#209. A path of reason, part two

PUTTING IT TOGETHER – HOUSEHOLDS AND THE FINANCIAL SYSTEM

In the previous article, we sought out a logical and evidential alternative to the continuity assumption that the economy can shrug off resource and environmental limitations in order to grow in perpetuity.

We demonstrated that the economy is an energy system – not a financial one – and that the fossil fuel dynamic on which the vast and complex economy of modern times was built is fading away, with no fully sufficient alternative in sight. The equation which calibrates prosperity in terms of energy use, value and cost has become a constrained equation, the constraints being (a) the relentless rise in the ECoEs of fossil fuels, and (b) the limits of environmental tolerance.

This does not, of itself, vindicate collapse theories, but it does mean that the world is getting poorer. The downturn in prosperity per person was preceded by a long period of deceleration, first identified (though not explained) in the 1990s, when it was labelled “secular stagnation”. Much of our economic experience in the intervening quarter-century has been characterized by failed efforts to use financial policies to ‘fix’ an economic problem which is not financial in nature, and thus cannot be countered using credit or monetary adventurism.

The onset of involuntary “de-growth” has profound implications for the four components of the economy which we can categorize as the household, business, government and financial sectors. Of these, the most important – and the easiest to project into the future using the SEEDS model – is the household sector. Simply stated, the average person will get poorer, on a continuing rather than a temporary basis, and his or her discretionary prosperity will be eroded by relentless rises in the real cost of essentials. At the same time, he or she enters this era with uncomfortably elevated levels of debt and quasi-debt commitments.

Through its effects on households as consumers, producers, savers, borrowers and voters, this process will shape the future development of the financial system, business and government.

The faith mistakenly placed in the ‘perpetual growth’ assumption has been strong enough to ensure that there has, thus far, been little awareness of, and even less planning for, the downtrend in global prosperity. Decision-makers in government, business and finance still seem to think that we can muddle through using denial, wishful thinking and a cocktail of things that Smith and Keynes didn’t actually say.

Financial – the high price of failed fixes

The immediate battleground for the conflict between continuity and reality is the financial system. Efforts to use financial policies to ‘fix’ the process of economic deceleration and decline have driven an enormous wedge between the ‘real’ economy of goods and services and the ‘financial’ economy of money and credit. Between 2000 and 2020, each dollar of reported “growth” was accompanied by more than $3 of net new debt creation and an increase of nearly $4 in broader financial commitments – and even these numbers exclude the emergence of enormous “gaps” in the adequacy of pension provision. Buying $1 of largely cosmetic “growth” with upwards of $7 of forward financial promises is not a sustainable way of managing an economy.

This has put the authorities between the Scylla of runaway inflation and the Charybdis of sharp rises in the cost of money. To be clear, finance ministries can run enormous fiscal deficits, and central banks can monetize the ensuing increases in debt, but neither can create the new sources of low-ECoE energy without which the economy must contract.

When we understand money as a claim on the output of the real economy, it becomes clear that the rampant creation of money and credit can only result in the accumulation of excess claims. These cannot, by definition, be met ‘at value’ by a contracting economy. This means that the value supposedly incorporated in these excess claims must be eliminated, either through the soft default of inflation or the hard default of repudiation.                      

The conundrum facing the authorities is simply stated. If they continue with negative real interest rates, which deter saving and encourage borrowing – and if they carry on believing that ever-larger injections of stimulus can somehow return the real economy to “growth” – they will drive the system into an inevitable process by which inflation destroys the purchasing power of money.

If, on the other hand, they decide to defend the value of money by raising rates into positive real territory, they will trigger slumps in the values of assets, and set a cascade of defaults running through the system.

The current policy is one of ‘hoping for the best’, assuring the public that the current spike in inflation is a “transitory” phenomenon caused by the coronavirus pandemic.

There are two main reasons for knowing that this explanation is false. First, ‘we’ve heard it all before’. The term “transitory” is the 2021 equivalent of the promise that the introduction of QE and ZIRP back in 2008-09 were “temporary” and “emergency” expedients. The more direct analogy is with the 1970s, when inflation was deemed a “temporary” problem, and governments even introduced the concept of “core” inflation, which excluded those very items (energy and food) whose prices were rising most dramatically at that time.

The second factor arguing against the “transitory” description of inflation is that soaring prices take on a momentum of their own. Rises in the cost of living prompt demands for higher wages, which in turn raise producer costs and push prices higher. To a significant extent, inflation is a product of expectation, a form of self-fulfilling prophecy that gives the authorities a rationale for understating what’s really happening in an effort to damp down public expectations. This, though, cannot work when consumers can see the prices of goods and services rising. This time around, the long-standing inflation in the prices of assets reinforces perceptions of inflation at the consumer level.

Where the inflationary issue is concerned, we need to be clear about causation. The chain of events began with a deterioration in the energy equation which determines prosperity. The authorities sought to counter this deterioration in ways which have led, with grim inevitability, to where we are now.

The policy of ‘credit adventurism’ – of making debt more readily available than at any time in the past – started a rise in asset prices, and created a surge in debt. When these trends crystalized in the 2008-09 GFC, the authorities responded with ‘monetary adventurism’, taking the real cost of money into negative territory.

This boosted asset prices still further, and created yet more debt, much of it channelled through the shadow banking system rather than through the more regulated channel of mainstream banking. Now we are in the grip of reckless stimulus, being carried out in the desperate hope that injecting ever more deficit finance, and persuading central banks to monetize most or all of it, will somehow reinvigorate the real economy (which it won’t), without triggering runaway inflation (which it will).        

The outcome of the inflationary conundrum is likely to follow the pattern set in the late 1970s and the early 1980s. First, the authorities dismiss inflation as a passing phase, and refuse to raise rates to counter it. Latterly, they take a reluctant and belated decision to act, raising rates in a macho demonstration of resolve.

That’s when asset prices collapse, and a wave of defaults rips through the system.

Back in the 1980s, this process triggered a sharp recession, but this proved temporary, because ECoEs remained low, and the economy remained capable of growth.

Neither condition prevails today. ECoEs have risen from 1.8% in 1980 to 9.2% now. Recovery in the 1980s involved the restoration of positive trends which had driven prosperity steadily upwards between 1945 and the disruptive and inflationary first oil crisis of 1973-74. Today, by contrast, inflation risk comes in the context of a long period of economic deceleration which, in the West, segued into deterioration between 1997 and 2007.

The first set of charts illustrates the magnitude of financial imbalances, comparing debt – and broader financial assets, which include the shadow banking system – with reported GDP and underlying prosperity. Full financial assets data isn’t available for the global economy as a whole, so the left-hand chart illustrates a group of 23 countries for which numbers are available and which, between them, represent four-fifths of the World economy.    

Fig. 1

Households – leveraged hardship

In any case, the financial system faces challenges which are far broader than the comparatively straightforward (though daunting) choice between inflation and rises in rates. This is where trends in the critically-important household sector shape the outlook. 

The average person in the West has been getting poorer over an extended period, though this reality has been masked by financial manipulation. Trends in prosperity, set against debt per capita, illustrate this situation as it has affected France, Britain and Canada (see fig. 2). Debt, it must be emphasised, has to be considered in the aggregate, including the government and business sectors, not just household indebtedness. Even these debt numbers exclude per capita shares both of broader financial assets and of off-balance-sheet commitments such as the underfunding of pensions.

In France, prosperity per person reached its zenith in 2000, since when the average person has become poorer by 8% (€2,540), whilst his or her share of debt has increased by 91% (€59,500). The inflexion-point in Britain occurred in 2004, since when prosperity has fallen by £4,600 (16%) whilst debt per person has increased by £23,800 (39%). The average Canadian has become 12% poorer, and 60% deeper in debt, since 2007.

Fig. 2

One of the myths of the contemporary economy is that sharp increases in indebtedness are cancelled out by rises in the prices of assets.

The reality, of course, is that increases in the supposed value of property and financial assets cannot be monetized, because the only people to whom a nation’s property or asset stock can be sold are the same people to whom they already belong.

The individual property owner can monetize the gain in property values, but even he or she then needs to obtain alternative accommodation. But homeowners in aggregate cannot do this, and reported aggregate ‘valuations’ are an error rooted in the use of marginal transaction prices to put a ‘value’ on housing stock in its entirety. Essentially, asset prices are functions of the cost of money, and of the quantum of credit in the system. As the economy moves further into de-growth, and as the inflationary spiral has to be countered by raising rates, inflated asset valuations can be expected to melt away like snow on the first warm morning of spring.

The decreases in prosperity cited here may seem pretty modest – the average French person has become 8% poorer over twenty years, the average British person’s prosperity has fallen by 16% over sixteen years, and Canadian prosperity has deteriorated by 12% over thirteen years. People in these countries have, then, been getting poorer at rates at or below about 1% per annum.

In terms of living standards, though, these rates of deterioration have been leveraged by relentless increases in the cost of essentials. In the SEEDS model, the calibration of essentials remains at the development stage, where ‘essentials’ are defined as the sum of household necessities and public services provided by the government. The definition of ‘essential’ varies over time and between countries, such that essentials may defy detailed calibration.

This said, the overall picture seems clear. As prosperity has fallen, the share of prosperity accounted for by essentials has risen. Moreover, the real cost of essentials is being driven upwards, because the energy-intensive character of many necessities creates a linkage between their real costs and rises in ECoEs.

What this leverage means is that, over a twenty-year period in which French top-line prosperity has fallen by 8%, discretionary prosperity – what remains after essentials have been paid for – has slumped by 23%. British discretionary prosperity has fallen by 34% (rather than 16%) since 2004, and the decline of 12% in Canadian prosperity since 2007 has seen discretionary prosperity fall by 24% (fig. 3).

Fig. 3        

These sharp falls in discretionary prosperity have not been reflected in actual discretionary consumption – but the gap between the two (which SEEDS can quantify) has been filled by continuous expansions in credit.

In some sectors this effect has been a direct one, and few people now buy a new car, for example, as a one-off purchase. Households may borrow on their own account to pay for, say, a holiday, but the broader effect is that household credit increases are supplemented by government and business borrowing – the former reduces the tax burden on households, whilst, in the absence of business borrowing, employment and wages would be lower, and consumer goods and services would be either more expensive and/or less readily available.

Full circle

There is, of course, a direct connection between an over-inflated financial system and deteriorating household prosperity. As and when a halt has to be called on perpetual credit and broader financial expansion, discretionary consumption will slump.

This of itself will impact the perceived values of discretionary sector businesses, and this trend will be compounded as businesses respond to de-growth tendencies including de-complexification, simplification (of product ranges and processes), adverse utilization effects and the loss of critical mass. At the same time, households will be forced to relinquish many of the outgoings which form streams of income for the corporate sector.

Ultimately, there are adverse feedback loops which connect deteriorating prosperity with a degradation of the financial economy. At the same time, the public is likely to be distressed, not just by the loss of cherished discretionary products and services, but by the widening hardship which occurs as falling prosperity draws ever nearer to the rising cost of necessities. The implications of this dynamic for government and the corporate sector are certain to be profound, but these implications must await another stage in our journey from ‘what we know’ about the present to ‘what we want to know’ about the future.     

In the meantime, here’s a reminder – if a reminder were needed – of how rising ECoEs drive prosperity downwards in a way that is frighteningly not understood by decision-makers in government, business and finance.  

Fig. 4

169 thoughts on “#209. A path of reason, part two

  1. Regarding John Michael Greer’s essay, it’s very interesting to see his focus on empty supermarket shelves in the USA.

    In the UK, much has been made of the exodus of eastern Europeans (due to Brexit) as being a driving force behind supply chain disruptions, and consequent product shortages. However, so far as I’m aware, the USA hasn’t had a Brexit event, and yet is suffering the same issue. I think that Greer hits the nail on the head when he refers to the fragility of highly integrated and centralised supply chains. These things work fine until there’s some kind of significant disruption. It only takes one node in the network to fall over, and the whole supply chain is affected. It seems to me that there have been multiple disruptions in recent years, Covid-19 being the obvious one, but also other events such as the microchip factory in Japan that was destroyed and led to global disruption in automotive supply chains. As someone who spent many years implementing Just in Time operating systems (yes, Mea Culpa) I know only too well the trade-off from resilience to vulnerability. All in search of that extra few % of efficiency, and of course a nice fat bonus for the C suite executives

    Globally, one of the big issues seems to be the ongoing shortage of shipping containers. Dual causes are a combination of the pandemic and the blockage of the Suez Canal some months ago. My, understanding is that there isn’t an actual physical shortage of containers per se, it’s more the case that many of them are in the wrong place, and therefore not available when and where required. This kind of dislocation just doesn’t work in today’s “on demand” order fulfilment processes.
    What’s more, this shortage of containers is very inflationary. Some data I picked up from the FT, shows the cost of a shipping container from the Far East to northern Europe increased from just under $2000 in August 2020 to just under $14,000 in August 2021. Now there’s price inflation for you! The disruption is forecast to last into 2022.

    This disruption is causing some businesses to examine their supply chain strategies with a view towards “Reshoring”. Ironic, isn’t it, that the big metal box credited with making globalisation possible, is now responsible for causing it to splutter. In fact, it might end up being be a catalyst to start the process of simplification and de-centralisation of supply chains. Re-localisation is to going to have to happen sooner or later, and maybe now is a good time to start.

    • Looking under the hood of the semiconductor shortage:
      Semiconductor Shortages amid Record Semiconductor Sales? It’s a Mess Out There
      by Wolf Richter • Aug 30, 2021
      @wolfsteet.com

      Don Stewart

    • Neill,

      I am not seeing that in Rochester, MN.

      There is somewhere an article regarding the world being awash in dollars and not wanting them. Perhaps people making things don’t want to work for dollars so there are fewer things. People in the US don’t want to work for dollars when they are either handed out or restrictions placed on using them, such as rent forbearance.

      More concerning to me is the almost bi monthly auctions in the Twin Cites of manufactures; everything from steel fabrication to precision measurement and machining.

      Going back to paragraph 2, one needs a skill set to make things, our children are losing that skill set and as the older generation retires or gets tired there are none to take its place. AI can do much, but somethings work easier by manual machine than totally CNC.

      Dennis L.

  2. Pingback: A path of reason, part two: PUTTING IT TOGETHER – HOUSEHOLDS AND THE FINANCIAL SYSTEM | ORCOP.COM

  3. Interesting tech: Pumped heat energy storage.

    Click to access EASE_TD_Mechanical_PHES.pdf

    Heat can be stored in low cost bulk materials, like water, rock or soil. This would appear to be a good candidate for long-term energy storage, as the storage medium is very cheap and embodied energy is low. Most of the applications that I have seen involve the storage of hot and cold for end use. This concept is more like a thermal battery, that uses a heat pump to pump heat directly from a cold source to a hot source. The cycle can be run in reverse to generate power, probably using a Brayton cycle.

    Thermal energy storage, either end use or regenerative, is probably the most promising storage option from a capital cost perspective. Thermal energy also accounts for a large part of total energy use in industrial societies, somewhere in the region of 60-70%. If renewable energy is to replace fossil fuels as the dominant energy source for the human race, then TES will be a key part of integrated systems.

  4. There’s a new article by Charles Hugh Smith, which, as ever, is a good read:

    https://www.oftwominds.com/blog.html

    In this article, he references a report by the Manhattan Institute, which I think is essential reading for anyone interested in the feasibility, or otherwise, of energy transition:

    https://www.manhattan-institute.org/green-energy-revolution-near-impossible

    CHS quotes this report to the effect that the annual output of Tesla’s battery gigafactory “could store three minutes’ worth of annual U.S. electricity demand”.

    • Thanks for drawing attention to this article.
      The MI report was in 2019. Sadly it has been virtually ignored (disbelieved) by so many who continually dream on? Meanwhile the planet is increasingly being covered by wind turbines and solar panels . Instead of removing the XR people from our streets they should be taken to a lecture theatre and presented with these facts.
      BTW Tim Watkins is in full flight at the moment.

    • Re the XR people, I think they’ve got a lot of things right, but one big thing wrong.

      They’re right about the climate emergency. They’re right that ‘the powers that be’ won’t listen unless they protest.

      Where they’re wrong is the assumption that an alternative system is ready and waiting, such that we can turn off the FF system almost immediately.

    • The Manhattan Institute (MI) article is accurate, but it is somewhat limited by its concentration on batteries for its analysis of energy storage.

      Chemical storage of energy (battery) will likely always be too expensive for storing massive amounts of energy for grid-scale use. MI is correct about that.

      Mechanical storage (pumped hydro and compressed air storage) is much cheaper than batteries, but sites for both are very limited. Flywheel storage is too expensive and too dangerous (a mechanical failure can cause bomb-like uncontrolled energy releases).

      Energy can also be stored as either sensible or latent heat (latent heat being from a material changing phase) and that is where a lot of research effort would have paid off. Solar energy can be collected and stored as heat much more cheaply than currently used molten-salt systems, but there has so far been little incentive to explore and commercialize other basic heat storage options. I tried to promote an ultra-cheap sensible heat storage system at a renewable energy conference in 2008, but got little interest from potential users.

      Heat is also available in a pre-stored condition. Geothermal and Ocean Thermal Energy Conversion (OTEC) take advantage of existing natural temperature differences to drive Carnot engines. The energy available from both sources is huge, but the cost of conversion equipment makes the LCOE too high to compete with cheap fossil energy.

      The MI report correctly points out the huge cost of moving renewable electricity around by creating an electrical grid nearly an order of magnitude larger than the one we have today. That problem alone is now likely to prevent our electrifying all of civilization’s energy supply, whether we turn to renewables or nuclear power.

      It’s too bad that the powers-that-be didn’t take fossil fuel depletion seriously. We should have taken our one-off inheritance of fossil fuels to build a fully renewable-powered world. I worked in renewable energy for thirty years starting in1980, hoping that the epiphany would come, the light bulb would blink on in our leader’s heads and a real effort to save ourselves with renewables would begin. That turning point has really never come and now it’s too late. We are stuck with what we’ve got until it collapses.

    • Jomelco, Joe:

      We have been ignoring this kind of issue for far too long.

      Limits to Growth (LtG) is a case in point. When published in 1972, LtG warned that growth would end within the coming 100 years. Few people or governments are much interested in something, however bad, that might not happen for a century.

      The recent review of LtG by Gaya Herrington essentially confirms LtG and indicates that the end of growth is likely to happen “within the next decade or so”.

      Even that timescale is too long for a system fixated on the next election, the next opinion poll, the next set of quarterly earnings, or the next Fed announcement. Ten years or so is still too far away to prompt effective action.

      The point which gets ignored is that these things do not happen, suddenly, on a fixed date. “The Revolution Will Not Be Televised”. Rather, we should expect a series of accumulating, compounding problems preceding the inflexion point.

      With the use of SEEDS, I’m seeing these precursor trends happening now. All we seem to get in response is an assumed transition to renewables in which blind faith and denial triumph over the realties as explained by this MI article.

  5. @ Dr. Morgan
    Given that the global economy and the environment and zeitgeist are complex systems, which are beyond our control or ability to predict in detail, it makes sense to stop thinking about rationality so much and think more about the nature of complex systems and how the human brain interprets them. For example, at the present time there are 44 container ships waiting to unload Christmas goodies parked off California. So what, exactly, is your problem with that? Aren’t Christmas goodies the purpose of the whole exercise of going to a job you don’t like for pay which never seems to be enough to buy things which don’t yield lasting happiness? Yes, it is true that measures of M1 in the US are still rising vertically, but how many people understand why that might be a problem? Isn’t more money the answer to everything. It certainly seems to be true that by printing more dollars the Federal Reserve makes container ships appear at Long Beach. And if auto plants are shutting down due to lack of chips, well then…just build more chip factories in the Arizona desert where water is definitely not assured.

    If an individual or small group of people believe that they have insights which the larger public just doesn’t have, then they need to insulate themselves as best they can. But my suggestion is that the insulation cannot be premised on the continued survival of the system they are trying to evade. So it boils down to either play the game as long as the music lasts or else build your own world where the band and the music and the dancing are not critical. That is easier said than done, but perhaps a model of Toyota’s idea of continuous improvement is appropriate. Every day, try to become incrementally less dependent. The alternative is trying to steer the ship…but prophets are usually stoned to death.

    Another possibility is to dissect the current system to identify the most toxic parts and get them out of one’s life.

    Don Stewart

  6. Please put each post as a separate entity accessible by a list or table of contents on the Home page. Right at this moment I am going to have to scroll down through several pages to find one of your summaries so I can link to it

    If such a list of articles is on the page I can’t find it.

  7. As A Couple of Examples of the Idiocy
    *Example Number One: China recent agreed to build a coal fired power plant in, I believe, Bangladesh. This set off alarm bells in Official Washington…more Belt and Road and increasing Chinese influence on the world. So they send John Kerry to China to try to get them to agree not to construct any more coal plants. China rejects any attempt by Washington to tell China what to do. The point out that they have a plan of their own, and don’t need or welcome comments from Washington. They state that if Washington wants to discuss matters with them, then Washington has to stop the other hostile acts such as the tariffs and the sanctioning of Chinese solar panels and, in general, stop treating China as an enemy. So what we have here is a pretty obvious attempt by Washington to throttle any Chinese attempt to develop a multi-polar world. Does Kerry understand that China understands all too well? Will it make any difference in what Washington does? I’d be very surprised if Washington sees anything other than a propaganda opportunity.

    *Example Number Two: The CEO of a ‘health food restaurant’ recently wrote an article about Covid and the co-morbidities, pointing out that the average person who dies from Covid has co-morbidities, and that reducing the co-morbidities with a healthy lifestyle is the best solution. He quoted the number 1 trillion dollars per year in the direct costs of poor health in the US, and indirect costs of an additional 1 trillion dollars per year in environmental damage. This set off a firestorm in social media with people complaining about the unfairness to the ‘fat shamed’ and, probably, ‘ people of color’ and complaints that if people did start eating health promoting food, he would make money. No mainstream media commented favorably. The Trump administration made it illegal for any federal agency to participate in Meatless Mondays.

    *Example Number Three: Joe Rogan (the well-known blogger) invited Rhonda Patrick (a PhD who blogs about health) for an interview. Joe had refused the vaccine. He began to question Rhonda. Rhonda pretty much defended the Washington Consensus: vaccines are the solution, everything else is de minimus. Rogan began to bore in on the statistic that the average person who dies from covid has 4 co-morbidities. Rhonda would not agree with that number off the top of her head, but then was shown the evidence. I don’t think it was in the interview, but we now know that, in Israel, having contracted covid and defeated it with one’s natural immune system is 13 times better than a vaccine in terms of preventing a second serious infection. (Using T cells.). Joe also brought up the issue of children. Is it better to allow children to develop natural immunity or to subject them to vaccines for the rest of their life? Now I don’t want to trivialize this. There are risks any way one goes. There are serious people on both sides. But YouTube will censor you if you talk about this with serious numbers and alternatives.

    Do these examples strike you as demonstrating the ability of either the public at large or the federal government or the media to actually engage seriously with serious problems? And so we get an endless parade of posing and virtue signaling and clever propaganda. Winston Churchill is supposed to have said “the Americans always do the right thing, but only when they have no alternative”. At the present time, printing money and censorship and American Exceptionalism and belief in the tooth fairy have obscured our view of just how close to the cliff-edge we really are.

    So I am not surprised at all about the lack of attention to ECoE and the cost of junk food and the cost of a bungled response to Covid and the potential deadly effects of a war with China.

    Don Stewart

    • Don Stewart, I think some people in the ‘highly-educated classes’ were brought up to believe in vaccines. So they just assume that when a new virus comes along someone else has checked the safety, gone through the full development (which Dr Robert Malone I think estimated would need ~6-7 years).

      Rhonda Patrick and Peter Attia seem to be in this group. They know an awful lot about preserving one’s good health but may have omitted to read the accounts of how the CDC is in a mess internally, how it’s totally ‘bought’ by pharma, how Fauci behaves like a mafia boss, etc. Also they may believe the fatality rates quoted early by those with vested interests. Ioannidis came out with a paper for WHO suggesting a fatality rate of 0.05% for under-70s and I think overall 0.15%. ‘Delta’ is in turn less bad than earlier versions.

      I have friends who didn’t ask enough questions and took it. Fortunately it seems that healthy eating habits may be protective against any long-term ill-effects. People on the VAERS list of vaccine injuries & deaths could be those whose health was poor already and who were destined to have something go wrong in the next few years.

  8. People respond to $s in pocketbook. This is why classical economics is still needed in my opinion. It would be nice if science and logic worked, but they don’t.

    • “People respond to $s in pocketbook” is accurate as a behavioural observation, but it doesn’t change the physics.

      LtG and World3 set out some physical realities which subsequent evaluation has corroborated.

      Our history since the 1990s has been one of throwing the financial system under the wheels of the juggernaut.

      We’re either at, or within a decade from, the point of limits to growth. I’d say we’re already well inside the “precursor zone” which precedes this climacteric. What value is money likely to retain in such circumstances?

    • My point was that Mary and Joe Sixpack (US & Canada) and their equivalents in Europe. AU/NZ, and elsewhere who are the vast majority, respond more to short term income than to Cassandra warnings. Even if floods, droughts, supply disruptions, pandemics…affect them, they seek money, food, shelter…ASAP from government. As soon as things return to semi-normalcy, they go back to their normal behavior. Most are incapable of comprehending complex systems. Blame gets directed at convenient targets like immigrants, other religious sects, urban elites, minorities… As real wages have declined for decades, maintaining buying power is foremost on their minds. Or so it seems to me.

    • Quite so.

      The public don’t understand the issues. Business and finance don’t understand. Conventional, money-based economics is incapable of understanding. All available evidence suggests that governments don’t understand. We’re deep into what I call the “precursor zone” (c1995 to c2030?)

      Apart from that we’re in good shape.

  9. Dr. Frank Lipman
    “FUTURITY: Kids Get Two-Thirds of Their Calories From Ultra-Processed Food”

    So what do you think are our chances for raising a new generation which rises above the level of Cardi B? [My addendum…a lot of the other third is probably accounted for by cow’s milk, which is well suited to baby cows, but not human children.]

    Don Stewart

  10. Regarding what it takes to “wake people up,” Thomas Lewis at The Daily Impact blog has a revealing article up about the “holy s **t” moment the talking heads had when Hurricane Ida severely affected the Northeast Bubble Zone. It finally gets real when it isn’t just happening in foreign lands or to deplorables living in fly-over country.

    “As I watched the television coverage I saw blood drain from the faces, and heard tremors in the voices of people who were awakening to the sheer magnitude of this unprecedented event, and its dreadful significance — that this which has never happened before is going to happen again. Frequently. The veneer slipped off more than a few news anchors’ beautiful faces, who virtually barked at their interviewees, “What are we going to do about this?!”

    Suddenly they are asking “what are we going to do about this?” in an urgent, panicked way. Take a look at the comments to the article on the “we” people. Revealing and spot on IMO. How are these people going to react when they realize the time for planned action that could have changed these results was 50 years ago, there’s no “we,” kemosabe, and they realize the bigger question is what am I going to do about it?

    • I think this issue has plagued every civilisation that has crashed, whereby the people wouldn’t make the changes they wanted to see, to save themselves, because the easiest person to lie to is yourself. Also, people fundamentally distrust others (for good reason) so in communal situations, without strong overseeing rule to guarantee fairness, they wont sacrifice for fear others wont.

      You see plenty of examples of this behavioural trait even in good times, in communal grazing lands, where good pasture is short for the animals on it, individual herders wont reduce their stock pro rata, because they think they’ll be the only ones taking the pain. Oil producers promise to make cuts to raise the price but habitually cheat to profit at the expense of others. This fundamental selfishness is driven by the survival urge at an animal level, but backfires on us at times and we can’t overcome it because basic evolution retains the feature. This is because it’s good for a species on the whole, if at the expense of any individual, so populations will expand in the good times and shrink in the bad.

      We are like passengers on the titanic still dancing as the music plays, or arguing about irrelevancies as the time to make a plan and execute it bleeds away. Only the wealthy are acting logically, they know their progeny will live like barons back in feudalism, still a good enough life. It’ll be the others’ lives that wont be worth it.

  11. Afghanistan; Glenn Greenwald and Snowden
    When trying to figure out what governments (particularly the US government) is actually doing, it is best to assume that they are pursuing absolute power. The very recent revelation that the US government under Obama essentially forced Snowden to remain in Russia, so that they could brand him as a traitor and distract the public from the embarrassing facts that he had revealed, is evidence of the lengths to which they will go to obscure the real reasons for their actions.

    Part of the evidence in Afghanistan that the real reasons we spent so much money and accomplished so little is the influence of the Military Industrial Complex is the sheer amount of stuff that got left behind. I can’t locate it now, but the count of things like SUVs is truly astonishing. The supply chains for all that stuff (and especially the C-Suites for those companies) are the ones who benefitted. I personally was acquainted with someone who knew a little bit about the decision to go after the Taliban rather than the Saudis or Bin Laden (who was a Saudi citizen). He described the people involved in making that decision as psychopaths. From the perspective of the Taliban, they have been manipulated just as Cuba and Ecuador and Bolivia were manipulated in the Snowden affair. The Taliban was armed by the US to fight Russia, then sacrificed to create a smokescreen around Saudi involvement in 9/11, and now faces a challenge from ISIS, which was aided by the US to try to bring down Assad in Syria.

    My point is that it is a hall of mirrors, where the most likely explanation is the protection of their own power by the Washington Establishment. That is what Eisenhower warned us against, and it remains one of the best explanations for their actions.

    Don Stewart

    • Good points.

      The predecessors of the Taliban were indeed armed by the US on the basis that ‘any enemy of the USSR is a friend of ours’. The list of kit left behind is indeed daunting, though this seems in part a consequence of the utter fiasco of the withdrawal. One can only wonder how much information was left behind as well. The images are strikingly reminiscent of Saigon, and the number of Americans left behind far exceeds the 52 hostages taken in Tehran in 1979.

      It’s noteworthy that Western leaders, who initially seemed in shock and pleaded for more time, seem now to have fallen into line with the administration.

  12. @Dr. Morgan
    Another angle on Afghanistan occurred to me after some additional reflection. Recall that Russia wanted the US to remain in Afghanistan. If Afghanistan has a weak government, and both Europe and the US seem determined to pursue that goal, then Afghanistan becomes a safe haven for ISIS. That is one of the reasons that some of the ‘Stans’ invited Russia to send troops to the border. An active ISIS spreading chaos through the islamic population in the Stans and southern Russia is just the kind of development that the US (and Europe) are drawn to. Cheaply disrupting a system they see as a systemic threat. The same may hold true for China on the eastern border. Part of US strategy is to prevent ‘enemies’ from spending money on the social needs of their own countries by creating as much distress inside them as possible. I imagine that the US diplomats have been whispering in the ears of the slow learners.

    Don Stewart

  13. Don, great comment about the hall of mittors. The next question is, once you’ve understood that and can’t trust any official narrative, how does one, with family, go about arranging one’s life. I believe it leads to the small farms future you often talk about.

    FI, in Nicole Foss’ last magnum opus (for a blog), she identified the six or so limits to the “solution space” for addressing our energy, resource, industrial and economic descent (arguably a better word than “collapse” because it doesn’t have the connotation of precipitousness, which is difficult or impossible to know).

    One of her key points is that the “trust horizon” drastically contracts to people you know and deal with personally. This makes cenntralized, top down measures impossible – outside the solution space.

    It is worthwhile to return to that article every once in a while.

  14. I’m actually curious, given the state of things, what one would think about investments in a future that is otherwise not going to happen.

    I’ve been thinking about pensions a bit lately, and although I’ve been putting in the maximum allowable contribution into mine, it strikes me that the money will never see my account and certainly not without being tarnished by some financial calamity down the road anyway, even if retirement mid-century was going to be a thing (it isn’t).

    That said, I’m considering reducing my input and simply throwing that cash into a tracker ISA that I can at least access for everyday needs, whereas a pension fund? Well, it seems saving for a just such a thing as retirement is a folly given how radically different the world will be.

    It just seems like a personal instance of expanding Heathrow for the presumed increase in flights despite climate change and resource depletion and general prosperity declines being the headwinds to contest such a future.

    • Nobody knows the future with certainty and precision. We know we will all die at some point. It seems to me that owning some physical gold as a hedge against currency debasement makes sense. People differ on %. I’ve read 5-25. If one is in a rural area where land is cheap, having a few acres with your residence which is suitable for growing vegetables, fruits, and maybe nuts is good but you need to be fit and not old.

      Savings in fiat currency, while necessary, is incomplete security in my view. Unfortunately our son, his wife, (near 50) are not interested in a small farm. Their in town home will soon be expanded at huge expense to house our daughter-in-laws mother. I’m unhappy about this, but nothing I can do about it.

  15. Recommended video
    https://odysee.com/@BretWeinstein:f/E
    Bret and Heather 95th DarkHorse Podcast Livestream: Collective Consciousness

    You can also find it on YouTube. Bret and Heather are a married couple, both evolutionary biologists. With the emphasis on ‘evolutionary’, they talk very precisely about many of the issues that we deal with on this blog…but also some additional concerns such as how we construct dating and mating rituals which avoids the disaster of silicon dating (they propose carbon dating).

    They propose a dual model. The first arm is culture…the way we do things here. Culture has worked in the past, with the evidence being that our society has survived up to this point. The second arm is consciousness, and particularly collective consciousness. If one runs enough computer models of the economy and the ecology, one comes to the realization that things are going to have to change. Sometimes a single personal experience is enough to convince a person that something has to change…for example, disastrous dating and mating using silicon. More frequently, change involves multiple people. It reminds me of the Yes/And method in improvisation. The improv is greatly improved if multiple people are engaged in inventing whatever is being improvised. Thus, a discussion around the campfire regarding what the village might do about the drought or the floods is likely to yield much better solutions than any individual alone. So we are conservative due to culture, but adventurous when we engage our consciousness.

    [I have never heard consciousness described this way before. Listening to them talk, I really like it. It is a very operational, hands-on definition. Not at all airy-fairy.]

    Bret and Heather are the authors of the forthcoming book Hunter Gatherers in the 21st Century. Now the 21st Century that they seem to anticipate is not the 21st Century that most of us hear anticipate. However, the principles are the same. They argue that many of our problems arise from the fact that we have been unable to adapt rapidly enough to the changes which have and continue to occur. But those changes can go into reverse and we might need to relearn 19th century survival skills, for example. In summary, if you think that adaptation to rapid change is likely to be necessary, this is worth listening to. Approximately an hour. There is a post show Q and A on Odysee…which I did not listen to because those tend to wander amid a multitude of subjects and I am very busy at the moment.

    Don Stewart.

  16. @ Steven Kurtz,
    One of the really good things about the Covid pandemic is that it has created widespread opportunities for working from home. For those who can do it and who are not so ambitious or career-minded that they have to be part of an office to continue their ascent, this means that they can now POSITION themselves on a rural property of say 5 – 20 acres which can be operated as a small farm or provide a fair degree of one’s food supply without having to immediately BECOME a small farmer with all the hard work it entails and all the difficulty of succeeding at doing so while in competition with large corporation industrial farming and a global economy. They can continue to support themselves in the digital economy while transitioning at a chosen pace to small farm life and be in a position to move more fully to that form of life when it will be far more obvious that it is the way forward and far more economically necessary. This may be particularly appealing to those in their 30s and 40s and who are disaffected with the corporate lifestyle. The main problem then is whether to disconnect from city life and the friends, pleasures and amenities it affords. Of course, Western governments’ reaction to Covid has taken the shine off a lot of that as well.

    Even boomers can so position themselves for the benefit of their descendants.

  17. A penny for your thoughts on the National Insurance increase in the UK, Doc? It’s things like this that should make people question the system. As I just replied to my father’s e-mail, with him mockingly thanking my generation for paying for this social care:

    You’re most welcome. However, you have to wonder what the Zoomers are going to do when it comes to looking after my generation, since most of them won’t have any homes or sizeable assets for the system even as it is now. And they’ll be a much smaller cohort than the Millennials before them, since the Boomers were by far the largest population of the 20th and early 21st century. The population pyramid is inverting in the West, and even in China now.

    With interest rates at practically zero, personal debt and financing at all time highs, and anaemic wage and economic growth (outside of the rebound this year from the worst recession in three centuries), one wonders if people are cottoning on to how unsustainable everything is.

    The immigrants we’re turning away (or attempting to, poorly) are likely going to be welcomed with open arms once the ageing population realises there aren’t enough workers to support them. Look at the HGV shortages now, something people were aware of a decade ago, and how many nations relied on cheap immigrant labour and the assumption people will work shit hours for worse pay to keep it all moving. That’s about to change.

    • I’m looking at this from a distance, but I seem to recall Mrs May proposing to charge the costs of social care to the estates of recipients after their decease. This, I believe, took away her Parliamentary majority. Mr Johnson is now putting this cost on working people in general, and younger working people in particular. This is happening at the same time as the cost of essentials – notably, gas and electricity – is rising. This increase in NI – essentially, a tax on workers and employers – has, apparently, been preferred to higher taxes on capital gains and inheritance. That makes no sense to me.

  18. As far as I understand it this morning, Dr Tim, we here in the UK now have the heaviest tax burden for over 70 years. Around 35% of income will be taken from 2022. We now have ‘big state, big taxes”. Whilst the problem needs addressing, I’m not so sure that my kids (and their employers) should be paying for my care, should I need it. Maybe a ‘land tax’ would have been fairer?

    • I would contend, of course, that it’s even worse than that – tax is measured as a fraction of GDP, but that’s a number inflated by credit and monetary adventurism, and prosperity is a lot lower.

      Either way, the meaningful burden for households is rising. This is happening at the same time that the costs of essentials, especially electricity and gas, are rising markedly. The discretionary sectors are bound to come under increasing pressure – money spent on essentials or taken in tax can’t also be spent on leisure, travel or ‘gadgets’.

      This is de-growth in action. It’s also interesting that govt hasn’t asked the BoE to print the money for social care – a recognition of limits?

    • Mark,

      A land-tax would have advantages: it’s difficult to hide land from the authorities, and you can’t relocate it to a tax-haven. On the other hand, setting up a land-tax would be a lengthy and expensive project; and any new tax would be plagued with teething-troubles.
      Another option for funding social care would have been to reallocate money (mis)used elsewhere: Trident replacement, HS2, TV licences…

  19. I quite agree, Dr Tim. More and more is being gobbled up by food, utilities, local and national taxes, insurances, transportation. My office is adjacent to a school uniform supplier. It now costs in excess of £375 to equip a child starting a new school, compared to £250 5 years ago, the manager told me.

    I also think that everyday citizens are more and more aware of the squeeze and the need to be as self-supporting as possible, which means a gradual preference towards ‘setting some money aside’ rather than ‘I’ll have that now, thanks’, among those who discern the need to change bad personal financial habits. Advertising still sells the ‘impossible lifestyle dream’, but I believe that it is beginning to fall on deaf ears.

    • The price ‘cap’ on UK domestic energy bills has been increased by 23% thus far this year. Households are also being subjected to the biggest increase in taxation for at least 40 years.

      Does anyone seriously think that this won’t affect the scope for discretionary (non-essential) spending? This has been propped up by borrowing, but aggregate (household, public and corporate) debt has risen by £2.8tn over twenty years in which GDP has grown by only £400bn.

      Well, actually, yes – businesses which supply discretionary goods and services – and their shareholders – do still seem to think that these sectors can grow. When the penny drops about this, equity markets (and by no means just in Britain) could slump. There have to be implications, too, for housing affordability.

    • @mark Andrew
      Why should any economy need “energy suppliers “? I have never understood the
      need to have competing suppliers occupying vast offices with computers,lights telephones incurring yet an additional ECOE. My conclusion is that it has enhanced the the employment figures subsequent to the reduction in employment in the pre-Thatcher industries. Also Sainsbury,M&S (among others) offering to supply your electricity and /or gas is even more ridiculous .
      In the “good old days” the producer was also the supplier within more localised areas.Seemed to work perfectly well.
      The current supplier cartels seem very much like the Greensill Capiltal equivalents that were attempting to infiltrate the NHS. Therefore, the sooner they all disappear the better. However , unfortunately the owners of the energy production facilities are in many instances now in foreign ownership. Not great for “Great Britain” .
      With so-called smart meters directly linking producer and consumer no need to have an irrelevant intermediary.
      It is little wonder Dr Tim’s model suggests the UK economy is very fragile.

    • Yes, the UK economy is very fragile. A lot of it is down to bad management, by successive governments, not just this one. Britain is in urgent need of new ideas, not just putting sticking-plasters on old ones that have failed.

  20. There can now be no doubt that living standards for a great many people in this part of East Lancashire – in North West England – are in remorseless and severe decline, and that the burden of taxation is weighing heavily upon local residents.
    Since 2009-10 Tax Freedom Day, which one accepts is a ‘rough and ready’ measure, has moved from mid-May to May 30th. In short, the citizenry in aggregate is now working another 2 weeks for the state; and I suspect that figure is going to become ever greater is the years ahead.
    For the last five years we have been contributing additional taxation towards funding adult social care through the 2% levy on the Lancashire County Council Precept. That’s an extra £520 Band D Council Tax per property alone.
    In addition, the Chancellor has previously announced that Tax Free allowances will not be increased. This leads directly to higher taxation through fiscal drag.
    In six months the contribution from national insurance will be increased.
    Finally, there is taxation through inflation, which as Dr. Tim has stated on any realistic measure is now running at above 5% per annum.

  21. Vindication, Dr Tim.

    According to Bloomberg, UK gas prices have just reached a record 136.68p per therm, and electricity is now £128.13 per MwH, a 13-year high, with a strong warning of worse to come.

    • We’re looking at a lot of moving parts, even when we look just at the UK.

      My interpretation is that The Limits to Growth thesis is being proved correct and, in economic terms at least, we’re within ten years of the point at which this conclusion becomes inescapable.

      LtG doesn’t happen overnight. There’s what I call a “precursor zone” that precedes it. I think that began in the ’90s, when “secular stagnation” was a topic of discussion. Since then, ECoEs have been moving relentlessly higher. We’ve been using credit and, latterly, monetary gimmickry as well to delude ourselves that none of this is happening. Some economies are now ‘stimulus junkies’. It all fits a pattern.

      What this means is that individuals, and economies, get poorer. The essentials – not just household costs like electricity, but public services too – get more expensive. The scope for discretionary consumption shrinks, and there’s only so long we can prop up discretionaries with ever more credit.

      If investors work this out, the discretionaries components of markets are in big trouble.

  22. Dr. Tim:

    “Does anyone seriously think that this won’t affect the scope for discretionary (non-essential) spending? This has been propped up by borrowing, but aggregate (household, public and corporate) debt has risen by £2.8tn over twenty years in which GDP has grown by only £400bn.”

    I realize you asked a rhetorical question, but among our own wordpress community kindly hosted and fostered by you, it surely cannot be any surprise that neither governments nor capitalists take into account the effect of their actions upon their citizenry at large. I.e., there is no “planning”; they are simply looking for the first order effect they expect – more money. Either that, or the plan IS to crush people. They decree, and it is up to those worse affected to simply make it work or die trying.

    The lords enclosing English lands to transition to sheep for the wool trade did not worry about where the peasants would go, or how they would fare. Let the peasants figure something out, we need the money from the increased global trade! The UK government did not carefully consider whether the UK citizens could afford the recent tax, its impact on other sectors of the economy, or whether taxes are already too high.

    We have another great illustration here in America this morning courtesy of Zerohedge. See “The Fed is Helping Facilitate Trailer Park Evictions.” Turns out that investors are snapping up trailer parks and increasing the rents and evicting those who can’t afford them, thereby increasing the TP’s capitalization value, using that to borrow more and buy another TP. Living in a trailer park is already the last step before homelessness – or very near so, but the investors are not worried about what will happen to the people they are pricing out of that rock bottom rental market. They simply expect to make money from the downwardly mobile former denizens of the middle class who haven’t hit rock bottom yet.

    There is virtually no historical precedent for any kind of second or third order effect planning or concern about how citizens will adapt expressed for those who will be crushed by governmental or capitalist action. This should come as a surprise to NO ONE who simply looks at the actions and ignores the words of our lords and masters. The only exception I am aware of is FDR’s New Deal, which was enacted when the banks were in or close to total collapse. It is often claimed that FDR saved capitalism from itself, but his social safety net has been hated by the oligarchs ever since (see the Lewis Powell Memo) and those programs too will soon go the way of the Dodo.

    • Agreed. I have only two responses to offer.

      First, in order to look at what the vast majority are going through, we need to look at prosperity, as we do here, and not fool ourselves with aggregate consumption or GDP, both of which are inflated by credit & monetary policy.

      Second, having done that, we need to look at how much more the ‘ordinary’ person can lose before he/she can’t afford the essentials. If the average person’s real income is crushed, who gets to buy all the stuff the corporates produce?

      Elites usually get into over-reach. It turns out to be a mistake, either economically, politically or both.

  23. Durable Goods and Chips
    Wolf street keeps telling the story that the Fed’s creation of more money has powered the increase in durable goods sales in the US and consequently the huge increase in imports from Asia and the congestion at ports in China and on the US West Coast. While production of chips has increased, it has not been able to keep up with the demand for durables which are constructed with lots of chips in them, and so we are seeing shortages of things like automobiles and involuntary idling of assembly lines. Even Toyota is now affected.

    Is the same thing happening in the UK? Are import terminals crowded and is the trade balance strongly negative? Are people buying durables with free money from the government? The answer might help me get a clearer picture of what is happening to the public’s sentiment in the UK.

    Thanks…Don Stewart

  24. Wind and Solar: A Sober Look
    Sustaining the Unsustainable: Why Renewable Energy Companies Are Not Climate Warriors

    You can read this on either New Labor Forum or Resilience.org

    Both wind and solar are consolidating and contracting as overcapacity takes its toll. None of the promises from 10 years ago are coming true. You will see some numbers from Scotland, as one example.

    Don Stewart

    • I took a look at the STUC (Scottish Trades Union Congress) Policy briefing paper that was mentioned in this report.

      I have to say that I was quite shocked at how the proponents of renewable business promise significant well paid local job creation but the reality is very different.

      I suspect they have to play up the “green” jobs because their agenda requires the destruction of many well paying jobs in legacy fossil fuel industry. It’s the scale of that, lie I suppose, that I found so shocking.

      Here’s a sample from the report, “Scottish Government Strategies, from a number of political parties, have promised significant numbers of jobs in renewables.” “For example Low Carbon Economic Strategy (2010) – annual growth of 4% a year to 130,000 jobs by 2020 (and 5% of the overall workforce).” This set beside the reality from the Office for National Statistics (ONS) ‘Low Carbon and Renewable Energy Survey’, the primary source of official information on the LCRE economy. “The latest figures released in January 2019 estimate 21,400 direct full-time equivalent (FTE) jobs in the LCRE economy in 2017”

      In its conclusions the STUC report notes that “Past predictions of employment in the LCRE economy have not translated into the jobs boom promised. The LCRE economy is characterised by overseas financial interests, a limited industrial base and precarious work.”

      That’s not to mention the environmental impact of the manufacturing processes of these massive windfarms sometimes on the other side of the planet and then the transportation to their final destination.

      We may have no option to transition to renewable energy but the industry has some dirty secrets and it’s clearly not as saint like as many of it’s proponents believe.

  25. I come from Gail Tverberg’s blog; I’m sure most here are up-to-date with the Herrington update to the limits to growth model based on empirical data. The relevant graphs are here:

    Click to access downloadSupplement

    The ‘human welfare’ line is of particular interest to me- whether the large decline between 2020 and 2025 will be noticeable to the general public in the West, or whether it will be explained away by the noise of the pandemic. Is the energy descent ultimately concealable by bringing welfare and economic freedom down in increments, and providing plausible justifications, or will the descent become quickly perceptible by the man on the street? Interested to hear the thoughts of those here.

    If you look at the historical Nasdaq chart also, currently rising almost parabolically, I find it difficult to believe that we won’t see a precipice sometime in the near future, and a subsequent shock to even the distracted member of the public.

    • Welcome.

      The human welfare component is based on the UN HDI, which combines health (assessed as life expectancy), education (years spent in school) and income (measured as GNI per capita, and given a diminishing importance as incomes rise). The index “does not reflect on inequalities, poverty, human security, empowerment, etc. ”

      Gaya Herrington’s paper is excellent, the main points being that the authors of LtG got it right (borne out by subsequent data), and that the limits to growth are likely to be encountered in “a decade or so”, unless fundamental changes are made.

      LtG does not define “growth” in solely economic terms, and references broad indicators including population numbers, food supply, pollution and so on. Even so, it’s a reasonable inference that economic growth ends within the “decade or so” period.

      If that’s the case, and if we recognize that this is far likelier to be a process than an event, we should anticipate what I call a “precursor zone” before we hit the limits. I believe that we entered this precursor zone in the 1990s, when we first started using credit (and, latterly, monetary) gimmickry to sustain a simulacrum of “growth”, itself a proxy for ‘business as usual’.

      On Nasdaq, and markets generally, these are buoyed up by monetary policy, which tries (but is failing) to sustain “growth”.

      For the corporate sector, my interpretation is that discretionary prosperity is being compressed between (a) decreasing top-line prosperity per person, and (b) the rising cost of essentials. This puts sectors supplying discretionary goods and services into decline. These sectors are a large proportion of the equity market, and the compression of discretionary prosperity has implications for housing affordability as well.

  26. Evergrande’s bonds are being priced at 20 to 30 cents on the dollar but the stock – which only receives the residual in liquidation after the debt is paid- is down only 10%?? Lol someone must be hoping for a bailout by the Chinese government!

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