#200. Other roads, part one


The release of a new policy document from the International Energy Agency marks a decisive stage in the evolution of the consensus around energy, the environment and the economy. Apart from anything else, Net Zero By 2050: A Roadmap for the Global Energy Sector reinforces the growing sense of commitment to a rapid transition away from reliance on climate-harming fossil fuels.

This policy paper confirms how closely the IEA is aligned with the broad thrust of policy intent in the United States, Britain and the European Union. Emerging economies like China and India might be harder to convince.

It would be easy to critique this document, applauding its ambition whilst questioning some of its methodologies and policy conclusions.

What matters much more, though, is the broad question of how we understand the interconnection between energy, the economy and the environment.

Granted that environmental risk is a function of our use of energy, are energy needs themselves a function of an economy that ‘grows’ according to its own, self-propelled, essentially financial and internal dynamic?

Or should the relationship be reversed, identifying economic prosperity as a subsidiary property of the use of energy?

From which direction?

It was pointed out to me recently that, whilst articles here make frequent reference to SEEDS, the meaning of this acronym is seldom explained. This is an omission based in familiarity and brevity, not reticence.

The short answer is that SEEDS – the Surplus Energy Economics Data System – is an economic model based on recognition that the economy is an energy dynamic. This means that it’s radically different from conventional models, which treat the economy as a wholly financial system.

This difference of approach may sound theoretical, but its practical implications could hardly be more far-reaching.

To illustrate, imagine that you’re trying to predict the future demand for some product or service. Conventionally, you’d do this by starting with GDP, and applying a forward rate of growth to calculate the size of the economy at some date in the future. With this as ‘a given’, you have the parameters or context for estimating the potential size of your market. What matters now is the potential expansion or contraction of demand for your product as a share of that broad context.

Your aim, of course, is practical rather than theoretical – you want to predict the scale and shape of the market for your product or service. You’re unlikely to be interested in the theory of economics itself, and are, in all probability, content to work within consensus methods, and arrive at consensus results. Even if your organization is big enough to employ its own economists, the probability is that this makes no real difference at all to the methodologies used, and very little difference to the resulting forecast.

Governments work in much the same way – they start by projecting, along conventional lines, the probable size of the national economy of the future, and only then assess the implications for the many aspects of policy.    

The same approach is used for the forecasting of future energy requirements. All such conventional projections start with an assumption about the future size of the economy, and only then calculate what that is going to mean for energy needs. The near-unanimity of conventional forecasting right now is that the economy, meaning GDP, will grow at a trend rate of 3%.

Travelling to Net Zero

Hitherto, the resulting informed consensus around energy has been that, whilst renewable energy sources (REs) will capture an ever-increasing share of the energy market, the quantities of fossil fuels used will continue to increase. In contesting this, the IEA report applies a significantly new impetus to the direction of travel in the forecasting of future energy needs.

To be sure, there are differences between proposals and forecasts. Even so, the IEA’s Net Zero is an almost breathtakingly bold break from the prior consensus. It argues that rapid commitment to energy transition can, by 2050, deliver a world with zero net emissions of CO2.

In addition to massively increased investment in renewable sources of energy (REs), the IEA calls for the immediate cessation of all new oil and gas development projects. This amounts to an accelerated run-down of supplies of legacy energy from fossil fuel sources.

The pay-off, says the IEA, isn’t just the prevention of catastrophic degradation of the environment, but includes millions of new jobs and a big – and this time a more globally-inclusive – spurt of economic expansion.

You won’t be expecting me to agree that all of this is feasible, and I don’t. Let’s be clear, though, that the IEA, and others, are absolutely right to stress the need for transition away from climate-harming fossil fuels to REs.

Indeed, SEEDS analysis takes this imperative even further.

Environmentalists – whose ranks now include most Western governments, as well as organisations like the IEA – assert that continued reliance on fossil fuels risks inflicting irreparable harm to the environment.

Where SEEDS goes further is in arguing that, whilst continued fossil fuel dependency would probably wreck the environment, it would certainly destroy the economy.

The explanation for this is simple – it is that the cost of fossil fuel energy is rising, such that its net (post-cost) value is decreasing.

What this means is that the established sources of energy value that have powered the Industrial Age are fading away.

Thinking – forwards or backwards?

This brings us back to the critical issue of method. Instead of assuming a future economy of a given size, and then working backwards to the energy that this economy will require, SEEDS starts with energy projections, and only then asks what size of economy can be supported by the forward outlook for energy.

Put another way, SEEDS dismisses any notion of commencing with an assumed rate of growth in economic output. At the same time, the model also dismisses the idea that GDP is, or can be, a meaningful metric for economic prosperity.

Consensus forward “growth” assumptions, typically 3%, are based on a supposedly cautious continuation of what are accepted as recent trends. These depict the economy, measured as GDP, as something capable of expanding at annual rates of between 3.25% and 3.75%.

That seems to check with stats showing that, between 1999 and 2019 – that is, in the twenty years before the coronavirus shock – annual increments to reported GDP averaged 3.6%.

What this ignores is that, over that same period, annual net borrowing averaged 10.4% of GDP. Unless you believe that the spending of newly-created purchasing power has no effect on the activity measured as GDP, then changes in GDP itself are linked to the rate at which credit expands.

Moreover, debt is by no means the only form of forward obligation whose expansion is linked to economic activity. Whilst each $1 of reported “growth” between 1999 and 2019 was accompanied by an increase of nearly $3 of debt, adding in the expansion of broader financial obligations lifts this ratio to well over $6 of new commitments for each dollar of “growth”.

As so often, the acid test for such varying interpretations is observation. If conventional data is right, global GDP increased by 110% between 1999 and 2019, whilst population numbers expanded by 26%. Even after a surprisingly modest fall (of -3.3%) in world GDP during crisis-hit 2020, output was still higher by 103% over a period (1999-2020) in which population growth was 27%.

This ought, surely, to mean that the economy is in far better shape now than it was back in 1999. Sharply higher prices for assets such as stocks and property seem to reinforce this optimistic reading.

But the economy as we observe it today doesn’t conform to this description.

Most obviously, we’re caught in a stimulus trap. If we carry on pouring gargantuan amounts of liquidity into the system, we face a very real risk of the hyperinflationary destruction of the value of money. But if we stop – or even scale back on – stimulus, asset prices would crash, and a cascade of defaults would ensue.

Can we square this observation of ‘fragility edging into crisis’ with the assurance that economic output has almost effortlessly out-grown population numbers over a very extended period?

The answer, of course, is that we can’t.

After all, if the economy had been performing as strongly as prior growth rates imply, why would we still be locked into a supposedly “temporary” and “emergency” reliance on negative real interest rates that began back in 2008-09?

We can’t, to any significant extent, put the blame for this on covid-19, not least because the official data itself puts the scale of the hit to the economy in 2020 at only -3.3%. At worst, then, we’ve lost a single year of the growth supposedly enjoyed during each of the twenty years preceding the pandemic.

The bottom line is that GDP stats are telling us one thing, and what we can see unfolding right in front of our eyes is the diametric opposite. On the one hand we have an economy that’s growing robustly – on the other, an economy dependent on the life-support of financial gimmickry, and trapped in a cul-de-sac from which there is no obvious route of escape.

Other roads

This is where alternative approaches are so important. To be clear, economic orthodoxy describes a robust economy that doesn’t exist, whilst policy orthodoxy is based on the continuation of positive trends which, it turns out, don’t exist either.

The SEEDS approach begins with three observations, familiar to regular readers and requiring only the briefest introduction for those for whom this is new.

First, the economy is an energy system, because literally everything which constitutes economic output is a product of the use of energy.

Second, whenever energy is accessed for our use, some of that energy is always consumed in the access process. This second principle establishes the role of the Energy Cost of Energy (ECoE), and divides the stream of energy and its associated economic value into “cost” (ECoE) and “profit” (surplus) components.

The third principle is that money has no intrinsic worth, but commands value only as a ‘claim’ on the products of the energy economy.

An economy stripped of money would have to resort to barter, or would have to create a replacement human artefact as a medium of exchange.

An economy stripped of energy, on the other hand, would, as of that moment, cease to exist.     

These principles identify a dynamic which, though complex in application, is straightforward in principle. We use energy to create economic value. Some of this energy value has to be used in the energy access process itself. What remains powers all economic activity other than the supply of energy itself. ECoE is the factor which differentiates between economic output and material prosperity.

From this perspective – and in an economy which still derives four-fifths of its primary energy supply from oil, gas and coal – a critical trend has been the relentless rise in the ECoEs of fossil fuels.

This increase in ECoEs fits with observable trends, first by explaining the emergence (though not, in general, the accurate interpretation) of “secular stagnation” in the 1990s, and then by tracking the subsequent, crisis-strewn descent into that dependency on the credit and monetary gimmickry that has created the stimulus trap described earlier.

In short, what SEEDS interpretation says should happen as ECoEs rise coincides with what has happened as this trend has developed.  

Feasible directions?

To resolve this issue, and to restore the capability for growth as well as minimising environmental harm, a transition to REs would need to accomplish two things.

First, it would need to provide a volumetric replacement for fossil fuels. This, unfortunately, is about as far as the conventional setting of targets usually goes.

Second, and critically, it would also need to drive overall, all-sources ECoEs back downwards.

For Western countries, successful ‘transition with growth’ would need, at a minimum, to drive overall ECoEs back below 5%, from a current global trend ECoE level of 9% and rising. For advanced economies, whose complexity involves high maintenance requirements in terms of ex-ECoE (surplus) energy, 5% is the upper ECoE parameter beyond which prior growth in prosperity goes into reverse.

Put another way, driving ECoEs down from 9% to 5% might be enough to forestall “de-growth”, but wouldn’t be low enough to reinstate growth itself. To achieve that, we’d need to push ECoEs down a lot further, probably to levels below 3.5%.  

The volumetric side of the transition equation is tricky, and has been costed at between $95 trillion and $110tn. The financial price tag, of course, isn’t the issue, least of all in a world in which money is routinely conjured out of thin air. What matters is the quantity of material inputs which these sums represent.

Let’s assume, for purposes of hypothesis, that the Earth can supply the requisite amounts of raw materials necessary for the provision of inputs ranging from steel and copper to plastics, lithium and concrete.

As we know, accessing these materials and putting them to use is absolutely dependent on the use of energy. Without energy-intensive activity, we can’t even supply water, let alone extract minerals and convert them into components.

In short, the principle of ECoE – which applies, not just to the creation of capacity, but to its operation, maintenance and replacement as well – tells us that getting energy from RE sources at the scale that we require is absolutely dependent on the prior use of energy for these purposes.

Since, at least for the foreseeable future, the supply of these materials depends on legacy energy from fossil fuels, the ECoEs of renewables are linked to those of oil, gas and coal.

Identifying process

So here’s the equation that net zero combined with growth invites us to accept.

On the one hand, energy sourced from fossil fuels declines rapidly. On the other, physical products of energy – the inputs that we’ll need to expand RE supply dramatically – will become available in very large amounts.

Another way to put this is that we’re planning to abandon the sunk energy invested in the carbon infrastructure, and build a replacement infrastructure at global scale, and carry on driving, flying and doing everything else that we do with energy, at the same time as we’re driving down energy supply from legacy sources.

An obvious snag here is that nobody seems prepared to tell us what uses of energy will need to be relinquished in order to free up the resources needed for physical investment at a transformational scale.       

If we free ourselves from the delusion that the economy is some kind of self-perpetuating, wholly-financial, perpetual-motion mechanism operating independently of energy, the only way to square this circle is to rely on indefinite cost reduction through continued progress in technology. This is why faith in the indefinite advance of technology is implicit in so many aspects of the ‘net-zero-without-economic-sacrifice’ narrative.

The problem with this is that it overlooks the reality, which is that the scope of technology is bounded by the physical parameters of the resource. This, of course, is why no amount of technology – or, for that matter, of financial commitment – has been able to use shale resources to turn the United States into “Saudi America”.       

In addition to technological extrapolation to a point beyond the limits of physics, the critical snag with driving the ECoEs of REs downwards far enough is the fallacious assumption that, through some kind of internal financial dynamic, the economy can “grow”, of its own accord, to make all of the necessary transitional steps possible.

If we once accept the proposition that, whilst energy use falls, real economic output can rise, then we’re in danger of endorsing the fantasy that we can “de-couple” the economy from the use of energy. And, since we cannot produce anything of any economic utility at all without using energy, “de-coupling” is a logical impossibility.

From here

None of this is to say that we can’t, or shouldn’t, bend every effort to transition from fossil fuels to renewables. On the contrary, the transition to net zero goes far beyond the desirable, and into the imperative.

Far from contesting the necessity for transition, SEEDS establishes a compelling economic as well as an environmental case for endeavouring to do exactly that. An economy tied in perpetuity to the rising ECoEs of fossil fuels would face inexorable deterioration.

This isn’t a trend that we have to predict, because it’s beyond doubt that this is already happening.

Where SEEDS-based analysis parts company with the ‘new consensus’ is over the belief, amounting to an article of faith, that this process (a) can be accomplished without sacrifice, and (b) can be combined with economic growth.

Any given quantity of energy cannot be used more than once. Legacy energy value from fossil fuels, already a finite quantity, becomes a smaller finite quantity under plans to accelerate the abandonment of oil, gas and coal.

A situation in which this limited quantity of legacy energy is used to expand RE supply, and to build the requisite infrastructure, and to maintain current energy uses such as driving and flying, fails the test of practicality. The associated assumptions – that technology will provide a fix for everything, and that the economy ‘will carry on growing’ thanks to some kind of internal momentum – fail the test of logical interpretation.                      

All of this, of course, carries the obvious, if startling, implication that we’re trying to progress to a desirable destination using a basis of planning that’s demonstrably false.

The pace at which we should abandon the use of fossil fuel energy is a matter for debate.

But the need to abandon those fallacious, money-only methods of interpretation which create the myth of the economy as a perpetual-motion machine, growing ever larger through an internal mechanism disconnected from energy, has become imperative.   

96 thoughts on “#200. Other roads, part one

  1. Hi Tim,
    I’m, as always, really impressed, you truly get it!

    you’re right that it’s a positive sign that the official bodies are embracing Environmentalism,
    they’re no longer externalising the environment and now recognising it exists,

    the thing is they need to take the next step to a full systems holistic thinking,
    what Dirk Gently, Douglas Adam’s Holistic Detective described as “the interconnectedness of everything’

    the best word I’ve found for describing this is Ecological thinking, it doesn’t have to involve hugging trees and kissing puppies, it just involves including everything in the equation,

    I’ve been following you all these years because, whether you realise it or not, your frame of reference has expanded to encompass all factors possible and you have evolved into an Ecological Economist,
    energy is at the core of everything, every process, every reaction, nothing happens without it and everything happens because of it,
    surplus energy is like the Rosetta Stone that can be used to translate everything into a comprehendable and quantifiable model,

    by becoming Environmentalists the politicians can now follow Ernest Bevan’s dictum;

    “the art of politics is finding problems, whether they exist or not, mis-diagnosing them and applying the wrong solutions”

    trying to grow further an already over grown economy that is beginning to starve from lack of energy and resources to escape a problem caused by overgrowth seems like a good way to kill the patient and this is what these ‘Environmentalists’ are proposing,

    some degree of degrowth and resource reallocation seem the only open avenue, all the others lead to collapse.

  2. Many thanks – this is an excellent piece, and much needed as a direct response to the IEA document. And something that I really learned from it: a concise description of the magical thinking that there may be an “inherent” economic dynamic that carries forward the economy, driven by entrepreneurship, money, human ingenuity and optimism, and technology. I have always asked myself – being a chemist by training – what it is that leads people to thinking that the economy is a reality that will just keep growing. It is the idea of an “internal mechanism” present in “the economy as a perpetual-motion machine, growing ever larger through an internal mechanism disconnected from energy.” Whatever that internal mechanism may be in the thinking of people, I now better understand the underlying idea. An idea that must be very strong, but is fundamentally unenlightened. The gods are in us, and working through us.

  3. “since we cannot produce anything of any economic utility at all without using energy, “de-coupling” is a logical impossibility…”

    There are 2 scenarios for the future here. The picture Dr Morgan paints for the high-energy economy is that the energy industry will grow like a tumour. We will all be working to extract energy, whether high tech infrastructure, or charcoal burning.. This seems to be an odd sort of economy – energy itself the set purpose of everyone’s lives. Dr M’s idea AIUI is that this is what we are doing already, only it’s disguised behind the products that the energy allows.

    But what is behind consumption? A modern person’s set purpose (beyond some [but how much?] safety, shelter and food) is for status. Status is tied to leisure, luxury, control, privacy, but is this only our atomised Western outlook. Suppose every person’s status was gained by aligning to some transcendent rule: some religious action, upholding the honour of his caste, feats of wisdom or valour or physical prowess, or hospitality? If such a status reliably brought a person safety – ie there would have to be a unified, highly structured society, with an inescapable moral code, ostracism, punishments – then much energy use could wither. It would be a closed religious society.

    We once had a big monastic sector – high status poverty. Obviously this wasn’t divorced from patronage by wealthy powerbrokers and by coercion – maybe you cannot decouple status from energy. But relative status is different from absolute status, and Feudalism provided social bonds, obligation and bondage, and festivals and rituals, that occupied people’s lives. People led full, very public lives. Fossil fuels, and abundant resources in general, broke up and displaced culture, and culture will return, in some perhaps terrible form, if fossil fuel use declines. The devil is in the transition: Gaza.

    And once again, why have I never heard Dr Morgan, or his point of view, on a podcast? He ought to put himself about.

    • Thanks Chris, and likewise Martin and Matt.

      On the question of ‘putting myself about a bit’, you’re absolutely right, and that’s the plan.

      To be clear, I don’t oppose the ambitions set out by the IEA and others. On the contrary, I agree wholeheartedly about the objective. But I differ fundamentally on how we interpret the challenge, and what we need to do to try and get there.

      This means that we – and, yes, I – need to up our game.

      The question is how.

    • I am not sure if there is a chance to be heard by TPTB. What I have tried in the area of chemical pollution is join forces with other experts and create a critical mass of authoritative voices and release a – brief – consensus statement that presents the key points in non-expert language, and carries the weight of the expertise, experience, and knowledge/understanding of its authors. Such a statement can then be distributed widely and referred to by others. Not sure if this is useful here, but at least it could be a first step.

    • Thank you, that’s good advice.

      I’m looking at this in various ways, and have just recorded a podcast at another site, of which more information will follow.

      Perhaps it’s because of my background in finance, but I tend to see things in a contrarian way – i.e., the prevalence of false assumptions should, at least in theory, offer considerable opportunities.

  4. @Dr. Morgan
    A very good post. It does leave the listener on a television show hungry for the next part: if I can’t preserve my real and financial asset wealth, what do I do now?

    It seems to me that Howard and Elizabeth Odum put their finger on a point which I admit I do not fully understand. The Odums make a distinction between emergy and energy. Emergy is created by energy, but it then takes on a life of its own. A university professor represents a ton of energy expended to create the emergy which is released as he writes and draws on a blackboard (at least back in the old days). Howard Odum said that religions represent a tremendous amount of emergy, and society needed to preserve that emergy as energy declined.

    Stated a different way, some of the best things in life really are free, but they also do not have much or any economic value. It seems that energy is necessary to create exchange value, but emergy is something different…we can think of it as a hard won cultural heritage. So one question is “How can we maintain what is worthwhile in our culture while our current energy budget declines?”

    Which leads pretty quickly to the questions of deciding what specifics in our cultural heritage need preserving and what needs to be abandoned, and the economic and political arrangements which best facilitate such a transition. I certainly do not know all, and perhaps not very many, of the answers.

    One recent example that I found interesting was Rob Hopkins short closing remarks at a conference in Jersey:

    Congratulations on a good article…Don Stewart

  5. Tim,

    I’ve so far failed to convince, after several fwds of your essays, a financial pro and friend for two decades of your (& my) position on energy as the primary factor. This one may do it. If he rebuts, I’ll share it.

    One quibble: few governments have given more than greenwash verbiage to environmentalism. Getting re-elected requires big bucks, and Mary and Joe don’t provide them. Even those governments sounding serious are fully addicted to growth.

    • Thanks Steve, much appreciated.

      In fairness, whilst governments are addicted to growth, so are the public, and, of course, the business sector. This was why those well-intentioned people advocating voluntary de-growth were never likely to be listened to.

      What we face now isn’t voluntary. So the question for governments is whether, after assessing the situation realistically, they believe that growth is “real” (in the sense of “really happening”), and can be continued.

      Ironically, the more governments pursue “growth”, and use monetary gimmickry in an effort to deliver it, the greater the risk of triggering a “collapse event” through hyperinflation and/or asset price collapses and defaults.

      Another way to look at this is that, if the differences in the economy 2020 vs 1998 are the products of “growth in GDP”, we’d have been far better off without it……

  6. Dt T., I agree as always on your energy and economic views, but have 2 immediate thoughts on this. Nothing will work in time to avoid a savage collapse without massive depopulation, on the scale and immediacy of a one-child-max global effort right now, or the diminishing returns of a shrinking resource base mean any wins are wiped out.

    Secondly having your view heard in a world tightly controlled by those who have no interest or incentive in making that happen, means using a very creative approach. The few times I have seen radical, progressive policies work in my lifetime have been in small countries where they somehow can get away with proof-of-concept projects the politics and stakeholders in bigger powers would never allow. Take the visionary ideas of Portugal’s handling of drugs way before decriminalisation went mainstream, Cuba’s successful healthcare program with the emphasis on the preventative vs later curative, Israel pushing agriculture in extreme environments to the limits of what is possible.

    So the suggestion is that you approach the government of a small but visionary and strong-willed country and offer your services, or failing that a respected global entity. (So with serious impartial reach, like Medecins sans frontiers, but more developmental/educational if that even exists)

    • @Chrissie
      I emailed three of the Scottish government’s economic advisers regarding the work that Dr Tim has done some three months ago. Of the three individuals approached I got only one reply – polite but diversionary . I had hoped that the land of Adam Smith and Lord Kelvin might have risen to the challenge .

    • Ireland? Varadkar is a medical doctor, so seems to have more mathematical / science nous than most political leaders.

    • @Chrissie
      I would not like to take up the valuable space in this blog with matters “Alban”.
      However, the individuals are respectively
      1 The chief economist of the SG.
      2 The principal of GU (who is a member of the SG economic advisory committee )
      3 The CEO of Scottish Engineering

    • @Chrissie, Jomelco, Simon, Thanks for replying. I have a lot of respect for the SNP, but think they feel hugely restrained by the conservative half of the population who don’t want independence, so aren’t very creative because they don’t want to rock the boat. Initially they probably wanted to prove they could bring about stability with responsible rule and there’s little pressure on them to perform as England elects ever-crueller governments.

      Ireland seems to have succumbed to corporate capture with their then (2008) government bailing out big business in general and banks in particular, whilst Iceland showed you didn’t have to take that corruption with the exact same circumstances. Interestingly, in Iceland it was ordinary people who spilled into the freezing streets to make it clear they meant it, even through peaceful protests.

      Maybe Finland will do something meaningful if you’re looking at Europe, they trialled UBI early and have made some other promising, courageous moves recently. The neoliberal culture of absolute greed isn’t as firmly entrenched in places that have only recently been exposed, so perhaps there’s more hope for central European countries vs the western.

    • I can’t comment on politics in Ireland, but the country is hugely exposed to anything going wrong with the status quo. Ireland’s exposure to the world financial system is enormous, even when measured against GDP – and Ireland’s GDP is a particularly extreme over-statement of underlying output and prosperity. Ireland is at or near the top when I use SEEDS to generate risk rankings.

      I don’t have Iceland on the model, but seem to recall they had a referendum, or perhaps it was an election, over whether or not to reimburse those investors (mainly British and Dutch) who’d lost money in Icelandic funds offering too-good-to-be-true returns on savings. They decided not to do so.

      If there’s one country I’d back to “get” the reality, it would be Germany, where the Greens are a growing force politically, and are bringing forward some interesting policy ideas.

    • @ Dr T., re: Germany showing the way, I also noticed that promising new Green party leader and have yearned for Merkel to leave for years what with her being the neoliberal champion of Europe. But human nature trumps all and the Germans are suffering the least pain at the moment, so have the least pressure to change, which is why I reckon a small country is more likely to show the way. The voters and therefore culture there will be the key, places that are proudly maverick tend to just go for it, with the culture tolerant of failures as long as they are born of reaching for success.

      I can only guess, but think that the reason change is more possible in small places is that if there are few resources to fight over, the bigger predators and parasites aren’t interested. This means no entrenched, powerful vested interests which outmuscle any newcomers to the scene, so ideas born can grow and flower. Look at Botswana under Ian Khama taking control of their diamond cash cow resource from De Beers and insisting more of the value-adding chain stayed in-country, then distributing the profits to fund development that benefited all, not just a few. His policy was generally to make the country more resilient through economic diversity so it wouldn’t be reduced to a puppet of global corporations or the governments of bigger bullying countries like much of the rest of Africa even today.

    • My view is that, where extreme economic liberalism in Europe is concerned, Britain and France are the standard-bearers. In both cases, the ‘establishments’/’elites’ are fully supportive – my hunch is that, whilst the British public in general go along with this, the French public are much more sceptical.

      Of course, to believe in extreme economic liberalism, you have first to accept that the economy does indeed operate as conventional interpretation says it does. My aim here is to demonstrate that this conventional theory doesn’t work. If it did, a world that is supposedly 110% better off than it was in 1999 – and is supposedly, on average, better off by 67% per capita – wouldn’t be mired in a “stimulus trap” that offers hyperinflation, or market crashes and defaults, but not much between those extremes.

      What also intrigues me is that, ever since 2008, stimulus has been pursued without the safeguards that might have been attached to it.

  7. this is a clip of Steve Keen dropping a bomb on the economic consensus on CNBCi

    the scenario he outlines is one that scares the pants off me.

    • @Matt
      The expert he quotes is Paul Beckwith at PaulBeckwith.net

      Paul has been talking about the Greenland/ Jet Stream shift for quite a while. As you know, Europe is warmer than it ‘should’ be because of the Gulf Stream. But the Gulf Stream results from the complex play of dissipation from the tropics to the arctic, and reducing the difference between the Arctic and the Tropic oceans seems like it ought to weaken the Gulf Stream. If, in addition, the jet streams move further in the direction of Europe, bringing colder air with them, then Europe could experience considerably colder climates. The northeastern US would be similarly affected.

      Beckwith is a proponent of geoengineering, because he thinks that rolling those dice is the best option left to us.

      Nordhaus and the other economists are simply idiots.

      Don Stewart

  8. You could try approaching Delingpole. He has a taste for the apocalyptic, is strongly anti-Greenwash (more I think than he is anti-AGW), is suspicious of establishment experts, is highly persuadable and does no research so would let you hold forth without staging any sort of hit job.

  9. Since we have left the herculean task of converting our energy system over to non-fossil sources until so late, the rate at which energy must be expended in the process of building any new energy infrastructure is very, very great. The only way to get that energy is to either greatly expand our energy surplus from our existing sources, which comes with bad environmental consequences (if it is even possible), or take it from our current energy supply and leave far less for business as usual.

    When we consider the fact that we were not able to convince people to sacrifice a small portion of their surplus energy several decades ago when an energy transition could have been very gradual, it makes it very unlikely that we can convince people now to really sacrifice their standard of living for a couple of decades or more to free up energy for the transition. It will always be less painful in the short and medium term to put off such a gigantic project. The rewards will only come after a generation of sacrifice akin those found in war time.

    This classic 2011 post from Tom Murphy’s “Do The Math” blog carefully quantifies the issue and describes how finding the energy needed for any renewable buildout will be very difficult. He calls it “the energy trap”.


  10. For advanced economies, whose complexity involves high maintenance requirements in terms of ex-ECoE (surplus) energy, 5% is the upper ECoE parameter beyond which prior growth in prosperity goes into reverse.

    I certainly think you are correct, but I wonder why the percentage is 5% rather than 10% or 15%. Are you using any theory or modeling results to arrive at this number or is it based on observation only?

    It would be interesting to understand exactly how the critical threshold varies according to the affluence of different countries and why those prosperity reversal thresholds are located where they are on the curve of the “net energy cliff”?

    • Joe:

      I think I should make clear that the 5% (and 3.5%) numbers ARE calculated. This kind of thing is where SEEDS informs the type of analysis here.

      It is, in that sense, a very big advantage over either (1) the conventional, and (2) ‘wing it’ (‘we disagree with the conventional, but we don’t have numbers to put on it’).

      SEEDS tracks prosperity, and its per capita equivalent, using (a) clean (credit-adjusted) aggregate levels of economic output, and (b) the ECoE deduction which distinguishes between output and prosperity.

      In 15 of the 16 advanced economies covered by SEEDS, prosperity per capita turned down at ECoEs between these levels. The exception is Germany, which turned down at higher level, but there are special factors with Germany, factors associated with the Euro Area. Germany aside, the results of this calibration are remarkably consistent.

      Incidentally, should Germany be unable to collect the EUR 1 trn owed by other EA members through the Target2 clearing system, and we apply this gap retroactively, Germany falls back into/close to the same ECoE parameter range as the others.

  11. @Joe Clarkson and Dr. Morgan
    May I suggest an explanation for the ‘turning points’ in ECoE in the rich countries? I think it is a similar process to the Limits to Growth Model. That model used a global market. And, as energy use increased, more pollution was generated. Eventually, the exhaustion of the energy resource and the deleterious effects of the pollution have dire consequences, including population declines.

    Exactly what sort of pollution Jay Forrester had in mind when he wrote World Dynamics, or what exactly the team who used his ideas to compose the Limits to Growth model, I’m not sure. But we can certainly look back 50 years and see that simply having access to huge amounts of surplus energy enables all sorts of destructive behavior. Economists and politicians and capitalists (call them E, P, and C) only see the GDP generating effects of the production of pollution. From the perspective of E, P, and C, if the GDP is increasing, then all is good. The originator of the National Accounts had warned that what the Accounts were showing was simply bookkeeping numbers, and was not real ‘prosperity’. But his warnings were easily ignored. When GDP was increasing, those gathering the money could easily direct resources into their pet projects, whether that was the most globally destructive armaments the world had ever seen, a string of golf courses one could live at following one’s whims, or speculation on Wall Street. From the perspective of ordinary citizens, GDP enabled them to get a ‘job’ rather than work at subsistence agriculture and crafts in the home. It seemed like a good idea at the time. Marx and the Chambers of Commerce had identified the enormous potential of industry to produce far more ’stuff’ than people would ordinarily consume.

    Meanwhile, the science of leading people astray was developing. Edward Bernays and company stepped into the breach to avoid the perils of under-consumption. The Great Depression temporarily caused people to doubt the ‘more consumption will save us from the glut’ story, but after WWII that story took off again, in overdrive. And now we can see that the pollution which Forrester and the LTG team had predicted has accounted for a huge percentage of the ‘prosperity’. By the time of the Rio conference, scientists would see that the world was going to have to choose between ‘prosperity’ and ‘flourishing’. Bush I famously rejected any re-orientation toward ‘flourishing’, saying that ‘the American Way of Life is not on the negotiating table’.

    IMHO, we are still stuck in the rut of ‘prosperity’ (except for a few people like Joe), unable to distinguish between ‘prosperity’ and ‘flourishing’. The flurry of excellent books on subjects like depression, metabolic health, the degradation of food and obesity, the destabilization of the climate, the poisoning of the land and the waters…all of these are the result of the bad choices which were enabled by the massive amounts of surplus energy. It makes little difference whether one is looking at Germany or the US or Tanzania in terms of the LTG type interplay in terms of the effect of large doses of surplus energy. The Communist regimes were a short term effort to direct resources into targeted production (remember Nixon and Kruschev looking at the kitchen appliances?). But the 5 Year Plans which focused on tons of steel and hydroelectric production could not stand against the tide of Bernays and company. As long ago as 1965, a French documentary film-maker visited Beijing and found capitalism flourishing everywhere, beneath the veneer of Communism. Neither the capitalist countries nor the communist-on-the-surface countries could distinguish between ‘prosperity’ and ‘flourishing’.

    We seem to be at a point now where the global situation is that we can no longer increase ‘prosperity’ and ‘flourishing’ is in retreat most everywhere. For the first time in the history of the world, there are more over-weight people than under-nourished people. For the first time in history, the rich people are less afflicted by obesity than the poor people. But the ordinary solution to the problem is to hook some electrodes to the dead donkey and try to resuscitate it. The Green plan is to to achieve ‘prosperity’ but also ‘flourishing’. Few people understand the gross misallocation of resources and the toll it has taken on ‘flourishing’. A few more people are aware of the end of cheap resources. Meanwhile, we are experiencing an orgy of Bernays-like techniques in the ‘digital world’.

    And that is the way I would describe the current debacle. In terms of ECoE turning down, because the trends have been global, the same metrics and turning points apply most everywhere…but perhaps with a lag similar to the one’s used in the LTG model. (A poor country becoming ‘prosperous’ takes a little while to accumulate pollution.) One has to look at remnants of the population to find people who are not caught up in the madness, or look for the fringe groups who have escaped to something like a subsistence farm or a monastery. We are fortunate that there are still a few hunter-gatherers who can be studied with modern scientific methods. These people shine a light on what our fundamental nature is like, and show what is possible without using surplus energy….but always in a world which may be hard but not impossible to live in. And they don’t show how to deal with 10 billion humans on a finite planet with dysfunctional ecosystems and an unstable climate and depleting surplus energy.

    Don Stewart

    • Don,

      My question about the prosperity increase/decrease turning points was directed toward finding a more detailed explanation as to why they are where they are. That declines in surplus energy make it more difficult to increase prosperity is intuitively obvious. But what is not really obvious is why 95% surplus energy is required for an advanced economy to keep increasing per capita prosperity as compared with 90% surplus or even 75% surplus energy.

      As primary energy supplies cascade through the economy some of it is lost in every step of the way until it is completely gone (turned into low grade heat). Where to draw the line as to what is “cost” and what is “surplus” is not easy. It can’t be all losses up to the final user, because the Carnot efficiency of heat engines would make the energy cost of, for example, natural gas be in the 60-70% range (if one includes all the losses from well drilling, gas processing and piping, burning in the combustion turbine and then line losses in the electric grid to get the energy to the homeowner’s toaster). Now imagine drawing a line through every chain of losses for every source of primary energy to fix the “cost” fraction, then weighting all the costs in proportion to each source’s contribution to total supply. All this just to get the energy cost of energy.

      Now comes the really difficult part. How to determine how big that cost can be for various levels of technological development and energy efficiency before a decrease in the functionality of energy use stops increasing prosperity? The only way I can see doing it would be through a very complex systems analysis of the entire energy system, a model of all energy uses that would allow the modeler to tweak ECOE parameters and see what happens to production of goods and services.

      An easier way to do it would be to look at numerous societies as they grow their output of goods and services, determine when that output per capita turns down and then use some simple rule of thumb to estimate their ECOE. This kind of observational survey would give ballpark estimates of energy cliff turning points, but it would not really tell us why those turning points (tipping points) are where they are.

      Dr Morgan’s response to my original question about this was that they “are calculated” as opposed to “observed”. To me, this implies that he has done a great deal of modeling work, including some clever boundary drawing around the beginnings of energy supply chains to determine energy costs, all to determine energy cost effects on industrial economies and where in those economies energy cost effects are greatest.

      Tipping points in complex systems are notoriously difficult to predict. I congratulate Dr Morgan on being able to figure out energy-cost/prosperity tipping points so well.

    • @Joe Clarkson

      My suggestion is that a society which has been functioning with excess energy (e.g., NOT a hunter gatherer or horticultural society) will accumulate wasted work such that all of the energy available is spent. If the ‘wasted work’ is pretty much the same for all societies which have access to excess energy, then as the free energy available begins to decline relative to what the society was accustomed to, then stresses will develop in all of them exhibiting much similarity. The societies needs to eliminate wasted work in order to eliminate the stresses. But because the government, economists, and capitalists do not see ANY work as wasted, because ALL of it generates GDP, then TPTB strongly resist any pruning. So Dr. Morgan can point out the bloated financial sector in the UK, but the UK politicians will continue to identify the financial sector in London as ‘essential to our future’. My hypothesis is that attempting to retain the wasted work has deleterious effects on the ability to do useful work because it is creating a dysfunctional society, which is a necessity for those organizing to do the useful work. So the ‘clean’ GDP begins to decline, despite the efforts to prop it up, and the quality of the society begins to decline more than it would if the pruning had taken place.

      Don Stewart

    • @Don Stewart

      I find this a very good and plausible description of the problem. The GDP point of view cannot discern the “quality” or relevance of a certain type of work.

    • If government paid one set of workers to dig holes in the ground, and another set to fill them in again, both sets of activities would add to recorded GDP.

      Essentially, GDP is calculated in three ways:

      – Consumption – which rises when the above workers spend their pay
      – Incomes – which are boosted by the wages of these workers
      – Value added – this increases, because output, irrespective of its objective worth, is valued at whatever someone is prepared to pay for it.

      0 x 3 = 0
      Nonsense x 3 = nonsense

  12. @Don The E,P and C remind me of 11th century alchemists=E court jesters=P and the C are the lords and kings gone off to the crusades. The E’s will have all that lead turned to gold by the time the C’s get back and the P’s will keep the serfs entertained in the meantime.

  13. Thank you, Dr Tim, another excellent piece.

    My recent experience with ‘struggling’ families and individuals has increased my horror of our debt-based economy; dependant in people spending money they haven’t got on things they don’t need as, you eloquently put it a while back.

    There is little new under the sun. In 1875, Samuel Smiles wrote: –

    “A man has no business to live in a style which his income cannot support, or to mortgage his earnings of next week or of next year, in order to live luxuriously today. The whole system of Debt, by means of which we forestall and anticipate the future, is wrong. They are almost as much to blame who give credit, and encourage customers to take credit, as those who incur debts. A man knows what his actual position is, if he pays his way as he goes. He can keep within his means, and so apportion his expenditure, as to reserve a fund of savings against a time of need. He is always balanced up; and if he buts nothing but what he pays for in cash, he cannot fail to be on the credit side of his household accounts at the year’s end.

    But once let him commence the practice of running up bills – one at the tailor’s, another at the dressmaker’s and milliner’s, another at the butcher’s, another at the grocer’s, and so on – and he never knows how he stands. He is deceived into debt; the road is made smooth and pleasant for him; things flow into the house, for which he does not seem to pay. But they are all set down against him; and at the year’s end, when the bills come in, he is ready to lift up his hands in dismay. Then he finds that the sweet of the honey will not repay for the smart of the sting”.

    Well, I have met many recently who are smarting from the sting, and I sense an indefinable feeling of precariousness in society – perhaps enhanced by the last year or so of the actions taken in the wake of the pandemic.

    There is a ‘wall’ of baby boomers reaching retirement in the next few years; many will be well-catered for as far as pension income is concerned; most will not, still suffering from the smart of the sting with their ‘overhanging mortgage’, other consumer debt, and the generality of living beyond their means.

    Maybe will will see a swing away from rampant consumerism as the sweet of the honey fades in the mouth? I rather doubt it.

    • Thanks.

      On consumerism, as on a lot of other issues, there are ‘foreground’ and ‘longer term’ issues.

      In the foreground we have the “stimulus trap”. Fairly soon, a choice will have to be made over this – probably not until the point at which it becomes obvious that inflation can’t be ‘transitory’ unless stimulus is curtailed. Easing back on stimulus can be expected to batter asset values, whilst continuing with it would trigger inflation. Inflation isn’t accurately (meaning systemically) presented in CPI measures, but people will know if or when it really takes off.

      Longer term, if my view as presented here is even ‘half-way right’, events aren’t going to conform to plans and expectations. But how can that be acknowledged – can one even imagine governments, businesses or anyone else at the decision-making level admitting (for example) that EVs aren’t a great idea, and that trams might make more sense?

  14. @Joe Clarkson
    Perhaps another angle on free energy. This is from the book Ramp Hollow, and what I will say is based on my faulty recollection. The author is exploring the relationship between the mountain people and the owners of the coal mines. The mountain people had been living off the land for generations, when a coal mine opened. The mine paid in cash and so some miners would go to work in the mine. But they still owned their land and they still knew how to live off the land, and the wife was still doing what she had always done.

    Now the mine owners decide to increase profits by screwing the miners one way or the other. The miners, having a human’s finely tuned sense of right and wrong, walk off the job and just go back to living off the land. The mine owners resort to various nefarious schemes to reduce them to abject dependence.

    There is no question that when the miner walked away from the job, their claim on energy declined. But it wasn’t a deadly event because they had not become slaves to the extra energy claims. For one thing, they had no debt. One strategy of the mine owners was ‘the company store’…which Tennessee Ernie Ford famously sang about ‘owing his soul to’. So allowing the equivalent of credit card balances was a strategy to lure the miners into becoming abjectly dependent.

    I don’t think I need to belabor the 21st century mechanisms which are very similar.

    Don Stewart

  15. The Fraying of the US Global Currency Reserve System

    This article explores some of those concepts, ranging from the fraying of the existing petrodollar system (for all of its stakeholders, both for US interests and foreign interests), to central bank digital currencies, to a total restructuring of the global monetary system.


    • Thanks Andrew .
      This is a long but highly informative comment on the interconnected international economy.

  16. I was thinking about meme creation this morning and with regards to how basically nobody takes collapse of our ecosystems seriously. The picture I have in my mind is the earth being fed into a meat grinder that is being powered by a coal power plant (representing BAU). The people gathered are celebrating upon hearing the good news.

    “Good news everybody soon we can power it all with renewables”

    Think I will make a T shirt.

    • Three former high-ranking German politicians (including Wolfgang Schäuble) just published a paper admonishing German politics to reign in Southern European states who sneakily circumvented austerity measures during the pandemic to support their own economies, causing undue financial stress on the upstanding German taxpayer, and a threat of inflation for all of Europe.

      It seems only brown people can cause inflation.
      In other news, the Ministry of Finance reports that inflation is back at 2% and that we can easily grow our way out of last year’s debt.

    • We need to start by noting that, in all instances, numbers are distorted by the way in which GDP is calculated.

      In Britain, for instance, reported GDP fell by £230bn (9.9%) last year, but this number *includes* a year on year widening of the deficit of £230bn (2020 vs 2019). In underlying terms, British output fell by 20%, not 9.9%, and this was actually worse than Spain (underlying -18.8%). The underlying fall in Germany was -10%.

      In Britain, as in the US, the central bank monetized the deficit. Since the end of Feb 2020, BoE net asset purchases have been £340bn, and net purchases in the US have been $3.6tn. The ECB bought EUR 2.87 tn over that same period.

      Re. Germany, SEEDS demonstrates quite how beneficial the Euro has been to Germany. A lot of this benefit takes the form of exports to other EA economies. There’s a snag here, though. Germany is owed EUR 1.07 trn through the Target2 clearing system, the bulk of which is owed by Italy and Spain (both owe c EUR 500bn to the system). That’s a big chunk of German GDP (EUR 3.3tn).

      Bottom line is that Germany is part of the Euro system, has benefited very much from it, but could see these benefits erode – AND a significant proportion of past gains unwind – if this were to go wrong.

      I have an enormous admiration for how Germany runs her economy, drastically better in policy terms than the US, let alone Britain.

      But the idea that German (or for that matter Benelux or other northern) ‘virtue’ contrasts with Mediterranean fecklessness is not just simplistic but outright misleading.

    • As someone on the outside looking in – are you getting a clear sense of who the steering of the German economy is leaving behind?
      The gap between the rich and the poor is among the widest in Europe, and during the last 30 years a whole underclass of closely monitored non-voters (the poor don’t vote, only those recently impoverished) has been created, people whose benefits basically serve as a reliable income stream for big industry, because consumption patterns and (required) lack of financial reserves mean that what goes in inevitably comes out every month.

      We’ll be seeing significant gains for the right wing during this year’s election, but are unlikely to witness anything like the Yellow Vests: The erosion of wealth has not yet gone far enough.

      Now that Biden seems to have backtracked on the pipeline it’ll be interesting to see whether German mercantilism will be left alone, too, after coming under fire under Trump.

    • Of necessity, there are situations where I can’t possibly be familiar, as locals are, with the situation on the ground. That’s why I make extensive use of data in general, and the SEEDS model in particular. I do look at distribution data, but this is limited in scope. That’s why my economic take on Germany has to be relative to other countries.

      On that basis I can only say that the German economy looks a lot more resilient than, say, France, Ireland, Britain or America. Most of Germany’s reported growth over the past 20 years has been real, i.e. not a function of pouring huge amounts of credit into the system. I do run an alternative (historic) scenario for Germany, the aim being to isolate the beneficial effects of the Euro.

  17. Andrew,
    Re: The Fraying of the US Global Currency Reserve System, what a fantastic article. Thanks for bringing it to our attention!

  18. View of the Low Carbon Future
    While the IEA paints a picture of (mostly) like for like replacement of fossil fuels, Kris DeDecker takes a deep dive into sail transport:
    Slog through the details and you get to some conclusions that I find to be illuminating.
    *As non-fossil fuel alternatives are implemented, everything changes
    *Substitution of labor for fossil energy
    *Time slows down
    *Comforts turn out to be expensive
    *Volumes will shrink
    *Localization of supply chains becomes essential
    *Physical inability to make enough of the low carbon vehicles to support current consumption

    Don Stewart

    • I enjoyed your podcast appearance Tim. I hope you do some more.

      I was quite interested in your hosts view on The NHS – I agree with you, it is pretty efficient organization. 1.3m employees must have some economies of scale.

    • Thanks Gordon, glad you liked it.

      A few years back I did some work on cost efficiency. If memory serves, the NHS came out a lot better than US healthcare generally, but the numbers for Medicare were very impressive.

      What interests me now is whether the philosophy behind the NHS can be adopted into a plan to ensure that the essentials are available and affordable for all. That could, and arguably should, be the next “rallying cry” and “big project” for political leaders.

    • “…martians with chequebooks.”

      Almost spilled my furlough funded beer as I giggled at that.

  19. @Dr. Morgan
    Have you considered that TPTB DO understand that the economy is an energy system, but they are determined to maintain the current power structure through whatever downsizing of the civilian economy is necessary? If that is true, then it is best not to argue with your theory and facts, but instead to focus on keeping the ordinary people busy building ‘green infrastructure’ while the elites go about constructing new systems to keep themselves on top…regardless of the size of the heap of sand.

    *The US military 9 months ago warned that the US and it’s military is ’20 years from collapse’ due to climate change (see next to last post by Alice Friedemann). But they turn it into a demand for more money to fight the Russians for control over Arctic oil.
    *Biden notes that the oil companies are ‘perfectly positioned’ to take advantage of the huge industrial scale ‘renewable’ facilities because they have the logistical and engineering and management skills to do it. (After all, the 7 Sisters created the global oil market.)
    *China, when it began to industrialize, maintained a huge military. A US Defense Secretary who visited in the early 2000s asked ‘why do you need such a large military?’. I don’t think it occurred to him that they needed to soak up a surplus of young men who might otherwise cause trouble. I remember a Chinese documentary at the time pointing to the problems with testosterone soaked young men and a scarcity of good jobs. Young women are not attracted to boys without prospects. That has also been true in the US.
    *My impression is that the EU bureaucracy is heavily invested in maintaining itself, even if ‘smaller might be better’…or even ‘smaller IS necessary’.

    My very tentative hypothesis is that TPTB don’t fail to understand, they just think that you are being naive by focusing on the common good…when it is really the maintenance of the power structure that is at issue.

    Don Stewart
    PS. Anybody who knows anything about human metabolism, ecosystems, and engineering knows that the key scarcity is usually energy. It makes no sense to deny that energy is important in the economy…unless you are a tenured Professor of Economics…in which case maintenance of the power structure convinces you that energy is irrelevant.

    • We can’t know about this, of course. Governments might understand the reality but choose not to say so.

      But what fascinates me is the seemingly unquestionning faith in conventional interpretation evident in business and finance. These people, who on the whole are pretty bright, really do believe in an economy with more of everything, from more cars (EVs), more automation, more ‘technology’, more consumption and, of course, more profitability.

      They don’t even seem fazed by an economy propped up by monetization. They don’t seem to draw a line connecting past “growth” with a parlous financial situation depdendent on stimulus. They really seem to believe that we can – for instance – protect the environment by mining cobalt in the deep oceans. They seem to see no contradiction between relinquishing legacy energy supplies and “growing” the economy.

    • There are definitely individual analysts working in, or working for, the UK government who understand this issue, and wanted to commission work on it. I was one of them.

      The only work I saw done on this issue by UK government was by Charles Hall commissioned by DFID. But that was limited to a few countries.

      Formal studies looking at problems and options are always competing for money with various other proposals for the limited analysis budget. They often need a high-level internal sponsor, a minister would be perfect. But in my experience they often they only support things within a tight techno-utopian ‘Overton Window’.

      The ‘sponsors’ like studies that are ‘massaged’ to conclude what they want, so they can use them to support their political agenda.

      This makes it very difficult to spend time on important but unrecognised issues within government. I raised the problems with this ‘sponsor’ based system in the past.

      After a frustrating few years working on trivial but ‘fashionable’ studies, I told my line manager that I felt “I could be a more effective Civil Servant outside of the restrictions of the Civil Service”.

      You’ve got to be in the right place who are willing to let you formally work on these issues, e.g. Tim with TP.

      Otherwise we’re just a bunch of fringe thinkers chatting on the web 😜

    • Thanks – I think I was aware of the DfID study, though I never heard what became of it. I was very fortunate to work for a firm that was so supportive of new thinking.

      Ironically, gradual emergence from covid (if that’s what’s happening) carries us nearer to a point of danger. I remain baffled by the extent of assurance and complacency at most levels of government and the private sector. It is, for instance, assumed that we can finesse the stimulus/inflation/default issue, but very hard to see how that can happen.

  20. @Dr. Morgan
    Like Wall Street, they may think that governments have their back. Many of them have been part of the ‘revolving door’, and everyone who is anyone has participated in ‘pay to play’. They may also be reflecting the ‘dance as long as the music plays’ fatalism. People get to the top not by being the wisest, but by outsmarting the competition.

    I learned some lessons about dealing with the upper echelons early in my career. I couldn’t understand why they avoided taking on necessary but unpleasant situations, and why blaming somebody else was so important to them. Once I figured that out (helped by some advice from wise old attorneys), things tended to fall into place.
    Don Stewart

    • I agree with all of that. This, though, is a situation without precedent. A very large proportion of the stock market is invested in sectors with little or no future. Themes like “tech”, “growth” and “disruption” might have made sense in the old world, but not in the one that’s unfolding. I’m genuinely surprised that this is passing unnoticed.

      I come back to the point about stimulus. OK, so the Fed decides to head off inflation by tightening, ‘tapering’, etc.. But that choice no longer exists. The size of the bubble is such that tightening would trigger defaults at a scale that would compel the authorities to intervene to bail out the system. Their only tool for intervention is money creation – back to Square One….

    • @Dr. Morgan
      See my note on ‘Tongue in Cheek’. The very rich are not ignorant of this…the story was accompanied by a picture of Jeff Bezos’ super-yacht. They can also do the math…or have their multitude of assistants do the math. The Buddha supposedly left a position of power for a position of powerlessness 2500 years ago…but there have been few such examples since then. It seem to me that what makes sense for the super-rich is to stay on the horse which made them wealthy for as long as they can, and build a bunker somewhere figuring that the collapse and bloodletting will be over pretty quickly and then they can emerge with some assets to get started again.

      The way they keep the horse moving now is to talk about Green Revolutions and Promising new Carbon Capture and Storage Solutions and how the transition is going to create bales of jobs (the IEA report). So…don’t worry about the fiscal deficits, the future (on Mars) is so bright that the amounts are trivial. (Forgive me if I grievously underestimate the intelligence involved in all this.)

      Don Stewart

  21. Everywhere in the UK, the mainstream media is humming a soothing lullaby on how there’s no need to worry about inflation by explaining how it’s totally different to the ’70s because X, Y, Z. In real life in the meantime, my power contract expired and I had to decide on its replacement, this required attention because the existing provider (who has good reviews in an industry noted for particularly poor service even in rip-off Britain) had raised prices going into the future by ~15%.
    So far, I’m not seeing much better on offer from alternatives and apparently vehicle fuel is going up too, while ironically water bills make your eyes water. All told, this is the pattern predicted here, essentials rising steeply, while there may be bargains among the various fripperies imaginable.

    • We’re still being told that this is “transitory” – of course, just as ZIRP and QE were “temporary”.

      I now see little hope of rescuing the financial system. If we taper stimulus, or raise rates, the scale of ensuing defaults would push the CBs into money creation anyway.

  22. Tongue in Cheek
    “I see little hope for rescuing the financial system”
    Well…maybe “we “will be better off if it can’t be rescued?

    The UN has issued a report on the responsibility for emissions by income and wealth level. They find that the top 1 percent creates twice the emissions of the combined emissions from the bottom 50 percent. To achieve equity of emissions, the top 1 percent needs to cut by a factor of 30, the top 10 percent need to cut 90 percent, and the bottom 50 percent get to consume 3 times more.

    I think I can say without fear of contradiction that the only way to achieve equity is for the financial system which supports the elites to collapse…(As one of the 10 percent, let’s hope that Mother Nature is unaware of these statistics…she can be quite nasty when aroused.)

    Don Stewart

  23. Particularly bleak analysis of the future from the latest Gail Tverberg reading of the runes:


    Interestingly she notes the value to the alert politicians in hiding behind pandemics to disguise all symptoms of decline as well as their ordinary and to-be-expected ”How can I use this best for me”

  24. A Sober Note on the IEA Paper

    Professor Chris Rhodes (UK) delivers a sermon about the necessity for addressing the whole problem…not just energy. This reminds me of the choice given some prisoners in the US—would you prefer to be hung or shot?

    I can’t argue with Rhodes’ basic premise that the whole of the way humans inhabit the planet needs to change. The morbid thought occurs to me that one way to bring that about is to tax everyone (or else just inflate away their claims on energy) in order to finance some long shot gambles on Mars or fusion or whatever. The proposal from the IEA that gross energy fall, while population is increasing and capital expenditures are multiplying, implies a huge reduction in somebody’s living standards. The obvious targets are the 1 percent and the 10 percent, strictly following the math. But it is really hard for me to believe that the political and business elites will attack themselves. Will Davos be cancelled because there are no rich people left to attend?

    I keep coming out in basic agreement with Rhodes: the human footprint on Earth will have to shrink. One of the illustrations in the Odum’s book A Prosperous Way Down featured a picture of a big city vs. a picture of a village. That may be an idea, but we have done so much damage to the infrastructure required to support a village (land, water, knowledge, practical skills, water transportation, railroads, etc.) that the village option may be closed to us. As I understand Dr. Morgan’s position, well designed cities may still be viable…but I have trouble envisioning a path from here to there. Fortunately, I was instrumental in creating grandchildren who are a lot smarter than I am…so let the mantle pass.

    Don Stewart

  25. It’s fun to speculate on what the “elitz” know or do not know and what their plans despite the fact that their guiding principle is “Oligarch Lives Matter (the rest of us are expendable).” But they will feed us a line and pander to us as we are being destroyed. A perfect example of how this works is how young men sacrifice their lives in war. The merchants of death get the big bucks for the instruments of death, megacorporations secure access to new low-cost resources and sweetheart contracts from the new puppet regime, and the soldiers who made it all happen get medals for their valor.)

    IMO it’s beside the point. The real question is what the rest of us are going to do in the absence of relevant government and corporate action and even counterproductive government and corporate action.

    • Tim Watkins latest commentary on the current predicament is highly realistic.

    • @tagio

      Re: “The real question is what the rest of us are going to do in the absence of relevant government and corporate action and even counterproductive government and corporate action.”

      We are forced to prepare our progeny with a broad education. Plus, if in rural areas, teach them skills in growing and storing food, fishing, hunting (ours won’t do that I expect) finding clean water, using wood stoves, etc. Urbanites are totally out of luck if systems break down. And over half the planet are in cities…Not a pretty picture.

  26. Another good essay, Dr Tim and much kudos for the podcast with James Kunstler
    It wasn’t that long ago you said that it was $4 of debt for every $1 of growth – now that figure is $6 of debt. I hope that this isn’t exponential! One thing that should be noted is the ever shifting interpretation of what is included in GDP – which, if anything, may result in ECoE being slightly understated.

    • Thanks!

      In the podcast I was quoting (from memory) numbers for the US. The $3.50 (ish) number is debt only, but the higher number includes broader financial commitments.

      Looking at my notes, the figure for the US for 1999-2019 was $3.75 of new debt – PLUS $3.80 of broad financial commitments – for each dollar of “growth”.

  27. Tim Watkins calls it for stagflation in his latest article :

    ( https://consciousnessofsheep.co.uk/2021/05/28/youll-own-nothing-and-youll-be-fing-miserable/ )

    For anyone who has experience in a poor country now or in the past, it rings true, most of the population barely has money to buy essentials, so there is almost no demand, little property and any recycling possible is done by those who have no choice, just to survive to the next day. It was scary to be reminded how food banks are now normalised in the UK, a country where for generations people parroted ”we are the best in the world” about everything without even thinking if it was true. And how long have main streets in almost every UK town been lined by charity, booze and betting shops? I remember 3 decades for sure.

    Meanwhile, ‘in the real world’ our Trump copy is pushing for his latest white elephant toy with the last of the resources ( https://www.theguardian.com/uk-news/2021/may/30/boris-johnson-plans-to-sink-200m-into-new-ship-of-state ) and given what he has gotten away with in his life to date, the £200 million begging bowl may soon circuit the world trying to recreate the past with other peoples who are simultaneously finding a very different reaction from officials when they land at ports here.

    • On stagflation, I come to the same conclusion.

      The stagnation part is inescapable, given that the surplus energy basis of the economy is eroding. Inflation then becomes inevitable, not least through a sort of collective petulance which insists that there *must” be a way of keeping growth going, and that all we need to do is to pour enough money into the system to ‘fix’ a non-monetary (i.e. an energy) problem.

      At the moment, of course, we’re being told that inflation is “transitory”, much as QE and ZIRP were “temporary”.

      Perhaps the biggest delusion is that we – meaning central banks and governments – have some sort of choice about this. We can, supposedly, always call a halt to inflation by (for instance) raising rates. If we did, though, the sheer scale of ensuing defaults would force the authorities into rescues which would amount to another form of money-creation.

      Back in 2008-09, there were ways in which ZIRP could have been enacted *without* triggering asset price escalation, but these safeguards were either not understood, or considered not acceptable on political grounds. Other tools may now exist to finesse the current situation but, again, you’d have to understand them *and* be prepared to do some unpopular things – perhaps a topic for another time.

    • @ Dr M., Agreed. Yourself and several others like Tim Watson, Gail Tverberg etc., are narrowing more and more towards a sharper image now of what is coming as more facts become available to build up the picture, like in a jigsaw puzzle.

      I would be fascinated by a discussion here, on your educated guess of what the future holds, based on what we know so far. For example, relatively expensive travel is going to become simply unattainable for most people in the same way as it already is for the lifetime of those in current teeming slums they never escape. This means places relying heavily on tourism, most of which is lower-end or of the mass variety, will suffer imminent deep depression and the consequences will ripple out like falling dominoes, like the young there emigrating if they can.

    • Thanks, and I’m glad you’ve raised that.

      I can only speak for myself, of course, but this is the moment when we need to get serious. Again speaking only personally, there’s only so much mileage (though no limit to the entertainment) that one can get out of showing up the fallacies of the orthodox point of view. When we get beyond the ‘transitory’ take on inflation, central bankers are about to show us how we can (a) borrow our way out of a debt problem, and (b) print our way to monetary stability.

      There’s a point at which the fun has to stop. My analogy here is that, whilst ‘Bugs Bunny’ might be endless fun for young and old, it’s not much of a guide to how to care for a pet rabbit.

      This is where, once again speaking personally, we need to move mainstream. The model – SEEDS – is fully ‘ready to go’. I’m working on applications, and on how to make data, projections and conclusions available.

      Right now, conventional thinking is taking ‘a long walk on a short pier’. Having alternatives available is becoming critical.

    • going mainstream is the next step, it’s not actually important to communicate the message to politicians and elites yet,
      the next stage is to communicate the message to the masses, once they grasp it adoption of the idea by politicians and elites becomes inevitable,

      new ideas as a cultural meme start in the imagination, evolve and develop in private circles, spread into the mainstream consciousness and at the final stage enter the political arena as an irrefutable fact,

      politicians will only take the message on board once it has been fully developed, become so simple and obvious a child could understand it and impossible to ignore and dismiss,

      getting on Newsnight for a long form interview or being a guest on Question Time only happens at the point an idea is already pretty much mainstream,

      for now we need podcasts and Zoom style interviews that can be posted to Youtube and Twitter,
      the objective would be to retweet, repost, pingback, ‘like’ ‘share’ etc. onto every media platform possible and see if we could get this interpretation to go viral.

      if you go viral with an idea that discombobulates mainstream orthodoxy they feel compelled to supress, dismiss, refute or discredit the new idea and they will naturally do it on the BBC or in a major newspaper,
      at this point you’ve got them by the balls because the idea is being discussed openly and all you have to do is tear their objections to pieces on the platform they have promoted the issue to,

  28. 40 years ago I remember others citing academic studies which suggested that extra economic growth and wealth in European countries led to no extra happiness. At a normal developed country living standard of the mid-70s, being with friends, family and loved ones mattered more.

    I presume other basics, e.g. modern medicine and telephones, were also important. But we had those back then. Fast forward to the 2020s and apart from the publication of what seem important studies of how to manage on finite resources/wealth, e.g. ‘Capital in the 21st.C’, ‘The Spirit Level’, we don’t seem to have advanced very far. We’re still treating the economy as master not servant.

    • Maybe they only get subsidies/tax breaks for building them and then guaranteed income for the first few years of service? When they make no profit – down they come.

    • Hi Trevor,
      that was the conclusion I came to,

      if the whole aternative energy market ends up being a subsidy and tax break harvesting enterprise it’s going to cost a lot to keep going,

      it goes back to the Charlie Munger quote; show me the incentive and I’ll show you the outcome.

      it also begs the question, if this is what they do with redundant land based wind farms what will they do with offshore wind farms when the favourable deal expires?

  29. Somehow left off of my link to a wind farm rejuvenation link above:
    If you search on “wind farm demolition” you can find (in the US) lots of articles. Here is one:

    Whether the Mendota Hills facility is getting extra government support or just the usual support that investment projects get and very low interest rates, I have no idea. But some old wind farms are being upgraded with new technology. I believe the reduction in sites at Mendota has to do with the more powerful windmills needing wider spacing to avoid interference in wind patterns. But the effect is still to increase the output.

    Don Stewart

  30. Interestingly, some in the mainstream have started connecting some epidemic-linked subsidies to UBI and proposed how it could lead to acceptability now:


    My only concern on UBI had been that was that it doesn’t generate more energy, so yes, we’d have less inequality, but still the problem of rapid general decline. However, thinking of the current alternative, printing money or taxing heavily so half to two thirds of the working-age population can do bullsh*t jobs (David Graeber) that make most people miserable and don’t help the real economy, isn’t better. So at least paying the same money to people to not travel, while instead looking after their own kids, homes and old folks, repair their own stuff, grow some food etc., etc, can’t be worse, not least from the energy perspective.

  31. Art Berman calls it “Net Zero, Gross Delusion”:

    He says, “The world economy is about 79% dependent on fossil energy. Substitution with non-fossil energy cannot happen fast enough to both reduce emissions and sustain present levels of economic activity and growth. Fossil fuels cannot be abandoned because production of non-fossil energy requires substantial carbon use.”

  32. Interesting statements by Tom Whipple and Steve Andrews in the Energy Bulletin Weekly,

    “Despite President Biden’s pledge to aggressively cut the pollution from fossil fuels that are driving climate change, his administration has quietly taken actions this month to guarantee the drilling and burning of oil and gas for decades to come. The clash between Biden’s pledges and some of his recent decisions illustrates the political, technical, and legal difficulties of disentangling the country from the oil, gas, and coal that have underpinned its economy for more than a century.”


    “Thousands of new oil wells and hundreds of new oilfields will be needed to meet global demand even if it falls sharply towards the middle of the century, Oslo-based consultancy Rystad Energy said on Friday. Its analysis stands in sharp contrast to the IEA conclusions.”

  33. Mike Pompeo (Trump’s Secretary of State and head of the CIA), said “If you put Climate Change First, you put America Last”.

    Nothing has changed since Rio: “The American Way of Life is not on the negotiating table”.

    While the current Secretary of the Interior voted against the pipeline in North Dakota as a congressperson, as the actual Secretary she fails to intervene and stop it.

    It reminds me of one of those Christian saints: “Lord, give me chastity…but not quite yet”.

    Don Stewart

    • St Augustine, in fact. But, as Stephen Maturin remarks in one of the O’Brian books, “he wasn’t actually a practising saint at the time”.

    • I wonder if renewable energy were to be renamed
      “Delusional energy” would that convert the “unbelievers”.

  34. The pieces of the energy jigsaw puzzle are slowly coming together Tim.

    One possible future is that all roads lead to a safe global energy capacity that will delimit the size of the economy of production and consumption.

    Safe global energy capacity in this instance refers to an alignment with the safe global operating space so that the human species can produce and consume (as a function of energy) within the planet’s ecological limits.

    This will mean national energy quotas with energy allocated for cost energy, critical energy and surplus energy with human activities categorised as low, medium and high energy in relation to the availability of surplus energy with individuals then choosing how to spend their energy allowance.

    As such, energy efficiency and productivity will enable some expansion in production and consumption as long as it remains within the Safe global operating space.

    The foreseeable problematics are both practical and theoretical. How to distribute national fair shares of the safe global energy capacity and how to measure the energy associated with the extraction, distribution and processing of raw energy (cost energy). How to measure the energy associated with creating and maintaining critical infrastructure, goods and services (critical energy) and how to measure the energy associated with material prosperity and luxury goods and services (surplus energy).

    Additional problematics are entropy and the balance between Technocracy and Democracy in terms of how national populations choose to utilise their national energy quota.

    • Steve G
      You are an optimist thinking that the world (UN or equivalent) will choose cooperation with ideological opposites. Perhaps regionally it is possible,

      Steve K


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