#196. The price of self-delusion


It can’t be emphasised too often that GDP, which is the preferred measure of economic output and “growth”, has become progressively less meaningful over time.

Essentially, GDP mistakes money for prosperity. It counts the spending of money as economic “activity”, drawing no distinctions between how the money is spent, or whether the money itself has been earned, borrowed, airily promised for the future, or simply created out of the ether.

Worst of all, GDP ignores the deterioration of the cost-value equation which determines how the economy converts the use of energy into material prosperity. It invites us to believe that the economy exists in complete isolation from physical resources such as energy, minerals, plastics, food and water. If we once let ourselves believe that the economy does indeed exist independently of natural resources, ‘growth forever’ becomes a plausible fantasy.

If we follow the logic of GDP, the complete destruction of the Earth’s ability to produce food wouldn’t be too serious, because it would leave the other 94% of the economy intact. If the economy really is independent of material resources, we could colonise Mars by sending nothing more than some starry-eyed pioneers and a printing-press. A more prosaic – as it were, a more ‘down to Earth’ – example would be that survivors of a ship-wreck could live indefinitely in a lifeboat, just so long as their supply of bank-notes didn’t run out.

You might be familiar with how the economy of money has disguised real trends in the underlying economy of material prosperity. In the twenty years preceding the coronavirus crisis, each $1 of reported “growth” in global GDP was the product of nearly $3 of net new borrowing. Even this understates the extent of our self-deception, because it ignores the creation of huge non-debt liabilities. These include both formal commitments and informal assumptions, the latter typified by enormous gaps in promised (but unfunded) pension expectations.

In America, manufacturing accounted for just 0.2% of all reported economic growth between 2000 and 2020. Even adding construction, agriculture and the extractive industries leaves the growth contribution of globally-marketable, ‘hard’-priced activities at only 5%. The remaining 95% of growth came from services.

These services can be important, and valuable, but they can also act as residuals, sinks for liquidity injected into the system. The FIRE (finance, insurance and real estate) sectors alone accounted for almost 30% of all recorded growth – but how much value do we actually derive from moving money around? – with a further 12% coming from government. Both FIRE activities and government spending are obvious conduits for the injection of borrowed or newly-created money into the system.      

The flip-side of this process is the creation of hugely inflated asset “values”, which are products (a) of the abundance (and hence the cheapness) of money, and (b) of the discounting to the present of forward streams of income which reflect expectations wholly detached from any realistic appraisal of the material economy of the future.

What this in turn means is that most asset “values” are no more than a function of our self-delusion about the true size of the economy of today and tomorrow. Many of them, including the aggregate “values” ascribed to equities and property, are purely notional, in that they can never be monetised. Even defined, committed assets – such as debts owed by others – are only as valuable as debtors’ ultimate ability to pay.

The joys of self-delusion

This situation raises two obvious questions. The first is that, as this is collective self-delusion, does it really matter? After all, we’re not trying to measure ourselves against alternative worlds where economic activity is reported more intelligently.

Second, can those of us who understand this situation – and who can, furthermore, put numbers on it – profit from this knowledge?      

The answer to the second question is that yes, we can.

The answer to the first is that, in economics as in so much else, self-delusion does matter. You wouldn’t expect to win a battle by lying to yourself about how many soldiers or warships your enemy had at his disposal. You wouldn’t expect to drive safely by lying to yourself about how much alcohol you’d consumed.

So why would we expect to become more prosperous by deluding ourselves about the size, shape and direction of the economy?

In economics, self-delusion matters because plans based on false information seldom, if ever, turn out well.

Here’s one example of the dangers implicit in economic self-delusion. Between 1999 and 2019, emissions of climate-harming CO² increased by 48%. If we believe official GDP numbers, economic output grew by 110% over that same period. From this, we can infer that economic output per tonne of CO² increased by 42%. Conversely, we could conclude that each dollar of economic activity now produces 30% less CO² than it did twenty years ago.

If we were to believe this, we could also believe that further such progress could, in due course, tame environmental risk, or even eliminate it altogether, without requiring economic sacrifices.

This sort of calculation helps explain why governments’ seemingly sincere (if belated) commitments to environmental reform aren’t accompanied by measures that, in purely physical terms, might appear necessary. We can, we’re told, overcome environmental risk without having fewer cars, limiting engine sizes, insisting on hybrid-only model slates, or rationing air travel.

Much the same applies to the use of energy. Over twenty years in which GDP increased by 110%, consumption of primary energy expanded by only 54%. Accordingly, the economic value created by the use of a single unit of energy seemingly improved by 36%.

The inference is that, in the future, economic output can grow whilst our use of energy decreases. This where the fantasy of “de-coupling” the economy from energy use comes from, and remains persuasive even though experts at the EEB have described the case for de-coupling as “a haystack without a needle”.

It is, after all, surely obvious that literally nothing of any economic value (utility) whatsoever can be produced without the use of energy – so why would we expect to grow the economy without increasing our consumption of energy?

So any theory which postulates indefinite divergence between energy use and economic prosperity affronts the laws of physics. Suggesting that “technology” can somehow over-rule the constraints of physics simply produces ‘self-delusion squared’.     

Cold reality

When we step away from self-deluding convention (and starry-eyed faith in technology), and look behind the fallacy of GDP, very different conclusions emerge.

For starters, stripped of what we can call ‘the credit effect’, world economic output increased by only 40% (rather than by 110%) between 1999 and 2019.

This means that we delivered 5% less economic value for each tonne of CO² emitted, and 9% less economic output from each unit of energy consumed.

Nor is this all. The Energy Cost of Energy (ECoE) is the critical dynamic determining how much economic value we derive from each unit of energy consumed. Driven primarily by fossil fuel depletion, ECoEs have been (and are) rising relentlessly.

If we include ECoE escalation in our calculation, each unit of emitted CO² yielded 10% less material prosperity in 2019 than in 1999, whilst the relationship between prosperity and energy use worsened by 14% over that same period.

The latter point, in particular, is self-evident – if, from any given quantity of energy supplied, more has to be consumed in the supply process, less remains for any other economic purpose.

These inconvenient observations tell us, amongst other things, that we can’t overcome environmental challenges without changing our behaviour, and that we can’t shrink energy consumption without shrinking the economy.

If we factor ECoE into the equation, two further critical points emerge.

First, CO² emissions are a function of the total energy that we use, whilst material prosperity is linked to surplus (ex-ECoE) energy quantities. As ECoEs rise, they load this equation against us

Therefore, a sizeable – and rising – proportion of CO² emissions is tied, not to the economic value that energy use creates, but to the energy that is used only to make energy supply available. We’re never going to combat climate change and ecological degradation effectively until we take this ‘variable geometry’ into account.

Second, realistic appraisal also tells us that we’re nowhere near a point at which we can use renewable energy sources (REs) as a “fix” for the environmental and economic consequences of rising ECoEs.

Transitioning to technologies such as solar and wind power will require huge investment, which has been costed at between $95 and $110 trillion. The money involved isn’t that important in itself. But it corresponds to vast amounts of steel, copper, plastics, lithium and numerous other resource input requirements. Most of these can only be made available through the use of fossil fuels, meaning that the ECoEs of REs are tied to those of oil, gas and coal.

Western societies’ prior growth in prosperity goes into reverse at or below ECoEs of 5%. Less complex EM countries start getting poorer before their ECoEs reach 10%. The latter level of ECoE might, just, be feasible for REs, but the lower level of ECoEs required to maintain (let alone to grow) Western prosperity is a pipe-dream.

Here, once again, we encounter the chimera of technology. The technological progress of the past has enriched us by increasing the efficiency with which we use both energy itself and those other resources whose availability is energy-dependent.

Critically, though, the scope for technological progress is confined within the envelope of the physical characteristics of the resource itself, and, ultimately, is bounded by the laws of thermodynamics.

Simply put, far too many of our expectations for what technology can deliver in the future are based on a fallacious assumption that we can extrapolate technological progress to the point where it trumps physics.

Anyone who believes that to be possible would be better employed writing science fiction, or running a government department. 

Practical implications

If we once free ourselves from the alluring embraces of financial and technological self-delusion, we’re in a position to recognise fundamental challenges that won’t go away just because we bury our heads in the sand.

Our first observation has to be that prosperity consists of those material things – goods and services – whose provision is a function of energy, not of our ability to pour ever more money into the system.

This linkage to energy is particularly important in the provision of essentials, including food and water, housing, health care, education, necessary transport and, of course, energy itself.

Even the most cursory examination tells us that, as prosperity continues to deteriorate in defiance of our economic self-delusion, so the proportion of our prosperity available for all discretionary (non-essential) purposes will diminish.

If, understanding this, you were in government, your forward planning would surely centre on ensuring the availability and affordability of essentials for everyone. This has already become a critical factor, as ever larger numbers are sucked into poorly-paid, insecure forms of employment, just as the cost of necessities continues to rise.

This is where plans for the universal provision of essentials should be front and centre of the policy process, much as – in some countries – universal provision for health care was the flagship objective for an earlier generation of political leaders. 

If you were in business, and applied this same understanding, you wouldn’t be banking on growth. Rather, you’d be working out how best to insulate yourself from a relentless squeeze on discretionary consumption, and how to safeguard your business from the coming technological disillusionment. 

Many people fear that an economic crisis will be brought about by the inflationary consequences of the endless injection of liquidity on the false premise that ‘money equals prosperity’.

They might very well be right.

It’s equally possible, though, that we might see markets brought down by a sudden, dawning recognition that discretionary consumption is destined to contract (as, excluding debt-funded purchasing, it already is); that perpetual growth in future income streams from consumers is a figment of self-delusion; that property prices must fall back into equilibrium with incomes; and that our fascination with technology has been blinding us to the laws of physics as they apply to prosperity, the economy and the environment.  

92 thoughts on “#196. The price of self-delusion

  1. “We are quickly approaching the point where, if the machine civilization should, because of some catastrophe, stop functioning, it will probably never again come into existence. It is not difficult to see why this should be so, if we compare the resources and procedures of the past to those of the present. Our ancestors had available large resources of high-grade ores and fuels that could be processed by the most primitive technology- crystals of copper and pieces of coal that lay on the surface of the earth, easily mined iron, and petroleum in generous pools reached by shallow drilling. Now we must dig huge caverns and follow seems ever further underground, drill oil wells thousands of feet deep, many of them under the bed of the ocean, and find ways of extracting elements from the leanest or ores-procedures that are possible only because of our highly complex modern techniques, and practical only to an intricate mechanized culture which could not have been developed without the high-grade resources that are so rapidly vanishing.” Harrison Brown, The Challenge of Man’s Future, The Viking Press NY 1954, p.222.

  2. Wait, where was the part about how we profit from this?! 🙂

    I’ve dutifully saved my money for decades, waiting for the various bubbles to pop so that I could scoop up bargains, only to watch fools get rich participating in said bubbles, and now, to watch my savings get inflated away into uselessness by governments and “federal” reserves run by private banker cabals.

    • That’s exactly how I feel. I honestly don’t know how to reduce the damage inflicted by inflation. I refuse to “invest” in “markets”. Bitcoin is a joke, PM’s are dead. I understand why all this is so, but it doesn’t help ease the apprehension of watching years of savings evaporate. However, I suppose getting poorer slowly is preferable to getting poorer quickly.

    • The United Kingdom is now into a decade and a half of Severe Financial Repression, and the transferring and re-ordering of wealth has been very profound. Russel Napier observes that governments can confiscate staggering amounts of money (from the citizenry) using these tactics. Napier, with his customary wit, describes the policy as ‘stealing money from seniors slowly’, although in truth money has been confiscated from all those holding their wealth in the polymer Promissory Notes issued by the Bank of England and the alloy currency coins minted by Royal Mint.
      Investment Manager Sebastian Lyon from Troy Asset Management at a webcast was asked: ‘Will we ever return to a normal interest rate environment?’ Lyon responded: ‘Regrettably, the answer is that interest rates are unlikely to be significantly higher for years to come. The Bank of England Base Rate has not exceeded 1% since March 2009. It may be a generation from this starting point before the return to ‘normal’ rates that savers so desire. Negative real rates will remain firmly in place for the foreseeable future, as they have been for over a decade. In the ten years from December 2009, the UK retail price index rose +33.9% compared to the return on cash of +5.1%. I suspect those numbers will be even wider apart during the 2020s.’
      My take on the situation is this. I strongly suspect that the Bank of England Monetary Policy Committee (MPC, otherwise known as the ‘Coin Clippers of Threadneedle Street’) will be content with CPI at or above 2% for a considerable period of time. They – or more likely the government – could well justify such a stance by adjusting policy from targeting a specified rate of inflation to an average rate over the cycle. That would provide official sanction for their real intent of allowing CPI to accelerate sharply higher, while maintaining ZIRP.
      Of course, the MPC may be forced to increase Base Rate, but they would do so with extreme reluctance; and it is highly unlikely (in fact, virtually guaranteed) that the rate would ever be normalised (CPI+2.0%-2.5% [Base Rate should be at, or around 3% as opposed to 0.1%]).
      Therein lays the rub. If the MPC raises rates significantly, as opposed to symbolically, they will push the economy into a slump, and asset prices will collapse. Thousands of mortgage holders would be forced into negative equity, and many would be unable to service the debt. Lenders would experience a rise in defaults on loans secured against asset values that were no longer capable of supporting corporate balance sheets. In addition, interest payments on the national debt would rise markedly, thus forcing severe cuts in public expenditure and/or a sharp rise in the overall level of taxation. In short: the country would be plunged into a debt crisis of unimaginable proportion.
      If, on the other hand, rates remain supressed and credit expansion continues unabated, then the value of £UK will continue to be debased, and there exists the possibility of significant price inflation (notably in essentials); and quite possibly a currency crisis when the value of money collapses suddenly.
      The conundrum was expressed rather well by Lance Roberts: ‘Interest rates MUST remain low, and debt MUST grow faster than the economy, just to keep the economy from stalling’. Welcome to the Kamikaze School of Economics!
      If I have the ‘wrong end of the stick’ here, I am more than happy to be corrected.

    • Kevin:

      I think most of us would agree that, in a ‘normal’ economy, rates would exceed inflation by 200-250 bps. Savers would have positive returns on their investments, making saving a viable route to betterment, and also making pension saving feasible. Young people would be able to acquire homes, and other assets. Business would need to – and could – earn returns on capital exceeding the cost of capital. Yields on stocks and bonds would be positive in real terms, and yields on stocks would include an ERP (equity risk premium).

      1. Why are we not in this ‘normal’ situation? The reality is that the economy, understood as prosperity per peson, stopped growing in the 1990s, and turned downwards in the early 2000s. Governments and others either (a) don’t understand this, and/or (b) refuse to accept it.

      2. Can we return to ‘normality’? The answer is ‘not unless we’re forced to’. Governments (and the public) are not prepared, or able, to recognise the underlying reality, and, the longer this state of denial continues, the greater the pain of returning to ‘normality’ becomes.

      3. Will we be forced – unwillingly – back to ‘normality’? The answer to this is ‘yes’, in that continuation of current trends will take economies to the point of crisis (I’m aware that some would use words stronger than ‘crisis’).

      4. What are the catalysts likely to be? As things stand, the real – comprehensive – cost of living is going to rise much faster than average or median incomes. This will impose worsening hardship, starting with the poorest but then extending up the income scale. This process is likely to exert ever-increasing pressure on governments. This needn’t necesssarily mean unrest, as voters might become increasingly disturbed by the hardship visible for all to see.

      The question then becomes one of ‘how?’ and ‘where?’ China is amongst the countries likely to manage this best, but there are Western countries, too, which might be in the ranks of the ‘first responders’ to this crisis. Others, notably the UK and the US, are likely to require a lot more distress than others before they start to respond logically.

    • gbell, David:

      First off, if I’m right in sensing anger in your comments, I share it.

      On the specifics, I regard Bitcoin (etc) as investments, not alternative currencies. I’m not a gold bug, but I do see some merit in gold.

      Investment advice is a regulated activity, and rightly so, so I have to be pretty general/theoretical in what I say here. This can be frustrating, given my background in analysis, strategy and as head of research. I’ve thought about doing an article here on investment principles, not making recommendations.

      Logic decrees that someone who does understand underlying realities should be able to run rings round those who don’t. That gets harder to put into practice when the system is run by the irrational. If we do understand the realities, we can identify some highly-touted “growth” sectors as turkeys, and other, supposedly-‘boring’ sectors with great promise.

    • Hi Tim,

      Can I ask a couple of follow up questions on your comment. You say, “The question then becomes one of ‘how?’ and ‘where?’ China is amongst the countries likely to manage this best, but there are Western countries, too, which might be in the ranks of the ‘first responders’ to this crisis.”

      Which Western countries would you consider would be in this camp and do you think that China’s non democratic structure helps it to make the changes necessary as they may very well be unpopular.

    • Like most people (I hope), I’m strongly in favour of democracy. But ‘pure’ democracy is a rarity.

      China may not match the Western idea of a democracy, but the Chinese riposte here might be to ask quite how democratic countries like America and the UK really are. Is everyone’s vote or voice really equal in the West?

      Pragmatically, China already has a mixed economy, which combines public and private sector provision. Too many Western countries have followed an extreme ideology which argues that only the private sector really matters or generates prosperity, and that private profit is the best motivation.

      Western countries best placed for the future will be those able to put this nonsense behind them, and to prioritize social cohesion and the public good over doctrines of ideology and self-interest.

  3. I think the point about running up against the laws of physics needs emphasising again and again. Most politicians believe in perpetual motion; accordingly they make a living by selling delusional optimism. I’ve started making the point that those who peddle this fantasy are actually committing treason against our kids – that within a decade or two they’ll be seen in the same light as Quislings and collaborators were in 1945. Nuremberg Two beckons.

    • Your point about economics and the laws of physics is spot on. I make this point repeatedly at this site, and others make it elsewhere. We’re very much in a minority. What baffles me, and perhaps you too, is that this is surely so obvious.

      One long-ago writer said that we discover the physical nature of the world around us when, as toddlers learning to walk, we first bump into the furniture. Why do so many people seem to ‘un-learn’ this?

      If you meet politicians – even the good ones – you soon find out that, in most cases, their thought processes run along tram-lines

  4. I am summoning the ghost of Julian Simon: “copper is a product of our minds.”

    • I like the line, from another source, that “a country is more an idea than a place”. If that’s so, bad ideas make for unpleasant countries, and vice-versa.

  5. Gail Tverberg, a reliable adult in the room with a thoughtful essay on having actual practical plans for serious future challenges like the pandemic, instead of constant clueless firefighting as things randomly happen. She effectively suggests that we look for the best solutions according to our available sustainable resources, mentioning precious remaining energy as well as finances:


    This is the sort of voice of reason that our insane world would never have at the highest and most appropriate position in government to safeguard our lives as much as is possible. The evolution of our species seems to have stalled, so that in civilisation after civilisation, at the same stage we will collapse in self distructive acts of stupidity and greed.

  6. It’s good to see you shift up a gear Tim towards the realm of political economy.

    Because of this I feel it is time that you felt some opposition (in terms of constructive criticism) which I hope will shift your/our work much more towards the middle class mainstream.

    Let me start by saying I’m glad you are starting to deploy ecological terms into your narrative, such as sinks. In my view, shifting towards ‘ecological rationality’ is highly important since part of the problem with the human condition is the extent to which it has disembodied itself from Ecology. As such essential goods and services are in fact the sustainable provision of ecosystem services which of course is the foundational component of the overall economy. Consequently, despite only comprising a fraction of GDP value, without these ecosystem services, there is no economy.

    Therefore (and my constructive criticism starts here), your statement “If we follow the logic of GDP, the complete destruction of the Earth’s ability to produce food wouldn’t be too serious, because it would leave the other 94% of the economy intact” is rather disingenuous since without food there would be no economy to discuss!

    Clearly, despite being a fraction of overall GDP, ecosystem derived services are the primary basis of the economy and form the foundation of the (technological) division of labour.

    Moving on, this statement “What this in turn means is that most asset “values” are no more than a function of our self-delusion about the true size of the economy of today and tomorrow” is extremely questionable and not grounded in current economic practices.

    Notional values are not a measure of market value or self delusion, they are more a measure of ‘leverage’ which forms the basis of derivative transactions. As such, “notional value is integral in assessing portfolio risk, which can be very useful when determining hedge ratios to offset that risk”. Similarly, “notional value also applies to interest rate swaps, total return swaps, equity options, and foreign currency derivatives”.

    From this point of view, in order to be taken more seriously, rather than critiquing the financial sector as ‘self-delusion’, you need to be critiquing the function of ‘leverage’ within the scope of energy economics.

    This leads to your ECoE assessment of decoupling which is truly outstanding and is the one aspect of your essay that will drive societal transformation/adaptation, especially in relation to the ‘law of diminishing (energy) returns’.

    Next, not a critique as such, but in terms of your statement, “surely obvious that literally nothing of any economic value (utility) whatsoever can be produced without the use of energy”, my feeling is that economic value needs to be changed to something consistent with the surplus energy framework whether it is material value? discretionary value? prosperity value. In other words, economic terminology needs to evolve to capture the different types of value contained within different parts of the energy economic system.

    I’m presuming you are aware of ‘gross primary production’ and ‘net primary production’ within Ecology as well as the energy function of ecosystems including ‘rate of energy transfer’ (velocity), route of energy transfer’ (investment) and ‘efficiency of energy transfer’ (productivity). Perhaps Ecology may help to provide more distinct terminology regarding different types of value in relation to the different types of energy transfer within an ecosystem.

    The following isn’t so much a critique but some added observations to your more practical policy suggestions which better incorporate ecological rationality.

    Recent surveys have indeed identified spatial inequalities as a top public concern which is understandable under the rubric of the law of diminishing energy returns and the consequent diminishing of per capita material prosperity as the human population grows. Hence, Brexit, the ‘levelling up’ agenda and the ‘build back better’ agenda which as governmental agendas are probably preferable to you are getting poorer because of the law of diminishing energy returns and there is very little hope that we will ever be going back to the post war years of increasing prosperity especially under conditions of human population growth.

    In this respect, Governments and political parties by their democratic nature (and arguably as part of their duty) have to straddle that line between political economic reality and political economic rhetoric in order to pivot diversely constituted populations towards cooperation between competing groups rather than competition between competing groups. In other words, governments have to be able to manage expectations and survival anxieties across diverse and antagonistic groups.

    Secondly, on a more philosophical note, humanism as typified by the three dimensions of liberty, fraternity and equality has in part, especially in an ecological rationality sense, been part of the problem. This is mainly because humanism is disembodied from Ecology by its philosophical nature, especially that Rights are not conferred to the Animal kingdom as a whole, which allows humanism to evade the life death relationship that underpins the sustainability of LIFE.

    This allows humans to treat Ecology as a monetised resource rather than a life support system which in turn gives rise to the race to the top in terms of ecologically deluded expectations.

    This, by the axioms of the maximum power principle, leads humans (particularly in the West) to broaden the scope of ‘essential’ goods and services so that Westernised poverty and destitution is relativised out of existence. This means ‘Western poverty’ needs to be derelativised into what I am currently referring to as sustainable poverty since within the scope of ecological rationality, Western poverty is paradoxically more typified by sustainable greed.

    In other words, what is a sustainable version of universal basic services in energetic/ecological terms.

    In this respect, money isn’t prosperity, money is notional energy which theoretically translates as the potential energy transfers of a human ecosystem via rates of energy transfer, routes of energy transfer and efficiencies of energy transfer.

    To conclude, whilst humanism is three dimensional, ecologism is four dimensional in that it is typified by


    since ingenuity, adaptation, traits and geological/atmospheric/ecological/biological conditions are rarely equal and for all intent and purposes cannot be equalised.

    Hence, ecologism raises the ugly head of natural selection, population ecology and biocapacity but without integrating these aspects of ecological rationality, we are simply self deluding ourselves into the ecologically partitioned reality of humanism.

    • Steve

      Thanks for some very thought-provoking comments.

      First of all, I am as concerned as anyone about the environment and ecology. To head off degradation of both, we need to explain that the economy and the environment are not in competition – once we understand ECoE and its implications, it becomes clear that reliance on fossil fuels would destroy the economy every bit as much as it would destroy the environment. So enlightened self-interest requires action on the environment. Protecting the environment doesn’t, as we’re so often told, have an economic “cost”.

      My point about “94%” was intended as satire on the absurdity of GDP as a measure of prosperity! Obviously, if the 6% of GDP that is food supply were to fail, 0% of the economy would remain, not the statisticians’ 94%.

      On asset prices, I stated that these are a function of two things – the cost of money, and forward expectations. An investor in, say, a lot of “tech” or “growth” stocks has (a) cheap capital to invest, and (b) faith in the ability of this type of company to “grow”. It seems to me that leverage is implicit in almost everything I say about the financial economy – $3 of debt for each $1 of “growth”, for instance – but ‘false narratives of the future’ are important in shaping where ‘notional valuations’ show up.

      On politics, my stance relates this to reality vs denial around prosperity. A sensible person in politics would accept the end of growth in prosperity, and start planning for how to ensure that the necessities are available and affordable for all. A non-sensible person would believe that, say, building more roads and airports will “grow” prosperity.

      If we accept that prosperity is deteriorating, this means that luxuries become less affordable. The definition of ‘luxuries’ isn’t confined to the material, i.e. the latest gadgets and frequent holidays. Another ‘luxury’ that we can no longer afford is that of having decisions made on the basis (a) of ignorance, and (b) of ideology. It shouldn’t matter whether our leaders are Tory or Labour, GOP or Dem. What matters is that their decisions are pragmatic, founded in reality rather than delusion, and aimed at the betterment of all.

    • Thanks Tim and thanks for your sympathetic response, I very much agree. And I look forward to seeing how your important work evolves.

      Perhaps part of the problem with prevailing narratives, is that unsustainability is made implicit whilst sustainability is made explicit. Perhaps this is part of managing expectations or part of the usual democratic evasion to avoid the potential for political point scoring but I certainly think that the unsustainability of the financial sector needs to made much more explicit beyond self delusional, especially for non financial trading folk such as myself.

      Presumably this means much more dissecting especially in the extent to which investment funds and traders are pricing and trading in ‘unsustainable notional value and leverage’.

      I certainly agree with your tenet of sustainable universal basic services but certainly the difficulty I am constantly confronting is that the middle classes whether on the Left or Right are trying to contrive a ‘sustainable median income’ well in excess of what is ecologically and energetically sustainable.

      Simplistically speaking, the Left are seeking to maintain their economic status quo by blaming the very rich (and promoting veganism!) although they are very much a part of the Global Rich and so are heavily reliant on the import dependencies that externalise ecological degradation whilst the Right are trying to maintain their economic status quo by denying fossil fuel depletion (and promoting population degrowth!). In the process, ECoE is getting lost within this rivalry.

      In other words,

      “The entire onus of the adjustment falls on the rich. Who are the rich, viz. the global top decile? About 450 million people from Western countries, or the entire upper half of Western countries’ income distributions; some 30-35 million people from both Eastern Europe and Latin America, that is respectively about 10% and 5% of their total populations; about 160 million people from Asia or 5% of its population; and a very small number of people from Africa”.


      Between Branko Milanovic, Jason Hickel and Kate Raworth coupled with your work and the work of other energy economists lies the sustainable answer.

    • Thanks.

      My role, as I see it, is to interpret the economy understood as an energy system, and to reach objective conclusions through modelling the economy in that way. I mention this because objectivity requires a certain amount of restraint in the political field, i.e. not supporting or opposing any particular partisan position.

      I don’t disguise my negative views of extremism in economics, and I’m an unashamed advocate of the ‘mixed economy’ that blends the best of the private and public sectors. Privatizing the police would be a disaster, and so would nationalizing electricians and plumbers.

      Extreme collectivism failed the USSR, and was failing China pre-Deng. Extreme market ‘liberalism’ has failed – and is failing – Britain and America.

      The failure of extremism isn’t confined to economics – societies founded on economic extremes tend to be unpleasant, as well as economically unsuccessful.

    • @ Steve Gwynne

      This is bogus in my view:

      ” Right are trying to maintain their economic status quo by denying fossil fuel depletion (and promoting population degrowth!)”

      The left deny FF depletion too. Think Dems in the US who want growth and renovation of roads, bridges as well as trains. It is well known that most electricity is produced by FFs. The Left commits the Cornucopian and techno-optimist fallacies as much as do the Right.

      Also, most conservatives in the developed world want *more* babies, not fewer. They are consumers who add to economic growth! Religions all want larger flocks. They are more conservative in general. Neither the left nor right want shrinkage.

    • We face grave financial, economic and environmental and other challenges, and it’s hard, looking around the Western world, to see anything resembling leadership that’s up to the job. Both Left and Right are in denial.

      Moreover, what now counts as ‘Left’ doesn’t look at all ‘left’ in historical terms.

      This malaise seems particularly pronounced in the US and the UK. It’s depressing if the best the US system can produce is a choice between Trump and Biden, whilst the British have only Johnson or Starmer. Could somebody run for office on a ‘neither of the above’ ticket?

    • To ‘recontextualise’ what I said Steven,

      “I certainly agree with your tenet of sustainable universal basic services but certainly the difficulty I am constantly confronting is that the middle classes whether on the Left or Right are trying to contrive a ‘sustainable median income’ well in excess of what is ecologically and energetically sustainable.

      Simplistically speaking, …..”

      I engage in online activism virtually every day and across diverse platforms and simplistically speaking, these are the arguments I encounter over and over again!

      Of course, what you are constantly confronting in terms of arguments might be entirely different which is why I effectively began that section with an ‘I’.

      So, to reiterate, what I am constantly confronting is the middle class Left blaming the ‘super rich’ and exhorting others to go vegan (in lieu of population growth) and the middle class Right denying that there is a need to transition from fossil fuels because they don’t believe in peak fossil fuel. Similarly, they constantly refer to the population boom currently underway in Africa, in lieu of having to reduce resource consumption.

      These are, simplistically speaking, the most common arguments I encounter when confronted with the possibility of prosperity degrowth and ecological degradation rather than accept that their own income derived consumption patterns are unsustainable.

    • Incidentally, Steve, what do you mean about shifting towards the “middle class mainstream”?

      Some would perhaps say that I’m not radical enough, rather than too radical.

    • SteveG: Re:
      “What this in turn means is that most asset “values” are no more than a function of our self-delusion about the true size of the economy of today and tomorrow” is extremely questionable and not grounded in current economic practices.

      Notional values are not a measure of market value or self delusion, they are more a measure of ‘leverage’ which forms the basis of derivative transactions. As such, “notional value is integral in assessing portfolio risk, which can be very useful when determining hedge ratios to offset that risk”. Similarly, “notional value also applies to interest rate swaps, total return swaps, equity options, and foreign currency derivatives”.

      This is not the only usage of “notional value(s)” Tim is right. Liquidation value is different than market value if one considers mass exodus out of an item. Market value would be a tiny fraction if a majority sought to sell.

    • Just to clarify, the aggregate valuations of stock markets and property are notional – the only people to whom these assets in their entirety could ever be sold are the same people to whom they already belong.

      Expectations do play a significant role. If one company is expected to grow rapidly, whilst another is regarded as low- or ex-growth, their market valuations will reflect this. This is why some loss-making companies trade at high stock prices. The current fixation is ‘growth powered by technology’.

      Liquidity is critical, and the driving factor for liquidity is leverage. If credit is available in large amounts and cheaply, asset prices will be high.

    • Steve G
      The article is incomplete. I was a derivative based money mgr for over 2 decades. I was on the first panel at the NY Fed on currency options in the early 80s. The notional amount of a swap, option, or other derivative is the face(total) amount of underlying security the contract covers. If a large move occurs, say 15%, the risk(rewarding winner/loss to loser) is a fraction of the notional amount. If a broker or bank decides to margin a party to the contract, they might ask for 20% or other deposit. The leverage is determined by the margin.

      Options are leverage too, but there is a speculative time premium paid, like a bet or insurance premium. The underlying is also called notional amount.

      Tim’s usage is another correct one.

    • Thanks for that Steven, although I am non the wiser as I am clueless about derivatives.

      However, slowly slowly I can learn.

      Is there a way of understanding whether the derivative markets are hedging sustainable or unsustainable future claims on energy?

    • Derivative contracts can be on any trade able item. The system is what it is. I don’t like it, but I understand it.

    • Steve G & all, The bulk of this post is clear and insightful. However it expects or hopes that rational behavior will (or could?) result if only a critical mass of leaders understood it. To date, history has shown that to be a rare occurrence. I hope that an exception occurs given the destructive path the planet is on. I fear for our grandsons (6 & 8)

  7. Dr Tim,
    I believe you have mentioned it a couple of times where we are consuming more energy, more efficiently, yet producing less value. I suspect it’s electronics and phantom loads.
    Could you please elaborate because this trips me up.
    David M

    • There are a number of factors involved, but these are probably the main ones.

      First, ECoE. If we access 100 units of energy, and ECoE is 2%, 98 units are available to produce economic value. At 10%, only 90 are available for this. Unless efficiency increases, we get less economic output (say in the ratio 90/98) from the same 100 units of energy.

      Second, supply mix and use. We measure energy using common units, enabling us to compare, say, oil with solar power. But this is simply quantitative – the characteristics and applications differ. Electricity is a good way to power trains. Oil is a good way to power cars. Characteristics limit interchangeability.

      Third, choices. X units of energy can be used either to power a combine harvester or to make party balloons, or to manufacturing a long-lasting garment, or a throw-away item, or packaging. Choices are seldom wholly rational or optimal, and how we price them, in the measurement of value, can be similarly subjective and imperfect.

      My analysis suggests the following:

      – Economic value per unit of energy consumed seems to have become remarkably static – efficiencies may improve, but mix and choice of uses offset these gains.

      – ECoE – once we factor this in, the downside (from rising ECoE deductions) far more than offsets any efficiency gains.

  8. Great post, but I encourage you to look ahead to the time when the monetary crises you anticipate actually happen.

    Rich countries now rely entirely on market operations to distribute resources. Once the current plateau of low growth turns negative forever, and people take notice, a huge crisis of confidence will drive the notional market value of most growth-dependent assets (equities, bonds, non-farm real estate) to near zero. Liquidity does the same, yet debt remains. Both options for dealing with debt, massive inflation and massive debt-default deflation, will destroy confidence in money. You have explained this scenario very well, but seem to believe inflation will prevail.

    If existing money implodes, governments can create new money at any time for use within their borders (ration coupons, for example), but what are buyers of resources from international markets going to do if foreign exchange ceases to exist, something that a global monetary crisis could easily precipitate?

    Organizing distribution of essential goods to the whole population will be difficult enough, even for countries that have all needed resources within their borders, but what will countries do to secure food, water and energy if they need to buy them from others (yet the “others” won’t accept their money)? I put the US in the first category and the UK firmly in the second. I see China as somewhere in the middle.

    You are rightly worried about a world in which essential resources are mal-distributed. Even longer term, what about a world in which there will not be enough to go around even if essential resources were distributed perfectly fairly? I fear a lot of geopolitical risk will follow right on the heels of market risk. How do you see the long term playing out?

    • Thanks Joe, and I agree with the points you make.

      I’m not wholly in the “it has to be hypernflation” camp. This article concludes with inflation as one of two possible outcomes, with “markets brought down by a sudden, dawning recognition” of reality as the other. The latter is the massive default outcome.

      In the event of mass defaults, it seems likely that governments will try to ‘make good’ with huge amounts of newly-created money. This suggests that both cascading defaults and runaway inflation are plausible outcomes.

      Recent events have exposed the fragility of international trade, with supply chains stretched in many cases, and fracturing in others.

      I’m perfectly happy for us to discuss longer term issues, and agree that resources will in due course become insufficient even if they were distributed fairly.

      I’m happy to discuss the longer-term outcome, and can set this up as a topic if you and others want to discuss it. Part of the problem is trying to envisage a change of mind-set towards the co-operative rather than the competitive, at a point when neither government nor the general public even understand that a prosperity/resources issue exists alongside the environmental.ecological one.

    • I for one would welcome an article on future projections including some policy suggestions if possible.

      Even better for me would be one that is directly but implicitly addressed to the prime minister 😊

    • I’m thinking about that. One approach (barring a better one) could be to look at where we need to be, and work backwards from there to what we ought to be doing.

      Little of this is likely to be popular, of course!

      I also think we need to look at this internationally, at least including other Western countries. Policy-wise, the UK and the US could be the hardest nuts to crack, admittedly.

      I should perhaps add that this could be quite an exciting thing to discuss.

    • If international trade collapses and countries can no longer obtain essential resources by trade we are back to barter or forcing other nations to provide resources. Back to the age of empires! Although next time it won’t be predominantly the British Empire, it will be the Chinese Empire.

    • Trevor, I expect you’re correct about China emerging as the next Empire. And yes, the world is likely to be blindsided by the tightening bottlenecks of materials and energy (as Dr Tim so aptly illuminates)

      Here is an example of Greenwash, likely sincerely believed by many involved and by most global leaders in business and government. Growth is never doubted. Short article translated from ElPais.

      Thinking green: cooperation, alliances and working together


  9. @Steve Gwynne
    “Is there a way of understanding whether the derivative markets are hedging sustainable or unsustainable future claims on energy?”

    I think the future is sufficiently murky that nobody can tell whether the hedges are realistic or fantasy. For example, MBS in Saudi is preparing to sell another 1 percent of Saudi Aramco. He offhandedly commented that ‘the US will not be producing oil in 10 years’. He also predicted that Russian production will fall off the ledge. If he is correct, and the Saudi’s will still have plenty of oil in 10 years, then paying lots of money for one percent of Saudi Aramco is probably one of the better uses you might have for your money. On the other hand, if you believe the US Energy Agencies that US production will be higher in 10 years than it is right now, then all bets are off. I just don’t think anyone knows for sure. I don’t even know how to quantify the risk.
    Don Stewart

  10. John Mearsheimer, professor of political science at Chicago University, who takes a particular interest in international relations, has an overview that contradicts the mainstream narrative,

    Bound to Fail: The Rise and Fall of the Liberal International Order

    I think he’s got the immediate future about right,

    this analysis doesn’t mention energy and resource constraints, population, the frightful mess of the financial system and the looming environmental disaster,

    I saw this global population projection,


    I think we’re a lot closer to peak global population than a lot of people realise.

    • This is very good indeed, but would have been even better if it had included the economic issues around energy, ECoE and the environment, leading to how much “growth” has been faked through financial gimmickry. In addition, I personally might quibble with some definitions of “liberal”…….

    • “I think we’re a lot closer to peak global population than a lot of people realise.”

      Since 6.5B out of 7.8 is below age 50, for peak population to happen “soon” either average life spans and/or birth rates must collapse.

      It won’t happen only by fertility rate dropping below 2 down to 1.

    • @DJ. Just some straws in the wind. Sperm counts are continuing to decline. Testosterone is down. Disease markers are rising globally. In terms of diet, the poor eat more unhealthily than the rich…and there are a lot more poor than rich in the world. Suppose that prosperity (as measured by Dr. Morgan, declines to the level of India. What effect would that decline have on the ability of medical institutions to keep all the unhealthy people alive? Does the pandemic in India and South America right now give us a clue?
      Don Stewart

    • I agree, DJ. Longevity peaked in some places earlier this C. (Russia for ex) It leveled off some years ago in the US, and might be dropping now with the pandemic. I suspect a combination of pollutants which lower fertility in both genders, increased negative feedback affecting longevity, resource wars (sometimes disguised as religious or cultural), women’s empowerment in more nations, family planning knowledge and technology, and the expense of raising kids nowadays will all work to reduce pop growth faster than demographers suspect.

    • I’m not saying it won’t happen, only that if it does it will be because of horrible circumstances.

      India has a life expectancy of 69. US life expectancy has fallen from peak of 78.84 to 78.54.

      Current world fertility rate is 2.4.

      Falling sperm counts and not affording babies is a developed world “problem”.

      For population to peak within the next 20 years people need to stop having babies, which they won’t, or life expectancies collapse, not drop by a year or two.

  11. A global experiment is currently underway to replace/supplement GDP with Gross Ecosystem Product.

    China is attempting to incorporate this new metric which largely seeks to provide an economic value for ecosystem services.

    Guess what!

    Gross Ecosystem Product and the ecosystem services that it seeks to measure does not include energy production at all!

    So again we have a conceptualisation of the ecological economy which does not have energy as its foundational base despite the fact that Ecology is underpinned by gross primary production, net primary production, rate of energy transfer, route of energy transfer and efficiency of energy transfer.

    • Steve G

      I have had a brief look at one of your earlier references. ( May 2nd at 1.03)
      This was to the Leeds Uni. “doughnut “ model .
      It has close analogy to Kate Raworth’s approach which is supposed to offer some hope in controlling degrowth.
      However, my view is that in models like these the energy component is totally misplaced / misrepresented. So as anyone who understands Dr Morgan’s work and who has a handle on thermodynamics would appreciate the model is worthless.

    • Not worthless, just incomplete and will probably require a complete rethink about how to incorporate different types of energy transfers into their modelling.

      I’ve already tweeted the Stockholm Resilience Centre and they have acknowledged me so let’s wait and see.

    • Re Stockholm & Rockstrom: They won’t even mention population level and growth as a variable. I’ve tried for several years with no response. Must be that the politically correct, scientifically ignorant pay for their endeavors.

    • Totally agree. I’ve tried too. Unfortunately population denial is easier to deal with than population ecology for large sections of acedemia.

      They avoid ecologism due to population ecology, natural selection and genetic recombination and instead default to eco-humanism.

      Let them get on with it. The main thing is incorporating energy production into their sustainability models.

    • Steve G., Thanks for the link to the PNAS paper focussing on China. I did find one small reference to energy here:

      “Examples of the value of marginal product approach from the literature include the impact of water flows upon hydropower production (64),”

      Biomass deserved mention in my opinion, as wood and non-food fiber from crops (and maybe peat in some areas) are derived from nature. Of course depletion of those items beyond renewal rates is a one shot deal.

    • Re: the PNAS GEP paper:

      It just occurred to me that If there are near surface heat sources (like in Iceland) that also would qualify as an energy source from ecosystems. I always wondered why the US hasn’t figured out hw to tap into the huge Yellowstone caldera without despoiling the area.


    • I agree Steven. There is a serious omission regarding biotic and abiotic energy production as part of ecosystem services.

      Probably going to take a while to feed through but it should turn out to be a game changer.

      Well done us 😊🙏💗

      I guess an energy production per capita metric will need to be formulated and some safe operating space associated with it including how the energy is produced.

    • Just finished watching a BBC Horizon presentation on “ The science of sewage”.
      Very well presented . There was a claim that the gas byproduct of this enormous plant can power 28,000 homes. Sounds wonderful , till one considers the energy consumed by the enormous ongoing filtration equipment which would power maybe 2,800,000 homes. EROEI is yet again misrepresented.

    • Yes interesting Jomelco. Presumably they were also extracting phosphates for fertilizer use as rock phosphorus becomes scarce. I notice in the write up they were also investigating how urine could produce electricity and using microbes for medicine.

      With the addition of biogas, all these applications could come under a subset of ecosystem services called biotic and abiotic human ecosystem services which could be further categorised by per unit energy use.

      My thinking at present is that we have gross primary production of energy and we need to know what essential goods and services can be provided for a certain amount of energy.

  12. Tim, I’d really be interested in an article on investment principles – something that isn’t widely understood. I think they should teach this is schools. (maybe they do)

    Talking to friends – not many seems to have any idea about investments – apart from buying a house and a pension – that is about it.

    In my, albeit very small investments – I’m a ‘not all my eggs in one basket’ investor. Investing as diversely as possible, with some safe and some more risky positions.

    One thing I have noticed – when rich people have spare cash they invest it – poor people on the other hand seems to spend it. Perhaps an oversimplification, and hard to get going if you are living hand to mouth.

    • Thanks Gordon, I’m giving this serious consideration, though of course I will avoid anything that could be construed as investment advice.

      I’ve always been very interested in investment theory, and I’m lucky enough to have worked with some really great people in this field.

      Before that, though, I’m working on the suggestion of an ‘open letter’ to government(s).

  13. “Western societies’ prior growth in prosperity goes into reverse at or below ECoEs of 5%”
    Dr Tim, did you mean “at or above”?

  14. Thanks for another great essay, Tim.

    WRT the geopolitical situation I was intrigued by the latest Keiser Report.
    The central point made is very prevalent – namely that the US Dollar has reached its Triffin dilemma moment. This is the time when the costs of having a Global Reserve currency outweigh the benefits.
    The said Keiser Report is here:
    The show heavily referenced a report by Lyn Alden, which can be read here:

    If you remember Rob Newman’s A History of Oil, we are at the Salvador Dali part – where Dali wrote all those cheques thinking that everyone would keep them rather than cash them in as it would “increase in value”. What happens when they cash them all in at once? Same with the Petrodollar – the Chinese put a stop to that in 2013 with the One Road One Belt initiative instead of recycling US Dollars. Those dollar bills are coming home with the Fed holding more and more whilst Chinese (and Japanese) holdings decline.

    The point I am trying to make is how does this translate within SEEDS and where to from here?
    I would like to hear your thoughts on this

    • CHS asks

      “What will benefit the banks?”

      and says it cannot be hyperinflation because

      “…how will banks profit from households paying off their once-stupendous mortgage (that required 30 years of monthly payments to pay off) with a single month’s pay?”

      “Hyper-inflation will destroy not just the currency but the entire banking sector, which is politically powerful. Will the banks just sit by passively watching their wealth and income being destroyed by high inflation?”

    • CHS is always good, and this article is exceptionally so.

      As I read it, the emphasis is on the limits to what can be done, and the limits to knowledge about what can be done. The banks don’t want hyperinflation, and its not in the national interest – but can the banks, or for that matter the national interest, actually get what they want?

      My take on this, of course, is that we’re in wholly new circumstances – caused by rising ECoEs and de-growth – that invalidate prior assumptions, and take away much of the banks’, the elites’ and government’s ability to predict and direct events.

      According to the SEEDS model, the prosperity of the average American has been falling since 2000. As of 2019 (i.e. pre-covid), that decline had been modest (-7% over nineteen years). That decline has been slow enough for denial and collective self-delusion to retain traction. But it remains a fundamental, unprecedented event, meaning that previous certainties no longer hold.

  15. Should also have said – your excellent posts continue to get better and sharper Dr Morgan, and comments often contain very interesting and valuable insights too. Thanks to you and all.

  16. Is Thermodyankics Sufficient?
    No, thermodynamics is not both necessary and sufficient to understand the current predicament in the US (and similar economies from China to Britain). Thermodynamics, as applied to the practical problems of the world needs starting conditions. With physics and chemistry, we have pretty reliable starting conditions with the exception of the extremely small (e.g. quantum phenomena) and possibly the very large (e.g., Big Bang scale events). But when applied to something like the economy, thermodynamics can only guide us given some assumptions about some human created starting conditions: e.g., the current neoliberal political order and pretty much unrestrained capitalism and consumerism along with the physics and chemistry which are pretty well understood. Thermodynamics as well as financial common sense indicates that our current trajectory is going to hit some kind of wall or fall off some kind of cliff in the near future.

    We can use thermodynamics and financial modeling and what we know about physics and chemistry (e.g., changes in climate or depletion of resources), and we can use biological principles (e.g., the protein leverage concept for many animals from slime molds to baboons and, yes, humans), and the principles of regenerative agriculture, and insights into the social nature of humans to sketch out some possible futures.

    But those possible futures don’t look much like the current situation. For example, yesterday I listened to a panel of doctors talking about the impending bankruptcy of the Medicare system in the United States. The discussion pretty quickly moved to the procedures and drugs and tests and so forth which comprise ‘standard of care’ in the US. One of the panelists finally exploded with a claim that his colleagues were essentially fiddling while Rome burned. The first and foremost duty of a doctor is to get the patient’s weight down (97 percent of Americans either weight too much or weight too little for the wrong reasons (e.g., smoking, cancer, etc.). Once the weight is down to the optimum, the very few remaining chronic disease cases can be dealt with.

    Suppose that doctor is correct. Then the task that those who hope to defend the dollar as a reserve currency must accomplish is to entirely restructure not only the profession of ‘doctor’, but also the size and purpose of the entire pharmaceutical industry, destroy most of the industrial food system and replace it with gardening and cooking, and change agriculture to regenerative practices. Such a task involves more than simply thermodynamics and more than finance, it involves very many diverse scientific disciplines but there is an underlying structure to everything which makes it all related.

    It won’t be simple, if it is even feasible.

    Don Stewart

    • Roger Hallam has posted a new video outlining his latest approach,
      it’s aimed at the kids and it’s unflinchingly stark,

      “you are all going to die, you’ll have to take over the state”

      it’s actually quite shocking and I’m suprised it hasn’t been pulled by youtube,

      in his framing of “The Real World” runs from 22mins 50secs to 51mins 38secs,
      he pulls no punches.

      do you think he’s being hysterical?
      we here is him talking to Peter Carter, Expert IPCC Reviewer,

  17. And in this morning’s business news, the price of commodities have pushed to a new high, the Baltic Dry Index is up 650% since the Covid low to an 11-year high, US lumber is at an all-time high price – up 4X in 12 months, and JLR/Mini have suspended production of new vehicles due to a computer chip shortage.

    Looks very much like the often discussed (especially by Tim Watkins) supply chain “issues” have now arrived. Some indicators of further declines in prosperity as necessities experience inflation?

    • Cost of essentials rising; consumer discretionary expenditure rises as “pent-up” liquidity is spent; nobody keen to reduce deficit & central bank monetization; nobody willing or able to raise rates; investors, with cheap liquidity on tap, favour anything but cash; asset prices inflate.

      That couldn’t lead to higher inflation, could it?

  18. And in other news, the “feeding frenzy” in the UK residential property market reaches a new apogee with £11.8bn net mortgage borrowing in March, the biggest rise in net lending since April 1993. Government-induced, with the stamp duty holiday; I remember the “double MIRAS” boom in the late 1980s – that ended well with hundreds of thousands of families caught in ‘negative equity’. Although the interest rate on borrowing via a mortgage is historically low, there are many taking out eye-watering loans today. These mortgages are virtually all capital & interest “repayment” loans.

    Speaking to a couple at the moment (just had first child) who have borrowed £326,000 over 34 (!) years. Mortgage costs just £1,287.70 a month @ 3%. If interest rates rose to 7% (so that the banks and building societies could actually make a decent profit) then payment leaps to £2,115.74; still more attractive than renting, though.

  19. currently the establishment is trying to restart and reinflate economic activity with hopes of getting back to steady growth,
    growth being the thing that they’ve not been able to achieve since 2008,
    it’s like they’re trying to jump start a corpse and get this zombie up and staggering in the opposite direction to that which every physical indicator suggests we ought to be going, degrowth, transition, simplification and frugality.

    in a parallel world it’s a year ago, 2020, covid has hit and the stock market is starting to tumble,
    they accept this and allow the everything bubble to burst and a rapid hard default to happen,
    businesses that are no longer compatible with expensive energy, falling prosperity, bleak environmental projections and a desperate need to transition aren’t bailed out but allowed to die off,
    most airlines gone or a shadow of their former selves, tourism toast, corporate scale resorts and hospitality are allowed to founder,
    only vital services get state fiscal support, all citizens are allowed to access the benefit system and social security safety net if they are unable to work,
    no furlough schemes are offered to employers, no businesses are put on life support, an open ended eviction and mortgage forclosure moratorium is put in place,
    it’s accepted that covid is the straw that broke the camels back, a period of sustained growth that has endured for over a century, growth is over, degrowth has arrived,
    when lockdown restrictions are lifted people will be going out into a new world dominated by a complete revision of the economy and financial system and all effort will go into transition,

    this all sounds pretty dire and dramatic but they come out of covid without an everything bubble, with some but not mountains of new debt and everything deflated to a realistic level as a baseline for the new direction,

    yet here we are in 2021 with nothing changed, trapped in stasis, unable to move forward because of limits, we still have our bubbles and debts, retreat beckons but we stubbornly refuse to recognise it as an option, two more years have been wasted,

    the world has changed but we still haven’t.

    in the last year and a half circumstances, i.e. covid, have imposed the first major step of degrowth, we could go with it and build upon it,
    but no, apparently we have to go back to futile efforts to achieve growth, why?

    • Matt, I chalk it up to human nature and MPP (maximum power principle).

  20. Time for some Enlightenment.

    If developments seem perplexing, and policies irrational, it is because, since the winter of 2019, the so-called Great Re-set has been in full implementation phase.

    The Bio-Digital-Military-Financial (CB’s) Complex – MIC 2.0 – has launched its bid to reshape….. well, everything it can.

    Or let’s call it Techno-Bolshevism, the breaking of eggs for the tasty omelette stage.

    Goodbye civil and human rights, property rights, and bodily autonomy: hello, technocratic ‘Digital Nations’.

    They are well aware of the impending resource and ecological disaster, and that the old growth engine behind fiat has its days numbered, gasping on a ventilator.

    They know that depopulation is an urgent issue and will be addressed in a non-consensual manner.

    Now, it might well be that it is as doomed to failure as Hitler’s drive to Moscow was: but most are stuck discussing possible 5 Year Plans, when the panzer columns of the GR are bearing down on them.

    It’s moving very fast indeed, bypassng all historic constitutional defences.

    Many have died already, and there are many more deaths to come – of institutions and ways of life, as much as of individuals.

    The former consumer democracies of Israel, the UK and the US are, of course, ground zero.

    Find a bunker – yesterday. And good luck!

    PS Always listen to Cassandra – she’s a clever girl.

  21. Matt
    Thanks for the video links. The US version of this message has been Guy McPherson for the last 5 years or so. But I find these videos to be the most compelling I have seen. I think, at least in part, because he is a farmer, and I understand something about the food system from first hand experience. It is one thing to read about sustainable food production and to actually do sustainable food production. For example, when the IPCC expert says ‘go vegan’, he probably has not tried to actually do that on a small farm. Small farms have always been about facilitating as much synergy as possible to get the maximum sustained yield from the sun and water. And some animals on the farm have almost always been part of the equation. (Chris Smaje understands that very well.). What was never part of the equation was vast feedlots fed by massive monoculture grain fields fed by industrial chemicals producing sick cows kept alive with massive doses of antimicrobials and transported, wrapped in plastic, around the world. As the IPCC man says, the ’new/old Eden is sustainable small farming with woodlots and hedges or shelter belts of trees’.

    When I first got really interested in this subject, it seemed like all we needed to do was recognize the peril and act accordingly. It seems very recent to me that Lyndon Johnson was aware of the systemic danger of population growth. Bush I put a cap on that awareness with his dismissal of the Rio meeting: ’the American Way of Life is Not on the Negotiating Table’. And so, of course, was the enormous increases in third world population on the negotiating table. About 15 years ago the BBC bought some documentary footage from China and put their own narration on it. The footage gave a lot of context for what was going on in China, from the small town maneuvering of the politicos to the need for a massive army to soak up young men who might otherwise cause mischief. But all the BBC wanted to say was that the ‘one child’ policy was a horrible affront to human dignity. The BBC obviously had no idea of the unfolding reality.

    Don Stewart

    • Gross Energy Product and the breakdown of economic activity into high, medium and low impact in terms of energy use which includes the energy use of all material inputs.

      Intuitively, my allotment living project has very low energy input which seems to be associated with low material inputs, low income, low ecological impact.

      From this point of view, energy intensity seems to be the common denominator that determines impact whether materially, in terms of income or ecologically.

      Similarly, within a fixed national quota of energy, a low energy lifestyle allows energy to be utilised for other (essential) goods and services.

      Again I’m feeling strongly that
      Ecology = Energy
      Economy = Currency

      And that Energy = Currency tokens.

    • Steve
      There are some refinements to the simple notion that Ecology equals Energy
      For example, humans contain 5 ‘appetites’ which drive our behavior. The most important is the need for protein. Other drivers are the need for carbohydrates, fat, calcium, and sodium. The appetites are a reflection of biological receptors which evolved to fit us for a certain ecological niche. So it is ultimately about particular species crafting bodies which are adapted to a particular sort of environment in terms of being able to create a positive energy balance. In terms of looking for specific leverage points, looking at the specific appetites is essential. Just looking at total energy consumption and invoking the Maximum Power Principle doesn’t give enough information….Don Stewart

    • Entirely agree Don 😊. Thanks for the appetites..

      It is going to take a while to develop a composite picture of the economy based on energy but was just thinking out aloud what appears to me to be the basics in terms of energy sustainability.

      Do you have time to do a pictorial model of the basic ecological economy?

    • Population is the problem, but corporations do not want to admit it as they cannot envision a world without growth. Even video man does not really address population. No hope of stopping the climate crisis but he never says population, just reduction in Carbon, weird.

      The USA has been culpable in population growth by limiting family planning discussions due to abortion craziness.

      Hopefully we can have more practice and less success when it comes to procreation, but we really need to get over pumping out the kids.

      Some hope but not enough

    • Agree, thanks Matt.( I’m catching up here) I’d seen this already, and am mildly positive about the topic receiving more exposure.

  22. As I’ve mentioned before, tell me if I am wrong but strictly and scientifically speaking, I don’t believe that MPP is, nor should be used as a cause. It’s a globalized summation and descriptor of aggregate observed human behavior that is the outcome of human drives and desires. It’s not a force like gravity or electromagnetic energy that acts on particles or inert matter and causes them to behave in certain ways. You can’t say MPP causes the fastest possible use of resources that available energy allows, that’s like saying the fastest possible use of resources causes the fastest possible use of resources. It’s tautological and unenlightening, i.e., it doesn’t really “explain” anything, it is just saying that what is, is and is consistent with what has been. What it IS correctly used for, I believe, is for pointing out where recommended courses of action or changes in behaviors are not likely to be adopted or prevail because they are inconsistent with MPP, i.e., they are inconsistent with the mass and aggregate of human behavior. OK, but even here, then what? We all just die locked in pursuit of our own individual MPP?

    The distinction is important because at least strictly and scientifically, it does not preclude the possibility that cooperative measures might under conditions of prolonged or permanent scarcity come to be more conducive to MPP outcomes than those produced by individualism or tribe vs. tribe. The result for me is that I don’t see MPP as particularly explanatory or as a “law of nature”, so I am not inclined to rely on it as a basis for analysis or guide for action. Concepts that endeavor to explain too much don’t really explain anything.

    • taigio:

      MPP is not restricted to single organisms. A system biologist friend Stanley Salthe, has explained this over the years to a list I co-own.

      In social (group) species, individuals are not the responsible unit. Cooperation is dominant, and leads to the best level of energy-matter throughput for the group.

      And it isn’t a law, it is a principle. There are exceptions, two of which I thought of: Suicides and Voluntary Simplicity.

  23. Hi Tim,

    I saw on one of your post a chart saying that South Korea economy could go till 2028 until it go into reverse. I was thinking that, being a developed economy, it would have an ECoE threshold similar to that of the western economies. So I’m quite surprised that the model shows their inflexion point to be even later than China, especially given the frequent reports of young people struggling to find quality jobs in South Korea too. Would you mind giving more details regarding the case of South Korea? Thanks

    • I think that must have been an old chart. As with China, the covid crisis seems to have brought forward the point at which South Korean prosperity per capita turns down. But the rate of decline in SK seems likely to be very gradual.

      SEEDS shows that SK has an extremely efficient economy.

  24. Mason Bees and Eat Like the Animals
    The experiments I described covered all sorts of critters from slime molds to humans. Here is an experiment on mason bees, which shows how and why their dietary preferences are very different from humans and what we might naively expect it to be:

    The upshot is that every creature is adapted to some niche which must be respected or that creature will not thrive. The pandemic of chronic diseases around the globe shows that humans are trying mightily to live outside our natural limits, and the limits are biting back.
    Don Stewart

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