#195. The unrelenting squeeze


Henry Ford may have said that “history is bunk”, but a glance backwards can sometimes help us to focus on the future. Though they are not the subject of this discussion, fiat currencies are an example of this.

The world monetary system moved on to a fiat or “command” basis back in 1971. For the following quarter-century, this worked reasonably well, and it seems likely that historians of the future will date the decline of fiat from the second half of the 1990s.

That was when we embarked on the financial excesses which culminated in the global financial crisis (GFC) of 2008-09. The rest – as the saying goes, and with apologies to Mr Ford – “is history”, with the ultimate fate of fiat determined from the moment when the world’s ‘market’ economies decided to turn their backs on market forces, and to ‘make it up as we go along’.

The aim here isn’t to revisit the subjects discussed in the previous article, but it’s worth considering why a monetary system that previously had worked pretty well then turned on to a dangerous path.

What, fundamentally, changed in the 1990s?

The answer, of course, was that ECoEs – the Energy Costs of Energy – reached what was, for Western economies, the climacteric zone that lies between 3.5% and 5.0%. SEEDS dates this ECoE climacteric to the period between 1996 (a global ECoE of 3.4%) and 2005 (5.0%).

From 1997, the prosperity of the average Japanese citizen turned downwards. The same fate overtook Americans in 2000, and the British in 2004, and most other Westerners by 2008.

Well before then, baffled observers had started to wonder about the phenomenon of “secular stagnation”, something which they could identify, but could not explain.

The rest is indeed “history”, because money-based systems of economic interpretation could propose only futile financial solutions for a trend rooted, not in money, but in energy.

Why, then, did the ECoE inflexion-point in Western prosperity put “the writing on the wall” for fiat currencies? The answer seems to lie in the flexibility that is at once fiat money’s greatest virtue and its fundamental weakness.

So long as the underlying economy keeps growing, fiat money can expand at a roughly commensurate rate, and that’s its virtue.

Once the economy turns down, however, a divergence begins, because fiat systems are incapable of a corresponding contraction, and that’s the system’s inherent vice.

Unless you understand the economy as an energy system, though, you couldn’t – and still can’t – see what’s happening.

Monetary expansion in a contracting economy can only create excesses of those financial ‘claims’ that, customarily, are called “value”. From that point on, the only real question is whether the instrument of “value destruction” is going to be a series of market crashes and debt defaults, or a hyperinflationary debasement of the value of money.

Here, history again provides a pointer, suggesting that decision-makers will almost always avoid formal or ‘hard’ default if the ‘soft’ alternative of inflationary value destruction is available.

So much for history, and the rise and fall of fiat. Turning to the future, here are some charts that ought to (but, of course, won’t) act as a wake-up call for decision-makers.

Fig. 1

Though extended out to 2040, these charts will be familiar to regular readers. What they show is the SEEDS calibration of prosperity per capita, set against the cost of essentials. The latter, defined as the sum of public services and household necessities, remains a development project, but the bottom line is clear enough.

In essence, the prosperity of the average person in America, in Britain and – now – even in China is deteriorating. The cost of essentials is continuing to rise. Accordingly, the scope for discretionary (non-essential) expenditure, within the parameters of prosperity, is eroding fast.

People will still undertake discretionary spending in excess of this shrinking capability, of course, as indeed they are doing now. But they can only do this by resorting to borrowing for this purpose. Discretionary consumption within the affordability of prosperity is undergoing rapid contraction.

More worryingly still, there seems to be every likelihood that the cost of essentials will, in due course, rise above prosperity per capita. As you can see, this might not happen until some time in the 2030s, but that doesn’t mean that we can ignore it until then.

For one thing, these are average numbers, not medians. For every person whose discretionary prosperity remains comfortably positive, there’s another who’s already near, or at, the point of reliance on credit to pay for the essentials.

Here is where we’re entitled to ask some questions. Are governments aware of this situation, as they continue to plan on the basis of rising revenues, and carry on investing in sectors geared towards discretionary consumption?

Do they, and central bankers, really think we can somehow overcome these fundamental, energy-driven trends by pouring yet more cheap credit and cheaper money into the system? Do businesses selling discretionary goods and services realise that they’re becoming hostages to the fortunes of credit expansion? And do those companies and investors reliant on assumed increases in consumer income streams understand the dynamic that is squeezing consumer discretionary prosperity?

In most cases, the answer, very probably, is “no”.

Have political leaders looked ahead to the very different agendas that will concern voters once the gravy-train of cheap credit either hits the deflationary buffers or crashes off the inflationary rails?

Again, probably not.


105 thoughts on “#195. The unrelenting squeeze

  1. This is a key question, Dr Tim. Can governments actually manage a soft alternative if many try to force competitive devaluations at the same time by flooding economies with more and more fiat? I read this morning that there is pressure on the US Administration to continue issuing regular stimulus payments.

    “decision-makers will almost always avoid formal or ‘hard’ default if the ‘soft’ alternative of inflationary value destruction is available.”

  2. Thanks for another great article! The impulse for a soft default through inflation is understandable. There are several limitations on governments being able to achieve this, I think.

    (1) Current central bank “money printing” dosn’t work the way it’s popularly understood. Creating bank reserves for dealer banks and lowering prime rates can make lending easier. However, against the energy decline background banks are NOT increasing their lending into the real economy since ~2005. (https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/JPM%20loan%20to%20deposit%20ratio.jpg) So banks can lend, but they are not, because it is not profitable to do so.

    (2) The ability to create producer price increases does not mean wage inflation can be created if costs can’t be passed on to consumers. This increases the squeeze. Governments can’t meaningfully increase their tax base from poorer consumers, companies with flat profits and declining earnings, and manufacturers squeezed between input cost and labor costs.

    (3) Legal/political limits on actual currency creation. The federal reserve act and policies of most CB’s work in similar fashion to #1 above. Anything bordering on MMT will require rewriting the federal reserve act. Opening this up to political input in the current political climate is likely to be a powder keg of class and racial conflict as desires for “narrow change” would be offset by “broad progressivism.” One of the more radical proposals is to monetize the balance sheets of central banks, creating a digital account from currently “inert” assets.

    (4) Most “money” in the world is not under the control of anybody. It is an emergent phenomena of collateralized balance sheet activities created in the inter-bank system. CB policies have little direct effect on this opaque and poorly understood world, which responds primarily to concerns about risk and liquidity clearing international transactions.

    It is my contention that CB’s are reactive entities to this system, not the other way around. If this is true, the idea that CB’s are in control is a an illusion. This would mean it’s not actually up to them whether they choose inflationary efforts or austerity pathways – it’s either responding to reality or admitting defeat and collapsing.

    I predict CB’s will try to create a soft landing until they discover they cannot under their current rules. This would be a bumpy horizontal move with lower-low’s (possibly higher highs), culminating in an indeterminant political crisis which I speculate would lead to changes which create hyperinflation, destroy the interbank system, or both.

    • Thanks, some interesting points to ponder!

      A great deal of financial ‘claims’ creation takes place outside the commercial banking system, and even the data that we have may not cover the whole of non-bank credit.

      As I see it, equity and property markets are pricing-in inflation, but bond markets are not pricing-in rate rises. That seems to me to stack up to a collective market consensus that inflation will rise, and won’t be countered by rate hikes.

      The UK is an interesting illustration. Broad-based GDP def inflation last year was 5.7%. House prices seem to be rising sharply. Anecdotally at least, so are consumer and producer prices. Yet policy rate is 0.1%, there is no discussion about raising it, and some investigation of NIRP. The government has just announced “help” (sic) for house buyers to get easier mortgages .

    • @Dr Tim: Good points Tim! A few bits of food for thought on housing and inflationary expectations vs actual inflation (whatever the real level is):

      Housing starts are volatile and have correlation with major market moves:


      There is a repeated pattern of inflationary expectations followed by sharp corrections:

      I realize this chart shows CPI – and I admit CPI is inaccurately low – but consider mainly the change in direction rather than the absolute levels.

      So I would agree that equities and stocks evidence inflationary expectations – whether this is “pricing in” inflation seems to me to be a historically incorrect assumption.

  3. Dr. Morgan,
    My tin foil hat half on today. Apologies if this is off track.

    My assumption is that “they” know some things. They would be the non-political players. I would guess that intelligence agencies have financial and resource models. Heck, they may have co-opted the LTG World3 model back in 1973. I would guess there is a CIA analyst who reads your blog. That reports like this one https://www.dni.gov/index.php/global-trends-home can be released publicly with almost no discussion about energy is a tell, in my mind, that they are aware of energy issues. Congressional testimony from military leaders years back showed a deep knowledge of the dependency on oil. So does military action over the past 40 years or so.

    So is there a (financial) plan, or are “they” making it up as they go along and just trying to keep the U.S. dominated western system going for as long as possible with what is essentially a currency war? Do “they” believe the IEA energy forecasts of eventual recovery and growth in production, or have their own? I don’t know. Its hard to believe they believe the debts being incurred now can ever be paid back, even with inflated dollars.

    Are political leaders aware? Domestically, the U.S. is now subject to whiplash every four years as power shifts between left and right political ideologies, all of which seem “energy blind”. However, some argue that international policy stays pretty much the same. (Trump seemed an aberration, but Biden is following some of Trump’s moves like pulling out of Afghanistan.)

    China and Russia seem to be acting with long term plans to secure themselves out of the U.S. dominated system. China is working hard to secure resources outside of its borders. Meanwhile in the U.S. we are distracted with domestic strife and now, UFO videos released by the U.S. intelligence community.
    Strange times.

  4. Sorry if this is a duplicate comment – it didn’t appear to post. There is a difference between “pricing in” inlfation and inflationary expectations. The latter have been quite wrong recently.

    Broad inflationary concerns, which we seem to have now, typically precede steep downward corrections, not upward surges.

    I admit that CPI is low, but consider the linked chart in terms of direction of change and overall trend, not absolute level.

    This has some correlation to housing starts, which is associated both with housing prices, and inflation over the same time period:


    Despite the volatility, a trend of lower lows and lower highs can be observed.

  5. Thank you for another interesting article. I am a new reader of your blog, having discovered it a few weeks ago and am really enjoying your insights. I have no training in economics at all but have become increasingly interested over the past year as I am worried about the state of the (British) economy and the potential repercussions. I had never come across your SEEDs theory but it does make sense.

    We have definitely seen a huge disconnect between the real economy and the financial economy, with people in finance/ politics calling all the shots and acting purely to benefit themselves at the expense of everyone else, so the rich get richer and less wealth is owned by the other >99%. In the UK, increasing numbers of people seem to be struggling, using food banks, etc. I haven’t noticed a general increase in the standard of living for many years (despite GDP allegedly rising) which very much fits with your figures. I have also observed an increase in prices this year: food, council tax bills, utilities despite the apparently very low inflation figures. This again fits with your analysis. I understand that the cost of raw materials and transport has also increased and that we are experiencing supply delays, all of which seem potentially inflationary with demand increasing.

    Despite all this, I have been amazed to see the housing market and stock market rocket. We are in the position of needing to buy a property (renting currently, having moved areas) and I had assumed that prices would decline in a recession but instead they have gone up by over 20% in this area with many properites selling within a week and going for well over asking price at the moment. This has only been exacerbated by deliberate UK government policy which has been seemingly obsessed with increasing property prices for decades. It seems particularly wrong and irresponsible at this juncture. We have decided to wait and see at present and hope that things settle down and prices become more affordable. Do you anticipate significant inflation by the end of the year, making it impossible for the BoE not to increase rates (they seem v resistant to this ideas)? I am expecting that house prices may then fall but, obviously, it will be in combination with various other less positive things occurring.
    Can I ask why you think the policies of QE and very low interest rates initiated after the GFC has worked for so long and why you seem so confident that a crash in global economies is now imminent and unavoidable?

    • Welcome Lucy.

      Your thoughts on housing echo my own. Having spent years learning things about economics that should have been taught at school, I am of the belief that housing in the UK is behaving like a ponzi scheme – created by the incessant need of the fiat banking system for creation of new credit (money in the system). This process has created a mindset amongst the majority of the population that housing is an investment that many consider their retirement plan. The result has been a buy at any price mentality because it “always goes up”. It is in fact a captive asset that is taxable and will be taxed heavily in the future

      Strangely, discussions around demographics are rarely raised when falling. The UK has an below replication reproduction rate, deeply negative in fact. Without huge immigration (brexit solved that) our population is going to fall in the coming years, other countries such as Japan have already felt the effects of this. Housing is at the forefront of serfdom at current prices, delaying purchase while the dust settles seems prudent.

      The antics in football right now resonate with what is happening broadly in the economy. While abhorrent to the history of football, the changes proposed are the only way the worlds leading teams rescue their broken model. They were and are a monopoly and they are trying to keep it. Without them the whole model is at risk.

      We are on a one way road to defrosted.

  6. “Help to Buy” should more correctly be named “Help to Sell” – for the homebuilders would not be able to sell the crappy mouse-hole shit-boxes they’re currently attempting to offload at nosebleed prices. And how many folks could afford a new car if it were not for the myriad of car loan and financing schemes available in order to shift them of the increasingly cluttered forecourts?

    We’re creating a generation of debt-serf-wage-slaves.

  7. Money Creation
    The traditional way to create money is for someone who has money to loan it to somebody who wants money. The borrower then spends the money to a third party, who spends it with a fourth party, and so forth. Since fractional reserves are possible and reasonable probabilities of success in the future exist, the initial confidence which led to the loan creates multiple sums of money circulating in the economy. It has long been the position of certain economists that the best way to ensure that adequate money is circulating is for the federal government to run a fiscal deficit. The government is then spending money into existence, much as the loan created money. If there is growth potential in the economy, then under favorable conditions a government deficit can create more money than the deficit. Think of the fiscal deficit financing a new oil field, for example.

    There have been periods in American history where the supply of money was declining. There was, for example, a long deflation after the Civil War…one of the most prosperous eras in our history. But loans extended to people like farmers were hard to pay back, as the total amount of money in circulation was declining. Which led to agitation for the monetization of silver…which came close but never happened. The second example of declining money supply was the Great Depression, when, as documented by Milton Friedman and Anna Schwartz, the supply of money dropped precipitously as confidence vanished in just a couple of months. Friedman and Schwartz argued that the Fed had made a terrible mistake, and was quite capable of stopping the collapse of the money supply. Jay Powell and company have arguably overshot and have created so much money that freight rates from East Asia to the the US west coast are skyrocketing, and our trade deficit is a record levels. Wolf Street covers that angle, also.

    I argue that extremely low interest rates are currently creating money. If you check Wolf Street today you can see the story of the AMC movie chain, which is rated CCC (on the verge of bankruptcy). Because the Fed has repressed all other ways of getting a return on one’s cash, people are flooding into the junk bonds. So people with money are loaning money to very speculative companies such as AMC, which then spends the money into circulation. If interest rates were ‘normal’, then people very likely would not loan money to AMC, and there would be less money in circulation…the velocity of money would be low. Velocity has been declining for a long time, and the Fed would like to see the velocity increase…which creates at least the illusion that money is ‘easy’.

    One of my main points here is that everything depends on the confidence that the initial loan can be repaid. If that confidence collapses, then the velocity of money sinks to zero and everything stops in terms of debt financing…which is the dominant form of financing a modern economy. If everyone woke up tomorrow and studied Dr. Morgan’s graphs, we might very well see a replay of 1929. Exactly what the Fed and other CBs would do is speculative.

    Don Stewart

    • there would be less money in circulation…the velocity of money would be low

      Reducing the amount of money in circulation will increase velocity, at least in the short term.

      The velocity of money is the ratio of the money supply (typically M2) to GDP. That is the definition of velocity. If money supply increases and GDP does not change, velocity goes down automatically. If the supply of money decreases and GDP stays the same, the velocity of money goes up automatically.

      So, it is the combination of the change in GDP and money supply that determines velocity. Large additions to M2 will immediately depress velocity, but if GDP then grows proportionately, velocity will return to its previous level.

      Velocity doesn’t really affect GDP, it is GDP that affects velocity.

    • Quite so.

      My view, of course, is that GDP is an increasingly misleading metric – and velocity would look very different if we put prosperity, instead of GDP, into the equation.

    • @Dr. Morgan and Joe Clarkson
      Hoarding and buying inert substances such as gold reduce velocity. You may remember Jesus’ story about the servants who were given some of the master’s money, while he went travelling. Jesus was scathing in his treatment of the servant who buried the money in the ground. During the Depression there was the notion, celebrated in song, that “let’s have another cup of coffee, and let’s have another piece of pie”. My summary of that idea is that if everyone is confident and doesn’t try to amass a cushion which is safely stored away, then the velocity of the money is high and turnover increases and GDP rises…which assumes that the resources needed to produce the GDP is not the rate limiting factor.

      Amassing debt now in order to start a new business or purchase some education so that one can be more productive in the future are similar ideas. They are examples of the growth of the various types of assets which are expected to pay off in the future.

      I agree that financial speculation of the type that is now dominating markets is a long way from such pedestrian ideas. That is why I go back to the basics of how it used to work. We can contrast that view of the world with a current view that resources, and particularly energy, are rate limiting and that pure speculation has little or nothing to do with expanding output

      Don Stewart

    • Don,

      Alternative views…

      First: your example of a person loaning money to another person for a venture or other use doesn’t create new money. It transfers money from one account to another. When banks loan, they create money as only a fraction is required to be from their reserve asset.

      Second: the burying of money or saving it under a mattress is best for the ecosphere! It slows resource consumption and waste production. I’m all for shrinkage, particularly of human population, but also of toxification of the planet.

    • Steven
      Suppose a rich man loans some money to a young couple wanting to start a farm. The farm generates lots of business for other people besides the young couple. That is the multiplier effect which is reflected in the velocity of money. I agree it doesn’t change the volume of gold or treasuries or clam shells or whatever the base money is, but it certainly does increase the amount of money being circulated.

      As for burying the base money under a tree, I can’t quarrel with your assessment.
      Don Stewart

    • Don, My point was that money supply and the velocity of money are two different measures.

    • Steven
      I think most economists would say that there is base money and there is effective money, which is the amount of circulation. That is why the Fed has multiple definitions of the money supply. The biological correlate might be the volume of the blood in your body versus the circulation of that blood and the ‘reach’ of the blood. If the blood is not getting into the cells, there will be severe problems…just as money, whether M1 or M6 needs to get to the people who need it.
      Don Stewart

  8. Dr Tim – your articles ‘nail it’ everytime! Thank you.
    I am attempting to assist my children in gaining some understanding of the dire situation facing the United Kingdom. I set-out my most recent thoughts in the following terms:
    ‘The situation in the (Dis-)United Kingdom can be summarised succinctly. The country is running Triple Deficits in trade, fiscal and overseas income. The marginal productivity of debt is close to zero, and quite possibly negative.
    The country is consuming more than it produces, spending more than it earns, and haemorrhaging interest and dividend income to foreign owners of debt and assets. The economy is accumulating debt at a rate that is greater than economic growth.
    In other words, it is now impossible for the country to borrow and grow into an era of renewed prosperity.
    The policy response from the ruling elite includes Severe Financial Repression (SFR): ZIRP, QE and currency debasement.
    Severe Financial Repression is a phrase for the word ‘zombification’, whereby the economy becomes increasingly distorted, and the citizenry become very much poorer. The purchasing power of £UK against real goods and services is now in remorseless decline, most notably in relation to essentials such as food and fuel, while prices of discretionary items are either stalled or falling. The overall burden of taxation continues to rise substantially, but public services are in retreat.
    Crucially, energy (which is THE MASTER DRIVER of economic activity) is no longer able to support the existing economy, or its complexity. Technically, the real driver is surplus energy – the energy that is available after subtracting the cost of accessing the energy. The key ratio of EROEI (Energy Return on Energy Invested) is falling and for developed economies, such as the United Kingdom, is believed to have reached the critical point that triggered economic de-growth around the start of the new millennium.
    SFR is proving disastrous. Currency devaluation stokes price inflation in certain assets and consumer essentials, thus eroding the value of wages, savings and many investments. In short, inequality (including the infamous North-South divide) is now turbo-charged, which is fanning the embers of populism and causing continuing political upheaval. Unrelated grievances become lightening conductors for civil commotion, as evidenced by recent disturbances.
    The economic model of the country can be titled: ‘The Plunder, The Sieve and The Veil’. The Plunder involves two processes. The first is funding the trade gap by selling assets (property, infrastructure and companies) into foreign ownership, and thus larger amounts of dividend income goes overseas. The second is funding the fiscal deficit by issuing debt to foreign entities combined with effect monetisation from the central bank. The Sieve is the process of SFR featuring continual debasement of the currency, and the stripping of wages, savings and investments of value and purchasing power. The Veil is the policy of maintaining and increasing asset prices, notably housing to create an illusion of wealth.’
    Have I ‘nailed it’?

    • That’s a good synopsis.

      What concerns me is the apparent lack of awareness of the real situation in the quarters in which decisions are made.

      This isn’t unique to the UK, of course, but my model shows Britain as being at particularly high risk. All too many decision-makers seem, quite genuinely, to believe that growth is ongoing, and will continue. From an energy perspective, there is increasingly persuasive evidence that this simply isn’t the case.

      Because the economy is an energy system, efforts to create “growth” using credit and monetary policy cannot work. All this really does is create worsening risk exposure.

    • wasn’t the economic liberalisation of the 1980’s basically handing the State over to the control of the East India Company and giving them free hand?

      now the decision makers are the privateers, buccaneers and pirates looting the country and stashing it in Caribbean bolt holes,

      this isn’t unique to Britain because our transatlantic cousin broke away from the British Empire in 1776 and formed it’s own Corporation the United States of America LLC, it even copied the EIC’s flag, retaining the stripes but substituting the Union Jack for a field of stars relating to the number of States in the Corporation.

      the economic liberalisation of the 1980’s occured simultaneously on both sides of the Atlantic,
      Social Democracy couldn’t keep prosperity rising so power was outsourced to the Privateers and they’ve been running the show ever since.

  9. The Space of the Possible
    So we are at a dead end in terms of the driving forces of the last decades in the UK and elsewhere. What comes next, and where can we get a picture of what that looks like? I recommend this just published interview with David Holmgren in Australia. This is a long excerpt, but it gives us a good picture of the situation as David perceived it around 20 years ago and how he sees it playing out right now and in the near future and how we can adapt to that real world.
    Don Stewart


    David Holmgren: Yeah. I think that’s exemplified to some extent by the shift after the involvement with Principles and Pathways beyond Sustainability and the teaching that came out of that. The lineage of work that lead to RetroSuburbia, recognising that humanity was rolling into multiple civilisational-scale crises. The most notable that people can understand is climate change, but resource depletion and all of the other ones that are linked to all of these issues, including of course pandemics and financial system instabilities and breakdown, and many, many others. As these processes unfold it was really clear to me even in the ‘90s when I was teaching on design courses, that how we retrofit and adapt where people already live is going to be far more important than building new state-of-the-art eco-villages or creating the world anew: whether that’s grand visions of gleaming green cities or the landscape reformed, it’s no longer just pastoral landscapes,

    No, no, that’s not going to happen directly in that way – because those processes to the extent they will happen will be happening in a context of chaotic, if not collapse, breakdown and change of systems that we’ve directly or indirectly relied on. So that adaption in situ and retrofitting what we already have was clearly more important in a strategic sense and also of what is realistic for people to do and what is effective. Because most Australians live in the suburbs, retrofitting those suburbs was a priority. So that notion of moving from clean slate design to every site has a history, every site has something there, and recognising the good and the bad and the complex layers of that – where we are just a participant, tweaking or adding to what already exists; that shift in thinking was also strategic – in the sense of it bypassed a lot of the regulatory impediments because it’s not big new developments. So sometimes it can be done under the radar and the consequences of mistakes are far less than in grand projects.

    The grand projects, yes, they can achieve great things that it’s hard to replicate in other contexts, but they also are where the big mistakes happen. I think that was part of my strategic thinking of how to deal with ongoing design in a context of crisis and chaotic change. Then, the emphasis in RetroSuburbia on three fields of action: the Built, the Biological, and the Behavioural, recognising that there’s limitations to changing biological systems; you can’t fast-track the growing seasons. And the built environment; well, we might not have the wealth or the capacity to knock it down and start again. Those limitations don’t apply to behavioural systems and this contradiction between “is people’s behaviour individually and collectively, the hardest thing to change?” or is it the easiest thing to change? It’s of course, both but increasingly moving to recognition that we can change the world mostly by changing ourselves, because that’s the most flexible system.

    It’s wrong to project that sort of view of change, adaptation, and design for, say people living on the Ganges Delta in Bangladesh relying on what they can produce on the farm and remittances from family working in the Middle East, to say “you need to be more creative or change your behaviour”. Whereas in affluent Western countries there’s so much fat in the system, there’s so many opportunities for that creative adaption, that a lot of my focus of design has moved back into the people side of things and how we facilitate that in a context of rapid and unpredictable change.

    Dan Palmer: Yeah. Reminds of our mutual colleague Joel Meadows’ refrain about how often we default to a green solution or we design a better house or get more solar panels, when so much of this is around human behaviour and management and the huge scope there to massively reduce consumption and that side of it.

    David Holmgren: Yeah. If you can take behaviour out of the good/bad model judgment of right/wrong, and see it as a design problem and be able to stand back and look at one’s situation and treat inappropriate behaviours as a worn-out pair of shoes, or shoes that no longer fit, or were badly designed – that we can get another behaviour that fits the situation. In that sense, I think design thinking can help so much in breaking down a lot of those moral, emotional blocking points that happen when we try and look at behavioural change.

    Dan Palmer: I honestly hadn’t appreciated the strategic brilliance of the approach in RetroSuburbia. How it’s landed for me now – it’s supporting people to get things happening in the context where they need to do something, and along the way discerning these different fields of the built, biological & behavioural. Because they are retrofitting what’s already there, like you’re saying, it reduces the scope for huge mistakes. It also forces you to pay attention to what’s already there because it’s there and you’re changing it. It avoids regulatory issues and as you start to move along, you are in a design process. So it’s almost like…

    David Holmgren: …continuous design….

    Dan Palmer: Yeah. By its very nature, it’s a healthy process that’s not a linear, copied and pasted from landscape architecture approach. It’s like a brilliant doorway into the space of that widespread design literacy as a core capacity that you talk about.

    David Holmgren: I think it also helps deal with one of the problems of copying. As we know, every design situation is different and requires a response to that situation. But the template and pattern of suburbia across whole suburbs and landscapes, and especially where there’s similar street layout and houses of similar age, there is that simpler act by which people do things; “oh look, they did that there, we can copy that”. And there’s more chance in those landscapes of that copying actually working whereas in a lot of rural contexts and a lot of more complex organisational contexts, it’s very hard for those copies to work. We recognise that a lot of people do things that way, and we all know as designers, that that’s not necessarily the best, and the idea of how can we uniquely respond to a situation is important, but people are into the baby steps of design. If we recognise design is a human literacy that potentially represents some degree of evolutionary transformation, at least at the scale of literacy and numeracy. Then that original vision I had in Environmental Design school, that our role is, not as expert designers, but people a little bit further down the track, to enable everyone to see themselves as designers and to find that power in the process, which is still I think, a struggle for so many people.

  10. Yes indeed Himua/ Jeremy- the UK housing is indeed a Ponzi scheme and is making many, mainly younger generations, into serfs because of the levels of debt needed. None of this is measured ininflation levels. I see in the papers today that Nationwide are now offering mortgages at 5.5 times salary. Helping people into increasing levels of debt.
    I also see even the CPI meausre of inflation is up to 0.7 as prices of clothes and transport rise.

    Do you think the policy makers are unaware Dr Tim? Perhaps it’s a combination of lack of knowledge, sticking their heads in the sand, short term nature of politics which is a big problem. I seem to be reading what I class as government propoganda in the paper about huge economic growth, etc. I suspect some of this is a deperate attempt to persuade us to get out and spend to save the economy which remains on life suppor!

  11. Another great piece that makes perfect sense – and some excellent, thought provoking comments. Not that our masters will take any notice. Nor that it helps me figure out how to prepare for the coming s**tstorm.

    One thing I can do, though, is leap to the defence of Henry Ford. Like Macmillan & his supposed “You’ve never had it so good” remark – something he didn’t actually say – Ford is quoted in a way that removes the context and intent. I believe that Geoffrey Upward (historian) explained the quote as follows:

    “What (Ford) meant and explained many times in later years was that written history reflected little of people’s day-to-day existence. ‘History as it is taught in the schools deals largely with wars, major political controversies, territorial extensions and the like. When I went to our American history books to learn how our forefathers harrowed the land, I discovered that the historians knew nothing about harrows. Yet our country depended more on harrows than on guns or great speeches. I thought a history which excluded harrows and all the rest of daily life is bunk and I think so yet.”

    It seems to me that Ford had a good point. For all I know, he might have been a SEEDS supporter.

  12. Dr Tim, here is (perhaps a rather flippant, but true) demonstration of debasement and inflation. Displaying nostalgia for my working-class roots, I’m rather partial to a pasty for lunch once a month or so. Perhaps not the most nourishing thing to eat, but once in a while a stodgy hot treat.

    My local baker offered a “traditional steak pasty” (although I prefer the cheese & onion variety, in truth) with proper pieces of beef steak, potatoes, carrot and swede (rutabaga) with seasoning wrapped in a pastry case (for our non-UK visitors) all for £1.95 in January of this year.

    I bought one last week, and the filling has been debased with the steak being replaced with minced beef, peas added into the mix and, I swear, the size/weight has been reduced a little. The price has increased to £2.95. When I asked why this was so, I was told that the cost of the ingredients for the ‘former model’ had risen, and they were sorry to have had to replace the steak with mince, but that, significantly, the cost of the electricity and petrol needed to prepare, bake, transport to and open the shops had risen by about 9% in recent days.

    Perhaps a ‘pasty index’ would give a reasonable picture of what is going on!

    Linked to this would be an ‘obesity index’, I’m afraid. Nearly every day, a man parks up near the bakers opposite my office in his car (complete with disabled badge) just before closing time. He oozes out of the car and purchases 3-4 reduced price pasties, waddles and wheezes back to his car, pours himself slowly in, and then proceeds to eat them all (half a pasty in one bite – yuck!) before driving off; as someone who arranges life insurance as part of his job, I can’t help watching this ill-mannered, and rather gruesome, exhibition with a morbid fascination, if I notice him. An entirely unproductive individual hell-bent on ‘self destruction’.

    Interestingly, the life offices here in the UK now offer ‘standard premiums’ to around only 50% of applicants, in my experience, with others being ‘loaded’ in some way because of underlying health issues, but more particularly ‘lifestyle’ issues such as excessive alcohol consumption; this being of primary concern to many underwriters I speak to, since the introduction of readily available booze around the clock 20 or so years ago. An ‘obesity index’ would link in very nicely with a ‘pasty index’!

    • Mark, The experience that you describe regarding pasties mirrors the situation here in the North. Perhaps the North-South Divide isn’t as wide as I often suppose! It is interesting that some of the comments on the BBC website relating to this morning’s CPI-read are revealing hefty increases in prices of raw materials, and in some instances severe supply constraints. A few commentators grasp the idea of currency debasement, but of the comments that I read no one mentioned ECoE. Among my family, friends and acquaintances my ‘take’ on the situation is either ignored, or brushed away flippantly with the trite “It’ll be fine”. I have to confess that it does leave me with a feeling of being a proper ‘odd-ball’.

    • Funny enough, there is a Big Mac Index used to compare currencies for over/under valuation! Different measure, and on a rather universal item. But I like the pastie one as an inflation marker where they are popular.

    • Hello Mark

      Yes inflation is here, and here’s my story. I produce and sell logs, kindling and charcoal as a side line to a neighbours farm shop/tea rooms. I checked my prices against the local commercial competition recently, Tesco’s, and national chain garden centres before the shop reopened on the 12th April and found I was under cutting the competition. Now as I sell quality fuel, cut by myself, and as the shop is somewhat up market, my aim is never to under cut the competition, especially as I can only supply so much. My costs have gone up very little, plastic net sacking is at the same price as two years ago at present (just bought 500 net bags), transport is half a mile, a little fuel for the chainsaw, and mostly hand labour. So I put my logs and charcoal up by 16% and the kindling by 20%, and most of that will go in my pocket. Now what I sell is not a necessity for most people, so sales may drop off, but it is still an affordable luxury for many, so I am not worried at present. But this does point to the future economy where those who can produce outside the fossil fuel economy will have a competitive edge up to a point, that point being limited economies of scale.

      Regards Philip

  13. @Steven Kurtz
    One can apply the multiplier concept to ECoE, and also see the relevance of David Holmgren’s work. Suppose a bank loans some money to a young couple who want to find and produce some oil. Oil in and of itself is of little interest, but what is of immense interest is how that oil can be used in an economy to produce goods and services that people are willing to work for. Dr. Morgan has evidence that, if the production system is pretty static, then the multiplier shrank to zero around the year 2000 in the advanced economies. It has now shrunk to zero in economies which are more efficient in their use of oil than the old industrial economies. It probably still has a positive multiplier in a country like Chad. (Setting aside the harmful externalities of the use of fossil fuels.)

    And that brings us to the relevance of David Holmgren’s work. For more than 2 decades David has been working on the question “what comes after oil?”…and all the other ‘afters’ such as soil depletion, climate disruption, ecosystem destruction, social unrest, and so on and so forth. One can view David’s work as restoring the multiplier from energy usage (whether in the form of water under the influence of gravity or solar energy striking plants, or whatever fossil fuels we have left). Which implies that our society will have to be adaptive…not static. David finds that behavior change is more flexible than either the physical environment (e.g., governments, the built environment, corporate power) or basic biology (e.g., we need to sleep at night and we need to eat plants during the day and humans need to mate and have children). But humans have exhibited a wide range of behaviors, and we are very clever and we copy well. And that is David’s project.

    Don Stewart

  14. ‘My personal view and analysis is that the preferred economic strategies of the US and the UK are mistaken.’
    I couldn’t put it as charitably as you have here, Dr Tim, although I can’t comment on the US.
    Whether they are aware of the SEEDS economic model specifically, I don’t know. Certainly, many of them have studied Economics at higher level so must be aware of the potential consequences of their policies. The price inflation commented on hasn’t escaped the general population as others have mentioned.

    Thank you again for your interesting articles.

  15. FWIW, I’ll engage in a bit of fruitless speculation here, regarding the question whether “they” know the likely trajectory of de-industrialization and de-growth based on an understanding of declining surplus energy.

    I tend to use the New Testament standard of “you shall know them by their works,” and ignore the words they say. As the saying goes, you know they’re lying because their lips are moving. This standard goes hand in hand with the fact that the human failing that Jesus most railed about is – hypocrisy. (You would be hard pressed to know this listening to “Christians,” but all you have to do is read his quoted words in the NT. It was not sexual mores, the primary fixation of “Christians” everywhere, with a free pass for all greed and war-mongering.)

    Arbitrarily picking people with a net worth in excess of US $100 million as our group of movers and shakers of society and its direction, I would say that, no, en masse, they do not know because the understanding is not evidenced by their behavior, at least so far as we can tell from the information presented about them in the news. From all outward appearances, with a possible few rare and quiet exceptions, even after amassing a fortune of $100M+, they continue to be completely immersed in the project of amassing even more excess financial claims, and achieving more power and status within the existing world system. Their behavior thus evidences (even if they do not openly espouse it) a core belief that money, power, social standing and connections provide the greatest social freedom and immunity, “solve” all problems and/or are the key to weathering all storms.

    Fundamentally, by the standards of most of human history and within the human world (the natural world and the impact we have on it being ignored in this overall world-view), they are not wrong in this belief, the rare exceptions being the relatively infrequent events described in Walter Scheidel’s “The Great Leveler.”

    My hypothesis is that if “they” truly understood, they would be busy converting that financial wealth into building a more self-provisioning local community in which they were enmeshed and with which they fully identified as their real home, moving toward independence of fossil fuel inputs and world trade as much as possible. They would find a locality that could feed and support itself fully or to a very large extent based on local inputs (or which could transition to it over time), effectively adopt a “lord of the manor” mode of behavior assuming responsibility to shape, support and bolster the local community and its ability to provide for itself as much as possible, assuring good husbandry of local land, water and other resources, good local schools, health services, good parks for recreation, community gardens, a really good library, and funding programs for the jobless to work building real infrastructure.

    Bill Gates amassing millions of acres of farmland does not fit the bill. He continues to work entirely within the modern mindset. The massive absentee property ownership and ownership of intangible property that constitutes so much of modern wealth exists only because of the massive surplus energy previously available, and social and legal complexity and enforceability enabled by that energy. We are heading toward a far more localized-central world.

    Conspicuously agitating for top-down change of this sort is meaningless. It’s little more than virtue-signaling and part of the game of creating enhanced social standing. What such posturing implicitly really says is that “I’ll change when someone in charge orders us all to do so.” Actions speak louder than words.

    My two cents.

    • Leaving aside the bible, your piece still makes sense. Here is a piece from today’s WSJ emailer sent to me by a friend. No subscription required.

      The Newest Status Symbol for High-Net Worth Homeowners: Trophy Trees
      By Katherine Clarke

      In search of the perfect garden, the super rich are paying upwards of hundreds of thousands of dollars to bring in huge old trees by helicopter, barge and flatbed truck

      read it here:


    • @Steve,
      You don’t have to be a “believer,” to adopt the standard as a BS monitor, or as the measure for manipulation and credibility! It’s an essential tool in a world that is managed by narratives and narrative control.

  16. To all visitors to this blog , I would recommend Tim Watkins’ latest addition to his blog “The consciousness of Sheep” . This goes under the title “A Dangerous Misunderstanding” .
    It helps to substantiate much of what has been discussed here.

    • I’m a big fan of Tim Watkins, but he misses that the CB’s do not really create money. They have created bank reserves. These bank reserves do not circulate in the economy, they just legally allow banks to maintain the mathematics required to extend loans. There are two problems still (1) The bank has to have the capital to loan and be able to pass a risk premium on to a lender, and (2) potential lenders have to be confident of their ability to repay the loan with interest. For firms this means being confident they can invest in activities which will produce a future flow of revenue.

      The economy is visibly shrinking – but so are the banks. They have decreased their balance sheets since 2008. Also, the loan/deposit ratio shows that there is very little response to CB activity.

      The loan/deposit ratio is at a 36 year low. https://www.pymnts.com/news/banking/2021/fed-data-shows-big-banks-loan-to-deposit-ratio-at-36-year-low/%20rel=

      The fiscal side of the situation (direct payment stimulus / helicopter money) will have a temporary reflationary blip for a few quarters after it stops, and influence inflationary expectations. However we’ll quickly hit an inflation ceiling which will collapse us to another leg down in my view.

  17. @Jomelco
    The only quarrel I have with his paper is blaming Biden. Trump was a vociferous advocate of deficit spending with super-low interest rates. If we imagine a ‘peasant’s republic’ for the US, with opportunity for all and modest wealth disparities (such as Kansas used to be), there is no significant political faction in favor of it. The Republicans either support the Trumpian line or else support a ‘financial nobility plus hired help’ arrangement. The Democrats also support a ‘financial nobility’, but also are in favor of impossible dreams such as ‘college degrees for everyone’ and ‘clean jobs for all’.

    In short, in the US we do not have any significant support for anything realistic.
    Don Stewart

  18. Central banks see deflation as the enemy which I have never really understood. It seems over most of history deflation was fairly normal; which is not surprising if you believe technology should drive improved production. In the past this didn’t lead to lower living standards.

    So the Central banks want inflation but they seem to want inflation without interest rates increasing. And inflation wouldn’t be bad if wages increased at a higher rate than inflation. In the Brexit referendum we would told that voting leave could result in higher wages and lower house prices. But this was meant as a bad thing which just shows how out of touch those in charge really are.

    Now deflation isn’t good if you have debt but inflation isn’t good if you don’t have the means to pay that debt. And we have the ‘richest’ clubs in European football desperate for their own league because they have a combined debt of £2.5B. So here’s a perfect example of too much debt and declining income because tv companies now pay don’t want to pay what they used to for broadcasting rights; presumably declining prosperity is a major factor here.

    Yet households paying down credit cards and increasing savings during the pandemic is viewed as a negative thing. It seems the credit spree needs to continue and the government have already come up with a scheme to enable first time housebuyers to borrow more. The trouble is we are doing this when in the U.K. we have a declining birthrate and ageing population (deflationary) but declining prosperity driven by higher energy costs (inflationary). This must be the worst of all worlds. We will have to return to sound money.

    I listened to a podcast recently where the person interviewed said one of his economics professors at Harvard said you have made it rich when you can borrow $1M. I have been doing it all wrong.

  19. The stock market in US selling off a bit because of Biden’s proposal to tax long-term cap gains at ordinary income rates. (Short-term cap gains already taxed at ordinary rates.)

    Entitled investors, traders and, for some reason, the robotic algos that they program, are losing their tiny little minds. Here’s what I’d like to hear from these whiners who are threatening to take their ball and go home: Please explain what supposed policy justifies taxing “capital gains” at a much lower rate than the tax on wages (labor). Why is this a wise economic policy and not just preferential treatment of the moneyed class? In doing so, note that:

    1) Capital is not “scarce” and does not need to be cajoled or coaxed from sitting idle (as if, unless they receive favoritism, they won’t want their money to earn money – what a joke! Accumulation – the life of more – is an obsession with them). In an era of near ZIRP, companies can borrow funds cheaper on an after-tax basis than they can by issuing shares. We don’t have to worry about a shortage of “capital” for productive investment. Only a shortage of capital for gambling – but that’s kind of the idea.

    2) Almost all stock purchases are of existing, previously-issued shares. The stock purchases are not funding investments in productivity of the companies – the shares are just “monetary instruments” for investment as a form of “saving” and/or income production via dividends. Ditto for bond purchases. (We can eliminate momo trading and speculation here because that is most likely short-term gain taxed as ordinary income anyway – the algos are front-running orders by flipping shares on the order of seconds and minutes, not yearly.)

    3) Most stock investments are held by the top 10% by wealth, who are already “rich” comparatively to the rest of their society. Stocks held by the 50% – 90% middle class or upper middle class tend to be held in 401Ks or other pension funds, the withdrawals from which are taxed at ordinary income rates anyway. Thus, the capital gains rate is not incentivizing savings, and in any event, if it did, it would primarily benefit those with the highest incomes anyway.

    While they are at it, perhaps they can also explain why only wage income (labor) pays social security and Medicare taxes, and these withholding taxes are not borne by all forms of income of all citizens and companies? Obviously, if the tax was borne by all income, the rates would be much lower for labor. Again, I’d love to hear these whiners explain why this is a wise economic policy and not just preferential treatment of a moneyed class that is able to buy political influence.

    • In a nutshell, they clearly think that taxes are for ‘little people’. One rule for us, another for the ‘Great Unwashed masses’ (or the Goyum, if you prefer).

    • Anti-semitic BS Tony H. The wealthiest .01% in the world are not mainly Jewish.

      “In a nutshell, they clearly think that taxes are for ‘little people’. One rule for us, another for the ‘Great Unwashed masses’ (or the Goyum, if you prefer).”

    • Just to be absolutely clear, I have no time for anti-semistism, or for putting people into groups. Every person is of equal value, and everyone is an individual.

    • ‘Anti-semitic BS Tony H. The wealthiest .01% in the world are not mainly Jewish.’

      That’s a rather blunt statement and I suspect it is not well informed. The wealthiest 0.01% in America is 33,000 people. Do you know even 1% of them?

      ‘Just to be absolutely clear, I have no time for anti-semistism, or for putting people into groups. Every person is of equal value, and everyone is an individual.’

      That’s a noble sentiment. I wonder if the 0.01% agree with it? Whether you think its valid to put people in groups or not, the bottom line is they are in self-defined groups. That is why the Jewish lobby exists and it is the most powerful lobby group in US politics. In UK politics, similar lobby groups operate and are if anything, more powerful here. They have succeeded in criminalising speech.

      Human beings are the rough, tribal things that they are. Pretending otherwise is wishful thinking and bound to disappoint. Is it ever noble to believe in a blatant falsehood?

    • So, your universe is limited to the US? And knowing individuals is irrelevant. I’ll wager for charity that I’m right about my statement and that you are wrong. Do you have conviction? Then step up to the plate.

    • I’m an atheist of mixed heritage. If these sorts of comments are permitted, I’ll add my 2 cents elsewhere. meanwhile will you take my charitable wager? If not, why are you chiming in?

  20. %tagio
    My financial knowledge is fairly limited so I cannot comment on your remarks.
    However , to try and improve my understanding of finance I have been reading “The Money Machine” by Philip Coggan. The “horrendous” complexities of finance are outlined there very clearly . My reaction (as an engineer ) to the facts as presented is that the finance community is oblivious to the impossibility of perpetual motion and increasing entropy . What they have in their pockets (or their multitude of accounts) as a by-product of the money machine are the non-green “elements” of this planet and the machine lubricants (interest rates) have now dried up. Seizure of the machine will follow as any engineer knows.

    % Dr Tim
    Is that a fair analogy?

  21. Tim, many thanks for another excellent article. I try to post links to your blog wherever I can. One thing that I find a little puzzling is that the understanding of the economy as a physical system, that is driven by energy, appears to have been better understood in the past (at least up until the 1990s) than it is now. The loss of the UK industrial base and the fact that most people no longer make things, seems to have reinforced the idea that that the economy is a metaphysical thing, that does not require real inputs.

    I am presently part of an ongoing discussion group that examines options for colonisation of Mars. What is interesting about this from an energy perspective, is that Mars is quite literally a desert island. Discussion of how to survive and thrive there always comes down to sources of energy. This is for the simple and obvious reason that anything of value to human beings has to be produced using energy harnessed and directed through tools to rework local materials. The prosperity of the growing colony and its rate of growth depend entirely upon the ERoEI of the energy supply. This inevitably leads to the conclusion that the colony needs a nuclear power source, along with the ability to build more nuclear reactors as the population and capabilities of the colony grow. But as soon as anyone mentions the word ‘economy’ it seems to draw people’s thinking into a parallel world of money, where physics ceases to apply.

    Interestingly, the discussion group has ended up dividing into two factions. One group, insists that solar energy alone can meet the energy needs of a growing economy on Mars. This group rejects the view that the economy is an energy system, because any analysison this basis, produces result that they don’t want to hear. The second group, which tends to consist of physicists and engineers, views the economy as an energy system, in which goods are the result of energy reworking local materials. This group comes down firmly in support of nuclear energy as the dominant power supply to a growing colony. As topics have developed, it has become clear that living on Mars, will require the use of far more energy per capita than is the case on Earth. This is because so many of the things that we get for free on Earth, have to be manufactured on Mars. Air is something that must be manufactured by chemically processing the Martian atmosphere. Water must be thawed from ice, which is frozen as hard as stone in underground glaciers on Mars. Water on Mars will have the same energy cost as concrete here on Earth. Food must be grown in heated, pressurised greenhouses. Trying to provide colonists with high living standards using solar energy, on a planet that receives only half the sunlight intensity of Earth, ends up resorting to absurd claims in a desperate attempt to avoid accepting reality. It becomes impossible to manufacture enough new solar panels to even replace a solar energy facility on Mars, before the old one wears out due to UV damage accumulation.

    In the UK situation, New Labour were the most ardent supporters of the idea of decoupling the economy from real resource inputs. They also happened to lean towards the idea of a societal transition to renewable energy sources. Once again, economic interpretation was shaped by deeper ideological prejudices, that a more grounded physics based analysis would have demolished. I have learned that people with a strong ideological attachment to an idea, will happily misrepresent data, lie and cheat to prevent that idea from being challenged. The idea of the economy as a metaphysical and non-material entity, was actively promoted by New Labour, as its acceptance gives a green light to both economic liberalisation (which leads to the asset stripping of a country’s manufacturing sector) and renewable energy, with its hopelessly poor ERoEI. These ideas were ideologically important to the people in power. So an economic interpretation that supported them was enthusiastically accepted without question.

    Discussions on Mars colonisation show dematerialisation and the idea of the economy as a financial system to be an absolute falsehood, again and again. It is impossible to dematerialise a human being’s needs to eat and drink and breath. The standard argument against the energy interpretation of the economy, is that value production is a function of technology and its impact on labour productivity, not abundance of energy. But this argument falls to pieces when one considers real life examples. It takes a minimum of 76KJ to heat the 200ml of water needed to make a cup of coffee, to boiling point. This reality does not change no matter how technologically complex the coffee machine becomes. Likewise, the production of steel, plastics and concrete. Generally, new technology has allowed some processes to become more energy efficient. This seems to have misled many people into believing that energy limits are unimportant, because new technology will always negate them. Such an idea can only really prevail amongst groups of people without engineering and physics background. It looks utterly absurd to those with such a background, especially when they are considering the energy requirements of the infrastructure needed to grow a new branch of human civilisation on another planet.

    • TonyH
      Will there be enough energy on earth to launch any spacecraft?
      Is it a valid use of the limited energy available to Earth’s inhabitants?
      Mariana Mazzucato claims that the space race of the 50s & 60s had so many side effects that it was economically beneficial. However, as we know from Dr Tim’s charts that era was one of “benign” energy .

    • My reason for raising the topic here is that a colony on another planet is a good test case for energy economic models, precisely because it is isolated. All human prosperity there must be manufactured by the action of energy on matter. It is a conclusion that is impossible to ignore and the simplicity of the situation means that discussions on how to produce the things that people need to survive are not clouded by financial fluff that tends to cloud understanding of what the economy really is: the production and exchange of goods and services.

      I don’t know if it is valid or not. One of the consequences of increasing concentration of wealth in the hands of the 0.01% is that those individuals are able to afford projects that in previous times would have been the preserve of governments. The two richest men in the world have chosen space colonisation as the goal of their lifestyle work.

      Colonising space or another planet is a worthy goal in my opinion. Probably more worthy than anything else that these people could be doing with their money. I have studied options for colonisation of Mars for several years now. If Elon Musk succeeds, humanity will have an entirely new planet to develop and his efforts would spawn a new branch of human civilisation. But for those that do go, it would be a tough life, at least for the first few decades. Mars is a harsh and cold place. Most living space would probably be underground, in order to escape the cold temperatures and high background radiation. Not something I would volunteer for. I am too old and too fond of open space.

  22. Finance; Money; Climate and Net Zero; Delusion; Opportunity to Make Money

    “The time has come to voice our fears and be honest with wider society. Current net zero policies will not keep warming to within 1.5°C because they were never intended to. They were and still are driven by a need to protect business as usual, not the climate. If we want to keep people safe then large and sustained cuts to carbon emissions need to happen now. That is the very simple acid test that must be applied to all climate policies. The time for wishful thinking is over.”

    I recommend the article, because it is a very clear description of the delusional path that the world leaders have been following since 1992 in terms of climate change. The authors suggest that the real motives were never about climate change, but instead were about preserving Business as Usual. I would like to call attention to a few more aspects of our current situation as members of the ecological system which gives our planet life:
    *The same observations and conclusions can be drawn in terms of debt.
    *The same observations and conclusions can be drawn in terms of free energy from primary sources.
    *The same observations and conclusions can be drawn in terms of the planets population.
    *The same observations and conclusions can be drawn in terms of the destruction of biodiversity.
    *The same observations and conclusions can be drawn in terms of the spread of chronic diseases and obesity.
    *The same observations and conclusions can be drawn in terms of water supplies (used for agriculture rather than drinking water)
    *The same observations and conclusions can be drawn in terms of the chemical pollution now evident everywhere, including in human bodies.
    *The same observations and conclusions can be drawn in terms of the destructive capacity of militaries.

    You can doubtless add your own items to this list.

    But many people who read this blog are primarily concerned about where to put their money right now in order to preserve as much of BAU in their own lives as possible. My GUESS is that humans have an almost infinite capacity to delude themselves. I will not be shocked if the stock market values those corporations who appear to be doing something about these crises…but without actually doing anything effective. So electric vehicles and stratosphere seeding companies and monoculture plantations in the southeastern US so that Sweden can claim carbon reductions are all attractive investment opportunities. I hope I am wrong, and that people wake up, but I won’t hold my breath.

    Don Stewart

    • This is a very good comment – there is delusion wherever you look… “My GUESS is that humans have an almost infinite capacity to delude themselves.” I put my hand up as one of those humans… I come up to breath every now and again, and then hold my breath and sink back under into the deluded depths.

  23. Russia and Hard Money and Gresham’s Law
    Here is Dmitry Orlov’s summary, in English, of what Putin just told the Russian parliament:
    “Nevertheless, there is a lot more for the Russian government to do to help the Russian people. Among the most frequent words in Putin’s speech were “family” (20 times), “children” (26 times) and, of course, Russia. Included are such bits as 100% paid family leave for mothers of young children, financial support for low-income pregnant women, 50% discounts on summer camp for children, sizable cash payments to parents of school-age children right before the start of each school year, etc. Already 60% of Russia’s schoolchildren are currently eligible for free higher education once they graduate (the highest percentage in the world) and Putin plans to grow this number substantially. All of this social largesse will be financed out of a virtually deficit-free federal budget. (Russia’s budget deficit is currently around 8 billion USD and is likely to disappear altogether as oil prices increase. Compare that to the US, which overspends its revenues by a factor of 2.5 and is headed for an annual budget deficit of $3.5 trillion.)”

    In short, a country being subjected to all sorts of sanctions is flourishing without government debt. I would call Russia a ‘hard currency’ country. Assuming that the leaders of the US, the UK, the EU, and Japan understand Gresham’s Law, and understand their current absolute dependency on deficit spending and the monetization of the deficit, then a forlorn hope is to somehow destroy Russia and give no space for Gresham’s Law to operate. Total global control of the inflating away of the debt with no realistic recourse for the citizenry.

    Don Stewart

    • Russia, like all other high income countries, is facing demographic implosion due to low birthrates.

    • @TonyH
      I take it you see declining population as a bad thing? I see it as a good thing. It does require a very different mindset and different practical responses…but it is the route of sanity. The world population by 2100 is likely to be 500 million to 2 billion, IF we don’t kill off our species.
      Don Stewart

  24. A timely piece by Dr. Michael Hudson today (Apr. 23) over at Naked Capitalism on the moral views of Plato, Aristotle and others in the ancient world on money-lust, and the hubris of wealth-addiction.

    [Snippet]: “Recognizing that “poverty produces faction and crime” (Politics 2.6 at 1265b), Aristotle concluded: “the duty of a true democrat is to see that the population is not destitute” (6 at 1320a). Democracy would be corrupted if creditors and others amassed wealth by impoverishing their fellow citizens. Men commit the most serious crimes because “their aims are extravagant, not just to provide themselves with necessities. Who ever heard of a man making himself a dictator in order to keep warm?” (Politics 2.7 at 1267a) . . . .

    Aristotle and subsequent Stoics advocated that rulers should prevent poverty by ensuring that citizens had enough land to be self-sustaining. This could not be achieved where citizens fell deeply into debt and land holdings were widely unequal. But that was the reality of classical Greek society, despite the principles of balance and moderation underlying most of its moral philosophy.”

  25. Review of Carey King’s new book on The Economic Superorganism
    “delusions of control.” The first of these is the confidence delusion, which says that we can always grow the economy if we maintain enough confidence in technology, markets, human ingenuity and ourselves. King questions the assertion that confidence constitutes an economic fundamental, and he insists that crucial information and knowledge are far more important to possess than confidence. There’s also the finance delusion, which encourages people to believe, for example, that efforts to wean off fossil fuels are bound to succeed as long as they receive sufficient investment. But the massively money-losing proposition that is the U.S. shale (tight) oil industry hardly supports this belief, observes King. Other delusions of control include the “freewill,” “political will” and “decoupling and services” delusions.”

    This gives a lot more scientific support to my rather vague assertions about our human capacity for delusion. What it means in terms of investing to preserve as much of BAU for oneself, I am not sure. There is an old adage: “you can tell the pioneers…they have arrows in their backs”.

    Don Stewart

    • Re King’s book: Sounds like a decent overview, but I didn’t detect anything new in the review. Good to have the memes spreading, though.

  26. a lone voice in the mainstream wilderness,


    I wish they’d let people submit full articles on the subject instead of relegating it to the letters page,
    there was even a time when Tim caught the attention of the grauniad, I’d love to know which TP report this article refers to,


  27. How can people be ‘better off’ in their lives on average? There are only 2 ways, either the economy grows, or they take from others.

    If everyone on average was attempting to take from others, we would have a complete breakdown of civilization, so the modern world has gone for growth as it really is the only option.

    With growth everyone can be better off (on average), which becomes the glue of the modern world. Growth is directly linked to energy use as we all know, but growth also needs money growth. As the method of creating new money is via new debt, then to keep money growing needs more new debt every year, more than is being repaid.

    Money is destroyed when debt is repaid, so if new debt were to go lower, with overall repayments to banks that created the debt, being above the new debt, then there would be less money in the system. Less money is available compared to existing goods and services, so the price in money terms should fall. We know that falling prices and wages is bad for economies leading to depressions.

    Central banks and governments all know this (or should know it!), meaning the only route to take is increasing the money supply, no matter how high the perceived debt levels. The debt created by governments and commercial banks borrowing from their own CBs is really just numbers on paper, it is only owed to future generations, with no real hope of repaying it, but to maintain the system now, governments need the money supply to continue to grow.

    The next recession/depression will be created by a reduction of new debt, which is what happens when interest rates rise and/or lending conditions tighten. It is never obvious because there is a lag between a reduction of lending and the recession/depression as it is the cumulative repayments of past debt that continues to take money out of the system.

    All of this is staggeringly simple when you think about it, yet it is amazing how many people (including top economists) that just don’t understand how our system really works. Maybe it because little inconveniences like savings, velocity, capital inflows and outflows etc muddy the waters slightly, hiding what is really happening in the system.

    The next big recession/depression will come when oil prices skyrocket, prices start rising in the system as a reaction, then lending is reduced as CBs governments fear inflation being too high, governments cut back spending etc. Nothing much visible will happen with the first couple of interest rate rises, so interest rates will keep rising, new debt will fall and all the while old debt is being repaid reducing the money in the system.

    At some point the oil price will not fall very far, because of shrinking production, CBs will persist with high interest rates thinking the problem is just inflation, and instead of the economy reverting to growth will continue with recession/depression.

    Without the prospect of growth, will humans revert to the other alternative for betterment, that being taking from others?? This is much better done as an organised group, like a powerful country taking from other countries, just like it seemed many times throughout history.

    We have had a huge increase in money creation in the last year, so my expectation is that there are boom times ahead in the short term as this works it’s way around the system. Oil prices are still relatively low compared to recent history, so watching them is the way to see the near future moves of CBs, with a lag of course, which is always the hardest part to factor in..

  28. Dr T, you’ll have to start a new movement, the Guardian says solar will *soon* supply free energy:


    I don’t know why the editors don’t point out that even doubling current capacity a couple of times would make no difference to global needs, let alone taking into account Jevon’s principle, this is the sort of topic that ordinary schools should be teaching even at early teen level. (And yes, the most fatal flaw is that solar depends on hydrocarbons for manufacture, maintenance and recycling)

    • The move to a more environmentally friendly economy, that sustains the current world population, never seems to get proper coverage in the mainstream media, at least in the UK.

      We’re told about our transition to “green growth” on a finite planet but we’re not for example told how pensions will work in a world without previous levels of return on savings.

      We’re not told that jobs in the fossil fuel related industries are likely to be replaced by jobs paying a lot less in “green” industry.

      We’re not told about the extent that petrochemicals are needed in the manufacture of many medical, pharmaceutical or agricultural products to fertilise or control weeds and predators. There little discussion about the continued extraction for these purposes but not for transportation fuel or if that’s even possible.

      We’re told about days when the country was powered by renewables but not that most of the heating of water was still done by gas or what would happen when it wasn’t windy for a week in winter.

      I accept that an honest debate is required on the need for change but it needs to be honest in terms of the cost and consequences. For too many it seems that we don’t have to give up anything about our lifestyle, we just need to do the same thing in a “green” way.

      There’s probably a need to explain to that part of the population of the world that hasn’t achieved a “western” lifestyle that they’re never going to do so but we’d like to keep our, thanks!

    • Right you are, ladydog 70. Another thing we’re rarely told is that our success as a species (400% growth in a century) will be the driver of our unintentional shrinkage.

    • Thanks for the Pollard link. I left a comment with a link to a 1958 interview of Aldous Huxley by Mike Wallace. He saw the writing on the wall over half a century ago.

  29. Pingback: A dangerous misunderstanding

  30. This is historically misinformed partisan perspective. To characterize the waning Republican party in this manner is an odd form of projection. Every one of the points is outrageously biased:
    1. Selective disenfranchisemant – the projection of partisan erosion of voting standard
    2. Selective suppression of dissent – a total mischaracterization in the days of Antifa and internet censorship
    3. Suppression or takedown of the mainstream media – US mainstream media is a currently a mouthpiece of the Democrat party and corporate interests
    4. Right wing propoganda on the mainsteam media? Seems like a constant drum beat to the opposite to me
    5. Law enforcement converted to right wing power consolidation? Police departments are collapsing after being sacrificed to political ens.
    6. Coddling of right with militias? These have come under considerable scrutiny and pressure compared to their left wing counterparts.

    If I had to sum up the US perspective I’d say Republicans only care about the budget when a Democrat is in power, and the Democrats only care about sustainability when it means cutting back on Republican voter interests.

    Point out perhaps that increasing the consumption of the bottom 90% would grossly outweigh any sustainability offset by taxing the 1% to find some cognitive dissonance.

    • @theblondbeast

      ” Every one of the points is outrageously biased”

      And your reactions aren’t? Both sides are biased. Humans are not capable of Spock-like objectivity. Bath sides err all the time. Extremists (wingnuts) aexist on the right and left.

    • @Steve – I don’t think so. I think my comments were certainly rhetorical, biased from a personal perspective, but not biased from a partisan perspective. I’m not a republican. Totally agree that nutters come in all stripes, in this case would note I think the author cited fits the description aptly at least in the context of this piece – not familiar with his other writings.

      I’d also agree objectivity isn’t truly possible. But I think one can be factual about what patterns are waxing and waning in the moment if one can detach from the assumption that one side is right and the other wrong, an assumption I endeavor to eschew.

    • @the blond beast
      Dave Pollard is certainly no friend of the US Democrats. He regularly cites those people who are pointing out Biden’s murderous agenda (and mentions it in the post under consideration). Dave is a systems thinker. What he perceives is a systemic reason why the Republican Party in particular is circling down a particular drain. (The Democrats are circling down a different drain…but they are usually disorganized and so don’t have the discipline shown by the Republicans.). I marvel that the Republicans everywhere are so diligently pursuing the Voter Repression agenda…I don’t think one could ever get Democrats to line up so orderly behind any agenda. I try not to expose myself to very much of social media, but I also marvel at the machine like precision with which right wing nut stuff gets spewed out over ‘issues’ like female orgasms. We should dust off the movies made in Europe in the aftermath of WWII which explored fascism. I think particularly of The Conformist and Fellini’s Amarcord.
      Don Stewart

    • @theblondbeast
      I’m a conservative green. Recall old school conservationists. And as I’m also an atheist, my cohort is minuscule. Pollard is definitely a left leaner. As a Canadian, he should view Biden and most Dems as centrist. I think he is off-base in the blame game, but given the last Republican administration I can see how his anger remains high.

      I was against most policies of DJT and his crew, and view him as a despicable person. However, I voted for and have liked the Republican governor (Charlie Baker) of my state ever since he ran for the office and won in 2014. Massachusetts is known as a very progressive state, and yet he won and his ratings have remained high for years. His policies are quite rational in my opinion.

    • @Don – thanks for the background. I could go so far as to agree that politics seems pretty divided on partisan lines regardless of the issue these days. Few seem to cross party lines on any issue.

    • @Steve – thanks for the comments. I think there are at least three ways to approach characterizing political issues as moderate/immoderate etc.

      One is an historically informed approach, which I advocate. I recommend the book The Great Debate (Levin, 2013) for the historically informed approach to issues of political Right/Left. https://www.amazon.com/Great-Debate-Edmund-Burke-Thomas/dp/0465050972

      A second is a morally informed approach (i.e. the strength of moral sentiment which current issues illicit, regardless of precedent). I don’t have much patience with this approach as I find most advocates to be disingenuous, poorly informed, or both. But perhaps I’m wrong, as an atheist, and absolute moral values do exist.

      A third might be an internationally comparative approach.

      All of these have their limitations as (1) times change, (2) the zietgeist changes, and (3) comparisons entail a great deal of simplification.

      I often advocate considering politics as negotiating for personal interests. I believe Greer has a good perspective on this: Nobody should expect to get everything on their agenda, and nobody should walk away with nothing.

      I have in-laws in MA and hear good things about Baker. He sounds like a reasonable fellow.

  31. Richard Heinberg
    An excellent essay from his recently published book:

    In terms of ‘how to define a liberal or a conservative’, his history offers no clear answers. But mine is this:
    *a liberal seeks to cooperate with as many other free people and other living things as possible, while competing with or simply ignoring the rest. The model is an ecosystem.
    *the top of the conservative hierarchy seeks to dominate…the middle of the conservative hierarchy seeks to obey (e.g., fascism or Soviet style communism or religious orders)…the bottom of the conservative hierarchy just wants to be left in peace and is deeply suspicious of others. The model is a political/ military/ religious Establishment in the agrarian societies.

    The facts don’t really support either idea to the exclusion of all else. As Richard notes, the discovery of new ways to produce free energy temporarily created more liberalism, but the tide has now turned. With Degrowth, we might go back to warring states. But history never repeats itself, and Ugo Bardi in his current essay notes that US bombing on a massive scale ended with Libya. Ugo speculates that the rearmament of Russia has something to do with deterring the US. At any rate, Mutual Assured Destruction doesn’t strike me as a particularly stable way to govern the world. The notion from 1945 that nations can govern themselves through the United Nations now seems very quaint indeed.

    Don Stewart

    • The English “Liberal” party was formed in 1859, from Radicals, Whigs and “Peelites” (Tories who had split from the Conservative party over the Repeal of the Corn Laws in 1846). Members included Lord John Russell, Lord Palmerston, Robert Lowe, John Bright, W.E. Gladstone and John Stuart Mill.

      I mention this because they were of very diverse opinions. But they had shared ideals, which included freedom of speech, freedom of conscience, hatred of slavery and oppression, and a commitment to the “improvement” of the conditions and opportunities of “the working [or “labouring”] classes”.

      By this standard, you’d be hard pushed to find any “Liberals” in today’s politics. We have ‘social’ liberals, with a penchant for conformity and censorship, and ‘economic’ liberals, who favour big business and minimal regulation.

      None of the above-mentioned people – or, for that matter, Voltaire – would have signed up for any part of that.

    • @ Dr.Morgan
      Thomas Frank wrote the book Listen, Liberal. Frank is a throwback to the Midwestern Progressives, which is the climate I grew up in. Frank gave a talk at the Kansas City Library which drew attendance from working class people to the heads of the biggest banks in town. Frank got his 15 minutes of fame, but the self-reliance plus cooperation with people you actually know seems to get no real traction. Liberalism is certainly not in healthy condition.
      Don Stewart

  32. Good, very succinct overview of the water and climate issues, with graphs, at IanWelshDOTnet, titled, “All the Futures that Will Not Happen,” a bucket of cold water thrown on techno-utopianism.

    [Quote:] Let’s put this all together: massively rising temperatures; more extreme weather events; changes in climate, including rainfall patterns; massive depletion of aquifers at the same time as we can expect many rivers to lose volume or dry up; no effective political action.

    One thing that India’s Covid crisis clarified for me is that India won’t be able to handle climate change, so let’s make some predictions.

    India breaks up within 20 to 30 years. It dies amid great famines which kill two hundred million or more people. Bangladesh, of course, will go oven sooner, and unleash a tsunami of over 150 million refugees which India does not want, as they are mostly Muslim.

    China breaks up 30 to 45 years from now and descends into warlordism. Prior to the breakup, there is a better-than-even chance of war with Russia for Siberia. Again, hundreds of millions of deaths.[End Quote]

    • I’ve known Chris Clugston for around 18 years. He’s meticulous at his research, and has done a great job documenting his work. The details are off putting to me, as I’m lazy and not looking to utilize the info. Be assured that he has no ulterior motives, and truly has done this as a service.

    • I can only say that I’m watching the course of events in India with great concern. I’m generally positive about India which, after all, is the world’s biggest democracy, and has come through some very big challenges in the past.

      Wealthier countries need to do everything they can to help India. Quite apart from the moral-humanitarian imperative, rampant covid in India could create a breeding ground for mutations, and we delude ourselves if we say that ‘they won’t come here’, and/or ‘vaccines will deal with all mutations’.

  33. @Ron Epperlein,
    Ron, if you are still following this comment section, I’d be interested in hearing your take on the new President of Ecuador’s plan to permit foreign banks to begin banking in Ecuador and the recent legislation establishing the independence of Ecuador’s central bank. Sounds like a prescription for expansion of financialization of Ecuador’s economy and greater foreign control over Ecuador’s resources. Not good.

    If you don’t want to post it in this comment section, since it is off-topic, you can email me at jsnyder62@gmailDOTcom.


  34. @Steve – Thanks – that’s good to know RE Craig! He seems like a straight shooter and comes to a sobering conclusion we seem to arrive at from multiple different roads.
    Most of his work I was familiar with was from closer to GFC, so I’m eager to see how his outlook updated in the 7 years between his books.

  35. Energy Skeptic With A New Book
    Ms Friedemann tries to cheer us up. I’ll just quote one chapter title:
    North Korea shows the way
    Don Stewart

  36. I thought this was interesting…

    As the world emerges from lockdown and companies start assessing the damage to their business models as they come off life support, there will be an understandable focus on the enormous amount of debt many are saddled with. But it is on the other side of the balance sheet that the real nasties could be lurking.

    Corporate debt is relatively transparent and managed through legally binding contracts. The most likely trigger for a wave of defaults – a big hike in interest rates – keeps being pushed back by central banks. This could be lulling investors into a false sense of security.

    The value of many assets, on the other hand, is little more than a collection of best guesses. For none is this more true than goodwill, which Adam Leaver, a professor of accounting and society at the University of Sheffield, describes as “the shadow asset of the corporate debt bubble”.

    The big question is how difficult it’s going to be for some companies to sustain the cashflow expectations that underpin the assumptions on which that goodwill is valued in this new world,” says Prof Leaver.

    What is goodwill? Ultimately it is simply the result of a sum. When one company buys another, goodwill is the difference between the appraised value of the target’s assets, minus any assumed liabilities. It’s basically an accounting ruse to deal with a bid premium without the balance sheet becoming unbalanced.


    • Yes, extremely good, particularly on modern slavery, theft of materials, the gig economy, and what’s behind the recent furore in European football.

    • The premier league clubs have come unstuck not only with the pandemic but the unwillingness of tv companies like the BBC, ITV, Sky, Amazon and BT Sport (incidentally up for sale) to try and outbid each other. It seems that consumers/advertisers are no longer willing or able to pay ever increasing amounts of discretionary income into the pockets of the leagues. My bet is that rather than a solution the JP Morgan money just raises the debt stakes higher for everyone in the long run.

      This is yet more evidence of the distortions caused by negative real interest rates and the Cantillion effect playing out time and time again. Assets are borrowed against with ever higher bets based on longer and longer time frame returns that can never be met in a world of declining prosperity.

  37. As Tim Watson shows so well, the maths behind today’s pseudoscience of economics relies on constant growth to pay of the interest on debts based on future earnings. Like a shark, the system can’t stay still for long, it has to keep moving forward because you can’t taper a ponzi scheme, a lot more new money has to prop up the base of the structure to keep it a pyramid. But we are heading for a crash because the world’s birth rate has levelled off (above carrying capacity of the planet at that) even if its population will still increase due to those already born living longer than they used to. Any new absolute growth is predicted to be mainly in Africa and that will not generate demand in the global economy because those people will be too poor.

    So the current system is unsustainable anyway, as it destroys remaining resources, but still, while we’re still trapped in it, it requires growth and there is going to be no overall growth from now on because the energy remaining will not generate what would be required. And when the neoliberal wrecking ball stops, our way of life will collapse.

    ‘Primitive’ societies, cultures, ways of life, will be what survives best, as they will have the least disruption when the music stops, having already the least involvement with global trade or need for that interaction. So low populations on self-contained, subsistence smallholdings, trading surpluses locally and preferably islands by whatever definition so desperate neighbours can’t attack them.
    It’s a neat irony, given they’re so exploited and looked down on at the moment and have been for so long, I wish them well, we had our chance and blew it.

  38. Dr Tim – I have titled the economy of the United Kingdom: ‘The Plunder, The Sieve and The Veil’.
    The Plunder involves two processes. The first is funding the trade gap by selling assets (property, infrastructure and companies) into foreign ownership, and thus larger amounts of dividend income goes overseas. The second is funding the fiscal deficit by issuing debt to foreign entities combined with effective monetisation from the central bank.
    The Sieve is the process of Severe Financial Repression featuring continual debasement of the currency, and the stripping of wages, savings and investments of value and purchasing power.
    The Veil is the policy of maintaining and increasing asset prices, notably housing to create an illusion of wealth.
    I can report that The Veil is in full ascendancy. Two headlines from the MSM illustrate the point:
    ‘House price boom sends national wealth soaring to £10.5 trillion’
    ‘Average Briton now worth around £172,000, ONS Reveals’.
    I would be very interested in any observation that you may have on all of this.

  39. @ Kevin, very nicely put. It feels like we here in the UK are really and increasingly living in an extraordinary era of fraud. (or are we just heading back into what always was after a generation which was an aberration of relatively little corruption?)

    If company A lives within its means, is well-run and does relatively well, it can still be taken out and asset-stripped by company B if the latter effectively bribe the former’s shareholders for their vote with a higher stock price after the buy-out. B could have borrowed the war-chest of buyout cash for this speculative action instead of using accumulated savings from doing business well for a period of time as was done in organic growth by good businesses before financialisation was rampant.

    In this globalised period, if a state is not strong in protecting its people from these speculative raids, it allows predatory entities like hedge funds to ravage the economy in a smash and grab race leaving devastation like drag-net trawling. Without legitimate protection (as opposed to subsidy) well run businesses have no chance and are unfairly outcompeted, so die off, leaving cartelised sectors in every industry, with the consumer as the worst loser. Even if well-run but excessive-debt averse businesses are privately owned, they can still be ruined by direct competitors who can load up on debt and drop prices until the former are bankrupted by being undercut to the point of the sale price not covering costs. The victor then raises the prices to whatever they can get away with.

    Though totally legal, this environment is therefore corrupting as anyone who tries honesty is driven into bankruptcy. A lot of these practices, like share buybacks used to legally be termed and considered fraud before the endless neoliberal deregulations to ‘remove red tape and so allow businesses to flourish’.

  40. I spend a lot of time explaining that most people’s ‘financial wealth’ is purely notional. “My house has gone up from £250,000 to £500,000, so I’m rich”, is a common phrase. Too many then ‘gear up’ with mortgages and spend future earnings on depreciating assets, like large cars or whatever. They become ‘slaves’ to lenders. They forget that, as Dr. Tim says, they can only realise this ‘wealth’ if they sell their house to someone who already has one (and then where do they live?).

    Much of my work is with individuals fast approaching or entering into retirement. The lucky ones, mainly public sector workers nowadays, have so-called “gold-plated final salary schemes”. More and more, though, just have an invested pension ‘pot’ and they then have to deal with what is correctly described as the ‘nastiest, most difficult, decision in personal finance’ – how to use the pot to provide retirement income. For example, at retirement would you rather get a lifetime pension annuity of £1,000 per month, or a lump sum of £300,000? Are you better off trying to manage notional investments to provide a ‘safe withdrawal rate’ from a pension pot for the rest of your life as your ability to do so is likely to decline with age? Or, would you rather get £1,000 per month for the rest of your life, or £750 per month for the rest of either your or your spouse’s life? These are some tough questions people face as they near retirement.

    Recently, an enquirer thought they were ‘sorted for life’ with a £250,000 pension fund. When I pointed out that a guaranteed, but fixed, income for life today from that size pot would only produce a secure (but inflation vulnerable) £12,000 a year, they were rather crestfallen; “I need £28,500 a year, mate, period, so I’ll draw from my fund then”. When I gently pointed out that he would likely run out of money before 10 years are up, he said “I’ll be dead before then, pal”. At age 66, this man has an average life expectancy of 85 years, a 25% chance of living to age 92, a 10% chance to age 96 and a 2.8% chance of living to 100 (Source: ONS Life Expectancy Calculator). Rather than trying to plan properly, the man got rather angry and left my office in a huff.

    There really is a dreadfully worrying pension problem that has built up – the tsunami of crestfallen retirees is now upon us!

    • I think a problem is the expected lifestyle during retirement. So many ads show people living a higher lifestyle when they retire compared with when they are working. In reality it is very unlikely that they will to be able to have even an equivalent lifestyle. People need to reduce their expectations of what retirement is all about – or save a hell of a lot of money.

  41. Making the public aware of the existential current civilisation ending threat is a great problem and discussions such as this need to be brought into mainstream media coverage:

  42. this is a presentation addressed to the business forum of The Geological Society of London,

    it’s the same sort of thing you’d expect from Nate Hagens, Jean-Marc Jancovici, etc. and comes to a similar conclusion,
    at the end of the presentation it offers the conclusion that we can choose from a managed decline or blunder into a chaotic decline,
    this suggests degrowth is coming whether we like it or not,
    the presentation is 1hr 14mins and conducted at a brisk pace to rapidly cover an enormous amount of material,
    it’s followed by a Q&A.

    once you get away from politics, media, PR, greenwashing and spin this seems increasingly to be the consensus amongst people who’ve seriously examined the situation.

    this is the website and resume of Dr Richard Norris,


  43. Fiat currency was doomed by the adoption of political correctness. The doctrine of ‘fairness’ and ‘equality’ meant that recessions and the normal of economic cycle of creative destruction had to be abolished. ‘No more boom and bust’… was always a falacy

    It was non PC and ‘discriminatory’ to deny poor ‘disadvantaged’ people access to easy money and credit. No longer would we be ‘judgemental’ about those that failed to live within their means…debt could simply be wiped out or made affordable.

    Ruinous welfare reforms that created the 21st century client state created a need for the push towards MMT..a conveneient theory that promised unlimited money for politicians to buy votes with seemingly no downside. I’m unconvinced that ECOE is anything other than of secondary importance…as yet.

    • There are those who’d say that debt isn’t extended to “help” anyone – the discriminated-against or anyone else – but to enable them to buy more stuff to the benefit of those who sell it to them. Perhaps we should beware of any politician offering financial “help” – witness “help to buy”, which might be described instead as ‘helping young people to take on huge debts to prop up the housing market’. The higher house prices are, the more relaxed people become about taking on more credit.

      So, where did this come from?

      Back in the mid-1990s, there was much talk about “secular stagnation”. “Deregulation” and cheap credit policies were adopted to incentivise consumption and drive “growth” out of this “stagnation”. That led to the GFC. Then there was cheap money, to stop those who’d borrowed too much from going under, and to supply yet more stimulus. That’s how we got to where we are now.

      We didn’t need any of this until the mid-90s. So what had changed? My analysis says “ECoE had changed………..”

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