#207. Could the dollar crack?


How big is the Chinese economy? On one level, that question is easily answered – last year, China’s GDP was RMB 91 trillion.

For comparative purposes, though, what’s that worth in dollars? Authoritative sources will tell you that China’s dollar GDP in 2020 was $14.7tn. Those same sources will also inform you that it was $24.1tn. That’s a huge difference. On the first basis, the Chinese economy remains 30% smaller than that of the United States ($20.9tn). On the second, it’s already 15% bigger.

The explanation for this very big difference lies, of course, in the two ways in which economic data from countries other than the United States can be converted into dollars. One of these is to apply average market exchange rates for the period in question. For convenience, we can call this market conversion.

The alternative is PPP, meaning “purchasing power parity”. To apply this conversion, statisticians compare the prices of the same products and services in different countries. (One such common product is a hamburger, which is why, in its early days, PPP was sometimes called “the hamburger standard”).

The differences between market and PPP calibrations of GDP are enormous. Last year, world GDP was $85tn on the market convention, but $132tn in PPP terms. At the same time, the use of PPP conversion diminishes America’s share of the global economy. Last year, the United States accounted for 25% of global GDP in market terms, but only 16% on the PPP basis.

Using PPP instead of market conversion doesn’t make the economy ‘bigger’, of course. It just means that a higher dollar value is ascribed to economic activity outside the United States.

There’s no ‘right’ or ‘wrong’ way of converting non-American economic numbers into dollars. To a certain extent, it’s case of selecting the convention best suited to the topic being examined. Market conversion is appropriate for transaction values, such as trade, and cross-border assets and liabilities. PPP provides a better measure of the comparative sizes of economies around the world. (The SEEDS economic model produces parallel output on both conventions, though with a preference for PPP).

For macroeconomic purposes, the PPP convention is arguably more meaningful than market conversion, because it better reflects the economic scale of countries like China and India. Additionally, it leaves both market sentiment and short-term vicissitudes out of the process. PPP conversion has been with us for decades, and is carried out by reputable authorities, such that we can accept it as a valid and consistent alternative basis of currency comparison.

Market rates are determined by many factors other than economic comparison. FX market players have multifarious reasons for liking or disliking various currencies. Their opinions do not constitute economic ‘facts’.

An obvious example here is the reaction to the “Brexit” vote. British citizens obviously didn’t wake up 20% poorer on the morning after the referendum, but that’s what market dollar valuation of the UK economy implied. By the same token, market-rate conversion asks us to believe that the economy of resource-rich Russia is a lot smaller (at $1.4tn) than that of Italy ($1.9tn).

People in Russia, China, India and elsewhere are not poorer because FX markets don’t, relatively speaking, like their currencies. Currency undervaluation against PPP equivalence does make these countries’ imports more expensive, but it also gives their exports a competitive advantage.

Benchmarking the market dollar premium

For present purposes, the importance of having two FX conversion conventions is that it enables us to benchmark the dollar itself. Using world economic data going back over four decades, we can examine the relationship between the PPP and the market valuations of the dollar.

In 2020, for example, the GDP of the world outside the United States (WOUSA) was $63tn on the market basis, but $111tn in PPP terms. From this we can infer, either that market conversion undervalues the WOUSA economy, or that the market dollar trades at a premium to its PPP equivalent.

For convenience, we can call this difference the market dollar premium, and calculate the ratio for 2020 at 1.74:1. Put another way, the market dollar commanded a 74% premium over the PPP dollar last year.

There’s nothing abnormal about the dollar enjoying a valuation premium over other currencies. The dollar’s pre-eminence can be traced back to 1945, when America accounted for half of the global economy, and was the world’s biggest creditor. The dollar, after all, is the world’s reserve currency, and the benchmark against which other currencies are measured. Most oil trade continues to take place in dollars, providing a ‘petro-prop’ for the USD, because anyone wanting to purchase oil must first buy dollars.

This being so, it’s no surprise that PPP comparison reveals a market dollar premium.

What’s interesting, though, is the upwards trend in this premium.

In 1980, it stood at 30%.  It reached 40% in 2001, and 50% during 2005-06. The market dollar premium reached 60% in 2009, and 70% in 2015. Based on consensus projections, the premium is expected to carry on rising, from 74% last year to 79% by 2026. Perhaps most strikingly, the dollar premium is twice as big now (74%) as it was in 1999 (37%).

Does the market’s attachment of a widening premium to the dollar make economic sense? It’s at least arguable that it doesn’t. Quite aside from the rise of economies such as China – and America’s falling share of world GDP – there are reasons to suppose that the economic pre-eminence of the United States is eroding, and that the market dollar premium, far from widening, should be contracting.

The most obvious negatives for the market dollar premium are to be found in the fiscal and monetary spheres. Starting in 2008, the Fed has operated monetization policies on a gargantuan scale, lifting the Fed’s assets from $0.8tn in June 2008 to $8.1tn today. Interest rates have been below any realistic estimate of inflation since the 2008-09 global financial crisis (GFC) and, with inflation now rising, are negative to the tune of at least 4.0%, and probably more. With the administration seemingly addicted to fiscal stimulus, and with the Fed apparently willing to go on monetizing deficits, these trends seem set to continue.

Scaling back or reversing QE – or, for that matter, raising rates to head off inflation – would prompt a greatly-amplified repeat of the 2013 “taper tantrum”, and tightening monetary policy could harm the US economy, would trigger sharp falls in asset prices, and would push up the cost of government borrowing. Neither monetization, large scale money creation or negative real rates can be considered positive for the value of a currency.

There’s a clear danger, then, that the US could push the dollar’s “exorbitant privilege” too far.

Meanwhile, the Fed also has to be mindful of the shadow banking system, sometimes called “non-bank financial intermediation”. This isn’t the place for a detailed consideration of shadow banking, but the system resembles an inverted pyramid, with very large assets (which have been put at $200tn) resting on a narrow base of collateral. Government bonds in general, and American bonds in particular, play a central role in this collateral.

Simply stated, a battle royal is likely to be waged between not-so-“transitory” inflation, on the one hand, and, on the other, pressing reasons for not raising the cost of money. 

This might not matter all that much if the market dollar premium hadn’t risen as far as it has. The use of PPP for benchmarking isn’t common practice, but the calculations required for calibrating the market dollar premium aren’t exactly rocket-science – and the implications of this calculation are stark.        

The conclusion seems to be that the dollar now trades at a more-than-exorbitant premium to other currencies – just as America is getting mired in a tug-of-war between stimulus and inflation.

79 thoughts on “#207. Could the dollar crack?

    • Crack? Losing 94% of its buying power since its inception, isn’t this way beyond the curve?

  1. Well done, Tim. The only quibble I have is with this:

    “Market rates are determined by many factors other than economic comparison. FX market players have multifarious reasons for liking or disliking various currencies. Their opinions do not constitute economic ‘facts’.”

    I don’t know your definition of “economic facts.” My experience trading in the FX market for nearly 40 years tells me that interest rates and perceptions of creditworthiness play a major role in investment flows between currencies. To me those are economic facts despite not reflecting rates and details of goods and services produced and the imbalance of trade.

    • Thanks. It does come down to “facts”, “opinions” and “influence”, and I’m glad you raised this point.

      Let’s take “Brexit” as a striking example. FX markets didn’t like the referendum result. They thought it would have an adverse effect on the UK economy (they might well be right, but this ranks as ‘opinion’). The result *itself* could deter inward investment (that ranks as ‘fact’). Markets’ adverse *reaction* could deter investment in Britain, though some investors might think the other way, i.e. it made British assets cheaper to acquire (that’s ‘influence’).

      There was, and always is, an element of self-fulfilling prophecy (‘sell GBP, because others will’). The clever bit is to work out where, and when, something, in this case GBP, turns out to be over-sold.

      “Buy the rumour, sell the fact” is a valid saying!

      I don’t have your FX trading experience, but I’ve worked in capital markets, both in strategy and H of R, so I understand how these things work.

      Here, though, I look at things from a macroeconomic perspective, which we might call ‘long-term, fundamentals, trends’. From that perspective, PPP is the better measure.

  2. Forgot to add that the big mac index has been used for some 40 years. It reflects over-under valuations from “fair” exchange rates (purchasing power parity-PPP).

    • PPP is now widely accepted. Forecasts for “global growth” are usually calibrated in PPP. I designed SEEDS to produce output in both, though my primary reference for national economies is local currency at constant prices.

  3. There is going to be a pressing need for at least temporary currencies when the fiat ones pop and people can be very creative with a gun to their heads. Practicality would suggest something small, fairly durable, light, long-lasting and with a range of values for the spectrum of amounts everyday trade requires. The only option that I can immediately think of is drugs, legal or otherwise, so at the market, when buying a dozen eggs, you can hand over a few blister packs of generic paracetamol, the same way cigarettes, sweets and stamps were used in wartime. Big pharma wins again.

    • Collect and keep a good number of current Sterling coins, which will continue to hold value for small purchases: they effectively become scrip items, as they have done many times previously. Also have some easily recognisable silver coins for larger trades ( gold coins are effectively too valuable to make change, but in the past people would take links from gold chains to make small purchases ) Basically, it will be the same as it ever was.

    • F1,
      “Big Pharma” does not make Paracetamol, ( that’s Tylenol to our American freinds ), there is no profit in Generic Drugs. In fact if things get really dire and the NHS were to collapse, then Big Pharma just might well find itself with no market for its overpriced products.
      But yes, you are right, bars of soap, razor blades, washing powder etc. All toiletries and domestic items will be the currency of the day. That and as suggested above, keep a stash of low denomination Silver coins.
      If the Internet goes down, then Crypto- and Visa card payments will be of no use.
      By my reckoning it is no longer a question of, if the Dollar collapses, it’s more a question of when it collapses.

    • I think most big pharmas have divested their OTC products, of which paracetamol is an example. I spent some time working alongside a top pharma analyst, and found it fascinating.

  4. The taper tantrum was perfectly coincident with a sudden loss of liquidity in the Chinese short term funding market as the PBOC went on one of its periodic efforts to tamp down its endless tsunami of credit expansion. A wave of liquidation to meet margin calls or to GTFO followed. (It is on another round of this now. Will they blink? There is no better bet in the world. Everybody blinks when there is a hint of financial asset deflation) The PBOC stepped in to quell the panic right away.
    The panic there soon ended and so did the taper tantrum.

    • Indeed – and credit (and broader financial) expansion then carried on….

      The PBOC is indeed trying to curb excesses. I can see the sense in that, and think they might succeed, at least to the extent of curbing the more extreme instances.

  5. Since the economy is an energy system at its foundation, why shouldn’t we just look at energy use, perhaps adjusted for average energy efficiency, when comparing the GDP of different countries? China uses about 145 exajoules of primary energy per year, compared with about 88 exajoules for the US. If energy efficiency is the same for both countries, this would mean China’s economy is 65% bigger than the US economy.

    Of course, determining the efficiency with which a country uses energy is going to be difficult, expecially since there can be large sectoral differences between countries. China may devote more energy to manufacturing and construction and the US probably devotes far more to services. If one country is spending energy on building infrastructure and another has already built a similar infrastructure, the comparison is even more difficult. The mature economy can back off on its energy expenditures for infrastructure and still take advantage of the benefits of that infrastructure for domestic production.

    Despite these difficulties of direct comparison between countries, it seems to me that comparison of energy consumption is a better indicator of differential economic activity than comparing money flows. And for the world as a whole, where country to country differences will tend to average out, total changes in world energy consumption should be a good measure of changes in global economic activity.

    Similarly, for an individual country, where economic sectors don’t change greatly from year to year, changes in per capita energy consumption should be a good indicator of changes in per capita prosperity. In the US, per capita energy consumption has decreased about 11% since the year 2000, which might compare well with your SEEDS calculation of prosperity change.

    • This really takes us to the SEEDS project.

      First, we need to calibrate economic output and other data in financial terms. The debate is conducted in financial language, so a model whose output is in energy units wouldn’t get us very far. Furthermore, GDP needs to be ‘cleaned up’ because of the effects of what we might, loosely, call ‘the spending of borrowed money’. GDP can, within certain limits, be ‘whatever you want it to be’, to the extent that you can pour enough credit into the system.

      Second, the correlation between energy use and output (or prosperity) works globally, but not locally. If a country imports high energy-content goods (like food, machinery and so on), and pays for them by exporting low energy-content products (such as financial services), it can appear to get a lot of economic value out of each unit of energy.

      Third, there’s ECoE. This might not be recognized by conventional economic interpretations and models, but it’s uttery critical. SEEDS incorporates that by distinguishing (a) between total and surplus (ex-ECoE) energy, and (b) between output and prosperity.

  6. @ Joe Clarkson, Don Stewart and Dr Tim,
    Yet another addition to Tim Watkins blog this time under energy.
    The ‘productivity ‘of this man is more (sorry as ) amazing as that of ‘our own’ Dr Tim.
    Tim Watkins mentions the work of Soddy . Soddy ( a Nobel prize winner) was clearly ahead of his time in respect of the significance of energy and its control by the PTB. (See Wikipedia) . Sadly since his death in 1956 the PTB have further entrenched their position by continuing with the financial model (beast) that voraciously consumes the resources of a finite planet .

    • As regards Soddy, I agree entirely.

      Tim Watkins’ output is impressive, and the quality is extremely good. It’s one of the few blogs that I make time to read. My own output is necessarily less than I’d perhaps like it to be, but that’s mainly down to spending most of my time on SEEDS.

  7. Yet Another British Tim
    Tim Jackson gets some attention from David Bollier:
    “While Jackson obviously remains committed to the challenges of economic analysis and policy, he has come to believe that we need to open up some new conversations, especially about our social relationships, ethical beliefs, and spirituality. It no longer makes sense to talk about “the economy” without engaging with these topics.

    Jackson surprised me with the observation that capitalism and Buddhism “both start at the same place” – how to deal with suffering. Of course, he quickly added, each offers “almost diametrically opposed routes away from that. Capitalism says, ‘You can’t get away from suffering, you can’t get away from struggle. So you better get good at that struggle by becoming as competitive and individualistic as possible.’”

    The subject of DeGrowth won’t go away. There are a variety of approaches. Some of them:

    *It’s just an engineering problem. Technology can solve it. Maybe with a little help from mining on Mars or a captured asteroid.
    *Humans are captives of the Maximum Power Principle (or your suggested principle de jour), so enjoy the ride and try to die before Armageddon.
    *The capitalism invented by John Stuart Mill is perfectly suited to any challenges. Purely rational behavior by corporations can solve all the issues optimally.
    *The perfect information which Adam Smith and Mill assumed consumers to have is far from the truth. Corporations can maximize profits by deluding the public. Therefore, governments can and must intervene to give consumers accurate information…not just cheerlead for the Chamber of Commerce.
    *It’s true that energy and other resources are becoming more costly. The most urgent business at the moment is installing large amounts of wind and solar and significantly restructuring transportation so that a new relative stability at a lower level can be achieved. No revolution required.
    *Rational behavior on the part of the public can be achieved with education. Such rationality will involve appreciating the interconnectedness of all life. (Jeremy Lent).
    *We need a turn toward a more religious/ spiritual and/ or artistic and social conception of what life is all about. Examples might come from Buddha or Jesus at the Sermon on the Mount.

    Jackson’s experience over the last 15 years or so has convinced him that the last item in the list is going to be an essential part of any solution.

    Don Stewart

    • Thanks Don.

      On the last point, I’d say that the shift from growth to de-growth requires a completely different mind-set. Some people get their thinking about the world around them from faith, and some from secular thinking. Many, alas, don’t think about this at all.

      A big issue addressed by faith is how we handle our relationships with others. Those relationships will need to be very different under de-growth conditions.

    • the high value of USD is detrimental to the US domestic market but preferential to the banking sector?
      devaluing USD would make imports prohibitively expensive but stimulate domestic production, export and employment, make it easier for foreign nations to repay USD denominated debts and be a blow to the Chinese export market to the US,
      wouldn’t this make a huge amount of people happy at home and abroad but seriously piss off the bankers and people with USD stashed offshore?

      would it also correct the USD premium you illustrate in this article?

    • The $ is a promise greed will get us anywhere. Like i said many times on this website, fiat currencies only work in a growth environment. A $ article on this site, to me, is nonsense.

    • Today’s problem with fiat currencies isn’t so much the ending of growth as the use of financial gimmickry to fake a continuity of growth. This is particularly acute with the USD, with US inflation now clearly taking off, but the authorities shackled to ZIRP/NIRP.

      In this situation, the outlook for the dollar does seem significant, and using a different, perhaps new way of benchmarking dollar valuation and the market dollar premium does seem relevant.

    • No empire remains top dog forever. Last century saw the Br. Pound decline from 5 $US to $1 I’d not bet on $US remaining the global reserve currency for the rest of this century. Some central banks have been increasing their gold holdings this century. Some like Canada sold off a lot (near the lows around 20 years ago. If/when the debt based system implodes, gold might still be a factor in realignment. I view the cryptos as competition as long as people believe in them and governments don’t try to ban them. (I own none)

    • Steven:

      I see cryptos as investments, not rival forms of money. If they became the latter, governments would have to intervene. Cryptos’ current aggregate value is about $2tn. That’s big, but is dwarfed by global debt and by the $200tn shadow banking system.

      What’s interesting is that, whereas fiats’ foundation is trust in the presiding authority (i.e. governments and the broader stability of the system), the basis of cryptos’ appeal lies in *mistrust* of that same thing. The case for buying cryptos rests largely on the fear that the value (purchasing power) of fiats is going to fall sharply as a result of irresponsible monetary policy.

    • Hi Steven,
      some say there isn’t enough gold on the planet to replace fiat but I think they overlook how much notional wealth could go pouff in a really cataclysmic crash!
      I’ve noticed different countries discretely dedollarising, it’s been going on for approaching a decade,
      I can’t say Washington’s sanctions help much!
      my guess is that no one will pick up the role of reserve currency in the forseeable future and it’ll be a more multilateral system evolving with trading being done with a basket of currencies and a bit of gold chucked in to boot,
      do you remember a while back Cuba offered to settle a debt outstanding to the Czech Republic from before the dissolution of the Soviet Union, they offered to pay in Cuban rum,
      that’s the sort of wheeling and dealing I admire!

    • I wasn’t talking about empires, but about growth fueled fiat currencies. Anyone can grow a tulip.

    • Excuse me doc. Reporting on certain switches within the fiat empire seems appropriate. It adds to our understanding of the environment within we have to compete. Maybe Don could chime in with his latest views about organic gardening, especially geo engineerd worms like the $.

  8. A while back I read an article that makes sense now, it was how people in the region formerly covered by the failed state of Somalia were a generation later using its defunct currency. This actually worked because no more was being made as it wasn’t worth it even to those with the means to counterfeit, so the relative scarcity meant it held it’s value over time. So between currencies that fit this criteria and useful items which are also practical to barter, I reckon they’ll suffice for day-to-day trade while larger scale international deals will use precious metals, stones and bulk goods, like that Cuban rum. (Think how many diamonds alone exist after all these years of mining but were never all released in case they flooded the market and crashed the price)

    • At the start of the 1800s, the British regiments running Botany Bay were known as “the rum corps”, because that was the currency in which their corrupt affairs were conducted. They appear to have been remarkably corrupt as well as brutal. Fortunately, Scots regiments were then drafted in, which improved the situation significantly.

  9. The United Kingdom has mis-managed very badly the country’s strategic gold reserve. For some years now I have been writing to my MP urging that the reserve be increased, when the price was right. Initially I received polite but perfunctory replies. Later he forwarded my request to officials and then in time I received a reply to say that the officials running the show were smart people using sophisticated techniques and that little people, such as myself, were quite clearly clueless. Increasingly, I am finding the standard of governance in the country to be rather dispiriting, to say the least.

    • Governance and government are slightly different things, but the UK seems to score pretty badly on both at the moment. The real question, though – in Britain and elsewhere – is whether the attitudes of the governing and the governed can adapt to the realities of “de-growth”. It’s hard to see that ‘thought transition’ happening effectively either in Britain or the US.

  10. “It’s hard to see that ‘thought transition’ happening effectively either in Britain or the US.”

    More of a behavior transition than a thought transition, because you can absorb the lesson of declining prosperity and then choose to figure out how to game it so you stay on top and/or climb higher, rather than help humanity. More than understanding is required – you also need a spiritual conversion. That’s the real sticking point.

    Further to which, note this article on consolidation of agricultural land and housing stock by gazillionaires and private equity/hedge funds in America. https://gen.medium.com/meet-your-new-feudal-overlords-e18709541d61

    THIS is how those at the top are dealing with increasing ECoE and decreasing prosperity. Locking up / seeking monopolies of food production and housing in order to extract rents from absolute rock-bottom human necessities. Note that if you or you and one or two others control most of a city’s rental stock, you become a price giver, not a price taker (monopoly).

  11. The IMF predicts a strong growth of the UK’s GDP now, “The International Monetary Fund (IMF) has upgraded its forecast for Britain’s economic growth this year, after a largely successful vaccine rollout led to a stronger-than-expected bounce back. The IMF on Tuesday published its latest forecasts of growth rates around the globe in its World Economic Outlook. The report now expects the UK economy to expand by 7% in 2021, a significant upgrade on April’s forecast of 5.3%.”


    Is this real? What does “real” mean here?

    • You will experience reality after the failure of fiat currencies. Not before.

      Currently, they are working on accepting all cultures and minorities, in combination with cbdc’s. Oh, and vaccines.

      Because the system is going down.

  12. of general interest to everyone but with Steven Kurtz especially in mind!

    Footprints to singularity: A global population model explains late 20th century slow-down and predicts peak within ten years


    hat tip to John Michael Greer who included the link in his latest post which is, as always when on the subject of decline, well worth reading,


    • Matt,

      Chris Bystroff and I have been in communication for many months, and he is a member of an e-list I co-own. The developer of The Ecological Footprint, Bill Rees and Rex Wyler, a co-founder of Greenpeace who is also a physicist and system scientist are also members. What a near term peak in population likely means is that TSHTF in many areas globally, and that necessities become irregular as well. We overpop. activists have been Cassandras about this trend for decades, while techno-optimists and cornucopians laugh it off.

      JMG is far too verbose for my taste. But he makes his living as a writer! Many of his insights are good. But they can be communicated clearly with 1/4 the word count. Time is an asset I hate to waste.

      The decline is likely to be unpleasant at best. Let’s hope it isn’t accompanied by extreme violence.

    • for anyone with their eyes open and willing to see I rather think TS is hitting TF all around us as we speak,
      it’s just starting to build momentum,
      my gut feeling was pop was close to peak and this paper rather confirms it,

      I wouldn’t be surprised if we see some violence as things proceed but I expect some of it to be expressions of righteous indignations flung against the elites who have orchestrated this massive act of folly instead of performing their assumed roles of architects of the future and visionaries,

      a recent Lebanese protest march against their leadership involved them solemnly carrying a guillotine in their vanguard. pour encourager les autres?


      I see JMG as a literary shepherd trying to lead a confused and fractious flock towards a saner future through the medium of story telling,
      if you already know most of the details of the story it can seem a bit tedious but it’s a clever way of delivering a narrative to the masses without unduly spooking them,
      we live in interesting times and it’s going to keep getting more interesting.

  13. A rare outbreak of radically plain truth by someone in a position of power embedded in the system of BAU, very likely because he is leaving the job and can speak freely now to keep his professional integrity as the money already earned from his contract is safely banked: https://www.theguardian.com/commentisfree/2021/aug/04/the-guardian-view-on-the-uk-economy-stuck-in-a-rut-of-low-growth-and-politics-is-to-blame

    This hints at the answer to a question that I find fascinating, namely ”Do those in power actually know the damage they do? So are their acts ignorance or subconscious greed?” (Basically Incompetence vs corruption) And at least in some cases, as this one seems to indicate, they do understand what they’re doing. If the key power brokers orchestrate the general destruction to their advantage, administered by a numerically superior lackey class, (who don’t have to understand the consequences of their actions, they just play the useful idiots for short-term gain) it’s enough to keep the whole system running. The vast proportion of the population pile up as helpless in a system designed to result in inequality, but it doesn’t matter as they’re powerless to retaliate.

    As the info Matt refers to above indicates, when systemic decline really gets going, this precariat can be eliminated quickly through a lack of the basic survival requirements, like food, water, shelter, clothing, medical care. Apparently guns ‘n ammo sales in the US are going above the usual levels of crazy in anticipation of social breakdown.

    • Thanks, that is indeed a very thoughtful piece, and can be recommended to everyone.

      The heart of the issue is the maintenance or creation of “growth” through ultra-lax monetary policies. This has driven asset prices sharply upwards. This benefits, not just those who own assets, but those in asset-related businesses. This has exacerbated inequalities.

      Ultimately, lax monetary policy creates inflation. The standard response is to raise rates, but this would reverse prior effects, i.e. it would cause asset prices to fall, and would back out much of the cosmetic “growth” of previous years. The argument about the penalties of inflation versus those of raising rates is complicated by the underlying fragility of the economy. Then, of course, there is the stand-off between the beneficiaries and the victims of ultra-loose policies.

      What we’re seeing are the consequences of using monetary policy to create “growth” in economies where, in underlying terms, growth has already ceased, and has in many instances already gone into reverse.

      This isn’t unique to the UK, of course, and is a particular problem in the United States. The much-vaunted “Anglo-American economic model” is failing.

      What follows isn’t just inflation, but particularly big increases in the cost of essentials, including food and fuel. These trends are particularly bad for those on low and middle incomes.

    • @ Dr M., In the actual scientific paper linked in Matt’s comment above, it was interesting to read about all the variables involved in population carrying capacity and limitations to the closed system that is the planet we live on. It mentions that in general talk today even conversationally between ordinary people in everyday life, the topic of population explosion is taboo. I can only therefore speak for myself, but I’m guessing it’s because there is a feeling that if you mention it you are assumed to be a eugenicist (and therefore evil) because it’s taken as saying some people can’t breed as much as they want. Or authoritarian, if it’s assumed to mean all people can’t have over a certain number of progeny, like in China today.

      Also, though the paper was about natural limits based on physics and biology, it barely touched on energy as a crucial limiting factor. This is despite at the molecular biological level every cell in living organisms needing to be powered by chemical reactions. So there seems to be a blindness to the importance off energy in our world and lives that is very, very difficult to understand, when even to the layperson, after they have paid their accommodation cost off, the main or largest regular bill they will then face is probably for the power used. It’s like a blind spot in most people’s brains, even in that scientific paper, that one reference to energy as a limiting variable wasn’t particularly highlighted. This is tantamount to mentioning the elephant in the room only by saying you crossed the room with some difficulty because you had to climb over an elephant blocking the way. I just don’t understand, is energy also a taboo?

    • @F1 , Dr Tim
      Today’s Guardian – Aditya Chakrabortty
      This article spells out just how destructive the financial engineering wrought upon the UK economy by the chemist turned politician (Thatcher) has been to the UK . Pity she’ had not paid more attention to the theory of thermodynamics and less on the fairy tales of Hayek.

    • @ jomelco, yes, most people don’t get the irony that whilst even neutrals have an automatic image of The Thatcher as a later day Queen Boudica (I remember her ending up talking like the actual queen in her delusions of grandeur) taking on the evil Roman empire/standing up to the EU, she initiated the firesale of the UK’s critical infrastructure and other national assets.

      And the electorate have not learned anything let alone matured in any way, they are now dutifully dancing behind our current mop-haired pied piper to their doom. No wonder Tim Watkins named his site with a nod to the sheeple reference. Whatever the solution is to our survival, history indicates the masses are not going to be a help, they do themselves no favours.

    • Apparently, when the £1 coin replaced the £1 note, some wags called the coin “the Thatcher”, on the grounds that “it’s cheap, brassy and thinks it’s a sovereign”.

      Seriously, though, all that we can do is enquire, interpret and explain.

  14. Two Comments
    *Disintegration: Indicators of the Coming American Collapse Paperback – May 1, 2021
    by Andrei Martyanov (Author)
    I haven’t read this, but the description sounds like what I see around me. The author is a Russian living in the US and writing in English. He has kept up a steady drumbeat about the failures of US military equipment. Biden, of course, continues to ridicule Russia.
    *On the issue of energy being taboo. Much of current biology is explicitly based on energy. Brain function is routinely described in terms of metabolic expense (energy used). And now careful studies show that the body tends to consume a set amount of energy. For example, increasing exercise does not cause weight loss. A current theory is that exercise does indeed burn energy, but causes a compensating reduction in other functions in the body. For example, it costs energy to operate the immune system. As people get older and fatter, they tend to develop overactive immune systems (chronic inflammation). If they increase exercise, the body may reduce allocations to the immune system which reduces the chronic inflammation which results in better health as other dominoes fall. Thus, exercise ‘works’ because it reallocates the use of a fixed amount of energy, with the reallocation being generally helpful in health maintenance.

    And one anecdote about the current state of discourse in the US. Lisa Barrett, the neuroscientist, points out that humans as social animals regulate each others ability to achieve homeostasis. (Think: no man is an island.). During the culture wars, she wrote a piece suggesting that we shouldn’t needlessly trigger other people. She got 7000 pieces of hate mail from the alt-right, along with threats of physical violence. Her university’s police force and the police force in her town stepped in with additional protection for her, her family, and her laboratory. Being a neuroscientist and psychologist, she was interested in talking with the people who reacted so violently to the words she had written. She offered to engage in correspondence with them personally. Of the 7000, only 7 took up her offer. I view this as support for the Disintegration that Martyanov is writing about. Lincoln and Douglas had profound disagreements, but they discussed them not only civilly but also intelligently.

    Don Stewart

  15. I will also point out the Donnella Meadows archive. For example, this teaching moment is exactly relevant to any DeGrowth discussion:

    You can poke around the other pieces of the archive and find a great deal which is directly relevant to us, decades later. Including a piece stating that since the world is a complex place, we must approach it with complexity. And a panel of experts talking past each other is not using complexity science very effectively.

    Don Stewart

  16. See Gail Tverberg’s current post
    This isn’t to debate anything about Covid. it’s really about honesty in government, the potential for corruption, trust in government, trust in corporations, the operations of science as an industry, the nature of reality, whether information can penetrate the fog of war, etc. But there is precious little in Gail’s post that wasn’t known a year ago. The details about the Delta variant were not known at the time, but the emergence of variants was taken as a fact of dealing with viruses. The doubt that using RNA inserted into one’s bloodstream and effectively genetically engineering you, was doubted even then. We also understood the nature of likely deaths and the relationship to poor immunity and what might be done about that.

    As I read (some) of the comments, I see enormous confusion and lack of a sound basis for governance. More evidence for Martyanov’s prediction of Disintegration.
    Don Stewart

    • Thanks Don.

      Gail’s article is a good summation of the issues. She is to be commended for how well she has put this together.

      As you appreciate, I’ve chosen to stay outside the covid and vaccines debate, because I don’t have the life sciences background that would enable me to “bring anything new to the party”.

      My stance is based in scepticism about extremes. I note the contrast between the authorities’ seemingly unbridled, absolute faith in vaccines, and some critics’ absolute certainty that the ‘powers that be’ are ‘up to something’. I doubt if there’s ever been a time when it wasn’t thought that TPTB had some kind of nefarious scheme up their sleeves.

      You are right to identify “enormous confusion and a lack of a sound basis for governance”. These factors have been brought to the fore by covid, but are by no means new – they were already evident long before the appearance of the virus.

      There’s “enormous confusion and a lack of a sound basis for governance” around the issues that we’ve long been discussing here – the ending and reversal of growth; the extreme and worsening risk in the financial system; the relationship between energy, the economy and the environment; and, perhaps most important of all, the lack of understanding about the inter-action of these processes.

      Energy, the economy, finance and the environment are, between them, taking us into uncharted waters. This multifaceted process is undermining all of our past certainties and, thus far, we have nothing to put in their place. Confusion and mistrust are natural concommitants of such a state of uncertainty.

  17. I don’t have a single, original idea in my head. Every idea that I possess has come from someone else way smarter than I am. I read a fair bit, and I try to think, however I no longer discuss thoughts with friends or relatives. The UK has always been reliant on imports but we now import a really significant chunk of our food, and we’re a net importer of energy. That strikes me as at some point warranting serious thought and discussion, yet my family and close friends simply can’t or won’t engage in even acknowledging that these matters may be of significance. They change the subject, or make some sort of joke at my expense. I’m sure they genuinely believe that whenever they turn on the light switch then the light will come on, and whenever they open a gas tap there’ll be gas; and the supermarkets will always be full of food, and in any case if the supermarkets have no food they’ll go to a drive-thru and get a burger. I’ve convinced myself that the visual certainty of the whole edifice betrays a structure that is becoming increasingly fragile.

    • I don’t think we need any new ideas, we just need to rediscover ideas we discarded,
      there is nothing new in this world, but there is too much forgotten.

    • This is a symptom of a bigger problem in society.

      Discussion and debate is shut down if it conflicts with the rainbows and unicorns, everything is awesome view of the world.

      Discussion and debate is shut down if it doesn’t validate the options expressed in the echo chamber I normally hang out in.

      Discussion and debate is shut down if it calls into question the possibility of a future I’ve promised myself or have convinced myself I’m entitled to.

      In the real world, the one that actually doesn’t care what my opinion is, I’ve found a fixed economy of ideas and opinion and debate is helpful.

      The lemmings going over the cliff may get too marks for group bonding but not so much for long-term survival.

      When I look at the debate in the UK today about rising domestic energy prices everyone has there hobby horse explanation. Few say that it’s complicated, mention prosperity, ecoe or just how incredibly expensive transitioning from carbon to renewables will be.

    • I know that energy is the driving force of the economy but I foresee drought as a major issue.We turn on the tap in the expectation that we will receive clean and abundant water. This only happens through the energy expended 24/7. I know that substantial supplies of the water in my home area is supplied from a reservoir constructed prior to Thatcher to supply the steel industry that disappeared during her watch. At least north of the border it is not in the ownership of foreign financiers.

    • KevinC,
      I know how you feel. My family and friends are the same, none of them even entertain the concept of an economy in de-growth, but I think the reason for that is that with them it is just basic denial. They would simply panic is reality dawned on them.
      As far as I can see, which admittedly might not be very far, the UK is defying gravity. As far as I can make out, the country is bankrupt, up to its neck in debt, has virtually no resources, has sold most of its assets, has a dumbed down population dependent on handouts, and is the world centre of illegal money laundering.
      Why is this place even still a country ?
      What is holding it up ?
      I really cannot see the strings, but they are obviously there -somewhere, because by my reckoning the UK Pound should be trading at parity with a Chocolate coin covered in tinfoil.

    • well spotted, that is a perfect example!
      “it takes about three generations for people to forget”

      there can’t be many people left alive who lived the experience of the Dust Bowl but now it looks like Californians might start giving up and making the trek East, just as their Okie ancestors trekked West 100 years ago.

      there’s no one alive who experienced the Great Wall St Crash of 1929 either.

    • @tagio
      Not only did the Japanese ignore warnings. The UK housing developments built in areas out forefathers chose to avoid are also examples of this blinkered society.

  18. A little thing I found squirrelled away in my “files”. Any opinions?
    The proposed Fifth Law is an extension of the Second Law of Thermodynamics. It postulates that, as a result of wear and tear, a machine will cease functioning as the sum of all the useful energy produced approaches the total energy expended in its construction.

    Due to their smarter designs, complex logic and mechanisms, stronger and more durable materials, and finer precision, energy-generating machines of a higher grade will perform better and produce useful work for a longer period. Taken together, however, these features require more energy input. This is why the total energy expended in constructing an energy-generating device correlates closely with the sum total of useful energy produced.

    A universal, prosaic truth of the Second Law of Thermodynamics is that decay is inevitable. An energy-producing device will never have enough material integrity to prevent its ultimate destruction by wear and tear (entropy). Also, no matter how efficient its operation, the device will never produce more energy than the total entropy-generating work expended in its construction.

    • Red, Solar panels as an example do not ‘produce energy’, they convert photon energy into electrical energy, hence can have EROEI of approx 20:1 if located in the best locations to maximize their working life.

      I have a 60w panel that has been providing electrical energy since 1986. It still has an output of ~55w when angled correctly to the sun.

      The same would apply to wind turbines, or gas turbines, they are all converting energy, so can produce a lot more electricity than went into their construction.

      Apart from nuclear power, and geothermal power, the only energy producing device I know of in the solar system is the sun, which means the fifth law is accurate as the sun “will never produce more energy than the total entrophy generating work expended in its construction”, being the sum total of it’s mass converted to energy through fusion.
      Shame we don’t capture more of it…

    • My take on this is that solar panels are a means of converting energy into a useable form. They turn diffuse solar energy into compact electrical energy that we can put to economic use. Electricity, more broadly, is ‘downstream’ energy, enabling us to run, say, an electric cooker from a variety of energy sources ranging from fossil fuels to wind and solar energy.

      I picture your 60w panel as the kind used to charge batteries on a sailing-boat. The batteries in turn power the boat’s radio, lights and so on. These panels are used when required, to charge batteries, and put away when not in use. Longevity might be a lot less if it were left out in all weathers, exposed to the elements.

      Seen in overall terms, the infrastructure is part of the energy equation. Energy is required, not just to make the solar panel, but to make the battery, and replace it when required. The same applies to the wiring which connects the panel to the battery, and connects the battery to the various devices. Energy is used, too, in making the radio, the lights and anything else powered by the system.

      This means that EROEI or ECoE is a characteristic of the whole system, not of the panel on its own.

      Importantly, the ECoE of a system has two main components. The first is the energy put into the making of the panel, battery, wiring and devices. The second is the ongoing energy cost of operating, maintaining and, in due course, replacing the system.

      In this example, far more energy is put into making the battery than into making the panel. If the yachtsman is happy to have his radio, lights and so on available only when the panel is generating power, the system can be simplified, and its ECoE reduced, by not having a battery. But, if he wants power on demand for his devices, he has to introduce a battery, which changes the ECoE equation pretty drastically, and adversely.

    • Take two backup generators of the same grade and quality – one rated at 5 kW, and the other 30 kW.

      An unlimited fuel supply is provided for both generators.

      The 5 kW generator will cease functioning well before the sum total of useful work it produces matches the total energy generated by the 30 kW unit during its lifetime.

      Why so, given the unlimited fuel supply available to both generators, which makes them truly open systems?

      It is not the fuel supplied to an energy-generating device that limits the sum useful energy produced, but rather the total energy expended in constructing it.

      As the 30 kW generator consumed more energy in its construction than the smaller 5 kW unit, the smaller generator cannot match the sum useful work of the larger device.

      No energy system can produce sum useful energy in excess of the total energy put into constructing it.

      This universal truth applies to all energy systems.

      Energy, like time, only flows from past to future.

  19. Martyanov and Disintegration
    After looking at his blog, I became curious enough about his book to buy it. He is a native of Azerbaijan. As a former Soviet citizen, he understand quite a lot about the failure of that system and the disastrous neoliberal regimes which replaced it. He also understands a lot about military hardware, the connection between military and economic and social power, and the role of energy in the economy. The book features a blurb by Paul Craig Roberts, an official in the Reagan administration, now blacklisted by many social media in the US for attacking Israeli policies and those in the US who always rubber stamp them.

    I will call your attention to a couple of things he says which interested me.
    *The price of residential electricity in Germany is 38 cents per kWh, second highest in the world below Bermuda. Comparable prices in the US is 14 cents, Russia is 6 cents, . For businesses, the German price is 23 cents, the highest for any developed nation, the US 11 cents, Russia 8 cents, and China 10 cents.
    *A Russian commentator, responding to the frantic attempts by the US to derail the Nord Stream project, said “For Russia, closing the Nord Stream project is merely an unpleasantness, for Germany, it is a catastrophe”. For the moment, I think the status is that Germany will hurl insults at Russia while it buys their natural gas.
    *”Even Russia’s proverbial patience has its limits, but Russia, unlike the EU and, in the end, also unlike the US, has the luxury of energy and time, and a much larger number of degrees of freedom. Ironically, at the foundation of all that are Russia’s enormous natural resources, especially energy, which have been used to pull Russia out of the rut of neoliberal economics and suicidal radical ideologies.”
    *He states that nation states must directly control fossil fuels if they want to use energy in any geopolitical sense. In the US, we have an energy sector which largely marches to its own drum hearing only about the price of stock. In Saudi, we have a voracious royal family plus a restive population which control the energy. In Russia, we do see a nation state using energy strategically.

    Don Stewart

  20. Alice Friedemann’s Advice
    “If you’re thinking of escaping to the country ahead of the energy crisis, consider living in a town for the sake of defense, and if you plan to farm or grow food, buy land within bicycling distance. Good luck!”

    That was my plan back in 2005. I went to work on a farm within bicycle distance. I figured that the farmer wouldn’t let a good worker starve. In 2008, my plant worked brilliantly. Alas, things change. I passed the age of 80 and don’t do stoop labor graciously anymore. I am increasingly surrounded. by suburbanites who don’t understand anything. On the positive side, the microbial revolution has occurred over the last 15 years and we now know a lot more about soil productivity and the carbon cycle. So my little kitchen garden plus some fruit trees give me a small cushion.

    I will comment that most traditional farming communities feature a fairly dense residential area surrounded by fields to which the worker walks or bicycles. Thus, getting the best out of a community while also preserving the many benefits of private ownership of productive land.

    Don Stewart

  21. I saw an English period drama recently, which was dated from just before the empire started its descent and it put into perspective in my mind how far this country has fallen, even just from the furthest point in living memory. As in many empire declines, it must be the same old story, greed and corruption is not the only factor for sure, but probably the commonest and most severe. Still, it never fails to amaze me how few (a tiny elite of a few thousand) steal so much from so many in such a short time, it’s like a heist or a coup and the masses are usually totally oblivious to it all.

    If I remember correctly, in the latest action, under out convenient ‘extraordinary measures due to the emergency situation of covid’ at least £370 billion was handed directly to ruling party donors to source vital kit, some of which was substandard, late or useless and all of which was over priced given the unnecessary middlemen. And what would be expected in return for this needless inflation of the contract values? Ask the nearest child and they could tell you the answer. Some of these recipients had none of the necessary experience at all, it was purely who they knew. (birthright)

    In the UK today, an ordinary person can’t transfer a few 1000 of your own money without triggering ‘money laundering checks’, but if you’re rich, you buy an island in the Caribbean with ease. And right now, the govt. are in no danger of being changed as they have mastered using the levers of state to influence the citizens in every possible way to re-elect them. A friend in Germany told me it’s the same in Germany (not the corruption) in that there is little likelihood of change in the upcoming election despite many things needing improvement, simply because of demographics.
    Boomers are the majority of the electorate there and the current situation suits them better than change, the decline of the west is complex and multifactorial, but I’d bet demographics is one of the most important, if not the single most important one.

    • ” Boomers are the majority of the electorate there and the current situation suits them better than change, the decline of the west is complex and multifactorial, but I’d bet demographics is one of the most important, if not the single most important one. ”

      As evidenced by the lockdown, where children and youth are sacrificed ( prevented from socialising, studying, exercising and imbibed with constant messages of fear and doom …… despite having a negligible chance of becoming seriously ill or dying from the virus ) to prolong the lives of the geriatric.

    • The causes of the UK’s predicament are complex, and, though I’ve not written about this in recent times, I’ve been doing quite a lot of background work on it.

      In most respects, the numbers for the UK (as generated by SEEDS) aren’t necessarily worse than for comparable economies, but the outlook for Britain is as bad as, or worse than, it is for most of those comparator countries.

      Much of this is a matter of attitudes and assumptions. To stand a decent chance of navigating the global phenomenon of de-growth, a great deal would have to change. Obviously – and in strictly a non-partisan sense – part of this change would need to occur in politics and government.

      But it’s change at the level of popular thinking that’s the big problem. Much of the required change would be unpopular. An ‘ideal’ political party, which understood the situation, and proposed the required responses, would stand no chance of being elected.

      It might be that nothing positive can be done until the situation becomes so acute that the need for change becomes apparent to everyone.

  22. My analogy for this is the Grand Canyon. We stand on the very lip of it. On the other side is an unclear situation – it could be great – localism, a new decentralised financial and political system, no more tyranny. Or more of what we have now.
    The canyon is full of debt and it’s currently giving the majority that false sense of comfort but actually it is of course going to disappear when people are part way across.Normalcy bias is far easier to swallow than the very frightening issues we really face. My biggest fear and shock is the lack of scrutiny the public seem capable of. Unfortunately their inaction validates the Great Reset “useless eaters” meme. You can tell them anything to get their vote, especially if it means free money.
    Democracy depends on simpler choices than we are about to face. People will run to security via MMT for as long as they can.
    Just ordered Jeff Booths’ The Price of Tomorrow. It contends that the next step-changes in IT capability will prove massively deflationary and that that will be good for the masses – more for less.
    So many moving parts right now. I am not surprised they are all voting for security.

  23. 4,000 weeks. I read an interesting piece in yesterday’s The Guardian magazine by Oliver Burkeman that was primarily focused on the pandemic of distractedness. However, if you live to be 80, you will live for about 4,000 weeks. Doesn’t seem very long when expressed like that. It’s about 130,000 weeks since the ‘dawn of civilisation’ in Sumeria and Mesopotamia, too.

    On almost any meaningful timescale, as the contemporary philosopher Thomas Nagel has written, “we will all be dead any minute”. This rather concentrates one’s mind.

    And yet, we are ill-prepared for our short span, with some in ever-increasing poverty, and others hurriedly amassing “stuff” (for what purpose, exactly, I’m not sure).

    The problems that Dr Tim and others have explained regarding the rise of poverty is now beginning to become more apparent in the MSM. I note, for instance, in today’s The Observer, that “Bailiffs called into at least 280,000 homes over council tax debt”. The city of Bradford requested the most attachments on benefits in 2020-21 – 10,417 benefit claimants – all relating to debts that pre-dated the pandemic. Reflecting the dilemma cash-strapped councils face, overall council tax arrears across England rose by nearly a quarter in 2020-21.

    I have had several conversations in relatively well-off Somerset of late with those who are virtually insolvent and their families are on the brink of collapse; it’s very disturbing in that these poor souls think that there will be a ‘rabbit to pull out of the hat’ – there is no rabbit.

    At least they and I do not live in the failed state of Lebanon. I was just listening to a well-educated middle-class woman on BBC Radio 4; no electricity, no water, no fuel for her car, none of the things that the ‘nearly insolvent’ here in the UK pretty much take for granted, until they lose access to them.

    The oblivious lack of preparedness by the ‘precariat’ simply appals me.

  24. I know Paul Beckwith can be somewhat rambling at times and difficult to follow but he recently did a presentation to the Canadian Association of the Club of Rome,
    it’s probably the most focussed presentation of his understanding of the situation you’re ever likely to get,

    he mentions earth.nullschool.net and I highly recommend people try this application as it gives you the means to grasp what he’s talking about in a visual and immediate way,


    it really looks like humans have entered a phase where we have little if no influence over events and can only react to them in the short term,
    things will likely be too chaotic for planning beyond the immediate future.

    the summary of the next IPCC report is due out, Monday I think, expect a media storm as people try to digest it’s contents.

  25. Advances in IT?; What It’s All About?
    There are at least two ways to increase the efficiency of making people feel better: more sophisticated targeting for propaganda and advertising AND more liberal use of mind altering drugs. From the standpoint of the elites, the first alternative is preferred, because it can easily be used to keep the masses working to produce the wealth that flows to the elites. In the counter-culture, drugs have long been the cheap solution requiring little work but usually exposing the individual to bad health, political persecution, and isolation from the mainstream. At the present time, it seems that every more finely targeted IT is dominant, but there is also a counter-current of psychedelic drug use (e.g., the highly respected Michael Pollan in How to Change Your Mind).

    I won’t delve into the psychedelic phenomenon, but instead simply point to an examination of the first alternative…ever greater control by the elites of the narratives which drive behavior in the masses:

    The video explains just why it would be so hard for any political party based on realism to actually succeed in a democratic system. At the very end, there is a reference to Thomas Paine, one of the godfathers of the American Revolution…who was unwelcome in the New America after the transiition from an English elite to an American elite had been accomplished.

    Don Stewart

  26. The Dim Outlook for the UK and the US?
    I have finished reading Disintegration by Andrei Martyanov, and some pennies dropped in terms of my understanding of what two citizens of the former Soviet Union think about how the world works…Martyanov and Orlov. Both of them point to the sense of group solidarity which can be generated in an identifiable culture but is probably out of reach in a world dominated by Neoliberalism. They both point to the new Russian Federation constitution which makes the Russian language an essential part of being a citizen, while also not restricting the use of a second language such as Chechen. The Russian Federation, and I think the Chinese system, have no problem subordinating the role of corporations to the ’national good’. It seems to me that the British and, perhaps to a lesser extent, the US conception of a corporation is that it follows the trail of money wherever it may lead. Trump tried to gain some subordination of corporations to nationalism, but his message was certainly muddled, giving the impression that he was striving for ’the Republic of Donald Trump’.

    Anybody who is successful in a family is bound to be subordinating their own narrow self-interest to that of the family at some times and in some particular circumstances. Martyanov makes the same point about military people and the nation-state. I am reminded of the Soviet pilots who gave their lives to cover Chernobyl in concrete. Whether that is wishful thinking and self-interest is always going to win is worth thinking about. Martyanov would suggest that the Anglo-Saxons are distinctively self-centered.

    His description of the current state of culture in the Anglo-Saxon countries:
    “Post-modernism, practiced in the Western world en masse, manifested in attention span-shrinking social networks, mass exhibitionism, self-absorption, and instant propagation of the most bizarre and unnatural dopamine-dependent social practices. It is a doctrine which rejects a common perception of reality as such, overcoming facts by swamping them with counter-narratives. Once truth becomes muddied by a storm of perspectives, it ceases to exist in any operational sense.”

    Martyanov thinks that the hegemony of the US dollar is now entirely dependent on the perception of US military power. But since the US has not won a war in a long time, he perceives that the world is losing its fear of US military power. In the book he points to the success of Syria shooting down most of the Tomahawk missiles that Trump launched at them, and in his blog he notes the recent shooting down of 4 missiles launched at Syria by Israel. It is an understatement to say that such incidents are vastly underreported by US media. He quotes a Russian defense minister: “We don’t need aircraft carriers, we need weapons which destroy them”. And his conclusion is that the Russians indeed have those weapons. Orlov said that during one of the confrontations with Iran, the US made sure its carriers were well out of the Persian Gulf…because of their vulnerability.

    Martyanov is highly critical of the “complete decoupling of modern economic theory, or rather its nauseating monetarist iterations, from reality”. He points to the market value of Facebook, a company which produces pretty much nothing.

    The impression I get is that Martyanov left Azerbaijan for the US, and is mightily disappointed with what he finds. He says that the military academies are taking ‘category 4’ students. Years ago, when I was trying to be a drill instructor, I got a bunch of category 4 recruits as part of the War on Poverty. It was a valuable experience for me, because I learned that one could not rely on hand waving to get anything done, as was my common practice with draftees who could be relied upon to mostly figure things out for themselves. Category 4s needed explicit instructions. I remember spending an hour trying to convey the concept of a ’shelter half’, and how to go about getting a complete tent.

    Don Stewart

  27. More on Russia
    Martyanov, like Orlov, recalls traveling between the US and Russia in the 1990s when Russia was a lawless exercise in neoliberalism. Maryanov recalls the sense of relief when he got back to the bar in the airport in the US. One of the things he points to in order to illustrate how things have changed is this newly constructed cathedral near Moscow:

    Just taking all this at face value (which is very hard to do if one is British or American and pays any attention at all to mainstream media), one has to be impressed by the accomplishment. Very similar to my impression of the very fast train between Shanghai and Beijing as being indicative of what the Chinese can accomplish. While the cathedral is clearly a representation of what wide segments of the Russian people can accomplish, Putin surely deserves a lot of credit for having helped pull Russia out of its downward spiral. I remember from decades ago seeing a picture of Putin at a religious service in Moscow, accompanied by scathing humor in the US media.

    As a contrast, the Emirates constructed a tennis court on top of a skyscraper and hired some tennis stars to come and play. I wouldn’t want to overgeneralize, but these differences are probably worth thinking about.

    Don Stewart

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