here in the US. For a brief moment, Americans became sober. Sensing how inappropriate it would be, the night time talk shows like David Letterman and Jay Leno stopped running, the fashion industry stopped talking, the Hollywood actors and actresses kept their mouths shut and didn’t offer advice or talk about themselves, all things entertainment stopped as if the earth stood still. Eventually, it all came back. George W. Bush told us all to go shopping so that the terrorists wouldn’t win and life returned to “normal.” But the experience suggests that given a big enough shock, people might re-orient themselves to a new reality. A slow, grinding degrowth might not be capable of producing this, as people argue incessantly over the reasons for it and try to make X great again.

    My own view is, why keep waiting for Godot? At some point we have to get really serious that our future is going to be very, very local, and act accordingly.

    • I’m thinking not so much of democratic wish-fulfillment – as quite clearly the age for that has long gone, 1940’s-70’s; but rather for the political wisdom of acknowledging that populists have legitimate fears and are protesting due to actual and increasing hardship and a sense of hopelessness, instead of abusing (‘deplorables’, ‘poor whites’ , ‘xenophobes’ etc) and trying to crush them, which can only aggravate the situation and drive societies into ever greater sectarianism and inability to enter into any sane dialogue.

    • My take:
      History shows that declining material well-being drives tribes/clans to circle the wagons against outsiders. It seems to be biologically driven, a survival instinct. To expect an overshot species to turn cooperative en mass is fantasy. Local groups will likely cooperate internally as long as there is sufficient food, water, energy… to maintain families. All bets are off when one’s progeny are starving, though. Some % will become aggressors. And breakdown in order follows.

  22. “statesmanship”
    But Dr T, is there, anyone, anywhere under the age of 40, who has the foggiest idea what on earth you are talking about?

  23. A further thought on populism, etc.
    George Lakoff in the US defined the difference between conservatives and progressives this way: conservatives believe that the world is a dangerous place and our ‘family’ needs a very strong father figure to manage our defense and discipline behavior; progressives believe that the world is fundamentally friendly and that we all need to co-operate to enjoy its many benefits, which implies a lot of behavioral freedom at the level of the individual, family, small group, etc.

    Now if we provisionally accept that distinction, we can see that Republicans and Democrats do not divide easily into those groups. Likewise, we can see that Wall Street and the Trillionaire class do not divide easily from the landless urban peasants and the rural captives of fossil fuels. In terms of the US government, we should note that “life, liberty, and happiness” began as “life, liberty, and property” (after John Locke in Britain). Presumably Jefferson was reluctant to make “property” a guaranteed constitutional right. Property at that time was mostly slaves…land was essentially free for the taking…from the Native Americans.

    You can go down that rabbit hole as far as you like. I’ll just point out one factoid: the conservative side requires an enemy. In the US, the Republicans have identified the enemy as China while the Democrats favor Russia and Vladimir Putin as Satan. A relative handful of people identify Peak Oil as the enemy, or climate change, or Peak Debt. All agree that Unemployment is a terrifying prospect which can best be avoided by perpetual growth in GDP. You can see how the Designated Enemy leads to a lot of dysfunctional behavior.

    Don Stewart

  24. Great article Tim.

    I say this every time. When you look at the state of the oil industry, I think your FF production estimates are way optimistic.

    BP, Exxon etc are close to bankrupt, so who is going to produce the oil? Venezuela supposedly has the largest reserves, yet their oil industry is at a complete standstill.

    We’re not dealing with linear systems or organisations. They don’t have the ability to degrade gracefully.

    Stairstep decline is what we’re facing. COVID was one. Next after that?

    • Fred
      I have more than a horrible feeling that in the not-to-distant future the oil cos will be bailed out with yet another tranche of QE. (Note that the likes of ExxonMobil have squandered around $20 billion on share buybacks – I wonder if that is the amount they will be asking for?)
      Venezuela has been subject to crippling sanctions imposed by the US – in contravention of International Law – yet its heavy oil is desperately required in the US. This is because Shale Oil is more condensate than oil and requires heavy oil to make a proper refine able blend. Currently the US imports heavy oil from….Russia!
      After the bailout, the larceny will continue unabated. So all in all, it is as grim as your worst nightmares.

    • I keep an eye on assets at the Fed, ECB, BoJ and BoE, and here are the monthly movements (in USD bn) in 2020:

      Jan -36bn
      Feb +49bn
      Mar +1,420bn
      Apr +2,232bn
      May +1,025bn
      Jun +884bn
      Jul +805bn
      Aug +410bn
      Sep +37bn
      Oct +576bn

      This totals $7.4 trillion over ten months.

    • I’m speechless Tim. Are those assets broken down by categories or just lumped together? Even in my cynicism i didn’t think it was that bad.

    • Yes, but not in ways that one can ‘tot up’. Each of the four CBs that I follow gives its own breakdown of its assets. The norm, of course, is to purchase the debt paper of the relevant government.

      To clarify, I access the asset totals for each of the four at the last publication date each month, together with the USD rate on the same date, to put together a running end-of-month series in dollars. The monthly series goes back to 2007, i.e. a year before the GFC.

      Separately, there are end-of-year totals for most of the World’s CBs going back to 2002, in local currency and USD.

      For my purposes here, this has proved sufficient.

  25. A Diatribe from Alice Friedemann
    http://energyskeptic.com/2020/climate-change-dominates-news-coverage-at-expense-of-more-important-existential-issues/

    Alice starts from the point of Rockstom’s Planetary Boundaries. Which are multiple and deadly threats. The mainstream media pays little attention to any of them. Take a look at the recent article on Electric Vehicles at Wolf Street, and you see the auto companies pouring billions into them. Now, this is not to deny that GM’s small electric auto in China is a good idea, and perhaps a stepping stone to something. But my own feeling (and it IS a feeling as opposed to a solidly based research finding) is that Alice is closer to the truth. Ugo Bardi’s current post shows happy crowds celebrating the National Day in China, which Bardi describes as ‘fully recovered and open’. He laments that Europe and the US can’t figure out why East Asia was successful in containing Covid 19 at a tiny fraction of the damage done in the West.

    Joe Biden is reportedly considering a woman for the Department of Agriculture who is very likely hostile to the agricultural future that Alice (or Chris Smaje or your favorite permaculturist) foresees as necessary to avoid near extinction.

    In short, I think we can see, right at this moment, the stark contrast between Alice’s viewpoint (which is a child of the various reports and studies from about 15 years ago) and the course which the world seems determined to follow now in the wake of Covid recovery.

    I will also note that the biophysical people seldom or never include debt limits. As I see it, the core of Dr. Morgan’s work is ‘limits to debt’. I would like to briefly digress into American history. John Locke, the British theorist from the 18th century, described America as a vast wasteland (long before television) just waiting to be exploited by Europeans. European settlers came and saw fertile farmland as far as they could see. What they didn’t have was capital. And so they needed to borrow money to build productive farms and industries and railroads. There was no question that output could be increased if greased by money. Yet after the Civil War the US government was pursing a hard money policy using gold as the backing for government issued money (retiring the Greenbacks used during the Civil War). Two battles raged. The first, before the Civil War, was whether the individual States could charter banks who had very loose lending policies and could issue money which was only backed by the bank and which tended to go bankrupt. Andrew Jackson was the champion of the State Banks against the Bank of the United States. The second battle happened after the Civil War. The official policy was gold, which does not grow very rapidly, which when combined with the exponential growth in the Midwest resulted in deflation. Those who borrowed money found that, in real terms, they had to pay back more than they borrowed plus the interest…which pushed a lot into bankruptcy. Thus William Jennings Bryan’s ‘thou shalt not crucify man on a cross of gold’ speech.

    I pose the question that if we are indeed entering a phase where Alice is approximately correct, we will not once again be entering a phase of deflation and even more concentration of wealth in the hands of a very few insiders. One can make a case for runaway inflation (such as the Greenbacks of the Civil War), but is it not likely to be followed by deflation as in the 50 years after the Civil War? In the earlier deflation, we at least had physical growth as the enthusiasm for ever more farms and factories and railroads and canals could not be stopped by the evident failure of most of them. Will electric vehicles be the ‘new farms’ of the 2020’s? Will SpaceX be the railroads?

    Don Stewart

    • Don, thanks for bringing Alice’s latest to my attention. I routinely forget to check her website. Great post on her part, she is uncharacteristically riled up, but rightly so. The chart showing what topics receive attention was quite eye-opening. I also had not heard about Rockstron’s (NASA) planetary boundaries before.
      I tend to focus on the financial and energy systems as the linchpins that keeps this show running, but I see my focus is too narrow.

  26. @Matt
    I was born in Appalachia, grew up in the Midwest, and spent formative years in El Norte and New Amsterdam. My wife is from the Eastern European ghetto across the Hudson from New Amsterdam. I see traces of the settlement pattern, particularly in my own heritage of cussedly independent farmers that Alexander Hamilton and George Washington tried to hang as scare tactics to the rest during the Whiskey Rebellion. Watching Chris Smaje from the UK talk, I saw on his bookshelf Ramp Hollow, a history of my clan. My wife came from a completely separate world. In the 1965 Manhattan blackout, we were supposed to eat dinner with her parents, and got caught in the electrical failure in the tunnels under the Hudson. It was around 10pm when we finally walked back through the tunnel to Manhattan, walked downtown amidst the overflowing bar scene, and caught the ferry to New Jersey. Her parents were completely unaware that Manhattan had gone dark. I took her father out into the street and had him look in vain for the lights from the skyscrapers in Manhattan. We’ve been together now for 55 years, so there is more to the story than European ancestry.

    “The Brainstem Always Wins: Neuroscience of Fight/Flight/Freeze”…the title to an upcoming Podcast. Actually, my favorite psychologist Lisa Feldman Barrett would add a fourth F, “F**k”.

    I suggest that using the four Fs is a lot better diagnostic tool. There are an awful lot of people in the US who are in the fight/ flight/ freeze phase, with an accompanying decline in the fourth F. There have been learned articles in journals such as The Atlantic noting the decline of sex. It is supposedly a very serious problem in depressed Japan. I think that is an ominous sign. I see it in the US.

    Right now, we are in a euphoric state because of the promise of a Covid vaccine. I have pointed out on numerous occasions here that when Putin addressed the UN offering the Russian vaccine to the world, and when the Russians responded to Western criticism in The Lancet a few weeks later, everyone should have known the schedule for multiple vaccines. If the Russians can do it, so can everyone else. Whether the suppression of ‘vaccine awareness’ was some plot by Shadowy Figures or just an inexplicable cyclical pattern I leave to others to explain.

    If Alice Friedmann is correct, I suggest that we are in for a very long season of fight/ flight/ freeze, with very little of the fourth F. At the present time, the election map shows, for example, the Atlanta suburbs solidly behind Biden, along with the other relatively prosperous cities, while the rest of the state is solidly behind Trump. One exception is the rural ‘black belt’ in southwestern Georgia, which is a remnant of the ‘old South’. But basing one’s political strategy on the ‘old South’ would seem to me a desperation move. The place I grew up in the Midwest is more properly categorized as the Rust Belt…it’s no longer the democratic egalitarian and prosperous place where I grew up.

    Don Stewart

  27. oh dear,

    https://www.theguardian.com/environment/2020/nov/17/boris-johnson-announces-10-point-green-plan-with-250000-jobs

    hydrogen…. nothing like barking up the wrong tree eh!
    ban IC’s by 2030, so the EV fantasy is alive and well,
    carbon capture initiatives, good luck with that,
    greener energies for aviation and maritime, yee haa… lets grow food, turn it into aviation spirit and keep flying!
    promote public transport, cycling and walking but not actually have a policy or funding,
    pledge to make London “Global Centre for Green Finance” well that really is blowing smoke up your fundament!

    the only thing in there I like the look of is the small nuclear power plants,
    everything else looks problematic,

    what a marvellous fudge, BAU forever guys!

    looks like collapse is still on the table.

    • The problem with all such plans is the apparent sequence of thought:

      1. How much bigger is the economy going to be by 2030 (or whenever)? (assumption – growth is perpetual)

      2. How much growth will there be in some components (road travel, flights, etc)? (static thinking – no structural change)

      3. How much energy will this require?

      4. How ‘cleanly’ can we get to this requirement?

      Of course, a cynic might see this as distraction by a government hit by Covid response shambles, procurement shambles, internal wrangling, “Brexit” cliff-edge and, for good measure, annoying Scotland and Northern England. (Just sayin’)

    • Here is a short article on the externalities and limitations of RE by a free marketer based in Houston. Despite his bias, I think much he presents is valid. Note: reposted from last year, and Mike Stasse, blog owner, isn’t the author.

      New post on Damn the Matrix

      The Physical Impossibility of Renewable Energy Meeting the Paris Accord Goals

      BY IER
      AUGUST 22, 2019
      Mark Mills has a new report and an op-ed in the Wall Street Journal entitled “If You Want ‘Renewable Energy,’ Get Ready to Dig” that point out the physical impossibility of renewable energy (mainly wind and solar power) and battery storage transitioning the world to a “new energy economy.” The transition would require “the biggest expansion in mining the world has seen and would produce huge quantities of waste.” Wind turbines, solar panels, and storage batteries are made from nonrenewable materials that wear out and must be decommissioned, generating millions of tons of waste. For example, to meet the Paris accord benchmarks, the solar power required by 2050 would result in the disposal of solar panels equivalent to over double the tonnage of the world’s current plastic waste.
      According to Mark Mills, building one wind turbine requires 900 tons of steel, 2,500 tons of concrete, and 45 tons of non-recyclable plastic and solar power requires even more cement, steel, glass, and other metals—notably rare earth minerals. Global demand for rare-earth minerals would need to increase by between 300 percent and 1,000 percent by 2050 to meet the Paris renewable goals. These minerals are generally mined in nations with oppressive labor practices. For more information on rare earth minerals, refer to this recent IER post.
      Furthermore, mining and manufacturing require the consumption of fossil fuels. To supply half the world’s electricity using wind turbines would require nearly two billion tons of coal to produce the concrete and steel and two billion barrels of oil to make the blades. And, most (over 90 percent) of the world’s solar panels are built in Asia with electric power heavily fueled by coal.
      Fossil Fuels vs. Renewables
      Fossil fuels (oil, natural gas, and coal) supply 84 percent of the world’s energy—a share that has decreased only modestly from 87 percent two decades ago. Over those two decades, total world energy use rose by 50 percent—an amount equal to adding two entire United States’ worth of demand. The small percentage-point decline in the fossil fuel share of world energy use required over $2 trillion in cumulative global spending on alternatives over that period. In contrast, wind, solar, and batteries provide about 2 percent of today’s world’s energy. Despite this dichotomy, developers of the Green New Deal and others want you to believe that renewable technologies will replace fossil fuels and can do so rapidly—even within the next ten years.
      Renewable energy (wind and solar power) do not have the combination of low-cost, high-energy-density, stability, safety, and portability of fossil fuels. For example, if one spends $1 million on utility-scale wind turbines or solar panels, over 30 years of operation, each of them would produce about 50 million kilowatt-hours, while an equivalent $1 million spent on a shale rig produces enough natural gas over 30 years to generate more than 300 million kilowatt-hours—over six times as much energy.
      Source: The “New Energy Economy”: An Exercise In Magical Thinking Source: The “New Energy Economy”: An Exercise In Magical Thinking
      Batteries
      In the “new energy economy,” batteries are a major feature both to store electricity for the grid and to power electric vehicles. Because the wind does not always blow and the sun does not always shine, batteries would be needed to provide back-up power for wind turbines and solar panels. But, the sheer magnitude of what would be required is mind-boggling. For example, the $5 billion Tesla “Gigafactory” in Nevada is currently the world’s biggest battery manufacturing facility and its total annual production would store just three minutes’ worth of annual U.S. electricity demand. Therefore, to manufacture enough batteries to store two days’ worth of U.S. electricity demand would require almost 1,000 years of “Gigafactory” production.
      About 60 pounds of batteries are needed to store the energy equivalent in one pound of fossil fuels. For every one pound of batteries produced, 50 to 100 pounds of lithium, copper, nickel, graphite, rare earths, and cobalt are mined and processed. Thus, a future of batteries for electric vehicles and back-up energy for the grid would require mining gigatons more materials as well as gigatons of materials needed to manufacture wind turbines and solar panels.
      Lithium battery production today accounts for about 40 percent of lithium mining and 25 percent of cobalt mining. In an all-battery future, global mining would have to expand by more than 200 percent for copper, by a minimum of 500 percent for lithium, graphite, and rare earths, and far more for cobalt.
      Comparing Batteries to Gasoline and Oil
      A single electric-car battery weighs about 1,000 pounds and manufacturing it requires mining and processing over 500,000 pounds of raw materials. Using gasoline, one can extract one-tenth as much total tonnage to deliver the same number of vehicle-miles over the battery’s seven-year life.
      About $200,000 worth of Tesla batteries, weighing over 20,000 pounds, are needed to store the energy equivalent of one barrel of oil. A barrel of oil weighs 300 pounds and can be stored in a $20 tank. Even an unlikely 200 percent improvement in lithium battery economics and technology would not close the gap.
      Conclusion
      The Green New Deal and a “new energy economy” are not physically possible despite what America’s politicians believe and what is promoted in the media. The sooner they come to grips with reality, the better for U.S. citizens, many of whom naively believe their patter. Recognizing it now means acknowledging the challenges and searching for solutions to those problems

      URL: https://wp.me/pbVMJ-3yk

    • Perhaps best to view it as rich comedy: Monty Python Britain? The philosopher can either weep or laugh…..

      It would be good to see some serious effort devoted to making cycling safe, as the health benefits would be immense.

      But even the few schemes announced during the pandemic have been set aside and defeated -one doubts that Britfats will be on two wheels any time soon. ‘Shanks’s Pony’ seems more likely for many.

      ‘Green finance’ in the City? Just another racket.

      However risible this all is, look at the EU, with the announcement of a ‘continent’ – someone do show them a map of Eurasia please! – where growth will be entirely ‘de-coupled from energy consumption’ .

      Frankly, anything purporting to be ‘Green’ which doesn’t make clean water, air, and restored soils and woodland the main priority deserves .contempt and derision as an exercise in deluded fantasy.

    • The European Environmental Bureau published an authoritative report, not long ago, de-bunking ‘de-coupling’, and describing the literature supporting de-coupling as “a haystack without a needle”.

      It would not surprise me if it turned out that lots of ministerial and admin jobs in Britain were being done by Basil Fawlty.

    • Decoupling would appear to me to violate the 1st law of thermodynamics. The idea only cropped up because politicians lost sight of the fact that economic goods and services are real physical things, rather than just numbers on paper. Somehow, these people have come to imagine the economy as a metaphysical concept, that can be decoupled from real resources. They seem to imagine that they can keep growing the economy with no extra expenditure of resources. The problem is that anything useful to human beings (and therefore of value) is the product of energy acting on matter. It is possible (within limits) to improve the energy efficiency of some processes. But there are hard lower limits to the energy requirements of individual processes and these are set by basic physics. Given that the economy is really just a collection of energy consuming processes, it follows that there are hard liwer bounds to how much any a specific process can consume. And designing for lower process energy use may have practical limits – I.e. vehicle practical speed and safety; engineering complication that trades process energy use for increased embodied energy, etc.

      As for hydrogen vehicles, I would suggest that this is not a new idea.
      https://www.lowtechmagazine.com/2011/11/gas-bag-vehicles.html

      In principle, it could be made to work. But it is an inefficient and cumbersome solution. Hydrogen has low energy density at atmospheric pressure, although it has been used for relatively short range and low speed vehicles in the past. Pressurising it is a problem, because it tends to leak through even the tightest joints and flanges.

      Then there is energy efficiency. Electrolysis can be anywhere from 50-99% efficient depending on the technological options chosen, but higher efficiency typically means lower current density and hence higher capital cost. So typically, about 70% efficiency. Individual PEM fuel cells can be 80% efficient, but the entire stack with pumps and preheated, etc, is probably closer to 50%. Then you have further losses in the drive trains and DC motors. So for a realistic hydrogen vehicle, only about a third of the electric energy entering the electrolyser reaches the wheels of the vehicle. Not an efficient solution. To power road transportation at present levels, electrical generation would need to triple.

  28. I took the time to watch the 20 hours of lectures that Jean Marc Jancovici gave as the 2019 course he taught at L’Ecole des Mines, Paris,

    it’s all on youtube, in French with English subtitles,

    all decision makers should have accessed at least this level of information before deciding on anything,

    people who can’t be bothered, or aren’t interested, ought not be making decisions that effect our collective future.

    • how irritating,
      this was supposed to be a link to the playlist page of 25 videos in English or subtitled in English,
      the lecture series are videos 15 to 22 inclusive,
      you can still click on the YouTube link and then the 25 video playlist is to the right,
      scroll down it to find the ones I mention,

    • I have only met a few of the French administrative elite, when a student: unlike the standard British history/classics/ economics/.politics/law (oh God, law!) graduate recruited to the Civil Service, or taken up by the parties, they appeared to be very competent mathematicians and physicists, which must surely stand France in good stead when addressing these issues?

      On the other hand, I do recall being assured by them of the utter corruption of their system, pockets getting well-lined in the course of a career.

  29. Chinese Take Out
    Even those who have no interest whatsoever in growing food from seed (and who plan to subsist on Chinese Take Out) might benefit from taking a look at Chris Smaje’s new book A Small Farm Future: Making the Case for a Society Built Around Local Economies, Self-Provisioning Agricultural Diversity, and a Shared Earth.

    One of the advantages of the book is that it is relentlessly Systems in its approach. He does deal with some fine grained agricultural issues, such as whether we really can convert staple crops back to perennials while maintaining high yields, but the bulk of the book deals with very large topics such as population, land and political reform, psychology, distribution of people in the landscape, already baked in climate change….the whole enchilada.

    Don Stewart

  30. Regarding policy makers coming to understand the issues, Don’s cite to Alice Friedman yesterday led me to her previous post, “Telling Others About Peak Oil and Limits to Growth,” where she refers to and repeats large portions of a post from 2007 by Edmund Fitzgerald called “How Many Understand?”

    “[Fitzgerald] looked at how many members there were of various groups, and estimated perhaps one one-hundredth of one percent of our world’s population (670,000, or one in ten thousand) may have been exposed to the concept of limits, and the reality of depletion and looming energy constraints. Of these, perhaps 10% (67,000) might have the level of expertise and study which a few of us have achieved by examining material for hours each day for the past ten years or more. I came up with a roughly similar estimate on my own looking at memberships, including theoildrum which had more viewers than any other website devoted to energy resources and limits to growth.

    Fitzgerald concludes with “This severely limits the ability of the masses to understand our folly, as William Rees wrote in “Is Humanity Fatally Successful ?” or as Albert Bartlett says, “to understand the exponential function.” This shows the impossibility of achieving a “critical mass” of public understanding in time to accomplish all but the most minuscule attempts at population control, resource sustenance and biosphere caring necessary for our continued (sustainable) survival. Some, of course, will squeeze through the resource constraint bottleneck, but most will not. The survivors will live in a resource-depleted world. It’s too bad our understanding, en masse, could not evolve as quickly as our numbers.””

    Alice then quotes at length the statements made by people about their experiences trying to inform others. It is very worthwhile reading, for those here who ponder this problem. Of particular note, here is “Jay’s” comment, whom I believe may be Jay Hanson.

    “Jay: Why the establishment MUST lie about energy. Recall that the sine qua non of government is public order. [1] If the truth were known, it would cause panic in the streets. Matthew Simmons makes this point: “Since our current petroleum stocks are now so much lower in both total volume in some areas and days supply throughout the petroleum complex than the industry’s stock levels in 1973, we are far more vulnerable today to a petroleum shortage and the resulting consumer hoarding than we were in 1973.” [2] So if the truth were told, a hundred million cars would suck-up another ten gallons each (run on the top half of the tank instead of the bottom half). In short, the news itself would cause acute shortages.

    [1] http://www.theatlantic.com/politics/foreign/anarcf.htm

    [2] http://www.simmonsco-intl.com/web/downloads/whitepaper.pdf

    Recall that the mass media is not in the business of dispensing truth either. They are in the entertainment business. And panic in the streets is bad for business.

    So don’t expect the USGS, DOE, or CNN to tell the truth anytime soon. Truth is not what they are about.

    Would we want it any other way? I am not so sure.”

    • It’s an excellent article.

      The old saying about it being best for the fog in the woods NOT to lift, lest it reveal the wolves who are stalking you, perhaps applies?

      We might go further, and add that even if you suspect that there’s a pack out there, it might not do any real good to tell your travelling companions.

    • @ tagio
      Alice was almost certainly referring to/quoting Jay Hanson. I learned more from his lists during around 15 years than any other source. Bill Rees was #2. I met him when I was presenting at two sustainability conferences in the early 2000s in Toronto. I brought Al Bartlett to one of those, and he was a wonderful person who didn’t even ask for expenses to come from Boulder Colorado.

      None of us know the future with any precision. And I’ve personally failed ( I think I’ve posted this before) as I played The End of Suburbia video [Kunstler] for our son and his fiancee around 12 years ago, but it had no effect on their actions. (they were mid-30s then)

      Re Simmons: some think he was murdered by oil magnates. I’m not a conspiracy nut, but it is possible. He was an expert consultant to many in the industry before he blew the whistle on peak oil. I missed getting to meet him due to his premature death. We both lived in Maine at the time.

  31. Some Interesting Experimental Data
    We might regard the stimulus checks mailed out to everyone in the US, and the ‘forbearance’ on loan repayments as an experiment. The results seem to me to indicate that things aren’t working the way Officialdom would like:
    https://wolfstreet.com/2020/11/16/all-container-heck-breaks-loose-amid-flood-of-orders-from-us-retailers-for-stimulus-stuffed-consumers-cancelled-sailings-by-carriers-record-spiking-freight-rates/

    I don’t know if imports from Germany are increasing, but the Asian imports are surging. So much so that US exports of bulk agricultural cargoes are hampered due to lack of containers. I think it is very hard to get an accurate reading on the US economy at the present time. Government spending is roughly twice tax collections, many people are not paying their debts but the debts are counted as ‘paid’ in terms of official statistics and also credit rating bureaus, and the US is running record trade deficits. Ray Dalio, who runs a large money fund, is recently quoted as saying the US is increasingly falling behind China.

    I doubt that Biden will pursue the aggressive actions against Chinese companies that Trump followed: arresting their officers, seizing their companies, preventing plant investments in the US, tariffs, etc. If I were an executive at an Asian company I would hesitate to put any money at risk in the US. Joint ventures, perhaps, but not direct investments.

    I don’t know how SEEDS looks at this data, but to my limited brainpower it looks like the US doesn’t know what it is doing. There is also the issue of the Reserve Currency. Paul Krugman, the well-known economist, says that ‘the reserve currency is preserved at the point of a gun’. With Trump withdrawing troops from the Middle East, it seems that the gun is fading as a persuasive argument. There was a report that Trump was considering bombing Iran, but his staff talked him out of it.

    If I sound confused, you got that right!

    Don Stewart

    • As you know, I’m hoping we can avoid party/personality politics here, and especially ‘ongoing events in the US’, because other issues are so much much more important in the scale of things.

      As a broader proposition, though, history suggests that ideological extremes usually serve us badly. Extreme collectivism didn’t prosper the USSR, or China under Mao. In the current situation, the US and the UK have followed extreme (economic) ‘liberalism’ to and beyond the point of systemic harm.

      SEEDS has a risk-ranking system. This ranks risk in the UK as extreme, and in the US as less than extreme, but too high for comfort. (Ireland is also in the highest risk category, but has the EU and ECB behind it).

  32. Here is a spectacularly prescient paper from 1973 from the venerable Howard T Odum on the relations between energy, ecology and the economy: http://movimientotransicion.pbworks.com/f/IN+-+Energ%C3%ADa%2C+econom%C3%ADa+y+redistribuci%C3%B3n.pdf.

    He discusses the centrality of net energy (as opposed to gross energy) to the economy and gives some very insightful commentary on the nature of energy flows in systems.

    @Steven B Kurtz, I believe you knew the man himself. Are there any more works by him that you would recommend someone read? I find his work to be very interesting indeed.

    • @Jackson
      I met HT Odum at The world Congress of the System Sciences in Toronto, 2000. He heard my presentation to the Plenary on overpopulation/optimum population. I know little in detail about his work other than basics re Exergy/Emergy and The Maximum Power Principle. Wikipedia has notes on these. There are many references available.

  33. ‘“What Syria withdrawal? There was never a Syria withdrawal,” Jeffrey said. “When the situation in northeast Syria had been fairly stable after we defeated ISIS, [Trump] was inclined to pull out. In each case, we then decided to come up with five better arguments for why we needed to stay. And we succeeded both times. That’s the story.” ‘
    https://www.defenseone.com/threats/2020/11/outgoing-syria-envoy-admits-hiding-us-troop-numbers-praises-trumps-mideast-record/170012/

  34. Re: Howard Odum
    The last book that Howard and Elizabeth Odum wrote is available in a PDF. Just search on A Prosperous Way Down PDF and it should come up.

    An excerpt from the introduction:
    “That the way down can be prosperous is the exciting viewpoint whose time has come. Descent is a new frontier to approach with zeal. The goal is to keep the economy adapted to its global biophysical basis. We have to abandon some of our useless diversions. If everyone understands the necessity of the whole society adapting to less, then society can pull together with a common mission to select what is essential. Presidents, governors, and local leaders can explain the problem and lead society in a shared mission. Millions of people the world over, if they see the opportunity, can be united in the common quest for a prosperous way down. The alternative is a world of selfish battles for whatever resources remain.”

    A lot of similarities to Chris Smaje, except that 20 years later, the situation looked more grim.

    Don Stewart

  35. Tim it must be pretty cold comfort for Ireland to have the ECB and the EU behind it. They trampled all over Ireland in 2008.

    • Yes, and its cuts both ways – if we imagine a parallel universe in which Ireland had never been in the EU, it’s economy would have developed quite differently.

      Also, and as I’ve remarked before, the EU side of the “Brexit” negotiations is being mishandled, which must of itself be of concern to Ireland.

    • Well, we know that even though Hitler et al dragged German into an unnecessary and devastating World War, the German state nonetheless did perform very well in keeping people fed and infrastructure functioning up tot he last minute – by analogy, some hope for Ireland there of a kind of drip-feed survival courtesy of Brussels?

      It is going to be fascinating to see whether the UK turns out to be the first ‘core’ economy to go under in a rather dramatic fashion……

    • The UK will have to overcome her new zoo narrative as soon as growth turns into an ice age with no leverage in sight.

      5g with windmills to power it.

      It will try to suck all of your insta posts dry in a moment of hopium.

      Better get your Instagram account ready Don. Your employer will be happy to pay for it.

  36. The financialization of the global economy continues apace, Dr Tim.

    “Global debt surged by over $15tn since 2019, hitting a new record of $272tn in Q3 2020. As the fiscal response to the pandemic continues, the Institute of International Finance expects global debt to hit $277tn (365% of GDP) by end-2020”

    Hmmm…not a good time for those holding fixed-income investments, methinks! We are left with index-linked securities and equities in businesses providing things that people need rather than want. Another client has had to dip into his pension pot at age 55 to pay off expensive loans after losing 3/5 days at work. Millions will follow, I’m sorry to say.

  37. If the Odum’s seem quaint?
    The Odum’s suggestion that political leaders can get us out of the mess (from 2001) seems somewhat quaint now…to anyone who has followed global politics over the last decades. To understand what the limits are, I suggest taking a look at Lisa Feldman Barrett’s concise book, just published, 7 1/2 Lessons About the Brain. She talks about the almost infinite adaptability of the brain:
    “It’s important for humans to have many kinds of minds, because variation is critical for the survival of a species.” She posits a crisis of one type or another during which natural selection sorts out those who are adapted to the new circumstances and they survive. Now, it isn’t genetic selection…we all have the same genes to a high degree of conformity. What we do have is great variation in how we express those genes. And selection will operate as it always does.

    But…”So even when scientists do acknowledge that there are different kinds of minds, they try to tame the variation by organizing into categories. They sort people into neat little boxes with labels.” (Red and Blue States in the US?)

    One of her principles is “Your brain predicts (almost) everthing you do.” Another is that “Your brain is not for thinking”. Your brain turns out to be almost entirely about allostasis…managing your body for survival.

    So our situation is that our brains are consumed by considerations of allostasis, and we predict mostly based on experience. I propose the question: ‘If most people have not had the experiences which would incline them to follow the findings of scientists about future trends, and their concerns are mostly about allostasis, then is ‘herd salvation’ a reasonable goal or is it, instead, ‘survival of a remnant’?

    Lisa is in the top 1 percent of the pyramid of scientific citations.

    Don Stewart

    • In such a hostile environment as the Earth, and as part of such a self-predatory species, it would be a surprise, surely, were the brain to be engaged in much other business than ensuring eating and shelter, etc.

      What is interesting is the dogged adherence to demonstrably false – but comforting – narratives.

      Best motto going forward, and not a new coinage by any means:

      ‘The only constant is change itself’.

  38. A credible expect explaining why these lockdowns are unecessary:

    It’s amazing how well and easily the MSM is drowning out other opinions with their wall of noise.

  39. The US Fiscal Deficit
    https://wolfstreet.com/2020/11/19/who-bought-the-monstrous-4-2-trillion-of-incredibly-spiking-u-s-national-debt-added-over-the-past-12-months-everyone-but-china/

    What I would like to do is put my own interpretation of these statistics out and let people who know more than I do, correct me. It seems to me that the US has lost SOME of the advantages of creating the world’s reserve currency. The advantage we have had is that foreigners have been willing to take IOUs in the form of dollars rather than demand real goods in return for the real goods that they sell us. But now the foreigners are not taking very much of the IOUs. Fortunately for the US, they are also not abandoning the currency in large quantity. But the current deficits are being financed by American citizens in the form of Federal Reserve purchases and by US chartered corporations. What the US corporations are taking is being significantly parked in tax havens. The corporations are not, for example, investing all that money in new plant and equipment.

    So it seems to me that the ‘free goods from foreigners’ has largely died and now the burden is on the US citizens. That burden may be paid for either through inflation or by increased taxes. The Federal Reserve is strongly in favor of inflation. Mnuchin of the Treasury has refused to extend certain federal programs, purportedly favoring a Federal Reserve solution. I take that as a Trump administration vote for inflation. Shadowstats puts the current rate of consumer inflation at 9 percent, with a ‘social security cost of living adjustment’ set at a little over 1 percent. So old, poor people are being fleeced.

    I don’t like it, but it seems to me that we old guys better look for something solid.

    Don Stewart

  40. Alasdair McLeod’s latest:
    “This article takes a tilt at increasing speculation about statist global resets, and why plans such as those promoted by the World Economic Forum will fail. Central bank digital currencies will simply run out of time.

    Instead, the collapse of unbacked fiat currencies will end all supra-national government solutions to their policy failures. Already, there is mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin. This is an early warning of a rapidly developing monetary collapse.

    Moreover, nothing can now stop the collapse of fiat currencies, and with it schemes to control humanity for the convenience and ambitions of government planners. There can only be one statist solution and that is to mobilise gold reserves to back and save their currencies, which in order to succeed will have to be fully convertible into circulating gold coinage. It will also require the role of governments to be reset into a non-welfare, non-interventionist minimalist role, which can only be achieved after a complete collapse of the current fiat-financed system.

    Anything less will fail.”

    at goldmoneyDOTcom

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