#185. The objective economy, part two


When somebody makes a discretionary (non-essential) purchase – pays for a leisure activity, for instance, or a consumer gadget, or a holiday – the assumption is that he or she ‘can afford it’. But the World economy runs on continuous infusions of credit, which makes the world “afford” subject to increasingly severe qualification.

This discussion presents an analysis of prosperity (as opposed to credit-financed ‘consumption’), in conjunction with assessments of taxation, and of the cost of household essentials. It indicates that the average person can not now afford discretionary purchases. Moreover, his or her ability to afford liens on income – the household counterparts of the streams of income now so critically embedded in an increasingly financialized economy – has to be open to very serious question.

As we near the point where we exhaust our ability to inflate economic ‘activity’ with perpetual credit injection, we are poised to make two very disturbing discoveries. The first is that swathes of discretionary activity are no longer affordable on a sustainable basis, to the point where sectors supplying these purchases are to a large extent living on the life-support of financial manipulation.

The second is that a large proportion of asset valuations – where they involve discretionary suppliers, capitalized streams of income, and property – are hanging by a thread.  


In the previous article, we went in some depth into the workings of the economy as an energy system, concluding that prior growth in prosperity has gone into reverse as the energy equation has deteriorated. The aim here is to explore some selected implications of the onset of “de-growth”.

This can best be done, not by looking only in a ‘top-down’ way at institutions, systems and enterprises, but by following a ‘bottom-up’ rationale which starts with the circumstances of the ‘average’ or ‘ordinary’ person.

The central realities are (a) that this ordinary person’s prosperity is shrinking, and (b) that conventional definitions of economic output and individual income greatly overstate the economic resources to which he or she has access.    

There is a sequence of hierarchy in how the ‘average’ person spends his or her income. The first calls are taxation, and the cost of household essentials. Next come various liens on income owed to the financial and corporate system – these are the household counterparts of the streams of income on which so much corporate activity and capital asset value now depend. ‘Discretionary’ (non-essential) spending – everything from leisure and travel to the purchase of durable and non-durable consumer goods – is funded out of what remains, after these various prior calls have been met. 

Putting these two facts together leads to some striking conclusions. Because discretionary consumption comes last in the pecking-order of spending – and because a large and growing slice of apparent ‘income’ is no more than a cosmetic product of financial manipulation – then it follows that the underlying and sustainable level of discretionary expenditures is far lower than is generally assumed.

In essence, discretionary sectors of the economy are now on life-support, kept in being only by the drip-feed of credit and monetary stimulus. Additionally, the ability of households to sustain the stream-of-income payments to the financial and corporate sectors is hanging by a thread.

This means, first, that, as and when credit and monetary adventurism reach their practical limits, whole sectors of the economy will contract very severely.

Second, it means that we have reasonable visibility on the processes by which asset prices will slump into a new equilibrium with much-reduced economic prosperity.

Critical path

These findings have profound implications, so much so that it’s important to understand the analytical route by which they have been reached. This discussion follows a path which starts with a top-down examination of how the ‘real’ economy of goods and services actually functions, translates this into what it means for the ‘average’ or ‘ordinary’ person, and proceeds from there to various findings relevant to business, finance and government. This analysis is informed by the proprietary SEEDS economic model, which presents energy-based analysis in the financial ‘language’ in which, by convention, debates over these issues are conducted.      

If you’re new to energy-based interpretation of the economy, the ‘big picture’ is simply stated.

Essentially, the dramatic growth in economic output (and in the numbers of people supported by that output) since the 1760s has been a function of cheap energy from coal, oil and natural gas.

More recently, three trends have undermined this dynamic. First, fossil fuel energy has ceased to be ‘cheap’, in meaningful, energy-margin terms.

Second, this cost increase is taking away our ability to maintain (let alone to further increase) the supply of fossil fuels.

Third, we have reached – or passed – the limits of environmental tolerance of an economy powered by fossil fuel energy.

This means, either that we find an economic replacement for oil, gas and coal, or that we adapt ourselves to the ending of the fossil fuel prosperity dynamic. The authorities, who are aware of the environmental but not the economic implications of this situation, are pinning their hopes on transition to renewable energy sources (REs).

The environmental case for transition to REs is undoubtedly compelling. But the belief that REs can replicate the economic impetus of fossil fuels, far from being ‘proven’, is simply an assumption, based primarily on wishful thinking, and, far from success being assured, the probability of it happening is actually very low.

Considered in ECoE terms, whilst the costs of RE supplies are falling, they are unlikely ever to be low enough to replace the fossil fuel growth dynamic. The building out of RE capacity continues to rely on inputs which only the use of fossil fuels can provide. We cannot – yet, anyway – build solar panels using only solar energy, or construct wind-turbines using wind power alone.

Moreover, we should not assume that REs can ever be a like-for-like replacement for oil, gas and coal. An economy powered by REs will not replicate the one built on fossil fuels. The push to replace internal combustion engine (ICE) transport with electric vehicles (EVs) is a case in point. Whereas the properties of petroleum favoured the development of cars, RE-provided electricity is likely to work far more effectively as a power source for public transport.

Even if (and it’s a big ‘if’) RE electricity can replace the quantity of energy used by ICE vehicles, batteries cannot replicate the characteristics of the fuel-tank.  If we try to ‘buck the physics’ on this – if we insist on clinging on to cars, rather than switching to trains and trams – then we risk, not only a costly failure, but also an environmental disaster caused by mining the materials necessary for the requisite supply of batteries.

In parenthesis, it’s only fair to note that the authorities very probably don’t anticipate like-for-like replacement of ICE cars with EVs, but they can hardly tell voters that car ownership is set to fall markedly.

Economic conditions – the personal factor

Where this top-down situation leaves our ‘average’ person is with deteriorating prosperity. It might not look that way to him or her, but this is because both macro and micro perceptions have been obscured by the use of financial ‘innovation’, which has included sub-zero real interest rates (by which people are paid to borrow), and monetary expansion (which back-stops this escalation in debt and other obligations).

Wages and other forms of income have continued to increase, but only because we have been taking on between $3 and $5 of new commitments in exchange for each dollar of apparent “growth” in GDP and, therefore, in incomes. A point will, inevitably, soon be reached at which we have to renege on some of these promises, either by walking away from them (‘hard default’) or by devaluing them through inflation (‘soft default’). The idea that this somehow ‘doesn’t matter’ is a fiction, because one person’s debt is another person’s asset, and because broader promises (such as pensions) form the real basis on which people plan their lives.       

The deterioration in prosperity has been experienced first in the Advanced Economies, and prosperity per capita has been falling in almost all Western countries since the early 2000s. The high levels of complexity in these economies carry extensive maintenance costs, meaning that prior growth in prosperity goes into reverse at comparatively low levels of ECoE (between 3.5% and 5.0%). Less complex EM (emerging market) economies enjoy greater ECoE tolerance, but they, too, have now reached the ECoE inflexion-points (between 8% and 10%) at which prior growth in their prosperity, too, goes into reverse.

This, of course, means that the average person – first in the West, latterly in the EM countries – gets poorer. So far, at least, the rate of deterioration in top-line prosperity has been pretty gradual, but its effects on the average person are leveraged by taxation; by the priority that must be given to household essentials; and by the liens on income created by the increasing financialization of the economy.

Here’s a simple illustration of this leverage effect. A person has an income of $100. Of this, $35 goes in tax, $40 must be spent on essentials, and a further $15 goes out in interest, rent and various subscriptions and stage-payments. This leaves $10 of discretionary income for the person to spend as he or she wishes.

If this representative person’s income falls by $5, from $100 to $95, it’s mathematically true to say that he or she is worse off by ‘only’ 5%. But, because of the leverage in the equation, his or her discretionary spending capability has slumped by 50%, from $10 to $5.

This person may – and, in the real world, increasingly does – counteract this ‘discretionary squeeze’ by taking on extra debt, or by stringing out (staging) payments for purchases that hitherto would have been paid for up-front.

But all that this does is to increase the future cost of debt service and other liens on income.      

Taxing times

Where fiscal issues are concerned, the prosperity problem for households is leveraged by governments’ failure to set policy based on the realities of prosperity.

In the group of sixteen Advanced Economies (AE-16) modelled by SEEDS, aggregate taxation increased by an estimated 40% in real terms between 1999 and 2019. Since recorded GDP rose by a very similar 41% over this period, the apparent incidence of taxation – measured conventionally against GDP – has been remarkably static, seldom varying much above or below 36% over the past two decades.

When we look past credit-inflated GDP to prosperity, however, the burden of tax has risen from 39% in 1999 to 49% last year.

As this pincer effect has rolled on – with taxes rising whilst prosperity erodes – relatively modest decreases in prosperity per capita have been leveraged into much more extreme falls at the level of disposable (“left in your pocket”) prosperity.

The most striking illustration of this effect is France, where prosperity per capita peaked in 2004, at €30,910. Since then, this number has declined by a comparatively modest 6.2% (€1,910) in real terms, to €29,000. But tax per capita has increased (by €3,000 per person) over that same period. Accordingly, the disposable prosperity of the average French citizen has fallen by a dramatic 34% (€4,920), from €14,700 in 2004 to just €9,570 last year. Popular anger at this state of affairs is palpable.  

In few other countries has this leverage effect been quite so extreme, but declines in disposable prosperity per person have, nevertheless, been pretty striking, falling by 28.2% in Spain since 2001, by 28.0% in Britain since 2004, and by 17.4% in the United States since 2000 (see table 1).

Table 1.

Essential pressures

The adverse leveraging effect of taxation has fiscal and political implications, of course, though what interests us here is its impact on consumers.

This impact is, moreover, compounded by the growing slice of prosperity accounted for by the cost of household essentials.

SEEDS doesn’t monitor essentials spending on a country-by-country basis, but does carry out this exercise in the single instance of the United Kingdom. Over a twenty-year period ending in December 2019, average wages in Britain increased by a nominal 77%, outstripping CPI inflation (of 49%) such that, in theory, the wage-earner was better off by nearly 10% over that period.

However, the essentials index (TMUKEPI) rose by 96%, such that wages measured against household essentials decreased by almost 10% between 1999 and 2019. It’s also noteworthy that, whilst the average cost of domestic rent rose by 8% in real terms, the real cost of mortgages fell by almost 20%.

Since a sizeable part of the cost of household essentials is linked to commodities traded globally – most obviously, to foodstuffs, materials and, above all, energy – it’s a reasonable inference that these broad patterns have been replicated elsewhere in the Advanced Economies. From this, we can deduce that non-discretionary purchases, whilst they account for perhaps 37% to 40% of household expenditures, already absorb somewhere between 50% and 55% of prosperity.

If this calculation is correct, it would mean that the combined burdens of tax and household essentials are already close to, and may in a number of instances exceed, per capita prosperity. If these costs seem to remain affordable within incomes – but not within prosperity – the explanation lies in the credit effect of inflating incomes (and aggregate GDP) by purchasing “growth” using incremental debt in a ratio of 3:1.     

In short, indicative numbers suggest that, over the past five or so years, the combined burdens of taxation and essentials have come to absorb all of the prosperity of the average person in a growing number of Western economies.  

What this in turn means is that the average household increasingly relies on credit expansion to fund all discretionary (non-essential) purchases. In this context, ‘debt’ includes the individual’s share of all government and corporate (as well as household) borrowing. Albeit at one remove, government borrowing pays for services that would otherwise have to be funded by taxation, whilst corporate borrowing helps fund the incomes of employees, and may also serve to reduce the end-user cost of purchases.   

As set out in table 2, perhaps the most extreme example of this credit effect is Ireland. Since 2004, the annual pre-tax prosperity of the average Irish citizen has decreased by €3,000 which, at 7.4% and spread over fifteen years, may seem a comparatively modest decline. Over the same period, though, his or her share of the country’s debt has soared from €82,000 to €198,000. This means that, on average, the average person’s share of debt has increased by nearly €7,700 in each of the past fifteen years.     

Table 2.


It’s a reasonable guess that the central conclusions of this analysis will not contradict many readers’ intuitive perceptions of what has been happening.

We know that increases in income have been more than matched by increases in debt. We know that, increasingly, households are taking on financial commitments in addition to traditional obligations such as mortgages and rent. We know that taxes on the ‘typical’ household haven’t fallen to mitigate these pressures. We know that the real cost of household essentials has risen, and it will come as no great surprise that there is a corollary between rising household credit and continuing expenditures on non-essential purchases such as leisure, travel and gadgets. We also know that many other indicators of hardship chime with these observations.

In this context, it’s necessary to be clear about what we know, and what we infer. Observation over time confirms that financial ‘innovation’, and outright increases in debt and other obligations, are being used to sustain increasingly illusory ‘growth’. Our understanding of the energy basis of all economic activity should reinforce our confidence that rising ECoEs lie at the root of what began as “secular stagnation”, but has since turned into something a great deal more serious. SEEDS monitors real-terms taxation in countries accounting for about 80% of the World economy and, if we cannot calculate the costs of household essentials on a country-by-country basis, we have data sufficient for reasonable inference on this component.

We need to be somewhat nuanced in the conclusions that we draw from a diminishing, and perhaps vanishing, aggregate capability to fund discretionary purchases without resort to spiraling credit.

For one thing, inequalities between households affect the overall situation. Whilst the ‘average’ person might not be able to make discretionary purchases without using credit, there will be some below this average who already rely on credit to pay for the essentials, whilst others are in a better position, and can still make discretionary purchases without going into debt to do so. To take just one example, the interpretation presented here doesn’t imply that air travel will ‘collapse’, but does indicate that it will contract, suggesting that providers will need to carry fewer passengers, and charge them higher fares.

This said, there can be no disguising the underlying trends, which point towards overall contraction in discretionary sectors, and also highlight the vulnerability of any activity or asset which depends on income streams derived from increasingly squeezed household prosperity. Logically, the industrial landscape can be expected to rebalance away from discretionary activities, whilst a sharp correction in asset prices is likely to be led both by decay in discretionary components and by a degradation in the scale and reliability of ‘income streams’.        

164 thoughts on “#185. The objective economy, part two

  1. Is this “Great Reset” b. s. that I’m hearing about some nefarious plan by the elite to restructure the world economic system so that they can maintain their power and wealth in an age of falling eroei?

    • It’s certainly part of it.

      One idea doing the rounds in ‘establishment’ circles is that the household of the future will own less – for example, using ride-sharing rather than owning a car, or hiring appliances when needed, rather than owning them.

      This might have some efficiency merits – why own something which, most of the time, sits idle? – but raises the question of who does own all this ‘stuff’.

    • “It’s certainly part of it.”

      Its the only part of it. What did the bailouts do in 08 Tim? Did they usher in an age of decentralization of assets and new management, or was it a continuation of those who made the problem in the first place? Clinging to power should be the descriptions of the 2010 decade.

  2. Tim, your essays keep getting better and better! The story that you tell chimes with my experience – the standard of living is falling. Sadly, Britain’s ruling political class refuse to recognise or acknowledge the stark reality of the situation. The disconnect between the governors and the governed is staggering, yet attempts at engaging local political representatives with reality on the ground meet with a mixture of indifference, incredulity and implausibility.

    • Thanks Kevin!

      Even where they enter government with good intentions, politicians bring with them ‘baggage’ which prevents objective assessment of situations. The current UK government has a prejudice in favour of outsourcing and privatisation, which was why the ‘test and trace’ system was set up in ways destined to fail. They believe that high property prices are ‘a good thing’, despite evidence and logic to the contrary. They often fall for corporate PR on how ‘big’ or ‘iimportant’ certain sectors are supposed to be.

      This particular administration also has certain very undesirable characteristics, but I’ve no reason to suppose that the alternative UK party would be much better.

      In other words, I see this as a systemic problem, beyond party issues.

  3. Tim,

    Your last paragraph mentions that the projected falling standards of living are not going to be equally shared. For the UK, say, is it possible to give meaningful estimates as to how these declines might be experienced in different socioeconomic groups/social classes? There is presumably a lot of data available from the ONS on debt ratios, tax etc which could be added to your SEEDS model. I’m certainly interested as I suspect who will be losers and winners Is not intuitively obvious.

    But thanks for another really thoughtful essay!

    • Thanks David.

      Much of what you describe would be feasible, but at the expense of not doing other things. The aim here is to look at things globally, and SEEDS coverage is of 30 countries accounting for c 80% of the global economy. This limits how much detail I can go into for any one country. Here, I used the SEEDS models for six countries, plus the Advanced Economies (AE-16) group.

      In an ideal world – if had the resources of a big organisation behind me – I’d have people doing exactly what you describe, for each country. That would give us granularity on which industries will contract or expand, where capital should be allocated, what governments could do to make the best of situations, and so on.

  4. Best yet, Dr. Tim. What you say chimes with my experiences with some clients this year; credit exhaustion, raiding long-term pension funds 15-20 years early to pay off debt for ‘stuff’, “personal contract hire” on shiny cars they have had little use of during lockdowns, emotional exhaustion from covid, commuting, inept government, and increase in grant-making from the local youth charity I am involved with, the struggle to obtain an income stream from financial assets, ridiculous asset price inflation, etc.

    I do believe that 2021 will be a tough year, especially for us here in the UK!

    • Mark, I often whether PPI redress has hidden, or at least for a great many households, provided a temporary source of ‘income’ against the impact of declining prosperity. Alas, that ‘life-boat’ is no longer available.

    • Thanks Mark, much appreciated.

      The aim here was to use the SEEDS system as an interpretative tool, and the outlook for discretionary sectors seems an important indicator identified by the model.

  5. Look on the bright side of things. Think how much money folks who refuse to take the crazy new RNA vaccine will save by not being able to fly!

    “Qantas plans to insist that passengers on international flights have been vaccinated against Covid-19 before boarding its planes once any jab is rolled out Alan Joyce, the Australian airline’s chief executive, said. I think that’s going to be a common thing talking to my colleagues in other airlines around the globe,” he added.


    Or going to concerts.
    “Ticketmaster Developing Plan For Event Organizers To Implement COVID-19 Vaccine”


    And if you’re not sure exactly what an RNS vaccine is, them get your learning on here:

    [audio src="http://www.radio4all.net/files/tony@cultureshop.org.uk/2149-1-COMPLETE_Dr_Stanley_Laham_immunologist.mp3" /]

  6. Disconnect
    From the New York Times today:
    “The longer-term picture is more encouraging, though. There is reason to hope that the next economic recovery, whenever it comes, will be stronger than the frustratingly weak recovery after the 2007-2009 financial crisis.

    Why? After that crisis, many households were coping with large debts. Today, household balance sheets are in better shape. And once a vaccine arrives, many Americans will be feeling a pent-up urge to spend — on vacations, business trips, restaurant meals, clothing, elective medical procedures, concert and sports tickets and more.

    “It’s a good guess that we’ll get this pandemic under control at some point next year,” writes Paul Krugman, the Times columnist (and Nobel Prize-winning economist). “It’s also a good bet that when we do the economy will come roaring back.”

    There seems to me to be no concept at all of physical limits….Don Stewart

    • Agree, Don. There will be surprised disappointment. And if the US Senate remains Republican, significant policy changes will be rare in my view. Krugman has had his head where the sun don’t shine for years when it comes to physical reality.

    • I keep hearing this, but all the middle class families I know are really struggling, and many of them are still on some type of forbearance. Their debt is maxed out. They used the stimulus, but that ran out quick.

      Maybe if we institute a UBI it will have a temporary boost to the economy, but the drop will be even steeper on the other side.

  7. Some effort should be made to determine what part of taxation adds to discretionary prosperity.

    For example, if taxes taken from the average person are used to build transportation infrastructure that allows that average person to avoid the necessity of a car, then the taxes cannot really be said to reduce prosperity. Taxes may have even increased prosperity if the marginal tax increase is less than the marginal benefit from not owning a car.

    And just as every debt is someone else’s asset, every income reduced by taxation is income increased for someone else when those tax dollars are spent. Workers whose income is derived from tax money see increased prosperity with every tax increase.

    The structure of tax rates also affects average prosperity. If tax rates were raised to 100% and the money was spent on projects of general benefit (public education for example), median prosperity would increase because money from the rich would subsidize projects that benefit the poor and everyone else.

    These examples show that taxes cannot only be seen as a direct reduction in average prosperity. It depends on who is taxed and how the tax money is spent. Indeed, some countries with very high tax rates have higher average prosperity than those with lower taxes, simply because the money is spent to benefit the average person rather than left to the preferences of the (wealthier) untaxed.

    • Thanks Joe.

      I think I should make it clear that tax and public spending don’t reduce average prosperity – but they do reduce disposable (discretionary) prosperity. We might think of it in two parts:

      – Service provision – tax is taken, and is used to provide services (health, law and order, defence, etc). These count (or should) as essentials. If the state didn’t do this, poorer people would go without these essentials, whilst the better off would be left with more capability for discretionary purchases.

      – Transfers (pensions, benefits, unemployment, etc) – these are taken, in general, from the better off (reducing their scope for discretionary consumption), and given to the worse off (enabling them to pay for essentials).

  8. Whither the US dollar?
    At 8:14 the new US Comptroller of the Currency, Bryan Brooks, explains Bitcoin and the Internet as a war between the US and China. Continue with Max and Stacey talking about how Bitcoin cannot be gamed the way national currencies can be gamed using Monetary Adventurism and outright fraud. Bitcoin, they claim, is based on performance…not smoke and mirrors. If you take a look at Wolf Street’s discussion of the recent exchanges between the US Treasury and the Federal Reserve you find both parties exulting in the fact that they could and did inflate the financial markets with the expenditure of a very small amount of money…the triumph of smoke and mirrors.

    Earlier in the Podcast, Max and Stacey list the huge hedge funds which are investing in Bitcoin…including Ray Dalio, the head of Bridgewater, who just a few days ago was claiming that Bitcoin would fade into nothingness

    It seems to me, looking at Dr. Morgan’s post above and other indicators (including the eagerness of Washington to characterize everything about China as a ‘war’, and to find ways to penalize corporations chartered in China), that the following make sense as objectives for anyone holding significant amounts of US dollars:
    *Reduce the exposure to rampant inflation posed by dollars, for which there is no reasonable indexing mechanism, including the inflation indexed TIPS investments.
    *Seek investments which hold their value regardless of whether the US and China agree to co-exist, or engage in a Cold War that one or the other wins. I’ll rule out nuclear war, since I doubt there is anything that has much value in that case. Gold, silver, productive farm land, and perhaps Bitcoin seem to be the investments to consider here.
    *It makes sense to hold some US stocks if one is a US citizen, since the US government wants to keep those corporations solvent and wants them to be national champions in the war with China.
    *I don’t have a clue what a British citizen might find sensible.

    I know this is not a blog which delves deeply into personal investments, and no such advice will be offered….but is the above analysis even logical?

    Don Stewart

    • “Whither the US dollar?” ?
      ” . . . 03:12 the dollar is in a downtrend and you got
      03:15 to sell these rallies
      03:16 like me personally i love when stuff
      03:19 like this happens because it just gives
      03:21 me an opportunity to add to my dollar
      03:23 short position . . . ”

  9. “…whole sectors of the economy will contract very severely…”

    “…the interpretation presented here doesn’t imply that air travel will ‘collapse’, but does indicate that it will contract…”

    It seems to me that the concept of a tipping point will come into play at some point. Sectors of the economy do not contract without consequence. Contraction of a sector of the economy precipitates increased unemployment. Unemployment insurance claims increase, draining state coffers. Other sectors of the economy contract due to high unemployment. Those sectors lay off employees. Business contraction decreases state tax revenues. So far the system is “holding its own,” at least from a superficial standpoint. Will there be a time when enough unemployment and business contraction results in a tipping point, where the economic web comprising individuals, businesses, and states fails not slowly, but precipitously?

    • Thanks Rick

      What you highlight here relates to some fundamental changes on the horizon.

      The current system might be described as a ‘dissipative landfill’ economy. We produce huge amounts of ‘stuff’ in an energy-profligate way, and much of it ends up being thrown away very quickly. Taking plastic items as examples, these use energy both as materials and to power processes. The human input is limited to design processes, and small numbers watching the machines that are doing the work.

      In the future, labour availability will remain abundant, but energy supply will not. The way forward under these conditions isn’t to carry on using energy to produce ‘stuff’ destined for landfill, but to leverage the labour input through up-skilling.

      Instead of buying something mass produced using high-energy/low-labour processes, we might find ourselves buying lower-energy, more crafted products which last a lot longer.

      The flexibility in the human input concentrates on skills. Instead of buying a cheap flat-pack kitchen table, for instance, you might instead buy one made by craftsmen. This will cost more to buy, but will last much longer.

      I’ve been working on something along these lines, provisionally called “crafting the future”. The logic of “pile ’em high, sell ’em cheap” is losing its viability as the balance between energy and labour changes. Skills may be the key to making the best of this situation.

    • @drtimmorgan – I think this would add to our mental health as well. Becoming a skilled craftsman is one of life’s greatest accomplishments and contributes immensely to ones self esteem.

  10. Tim, one thing you didn’t mention here was the effect of demographics in advanced economies.

    Many more people have been moving into retirement, or will be very soon. Moving to a fixed income , with no idea of how long you will live, could result in a voluntary reduction in discretionary purchases – further impacting those sectors that rely on that ‘discretionary left over’ component from people’s income.

    Raoul Pal covers this in more depth on Real-Vision: https://youtu.be/5OFaZcC0lRU

    Do you think this is another ‘headwind’ we’ll be sailing into, in addition to the rest you have discussed?

  11. Thanks Tim. I am a regular reader and admirer of your work and my job involves delivery of EV charging for local government, which puts me in an ‘interesting’ position. Today’s task is commenting on a draft strategy for residential EV charging; given i’m at the coal-face i might have useful things to say. A critical consideration will be the ‘discretionary’ nature of making different trips and the means chosen for doing so and therefore degree to which a car is a ‘discretionary’ financial (and other?) commitment. The SEEDS model outputs suggest a wiser strategy would be to let the ICE ‘system’ wither on the vine? More specifically I argue that we should do it where it can facilitate EV car clubs that substitute for private car trips/ownership. I am also engaging the electricity network operator on deliverability but aware that talking down your own product is rare. BTW thanks for your posts but also creating a great space for dialogue – it’s reminiscent of the old Oil Drum days, sometimes.

    • Thank you.

      I’ve never been persuaded that forced switch-overs to EVs are the best solution, on environmental or economic grounds.

      My preference would have been to prohibit the sale of non-hybrid ICE vehicles; to introduce limits or disincentives on ICE engines above specificed sizes; and to invest in making public transport more attractive.

      It’s not at all clear that we can generate enough power to replace the energy used in ICE vehicles, still less that we can do so from RE sources alone. Supplying materials for the quantity of batteries required could be very bad for the environment.

  12. Shale Well Productivity in the US
    The gist of it is that, during previous downturns in drilling, the volume drop in production was much less than the drop in rigs, as the producers ‘high graded’ and produced only the most productive wells. But during the current downturn, the volume drop in the Bakken has been more severe than the drop in rigs, with the Permian and Eagle Ford having roughly comparable downturns in volume and rigs. The conclusion is that ‘high grading’ is no longer a viable strategy for keeping volume up…due to depletion of the best locations.

    From a SEEDS perspective, it takes a higher price for the light oils and associated gas to incent producers to drill and complete the wells and connect them to pipelines, but the inherent cost of completing the wells is increasing, and so the limits of ECoE may prevent the larger economy from generating the ability to pay the higher prices. (At least, that is my interpretation.)
    Don Stewart

  13. @Dr. Morgan
    As you think about the transition from a throw-away economy to a long-lived asset economy, you might consider the Shakers. Here are two references which will give you a very brief overview of what the Shakers were about:


    You will see that they were searching for a simplicity with a basis of strong religious principles. It is important to know that they accepted anyone into membership in a community and then taught that person how to do something useful. Thus, they put a lot of thought into a design for a rather standard object, such as a chair or a table, with the goal that it didn’t take a fine arts cabinet maker to produce it. So the mechanics of production were relatively simple, but the result was a work of art with a spiritual simplicity.

    They also put a lot of thought into the reduction of labor in everyday life. For example, their rooms had a row of pegs about eye level on the walls, so that person who had been sitting in a chair could hang the chair on the pegs when they left. This allowed easy cleaning of the floor. Around them was an economy based on slaves or at least servants…and they designed to do it all themselves. Perhaps some resonance with the loss of fossil fuel slaves?

    Don Stewart

    • If some are unaware, Shakers were celibate. They helped the population problem, but went extinct in the process.

  14. Dr Tim,

    “Crafting the future” is an interesting proposal, but its full implementation would occupy decades. Upskilling our workforce would be a slow process, because AFAIK we don’t currently have the trainers or the facilities. Additionally, we’d need to improve the pay, status and job security of craftsmen — easier said than done. We’d also need to change the expectations of consumers. Does your proposal imply greater national self-sufficiency — i.e. fewer imports and fewer exports?
    I’m sure you’re aware of these and other considerations, and plan to discuss them in a future blogpost.
    CHS and others have discussed the decline in the quality and durability of manufactured goods, and the difficulty in getting them repaired because they are not designed for easy maintenance, and / or because spare parts are not available. Putting this right (again, easier said than done) would in itself be a significant step away from the dissipative landfill economy.

    • Thanks.

      Though you are right about the challenges – craft skills used to be passed on through families – I can’t see any alternative to a “crafted” future replacing “dissipative landfill”. Consumers might adapt to it reasonably well but, as ever with any transition, there are vested interests who would oppose it tooth-and-nail. The implications are certainly localist, which might be extension imply greater national self-sufficiency.

      This is something that can’t be considered in isolation, but would need new approaches from governments.

  15. Based on history, I would expect that “tooth-and-nail opposition” would be the single most important hurdle for social change, especially change of the magnitude being entertained here. After the tractor was invented in the late 1800’s, the Horse Association of America vehemently opposed the tractor on both economic and (interestingly) moral grounds until the 1940’s. That’s opposition with staying power! Imagine that kind of opposition across the whole economy. Change would be excruciating and excruciatingly slow. Ultimately, it’s not about the economy, SEEDS or otherwise. It’s about people and their view of what the world should “look like.” (By the way, I fully acknowledge that I should have a t-shirt that says “World’s greatest pessimist.”)

  16. Tim, well done for another excellent article. If the majority of households have no surplus income after taxation and essentials, without debt, then it would suggest that a collapse in living standards would occur if credit were removed.

    ‘Moreover, we should not assume that REs can ever be a like-for-like replacement for oil, gas and coal. An economy powered by REs will not replicate the one built on fossil fuels. The push to replace internal combustion engine (ICE) transport with electric vehicles (EVs) is a case in point. Whereas the properties of petroleum favoured the development of cars, RE-provided electricity is likely to work far more effectively as a power source for public transport.’

    Fizaine and Court estimated that the US economy cannot grow at EROI levels lower than 11.

    Hall et al estimated that an EROI of 5 was an absolute minimum for maintenance of a technological society and an EROI of 3 for any sort of human society.

    Weisbach carried out an EROI analysis for energy sources deployed within Germany. His results indicate the following aporoximate EROI values: Solar PV: 2.1 – 4.0; Wind: 16; Solar thermal: 17 – 21; Coal: 30; Nuclear (PWR): 75.

    Click to access Weissbach_EROI_preprint.pdf

    The EROI of all intermittent energy sources is around 50-75% lower after buffering using pumped storage. This suggests that solar PV has insufficient EROI to power an advanced economy, at least in northern climates. The EROI for solar thermal and wind appear to be marginal and successfully powering an advanced economy by these means requires that inefficiencies be minimised. This means that energy transitions need to be minimised. Very little energy can be sacrificed to inefficiency and embodied energy of storage and most of the electricity must be consumed as direct electricity, drawn from the grid. This suggests to me that energy demand needs to adapt to intermittent supply, with relatively little energy storage. Hydrogen and other synthetic fuels have poor cycle efficiency. Battery technologies have high embodied energy.

    Transportation should focus on options that minimise both embodied energy and energy consumption per passenger-mile and tonne-mile. Walking, bicycle, velomobile are energy efficient personal transportation options, but are unsuitable for long-distance transportation or the movement of heavy freight. Rail is energy efficient, can be powered by direct grid electricity and is capable of moving both people and freight at a good speed. It is the rational choice for long-range transportation and can be powered by direct electric power from the grid. Wind powered ships are a proven long-range transportation option, albeit at low speed. Hydraulic and pneumatic capsule pipelines are promising, but as yet poorly developed options. All of these transportation options are nodal by nature, requiring other short range transportation options between the node and surrounding area.

    As for the possibility of building renewable energy infrastructure without fossil fuels, the most important indications of plausibility would be whether we can make steel and concrete without fossil fuels. Can that be done at a cost that is affordable, in terms of maintaining the GDP devoted to energy production? Most steel now is recycled in electric furnaces. Relatively little fresh steel would actually be needed. Maybe it could work.

    If institutional obstacles to nuclear power can be removed, then a transition away from fossil fuels should be relatively straightforward. The EROI would appear to be high enough to tolerate the parasitic losses associated with synthetic fuel production. A hydrogen economy is by default a nuclear economy. The problem is that people are frightened of it.

    • The NGD is not going to be the way it is now envisioned or being sold. I have lived “off grid” since ’06 and can safely say that in a world powered by RE that the 9-5 work week won’t work. Here at just shy of 45 north on the Atlantic coast of Canada the household chores only get done on days with lots of sunshine. We use the extra electricity,(over what’s needed to top up the battery bank), to run our appliances such as vacuums, washers and machinery in the workshop. This time of year if things are pressing than the generator is used to supplement. In a world without FF the work week will be when the power is produced which won’t often be 9-5 Monday to Friday. This realization will not work with the present business models of our capitalist environment. The income streams of the FIRE industries set by the calendar won’t work. “Making hay while the sun shines” doesn’t lend itself to regimented payment schemes. This should make quite the mess of the way accounting is now done as well as a lot of other fiscal planning.

      Thanks again Dr. Morgan for your excellent essays. They help me tremendously in trying to explain the actual costs of doing things to my friends and neighbours. As well as why this won’t continue for much longer.

  17. Well, in the UK we have a bonafide example now to answer the question of whether the ruling elites know the risks of the games they play on our behalf. (our sacrifices they’re prepared to make) From a MSM news outlet, no less: https://www.theguardian.com/politics/2020/nov/24/uk-facing-risk-of-systemic-economic-crisis-official-paper-says

    I’ll bet our great helmsmen at the roulette table still ‘go all-in on the red’ with our lives and futures.

    They’ll sweep up the assets anyway in the chaos of the firesales later, disaster capitalism is win-win for them, heads they win, tails we lose, witness the billions in no-bid covid contracts already.

  18. Well yes and no. “Essentially, the dramatic growth in economic output (and in the numbers of people supported by that output) since the 1760s has been a function of cheap energy from coal, oil and natural gas.” this somewhat oversimplifies things as it was not just cheap energy alone but its application through ever more inventive technologies. Energy itself produces nothing but at a most basic level heat and light if burned. It was the technologies of the steam and combustion engine that led to industrialisation and then allied to inventions such as the spinning jenny onwards to mass production. Technology from the invention of the most basic tools to contemporary computing has ben the driver of human development, not necessarily progress as witnesses by the many downsides.

    • You’re quite right, of course, in one direction – but not in another.

      Energy cannot be put to work work without ingenuity. The coal that we started accessing in large amounts in c 1760 AD was there in 1760 BC. So was the iron-ore. In theory, and given the requisite knowledge, Cleopatra could have had a Cadillac – all the raw materials existed – and, likewise, Henry VIII could have put a man on the Moon.

      But it doesn’t work the other way. No amount of technology can produce energy-derived products if the energy isn’t there. Technology works within the envelope of physics. Technology couldn’t, and hasn’t, made US shales the economic equivalent of the huge oil reserves under the sands of Arabia.

      You might recall the phrase “Saudi America”, when investors were piling in to shales. Just recently, we’ve been told that Britain can be “the Saudi Arabia of wind-power”.

      Physics trumps everything in the end (no pun intended). To think otherwise – like those who propose that we can “de-couple” the economy from the use of energy – is like the person who, having jumped off a 100-storey building, is heard to say “no problems so far!” as he passes the third floor……….but Isaac has the last word.

    • Like locking up 30 of the brightest minds in a vault. With billions in funds, all computing power available and all forms of communication.

      With one simple assignment; make me a sandwich.

  19. Dr. Morgan

    Something I have been pondering, I thought I would ask for thoughts here. Where does the current explosion of “technology” fit your view of coming delaying, simplification, decreases in discretionary spending?

    Many technological “solutions” are offered as productivity improvements, although many are just solutions to increasing complexity. Some technology can lower the cost of manufacturing goods and services, making some goods and services quite inexpensive, although I wonder about the hidden energy costs behind those processes.

    Prices for shares of technology stocks have gone exponential, it seems. In theory this represents a massive bet that these companies will delivery massive cash flow to shareholders in the distant future. In actuality, it may of course just be part of the asset biggest bubble in history.

    However, in my wondering mind, I have constructed a far-fetched narrative that the “value” of fiat currencies is escaping towards these technology stocks which might continue to “eat” the world through software (and the use of electricity) and generate cash flow for the foreseeable (ha, ha) future. Several people I know very well have made multi-million fiat U.S. dollar gains speculating on these tech stocks. One of those persons has just upped their ante.

    To flesh out the term “technology, this incomplete list: Artificial Intelligence and Machine Learning, Quantum Computing, Augmented Reality and Virtual Reality, Digital Transformation/Software Eating the World: 5G, Mass satellite deployment, Internet of Things (IoT), Blockchain, Cryptocurrencies, big data, SaaS – Software as Service, cloud computing, FinTech, Social networks, etc. In Biological and Medical areas, we have Augmented human (biochips, neural links, etc.), Genomics and gene editing, Anti-aging drugs, AI-discovered molecules (for medicine, etc.). In Materials Science/Manufacturing, Robotics, 3D and 4D printing and additive manufacturing, Semi-conductors, Nanotechnology and innovations in materials science. Innovation in energy production of course, including all the “green” energy tech. Tesla seems to be the poster child for this, the share price now selling at astronomical levels. New military weapons such as hypersonic weapons.

    Can we continue towards a world of integrated circuits/software automation, robotization, wireless communication, big data, artificial intelligence, if net energy production is declining? If so, for how long?

    Although I have been in the declinist camp for some time, a review of recent technological innovations, and the fortunes being made in technology stocks have me checking my assumptions. Putting aside philosophical reservations about industrial civilization, I wonder if this technology era might be around longer than I have anticipated. Or will technology and tech stocks rapidly fall away and devalue over the coming years?


    • Economist Ha-Joon Chang, in his book “23 Things They Don’t Tell You About Capitalism”, says that the biggest increase in productivity was brought about by the washing machine and the dishwasher. Compared to those, the current technology is mostly gimmickry that increases complexity, but not productivity. The prices of tech stocks reflect only expectations and fantasies, not value. Zoom certainly cannot be more valuable than Exxon.

    • Interesting questions!

      With the proviso that nothing I say here should be construed as investment advice, “tech” in its Wall Street meaning is something of a misnomer – to me, “tech” means things like electronics and life sciences. Within the Wall St definition, “tech” covers a range of different activities.

      If you look back at components of the equity Indices over time, you’ll see that many companies, once highly valued by the markets, have since either disappeared or dwindled in size. I see no reason why it should be different this time. Fashions change.

      Technology tends to do one of a number of things. It might provide new ways to use energy, in which case it’s a blind alley. It might help us to use energy more efficiently, which would be good positioning. It might be an adjunct of the financial economy, which isn’t where I’d want to be. It might provide products or services which people or businesses want, but don’t need, and this would not be advantageous in current circumstances.

      Ultimately, many big businesses, like many governments, end up (a) putting too much faith in ‘the way we do things now’, and/or (b) assume that the future must be an infinite extrapolation of recent trends.

    • That is why i prefer Gold over BTC.

      More complexity in a de-growth environment is suicide.

      Interests, interests…

  20. About the landfill economy and the K-shaped recovery:
    Probably the rise of CBDC (and) UBI will lead to two economies/monies: one for assets and capital and “sustainable” growth (cough) and the other for consumption. That will imply the consuption money is essentially worthless. Well in the beginning there might be acceptable exchange rates but as the situation deteriroates, earning consumer money will in the long run inflate you out of access for capital money (buy a chainsaw or carpetry machinery?)
    There is a path clearing up that leads to north corea for 90% and Silicon Valley for 10%. A Bowl of rice and a paper bag of dried sardines a day with max transport tool of a bilke might be a “good” sustainable civ.

  21. Interesting to hear the discussion move yet again to ‘efficiency’, seen by many as a positive way through the thermodynamic squeeze of ERoE. But if we understand right from the bottom that tools are embodied energy, and by extension technology enables us to use more energy, then efficiency is merely trading existing levels of energy use for increased embodied energy, as supply chain requirements and cultural assumptions (car ‘ownership’ anyone?) have to support increases in technological efficiency.
    Taking Garrett’s work on the almost perfect correlation of energy consumption with total economic activity, we see that Jevons wasn’t describing a paradox (efficiency leading to increased energy use), merely observing on the relative competitive advantage of applying an efficiency at a point in a hierarchy of utility, as the locus of technological advance calls up supply chain and cultural requirements (need charging points for EVs, anyone), increases complexity and embodies an increased energy consumption requirement.
    This raises questions for Tim’s current SEEDS strategy, which seems to want to provide analytic solutions to degrowth with sectoral, regional, national foci as though these might give insights into competitive advantage or just plain ‘survivability’. Given the technological interdependence and supply chain integration in the world economy, these slices of insight may give temporary or local advantage, particularly at lower levels in the hierarchy of utility, but I increasingly suspect that even lower levels of complexity are unsustainable, because of technological path dependency (without reversibilty) has stripped out cultural practices and skills at the lower levels. There’s no going back on efficiency!
    The recent discussion celebrating and reimagining a world of crafts seemed to ignore the years of practice implied in craft skill, because our technological ‘advance’ has dehumanised and abstracted the living practice of craft. I’ve always found it odd to see a craftsperson drive to work in a car!

    Tim, I’m very grateful for your insights over the years and think the fundamentals of your ECoE analysis are sound.
    It was obvious to me that, at the highest levels of complexity, activities like space travel will struggle in degrowth, so I’ve spent 25 years peddling ideas of low energy living and ‘sustainability’. This has had very little traction in a world of progress and growth. Even at a local level the global economy has irreparably eroded integrations of material and energy into human culture – the discussion of spare parts shows this all too clearly. We yearn for a more fine-grained analysis to let us in on your bigger picture insights; I’m losing faith that it can do so.

    • Just so: the advanced economies have, as it were, climbed a ladder, kicking out all the lower rungs as they ascended. It looks like a dreadful drop from the top rung and sliding down is highly perilous……

      Anyone who cares to understand how the old crafts functioned might like to read ‘The Wheelwright’s Shop’, a great classic written by the clever son of a master wheelwright at the end of the 19th century.

      Time is a very important factor in crafts. At then end of a 7-year apprenticeship, a wheelwright could only make a wheelbarrow from scratch.

      There are some fine craftsmen around today, but they work for the rich mostly – even if making estate fences – and have few students.

      Like the old breeds of livestock and draught animals, they have shrunk to too small a gene-pool.

    • Jeremy, Cynic

      Thanks for this. I’m working on ‘crafting the economy’, and it’s throwing up a lot of interesting points, of which two might be of interest now.

      First, our economic system of production determines our social structures – corporate, financial and political. A mass-production, energy-profligate system trends towards concentration of economic and other power, whereas the decline of this system is likely to usher in very different arrangements.

      Second, it’s often stated that Western economies have become ‘service economies’, with lots of stats supposedly backing up this claim.

      But there’s another way of looking at this. If (through energy-profligate mass production) all of the goods – everything from shoes and clothes to food and equipment – can be produced by a small proportion of the workforce, services become residuals, i.e. something for the rest of the workforce to be given to do with their time.

    • It seems likely to me that techno-optimism will remain an axiom of the growth god until major collapse is well underway. Techno-fixes will repeatedly be attempted, and only when increasing %s fail will Homo superstitious wake up.

  22. “services become residuals”
    I have thought about this issue for a number of years. While I have no definitive answers, I will offer a couple of thoughts.
    *A person operating an excavator is using a tool and some fossil energy in order to bring about a physical change in the landscape. Society pays the operator for their time and skill in bringing about the transformation, as well as paying for the tool and the fossil energy. The operator therefore gets an income with which to buy goods and services from other people.
    *People in a call center are trained to filter the information they get over the telephone or internet and to either cause something to happen by pushing the right buttons on a computer, or else to prevent something from happening by pushing different buttons on the computer. While it is not immediately apparent, the call center employee is also bringing about a change in the world…the person is approved for a surgery or told that their ‘out of network’ expenses will not be covered and the person must dedicate part of their income to paying the tab. Whoever is paying the bill employs and pays the call center person and they can in turn pay other people for items like food and rent.
    *Perhaps the most immaterial seeming services involve advice. The world is awash in preachers, health coaches, athletic coaches, math teachers, mystics, and so forth who help people achieve something which would otherwise be beyond their capability. Howard Odum thought that a university professor whose main tool was a chalkboard was one of the most energy intensive jobs because of the years of training it took to produce the professor. Even a charlatan has to learn their trade, which inevitably involves energy expenditures.

    The key question is whether services have the same earnings potential as people who manage the more immediately earth shaping work such as a person operating an excavator. It seems that they do. As fossil fuels have enabled us to build more complex tools, such as a modern automobile, then the ability of an ordinary person to operate or repair the tool becomes impaired. The trick to Zen and the Art of Motorcycle Maintenance is that, now, very few people can maintain their motorcycle. In fact, most mechanics can only consult computers to find out what is wrong and replace some part. Actually fixing something, like a traditional blacksmith would do, is now rare.

    And that latter point may be the Achilles Heel of the service industries. One of my doctors has recently taken to complaining that he is being reduced to doing whatever the computer tells him to do…he is becoming like the mechanic replacing parts off the shelf. Thus, it might be true that the wages of the service class will decline. For example, the FDA in the US is trying to require supplement companies to stop selling N-Acetyl Cysteine. NAC is a precursor of glutathione, an antioxidant which is critical in the prevention of bad cases of Covid 19. NAC is inexpensive when bought from a supplement company, but would be expensive if the FDA succeeds in requiring that it be sold through medical channels. We can see this maneuver as the pharmaceutical and medical and regulatory agencies using legal maneuvers to increase their earnings potential. While there may be temporary victories for the monopolistic impulses I think that the internet is eroding all such barriers.

    So my conclusion is that ‘services’ are energy dependent just as physical jobs are energy dependent. But that increased mechanization of knowledge coupled with the complexity of tools may be eroding the earnings potential of people who work in the services industries. The ability of the services people to afford increasingly expensive energy may be at risk.

    Don Stewart

    • Just as artisans and skilled workers of all kinds were rapidly displaced by the human-machine mechanism – and if they couldn’t re-skill were cast into destitution – so old-style service specialists will find the ground giving way under their feet.

      In turn, this will render the transition from the industrial economy to the almost purely service economy – the prime exemplar being the UK from the 1980’s – a dead end and lead to a profound systematic crisis.

    • These are amongst a lot of things we need to discuss.

      With ‘The objective economy’, I’m aiming to pull a lot of stuff together in pursuit of a rounded, comprehensive assessment of what might lie ahead. Part one used SEEDS to look at the economy as an energy system, and part two concentrates on discretionary consumption capacity and the vulnerability of ‘streams of income’, many of which have been capitalised.

      Hopefully, if we can look at supply methods, including the roles of goods and services, we can reflect on how changing production systems drive social and political arrangements.

    • And the imbecile author nonetheless implies that ‘cutting out fossil fuels’ is a good idea for the UK. Good God!

    • Can someone explain why I read that electricity from wind turbines is much cheaper than that from fossil fuel stations, yet it still needs to be subsidised and have special ‘first option’ status? Also the cost of essential backup and/or storage is never considered. It seems the plan is that installing many more wind turbines (at huge cost) will provide all the power we need during times with no wind. How does that work?

  23. “changing production systems drive social and political arrangements.”

    I would encourage anyone thinking along those lines to check out Chris Smaje’s take on the subject in his book A Small Farm Future. After laying quite a bit of groundwork, he tackles the subject in Chapter 16: From Religion to Science (and Back).

    “Any vision for the future has to engage individual motivations more personally. It has to work like a story or a song of life: this is who I am, this is what I do, this has meaning…change often calls forth prophets to supply new stories. The best among them can discern and prefigure the shape of the emerging new reality, breathing life into it by naming its spirit or characterizing its logic, while somehow relating it authentically to older stories inherited from the past that make it feel familiar and preordained.”

    In Chapter 17, he begins by admitting that it seems a stretch to imagine that the current political and social system can actually make the necessary transformation:
    “We seem to be living in the age of Zombie Liberalism. Neither right-wing versions–that price responsive markets will solve current problems–nor the left wing versions–that justice responsive governments will progressively solve current problems and fairly distribute the economic surplus–show any vital signs.”

    Despite the obstacles, he believes that a small farm future is in our future due to resource constraints, and the wise will prepare for it and take as smooth a transition as possible.

    Don Stewart

    • Perhaps one can look to the historical example of the founders of the first great monastic communities in Europe among the wreckage of the Roman system: although there are hints in the sources that they -including Popes – engaged in the purchase of slaves on the open market to work the land.

      He is quite right about the bankruptcy of our current mythic narratives masquerading as economic and social solutions.

      Interesting to observe the struggle of the Eastern European members of the EU, seeking, essentially, to preserve their ethnic and cultural unity against the pressure exerted by France and Germany to take alien immigrants in large numbers.

      Cultural unity is essential in facing a hard future.

      Those who have a valid path may not be allowed to follow it as the system implodes.

      The tendency of governments to shape societies in a damaging way even as they crumble should perhaps not be under-estimated.

    • Houtskool, play the ball, not the man. I for one appreciate Don’s comments in the main. They are usually insightful and I often learn something. You are free to skip over them without comment. I understand that you have a very bleak view of the future, and that is something we all share to some degree. However is the some time between now and then, and a lot of people trying to think about how to make an ultimately dire predicament less dire for as long as it is possible.

    • The guidelines here are pretty simple.

      Essentially, relevance to the subjects of energy and the economy; of interest to all readers, not just some; reasonable brevity; and courtesy. Oh, and try to avoid party and personality politics. At present, there’s an additional one which is ‘don’t mention Joe or Donald’.

      The courtesy point does mean ‘play the ball, not the man’. ‘That idea is idiotic’ would be acceptable, but ‘you are an idiot’ would not.

      I like to think we all know that there are big issues at stake, far more important that party politics and spats.

    • Partly agreed Halfhog.

      Endless long posts that contain half of Wikipedia undermines the message.

      One could wonder if it is the person i’m attacking, or the issue that hides behind it.

  24. Pingback: The Real Great Reset | Consciousness of Sheep

  25. Dr Tim, picking-up on your illustrative example of the impact of increases in taxation upon discretionary income perhaps one could go further and include increases in the prices of essentials. I have reconfigured your illustration as follows:

    A person has an income of £100. Of this, £35 goes in taxes, £40 must be spent on essentials, and a further £15 goes out in interest, rent and various subscriptions and stage-payments. This leaves £10 of discretionary income for the person to spend as he or she wishes.

    If this representative person’s taxation increases by roughly 10% to £38 and the price of essentials increases by 10% to £44 then his or her discretionary spending capability has slumped by 70% from £10 to £3.

    If one then factors in a fall in income of £5, then the equation no longer computes!

    I think we can make the case that pretty soon with the way things are headed that large swathes of the discretionary economy are, to coin a phrase, ‘toast’.

    • Quite so!

      Of course, some people are better off than the average, and some worse off. But the effects of taxation are to enable the worse-off to afford the essentials, which in the process reduces the ability of the better-off to spend on discretionaries.

      Other factors are in play, too, some of which are likely to be addressed in the next article.

      For instance, as the ability to afford discretionaries decreases, economies of scale are lost to the suppliers.

    • Dr Tim, one other thing that occurs to me is the way in which processes that previously were manageable or sustainable, assume new criticality. My thinking here arises from reports that the forthcoming water bills and council tax may be higher to replace income lost from arrears and defaults. That has always been the case, but as more and more of the less well-off struggle or fail to pay some bills for essentials a greater sum of money is effectively transferred to be collected from the better off, many of whom now are themselves experiencing a decline in prosperity – thus exacerbating the situation along the chain, so-to-speak.

    • One could add that when people see their discretionary expenditure money shrink to that extent, they won’t even spend that remaining £3, when they would have spent the £10 in all probability, but will hang on to it for dear life.

      Much as, to the despair of most economists and politicians, average people tend to save more when interest rates drop.

      I ruthlessly cut most of my discretionary spending in 2018, seeing what was coming, (also buying such things only in very good sales, never full-price) and having increased reserves to buy life-preserving essentials is a comfortable feeling – for now…….

      So, yes, that’s a tipping point: when spending does not simply decline proportionately, by 10%, or 30%, 60%, etc, but stops altogether as far as people can do so.

  26. I have a piece that you may want to look at, Dr Tim, with regards to your focus on the craft economy which a transition to may be necessary in the future:

    Click to access HomeBrewRevolution_Carson.pdf

    This piece describes a “low-overhead” industrial economy where production is decentralised and lean. The main focus is on low overheads: the reduction of fixed costs as much as possible (by the elimination of artificial monopolies like intellectual property and reduction of regulations) so that businesses are far more resilient to slow business periods whilst being much less wasteful with energy and resource inputs. This is an ideal which governments could actually work towards, when coupled with things like a debt jubilee, to enable the societies they steward to tolerate some of the ructions that will be in place in the first couple of decades of degrowth.

  27. I’m not offended
    If Houtskool meant to offend me…he didn’t. I’m 80 now, and verbal styles have changed beyond my recognition. The only group I can now reliably tell a joke to are young black women…why that is so I have no idea.

    At any rate, Chris Smaje thinks that the beginning of wisdom for the new low-energy world is to begin raising chickens…to which I would add rabbits and worms. When we build our first rabbit hutch on top of a worm bin and feed the kitchen and garden scraps to the rabbits who poop into the worm bin and with the help of the microbes make magical fertile soil for the garden, we are, in Chris’ words, turning our backs on the world as envisioned by Goldman Sachs. In the majority of the United States, what you would be doing is currently illegal…or at least severely frowned upon by the neighbors. One of Chris’ points is that the values represented by the chickens (who also make compost out of scraps) or the rabbits are completely different than the values espoused by Goldman Sachs. They are not necessarily less satisfying than the values espoused by Goldman Sachs…and thus, if we are lucky and smart, perhaps provide a basis for a thriving low-energy, localized world.

    Don Stewart

  28. Worry not. The next decade will be a repeat of the 1920s, it seems.


    Curious myself as to how this moves forward now. We have a pincer whereby the two sides moving in on us are the virus enhanced downturn, and the prospect of growth being curtailed by output peaking in oil (see the story about shale high grading).

    The next twelve months should show us if any recovery runs into the latter, or if no recovery comes, how much worse the virus has expedited the reality setting in for many unsustainable trends.

    • Those who predict a new ‘Roaring Twenties’ – in a positive sense and without even a hint of irony – display an ignorance of history that I for one can hardly comprehend.

      Only to be compared, of course, to those who pretended to believe that Trump was ‘a new Hitler of Mussolini’.

    • Comparisons with the inter-War years are interesting.

      As, when and if the pandemic is over, there’s likely to be a huge sense of relief, and a desire to catch up on what people feel they ‘missed out on’ in 2020. There was certainly something of that in 1919-20, after the War and the flu epidemic. People might also feel that they’re so deep in debt now that a bit more won’t matter. So I can see why there might a bit of Roaring Twenties atmosphere – followed, of course, by the hangover. Governments will certainly be tempted to stoke up ‘feel-good’ sentiment.

  29. Rabbits Plus
    And to extend the satisfying ecology of rabbit hutches, worm bins, and gardens…
    A local economy begins when one combs the rabbits and gathers the fur and sells or trades it to a neighbor with a spinning wheel and loom on which to weave.
    Which leads to fabric, which can be sold or traded to another neighbor with a sewing machine (treadle operated) who makes clothing.
    When the clothing is worn out, it goes back into the garden to make compost again.
    Ellen MacArthur would recognize this as a circular economy.

    Don Stewart
    PS. The Toyota Motor Company still sells the looms tracing back to the company’s origins…the last I heard.

    • And, just like the used material that naturally decomposes, the carts, barrows and windmills of the past made excellent firewood when their day was done.

      Compare that to the ecological crime represented by most ‘Green’ devices and machines.

  30. Happily Ever After
    When the potatoes are ready to harvest, the gardener invites the neighbors for an evening featuring some rabbit stew and home-made beer, plus music and dancing.
    And down by the pond in the moonlight, a boy and girl find each other and the next generation is begun.

    • is this a viable ‘Tiny Farm for Everyone’ system?


      if every home without 600 sq metres of potentially arable land was allocated an equivalent plot within walking or public transport range,

      if new build houses had to have a minimum of 600 sq metres of garden that wasn’t concreted over or tarmac,
      new apartment complexes had to be surrounded by sufficient 600 metre plots?

      Russia got through it’s various ups and downs because people could revert to self support if need be,
      Cuba got through the special period when the Soviet Union folded by creating urban gardens and markets,
      could Europe and the USA get through the Long Emergency if everyone was allocated a plot to fall back on as a plan B?

      should access to 600 sq metres of arable land per household be a basic human right?

      cottage gardening for food is a skilled craft in it’s own right,
      agriculture is the first building block of any civilisation,
      bartering surplus agricultural produce must have been the birth of commerce,
      if we are to transition to a different form of civilisation and almost need to remake our current civilisation why not start from the foundation?
      if we’d entered this covid pandemic with such a system already in place we’d have had a plan B ready to go.

    • It’s a b̶i̶g̶ green club, and you ain’t in it. You and I are not in the b̶i̶g̶ green club. And by the way, it’s the same b̶i̶g̶ green club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head in their media telling you what to believe, what to think and what to buy

      Carlin, updated for carbon-neutral clownworld.

    • The ‘incumbency’, the ‘establishment’, the ‘elites’, or whatever term you prefer, always has ‘a plan’, and the best critique I’ve read of this is
      the real great reset‘. Government, though hopefully not party politics, is something that we’ll come to, but the linked article is very good on this.

    • I’m looking at the stats for this car,

      it’s max design speed is 155mph, the UK motorway speed limit is 70mph, A roads 60mph,
      during the 1970’s oil shocks it was decided 55mph was the best compromise max speed in relation to wind resistance,
      all fuel consumption blurb gives best figures at a steady 56mph for this reason,

      for fast charging it requires 400vdc supplied by a 3 phase supply (415vac), and with the best onboard charging transformer pack will charge at up to a rate of 270kW
      270,000w / 415 = 650 amps 3 phase,
      this is hardcore industrial electricity usage,

      single phase charging is up to 11kW @ 230vac
      11,000w / 230 = 47.83 amps,
      domestic cookers are on a 30 amp fuse,
      charging this puppy at home is like having two electric cookers running near full bore for 9 hours solid,
      11kW x 9hrs @ £0.18/kW/h = £17. 82p for a charge,

      usable standard battery capacity is 71kW/h
      usable performance battery capacity is 83.7kW/h

      my home consumption is about 5kW/h per day
      I could run my home for 2 weeks off one charge of this cars battery,

      I’m not suprised they couldn’t find the roadsides littered with fully functional industrial 3 phase charging points capable of delivering enough power to run a small engineering machine shop!

      I’m guessing if people are buying this sort of car they’re getting their domestic supply upgraded to industrial 3 phase,

      how can we ever supply sufficient carbon free electricity if people expect to consume these sort of quantities just for personal transport?

    • To the buyer, won’t £17.82 for a full charge seem very cheap compared to filling the tank of an ICE vehicle of similar size and performance?

      Point taken, though!

    • “To the buyer, won’t £17.82 for a full charge seem very cheap compared to filling the tank of an ICE vehicle of similar size and performance? ”
      My ICE car would cost about £13 to fill with petrol if I didn’t pay the tax. The government is not going to give up all that lovely cash once EVs become a significant percentage of cars on the road. Then it will recoup the money somehow. Maybe mileage charges for EVs, but they will still get their money. EVs won’t be cheaper to run unless they ramp up petrol taxes – which they might.

  31. I don’t think tiny farms fall within their obsession of centralisation, Big Data and total control.

    Plus, we all need to give up meat due (You guessed it) climate change.

    Tiny labs to synthesise meat, maybe

  32. Dear Dr. Morgan,

    First time commentator, long time reader. I have a question about your definitions of prosperity.

    You state:

    GDP – Distortion from credit expansion = C-GDP
    C-GDP – EcoE = Aggregate Prosperity.

    Okay, but how do you make the leap to Discretionary Prosperity from here? I have confused myself, can you help me bridge this gap?

  33. Dr Tim,

    Another point you have made is coming true. According to the BoE, net consumer lending fell by £590m in October taking the annual rate to a survey low of -5.6%. That, I understand, is the biggest contraction in consumer lending since 1994. With the Arcadia Group on the verge of collapse (an analogue business in a digital world, if there ever was) we can see that an economy founded on consumers spending money they don’t have on things they don’t need is slowly petering out. As the cost of essentials inexorably rises, I believe that only small, nimble, local businesses will survive. Businesses like Arcadia Group are doomed.

    The supermarkets should be fine, subject to supply-chain disruption occasioned by “Brexit”, as will be the “essential service” providers.

    Bizarrely, however, the housing market is red-hot in the UK; that won’t end well either, methinks.

    The quest for finding income from financial assets gets harder every day, just as I have long expected.

    • @Mark
      You might like to spend a little time with this podcast:

      They get into the details of how the combination of the surveillance economy and the Pandemic has been wonderful for Amazon and Wal-Mart and terrible for small businesses.

      Their conclusion is that the US needs to enforce the anti-trust laws, after 50 years of virtually no enforcement.

      Don Stewart

    • Right now, just about everyone seems to think that ‘the future of retail is on-line, and that bricks and mortar retail is finished’.

      Suffice it to say that I see it quite differently…….

    • If you look at the OBR spreadsheets, you’ll see that household sector net borrowing is seen as a key driver of GDP……..

      Thinking worldwide (not just UK), the views set out in this article are in direct contradiction with conventional assumptions, interpretation and planning – positioning which suits me just fine.

    • Yes, certainly as I use the term here.

      A bit of background might help.

      Internationally-comparable data divides debt into (a) government, (b) households and (c) private non-financial corporations (PNFCs).

      Government debt is presented as ‘nominal’ (the sum owed) and ‘market’ (the value of traded government bonds).

      Debt to the private sector can be further divided into borrowed from banks, and borrowed from other lenders.

      SEEDS uses, as ‘total debt’, government (nominal), household and PNFC.

      Dividing household debt into ‘secured’ (essentially, mortages) and ‘unsecured’ is possible, by accessing countries’ own national statistics sources.

      Debt is a ‘liability’ for borrowers but an ‘asset’ for lenders. From debt data, you can cross-reference to ‘financial assets’, broken out by category.

  34. Consumer Credit and Future of Brick and Mortar
    Here is the chart of consumer credit in the US:

    To get below the aggregates, I think the best analyses are from Wolf Street, who disentangles the direct federal money which has been provided to consumers and businesses from whatever organic growth or decline may be present.

    My second question is to Dr. Morgan…why do you think the future of retail is brick and mortar? Just as an aside, the next big thing in electric vehicles is the delivery trucks for Amazon and the parcel services (to the extent they can survive the Amazon juggernaut). The usage of the trucks is particularly suited to electric, and they can be charged in rotations or overnight with fleet efficiency. The great efficiency of on-line, from my standpoint, is that I get exactly what I want…not what a brick and mortar store happens to have in stock.

    I have an emotional, but not a monetary, interest in a local brick and mortar, which needs to figure out how to make money after the Pandemic is over.

    Don Stewart

  35. Dr Tim,

    Shops and online are not the only options for retailing. Door-to-door retailing, and telemarketing / call-centres, may also survive. There can be a place for all four, depending on the regulatory and fiscal environments, the cost structure of each option, and the public’s perception of the pros and cons [!] of each option.
    I’ll be interested to see how you tie all this in with your proposal for “crafting the future”.

    • regulatory and fiscal environments,

      there lies the rub,
      is it a level playing field or does it favor the big guy or the little guy?

    • Thanks.

      The plan for this ‘Objective Economy’ series is as follows:

      – Part One – outlook for the economy as an energy system (published November 12)
      – Part Two – consumers – discretionary vs essentials, use of credit, viability of household ‘income streams’ to the corporate sector (this article).
      – Part Three – ‘crafting the economy’ – supply systems in the post-growth economy (next)
      – Part Four – government
      – Part Five (possible article) – financial system
      – Part Five/Six – summary of conclusions and issues
      – Part Six/Seven (possible article) – summary of forecasts

    • Also, direct mail: I receive tons of that, some from national, the rest from very local, retailers – I read none of it!

      I suppose it must work,as the volume never goes down.

      Do people really buy from doorstep sellers? I always assume that they are merely fronts for criminals checking things out -alarms, residents, etc.

  36. @Dr. Morgan
    Expansion of my question. As I see it, these are the critical factors in the battle between the on-line giants and the smaller brick and mortar retailers:
    Logistical Efficiency
    Consumer Information and Choice
    Ability to shrink by e.g., 10 percent, 20 percent
    Delivery vs. Driving to Store
    Leveraging of surveillance
    Anti-competitive practices
    Government Influence: both Bezos’ palace for entertaining official Washington plus the partnering with the Deep State

    As I see it, almost all of those factors are driving the strong growth of on-line.

    I’d like to hear the other side…Don Stewart

  37. @Don, re Bitcoin and the US Dollar,
    Don, I wouldn’t trust anything Keiser says about bitcoin. IMO he is a classic pumper and dumper who never left off that tactic from his bond trading days, and is simply trying to drive the value of his holdings skyward. I learned my lesson from the days after the 2008 crisis when he was saying silver was going to go to $500. Now Max is trying to get the US government to diversify into bitcoin! Oh yeah, let’s panic! Let’s have the government “diversify” into bitcoin. Imagine what that will do to the price. Hedge funds are simply riding a wave, that’s all they ever do, it doesn’t indicate any fundamental soundness.

    Bitcoin is classic scam material which, unlike gold, is way to complicated for most people to understand. “Bitcoin can’t be manipulated?” Really, why, because there’s a limited supply? You mean like gold can’t be manipulated? Wall street is busy trying to create derivatives markets for bitcoins. How about all the thefts, collapsing and fraudulent exchanges with founders who abscond with the bitcoins? Governments, including the US Treasury, don’t seem to have any problem at all seizing them. TAE just highlighted the fact that China just confiscated 2.5 billion Pounds of bitcoin from a South Korean exchange using servers located in China: https://www.express.co.uk/finance/city/1365523/china-latest-bitcoin-price-index-mining-capacity-cryptocurrency.

    Dr. D, a regular commenter at TAE, had this to say:
    ““Beijing swooped on the South Korean based cryptocurrency exchange”

    I’m sorry, what? I think you just said China invaded South Korea? …Or was this more like an exchange that was South Korean in name and law only, having all assets, servers, and structure inside China. IN which case, what part of “Communist country with-dictator-for-life not recognizing any laws or norms” did you not understand here?

    YEEEEEEEEEEESSSSSSSSSSS they are going to steal everything, you idiots. What does it take to get through to you? And beyond China, which is so obvious, I’m actually GLAD they stole it as a warning to others, what about the exchanges? Newsflash: they don’t own cryptos either. They are leveraged 300:1 just like gold and stock markets. AND like Coinbase, have “server problems” whenever you want to get in or out. If you don’t hold it, you don’t own it. Bitcoin weighs nothing: it takes up no space. Why would you not hold it and own it? Crikey people love to be robbed. Here, let me leave a trail of $100 bills from Skid Row to the door of my house. I’m sure like China and Korean exchanges it will all work out fine.”

  38. Doc, what is your opinion on CBDC’s? Central Bank Digital Currencies?

    Sorry to bother you with another ‘thingy’, but this one is growing bigger and bigger.

    Blockchain based currencies to bypass ( and, eventually, even overthrow) the current system.

    You know, more control over the starving bee population by managing the honey in flowers they should visit.

    There are some nice features in CBDC’s; like complete and total control over spending and saving…..

    • In the US
      anyone talking about Vitamin D and Nitric Oxide and other non-patent boosters for the immune system can get in big trouble. Very early on the government put out the official word that ‘nothing anyone can do will boost the immune system’…except, of course, the promised vaccine. And, of course, the crooked path on what they said about masks is shameful.

      I don’t know if it is just venality, as the article above claims, or if it is a deep conviction that the more expensive a solution is, the better because it will generate more GDP. During the Depression there was a widespread belief that the government and private cartels needed to increase prices…Roosevelt called it the National Recovery Act. If a business can’t pay the rent, then how about forming a cartel to increase everyone’s prices? The decades of stagnation in Japan began with an effort to keep Tokyo real estate prices in bubble territory, if I remember correctly. Will Britain try to support their current bubble?

      Don Stewart

    • Japan is an example of where this can lead.

      At the height of the bubble in the 1980s, it was said that, on a ‘per square foot’ basis, the grounds of the Imperial palace in Tokyo were worth more than the entire State of California.

      Likewise, changing the rules to allow building above fuel stations resulted in huge book gains for oil companies.

    • “The decades of stagnation in Japan began with an effort to keep Tokyo real estate prices in bubble territory, if I remember correctly.”

      ‘ . . . in 1989, Yasushi Mieno said that,
      37:17 “Since the previous policy of monetary easing
      37:19 had caused the land price rise problems,
      37:22 real estate-related lending would now be restricted”.
      37:27 He looked around, looked at the bubble,
      37:29 asset prices rising, the gap between rich and poor getting bigger…
      37:33 Let’s stop it.
      37:35 His name was Mister Mieno, and he was a hero in the press,
      37:40 because he fought against this silly monetary policy.
      37:43 But he was deputy governor during the bubble era,
      37:47 and he was in charge of creating the bubble.
      38:16 All of a sudden land and asset prices stopped rising.
      38:22 In 1990 alone, the stock market dropped by 32%.
      38:31 Then in July 1991, window guidance was abolished.
      38:38 This took the window guidance officers
      38:40 at the Bank of Japan themselves by surprise.
      38:44 Bankers were left almost helpless.
      38:47 They complained that they did not know
      38:48 how to make their lending plans anymore.
      38:52 In the past, when a certain branch said they would like to lend more,
      38:57 they would respond
      38:58 that the window guidance quota had been used up.
      39:03 Now they couldn’t do that anymore.
      39:08 As banks began to realise
      39:10 that the majority of the ¥99 trillion in bubble loans
      39:14 were likely to turn sour,
      39:16 they became so fearful,
      39:18 that they not only stopped lending to speculators,
      39:22 but also restricted loans to everyone else.’ https://www.youtube.com/watch?v=p5Ac7ap_MAY

  39. @Dr. Morgan
    The appointment of Janet Yellen as Biden’s Secretary of the Treasury is, I think, a vote for inflation to solve our problems. Trump’s desired solution was negative interest rates, and he did get zero nominal and pretty steeply negative in terms of real consumer inflation. Many years ago I studied environmental law. In the US, it had evolved from the English Common Law which stated that if one caused damage to a neighbor’s property, then one was liable for the damage. Our advanced civilization obviously couldn’t live with that, so it devolved into ‘whatever the law says, and forget about looking at damages’. So what we got were attempts to balance ‘reasonable damage’ with ‘profit potential with pollution as collateral damage’. The instructor took pains to demonstrate that in most court cases it turned into ‘protection of monetary assets’ as the principle goal. Environmental toxins produced and income streams were secondary to monetary assets…keeping the rich more rich.

    Don Stewart

  40. Two Challenging Articles
    The first article, which I think is exactly on target, argues that our traditional way of thinking that the environment and society have to adjust to the economy is ridiculous. She argues that society has to adjust to the environment, and the economy has to adjust to the environment and society. That is very much a ‘biological’ argument…without life, which is created by the first two, the third is meaningless. And the environment sets limits on what sort of life is possible. So the big circle is environment, the lesser circle is society, and the tiny little circle in the middle is the economy. All are required, but the pecking order is essential to our success.

    The second article I use mostly for the name ‘communities of practice’. We accomplish things by working with groups of people and plants and animals. Sometimes we can reach out and touch the others, and sometimes we have an arm’s length relationship held together by strong bonds (e.g., a monetary system), and sometimes we have an arm’s length relationship based on ephemeral concepts such as the nation state or global humanity or Gaia, or some particular religion. The conclusion I draw is that we need to concentrate most of our problem solving at the lowest level practicable…where the bonds are strongest. Thus, the more that can be accomplished in an extended family, the better. The more that needs to be accomplished at the United Nations, the less we are likely to be effective. *See note below.

    Environment then Society and only then Economy
    View at Medium.com
    Co-operate with as many as you can to meet some particular need; try for an arm’s length relationship (e.g., mediated by money) to meet other needs; be wary of enemies and co-operate for defense

    *I owe this thought to a Strong Towns discussion between Blake Pagenkopf and Chuck Marohn:
    HOWEVER, I extend Pagenkopf’s suggestion way beyond what he proposes, to include a multitude of ‘communities of practice’ rather than just the 4 dimensional political analysis he uses for a nation state.

    • Individuals – families and communities – attempting to cooperate have little power, or none, relative to the system, which will triumph even as it fails.

      This is history (feudalism, industrialism, the triumph of Amazon,etc) and it is the future.

      Here, all my ‘resilient’ relationships built over years with friendly and honest local people have been destroyed quite suddenly by ‘development’, just as the owners of the family farm I mentioned above can only stand and watch it covered by tarmac to make a ‘Green’ car park.

      As one instance, instead of buying my organic lamb from a local woman who stops to chat when we meet walking our dogs, I now buy from hundreds of miles away using the internet and couriers. Her land is being taken, and she has lost heart.

      As conditions worsen, cooperation will become impossible, as everyone scrabbles to survive.

      It is always possible to imagine better ways of doing things, rarely possible to achieve them, above all in a crumbling but still powerful system.

  41. Below is some information on the materials requirements for wind and solar power, which strongly suggests that high living standards will be impossible in a society powered by renewable energy.

    Here are some numbers on the amount of material needed to produce a single 2.3MW onshore wind turbine.

    I converted it to metric and used a 33% capacity factor to work out the amount of material per average MW. Here are the results:
    1539 tonne concrete;
    349.2 tonne steel;
    56.87 tonne iron;
    28.39 tonne fibreglass composite;
    4.74 tonne copper;
    0.47 tonne neodymium;
    0.077 tonne dyprosium.

    This is before we look at the material budget for transmission and whatever solutions are put in place to deal with intermittent energy supply. Here are the equivalent values for steel and concrete for an average MW of nuclear, coal and natural gas generating capacity.

    Click to access 05-001-A_Material_input.pdf

    Look at the tiny materials budget for the combined cycle gas turbine compared to what I have just presented for a single wind turbines. It takes roughly ten times as much steel to produce an average MW of wind power, than it would to do the same thing using a nuclear reactor. Now consider that wind power will require energy storage, which is really a whole other power station and involves substantial energy losses. Consider also that wind turbines have a 20 year life expectancy, whilst a new generation nuclear power plant can expect to achieve 60-80 years. All together, it takes roughly 2 orders of magnitude more embodied energy and materials to produce a MWh of wind power compared to a MWh of nuclear electricity from a light water reactor.

    The disparity is even greater with solar power. Here is the materials budget for a 5.55TWh per year (633.7MW average) PV solar plant that was considered for Colorado.

    Click to access Pacca_2002.pdf

    Steel: 4.6 million tonnes
    Copper: 480,000 tonnes
    Aluminium: 177,000 tonnes
    Cement: 2.22 million tonnes
    Glass: 1.066 million tonnes
    Electricity: 7.56 million MWh

    Presumably, the electricity is that required to manufacture the photovoltaic material.

    I divided this down into materials per average MW because I wanted to see how it would compare with wind power. Here are the results per average MW:

    Steel: 7259 tonnes
    Copper: 757.5 tonnes
    Aluminium: 280.6 tonnes
    Cement: 3503 tonnes
    Glass: 1682.2 tonnes
    Electricity: 11,930 MWh

    The steel alone, presumably for supporting frames, is around 20x more than is needed for an average MW of wind power. The payback time for the steel alone, is 5.5-7.0 years. The electricity: 1.36 years. The cement: 40 days. The glass: 290 days. Summary: energy payback time about 8 years. If the station has a lifetime of 30 years say, then ERoEI would be about 4.0.

    I thought the embodied energy and materials budget of wind power was bad. But solar comfortably puts them in the shade. Even before energy storage is accounted for, tge embodied energy of the solar power plant is about 200x greater than a nuclear power plant producing the same amount of electricity in a year. Of course, Colarado isn’t the sunniest place in the world. But it is sunnier than most of Europe.

    In the absence of fossil fuels, high living standards can be sustained only through the use of nuclear energy. Renewable energy simply cannot fill the gap left by fossil fuels because of its chronically low power density and resulting huge materials budget.

    • The numbers above are completely wrong and probably badly out of date. You have worked out the per Mw numbers, but by looking at the per Kw numbers show how wrong those numbers are…

      1Kw = 7.259 tonnes of steel
      1Kw = 0.7575 tonnes of copper
      1kw = 0.28 tonnes of aluminium
      1Kw = 3.503 tonnes of concrete
      1Kw = 1.682 tonnes of glass

      Realistically 3 X 350w panels gives slightly more than 1 Kw.
      We all need to be careful about quoting numbers that have clearly been written (in the original report) to show something according to the writers agenda, instead of realistic numbers.
      The very first solar panel advertisement I went to shows that 350w panel has a total weight of 23kg, so 69kg for 1.05Kw or 69 tonnes for 1Mw.

      Various reports on the net quote about 5.5 tonnes of copper for the wiring and inverters per Mw of solar. (not the 757 tonnes in the report)

      While the amount of materials needed is going to be massive, it is not the impossible numbers often mentioned by detractors of renewables.

      Realistically we have all the resources necessary to build a renewable future, however we will be using a lot of energy to access the resources as lower grades of ores will be needed compared to what is currently mined (for copper as an example).

      We have the energy available to convert to fully renewables (including making some liquid fuels for air transport etc), but as the collective ‘we’ keep wasting FF on ‘discretionary spending’. ‘We’ are unlikely to do the conversion by the time it’s needed from an energy perspective.

    • Interesting though it may be to go into components and weights, here are the questions which, in my opinion, are essential:

      1. Can REs provide enough total energy to replace FFs?

      2. Can REs provide really low ECoEs, equivalent to FFs in their heyday?

      3. Can REs be built out and maintained without using FF inputs?

      4. Can REs replicate the characteristics of FF systems?

      The answers appear to be:

      1. Improbable, but perhaps not impossible

      2. No.

      3. No

      4. No – for example, using batteries to replace fuel-tanks in vehicles, is far less practical than using REs for public transport

    • This is a bold assertion:
      “We have the energy available to convert to fully renewables (including making some liquid fuels for air transport etc), but as the collective ‘we’ keep wasting FF on ‘discretionary spending’. ‘We’ are unlikely to do the conversion by the time it’s needed from an energy perspective.”

      After 25 years or so, much RE infrastructure needs re-manufacture. If FFs Are required to do that, then the REs are not technically renewable.

    • The questions that always loom large for me are:
      1) What about the waste streams? We know what FF’s streams look like, climate change that will render industrial agriculture obsolete in the near to very near future. Among other nasty pollution issues.
      2) Could someone do the math on keeping nuclear waste contained for several millennium, perhaps longer?
      3) Can RE support the maintenance of the existing infrastructure which now requires constant inputs from FF’s to be functional?
      4) What about entropy? The energy used to construct buildings, roads, power grids, RE, etc. has to be constantly poured in to keep them functional, second law of thermodynamics says so. Haven’t seen that one broken yet!

    • @Hide-away
      “Realistically 3 X 350w panels gives slightly more than 1 Kw.”
      Realistically, it gives a lot less (often 0 kw)… You’ll need to multiply that by capacity factor to get an “average kw”.

    • Below is a link to the 2015 Quadrennial energy review, produced by the US department of energy. A reliable enough source?

      Go to Section 10, Table 10.4 for a summary of materials inputs into several different types of powerplant in ton/TWh. Here are some tallys per TWh:
      Nuclear (PWR) = 760t concrete / cement; 3t copper; 0t glass; 160t steel; 0t aluminium.
      Wind = 8000t concrete / cement; 23t copper; 92t glass; 1800t steel; 35t aluminium.
      Solar PV = 4050t concrete / cement; 850t copper; 2700t glass; 7900t steel; 680t aluminium.

      Compared to a pressurised water reactor nuclear power plant, a solar PV plant producing the same electric power output will require some 5.3x more concrete; some 280x more copper, some 49.4x more steel; and thousands of times more glass and aluminium. Wind turbines (presumably onshore) require about an order of magnitude more materials for the same amount of electrical energy generated. There is no indication that these quantities include any materials investments needed for energy storage. This would require further materials investments in pumped hydro, CAES or some other means. This increases the materials cost of wind and solar still further. Embodied materials are a reflection of embodied energy.

      If one is looking for a low ECoE replacement for fossil fuels, it will not be found in low power density renewable energy. The world desperately needs a modular, nuclear fission based power system that is suitable for mass production.

      Could we build replacement nuclear / renewable energy systems without fossil fuels, using only the energy that they themselves produce? From a technical view point, the answer is yes. We can recycle steel in electric furnaces and produce fresh iron from iron oxide ores reduced in hot hydrogen gas, produced by electrolysis. In principle, all the power could come from nuclear or renewable energy sources. The same is true of concrete. A cement kiln could be powered by electricity or hydrogen produced by electrolysis. The problem is that the materials budget for wind and solar power plants is so large, that manufacturing the requisite steel, concrete and other materials would eat a lot of the energy that they produce, ultimately making the infrastructure very expensive. Clearly this would be far less of a problem for a society relying upon nuclear energy. We almost certainly could replace nuclear infrastructure without the use of fossil fuels. And it could indeed provide a low ECoE replacement for fossil fuels. The obstacles standing in the way of nuclear energy are institutional and political, not technological or financial.

  42. it does seem odd to place massive windturbines offshore and cover arable land with PV arrays,
    all to generate electricity to use in the built structures we occupy,
    wouldn’t small windturbines and small PV arrays on the roofs of our built structures where we want to use the energy be much less complicated and expensive?

    we’d still have navigable coastal waters and usable arable land too.

    if the roof space of our built structures is insufficient to generate the quantity of energy we aspire to have available, shouldn’t we question the magnitude of our aspirations and consider using energy more efficiently to lessen the mismatch?

    the use of electricity only took off when it could be produced at scale using fossil fuelled machines,
    fossil fuels enabled industrialisation which enabled mass electricity generation,

    1760 world was entirely renewable,
    windmill, waterwheel, sail, horse, oxen, wood, peat, human arm and leg powered everything,
    the complexity of everything was limited by the amount of surplus energy available,

    2020 world complexity is supported by the much larger surplus energy margins provided by exploiting fossil energy sources,
    as the energy surplus margin shrinks our complexity will have to reduce accordingly,
    efficiency and the avoidance of wastage, human ingenuity, will be the only resource left to exploit,

    we can retain the knowledge of 2020 world but will only be able to wield that knowledge within the constraints imposed by a 1760 world surplus energy margin.

    we will also be hindered by a 2020 world population,
    a 1760 world population would offer each person an 8 times bigger slice of a much diminished pie.
    the longer we leave transition the more likelihood we will be hindered by an increasingly destabilised climate and degraded biosphere,
    1760 world still had a pretty stable climate and an almost fully stocked biosphere.

    the biosphere is the primary economy on planet earth, the primary energy source is the sun,
    the human economy is a sub-system living off the primary economy,
    if the human economy is parasitic it will kill the host,
    if it is symbiotic then both could survive,

    • I agree with most of your post, but rationality is not the boss. Unfortunately, emotions, reptilian brain, MPP, …are in command.

    • I do understand your point Steven,
      we do need to transcend our ego’s, emotions, lizard brains,
      have some humility about the extent and scope of our wisdom, feel empathy for all forms of life instead of just our immediate tribe,
      exhibit custodianship not dominance,

      a new age of enlightenment could guide us to a brighter future,
      I believe the potential is there and a spark could be lit,

      if we don’t carry the torch who will expel the darkness?

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