#216. It’s now


When and how can we know that a change of direction is fundamental and lasting, rather than a temporary departure from established trends?

That, in essence, is the call we need to make now. Far from being “transitory”, current conditions – including rising inflation, surging energy prices and the over-stressing of supply-chains – are indicators of a structural change.

Ultimately, what we’re witnessing is a forced restoration of equilibrium between a faltering real economy of goods and services and a drastically over-extended financial economy of money and credit.

This is where confidence in continuity crumbles, where the delusions of ‘growth in perpetuity’ succumb to the hard reality of resource constraint, and where ‘shocks that are no surprises’ shake the financial system.

If you want just two indicators to watch, one of these is the volumetric (rather than the financial) direction of the economy, and the other is the behaviour of the prices of essentials within the broader inflationary situation.        

The economics of stress

In the science of materials, it’s observable that fractures happen quickly, even if the stresses that cause them have accumulated over a protracted period. We can spend hours, days, weeks or even years gradually increasing the tension applied to an iron bar, but the ensuing snap in that bar will happen almost instantaneously.

Economics isn’t a science, but there’s a direct analogy here. Anyone who understands the economy as an energy system will be well aware of a relentless, long-standing build-up of stresses.

They’ll be equally aware that this cannot continue indefinitely.

Two things matter now.

First, when will these cumulative pressures bring about the moment of fracture?

Second, what should we expect to see when this snapping-point is reached?

The answers to the second question are pretty clear.

Once the break-point has arrived, we should anticipate deterioration in the material economy of goods and services. Rather than being misled by financial proxies for economic activity, we need to focus on physical metrics, which range from energy and resource consumption, and the supply of goods and components, to the movement of products and people.

Looking behind distorted comparisons with coronavirus-depressed 2020, this is exactly what we’re seeing now.

All sorts of explanations might be advanced for lower physical supply, and many of these explanations are, within their limits, valid. Many interruptions can be identified, across the gamut from the manufacture of cars, chips and components to the availability of containers, transport capacity and skilled labour. Many businesses are in big trouble, not least from sharp rises in the costs both of direct inputs and of the utilities that every business requires.

But what matters here is the overall effect, and that effect is a weakening in the material or physical supply of products to the economy.  

Overall downturns in these ‘non-financial metrics’ are of enormous significance, and can be expected to carry on trending downwards once the economic inflexion-point has been passed.

At the same time, we should anticipate major financial dislocation, including surging inflation, market slumps and a cascade of defaults. We can usefully refine the focus on inflation by stating that it won’t be broad inflation, but the rising prices of essentials, that will be the critical lead-indicator of systemic disruption.

Meanwhile, we should also expect to see the combination of financial stress and deteriorating material activity extend more broadly, most obviously into politics, and into wider manifestations of popular discontent and anxiety.

If we compare what we would expect to see with what we can observe, we have an answer to our first question.

The moment of fracture has arrived NOW.        

Revealing trends

Cumulative tensions between the economy and the financial system are clear to see, provided we know what we’re looking for.

Three metrics provide examples of what this means.

Between 2000 and 2020, global economic activity, expressed as GDP, increased by 94%, meaning that the economy is supposed to have “grown” by $64 trillion (at constant 2020 values).

This “growth”, though, has been paralleled by a far larger – 190%, or $216tn – real-terms surge in aggregate debt. The relentless stretching of the balance sheet becomes even more pronounced if we look beyond formal debt, and take into account rapid increases in broader financial liabilities, and the emergence of huge ‘gaps’ in the adequacy of pension provision.

The aggregate of commitments, then, is rising far more rapidly than reported “activity”, and it’s clear that much of this “growth” in activity is a statistical function of soaring commitments.  

Our third metric, provided by the SEEDS economic model, is that global aggregate prosperity increased by only 31% ($19.9tn) over a period in which “growth” is claimed to have been $64tn, or 94%.

If we overlay a 25% rise in population numbers between those same years, what emerges is that a reported 55% increase in GDP per capita masks a rise of less than 5% in the prosperity of the World’s average person.

Add just a soupçon of widening inequality and we have a situation in which the median person gets poorer.

This has happened over two decades in which his or her share of aggregate debt has risen by 130% in real terms.

Just to be clear about this, these are long-term patterns, not fundamentally affected by pandemic-induced effects which, in 2020, reduced GDP by a reported 3.1%.

The Great Divergence

If you’ve been visiting this site for any length of time, you’ll know the importance of drawing a conceptual distinction between the real economy of goods and services and the representational or financial economy of money and credit.

In a process whose origins can be traced right back to the 1990s, these ‘two economies’ have diverged, creating a dangerous disequilibrium.

Contrary to conventional orthodoxy, the economy is an energy system, not wholly or even mainly a financial one. Nothing that has any economic utility at all can be supplied without the use of energy, and the delivery of material prosperity can be – though generally isn’t – expressed as an equation comprising the supply, value and cost of energy.

The most critical of these variables is cost, meaning the Energy Cost of Energy. ECoE references the fact that, whenever energy is accessed for our use, some of that energy is always consumed in the access process. Material prosperity is a function of the surplus energy that remains after ECoE has been deducted from aggregate energy supply.

In short, rising ECoEs mean falling prosperity.

The problem, in an economy that still relies on fossil fuels for more than four-fifths of its energy supply, is that the ECoEs of oil, gas and coal have been rising relentlessly. SEEDS data indicates that the trend ECoE of fossil fuels has risen from 2.8% in 1990 to 6.3% in 2010, and 9.8% now.

Since most ex-ECoE (surplus) energy isn’t used for growth, but for system maintenance and renewal, a rise of 710 basis points in ECoEs, in an economy previously capable of growing at about 3% annually, is much more than enough, not just to eliminate the scope for further expansion, but to put prior growth into reverse.

The imperative, in economic as well in environmental terms, is to replace fossil fuels with lower ECoE sources of energy supply. If we can’t do this, then surplus energy – and, with it, material prosperity – must decline, initially in per capita terms and, latterly, in aggregate.

There is, as yet, no evidence that renewable energy sources (REs), such as wind and solar power, can supply this lower ECoE alternative to oil, gas and coal.

The probabilities, rather, are against this being possible.

Even if this can eventually be accomplished, it certainly can’t happen now. This is why the ‘real’ economy of goods and services has been decelerating, to the point at which involuntary “de-growth” has become a reality.

Whilst prosperity is, of necessity, a material concept, money is a human artefact, validated by its use as a medium of exchange. It has value only in terms of the things for which it can be traded. This means that money has no intrinsic worth, but commands value only as a ‘claim’ on those material goods and services for which it can be exchanged.

Conventional economics tries to circumvent this hard reality with the notion that [financial] demand creates [physical] supply. The fallacious logic here is that, so long as there’s enough financial demand for something, the availability of material supply will somehow follow automatically.

Where finite resources – such as low-cost energy – are concerned, this simply doesn’t work.

We can’t create something that doesn’t exist in nature, simply by putting up its price.

This is why we can’t spend (“stimulate”) our way to material prosperity, any more than we can borrow our way to solvency, or “invest” (meaning monetize) our way to environmental sustainability.

What we’re seeing here is a widening gap between the economy as it is and the economy as we choose to see and present it.      

In essence, we’ve been creating apparent increases in economic activity (using expansions in credit and other liabilities) without creating much material economic value.

In the process, we’ve been driving a widening wedge, not just between ‘activity’ and commitments, but between the energy economy of goods and services and the proxy, financial economy of money and credit.   

Inflation – the importance of the essential

Logically – because prices are the interface between financial demand and physical supply – inflation should be a prime mechanism in the restoration of equilibrium between the real and the financial economies. Using the material and the financial as the components of an equation, we can identify rates of inflation that substantially exceed reported numbers. Known as RRCI, this is an ongoing development project within the SEEDS economic model.

These broad trends, though, can’t really be seen in readily-available data. For a start, and as you may know, official inflation has been distorted by the use of concepts such as hedonic adjustment, substitution and geometric weighting.

Just as significantly, conventional measures of inflation confine themselves to movements in consumer (or ‘retail’) costs, thereby excluding those changes in asset prices which are a material component of the overall relationship between the quantitative and the financial dimensions of the economy.

The tendency with the use of official numbers is to compare inflationary rises in consumer costs with nominal changes in wages. Theoretically, at least, if consumer inflation is broadly matched by increases in incomes, then the ‘ordinary’ person’s situation doesn’t change all that much, except that his or her debts are inflated away, whilst savings are eroded.

There are many snags with this notion, of which the most obvious is that inflation can take on a momentum of its own, with wages chasing prices, and wage costs pushing up consumer inflation. This tendency threatens a destruction of the purchasing power, and hence of the critical credibility, of money. This is why, whilst low inflation is generally deemed to be acceptable – and is often regarded as beneficial – anything above about 2% is recognized as a problem.

Though true as far as it goes, this approach conflates two very different forms of inflation as the consumer experiences them.

The consumer spends his or her income in two ways. The first is the purchase of essentials, including food, housing, domestic energy, utilities and necessary travel. The second is the purchase of discretionary (non-essential) goods and services. These ‘discretionaries’ are residuals, meaning things that the consumer buys after he or she has met the cost of necessities.

It’s quite possible to envisage circumstances where the cost of essentials is rising much more rapidly than the prices of discretionaries. We might, for instance, have a situation in which, whilst broad inflation is running at 5%, the cost of essentials is rising by 10%. Incomes, if they too are rising at 5%, thus offset general inflation, but fail to keep up with the cost of necessities.

This inflationary divergence makes the consumer poorer because, whilst discretionary purchases such as cars, smartphones and holidays can be deferred – and are not, in any case, made continuously – essentials such as food, electricity, gas and other utilities have to be purchased, generally on a regular weekly or monthly basis.

The vital point about this ‘asymmetric inflation’ is that we need to put the emphasis, not on broad or theoretical inflation, but on trends in the real cost of essentials.

If the cost of, say, a smartphone or a foreign holiday increases, the consumer might not be much concerned about it, because he or she doesn’t need to buy it at all, and can certainly put it off for later.

If, on the other hand, there’s a sharp rise in the cost of food, or the utility charge for electricity or gas, or the price of fuel at the pumps, he or she notices it very quickly indeed – and is right to do so.

Critically, essentials are highly energy-intensive. This is as true of, say, food and water, and of the building and maintenance of homes, as it is, more obviously, of fuel and domestic energy.

The point of impact

What this asymmetric inflation means is that, as energy-based prosperity deteriorates, an obvious financial corollary is a rise in the cost of essentials. As well as causing public discontent, this also leaves the consumer with a reduced ability to purchase non-essential goods and services.

At the critical moment of impact, then, we should expect to see two important trends.

One of these is a rise in the cost of essentials, and the other is volumetric weakness in the economy, most obviously in the use and delivery of physical goods, and in deteriorating metrics in discretionary sectors.

This is exactly what we’re witnessing now. Whilst the prices of essentials are rising, volumetric consumption of discretionaries is trending down, even if this can be hard to see behind an anaemic “recovery” from the artificially-depressed conditions of 2020. When, as is frequently the case, we’re told that discretionary sectors are ‘growing’, it often transpires that this is true only in comparison with last year.     

Given that stock markets are heavily skewed towards discretionary sectors, this trend alone is likely to become a worry for investors.

Moreover, rises in the cost of essentials have a direct bearing on decisions made around monetary policy. Consumers, who are also voters, might not make much of a fuss if the prices of discretionary purchases rise, but will react very strongly indeed if the cost of their utility bills, of filling up their car and of the weekly purchase of groceries moves markedly upwards.

It doesn’t take all that much inflation in the cost of necessities to create popular demands for action, demands which, in policy terms, can be met only by raising interest rates, and by easing back on, or reversing, asset purchase programmes.

Because prices, especially of necessities, are the point at which the financial economy of money intersects with the material economy of energy, current trends are unmistakable signs of the moment at which monetary delusion succumbs to energy reality.    

It is, perhaps, fitting that this is happening as the pantomime season approaches. Borrowing our way to prosperity played to packed houses in the decade or so before 2008, and much of the glitter carried over into more-than-a-decade in which the speed of monetary expansion has deceived the eye of reality.

There comes, though – and, now, has come – a point at which the curtain descends, the glitter fades and the magic of beans and bean-stalks recedes into memory.                

117 thoughts on “#216. It’s now

  1. Ỳou talk about the increase in cost of essentials squeezing out the cost of discretionaries – but it seems to me that this rapidly gets overtaken by the inability of more and more people to even buy essentials. I would imagine this would manifest as more and more people being unable to afford to heat their homes, or run a car or even to buy enough food. Do you think we are at that point yet? Is it avoidable? How will we see it?

    • the squeeze will mean less discretionary spending and thus less jobs in discretionary sectors.

      so yes, perhaps a rapid increase in former workers, who then cannot even buy essentials.

      this job loss scenario is an element of the NOW that Dr. Morgan correctly asserts.

      and the job loss aspect could speed up the rapidity, even turning into an economic downward spiral.

      this job loss aspect is somewhat off the radar, but will become very visible in the near future.

    • At the moment I’m endeavouring to plot the probable future course of discretionaries, but yes, these sectors will trend downwards, reducing employment. Job losses are implicit, too, in the taxonomy of de-growth that we’ve discussed here, in processes such as simplification and de-layering.

      On the other hand, we may see increased reliance on human labour, with an increasing emphasis on skills.

      I believe that ensuring the availability and affordability of essentials for everyone needs to be the next big political ambition.

    • Thank you for all of your efforts. I look forward to more quantifying of this dilemma of discretionaries.

      Of course less discretionary spending leads to less jobs in these sectors, and I worry about that positive feedback.

      Massive unemployment could come way too soon.

    • Thanks David.

      There are various dilemmas from here on, discretionaries being one, and investment another.

      What I’m exploring now is what allocation patterns might look like going forward – with prosperity deteriorating, how much goes on essentials, how much on capital investment and how much to discretionaries?

  2. At £6.80 a gallon for diesel – I think UK consumers are starting to notice price rises.

    • ouch, I ditched my car at the beginning of 2020,
      I’ve saved on no insurance, no tax, no MOT, no maintenance and of course no fuel,
      I didn’t know the current price, seeing your post I feel I did the right thing in the circumstances!

    • on the Guardian site is a pic of a petrol station sign with diesel at 168.9p/litre, that works out as £7.67 a gallon, crikey!
      I had a look online, confused.com has a fuel checker,
      it claims on the 25th of November the cheapest diesel in the UK was 136.9p and the most expensive was 199.5p yowzah!!
      the average was 151p or £6.86 a gallon,

      so your price as an average is spot on, I bet you’re glad you don’t live in a 199.5p/litre area!

  3. I guess that the next question(s) might be, something like: When will physical shortages become undeniably obvious? When, and where, particularly within the industrialized “West”, will large scale famines take place? That kind of thing.

    I could be wrong, but I just can’t imagine that a drop in population, which must occur as a result of physical shortages, from 8 bil. to something much much smaller, will follow any type of nice smooth curve on the way down.

    • According to Art Berman {a working petroleum geologist.}
      “ . . . just opec alone
      28:12 is sitting on something like 7 million
      28:14 barrels a day of spare capacity that’s
      28:16 eia’s estimate some people will argue
      28:19 with that some people say they don’t
      28:21 know what they’re talking about i don’t
      28:22 really care it’s a lot of oil you know
      28:24 is it 5 million is it 7 million is it 9
      28:27 million it doesn’t matter
      28:28 opec plus has more because they include
      28:31 russia
      28:32 those guys could solve this problem
      28:34 tomorrow
      28:36 maybe if they wanted to but they don’t
      28:38 want to . . . “

  4. Back in 2007, 2008 and 2009, during the financial crisis, I observed that if the solution to bad debt was more debt then surely the cure for alcoholism is a more generous supply of whiskey.

    It will all end in tears.

  5. Pingback: It’s now | ORCOP.COM

  6. This rather old article examines the possibility of building a 100mpg car.

    The conclusion is that it is achievable, but the additional drive train and materials costs end up negating any reduction in operating costs due to improved fuel economy. Some of the materials costs have come down since this article was written and fuel costs have increased. I suspect that a 100mpg car would be a more attractive prospect today.

    The increase in capital cost is exactly the problem with electric vehicles as well. They achieve reduced operating costs at the expense of higher capital cost. And those improvements in operating cost disappear if road use electricity is taxed at the same rate as petrol or diesel. If that were to happen (and eventually, it surely will) we would be left with cars that have roughly twice the purchase cost and twice the running cost of a standard petrol or diesel. A 100mpg diesel can at least claim reduced running costs even if it does cost more to buy.

    • I rediscovered something yesterday that I can remember being discussed during the 2008 oil shock.

      This can yield up to 40 tonnes of dry biomass per hectare per year. Under UK conditions, yield is given as 200-250GJ per hectare per year. This is the most productive biomass crop developed to date. Using flash pyrolysis, around 60% dry mass can be converted into bio oils, which could be blended with diesel. The balance is char and syngas, in roughly equal quantities.

      There is no hope of growing sufficient biomass to substitute more than a small fraction of the 1.5 million barrel per day of oil products that the UK consumes (prior to lock down). But maybe a 10% substitution, using a mixture of purpose grown biomass, crop residues and recycled woody materials is not unrealistic. This would not be sufficient to sustain mass motoring, but it could power collectivised public transportation and maybe mass goods movement, especially if both modes can make more intensive use of rail.

      The char could be ground into fine dust and deposited back onto the soil from whence it came. This would gradually improve soil fertility. Nuclear and renewable electricity could provide power to the pyrolysis process if it is carried out in electric furnaces. The gas that is yielded could be burned in gas turbines backup powerplants for wind farms.

    • We’ve seen commercial airliners triple their fuel economy since the 1960’s, while their max speed has decreased, although long haul flights are in reality much faster because the planes don’t have to refuel. If cars had followed the same path they would average 100mpg and go no faster than 80mph. You could build a cheap 100mpg right now, problem is nobody would buy one, fuel economy is still low down our list of priorities, hence the mania for oversized SUV’s. I drive at a good old clip while on the A96, the fact that drivers overtake me when I’m doing 60mph suggests that most Road users don’t even try to conserve fuel.
      In any case 100mpg cars don’t have to be expensive and crap, Google Obrist hyper hybrid if you want to see a Tesla that actually works.

  7. I’m reading today, how Germany is shutting down 4GW in nuclear power generation in 2022.
    Even without a crystal bal,l I can soon see the German autobahns littered with stranded Electric Vehicles, and their overall economy stuttering to a halt.
    At the same time they are antagonising their biggest Energy supplier.
    Their timing is perfect.
    Reality of course, will one day ( soon ) triumph over Idealism !

    • The German position is a good indication of what happens when idealistic politicians make decisions that should be left to engineering professionals. It has been so long since western countries experienced genuine widespread famine and hardship that too many people are blasé about what really are life and death decisions.

      It is also clear to me that green politics is increasingly divorced from any practical environmentalism. No environmentalist worth their salt would advocate closing emission free electricity generation and replacing it with coal. That is exactly what Germany has been doing.

  8. don’t worry guys,
    we’ve invested in the latest super high tech aircraft from America at a mere $100 million a pop, so we’re ready for anything if the Russians or Chinese want a fight!


    obviously this won’t happen everytime and certainly not when they’ve all been adapted to carry x2 tactical air drop nukes as per NATO request, to be ready for January 2024,

    I wonder if this one was still under warranty?

  9. We are in the human overshoot that Limits to Growth has been predicting since ’72. Degrowth is as inevitable as Death. Homo sapiens, like cancer cells cannot fathom any other course of action but to continue to grow and destroy. Only 5% of the population understands science and with majority rule a predicament is not only ignored it is encouraged. Collapse is underway, look around you.

    • In a recent article here, I suggested that LtG back in ’72 got it right. This was only ever going to be process, not an event. My assessment is that we entered an LtG “precursor zone” in the 1990s, a zone that we have now nearly traversed.

  10. degrowth rather points to a degree of decentralisation, localisation, a reduction of complexity and simplification,
    we step back from the increasingly complex and centralised which relies heavily on technology like transportation and automation,
    degrowth is going to be haphazard with us having to work out the wrinkles as we go along, when stuff is decentralised and localised it can be more adaptive as you’ve closed the distance between consequence and reaction,
    if you’ve reduced complexity and simplified you’ve less to rearrange and less sunk cost in the arrangement you are reconfiguring,
    as you step back from centralised, technology driven solutions that reduce human labour inputs you get to create more job roles,

    I see it as really helpful to simplify stuff to a point we can easily get our head around and therefore cope with adapting as required,

    but, even though the economy is faltering, markets are teetering and degrowth is looming we still seem to be pushing ahead with more technology, more centralisation and top down control, more cost cutting and discarding of surplus capacity to streamline costs, more trying to hype up and stimulate consumption of goods and services, more efforts to keep GDP growing,

    we really need to open up the tool box and find every possible tool that could be put into service, examine every option we could consider if need be,

    but when I look in the toolbox we are using I still see just one big club hammer, neo-liberalism, the solution to every ill.

    • Really enjoy and agree with your perspective. Trees are solar batteries and need to be grown wherever practical especially on marginal land. The possibilities are vast but require human labor inputs

  11. Thank you for the latest analysis. It’s a big call to make Dr Tim, to declare that the moment of economic fracture is upon us right now; but I wouldn’t disagree with your assertion.

    Anyone with their eyes open doesn’t have to look far in any direction, to see troubling signs.

    Very little surprises me these days, but I must confess to being a little taken aback to learn that entire lines on the London Underground network, and possibly even the entire system, are threatened with closure due to funding shortages. The capital’s transport system is undoubtedly an “essential”, and part of our national heritage too. I never thought I would see it under threat. I doubt it will be allowed to go under, but there could be a widespread reduction in services. That just doesn’t seem to stack up, considering there’s a need to move more of the population onto electrified mass transit.

    That’s just one of many contradictions that seem to be all around us presently. There’s plenty more.

    For example, there’s a shortage of workers at a time when minimum wages have been increasing, and companies are offering “golden hellos” to entice new recruits into the workplace. One can only conclude that the incentive not to work (social benefits) is still too great.

    Another crazy contradiction is the situation in Germany with the retirement of Nuclear power plants. It’s happening at a time when Green politicians are demanding clean electrification, and gas supplies are at risk. Make sense out of that one if you can.

    The current brand of politicians seems to be the most “mutton-headed” we have seen in a generation. They will probably end up being the proverbial frog in a pot, not realising what is going on around them until it’s too late. I just hope they don’t expect us to be boiled slowly alongside them.

    • the jobs situation is a bit odd, I know they have raised the minimum wage more rapidly than at any time before, but there may be an element of too little too late, it’s still not caught up with the cost of living and being available to work, I’d include housing and transportation to and from work, these costs still power away from the decent yet insufficient rise in minimum wage,

      losing a chunk of the Underground network would just make commuting in London more awkward and probably more expensive and time consuming,

      also the location of these vacancies, I strongly suspect they are clustered in certain hotspots, not evenly distributed across the country, I wonder if someone drilled down into the numbers if they’d find it’s hard to get people to fill relatively low paid jobs in relatively expensive places to live,

      the other motif of employment during the neo-liberal era has been a tendency to poach or headhunt experienced and skilled staff to avoid training, employers want the staff but not to invest in staff,
      the NHS has been poaching staff from abroad for a long time, Brexit + covid may well have messed this right up, these skills require lengthy training, also hospitals have been centralised into big district hospitals again putting the vacancies in one place making people have to commute which is expensive privately and public transport is becoming more erratic,

      we keep seeing our “mutton-headed” politicians trying to cope with situations by shifting the responsibility to adapt onto the employees instead of adapting society to enable people to work, every employee finds their job entails more jumping through hoops, longer, more complicated and expensive commuting, greater compromises in their choice of accomodation,

      mass transit is all about getting large numbers of people quickly, easily and cheaply into a congested area where the jobs are, this helps business,

      affordable housing near large employers of non professional staff would also help business,

      support for and streamlining of training for required skill sets including a reduction of the cost burden to individuals entering training would ecourage prospective candidates,

      I mulled over retraining but it would be entirely at my own expense with no clear sign of a job at the end, places to retrain are clustered in the middle of inaccessable distant areas, relocation is prohibitively expensive, it looks expensive, awkward, time consuming just on the travel front and no clear view of an objective at the end.

      it’s as if the politicians are just sitting back and expecting individuals to spontaneously reorder society, they have no plan, they only introduce more obstacles.
      it’s been like this for a long time but earlier the rewards to the individual exceeded the costs, now it just seems more trouble than it’s worth.

  12. This is a moment for posterity. Someone as considered as Tim making this statement is material.

    FWIW, the markets today are in complete agreement. Notes and Bonds alongside the Dollar flat, while risk markets and energy up…..the smart money has sniffed this out and is positioning.

    • it’s quite gripping stuff isn’t it,

      on one side you have the Davos Set and their scheme to bring about a Tomorrowland where they own everything and control every transaction,

      and on the other side you have physical reality and Tim methodically doing the accounting,
      coming here is like reading The Sporting Life and deciding which horse to back,

      The Davos Set looks impressive, sleek, shiny, full of oats and zing but I think it’s going to take a horrible tumble in the last furlong and Physical Reality is going to cross the line looking unflustered.

      I think our Governments have bet the farm on The Davos Set.

    • Interesting times sure enough.
      At the End of the Day however, there will be accountability. I was in Nuernberg recently, which got me thinking.
      The “Davos Crowd”, just like the CEO’s and executives of today’s large Pharma companies, really seem to believe that they have indemnity, and that they are going to walk away from this impeding train wreck without facing any consequences.
      However, when the revolutionary council take control after the event, previous promises made by those in power today, will be of no value in the future.
      So if I survive the coming years and manage to see the coming crisis through to its inevitable end, I will expect to see many heads mounted on pikes adorning the roadsides.
      The wrath of the mob, is something that nobody wants to experience.

    • It’s good to remember the old adage:
      “The search for the guilty and the punishment of the innocent”.
      Don Stewart

  13. Just Guesses
    *Biden’s approval rating in dealing with inflation is abysmal. Financial people may understand the fueling of the inflation by the Fed, but most people don’t have a clue. When Biden reappointed Jerome Powell, he stressed that something had to be done about inflation. Powell promptly changed his rhetoric. He said he would taper more quickly…which prompted a decline in stock prices.
    *Meanwhile, a new Covid variant emerged in Africa. The indications, as of yesterday, were that it is highly contagious, but yields very mild symptoms. (Like the flu?). But several politicians panicked and began talking about strict lockdowns. One has to give some credence to the notion that the lockdowns are a way of managing the public…rather than necessary responses.
    *A White House spokesman said that we are on the verge of technological changes which will reduce costs and defeat inflation, as well as reduce carbon dioxide emissions.

    I begin to suspect that the White House and the Fed may actually believe that technology is going to save us in the very near future. If technology is the savior, then it makes sense for:
    *the Fed to continue supplying lots of credit to Corporate America to develop and deploy the technology.
    *the Fed to keep stock prices high so that companies can continue to raise funds
    *keep fossil fuels production high so that energy is available to deploy the new technology
    *use the power of hedonic adjustments to mask the inflation which is clearly taking place

    I suspect that Wall Street is simply looking at the additional liquidity that the Fed is providing. More liquidity implies rising stock prices.

    The Pentagon knows very well that new technology is materials dependent. The stage may be set for a more expansionary US policy toward resource countries.

    What will the public think? The American public almost always believes in new technology. Can their trust in technology assuage their pain in the supermarket?

    I guess time will tell….Don Stewart

  14. In UK storms are placing many without power , umpteen energy suppliers are collapsing financially and Hunterston nuclear power station is moving in to a planned close down .
    Maybe we will witness an energy collapse before Dr Tim’s financial predictions come to pass.

  15. @ Matt

    Last time I checked, Drax power station provided about 5% of UK electricity supplies. Whether it’s truly carbon neutral or not (I suspect it’s low carbon, not neutral), it’s keeping the lights and the heating on for many homes. Overall the biomass sector provides about 11% of UK electricity. I did a spot check this morning and it was closer to 13%. That’s absolutely vital in our current energy predicament. By the way, not a lot going on with Solar at 7am on a December morning!!

    I live in NE England which has been hammered by the recent storms. We lost power to our house for a brief period, but people we know have been without power for best part of a week. Having been deprived of all the modern comforts provided by a continuous electricity supply, ask them if we need Drax or not, and I know what they will say.

    Although biomass has its flaws, I think it plays a vital part in the energy mix. The biggest flaw is probably the import of fuel pellets, but there’s also locally produced biomass in the UK. We have a couple of Willow plantations close to us, which are coppiced every 5 years or so. These monocultures ain’t pretty, but they provide locally grown biomass to some of the smaller, purpose built biomass power plants. I would like to see the development of more locally produced biomass in the UK, with science helping to develop crops with the highest energy return possible in these latitudes.

    Ultimately, (and barring a remarkable energy breakthrough) mankind’s predominant energy supply will revert to Biomass, so we should be investing in it. “Ultimately” might be closer than we think, with depleting fossil fuels, and in my humble opinion, insufficient resources to build a second generation of wind and solar renewables.

    • keeping the lights on in homes is one of the essentials that Tim thinks ought to be a governmental priority and I strongly agree,
      for now Drax is there and if need be we must use it,

      I’m in Sussex, I’ve friends in Cumbria and have always remarked on what a difference those several hundred miles further north makes to the weather,
      Northern England and Scotland have more in common with Scandanavia than Northern Europe,

      but being in Sussex, specifically very close to Hogge Farm where the forgemasters perfected casting iron cannons, I’ve an appreciation of the effect that using wood to power high temperature industrial processes can strip the landscape of old forest rapidly,
      when the wood ran low in Sussex, Ironworks moved north to utilise the power of coal,
      biomass can and will play a role, but if it takes off in a big way 8 billion people with their modern energy consumption levels will gobble up forests at an alarming rate,
      we struggle to generate electricity now, imagine what it’s going to be like if we switch everything currently running on liquid hydrocarbons to electricity too,

      as a kid in the 70’s nuclear was still the great hope for the future, unfortunately Britain has let it’s leading position in nuclear technology slip through it’s fingers,
      don’t you find it bizarre that we have reserved nuclear technolgy for powering bombs and attack submarines at the price of resorting to burning trees to keep the domestic lights on?

      truth be told, there are no simple answers, we are in a predicament, one thing that would take the edge off our problems is to accept the inevitability of degrowth and start to embrace it.

      I do worry, and not just for myself, I worry about the prospects for all the inhabitants of the British Isles and the wider world.

  16. @ Matt
    One of the things I learned over the years is that technology is neither a force for good or bad, it’s the application of technology by humans that determines whether it’s a force for good or not. What then, does it say about humans, that we took a technology to produce clean (at point of generation) electricity, and turned it into a weapon of mass destruction so that different tribes could compete with each other, and potentially destroy each other? On face value it seems to suggest that our species is stupid and evil. There was hope of better at one point, when the USA and Russia agreed on the cash for Nukes program. Many warheads were dismantled and ended up producing clean electricity. Sadly, that cooperation has ebbed away, and nationalist tribalism has seen an increasingly belligerent tone between the major nuclear powers. The posturing over Ukraine should be on everyone’s radar. It is a worrying development.

    Reverting to the argument in favour of Biomass, you are right that it wouldn’t take long for 8 billion people to strip away the forests and any other biomass that would burn. In my thinking, there wouldn’t be 8 billion people by the time we revert back to a primarily biomass powered civilisation. That’s a spine chilling thought, but I think the informed souls who visit this forum tend to agree that we are well into overshoot territory.

    I also think energy from waste will become ever more important. There’s a lot of megawatts buried under landfill. In the future it’s might be viewed as a resource rather than a waste.

    • I’m most definately interested in wasting nothing,

      I’d completely ban the export of waste and it’s landfill to force people to A; put it to a good use B; motivate people to produce less problematic waste in the first place,

      I’m fascinated by thermal depolymerisation of plastics, you can return them to the simpler precursor elements and seperate them in a fractionating tower,

      some plastics thermally depolymerise into pretty much gasoline,
      vehicle tyres can be depolymerised into a mixture of diesel and heavy oil,

      if packaging was made from an annually produced crop of biomass, such as hemp, to produce fibre for paper and cardboard, we could be stuffing used paper and card fast food wrappers into Drax for sustainable low carbon electricity and giving farmers a market for growing hemp,

      all the stuff we import get’s discarded at some point and that’s when it should be recycled in some way to provide the inputs for our domestic manufacturing of essentials,

      I’m afraid I think only of the physical, material and energy requirement aspects of society and orthodox economists would be up in arms about my ideas,
      the reality is that economists need to bend their skills and models to serve reality,
      unfortunately the economists of today expect reality to bend to fit their preferred models,
      I know no way of bending reality, it just is, and refuses to budge an inch!

      I’m sure if we all got together in conference we could brainstorm a much more sensible society and Tim could temper those plans with some hard figures and find a way of making it economically feasable,

      most of all we must remain upbeat, to fold in the face of challenges merely opens the door for disaster.

  17. Excellent piece Tim that is bringing us ever closer to a systems view of how humans will live in a post growth future.

    Certainly what has been at the forefront of my recent thinking is how QE, credit and immigration are effectively causing a negative lag between the material economy and the financial economy which as you’ve repeatedly pointed out, is in reality living on borrowed time from the future.

    On another level however, it is hard to imagine an economy that isn’t reliant on QE, credit and immigration for the foreseeable future, up to the point that ecological/material limits are obviously breached.

    In this respect, one level of my thinking is grounded in the current reality of post growth (I prefer not to use degrowth as this is term is already used to describe a well defined set of economic policies) and another level of my thinking is making sense of a lagged/delayed post growth world.

    From my point of view, the difference between the two is not only in terms of the futurity of material/energy constraints (which I think is what this article underlyingly focuses on) but also political in terms of economically and financially accessing the critical materials and the energy usage required to proceed with Net Zero.

    From the latter point of view, money is bridging the transition from the old energy system to the new energy system in terms of investment and manufactured demand. Thus the futurity of financial demand is compelling the futurity of material supply leading to ‘managed inflation’ and increased competition as old system material flows compete with new system material flows.

    This makes me think that the financial demand material supply equation is operating as a double feed mechanisms with need, want and desire in a double feedback relationship with affordability, availability and satisfaction.

    Hence little wonder that it is difficult to unravel the inter-relationship between the material economy of energy and the transactional economy conducted using the mechanism of money.

    I imagine this will become even more difficult when the commodication of mind experiences within virtual realities takes hold which will act as a form of relative decoupling. In this respect, is it conceivable that the financial economy could relatively decouple from the material economy in a permanent kind of way, considering virtual realities, derivative markets, cryptos and the shadow banking sector.

    In a way, it is as if the mind is relatively decoupling from the body. What next, hibernation technologies with drip feed nutrients.

    Another observation that results from my analysis above is that future claims on energy within a new energy constrained system will put more emphasis on the use of energy in relation to material impacts.

    Thus future claims on energy might not necessarily be directly related to the volumetric quantity of energy used but more about how scarce energy is used.

    Thus energy used which is associated with relatively decoupled material impacts, such as the use of deep virtual reality platforms, highlights how the energy functioning of an energy ecosystem might adapt in relation to the rate of energy transfer, the route of energy transfer and the efficiency of energy transfer.

    The potential relative decoupling of ‘low impact’ virtual consumption highlights how delayed post growth as a result of QE, credit and immigration may well be taking the species in a ‘synthetic’ future as opposed to a nondelayed post growth reality in which the delaying impacts of QE, credit and immigration are removed. This I suggest would take the species towards an ‘organic’ future.


    On another note we have this recent Foreign Affairs article explicitly acknowledging our first principle, albeit missing out the futurity of material constraints.


    Green Upheaval

    The New Geopolitics of Energy

    By Jason Bordoff and Meghan L. O’Sullivan

    The energy system “is the lifeblood of the global economy and underpins the geopolitical order.” Now, to curb the damaging effects of climate change, the entire system must be remade. Yet “talk of a smooth transition to clean energy is fanciful,” Jason Bordoff and Meghan L. O’Sullivan warn in a new essay. “The process will be messy at best. And far from fostering comity and cooperation, it will likely produce new forms of competition and confrontation.”

    How will the energy transformation reconfigure international politics? Who will win and who will lose? The stakes are high: “a failure to appreciate the unintended consequences of various efforts to reach net zero will not only have security and economic implications,” Bordoff and O’Sullivan write. Ignoring the geopolitical risks could “undermine the energy transition itself.”

  18. Matt,

    “I mulled over retraining but it would be entirely at my own expense with no clear sign of a job at the end, places to retrain are clustered in the middle of inaccessable distant areas, relocation is prohibitively expensive, it looks expensive, awkward, time consuming just on the travel front and no clear view of an objective at the end.”

    There are more opportunities to learn almost anything than at any time in history. Youtube is incredible, Coursera and the like is incredible, MIT has openlearning which is incredible.

    Chose something where you have a good talent, this is maybe a passion for those who are lucky, for the rest it is a job which is why they call it a job. Look at what it pays, how it pays, what it looks like going forward, are there skills that cross multiple areas. It is not that hard.

    A journey of a thousand miles begins with the first step, go for it.

    Dennis L.

    • well since leaving college I’ve been teaching myself from books and latterly from the internet,
      I can’t spend thousands on University and take years of infrequent lectures,

      when I start a new job I’m rarely given any training and have to train myself and specialise in whatever field my new employer operates in,

      I’ve been pretty successful as an autodidact, I can target my curiosity on the subjects of interest, most courses are pretty general or don’t even touch where I want to go,

      if we can keep the internet up and running and stop all information being locked up by IP laws it’s a fantastic resource where you can learn literally anything if you apply yourself!

  19. How to Proceed in the Midst of Chaos?
    I missed this live discussion a few days ago. Here are some notes from Dave Snowden and Nora Bateson’s discussion:

    I suggest you ignore Dave Pollard’s attempts to square his notion of non-duality with the practical problems posed by trying to use what we know how to do in order to ameliorate a current problem.

    Also, I will add my own noticing of the blindingly obvious yesterday. Listening to somebody talking, it occurred to me that we all desire movement…we want to be somewhere else or we want some relationships in the world to change or we want to transform ore in the ground to a useful metallic shape, etc. But there is friction. Friction is a fact of life (except in super-conductors). When someone can offer to reduce the friction in my life, I am willing to pay something for it. GDP is created.

    The trick is whether I am wise enough to want to reduce the correct point of friction. If I really want to fly to Las Vegas so I can gamble away some money, there are plenty of people willing and able to remove that sticking point. But the net result is destruction of real wealth. On the other hand, suppose someone can give me a really good tip on more effective feeding of the gut microbiome to enable physical and mental health? The ‘upside-down’ relationship between thriving and ‘more GDP’ is thus explained by the rather stupid selection of the wrong goals. Neo-liberalism and Marxism both miss the point.

    Don Stewart

    • this is an interesting take on the current zeitgeist by Alastair Crooke, former British diplomat and former ranking member of MI6,


      I recognise what he is saying and I don’t think he’s being melodramatic,
      we really do seem to be at a turning point in history,

      the financial markets seem to be contorting and gyrating in strange ways,
      segments of the Western public are increasingly mutinous,
      geopolitics are conducted in an incoherent manner by the West and the atmosphere is fraught,
      China was back to normal by August 2020, but the West seems trapped in a groundhog day loop with no sign of an exit,

      there is plenty to reflect upon.

  20. China placed a third city under lockdown on Thursday to tackle Covid-19 numbers, with around six million people now under orders to stay home as Beijing chases zero cases before the upcoming Winter Olympics.


    Shortages in China’s ‘Christmas town’ mean higher prices for the West.

    Raw material shortages, shipping snarls and electricity blackouts hit Yiwu city, the producer of most Christmas ornaments exported by China.


    The latest shock to China’s economy: power shortages.
    At least 19 provinces have suffered power cuts in recent weeks.


    The Real Reasons Behind China’s Energy Crisis. Cheap pricing and too much coal are leaving Chinese in the dark.

    It’s the worst electricity crisis China has faced in a decade. The immediate cause is that China is still highly dependent on coal, which provides 70 percent of the country’s power generation. The electricity prices paid to generators are regulated by the central government, while coal prices are set on the market.


  21. Charles Hugh Smith’s new book will be out in a few days…Don Stewart
    Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States.

    “states, societies and markets are problem-solving structures, and when they lose the capacity to solve problems, they fail and are replaced with a more adaptive

    The issue isn’t ideological labels or principles, it’s whether the state solves problems or covers them up with fake fixes that maintain the status quo.”

  22. When interest rates rise, even while stocks and other assets are falling, then you will know change is here. To put it another way. nothing has changed until interest rates, especially long dated ones rise to multiple digits, say with a 3 or 5 or beyond.

    A solid example of no change is this weeks stock market drop saw 10yr Treasury Notes yield drop (and thus Treasury Note prices rise) from 1.48% to 1.34%. There may well be myriad examples of systematic failure, from anecdotal to gigantic headlines, but until rates rise nothing will really have changed.

    That’s my story and I’m sticking to it. I am allowing it may not happen in my life, nor in 50 or 100 years. But it could be next week.

    • A yield curve inversion (short dated bonds start to yield more than long dated bonds) is widely recognised to be a leading indicator of “recession ahead”. The spread on 2 year and 10 year bond yields tends to be the benchmark for this.

      Stripping out short term fluctuations fluctuations, the trend is clear. The yield curve on UK bonds has been flattening since May and is now only 30 basis points. In the US, it’s been flattening since March and sits around 80 basis points. They are not quite there yet, but getting closer.

      Watch that space, because a full yield inversion might just be the snowflake that starts the avalanche

  23. @Rapier and Neil61
    It seems to me that the crucial question is:
    Governments think they need some real assets to plunder to do something…build bigger armies or build dikes around Florida or convert the economy to electricity or fight wars or to reclaim industries lost to Southeast Asia. Where can they get the assets? And I suggest that the current answer is to debase the promises made in the form of Social Security and Pensions and long term bonds.

    The exact relationship between short term and long terms government obligations is not the main issue. It is the fact that real returns are significantly negative. Until that changes, nothing will have changed in terms of the underlying financial strategy.

    Don Stewart

    • “Governments think they need some real assets to plunder to do something…build bigger armies or build dikes around Florida or convert the economy to electricity or fight wars or to reclaim industries lost to Southeast Asia. Where can they get the assets? And I suggest that the current answer is to debase the promises made in the form of Social Security and Pensions and long term bonds.”

      From the outside looking in, it often looks to me like the Fed is intentionally destroying (debasing) its own currency. While this may be a way to also destroy SS and pensions and all sorts of other obligations, it doesn’t seem like a route to the acquisition of hard assets. Like you point out, that’s what all governments really want and need. The dollar has served this purpose for the American government for a long time now. Maybe it’s time for something else? Don’t know.

    • The US authorities seem fixated on preventing stock markets from falling. The UK has a similar fixation with property prices. This prevents either from plotting even a gradual route back to the normality of rates exceeding inflation. The big challenge now might be sustaining these policy fixations in the face of rising inflation, particularly where the cost of essentials is concerned.

      Both obsessions seem political rather than rational. No country can monetize the aggregate valuations of stock markets or the property sector – one can never turn the whole lot into cash- so aggregate values are purely notional. Propping up asset prices is adverse for those – generally younger – people who’d like to buy stocks and/or houses, and earn decent returns on invested capital. But, beyond the over-stated “wealth effect”, part of the problem now is the exposure of collateral to paper reductions in asset values.

      The Euro Area has a different problem, albeit also political – trying to operate a single monetary policy with 19 different sovereign budget processes is illogical. Pre-EUR, a student proposing such an arrangement in an exam essay would have got an ‘F’.

    • @davelysak
      When the government takes money away from social security recipients, pensioners, and savers, it frees up real assets from the claims which they have just ‘disappeared’.
      Don Stewart

  24. Pingback: #216. It’s now – Olduvai.ca

  25. Why the Energy Transition Will Be So Complicated.

    The degree to which the world depends on oil and gas is not well understood.

    By Daniel Yergin

    The energy basis of the global economy, carbon entanglement and energy geopolitics.


    The term energy transition somehow sounds like it is a well-lubricated slide from one reality to another. In fact, it will be far more complex: Throughout history, energy transitions have been difficult, and this one is even more challenging than any previous shift.

    • Calling it challenging is equally a euphemism. It’s not possible as far as I’m concerned. There could have been short term quick fixes like fusion -but we all know how likely that is- or our old “friend” nuclear with it’s own large problems. But it is too late for that either as building a new nuclear reactor is obviously not something you do in a afternoon. Look up Olkiluoto 3 in Finland as a reference.

      As far I see it we are hurtling towards the energy cliff with no help in sight. This would mean the end of the overshoot of our species and as the ultimate consequence the death of billions of people as our current population is simply a result of the fossile fuel age.

    • hi Florian,
      not content with going over Niagra Falls in a barrel we seem to have upgraded to using a speed boat!

    • If Daniel Yergin is writing like this and mentioning Vaclav Smil, the situation must indeed be getting critical.

    • hi Adam,
      Vaclav Smil is one of the best informed and level headed people I’ve come across on the subject of energy,
      in a rational world he would be all over the tv and newspapers,

  26. Chris Martenson Interviews a Mass Delusion Expert
    Chris’ major concern is the disaster of Covid 19 management, but the lessons are much broader, to include the delusions of economists and the technocracy crowd in terms of our energy future. Dr. Desmet suggests that the ‘experts’ are so convinced that their prescription is the correct one, that evidence that their program is failing just doesn’t register.

    There is no magic bullet to destroy the mass delusion once it is established. They always burn themselves out, as disasters unfold. In terms of Covid, Desmet and Martenson agree that natural immunity aided by diet, exercise, targeted supplements, and social measures is the answer, while the Big Pharma and the people controlling western country’s public health responses all support intensive pharmacological interventions plus repressive social measures. They don’t discuss the economic and technological predicaments too extensively, but something like Degrowth and particularly the rebuilding of social networks is clearly on the agenda.

    Chris thinks this is the most important interview he has made this year.

    Don Stewart

    • did you ever see the German made film Downfall with Bruno Ganz playing the little Austrian fella?
      I’d already read Traudl Junge’s memoirs about being one of his secretaries and the last weeks in the Berlin bunker,
      then when the film came out I watched it,
      both are very compelling stories illustrating delusion all the way up to the end,
      it was a Reich intended to last a thousand years and it only managed 12,
      in the film it depicts very well the generals not being able to bring themselves to confront the leadership and openly admit the game was up,
      because it was such a catastrophic end Speer came out looking quite good by not carrying out the final scorched earth policies and appears to be the only person who openly admitted to the leader the game was over,

      I think we are heading into a time of extreme bloody mindedness that will parallel that past moment in history,
      it rather sends shivers up my spine when I think about it.

  27. Pingback: Tim Morgan: Afnemende meeropbrengsten bij de wereldwijde energievoorziening, deel 1 | Paradoxnl's Blog

  28. Tim, I’d like to suggest something here that I hope will not derail the conversation. I know you do not want this to become a Covid site, and I am in full agreement with that. However, without getting into a public health or scientific assessment of covid, it’s danger or severity, or whether the vaccine is worse than the disease, whether mandatory vaccination and vaccine passports are an infringement on fundamental liberty and bodily integrity, etc. please consider that the systems being put in place to manage covid and to manage the population due to covid are also ways to “manage” degrowth – or more accurately – to crush demand in discretionaries and other areas and to ration supplies and services to increase the amount of energy left for more essential uses or to free up remaining purchasing power for spending on rentier-intermediated necessities or rentier-intermediated services like health care insurance – i.e., to protect the income streams of rentiers as much as possible and for as long as possible. Whether this was or is intentional or not is beside the point – it is having that effect and once recognized can be further used to that effect – never let a good crisis go to waste.

    As a sample, here’s a headline on Zerohedge today: “New York will require full vaccination to access restaurants, gyms and entertainment;” and evidently, public schooling: “5-year olds will need at least one shot.” The targets of this control are very telling.

    When I suggested this in an earlier post, you mentioned that this was not really managing degrowth, because there was no effort to deal with the economic dislocation caused by crushing these businesses. Well, true, but my point was that this was the sort of “managing” that humans do. Governments historically never worry about the collateral damage of their policies. Just as those affecting land enclosure did not address or worry about how the dislocated commoners would cope, the land owners needed to enclose to raise sheep and make money! – it is always left to those adversely affected to deal with it – if they can. Governments and companies deal directly only with what they want, the consequences – to those below – be damned.

    In other words, your idea of “pragmatic” management has an element of idealism in it, in that your standard of pragmatic management has an implicit or explicit requirement to expressly deal with the collateral consequences by ameliorating the fallout on those adversely affected by declining prosperity. I agree that that is utmost to be desired; I just think that if history is any guide, it is not going to happen. Of course, it would be great if this is just pessimism and I am wrong.

    In sum, while I am not asking that you write about this let alone confirm my cynical hypothesis or speculation, I do suggest that we pay attention to the manner in which covid “management” strategies are laying the groundwork for, and/or can or will become a paradigm for “managing” degrowth.

    • Gail Tverberg also thinks along these lines: “Europe is the part of the world where the push for vaccinations is now highest. It is also in terrible shape with respect to energy supply. By ostracizing the unvaccinated, European countries can attempt to cut back their economies to the size that their energy supply will support, without admitting the real problem.”

      But that would mean to assume that governments are aware of the increasing ECoE and, by implication, of the long-term perspective of degrowth, AND that they have a plan or a plot to install covid measures as part of a broader strategy. I really doubt that they are capable of doing that. In other words, there may be a “pattern” to see here, but a pattern is not yet a plan implemented by (many) governments in a coordinated effort. Coincidence is not yet causality.

    • where temporary QE after 2008 has become permanent,
      temporary restrictions and lockdowns over public health seem to be becoming permanent,
      one can let a real economy slipping into degrowth slowly wither on the vine, wrapped in restrictions, conditions and hinderances,
      whilst the financial economy is allowed to let rip being stoked with it’s feedstock, money, which is uncontrained by physical reality,

      inflation in the financial economy is called growth and lauded,

      inflation in the real economy of things and people is bad, the real economy must be kept repressed so that it shrinks inline with the dwindling surplus energy and the increasingly constrained supply side,

      the divergence has accelerated in the last two years, the uncoupling of the two arms of the economy increases, the divergence from reality gathers pace,

      what will be the straw that breaks the camels back? will domestic electricity be cut to divert power to keep the trading houses computer systems running?!

    • Tagio, as always an excellent comment, and Matt and excellent observation! And they use the same excuse for why it isn’t working, we just didn’t do enough of it so we’ve got to do more! 😉

    • Considered more like ‘mismanaged’ degrowth to me🙂, sadly I share your conclusions. Don’s interview link above was extremely interesting, one of the key points was high intelligence is no diffence, I did wonder early on if it was me that was going mad as good friends got strangely blinkered. Snapping point or not (que money injection drum roll…🙂) Dr Tim’s continued insight was very much appreciated.

    • hi Stvn,
      I can relate when you say ‘have I gone mad!’
      well you’ve awoken from a pleasant dream state and discovered reality is a nightmare!
      you’ve not gone mad, you’ve gone sane!

      the crazy thing is everyone still in a daydream like trance will look at you as if you are bonkers because they can’t see what you can see and what is making you feel agitated,
      it’s a very topsy turvy world at the moment.

    • We are at the end of this worldwide civilization. As such, there is a lot of stress to be addressed and new/complex issues to be understood. One can either do that rationally and with some dignity, or be swept down the rabbit hole by irrationality, fear, scapegoating and paranoia.

      I started reading Ms Tverberg at the beginning of her carrier as a blogger at ourfiniteworld. The site was a place to see the overall problems that humanity is facing from the point of view that the planet would never run out of oil – which is what the “peak oilers” were and largely still are saying – rather, oil would become too expensive to buy, but too cheap to pump. Which of course is what is happening/has happened.

      Back in the old days, there was no hate speech, in fact, I saw a post that lead to a right wing hate site, pointed out the issue, and Ms Tverberg removed the hateful comment. Now, every other comment is about the inferiority of blacks, or how jews are simultaneously sub-human, and in complete control of the entire planet.

      Originally, Gail acknowledged the validity of AGW, but felt it wasn’t important because things would fall apart before it became important. Now, she says that it doesn’t exist.

      After COVID, the comments became more and more bizarre. Last week, there were several pages about how real the nano razors being injected with the vaccines are.

      Part and parcel with the hate speech, bizarre theories, and abandonment of scientific thought is this imagined conspiracy about how “they” have it all figured out, and how “they” are all working in concert somehow. If one reads those conspiracy theories closely, the commenters always refer to “the elders”. As a long time follower of that site I know that “the elders” is a code word for Jews. On her site, you cannot write a comment with the word Jew, so, they invented the code.

      I hope that Dr. Morgan will keep the comments here civil, intelligent, and free of hate. I know the temptation is to follow Gail down the rabbit hole, after all, ourfiniteworld gets at least an order of magnitude more comments than surplusenergyeconomics. Things are scary, but we don’t need to believe silliness. Things are complicated, so we need to work hard to keep our heads.

    • I make a point of not commenting on others’ sites. I have the highest regard for Gail and her analysis of situations. Every site has its commenting guidelines. I can only comment on those here at SEE.

      Our focus here is strictly on the energy economy, and on closely-related issues like finance and the environment. It’s here that we can ‘add value’, based on our specialist knowledge, and backed up by the SEEDS economic model. We can’t add value in areas where we don’t have specialist knowledge. The aim is to be coldly pragmatic, not get caught up in the heat of argument.

      Free debate and the exchange of opinions are vital. To work effectively, this has to be polite and reasoned. I ask that anyone commenting here stays on-topic, is courteous, and respects the right of others to differ. We ‘stick to what we know about’, ‘treat others as we would like to be treated ourselves’, and ‘play the ball, not the man’.

      These might seem like ‘old fashioned’ principles, but I’m fine with that.

  29. So far discussion on managing de-growth has been from a top-down stance. Maybe it would be worth considering a mixed top-down/bottom-up strategy. A transition to top-down management of matters of national interest, and bottom-up local community development. Much like agrarian times in the UK.

    • I think bottom up will be a decentralised organic grassroots reaction, a pushback against an intolerable situation,
      it will be top down versus bottom up,
      not the pragmatic alliance that a rational person would try to enable,
      it will be a struggle, a conflict, a final battle.

  30. Martin, regarding your comment, “But that would mean to assume that governments are aware of the increasing ECoE and, by implication, of the long-term perspective of degrowth, AND that they have a plan or a plot to install covid measures as part of a broader strategy, ” I think a specific awareness of the type you describe is NOT required.

    Like animals who sense an impending snow storm, hurricane, or earthquake, humans, who are extremely attuned to social vibes, are able to discern and feel impending and actual changes in their economic habitat and diminishing economic opportunities without having to make a detailed statistical analysis, model the economy, or have an overarching ECoE / resource constraint explanation. People have been sensing the sea change for decades. How else explain the fact that in the 50s and 60s we entered into the era of mass consumption with fortunes being made in actual industry, whereas in the 1990s till now, the “best and brightest” have switched to making fortunes in financialization, with people with Physics PhDs going into investment banking to create algorithms for programmatic trading at the speed of electricity and computing power? People sense their environment, can feel changes; they don’t need to understand or know the correct underlying causal factor before they can see it all around them. The mass moves accordingly.

    I think it dangerous to nix a hypothesis on an assumption that for it to be true, “they” have to “know.” As a philosophy professor of mine once asked a pesky student, do you think that the Greeks didn’t know what tables were because they didn’t understand modern chemistry or the quantum nature of atomic substructure? The word “know” is bearing too much freight and unexamined assumptions to be useful in cases like this.

    • I kinda agree, govt’s probably don’t grasp the complexities of surplus energy,
      but saying that, they must be aware it’s increasingly difficult to access the energy they want at the price they’d like to pay,
      so as you say, they more ‘feel’ it than understand it.

    • Even academics in the physical sciences still wax lyrical about carbon capture ,
      hydrogen (of all shades from green to blue) and solar as cure alls.
      On the planet I inhabit they most certainly are not.

  31. Passing Along Without Comment…Don Stewart

    Rising Gas Prices vs Battery Costs – Virtual Discussion with Adam Rozencwajg
    We are excited to be one of the featured experts at the Driving into the Future virtual auto event brought to you by TOYOTA.

    About this event

    Driving into the Future brings together automotive experts to discuss what’s new in the automotive industry.

    Will $2/Litre gas change the way we drive and accelerate the shift to EV adoption?

    • It seems to me that, if energy prices generally increase, so will the cost of making the battery (and the wind turbines, solar panels, storage systems, grid, etc). Am I missing something?

    • My suspicion is that you are correct. There was some clickbait on the internet a couple of days ago about gigantic objects. One was a picture of a blue whale swimming beside a big ship. There were two pictures from the mining industry. One featured an ore moving truck. The human driver was about half the height of the tires, and the whole thing carried a huge amount of ore to be processed. Another picture was an excavator which was gigantic. And we know that the mineral content of EVs is twice the content of ICs. I doubt that the mining companies are going to replace these diesel powered machines with battery packs that one recharges by plugging into the household electrical system. BUT, I did notice that Russia is building a small nuclear reactor specifically for a mine. One of the Toyota executives who will be appearing has been in various public policy decisions, including working for the Canadian government. Toyota is on the verge of announcing a new EV. So it is likely a ‘tangled bank’.
      Don Stewart

    • The Dark Horse Podcast with Weinstein and Heying featured a similar conclusion a day or so ago. I think the number is Podcast 105. Their point is that whatever it is governments are doing is not working. Increasing numbers of people are seeing that the “Emperor has no clothes”. Yet the governments’ efforts to completely choke off any alternative to Big Pharma are being redoubled. In the midst of the Big Brother actions in the US and other places, it is comforting to see that US diplomats will not be going to the Olympics in China…maybe our government really is a straight shooter?…with the well-being of its citizens at heart????
      Don Stewart

    • I watched a few seconds of this utter BS (They-need-your-children!) Please, just use your head for a few minutes and you will see this for what it is.

  32. I picked up a very interesting “one-liner” from a bloomberg interview with Amrita Sen, who’s regarded as one of the leading analysts to the oil industry. The gist of it is that structural supply constraints start biting and become undeniably obvious in 2023, which implies that we muddule through 2022.
    It felt like she was suggesting something of magnitude is likely in 2023. Sen has a very big research organisation behind her, so it’s worth taking note. I wonder how her view fits with DR Tim’s SEEDS model?

    • Nice article!

      If i read it correctly it is saying that at an energy cost of energy of ~20% you have effectively eliminated all discretionary income. Essentially all income is going to necessities.

      If our host is correct we are already at ~10% energy cost of energy so we should see the ongoing destruction of discretionary income and the businesses that rely on discretionary income.

    • Thanks Jim, and yes, you read those implications correctly.

      Any given amount of economic output – whether it’s GDP or prosperity (calculated on an energy basis using SEEDS) – is allocated to three main uses:

      1. Meeting the essential needs of the population

      2. Capital investment, mainly replacing capacity that has worn out, but also adding new capacity

      3. Non-essential or discretionary consumption.

      The picture as I see it – and model it – is that, whilst prosperity is deteriorating, the cost of essentials is rising.

      Reduced capital investment is to be anticipated.

      Even so, we should anticipate a relentless reduction in the scope for discretionary consumption.

  33. Dr Tim, I see that the UK government, back in March this year when we were all preoccupied with other things, announced the end of the ‘red diesel’ subsidy. Come April 2022, the red diesel entitlement comes to an end.

    Currently there is a rebate on red diesel; in effect red diesel is taxed at about 11p/litre whilst white diesel attracts about 60p/litre. The result is red diesel costs about 68p/litre, white diesel costs about £1.45/litre.

    Currently red diesel is used on farms, construction/demolition sites, industrial sites, waste sites, quarries. Come April fuel costs are going to increase 3 fold and that cost will be passed on.

    I will be amazed if inflation only reaches 5%.

    • It seems agricultural uses will still be allowed the rebate, and interestingly the machinery (including caravans) of travelling fairs and circuses!

      So housebuilding costs to go up, but food shouldn’t directly go up.

    • hi Mark,
      if we take the official claimed inflation rate and compare it to Tim’s RRCI we can work out the ‘fib factor’
      my guess is we are at around a fib factor of x3 at the moment.

  34. Did anyone in the UK see last night’s Panorama programme on the state of the care home industry? It revealed that about 80% of care home beds are provided by highly leveraged offshore private equity companies, who employ extremely complex and opaque ownership structures. A forensic accountant dug out the fact that these companies are massively loaded with debt, and about 20% of the cost of a care home bed is used to service that debt. These are the companies tasked with looking after some of the most frail and vulnerable in society. As former health secretary Jeremy Hunt put it “it’s the unacceptable face of Capitalism”

    Care for the elderly must surely fall into the category of “essential spend”, but the financial risk to the entire sector looks worryingly precarious. The financials make it look more like a speculative punt in the Casino, hoping for a continued low interest rate environment to avoid losing the bet.

    We are regularly told there’s already a crisis in care, but the potential for wide scale bankruptcy of care providers adds a hidden dimension. A rise in interest rates or some other significant financial shock could trigger collapse across the sector. I can foresee little alternative to a government bailout or nationalisation if there’s a disorderly financial collapse in this sector. That infers more magic money printing, and a transfer of liabilities from the private sector to the public account. In the meantime, private equity will have milked a sector that successive governments have gladly offloaded to them. Might this just possibly constitute some kind of policy failure?

    • Hi neill,
      I picked up on that subject on a Radio 4 show some years back, then I was looking at Private Eye’s online map of British properties in overseas ownership and found my new revamped GP surgery was built on land in overseas ownership,
      when I enquired about it I was told it was normal practice for PPI financed projects,
      I’m no expert but I think you’ll find this neo-liberalised approach has been quietly applied everywhere possible,
      the main thing with care homes is private equity buys a home up, splits it into two companies, one owns the property offshore and rents it to the other company that provides the care services,
      everything is a financialised accounting scam these days with the actual public facing service being incidental,
      when the next crash happens and all the financing arrangements are put under stress we’ll discover everything has been sold off and is insolvent, the whole country has been plundered and is being rented back to us from abroad.

      I read; James Meek, Private Island, why Britain now belongs to someone else.

      it’s not a comfortable read, avoid if you’re depressed and at risk of self harm.

  35. We need an economic collapse to avoid an ecological collapse. That is the essence of our predicament. We need to end our excessive breeding and consuming or all is lost. “And the damn fool said to move on”.

    • I rather agree, the only thing capable of saving us now is our remarkable hamfistedness and ability to screw up the simplest of things!

      an almighty financial crisis would pull the rug from under all the stupid things we insist on doing and leave us with no alternative but to do more modest and hopefully more sensible things which will be the only options left within our grasp.

      the reduction of access to surplus energy will deleverage our tendency for self harm,

    • @ Sissyfuss
      There’s no guarantee that economic collapse will avoid ecological collapse. Conceivably it could still happen through different mechanisms. If there’s a disorderly and catastrophic collapse of the worst kind, then cold, hungry, impoverished people will be doing whatever it takes to obtain the basics of existence. The notion of intergenerational equity for the future (unborn) citizens of the world, will not be high on the agenda of people who are to surviving day by day.

      As a result of “whatever it takes to survive”, the environment would be at risk of suffering serious degradation. Economic collapse would surely result in burning less fossil fuels, but people who can’t access conventional forms of heat, will burn anything in sight. That can be concluded with some certainty, because it already happens today in the poorest parts of the world, where even toxic waste ends up in the fire pit. My view is be careful what you wish for. Sometimes it’s better the devil you know than the devil you don’t, but I don’t expect everyone to agree with that view.

    • Sissyfuss,
      Great reference to Pete Seeger’s Waist Deep in the Big Muddy. As a youngster, I saw the The Smother Brothers show where it was censored because of the obvious implied criticism of the Vietnam War.

      “Well, I’m not going to point any moral,
      I’ll leave that for yourself
      Maybe you’re still walking, you’re still talking
      You’d like to keep your health.
      But every time I read the papers
      That old feeling comes on;
      We’re, waist deep in the Big Muddy
      And the big fool says to push on.”

    • @neill61

      There’s no guarantee that economic collapse would avoid ecological collapse, but without economic collapse ecological collapse is guaranteed. Economic collapse may not be sufficient to avoid ecological collapse, but it is certainly necessary.

      I do think that economic collapse will be fast enough and moderns will die in great enough numbers that a widespread desperation-based plunder of nature won’t happen. In a chaotic and rapid economic collapse, modern folk in urban areas just won’t have the time or the ability to migrate into the countryside or wilderness areas and make a subsistence living. I’m pretty sure they will wait at home for whatever food and other resources remnant governments can provide. Cities are “feedlots for humans” and most people will stick with their feedlot.

      But it takes a great deal of energy and other material resources to supply the metabolism of a modern city and it will be very difficult to adapt that metabolism to diminishing energy supplies. If adaptation fails, collapse will happen. If somehow cities do adapt and economic contraction is gradual, then the climate will be destroyed. In any case, economic tipping points will probably arrive soon enough (if they are not already here) that we will get to find out who is right.

  36. How to Cope With Discretionary Decline???
    How about decline in the ability to afford necessities?
    Charles Hugh Smith at oftwominds.com, lays out the problems pretty well in his current post:
    “Put another way: the status quo is no longer the solution to inequality and scarcity, it is the problem. Private-sector and political elites are incapable of recognizing they are now the problem, and so the rapid unraveling of the status quo will come as a great shock to their magical-thinking confidence in their power.

    The elite’s delusional “solution” is a seamless, painless transition to a new era of abundance via “green energy.” Unfortunately, this vision is 100% magical thinking, as all these projections ignore the physical realities of building out a global energy system that generates energy on the same scale as existing hydrocarbon energy sources. Read these three reports for reality-based assessments:

    The “New Energy Economy”: An Exercise in Magical Thinking (manhattan-institute.org)

    The Delusion of Infinite Economic Growth: Even “sustainable” technologies such as electric vehicles and wind turbines face unbreachable physical limits and exact grave environmental costs. (scientificamerican.com)

    Assessment of the Extra Capacity Required of Alternative Energy Electrical Power Systems to Completely Replace Fossil Fuels (PDF, Simon P. Michaux, Geological Survey of Finland) Read the 3-page abstract. ”

    Let me add a mathematical formulation. When a curve is increasing exponentially, as is the case for the cost of fossil fuels, the future is not nearly as voluminous as the history. So if, as has been alluded to recently in this blog, we have crossed the 10 percent threshold and will be dead in the water at 20 percent, the curve from zero to 10 will be more voluminous than the curve from 10 to 20; So even in a perfectly harmonious political and economic regime, the transition to something else would be problematical. As Charles has said before, nation states can only exist so long as they can solve problems. If the State cannot solve your problems, then why are you paying taxes?

    And what we see is dysfunction…not harmony. So my guess is that we will now see increasing contention over not only the control of the state’s governing apparatus but also a struggle to free ourselves for the shackles. It is fine for Chris Smaje to think about a Peasant’s Republic, but no State will voluntarily cede power to such a creation. A Peasant’s Republic MIGHT arise out of a French or Russian or Chinese revolution, but all of those were bloody affairs.

    I could go on to speculate about how best to survive the turmoil, but your speculation is at least as good as mine….Don Stewart

    • https://ifrf.net/ifrf-blog/a-review-of-the-new-energy-economy-an-exercise-in-magical-thinking-published-by-the-manhattan-institute/

      This review sets out the debate between The “New Energy Economy”: An Exercise in Magical Thinking (manhattan-institute.org) and the Lazard Report regarding its calculations for the Levelized Cost of Energy and Levelized Cost of Storage 2019


      In the review, it mentions that the International Energy Agency has recently begun to examine the use of a ‘Value-Adjusted’ LCOE (‘VALCOE’), which attempts to include the value that comes from flexibility and capacity.

      Overall, there appears to be a debate about how to assess the energy cost of energy in financial terms.

    • @Steve Gwynne
      I suppose we have to spend the time and effort to do these studies. But I think the larger question is:
      “Can our current political and (heavily leveraged) economic system survive the transition?”

      I have no doubt that a Peasant Economy could survive with an ECOE of 25 percent. Traditional agriculture and subsistence living must be in that neighborhood in terms of human labor…and much higher cost in terms of the efficiency of photosynthesis.

      But to me the most interesting question is “how do we get from here to there?”. The Status Quo will resist any such transition with all its might. Everything we have that we count as ‘wealth’ would become worthless.

      Don Stewart

  37. People have been stocking up on essentials with long shelf lives ever since the Y2K bust. We convert paper money to tools and building material, often free, or heavily discounted with the large number of Californiagees leaving the state. Many of the Skills of Poverty are outlined at this non commercial site predating the turn of the century: verdant.net

  38. Comment by the head of the largest oil company:


    The CEO of the world’s largest oil producer said the oil industry must play a role in energy transition to avoid ‘energy insecurity, rampant inflation, and social unrest’
    Huileng TanDec 7, 2021, 4:54 AM

    Saudi Aramco CEO Amin Nasser said the energy system can’t be transformed overnight.

    Nasser told CNBC that the industry needs an “orderly transition.”
    Energy prices have risen rapidly this year on the back of the global economic recovery.
    The world’s largest oil producer has warned of runaway inflation and social unrest should investment in fossil fuels taper off too quickly in the world’s transition to green energy.

    Saudi Aramco CEO Amin Nasser made the remarks during a speech at the World Petroleum Council Congress in Houston, Texas, on Monday.

    “It’s increasingly assumed the entire world can run on alternatives, and the vast global energy system can be totally transformed, virtually overnight” said Nassir, according to a copy of the speech posted to Saudi Aramco’s website.

    “Or that investments requiring roughly $115 trillion will be made in 30 years,” Nasser continued, referring to the pledge made by many energy companies and nations to reach net-zero emissions by 2050. “Most worrying of all is the assumption that the right transition strategy is in place. It is not. It’s deeply flawed.”

    His comments are the latest in a debate between policymakers moving toward sustainable energy and fossil fuel executives as the world navigates a massive energy transition.

    “Some people are trying to portray the current high energy prices as the first crisis of the clean energy transition. This is completely wrong,” said Fatih Birol, director of the International Energy Agency, at a conference in Copenhagen in October, per Reuters. “The current situation on the energy market has nothing to do with the clean energy transition. If there is one link, it is not because there is too much clean energy, but there is too little.”

    In May of this year, the IEA advised that energy groups must stop all new oil, gas, and coal projects in order to achieve net-zero emissions by 2050.

    Energy prices have risen rapidly this year on the back of the global economic recovery and as supply struggles to catch up with demand. This is in part due to slow investment, energy industry executives say. Many oil exploration and production projects were delayed or canceled after the oil price crash of 2014, according to commodities consultancy Wood Mackenzie.

    In September, the European Union’s top climate change official, Frans Timmermans, said that record-high power prices in the trade bloc underscore the need to make a faster transition, Reuters reported.

    “Had we had the Green Deal five years earlier, we would not be in this position because then we would have less dependence on fossil fuels and on natural gas,” Timmermans said, noting that prices for renewable energy had remained stable even amid the fossil fuel price spike.

    On Monday, Nasser told CNBC that the industry needs an “orderly transition.”

    Nasser said during his WPCC speech that admitting the role of oil and gas in reaching net-zero “will be hard for some.” But, he added, “admitting this reality will be far easier than dealing with energy insecurity, rampant inflation, and social unrest if prices become intolerably high. And net-zero commitments by countries may start to unravel.”

    Until this year, the oil market has been relatively sluggish for years — with prices of US futures even falling into the negative zone last year. US crude oil futures are up over 40% year-to-date.


    • Note Nasser’s reference to “investments requiring roughly $115 trillion” to install the equipment needed for an energy transition. Gross World Product is about $81 trillion, of which manufacturing is 16%, or about $13 trillion per year.

      If new energy installations are roughly 2/3 manufactured equipment and 1/3 civil work (guessing here), then it would take six years of devoting all of the world’s manufacturing capacity to creating the new energy equipment needed for the transition.

      Since only a fraction of existing manufacturing capacity can be devoted to new energy equipment, any attempt at an energy transition would likely take decades, during which time ECoE will keep rising, making the effort more and more and more of a burden to the global economy. I suspect the transition effort will be abandoned due to an increasing inability to keep other economic sectors functional.

      These difficulties in marshalling manufacturing capacity to new energy installations apply to any technology, whether nuclear or solar/wind. If I were Nasser, I wouldn’t be worried at all about being able to sell oil. The only thing that will kill the oil market will be an economic collapse. If that happens he’ll have a lot more to worry about than oil sales.

  39. Nora Bateson and Dave Snowden
    This is an important conversation for anyone contemplating how we get out of our destructive pattern into some new pattern:

    Couple of teasers:
    “life is not a wristwatch”
    “life requires that something die”

    Let me elaborate very briefly on that latter point. We are told that more than 99 percent of all species who ever lived on Earth have gone extinct. Suppose, as a thought experiment, that some benevolent entity had tried to keep all those species alive. What would the world look like now?

    Most of us probably think it would be pretty awful. So one of the problems humanity has to solve is how to kill the old, no-longer-problem solving institutions. The shift to Degrowth exacerbates the problem. We have relied on the “creative destruction” of neoliberalism. But it seem that, now, neoliberalism is totally unsuited to Degrowth. And nation-states as they currently exist are now dysfunctional and need to be destroyed. Exactly how do any of us accomplish that?

    Don Stewart

    • MMT’s allure is the irresistible promise of freebies; full employment, unlimited higher education, healthcare and government services, state-of-the-art infrastructure, green energy and “the colonisation of Mars”. But monetary manipulation cannot change the supply of real goods and services or overcome resource constraints, otherwise prosperity and utopia would be guaranteed.

      While the current game can and will continue for a time, the bill will eventually arrive. The borrowings will have to be paid for out of disposable income, higher taxes or through inflation, which reduces purchasing power, especially of the most vulnerable, and destroys savings. Other than nature’s free bounty, everything has a cost.


      For an actual post growth environment to be realised, rather than a delayed one, QE, cheap credit and population growth would need to be thwarted or stopped altogether.

      However, as pointed out above, MMT is most likely to lead to speculative consumption that leads to inflation and greater inequalities with the effect of decreased discretionary consumption leading to a contracting economy.

      The same can be said of rising ECoE or the effects of resource scarcity especially if those resources are critical materials.

      In other words, the strong likelihood is that all roads lead to a reduction in discretionary spending and a contraction of the material economy even if the financial economy appears to be growing.

      Thus the first stage in my opinion in order to align with the underlying post growth dynamics is to contract the public sector and by doing so, turn net consuming economic agents into net producing economic agents.

      This in my opinion is essentially where we are currently stuck or delayed. Excessive fiscal and monetary policy is seeking to maintain the public sector and the tax base of the overall economy in the face of a pugnacious intransigent technocratic middle class who will use sophistry and gaslighting to appeal to voters regarding the poor, the marginalised, sleaze, cronyism and incompetence in order to protect their technocratic middle class interests ranging from metropolitan professionals, the liberal/progressive media, leftwing progressive acedemics and the bureaucratic public sector.

      In other words, the technocratic supranational left are on the warpath in a desperate bid to thwart systemic entropy.

      Therefore, rather than resign themselves to the need for a contracted State, reduced taxes and a more resilient private sector and third sector to acknowledge the realities of post growth, the technocratic supranational left are resorting to dirty politics to try and get control of the State in order to avoid ecological rationality and keep their middle class public sector pay checks coming.

      What was a manufactured culture war is now a manufactured confidence war with white middle class liberals leading the charge.

      I call this daylight cronyism and appears to be the stage of a post growth crisis. The only way to defeat this survival anxiety driven cognitive dissonance is to defeat the left at the polls on the basis of a deep acknowledgement of post growth realities and the need to contract the net consuming discretionary aspects of the public sector, ie a cull of the public sector middle management.

    • A pretty comprehensive rebuttal of that Guardian article can be found here: https://www.taxresearch.org.uk/Blog/2021/12/11/a-guardian-article-on-the-threat-from-modern-monetary-theory-was-quite-staggeringly-wrong/

      Note that there is not a mention of a debt jubilee – something that deep thinkers such as Steve Keen and Michael Hudson advocate. A cancellation of debt will at least arrest the growth of ECoE whereas debt on top of more debt will compound the issue.

    • Thanks Tel.

      How does the cancellation of a financial debt reduce the amount of energy needed to access energy?

      Debt cancellation would increase disposable incomes which to some extent will counterbalance the increased energy prices associated with rising ECoEs until demand and then supply drops off (the consumer/supplier affordability problem). However, debt cancellation by itself ignores the default losses incurred by the borrower. Is the intention of a debt jubilee to use MMT to pay for liability losses? In this case, MMT is just like QE by seeking to replace the investment lost due to insolvency by way of compensating borrowers for their losses.

      This would in theory stimulate the economy but would hit the same problem of material constraints arising from rising ECoEs and create inflation and so taxes would need to be immediately applied.

      Regarding the rebuttal article, there didn’t seem much to argue with other than his claim that QE does not create inflation. Similarly, he didn’t point out that QE serves a specific purpose which is to replace the private sector investment lost as a result of secular stagnation in the material economy and systemic investment deficits incurred due to bankruptcy, liquidation and insolvency, especially in the case of the financial crash. That’s my understanding anyway.

      It would seem that MMT on the other hand is specifically aimed at the public sector and more specifically State backed investments in the private sector regarding infrastructure, training and job subsidies.

      However, what he doesn’t go into is the practical application of MMT regarding current economic circumstances. Would money printing overheat the current UK economy with approximately 1.48 million unemployed people and an estimated 953,000 job vacancies.

      He mentions that a Green QE would better equate to MMT, presumably because it would attempt to directly create jobs rather than substitute for investment deficits (which in theory also creates jobs/work in the financial sector), but he is unable to qualify whether MMT would quickly bring on a commodity supercycle and a rapid increase in the price of critical materials, ie inflation.

      As pointed out above and earlier in a previous blog (Richard), if an economy is not naturally growing due to rising ECoE and material constraints, MMT becomes redundant since money printing has to be immediately followed by taxes to curb inflation, to no net effect.

      Thus, overall I think the author relies too much on the theory of MMT rather than its practical application in current economic circumstances and consequently is unable to engage adequately with the practical (financial and material economy) consequences highlighted in the Guardian article.

    • Hi Steve
      Thanks for your reply!
      With regards to the debt jubilee – yes it would be a reduction in liability – for the debtor side of the equation. It is the growth in personal debt – rather than Government debt or any other debt for that matter, per se – that is the major cause for concern. Steve Keen discussed this back in July: https://braveneweurope.com/steve-keen-what-is-the-role-of-public-debt-and-private-debt-in-the-next-great-financial-crisis
      What should be stressed is that this is only ever going to be a hypothetical scenario because, as Steve Keen admits: “So it looks like it could be done and would work, but I think the political chances of something like this being tried are basically zero.”

      With regards to MMT – I posted the previous article as more of an explanation by one of its main proponents. I do have major qualms about it as well. Will taxation move towards resource consumption, a Land Value Tax base, a combination of the two or something else? Having previously worked in finance I would add a Tobin Tax in as well – not just as a revenue raiser but also to highlight the distortion that High Frequency Trading does to the Stock Market.

      However, the cold hard reality is that we are up against resource depletion and that our current economic system is not fit for purpose. The Green New Deal is trying to rectify environmental degradation by employing the same system that caused it in the first place! Ted Trainer discussed it here: https://www.resilience.org/stories/2021-11-21/can-the-green-new-deal-save-us-no-it-cant/

      The key questions are how do we transition to a more ecologically sane economic system and what timescale do we have left? I suspect the answer to the latter being highly probably negative

    • Thanks Tel. Sorry for my delayed response. I’ve been focused on other matters.

      Regarding taxation to reduce the inflationary effects of MMT, then I’d imagine VAT being of use, especially if VAT was was more discerning regarding essential and discretionary goods and services.

      Steve Keen seems to be talking about the intersection of fractional reserve banking and quantitative easing which has shifted the variables of a standard economic model from a strict supply demand analysis to one that is able to better incorporate the supply and velocity of money.

      An interesting read that needs a reread to better understand the implications of money supply.

      He didn’t seem to go into the details of how a MMT based Debt Jubilee might create inflationary tendencies through surging demand in goods and services as both the creditor and the debtor suddenly find themselves better off (especially in relation to “We can’t do the same thing today—simply cancel all household debt—because it would bankrupt the banks”).

      Presumably his perspective is growth not sustainability so increasing the money supply to encourage more consumption is a primary consideration rather than ecological sustainability.

      That said, this interesting article lays out a ‘Sound Money’ perspective where State and State funded bureaucracies are contracted, with tax savings redeployed in the form of a Universal Basic Credit or a Debt Jubilee.


      This would reduce public sector consumption and the need for State borrowing and debt, redeploy relatively unproductive labour into the more productive private sector whilst increasing competition regarding wages and therefore prices and reducing the impact of bureaucratic self interest which seems to be having a counterproductive unelected influence on democratic politics usually in the form of inflationary demands for more State borrowing, more State debt and more State spending with absolutely no consideration for the prosperity producing private sector.

  40. Richard Heinberg on David Hughes analysis of US Shale Oil and Gas:


    “David Hughes, working for the last decade from a modest home on a beautiful island off the coast of British Columbia, has done what dozens of well-paid Washington agency analysts have failed to do—tell us the truth about America’s last fossil-fueled hurrah. He has put plain numbers in front of politicians and the public with no motive other than a dim hope that rationality can prevail. Hughes deserves hearty thanks from all who have benefited from his generous and expert work.”

    The basis for any sane policy is some grounding in facts. David Hughes gives us a grounding in facts which are available to any careful analyst. Dr. Morgan gives us a grounding in facts which come from a proprietary data base, but which seems to me consistent with what we can observe in the real world, and is consistent with what David Hughes finds when he look at US data in detail.

    Our biggest problem is likely Degrowth triggered by declining oil and gas (or at least the affordability of oil and gas). Governments seem to understand that fact, as they struggle for geopolitical advantage in terms of oil and gas. But the public discussion is all about climate change. Houston, we have a severe case of cognitive dissonance.

    Don Stewart

  41. Just heard that Evergrande (China) has collapsed .
    Is this the tipping point that we await?
    When interviewed Ray Dalio said it was not a Lehman bros. moment .
    Some here might think otherwise.

  42. Pingback: #217. No ‘soft landing’ | Surplus Energy Economics

Comments are closed.