#220. The human factor

CONTINUITY, CONTRACTION OR COLLAPSE

Over an extended period, but with growing intensity in recent times, there has been a discussion, here and elsewhere, about whether we can prevent economic contraction from turning into collapse.

This is part of a broader debate in which every point of view seems to begin with the letter C. The orthodox or consensus line is Continuity, meaning that the economy will continue to expand in the future as it has in the past, and is claimed still to be doing in the present. The main contrarian theme is the inevitability of Collapse. Those of us who believe even in the existence of a third possibility – Contraction – are in a tiny minority. 

Of these three points of view, the only one that we can dismiss is continuity. The economic “growth” that we’re told can be extended indefinitely into the future isn’t even happening in the present. 

Most – roughly two-thirds – of the reported “growth” of the past twenty years has been cosmetic. The preferred metric of gross domestic product (GDP) measures activity, not prosperity. If we inject liquidity into the system, and count the use of that liquidity as ‘activity’, we can persuade ourselves that the world economy has been growing at rates of between 3% and 3.5%.

The classic illustrative example is of a government paying one large group of workers to dig holes in the ground, and another group to fill them in again. This adds no value, of course, but it does increase activity, and therefore boosts GDP.

In this example, the obvious question is that of how the government pays for all this zero-value ‘activity’. The simple answer is to use borrowed money. Conveniently, GDP, as a measure of activity, calculates flow without reference to stock. This sleight-of-hand has persuaded many that their national economies have now recovered in full from the coronavirus downturn, a claim that is only valid if changes in the stock of government (and broader) liabilities are left out of the equation.

Statistically, world GDP increased by 94%, or $64 trillion, between 2000 and 2020. This “growth”, though, was accompanied by an increase of $216tn (190%) in total debt, meaning that more than $3.35 was borrowed to deliver each $1 of “growth”. On the basis of broader liabilities (including those of the shadow banking system), this ratio rises to an estimated $7.25 of new commitments for each dollar of “growth”.

If we further included the emergence of enormous deficiencies (“gaps”) in the adequacy of pension provision, this number would rise to somewhere close to $10.     

The artificial inflation of GDP does more than persuade us that the economy is growing at a satisfactory rate. It also affects the denominator used in numerous calculations and ratios. On this basis, it can be contended, for example, that debt and other liabilities are ‘not excessive’, and that government expenditures remain at a ‘modest and sustainable’ percentage of the economy.

This pattern of behaviour merits the term “Ponzi”, with the proviso that there may not have been any conscious and deliberate intent in the creation of this situation.

In objective terms, we can conclude that two factors have informed decision-making through a period that began with ‘credit adventurism’ before, in the aftermath of the GFC (global financial crisis), adding ‘monetary adventurism’ into the mix.

The first factor has been a determination to support the status quo, and the second has been the misplaced faith placed in an orthodox school of economics which dismisses resource constraints as part of a money-only interpretation of the economy which promises infinite growth on a finite planet.

Decision-makers may have drawn comfort from the relentless rise in the prices of assets such as equities and property. The snag here is that the aggregate valuations of these and other asset classes are purely notional, meaning that they cannot be monetized.

We can, for instance, multiply the average price of a house by the number of properties to arrive at an impressive-sounding ‘value’ for a nation’s housing stock. This ignores the inconvenient reality that the only potential buyers of this stock are the same people to whom it already belongs.  On this basis, we can calculate that aggregate assets are ‘worth’ a sum comfortably in excess of aggregate liabilities. Any such calculation may be reassuring, but the reality is that it is meaningless.

As regular readers will know, the alternative interpretation favoured here is that we need to draw a conceptual distinction between a ‘financial’ economy of money and credit and a ‘real’ economy of goods and services. The connection between these ‘two economies’ is that money, having no intrinsic worth, commands value only as a ‘claim’ on the goods and services produced by the real economy.

With this distinction established, we can further observe that the ‘real’ economy is an energy system, because nothing that has any economic utility at all can be supplied without the use of energy. Put another way, economic prosperity is determined by an equation involving the supply, value and cost of energy.

Over a long period of time, the conversion ratio of energy into economic value has been largely static. The quantitative supply of energy is a function of the value and cost of energy, as applied to the physical availability of the energy resource. 

These considerations identify cost as the critical part of the energy equation which determines prosperity. We know that, whenever energy is accessed for our use, some of that energy is always consumed in the access process. This ‘consumed in access’ component is known here as the Energy Cost of Energy, or ECoE.

If ECoEs rise, the surplus (ex-ECoE) energy which determines prosperity contracts. Rising ECoEs also exert an adverse effect on the value-versus-cost equation which determines the quantity of energy supplied.   

Critically, trend ECoEs have been rising relentlessly, primarily reflecting the effects of depletion on an economy which still derives more than four-fifths of its primary energy from oil, natural gas and coal.

Decision-makers still fail to recognize the constraint imposed by a rise in the ECoE costs, and a deterioration in the surplus value, of fossil fuels. They have, though, reached a belated recognition of a second constraint, imposed by the limits of environmental tolerance.

The proposed solution is a “transition” to renewable energy sources (REs) such as wind and solar power. These REs may pass the test of being better for the environment than fossil fuels, but they are unlikely ever to pass the second, critical test of delivering ECoEs that are as low as, or lower than, those of oil, gas and coal.

The slogan used almost universally in this context is “sustainable growth”. Within this term, the word “sustainable” – meaning environmentally tolerable – might indeed be delivered. After all, we had this kind of “sustainable” economy before the first effective heat-engine was completed in 1776.

But the word “growth” is simply an assumption, based on that same ‘money-only’ theory of economics which, by dismissing resource constraints, also dismisses the entire concept of ECoE. 

Those of us who understand the energy basis of prosperity, and who also recognize the critical duality of the financial and the real economies, can arrive at the reality behind an economy in which prosperity per person has ceased growing, and has started to contract.

For us, involuntary “de-growth” is a situation, defined as ‘a set of circumstances allowing of more than one possible outcome’. On this basis, and for so long as the alternative of ‘contraction’ exists, we cannot state that ‘collapse’ is inevitable, though it is eminently possible.

Having ruled out continuity, the difference between orderly contraction and disorderly collapse devolves into a question of management, a question which necessarily involves government and politics.

Our understanding of the situation, applied here using the SEEDS economic model, enables us to project various trends into the future, trends which are either unknown to, or ignored by, decision-makers in government, business and finance.

We know, for instance, that a simulacrum of “growth” cannot be maintained for much longer in the face of a trend towards the restoration of equilibrium between the real economy of energy and the financial economy of money and credit.  We know that this process will involve rapid (and probably disorderly) contraction in the financial system, which will need to shrink by at least 35-40%, and perhaps more, to reach stable alignment with the material economy.  

We further know that the real cost of energy-intensive essentials – including food, water, domestic energy, necessary travel and the building and maintenance of housing and infrastructure – will continue to rise, even as top-line prosperity erodes.

We also know that the scope, both for discretionary consumption and for capital investment in new and replacement productive capacity, will be compressed by the narrowing of the margin between prosperity and the cost of essentials.

We can further set out the taxonomy of de-growth which describes how businesses will seek to adapt to falling consumer prosperity, rising costs, worsening supply vulnerability and deteriorating financial conditions.

But what we cannot know is how society will adapt to a future which involves reduced prosperity, worsening hardship and insecurity, severe financial disruption and a loss of faith in the continuity of growth.

We can anticipate, of course, that economic considerations will rise steadily up the agenda of popular priorities, and that a leadership cadre, unaware of the inevitability of deteriorating prosperity and financial dislocation, will make every effort to maintain the status quo.   

Until we have answers to these questions, we cannot know whether the future will be one of orderly contraction (which is theoretically feasible) or of disorderly collapse (which is frighteningly plausible).               

200 thoughts on “#220. The human factor

  1. @Dr. Morgan
    I’ll probably have more to say in the future. But I will, for now, suggest one critical element…feedback. Financial feedback for businesses depends on the projected shrinkage in the gap between the financial economy and the real economy. The monetary authorities know, at least in principle, how to bring that about. Political feedback is more complicated because “we create our own reality” has been the political mantra now for a few decades. I think the feedback to ordinary people living in the “advanced” economic systems is the most problematic of all. Businesses can contract in response to financial forces, and governments can become more authoritarian, and Indian peasants can continue to farm for subsistence, but it is very hard for me to imagine any future in which the inhabitants of the mega-cities can even survive.

    A well-reasoned post….Don Stewart

    • Thanks Don.

      You might have detected more than a bit of frustration in this article. My view is that we, here, know a great deal about where things are going, and can even quantify a lot of it using SEEDS. There are unmistakable signs of things panning out as our analysis indicates. But the broader situation, whether through misunderstanding or intent, appears to be getting worse.

    • The inhabitants of the mega cities will be looking for meat, dear Don. And games. Nothing more entertaining than an ‘unknown unknown’ frontrunning the lions.

  2. Thank you, Dr Tim. A clear, cogent, piece (as always). Despite the emotional response that the phrase “collapse” has for some individuals, I firmly believe that “contraction” is far more likely. We are seeing that already here in the UK, with the newly retired transitioning from a life of buying “stuff” to one of “getting by”. In truth, for those fortunate to have lifetime streams of guaranteed income through pensions, or income from capital at risk investments, many people I work with surprise themselves when they understand that they have most of the “stuff” they will ever need, and that their much-reduced income provides enough to pay their taxes, buy their “essentials” and have the odd treat.

    However, this cohort is shrinking rapidly with the decline of defined benefit pensions and the lack of understanding the contract-based nature of insured income through annuities. Too many people are increasingly reliant on “the kindness of strangers” by basing their income needs on stock and bond portfolios which, by most measures, are overvalued.

    Inequality is becoming very evident, and my hunch is that, sooner or later, a redistribution will become necessary and a politician or two are beginning to make noises in this direction.

    • Thanks.

      What you describe is what we might call a ‘bind’. There’s a reasonable case that asset prices are indeed extremely over-inflated, and my working estimate is that real asset prices might need to fall by 35-40%.

      This is a global number, with different countries, and different asset classes, experiencing greater or lesser corrections. In each broad asset class and sub-class, we can see the processes that are likely to bring about these corrections.

      Switching into cash isn’t an obvious answer, because of rising inflation, and there are plenty of reasons to suspect that even inflation-linked pensions may not keep up with the real cost of living.

      I agree with you about redistribution. There’s no justification for the assumption that the current surge in the cost of essentials will be temporary, or for thinking that the average person will simply shrug his or her shoulders and accept worsening hardship without complaint.

    • My 35-40% downsizing benchmark refers to the fnancial economy as a whole. Equities and property are over;leveraged to this trend.

      Solid companies can survive this, and even prosper, and asset markets are, after all, ludicrously over-priced. Loss-making, over-indebted businesses priced on hope (and especially techno-hope) are toast. Astute, well-run companies can adapt. If it’s any comfort, aggregate “valuations” of asset classes are, in any case, no more than notional figures, incapable of monetization.

  3. “But what we cannot know is how society will adapt…”

    I think we have some examples to look at when we look at places like Lebanon, Venezuela, Ukrainia, Afghanistan, Syria, Argentina, Greece, etc. I think that these places have lost their places on the “growth” bus. They will be (have been) left standing on the side of the road, with nowhere to go.

    I could extend this analogy, but most here will get the idea. One man’s contraction is another man’s collapse. There is no other way, that I can see, in a zero-sum game.

    • the question remains as to what the Core countries may or may not learn from these collapsing Periphery countries.

      if the Core understood the lessons of Dr. Morgan here, then a path forward to a managed contraction would be more probable.

      alas, with their economic blinders on, “they” are solidly on the path towards mismanaged contraction, which is a path much closer to collapse.

      mismanagement is a quite common human factor.

    • It would be easy for us to look at current Western leadership and ask ourselves ‘could these governments/parties/leaders manage an orderly contraction?’ and reach the depressing conclusion that they could not.

      But my view is that they, and we, won’t get the chance to find out. Change as profound de-growth produces drastic changes in everything else, including popular priorities, politics and government. The status quo cannot be preserved.

      Current leadership thinks that the task remains that of managing growing economies. They’re wrong, and that’s part of the reason why so many Western governments seem so dismally inept and out of touch. The idea that the current surge in the cost of living is somehow temporary, and will ‘fix itself’, sums this up. Today’s governments often seem to know less about the economy than Louis XVI knew about hardship, or Nicholas II knew about popular discontent.

    • “will make every effort to maintain the status quo”

      That has been the case for the last 20 years. If they continue to maintain the status quo then collapse will be the road taken. The window to not take this road is closing rapidly because “certain personalities” can not admit they aren’t as wonderful as they think. That is really all it comes down to. Do we handle this as responsible adults, or like children kicking and screaming as it all comes tumbling down. Brexit and Trump are both symptoms of this problem, but instead of handling it like adults, our leaders have handled it like immature high school kids. I’m surprised Michael Moore gets it, watch the short clip i’ll link below. Perhaps he gets it because he truly does care about ordinary people. Its funny Dr. Morgan, but if i remember correctly Mr. Moore also pointed out that putting all our hopes in renewable energy is not feasible and then was immediately canceled by the people who used to adore him. That is the politics of high school and we really need to get beyond that.

  4. Dr Morgan,
    Another very fine piece. Thank you for all the work you do to educate and inform us.
    With business I can’t help but think we are entering a period of intense economic scrutiny aka ‘sharpening ones pencil’, the level of which has never been with us before. This is the black and white difference between government and business, in business your must at a minimum break even if you wish to continue. Governments can legally play games with money.
    I see and feel the contraction already. Producers have been shrinking product sizes. 30 oz
    mayonnaise instead of quarts as they try to make a profit and maintain a ‘price point’. I get it, they are getting sandwiched between rising energy cost inputs, rising cost of labor, and currency devaluation at the same time, and must choose a direction. Call it what you will it’s higher prices.
    I think the choice has been made via currency devaluation to deal with fixed income retirement deficiency. Looking back over your posts I think it becomes very clear. This is going to be chaotic and messy if we are lucky, deadly and destructive if we are unfortunate.
    I saw a chart of expenses on Mish regarding household expenditures over the last 80 years, from someone who inherited their grandfathers house. It was eye opening. Energy and utility costs all went up but reasonably. It was the taxes that were the biggest increase. Worth a look.
    Thanks again,

    • Thanks.

      The process called “shrinkflation”is highly visible, certainly where I live. A 500g packet of spaghetti becomes 450g, and 250g of butter or cheese shrinks to 225g or 200g. Even then, prices are rising, often rapidly.

      Part of this is undoubtedly reflective of cost increases, though there may be an opportunistic dimension as well.

      Businesses, almost irrespective of sector, seem unware of the fundamentals. These have been described here as the ‘taxonomy of de-growth’, and include simplification (of product and process), de-layering, and efforts to circumvent the issues of adverse utilization effects and loss of critical mass.

      We could easily devote an entire article here to what businesses will need to do to remain viable.

  5. What does the future hold?
    What should I say? I say – and this is certainly strong! simplified and very figurative: four times “E”.

    1. Ecology
    The ecological foundations on the planet we live on are gradually ruined and lose vitality and “productivity”. What we make sick also makes us sick – logical. Besides, we are far too many people. Every day we add about one city like Münster.
    An exponential population growth curve, like a field hockey stick.
    Everything that cannot be continued forever will eventually stop. Evolution takes care of that.
    The better way to limit population growth would be education and development in the weak countries.
    Just a few, few examples to the first “E”:
    Temperatures rise, the evolutionary adaptation does not come along.
    Soils are poisoned.
    Resources are squandered for a hypermobile fun society. Swarms and plants are overused. Useful things are thrown away.
    Almost all of us make our own fire in the combustion engine under the hood and drive around with it. Largely unproductive, purely for pleasure.
    Air and water are becoming scarce and polluted.
    We deforest, dig and poke deeper and deeper, e.g. to extract oil:

    2. Oil
    Money rules the world? Money makes the world go round?
    Wrong! Oil, here as a synonym for fossil energy, is the magic potion that drives everything.
    Oil is everywhere. Sit on the floor in your house and think away everything that was not created with or with the help of oil. You are now sitting naked in the field. Now think what could be reclaimed without the use of oil, only through renewable energy? You are still sitting there naked, because regenerative energies also require the use of oil to make them possible.
    Everything that moves and lives operates energy dissipation (i.e. utilization) and causes entropy.
    Somewhat vaguely described, entropy can be equated with the transformation of energy into a disorder that is no longer usable for anything. Humans, for example, consume high-value food and create entropy through their excretions.
    A hurricane consumes (dissipates) the temperature differences between the ocean and the air layers for its vorticity. It gradually dies as the temperature differences disappear because, for example, it hits land or the sea cools. It produces entropy (disorder) when it swirls around.
    We celebrate a one-way party fired by the magic potion oil. All of industrial civilization is burning (dissipating) one-time fossil fuels created over hundreds of millions of years, with the harvest factor (the ratio of the energy expended to extract, process, and distribute the oil to the energy output for the economy) steadily decreasing. This is called diminishing marginal utility (the first cut is the deepest, or the low-hanging fruit is harvested first). In the 1950s, when, simply put, all you had to do was poke the sand and the oil gushed out, the harvest factor was about 1 in 100. (High net energy: one unit of energy in, 100 units of energy out as yield). This very effective potion was used to build the infrastructure for industrial civilization. Today, with the use of e.g. fracking, deep sea drilling and oil sands, and due to increased complexity, the harvest factor is about 1 in 30, and declining. The magic potion is being watered down. This would already not have pleased the Gauls. Sinking net energy produces stress (unequal income distribution), conflicts (bleeding middle class) wars (middle east), separatism (Brexit), egoism (America first) and it is difficult for us to maintain the infrastructure at all – why, that explains itself in the next “E”. Everywhere the “means” are lacking. Everyone is formulating demands. There is no longer enough soup for everyone (as in the game “musical chairs”). The “keep it up ” (BAU = business as ususal) succeeds in the meantime only by a constantly rising, escalating indebtedness. We have to “pump up” the future because we can hardly “pump up” the past.
    Which brings us to the third “E”:

    3. Economy
    Money does not just exist. There is no state treasury from which it is taken to be used as a medium of exchange. Money is created through debt. Simplified again: If you want to build a small factory, for example, you go to the bank and get a loan for it. The factory serves as collateral. The bank transfers e.g. 1 million € to the account of the borrower and has a claim. The borrower has a liability in the same amount. The money was not there before! As long as such debts are used for productive investments, this is no problem. The central banks create money, e.g. by bond purchases of states or enterprises. A detailed explanation would lead here too far. What is important is that through debt, money suddenly exists that did not exist before. Thus, money basically consists of promissory bills that are made circulable by government power and guarantee. Money is a claim on the future use of power and the resulting products and services.
    Interest can be charged as long as the future can be used productively thanks to cheap energy and good ideas (technical progress and profitable business fields), among other things. However, the investor must find customers (subsequent debtors) who “redeem” him (also become indebted and buy from him) so that he can pay interest and repayment. For these subsequent debtors the same is valid, they must obtain incomes, in which again others indebt themselves and so on. A chain letter, which may not end. This is how our system works, it has to grow, among other things because of the interest and the taxes for the gluttonous state. Complexity must constantly increase. More complexity requires increased energy dissipation. We depend on global supply chains, cheap energy, growing debt, and growing complexity (e.g., the Internet, high-tech engines). The top, debt-based mega-complexity level must function because the lower levels of complexity (fax, horses) no longer exist.

    At some point, over-indebtedness occurs. The future cannot keep its promises because the harvest factor of oil (and other fuels and raw materials) is constantly decreasing and because the growing complexity can no longer be controlled and financed. The central banks help with various “magic” (credit expansion, zero interest rates, grants, aid packages, quantitative easing, Modern Money theory …) to keep the party going. This has worked to some extent, especially since the 2008 financial crisis.
    You can initially, nominally, continue to burden the future with more and more debt but without real growth. But you can’t, in real terms, print cheap energy. Sooner or later, the currencies will be in danger. Inflation threatens, because too little “real” stands opposite the many money.

    4. Emotional Opinion
    At some point, with obviously excessive and not repayable over-indebtedness, the market participants lose confidence and accept even cheap not credits more, or excessively over-indebted states, companies and households get no more credit. Who invests in a bottomless pit. The psychology tips over. Rather one exchanges money into material assets, e.g. into concrete gold. Hence the building boom of the last years and the so-called “crackup boom” with overheating and full employment. Bubbles are created in real estate, stocks, bitcoin, bonds, in the art market, etc., until they burst.

    Central banks are dropping money by helicopter lately (helicopter money or unconditional basic income). Money gifts are now announced. But the nominal money glut does not change the physics and the existing, real, productive possibilities on a limited planet. Wealth cannot be printed or voted into office. Currencies go “bust.” This happens again and again (ask grandma or great-grandpa, if he is still alive). Currently, the fall height is as large as never before. Public opinion is slowly changing. People get scared and at some point run for the exit at the same time. The bubbles burst, avalanches tumble, chains break. This can all now be blamed on the Corona virus, which is certainly dangerous to our health. But an avalanche can only trigger this treacherous virus because it has been built up over decades, layer upon layer, through immoderate credit expansion and rampant complexity. At some point, it’s too much. We don’t know exactly when!

    Corona is a black swan, an unpredictable triggering event. It could have been anything else. It’s like Jenga, you don’t know which stone will be the last to topple the fragile tower through mass psychological herd behavior. What is certain is that there are those responsible who can manipulate this behavior up to a certain point, e.g. via the media.

    However – crisis means danger and opportunity and the most important word in the future is “less”. Hopefully combined with an orderly return to human scale.
    Less globalization, less pointless transportation, less flying, less driving, less knick-knacks and trash entertainment, less waste and pollution, less selfishness?
    We will have to make do with less. The World Economic Forum wants to set the course. Exciting times!

    My solution approach:

    Take care!

    – Be friendly and balanced, don’t believe every crap.
    – Be peaceful, self-critical but do not put up with everything.
    – “Come down”, think “small”, for a species-appropriate human husbandry.
    – Buy regionally, support local producers, manufacturers and artisans. Eat healthy, fresh, unprocessed foods.
    – Start a kitchen garden. Start small.
    – Learn something hands-on.
    – Cooperate and exchange with like-minded people.
    – Listen to your inner voice – not to ideologists and pied pipers from the right and left.
    – Avoid mass consumption and mass media.
    – Inspire other people to join the movement.

    • I like this line “Corona is a black swan, an unpredictable triggering event”. But it is actually a well crafted game theory event that is intended to trigger a reset. Contraction is controlled, collapse is free fall. We are entering a discontinuity, thus outcomes are not fully predictable, but it will not be the status quo.
      By the way, hurricanes are not driven by air temperature differences, to be precise. But by the fact that H2O gas molecules are approximately half the mass of other air molecules. (hence ‘hot air balloons are usually water vapour balloons) and then when the water vapour condenses as rain or ice it becomes a minuscule proportion of is former volume 🙂

    • As I think this might be your first comment here, welcome, but please let me point out that coronavirus is not discussed here – if it were, it could easily swamp our debates about energy, the economy and closely-related subjects.

    • We are in (an unmentionable 😉 event that is an unprecedented economic and societal upheaval on the global and temporal scale. We have to reverse engineer the causes and predict the outcomes without actually mentioning what it is.
      It certainly is an interesting time we live in.

      From an (energy and fiscal) point of view, any thoughts on Carbon Capture? Prompted by Elon’s Xprize?

  6. Concise and clear. The horse race not mentioned is beggar thy neighbor currency devaluation. I expect this to be more prevalent the next few years.

  7. Dear Tim,

    Thank you for your thoughtfull post.

    As you well know, all the national economies are not equal, in particular in terms of energy supply and in terms of energy cost of energy.

    As we all ponder on the form that will take our collective sliding down the net energy cliff, might it not be the appropriate time for you to enlighten us on the geopolitical dimension that will likely intervene in the process ?

    More specifically, in an era of increasing cheap energy rarity, will it not be tempting for some countries, for example Russia, to throttle the flow of ils oil and gas in search of far reaching political, economic and strategic advantages ?

    Hence, might not geopolitics be a critical factor shaping the inevitable « contraction » that needs to take place to realign human civilisation with its growing energy scarcity reality ?

    Best regards,

    John

    • @John Drake
      Saudi Arabia and Russia are perhaps the most salient examples. I think they are in different positions. The Saudi’s will likely be happy so long as all the princes are extremely well treated. The Russians are, it seems to me, intent on gaining independence from the West. The West still thinks it can throttle Russia with sanctions and extract the natural resources that Europe, especially is short of. The West has imposed a lot of sanctions, but the net result has been to strengthen domestic production in Russia. I think that the current Western attempt to make a “crisis” out of Ukraine is the last gasp effort to attack the notion of Russian independence. Russia gains nothing by conquering the part of Ukraine ruled from Kiev…the Donbass is different… it was and is largely integrated into the Russian economic system. The Kiev ruled part would be a resource draining colony if it were taken by force. The Russians are not that stupid. A good rule of thumb is that the editorial board at the New York Times either understands nothing at all, or is part of the plot.

      According to Wolf Richter, Russia is the only major country in the world dealing adequately with inflation. I can see the West being infuriated by Russian economic fundamentalism.

      The Russian and Chinese relationship is complex, and I don’t truly understand it. The way I interpret Charles Hugh Smith’s comments, Xi is trying to impose a Chinese version of economic fundamentalism which is getting push-back from the power brokers. So I don’t know what will happen there.

      Don Stewart

    • @Dr Morgan
      The Russians have been eager to run gas pipelines to China, and export LNG to China. IF the Russians had been able to predict the insanity In Europe 10 years ago, NordStream 2 would never have been built. They would have focused on getting as to China. IMHO
      Don Stewart

    • Thanks.

      Geopolitics is certainly something to consider, along with different levels of national and regional risk.

      Current thinking is that this article ‘The human factor’ might be followed by ‘The numerical factor’ (stats looking forward), ‘The political factor’ and, maybe, ‘The personal factor’.

  8. Another excellent post, Dr Tim. In the age of Limits to Growth and human overshoot orderly contraction can be achieved in theory only. We’re still digging in a hole that soon will be inescapable.

  9. Thanks for the post Dr. Morgan.

    My take, for what its worth, is that we face a long term contraction in population and economic activity marked by short term crises followed by limited recoveries. In the end, if we can only use renewable energy since fossil fuels are too expensive, our population and economy will contract to what we can afford. It will not be a pleasant process and will entail a great deal of natural selection. The survivors will be harshly frugal and suspicious of change.

  10. Here is a factoid to ponder as we think about Degrowth:
    “The metabolic food waste – what is eaten over and above what we need – is of the same order of magnitude as consumer food waste in western countries. And it is driven by the same forces that drive food waste before the mouth.”

    https://gardenearth.blogspot.com/2022/01/to-waste-or-to-waist.html

    The quotation is from Gunnar Rundgren in Sweden. Food that is wasted can be compost if treated correctly. But what is eaten to excess is an actual drag on the economy as it produces excess weight and lots of medical problems…and a lot of GDP.

    Don Stewart

  11. Thanks for a very interesting post. You define three possible outcomes: Continuity, Contraction and Collapse. I wonder if there may be a fourth outcome.

    Following the 9/11 attack on the Twin Towers, Tom Friedman said that our failure was not lack of knowledge (we knew quite a lot about terrorist organizations). Our failure was lack of imagination — we simply could not imagine that people would voluntarily fly a commercial airplane right into a building. Maybe we are not being imaginative enough now. The concept of Hegelian Synthesis may be relevant. We have an initial state, the reaction to that state, and an outcome — a Synthesis — that has roots in both but that is also different from both.

    Let me give an example. Just last month a paper published in the journal Energy & Environmental Science described a process for the direct conversion of CO2 to solid carbon. Will it work on a commercial scale? I have no idea. Is it another example of cold fusion? Possibly. Will running the process spit out more CO2 than it absorbs? Probably not, but it’s a question worth asking. Nevertheless, if this process does turn out to be realistic it could create a world that does not fit into the three ‘C’s.

    We cannot get around the thermodynamic realities to do with declining amounts of low entropy oil and atmospheric temperature increases. So responses such as the CO2 to carbon technology will not deliver ‘Continuity’, certainly not ‘Business as Usual’. But they may create a non-‘Collapse’ outcome.

    This is why I continue to explore realistic (with an emphasis on engineering and project management realities) technical responses to our current dilemmas. Is there a solution that will return us to the old way of living? No. But is there a response that can create an end state that is not as bad as Collapse. We don’t know, but it’s worth looking.

    With regard to Black Swans, Taleb’s key insight was not that highly improbable events happen — that is something we are all aware of — but that they are obvious in hindsight. Let’s hope that his insight applies to what is going on now.

    • Thanks Ian

      I think what you’re describing is a version of contraction?

      The problem with new methodologies is the loss of the ability to invest in putting them into effect. If something requires, say, steel if it’s to be implemented, do we have the energy (even if we have the raw materials) to produce the steel required?

      Right now we’re seeing sharp rises in the cost of raw materials, driven by rising energy prices. How many investment projects, including wind and solar, remain viable now that costs have increased so much?

    • There does not seem to be an ability to reply to a reply with this software. This is comment links to what I said earlier.

      Contraction seems to be inevitable due to the irreversible decline in energy and material resources. But contraction can take one of two forms. The first is shrinkage to a smaller version of what we have now. That is the same as collapse. There is no way that we all harmoniously agree to reduce our standard of living. It will create a fourth ‘C’ word: Conflict.

      However, if we use our declining resources to look for innovative responses (not necessarily “solutions”) then there is some hope, a sense of purpose. Will this work? I have no idea, but it’s certainly worth the attempt.

      This approach is not just theoretical. When we look at the investments that many companies are already making in new technology there seems to be a potential for pleasant surprises. These companies are innovating, not because they want to “do good”, but because they want to succeed commercially and to avoid their own Kodak Moment.

    • I think you can reply to original comments, but not reply to replies.

      Making technology work needs access to material inputs and capital.

      A large proportion of current new technology finds ways of using energy, not of using it more effectively.

      As for access to capital, there’s a big difference between technology itself and what Wall St calls “tech”. The latter has long looked massively over-valued, and we may have seen the start of a sharp correction (which could in turn be the beginning of markets tumbling).

    • “Raw material shortages, notably in metals and minerals and polysilicon are impacting the renewable energy industry
      The cost of solar panels, wind turbines, and EV batteries is climbing after years of declines
      Solar panel prices had surged by more than 50 percent in the past 12 months alone. The price of wind turbines is up 13 percent and battery prices are rising for the first time ever”

      https://oilprice.com/Energy/Energy-General/The-Era-of-Cheap-Renewables-Grinds-To-A-Halt.html?fbclid=IwAR2bP-kU2DIRiN7oF6VhiuZ0QVmNJARuLQc2lbkSNa99j9PHk4RHyCL8FYk

  12. Doc, your contributions to society are great. That goes for your articles too. Not for this one though, this one is crap.

    We both know fiat currencies are doomed to fail. This time, the everything bubble is tbtf 3.0

    Your efforts to make something out of nothing are beyond soul and spirit. Thank you for that.

    Mises quote:

    There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

    Ludwig von Mises

    Doc, end game approaches. With 8 billion people fighting over the last crumbs of the monetary plane, and the physical plane trying to reach Mars, first, with billionairs on board, and then, all of us, it should raise some serious questions. More serious as in this article.

    With love & respect,

    houtskool

    • Glad you liked this article so much.

      I don’t mind telling you that I went through seven or eight drafts of a stage-by-stage, detailed analysis of ‘collapse vs contraction’. Each one started turning into a book. Examination of the financial system, asset prices, liabilities, energy, ECoE, prosperity, essentials, discretionaries, capital investment, government revenues, corporate sector, government sector, household sector, politics…………..and an ever-growing list of tables and charts.

    • That’s the problem doc. With all respect for everything you, and a few others, have been doing. You cannot see the tree through the forrest anymore.

      I was at a certain place, many years ago, near a railway station. I saw at least 15 signs (boards, traffic restrictions, (i’m Dutch so i hope to get this right) that were trying to force me in a certain direction.

      To me, its just plain stupidity to look at all those signs while driving straight into a school class with 60mph.

      Just look at what the hell is happening.

      Intrest rates at 0%
      P/E ratios on Mars
      Senile US president
      Crypto’s to the moon and back
      Senile New Zealand president
      Supply chain disruptions
      40% inflation in Turkey
      Senile and drunk UK president
      Home prices in Holland rising 20% each year and still importing ‘refugees’ from Greece where they are safe
      A senile French president

      Jeeeez, look at this incredible mess.

      Look at the boatloads of useless text in the comments.

      Don’t be the next president doc.

      You are more than that.

    • The situation does indeed look crazy, but that’s why, in my opinion, we need to look for better ways of doing things.

      Rates are at zero – far below inflation – because we’ve been trying to prop up the debt of a system built on continuous credit expansion. This has been the alternative to accepting the reality of a post-growth economy.

      Supply chain disruption has long been predictable as part of the ‘taxonomy of de-growth’.

      PE ratios are absurd, but that’s because of the creation of ultra-cheap capital, because asset prices are inversely related to the cost of capital. This points towards market slumps, as part of the restoration of equilibrium between the real and the financial economies.

      House prices always rise just before a slump, as people try to lock in low-rate mortgages ahead of rate rises.

      Western leadership is inept because the realities of the situation are either unknown or resisted -the economy cannot grow, and the status quo cannot be preserved.

  13. The predicament we are in is a bit like a Rubik’s cube,with an extra dimension or two added.
    I’ll digress just for a bit. I’ve just read “The Nutmeg’s Curse” ,by Amitav Gosh. In one section, he briefly states that the solution to Anthropogenic Climate Disruption is obvious. We just change from fosssil fuels to renewable energy. It would be nice if it was so simple. As well as the energy
    aspect that Tim mentions, there is also the material requirements to construct all the requisite
    infrastructure,plus the energy storage infrastucture,plus the restructuring of the all energy using equipment to a different energy source. Plus it all has to be rebuilt after 25 or 30 years. And all the while,the use of fossil fuels to do all of this massive construction effort,even
    if the material limitations can be addressed.is increasing atmospheric CO2 levels,and increasing the
    ocean heating and acidificatoin problem. We are in the mother of all progress traps. Plus,of course,the probability of wars increase as energy.material and environmenta stresses increase.
    I posted this in the last thread,it’s relevant to this thread,and worth reading for those who missed it.
    https://www.faninitiative.net/collapse/the-tragedy-of-the-sapie

    • Thanks for this – I read it a second time now and like it even more. JMG’s recent post broadly agrees that it is delusional to think we can approach the future through the lens of “management.” i.e. “Make a plan for the future informed by experts looking at data, then make decisions and go do it.” https://www.ecosophia.net/the-unmanageable-future/

      There won’t be one “future.” There will be futures, plural. Some nations will collapse and the people disperse. Some may decline or break apart into others which will last for hundreds of years. Some of these will have new histories and territories due to mass migration. Some will fight to seize resources from others and win, others lose.

      We know this is possible because it is happening now, and is indeed the way history has always worked even during good times.

      Degrowth doesn’t necessarily mean that humanity is doomed – but what could be called global civilization is most certainly doomed by definition because the systems which created and sustain it are doomed. The moment it is no longer worth participating in, parties start heading for the exit or make new alliances. This reveals to some extent the delicate nature of the concept of civilization – it’s an abstraction applied to an aggregation of human behavior. Once the behaviors broadly change, it’s no longer the same thing.

      If future shepherds raise sheep on the white-house lawn it matters little whether they still call it America or not.

      To think this will be managed globally, I think, is folly – such a solution would require a higher level of complexity than we now enjoy, which would imply more energy and resources. Such a thing is surely not even “theoretically” possible. It is certain that global cooperation, the functioning of international bodies, international trade and so on, will all decrease – because they will no longer be worthwhile.

      Possible futures will be comprised of less complexity, and this includes less managerial complexity. Perhaps a better question than “Can collapse be avoided?” is “To what extent can we limit the increase in excess deaths from violence, pestilence and starvation?” This may sound bleak, but I would argue is a more sober way to approach the heart of the matter. It would help to at least make sure this is our goal. If that’s not the goal, then what is?

      The maintenance of a habitable biosphere? For whom? For how long? I’d like to maintain a habitable biosphere for our descendants until the next ice-age. At that point, nature shakes the dice again.

    • Is civilization, then, a function of material prosperity? I suppose it depends on what we mean by civilization.

      If this were true, it would mean that richer countries are always more civilized than poorer ones, and that countries have always become more civilized as they have become more prosperous. I find this a hard proposition to accept.

      My view tends towards a ‘standard of civilized conduct’, putting the emphasis on values, including, for example, free speech, care for the poor and disadvantaged, an equitable legal system, respect for the opinions of minorities, minimization of exploitation, transparent democratic government, and so on. We might want to find a place for art, literature and music in our definition.

    • @Dr. Tim – thanks for the clarification. I see that your focus is on civilized behavior, in a Western context. I was focusing on the anthropological perspective. The things you mention are things very dear to my heart. But consider for a moment the following:

      Most anthropologists would list a few common features of civilization such as a complex society characterized by lots of types of interconnection. This can include urbanization, social stratification and a form of government. I think some of these things can persist.

      It’s just important to note that we don’t have a single civilization – we have several, which sometimes cooperate and sometimes compete. Samuel Huntington’s Clash of Civilizations is relevant, here. While open to criticism he lists eight distinct civilizations. Western Civilization, I certainly would like to preserve. Though some would argue it has already passed. (Spengler, 1922). Some other civilizations would like to see Western Civilization crumble, or at least be indifferent toward our fall.

      The global “system” is comprised of these civilizations interacting in complex ways – it is this system which cannot possibly survive because it’s existence is constituted by the patterns of behavior of its parts.

      For example, while civilization is not defined by material wealth, surplus food production is most surely a necessary pre-requisite for Civilization. An important question may be “How can we maintain surplus food production?” (NB: Even this may be misguided. It’s already the case that not all areas currently have, or have ever achieved, endogenous surplus food production, and so will surely collapse once the global system of economic growth is over.)

    • I’m sure I’m influenced by a Western tradition which is secular, and which comes down to us from Ancient Greece, via the Renaissance and the Enlightenment.

      ‘Civilized’ means a society that cares for its weakest, respects free speech and the rights of minority view-points, and maximises the liberty of the individual in so far as that is compatible with the liberty of others. It also involves protecting the individual against the power of the state.

      Many of these values are set out in the US Constitution, though they can often be incorporated in tradition, or in common law.

    • @Dr. Tim – I share these values. I am relatively sure they can be preserved in some way, and this can be separate from whether the alliances and nations of the West survive in their current arrangement. It’s also worth noting these values are already a minority position globally.

    • Thanks.

      A secure, confident government does not need to coerce its citizens, or limit their rights to free speech and free expression. This suggests lack of confidence and insecurity in current governments.

    • (1-27) “A secure, confident government does not need to coerce its citizens, or limit their rights to free speech and free expression. ”

      This aptly applies to Russia, China, North Korea, and many other dictatorships. Today Russia tried to block Security Council (UN) discussion about their action rear Ukraine, but they fail by 2:1 vote.

      https://www.france24.com/en/europe/20220131-un-security-council-to-meet-over-ukraine-as-us-senate-readies-new-sanctions

      “Russia had tried to block the 15-member Security Council from holding the meeting at all – with its envoy to the UN, Vasily Nebenzya, accusing the United States Monday of trying to “whip up hysteria” by pushing the debate.

      But Washington’s UN envoy Linda Thomas-Greenfield said Moscow’s troop buildup justified the meeting, and Russia’s blocking move was rejected with 10 out of 15 members backing Washington.”

  14. I wrote a comment,wordpress asks me to log in,and then the comment disappears. I don’t know where it goes- to some spam folder ?

  15. @Dr. Morgan
    May I suggest that we combine a few general observations and see where they point us?
    *Humans are an intensely social species
    *Therefore, any actions which help us ameliorate our current discomfort must have a strong social element
    *But the scale of the social element is going to have to be very local…because of all the fallout from rising energy costs and the collapse of finance
    *The rising energy costs and the collapse of finance will collapse the solution we have become accustomed to using to facilitate social cooperation on a global scale…the petro-dollar and the financialization of everything
    *If we can avoid annihilating ourselves with a global nuclear war, then the future is very local and focused on essentials such as food, water, shelter, fuel, defense of homestead, etc. The challenge is that very few of us in the “developed” world actually know how to produce those essentials in the absence of the global economy.
    *What governments CAN do is get out of the way and shrink drastically.

    In any event, it isn’t likely to be pretty. If we are exceptionally lucky, we will get the long, bumpy decline that John Michael Greer has long predicted. A Unitarian minister did a series of talks about his discovery of Greer’s theories and how they completely changed the way he thought about the world. Perhaps that “rethinking the world’s direction of evolution” is the first step.

    Don Stewart

  16. Many thanks for the latest article Dr Tim. One very important point you make is:-

    “…the difference between orderly contraction and disorderly collapse devolves into a question of management, a question which necessarily involves government and politics.”
    I agree with you 100%, and the current state of affairs doesn’t bode well for effective management.

    Preparation for the end of growth has been non-existent at government level, and without preparation, it will be panic management when the great unwinding accelerates. Actually, it would be bizarre if it had been planned for, because all governments continually forecast perpetual future growth and throw resources at trying to achieve it.

    To imagine how unprepared governments really are for a De-growth future, just think of the Covid-19 pandemic. Such an event was something that governments had actually risk assessed and prepared for, yet the national response to the pandemic was still shambolic panic management in most cases. The NHS didn’t even have adequate supplies of basic PPE.

    When the effects of forced De-growth really start to bite, I suspect that most national governments will fail the test of leadership and management, and in many cases the centre won’t hold. My thoughts are that regional and local authorities will increasingly play a vital role in dealing with the fallout from events triggered by the abrupt termination of economic growth.
    From my own knowledge, local authorities are no better prepared than central government, but they are closer to the action, and they do control resources that have significant day to day impact on people lives. I suspect that they will play a pivotal role in trying to hold things together, as will local grassroots organisations within the community.

    As de-growth accelerates in whatever form it takes, central government might well become far less relevant, and could even collapse completely in some cases. Central government expanded exponentially with the increase in surplus energy during the 20th century, and as surplus energy declines, the cost of bloated state apparatus will become prohibitively expensive. This is going to be quite traumatic for the masses, because it will impact the welfare state that evolved in most developed nations from the middle of last century. The welfare state may become unfit for purpose at the very time that economic hardship drives millions more people towards it. Rising ECoE and falling prosperity will bite at both ends.

    • Thanks Neill

      Current Western leadership looks lamentably poor. As a general proposition, we’d probably have to go back to the 1930s and appeasement to find an equivalently-bad set of Western governments and leaders, and even then we might want to give FDR a better rating.

      But part of this is because these people (and their advisers) have no idea what’s really happening, an ignorance seemingly shared across much of business and finance. They seem to think that the economy is growing, and will carry on doing so. Nobody grasps the reality that two eras are ending – 200 years of assured growth, and 40 years of the “liberal” economic consensus.

      Just as peace and war need different attributes, and tend to produce different ideas and different leaders, we may be still in need of, and may yet find, leaders suited to the post-growth world.

      Asking whether Trump or Biden, Johnson or Starmer (and so on) can lead effectively in these radically new circumstances is like asking if a distinguished soccer coach could manage a baseball team.

      If de-growth changes everything, it changes politics, and it changes public priorities – at least, let’s hope so!

    • It’s even worse than you fear. Even if we had leaders at all levels of government who knew exactly what was happening and why, just what could they do about it? The global market economy is not controlled by anyone or any government. It is an emergent system, created out of billions of daily transactions by individuals and businesses. True, it operates under a set of simple rules, but when the rules can no longer be applied, the market won’t work.

      When the future income stream of the vast majority of businesses shrinks to the point where they can’t pay back their debts, their capital value goes to zero. Public companies that can only lose money have their shares go to zero. Private companies with little to no debt will look out on a landscape where they are the last businesses standing, but how can they do business when most of their counterparties are failing?

      Any political leaders facing a near complete breakdown of the market might suppose that they can simply take control of the physical assets of the the economy, which after all still exist (assuming they haven’t been destroyed in wars) and direct them to function through command and control from their levels of government. But this takes us back to my first paragraph and the emergent properties of the market economy. The complexity of a modern market economy is far beyond anyone’s ability to describe accurately, much less control. We kind of know how all the cells and organs of the human body work, but we still can’t command a dead body to come back to life. Political leaders will have no more luck with the corpse of the global market. All they can do is keep it on life support as long as possible, but it will eventually seize up and die. When it does, we’ll call it collapse.

    • You are right in so much that you say here. Speaking personally, my primary aim has been to understand and, putting this with due humility, explain and explore the real economic situation, but this leads to the secondary question of what, if anything, can be done about it.

      I agree that a command economy cannot work, but the system that we have now isn’t working either. If we had a time machine, perhaps we could go back to the 1990s (and decide to live with deteriorating growth rather than adopting the gimmickry of ‘credit adventurism’), or to 2008-09 (and learn from what the GFC taught us, and not opt for ‘monetary adventurism’) – but this isn’t possible outside the pages of HG Wells.

      Trying to be constructive, I emphasise the distinction between the financial and the real economies. Homes still exist and serve a function if house prices crash. Companies assets still exist if stock prices drop to zero, and/or ownership is transferred to creditors. Resources and labour still exist even if the value of money collapses.

  17. Essential Reading for Prophets
    So the current method of operating the global economy can’t last. What might replace it? Will we need new humans, or replace humans with machines? Is our behavior baked into our DNA?

    I can’t answer those questions here, but I can give you a very good reference which may put things in perspective. See Denis Noble’s book Dance to the Tune of Life, pages 51 through 56. Is DNA the Book of Life? The discoverers thought so, but it quickly became evident that it is not. For example, a caterpillar and a butterfly have exactly the same DNA. Humans share a lot of DNA with worms. And DNA changes its function in response to signals from the organism of which it is a part. Organs as distinct in function as bone and heart are made from largely the same chemicals.

    Noble says that the purpose of the organism constrains behavior at lower levels. In terms of thinking about a post-growth economy, we will still be using ordinary, fallible humans, but they will be constrained by an organization which puts limits and guides their behavior. At the present time, my argument is that it is the petro-dollar that is constraining our behavior. The crash of the petro-dollar will permit some other regulatory system(s) to emerge. Minimalists thinks it may be the emergence of a Chinese or crypto currency. But it seems to me more likely that we may revert to local sustainability in a world powered mostly by photosynthesis and passive heat and cooling.

    I also suggest that neither current “conservative” nor “liberal” politics is useful for finding the new equilibrium. Maybe something more like Anarchism?

    Don Stewart

    • I’ve become somewhat enamoured by Distributism as popularised by G K Chesterton and Hillaire Belloc,

      https://en.wikipedia.org/wiki/Distributism

      it’s rather a nifty compromise which is neither socialist or capitalist, wikipedia have entered it in their series on Libertarian Socialism, outside of elite circles it could be quite favourably received, elites would hate it with a vengeance!

    • Don, it is hardly surprising that a Caterpillar and the Butterfly it grows into have exactly the same DNA – they are the same animal at different life stages! Humans share a lot of DNA with every living thing – that is because we all share a common ancestor. We share about 50% with trees for example.

      I don’t think our behaviour is baked into our DNA. We only have to look at how archeological evidence suggests we lived in prehistorical times before the widespread adoption of fixed villages and agriculture. In my field, IT, look at the amazing amount of open source software, altruistically donated for free to anyone and everyone, that largely underpins the Internet. That suggests that we are not all selfish economic agents looking to always maximise our wealth.

    • Behavior is the result of the current situation being encountered by our cumulative experiences since conception of sperm/egg, plus heredity. That includes genes, microbiome, viruses, prions, and likely more about which I’m ignorant. Epigenetic switching occurs along the way. As far as science knows, all of this past is physical [energy-matter-information], and is embodied in life forms. As of yet, no ghost in the machine has been found which challenges this sort of determinism.

    • @Steven Kurtz
      I don’t see a ghost in the machine, but I think you may be missing the point. There is enormous potential for diversification, so there is no assurance that there is some pre-determined path for evolution to follow.

      A few quotes from Denis Noble:
      “the very concept of species does not have much sense at the scale of microorganisms”
      “the mechanism by which they incorporate DNA from their environment…seems to be an adaptation to stressful environments”
      “We and other animals and plants are made from prokaryotes, and we are still totally dependent on them. The cells in our bodies…arose from symbiotic associations”
      “We have to recognize that for the great majority of life lateral gene transfer made the tree of life into a network at its roots at least, but probably elsewhere too. Symbiogensis to create organelles like mitochondria and chloroplasts make parts of it look like a ring since formerly separate branches reconnected.”

      Debating about “free will” seems to me a waste of time. There is obviously a very wide range of options, even to a clumsy human. We are also gifted with the ability to react both quickly, almost without thought, but also with considerable weighing of the options. Whether, at bottom, we find God, or Newtonian determinism, or Quantum Mechanical randomness, shouldn’t demand too much of our time.

      Don Stewart

    • @Don S.
      You are missing *my* point. When I include the current circumstances, that includes everything you delineate in your reference! That PLUS the embodied history to date produces outcomes. It is impossible to know all the near infinite variables in complex reality. And if natural selection is at work, that is to be expected. No supernaturals. No soul. No disembodied self. (ghost in the machine) We are just a clever social mammal. Yet we see to be:

    • I should mention
      stay tuned at the end for the Q and A. Rees gives a very sober answer to what the best future we can achieve looks like.

      I should also mention that there has been a very recent discovery of a “food forest” on the northwest coast of North America. The trees are those which would have been planted as favoring humans. This helps explain how the early European explorers found flourishing and rather complex societies. But a “food forest” mentality is one that is able to take a long term view, achieved by successive generations.
      Don Stewart

    • Don,

      I’ve known Bill since we both presented at conferences in Toronto over 20 years ago. While he was still an active prof. at UBC, he couldn’t be as outspoken and realistic as during his retirement. (Emeritus) I was the first (& I think only) Yank admitted to CA Assoc for C.O.R. Two years later we moved to Ottawa, became dual citizens, but returned to New England when our son married a MA woman. (Grandkids are a strong magnet. Last year I joined the US Assoc. too. It had been inactive for over a decade.

  18. I should also mention…
    Rees describes his conversations with “green” organizations as consisting of them looking for ways to use him to further their particular political program…e.g., Green New Deal. They have no interest in a message which indicates that the Green New Deal is a waste of resources.

    Scientists are trained to look for counter indications. How might our best current theory be wrong, or at least not complete? The political viewpoint strikes me as “how can I get a bare majority to enable me to be part of a winning coalition?”. Showing up at a political meeting with Rees’ sobering message has never moved the needle.
    Don Stewart

  19. I think contraction or collapse will depend on the role of the “state”.

    As the effects of a rising ECoE cause a decline in discretional spending, big chunks of the economy will disappear. The resulting unemployment will need to be addressed. People will need a mechanism to access the essentials, if they can’t use the old method of selling their labour in exchange for money.

    A smaller but still intact “State” would need to facilitate a coupon/rationing system as I can see money’s “value” being too volatile as an effective means of exchange. (The Wiemar Republic’s hyperinflation, springs to mind).
    Only under these circumstances can I see a “managed” contraction being possible.

    If the contraction is left to “market forces” then we will get collapse. “The market” has no concern for human misery.

    • Hardship and insecurity have often been catalysts of political change. We shouldn’t overstate this – people have never rebelled because they can’t afford the latest gadget, or gone to the barricades because they can’t have foreign holidays. But real hardship is a powerful force for change. Likewise, asset price collapses, and slumps in rents or other incomes, can take away much of the power of elites.

      Optimistically, what’s happening now may provoke positive change, perhaps involving the curbing of excess and the promotion of the ‘mixed economy’ which balances the roles of the public and private sectors.

    • Dr Tim.

      I think that the public will only come to the right conclusions if they are given all the facts.

      My worry is that a Trump style politician will come along and deny the facts and promise the earth. There will be lots of people who will be willing to listen to that narrative rather than the real story.

      If even the “Green” movement don’t want to know, it’s going to be much easier for a right wing popularist to create a following.
      The real story will be kept on the fringes of public discourse.

    • Just to add.

      My views are a bit UK centric. I can see the “State” still having a central role here as the distances involved are small.

      In the US, I can see Washington’s role dwindling and local regions or States going their own way.

    • @John Adams
      I suggest that thinking in terms of US states going their own ways may miss some important considerations. Across the US, the urban areas have more in common with each other, and the suburban areas have more in common with each other, than either have with the rural areas in the states where they are located. An examination of county results from the last presidential election shows the divide very clearly in most states. Atlanta is not like Georgia and Houston is not like Texas in many respects. New York City is not like the rural upstate counties.

      As one example, I saw a headline yesterday from Houston saying that the passage of Biden’s infrastructure bill might finally provide the money needed to erect a sort of Dutch Sea Wall on the Gulf Coast. Does that sound remotely like the Texas politicians who claim that tjhey want to leave the Union? Or that Washington is the source of all problems?

      We have, in the US, huge concerns about “gluten intolerance” in food and “brain fog” in terms of mental functioning. The “brain fog” is supposed to arise from various causes, which gurus promise to cure. While there are undoubted a few bona fide cases of problems, this looks to me like mass hysteria. I agree that we have an abundance of brain fog, but I don’t think food is causative reason.

      I just don’t see the US being able to have a coherent political viewpoint any time soon. Rachel Donald’s current interview with Carl Safina includes a description by Carl of how the US is coming under the sway of religious thinking, replacing the practical politics which was characteristic of the Founding Fathers. While it may seem far-fetched, I suggest that a look at Leni Riefenstahl ‘s movie about the Nuremberg rallies in Germany in 1934: Triumph of the Will, may give some sense of perspective. I find it a scary time.

      Don Stewart

    • Don.

      I was really just thinking of the practicalities rather than the social dynamics on the ground.

      The “State” has a better chance of some form of overall influence in a de-growth world in a small geographical country like the UK.

      The vast distances in the US, for example, may favour a more localised form of organisation.

      (Those cities you speak of will empty out pretty quick when the energy crunch bites.)

    • @John Adams
      The people in rural areas are more dependent on fossil fuels than the urban areas. Note the Yellow Vest revolt in France. It is very common for people in rural areas to drive a hundred miles each day to get to and from work. Very few of them are engaged in subsistence farming. They also tend to do jobs which are very energy intensive, such as cutting down trees and trucking them to sawmills.

      What I expect is that:
      *There will be a lot of distress
      *Many people will die, getting down to Bill Rees’ prediction of a population of 1 billion
      *The survivors will re-invent subsistence agriculture and live in villages

      On the way to that future, my crystal ball is very murky. But I doubt that US States as currently configured will survive. What purpose do they serve that justifies the energy they require to function?

      Don Stewart

    • I’m largely in accord, Don. The old skills are rapidly disappearing with the death of boomer parents. Subsistence farming, fishing, hunting, gathering are practiced by a tiny % of humans today. They are best fit to survive the downslope.

    • On reflection, I think the UK will split into its constituent parts with Ireland becoming one entity again.

      The role of the Federal government in the US may well go. Maybe the old tensions between State and Federal never went away.

      You guys State Side probably have a better take on that.

    • The transition from 7 billion to 1 billion might not take that long.

      How long can humans go without food? A few weeks?

      If food supplies collapse, then it could all be over within a year.

  20. On a slightly different note.

    I’ve been leaving comments on a different blog, regarding the limitations of renewables due to their low EROI.

    After a few exchanges with the host of the blog, I was told that he would no longer post my views on the subject. 🙂

    The conclusions that people here have come to, are still unpalatable to people who can see that change is coming.

    It’s not just right wing reactionaries that have trouble with the idea of energy reduction.

    • Sad, but perhaps not unexpected? I’ve taught a seminar on (re)localization with a colleague for 15 years using the premise of energy descent (mine) and the urgent need for systemic reorganization (his). Lately, we have included readings from this blog in setting up our premise (and suggest that they buy Tim’s book). As a result, we occasionally get asked to present mini-versions to different groups on campus and in the area. Usually, we get a huge push-back, and being face-to-face with a Q&A period, we get into some serious debates. Early on these started to have repeated elements and so we have created a taxonomy of such. Nothing scientific mind you, but we have three categories of deniers of the energy descent premise. There are undoubtedly other categories we haven’t come across yet.

      (1) Direct – argue against significance of ECoE (or EROEI, or the food version). Citing other (usually older) metrics that suggest there is no problem (e.g., reserves-to-production ratio, history of success at reserve replacement) or citing rabid techno-optimism as a universal solution (an optimism that we see as having emerged simultaneously with the discovery of fossil fuels; funny that).

      (2) Instrumental 1 – their chosen solution (e.g., green growth of the GND, build out of renewables) to the several environmental crises being faced finds energy descent in general and ECoE in particular to be an inconvenient truth. Their deep and/or long term investment in their chosen solution makes it easier to doubt our premise than to alter their understanding/solution (this is very human of them, and of course it might also apply to us as aspects of our premise evolve). These folks seem to have the very best of intentions.

      (3) Instrumental 2 – their work within their chosen field-of-study is thwarted by the predicted decline of discretionary energy. For instance, those doing international environmental work, or whose research is located in distant lands, see the premise as a barrier to their professional contributions/advancement. They can become incensed from the assumed critique that their work is not worthy of privileged access to the needed energy (e.g., for travel, equipment, staff, field residences).

      We’ve thought about how to alter our presentations in anticipation of this push back. Often using the “what are the conditions under which they would change their ideas or behavior.” But he and I have lots of other stuff to work on, so we haven’t gotten far. And since their will always be laggards with nifty websites, it seems best not to be distracted. My own take on things is that, soon now, a local provisioning economy will be necessary for our survival. Best get busy on that?

      But I’m always looking for blog posts that do a great job of presenting the ideas worked out on this site (in terms of content) or a great job of hitting the right “tone” (in terms of domesticating our ideas) On the latter, Chris Smaje’s writing (smallfarmfuture.org.uk) often has a nice balance of practicality, vibrancy, and humility.

  21. I am curious how little mention there is in the blog and comments relating to demographics, demographic transition, aging populations, etc,
    Degrowth/contraction has been happening in Japan since 1989 when the number of over 65 year olds started to exceed the number of under 15 year olds. (Japan had no post war baby boom)
    Japan legalised abortion in 1948. Also Japan has minimal immigration.
    Europe reached the same demographic/economic tipping point in 2008, softened by immigration. This date, like in Japan, coincides with a 40 year interval after the widespread legalisation of abortion in Europe.
    Demography is a massive part of economic energy.
    Of course now we have the specter of a vaccine induced depopulation event which if it eventuates will create a massive discontinuity rather than contraction…..maybe that is the plan. Is it to plateau peak oil?

    • Despite the humor of your “specter”, you raise a good point. Demography does drives a large part of economic growth, but it’s not likely to make much of a difference, at least in time to alleviate environmental destruction. The gradual leveling off of population increases in the US, and western Europe and the decrease in population in Japan have resulted in a leveling off of carbon emissions from those regions, which is a good indicator of resource extraction, conversion and consumption. However, the same leveling off of population in China has been accompanied by its population becoming much more affluent and rapid increases in carbon emissions.

      Japan’s population peaked in 2009 and had started to level off even earlier, in the mid-1980’s, just about the time that GDP per capita started climbing rapidly. Since the population peak, Japan’s GDP per capita has drifted up at about the same rate that it’s population has declined, resulting in very little growth for Japan’s economy, but also no degrowth. Japan’s GDP in constant prices has actually increased about 30% since 1989.

      All-in-all, demographic changes in modern countries look like they will result in plateauing, not rapidly falling, economic activity, which means that the “demographic transition” won’t reduce overshoot and will at best slow its growth. In order to get the rapid rates of degrowth we need, I think that the global market economy will have to cease functioning. Unfortunately, neither the ongoing pandemic nor the ‘vaccine apocolypse’ (ha ha) have done the trick. I’m placing my hopes in a global financial crisis.

    • A couple of thoughts. First, SEEDS indicates that Japanese prosperity per capita has been declining, albeit very gradually, ever since 1997. Any apparent “growth” in GDP since then has reflected enormous QE and rate suppression, with more than half of all JGBs now owned by the BoJ.

      Second, I think it’s about getting the right kind of financial crisis. With the financial and the real economies now so far apart – and with the cost of essentials, as well as inflation generally, taking off – some kind of major correction is a given. My benchmark here is 35-40% ‘value destruction’.

      Ideally, a slump in stock markets would take out the speculative ‘fluff’ whilst leaving solid companies intact, albeit at lower valuations, and with greatly reduced access to new capital. Falls in property prices would take out the ‘petit rentier’ slice whilst leaving ‘ordinary’ households in decent shape.

      Initially, as in 1987, 2000 and early 2020, everything will fall at roughly the same rate, probably over-cooking the necessary correction and without much discrimination.

      The real problem is debt. Aggregate asset valuations are purely notional, in that they are incapable of monetization. In this sense we don’t “lose” X trillion when markets crash.

      Traded debt can be regarded similarly, a least in so far as it trades at a premium to book. Underwater mortgages could be converted to tenancies, reducing the need to book write-downs and impair lender balance sheets.

      My fear is that the authorities – who, as I see it, don’t understand reality as we discuss it here – will try to prop up everything. This is what they did in 2008-09, with disastrous consequences.

    • The ‘crux’ on any countries demography chart is the date where the line showing population of under 15 year old crosses the line showing the population of over 65 year old. The total worker/dependency ratio might be the same BUT at this point the energy goes out of the system and becomes emotionally moribund. It truly seems to be the marker denoting the closing of the demographic dividend window.

  22. For those of you interested in following supply chain disruptions, I just learned via the Confounded Interest blog that “Kuehne+Nagel International AG last week launched its Seaexplorer disruption indicator, which the Swiss logistics company says aims to measure the efficiency of container shipping globally. It shows current disruptions at nine hot spots is hovering near “one of highest levels ever recorded,” with 80% of the problems happening at North American ports.”

    The index is available only to registered users of seaexplorerDOTcom. See today’s {1/24} Confounded Interest blog for a copy of the current chart as well as info about other supply trackers.

    the Kuehne+Nagel indicator reports a twenty-foot equivalent unit (TEU) waiting time of 11.56 million days at all ports, about 9.2 million days of which are at North American ports.

  23. Thank you, Dr Tim for another important essay highlighting that age old oxymoron “Sustainable Growth”. What is never adequately defined is what it actually means – sustainable for whom?

    Someone else who has been musing along the same lines is Art Berman. His latest can be found here:

    The Climate-Change Trip to Abilene

    • Thanks.

      I’ve been making lists along these lines;

      – What we know (based on our understanding of the ‘two economies’ and the energy basis of prosperity)

      – What we can reasonably infer based on this knowledge

      – What remains in the realm of speculation.

      Plus:

      – What the consensus thinks it knows (most of it mistaken) – this is where “sustainable growth” fits into the lists.

  24. According to The Guardian this morning, thousands of management jobs going at Unilever and Royal Mail. Delayering is well under way.

    • Indeed – de-layering is going to eliminate huge numbers of white-collar jobs, and lots of intermediate/intermediary businesses, though i doubt if even the biggest corporate players really understand this yet.

    • So, lots of “customer shortages” will be created then. Double whammy. Rising cost of essentials plus rising unemployment.
      At some point the customer shortage will adversely affect economies of scale that were built based on on widespread purchases and use..

    • As populations get older there are fewer people of working age to do the essential work needed. But there are also going to be fewer and fewer jobs around for working age people as everything gets automated. And both appear to be major problems. I’m confused.

  25. Pingback: #220. The human factor – Olduvai.ca

  26. @Dr Morgan,

    I hope very much that you produce an article about the impact of de-growth on businesses. It will be a most worthy contribution to your ongoing analysis. I can tell you as someone who’s still active in the business world; they are just as unprepared as government and the population at large.

    In business, there’s a tendency to think that new technology is the answer, and will be for evermore. That’s understandable, because over the years, the capital inflows into technology have tended to pay back handsomely. Automation in the industrial sector slashed the blue collar payroll for many companies. Now it’s the turn of white collar workers to be replaced by so called AI bots. The masters of capital have found a new opportunity to remove labour from the business world with the mass roll-out of white collar automation. The digital revolution is inherently another “POPing” exercise (PEOPLE OFF the PAYROLL). This is driven purely by the profit motive, and when we now superimpose the additional threats to white collar jobs from economic de-growth, it’s easy to imagine huge swaths of the middle class being wiped out and washed away. Where will they go? Eventually, back to the fields and other manual labour I suppose, but in the interim period the risk is they become lost souls amongst a rising tide of unemployment.

    It seems to be a little odd painting such a picture when many companies are screaming “labour shortage”. What a strange world it is at the moment. Transition phases are always full of unclear and contradictory signals, and are surrounded by a whole load of noise. Eventually, all will become clear to even the most myopic spectator.

    • People going back to the land
      I went back to the land in 2007. I correctly anticipated the financial debacle and wanted to get a reliable source of food. So I found a small farm nearby and started working there part time. 1 day of work got me about a week’s worth of food. I learned many lessons, from seed saving to how difficult it is to operate a commercially successful small farm. Let me just share one lesson, which may make it clear that looking at the financial precariousness of existing small farms is not a reliable indicator of how valuable even a vegetable garden or a plot of potatoes might be going forward.

      Way more work (both human and fossil fuels) is expended in getting the farm products sold to consumers than is expended in producing the products. On the farm itself, I frequently took home a lot of “uglies”. These were perfectly edible but were not the sort of visual appearance that people would buy at the farmer’s market. And the farmer’s markets are a pain in the ass. Fresh produce is incredibly difficult to preserve in the heat of summer at a farmer’s market. On the other hand, it is incredibly easy to go out to the fields and gather lunch and bring it back and quickly prepare it and eat it at a picnic table under a big tree.

      I found that all of the social stratification melted away. All of us were in the same boat, pretty much. As the financial crisis unfolded, many college graduates came to work in order to feed themselves. The ones I worked with were incredibly optimistic and enthusiastic workers. We even had a military intelligence officer working alongside everyone else.

      I could tell stories for a long time…but you can get the main points I want to make.
      Don Stewart

    • I’m starting to put together an article about business and de-growth.

      As part of this, I’m going to address where inflation goes from here.

      I’m inclining to the view that, intentionally or not, the authorities will be complicit in much higher inflation.

      I cannot see CBs raising rates by enough to prevent it. At the same time, though, I can’t see them presiding over a situation in which the rising cost of essentials imposes severe deflationary/contractionary effects on discretionary sectors.

      This might merit an article to itself.

    • Dr. Tim,

      There are few in the billionaire elite who have a clue. Jeremy Grantham (83) is one. from the linked article:

      “…the growth of the past century in pursuit of ever-higher standards of living left depleted soils, poisoned ecosystems and a changing climate, he said. That’s why wildlife is disappearing, biodiversity is in jeopardy and human reproductivity is slowing.”

      “We have simply shot way beyond the long-term capacity of the planet to deal with us,” said Grantham, who operates a $1.5 billion foundation to protect the environment. “Nature is beginning to fail. And in the end, if we don’t fix that, we begin to fail as well.”

      https://finance.yahoo.com/news/jeremy-grantham-even-scarier-prediction-130000203.html

    • “I went back to the land in 2007. I correctly anticipated the financial debacle and wanted to get a reliable source of food…”

      I had a small farm for a while. In my experience, raising most vegetables and such was a waste of time and effort. The resources in v. the resources out just never added up. Other situations, in other places, may add up differently, don’t know. I was in Southside Virginia.

      Raising animals, animal husbandry of all sorts, however, did make some sort of good sense, especially for personal consumption. For example, I started with three small pigs, maybe 45lbs each. With a little time and some inputs, and some minimal efforts, I ended up with 3, 400 lb monsters. One ended up in the freezer. The other 2 got sold off at a live auction for a small profit. Trying to butcher and sell the meat and such on the open market is difficult, to say the least.

      Chickens. I started with maybe 10 chickens and a few roosters. Before I knew it, I had maybe 50 chickens, buckets eggs, way more than I knew what to do with (fed many to the pigs), and more roosters than I could kill and fit into the freezer.

      I could tell similar stories about goats and sheep.

      Very little of this could be turned into cash. People can still go into the local grocery store and buy a dozen eggs for $1.50. Just yesterday, the local grocery had had whole cleaned and packaged chickens on sale for $0.99/lb. I bought two and put them in the freezer.

    • @davelysak
      I am also a nutrient nut. I know that some leafy greens harvested from a field that has been subjected to mild stress from predators and which I promptly eat with minimal processing is one of the keys to good health. So my goal is not so much “maximum pounds” or “maximum money” as it is “maximum sense of thriving”. I always figured that buying dried grains and beans which are easily transported would be an essential source of calories. The problem with large animals is that they require one of two strategies:
      *Have a village feast to eat it all before it rots
      *Have the accoutrements of civilization such as freezers and electricity
      Chickens for eggs makes sense. My daughter has backyard chickens for that reason. She pays attention to the chickens so that the eggs are as nutritious as possible.
      Don Stewart

    • @neill61
      I have followed the work of some of the leaders of Permaculture, such as the work on water retention structures and David Holmgren’s work on “sustainable suburbia”. I never subscribed so much to the “design” priority, mostly because my method is to start and then refine as experience accumulates and my slow brain develops modifications. I was an early convert to the centrality of the carbon based economy in the soil, which I don’t think the early pioneers of Permaculture really understood.

      It was easy for me to detect two particular weaknesses of the farm I worked at. First, the water just ran downhill, resulting in soil erosion followed by drought. Second was excessive plowing, resulting in depletion of the carbon economy and disease and pests. The first was clearly related to the pre-Permaculture work by Yeomans in Australia (but which I had also seen as a child growing up in the period after the Dust Bowl in the American Midwest). The second came out of the microbiology revolutions of the early 21st century.
      Don Stewart

    • Don and all,

      My wife (kicking and screaming) and I left our 1000 sq ft Manhattan apartment in 1990, moving to our much larger country house in SW NH. We had owned it for a few years, and had installed around a dozen raised bed gardens for vegetables. The soil was good as it had been a sheep farm in the 1800s. We added drip irrigation, and used the no-till method, mulching with grass clippings and some chopped tree leaves bagged when we mowed. A permaculture chap helped me set it all up. There were huge berry stands, and some fruit trees. I learned how to prune raspberries, blackberries, blueberries(very lightly), apple and pear trees, and grape vines. (red & blue) We added gooseberry, hardy kiwi, renovated an asparagus bed, added potatoes…It was a fun decade. But then, at 55, we sold it and moved to Ottawa. Now I wish I still had the place, but with 125 acres (mostly forest), it was a lot of work. I cut standing dead for firewood, burning around 5 cord each winter, along with some oil.

      I’m nearing 77, and am not about to start up again. Our son is a professor of sound recording and his wife an MD. they have 3 boys, and no interest in a farm.

    • “energyskeptic says:
      March 24, 2015 at 3:47 pm
      The main issues with nuclear reactors are their capital cost and long time to build, the odds are good that since they’re all ageing there will be more Fukushima’s and breakdowns, turning the public against their use, and above all, no where to store the waste. Plus nuclear is baseload power and doesn’t ramp or down quickly enough to match demand, which will bring on a blackout (no problem now but a big one when natural gas runs out). But that’s not the real issue – the real issue is that transportation depends nearly 100% on oil, and that transport that really matters, freight, runs on diesel fuel and their combustion engines can’t burn anything else, and coal and natural gas are near their peaks as well, and there isn’t enough biomass to make a significant amount of diesel from biomass. The thousands of suppliers for a nuclear generator won’t be able to ship, truck, fly, or send their components by rail to the building site, the workers won’t be able to get there without cars – civilization ends when transportation stops, especially trucks.”
      http://energyskeptic.com/about-energyskeptic/

      ??????

  27. Here is a Good Twitter post referencing some recent research on polarization and how to avoid it

    @kurtjgray
    ·
    Jan 25, 2021
    Our new paper at
    @PNASNews
    .
    “15 studies show that we misunderstand how to bridge divides. We think that using facts in political/moral discussion should foster respect. But it’s personal experiences (esp about harm) that best bridge divides. ”

    In terms of politics, what seems to motivate the politically active is finding a coalition which can force through its agenda…e.g., Green New Deal or America First.

    But anybody who is married knows that the cost of forcing something is frequently more than whatever the victory was worth in the short term.

    Now here is a sticking point in terms of persuading someone to do something because you and I think that the energy cost of energy is increasing and threatens civilization as we have known it for the last couple of hundred years.

    As I said just a little ways up the blogroll, I saw what depleting the carbon stores in the soil could do to a farm. I don’t need much more convincing. But how can I persuade somebody who has never seen energy depletion at work? And that accounts for the vast majority of business and political leaders. It’s probably easier to persuade energy scientists and executives, which is why all those people were active in the Peak Oil movement. They obviously tried to maneuver things for the benefit of their companies and their careers, but few of them ever said that cheap oil was infinite.

    I’m not on solutions in this post…just pointing out the problem with what I hope is some specificity.
    Don Stewart

  28. @ D. Stewart

    *Have a village feast to eat it all before it rots
    *Have the accoutrements of civilization such as freezers and electricity.

    Yes, these are points that can largly be overcome by herd management of various sorts. Some ways are: culling, both old and young, selective castration, sexual separation, trading and bartering of animals (requires a social network), etc. Currently, excess stock pretty much goes to the auction. (Auctions, as they currently operate, require most existing infrastructure to be in operation. But, could easily be reconfigured to serve a lower energy situation. I’d say.) There’s always someone who’s willing to buy, if the price is right.

    I know that I had envisioned a self-perpetuating flock of “free range” chickens and other fowl. For a number of reasons, this did not work out at all as I had envisioned.

  29. I came across this article on the BBC website today on quantum computing. The tone of the article suggests this new frontier in technological complexity, will benefit criminals and malign state actors rather than ordinary citizens of the world. I noted that the technology is expensive and generates lots of heat, which of course means high electricity consumption. Don’t these guys in white coats realise there’s an energy crisis?

    On a more positive note, I wonder if a breakthrough in Quantum computing could lead to the realisation of commercially viable nuclear fusion technology?

    https://www.bbc.co.uk/news/technology-60144498

    • all a quantum computer does is run a program very quickly,
      the program is the important bit, a computer might be fast but it’s only as smart as the people that programmed it.

      when you mention criminals and malign state actors I can’t help thinking of our governments!

      the real problem with IT is that it’s energy and material resource footprint is growing exponentially, vastly outstripping any improvements in efficiency,

    • A friend of mine once took an apprentice to do some work in an empty house. The apprentice suggested putting the kettle on to make a cup of tea. My friend told him that the power was off. The apprentice said “I know, but there might be enough left in the wire” The lad probably became a tech genius.

    • Government is an issue that we might discuss here, if we can avoid the politics of party and personality.

      Western government seems to be deteriorating, most visibly in supression of free expression, and the use of coercion.

      These seem characteristic of governments feeling insecure or threatened, typically by forces that they cannot control.

      In the present instance, this might be connected to the onset of de-growth, which they may be aware of, without necessarily understanding why it’s happening. There are no easy answers, when the worst off are suffering hardship and the better off resist any sacrifice that might be necessary in support of the struggling.

      If you’re in government now, do you tell the poor/average citizen that you can’t help him or her with the cost of living; or do you tell the better off that their affluence is going to be reduced? Do you, for instance, tackle inflation using rate rises that reduce stock and property prices?

    • a mechanic I know said he’d called out to their new apprentice from under a car and asked him what time it was,
      the apprentice replied ” I dunno”
      my friend said “what do you mean ‘I dunno’ there’s a clock on the wall”
      the apprentice replied “yeah.. I know, but I can only read digital!”

      kinda scary considering his generation will be servicing self driving electric cars.

    • Neill61 asks, “On a more positive note, I wonder if a breakthrough in Quantum computing could lead to the realisation of commercially viable nuclear fusion technology?“

      No. The factors that make nuclear fusion very hard and makes the only viable fusion research take a huge and expensive scale has nothing or very little to do with faster calculations. There are physical constraints that make it impractical such as the massive amount of neutron radiation produced which breaks down the containment vessel..

  30. Hi Tim,

    On the issue of government and paying for government services, I find the recent situation in the UK in terms of the funding of heath and social care interesting.

    Diminishing prosperity must have an impact on peoples ability to pay for the provision of public services via taxation, despite their stated desire to have the state provide the very services that they are increasingly likely to no longer afford.

    As I see it, many government and particularly opposition politicians and trades unions have been campaigning for years for increased spending on health and social care.

    The UK government has now said they will spend more and have set out how it will be funded.

    The realisation that increased public spending was going to result in increased taxation seems, to many, to be a surprise.

    Surely no one expects ongoing public service provision, like health and social care to be paid for from borrowing, which should, only I assume be used for investment?

    Do you think, in the future we are likely to see more services provided by the state or less?

    • the problem with healthcare is the NHS is being neo-liberalised and sold off bit by bit, they have to under fund it to prove it doesn’t work to then justify selling bits off, rinse and repeat,
      it’s the last major remaining asset other than the BBC and they’ve been slowly neo-liberalising and privatising that too,
      they’re two national jewels the British public are very attached to so it’s all having to be done by stealth and deceit,

      John Pilger did a film about “The Dirty War on the NHS”

      http://johnpilger.com/videos/the-dirty-war-on-the-nhs

      Britain isn’t poor, enough money could be raised to do pretty much anything sensible required, it’s just they don’t want to, that’s not how neo-liberalism works, you’re supposed to sell off and privatise everything creating revenue streams, loot the entire country and stash it off shore away from the tax man,

      what was the top rate of income tax in the UK in the 1960’s and 70’s? what has changed since then, the prevailing political and economic orthodoxy.
      have you seen the bizarre financial shenanigans local authorities are up to these days to fund themselves?

      https://www.theguardian.com/society/2022/jan/15/austerity-hit-council-defends-its-high-risk-investment-strategy

    • One can look at “neoliberalism” in one of two ways. Politically, it’s open to the accusation that it skims profits for a minority at the expense of the majority.

      My preference, though, is to look at it, not so much politically, but as an economic ideology, and one that doesn’t work. It doesn’t even make sense in a growing economy, still less under conditions of de-growth. The failure of extreme economic liberalism doesn’t mean that extreme collectivism would work.

      Extremes have seldom served us well.

      I make no secret of my preference for a ‘mixed economy’, which blends the best of public provision and private enterprise.

      It’s becoming clear that the era of a ‘globalized’, ‘corporatist’, ‘financialized’, or ‘ultra-liberal’ system is drawing to a close. This is bad news for those countries which have ‘bet the house on’ its continuity.

    • The short answer, as I see it, is that governments will provide fewer services than they do now, but the public sector will shrink less rapidly than the private sector. This is what decreasing prosperity, and the rising cost of essentials, is likely to mean.

      No government wants to concede that growth has ended, and has gone into reverse. They may not even understand this reality. SEEDS indicates that the inflexion-point in prospeity per capita occurred in the UK in 2004, and in the US in 2000. Since then, we’ve created activity without adding value and, depending on what we include, have added, globally, anywhere from $3 to nearly $10 of forward commitments for each $1 of “growth”. (SEEDS produces each of these figures individually for countries covered by the model).

      There’s a limit to how long this can continue. Governments get flak whenever they cut services or raise taxes. Many believe, mistakenly, that we can ‘fix’ this with wealth taxes (which wouldn’t work, as most wealth isn’t in monetized form).

      In the near term, I don’t see governments taking the tough, unpopular decisions imposed by deteriorating prosperity, which means rising debt, increasing monetization of this debt, and inflation. Any government or CB can sound virtuous, until large and/or influential groups get angry. St Augustine, after all, asked the Lord to make him virtuous – “but not yet”.

    • Hi Matt,

      You say that, “Britain isn’t poor, enough money could be raised to do pretty much anything sensible required, it’s just they don’t want to,”

      My point was that the government rather than not wanting to have said that they are going to, by increasing tax on employers and employees. We’re told that raising this money is going to cause a cost of living crisis.

    • Britain might not be poor, but is certainly getting poorer, and has been over a lengthy period.

      At constant values, GDP increased by £410bn (24%) between 2000 and 2020. Over this same period, debt increased by £2,820bn (+97%), or £6.90 per £1 of growth. Broader financial assets grew even more rapidly over these years.

      Yes, 2020 was adversely affected by the pandemic, but the figures are not that dissimilar if we use 2019 data instead.

      SEEDS calculates that aggregate prosperity declined slightly (-1%), and prosperity per capita fell by 13%. Debt per person increased by 73%. Unless the UK can find non-British buyers for the entirety of its housing stock – and even then, ‘live where?’ and ‘pay rent to whom?’ – the ‘rise in asset values’ cannot be monetized, so provides no real offset at all.

      Government spending rose by 83% in real terms between 2000 and 2020. Public spending rose from 34% of prosperity to 63%.

      I’m still working on how to make these figures (for all economies covered by SEEDS) available here. The UK situation isn’t unique, but it’s pretty bad.

    • Britain does seem to have bet the farm on neo-liberalism,
      I know it’s just an economic ideology but it’s been so enthusiastically grasped by the political class that it’s become the nostrum for all ills,
      there is barely any difference between Labour, the Liberals and the Conservatives, they all want to win votes by increasing the economy and roundly agree that more neo-liberalism is the only way,

      it’s staggering how the entire political establishment and media will turn on anyone suggesting anything different,

      for a tree to survive it has to be flexible, bend with the wind, otherwise it will snap.

      consider the national response to the challenges of WW2, a coalition govt. was formed, incompetence could no longer be justified or tolerated, conspicuous consumption was considered distasteful and frowned upon, rationing was introduced to ensure everyone got the essentials, the wealthy and well to do allowed their grounds and estates to be used for the war effort with little complaint, everyone was encouraged to produce something of benefit, scrap metal collection, digging for victory, small businesses producing war materiel, there was full employment, wage controls, everyone stepped up to do their bit, I believe our current Queen was trained as a driver and mechanic in the Auxilliary Territorial Service,

      it shows how rapidly things can change when the entire nation is galvanised by a perceived external threat and rises to the occasion,
      we are currently faced by multiple external threats, the energy cliff, financial chaos, climate change and a realigning geo-political order,
      we all have an interest in weathering the storm of crisis, change doesn’t have to be permanent, it just has to suit the prevailing conditions, burying our heads in the sand won’t make these problems go away,

      the coming storm is going to hit all the advanced economies of the West at the same time, jumping ship won’t help, appealing to other countries for aid and succor is unlikely to succeed, we’ll have to batten down our hatches and ride this storm out, leaving everything to the last minute is a very risky approach.

    • Ladydog70.

      I’m of the MMT persuasion when it comes to describing public finances.

      It seems illogical to me that Governments (with a central bank and currency) tax first and then spend. How does the money first get into circulation?

      It makes more sense that government spends the money, only IT can create, and then taxes it back out of the economy again later. The taxes are used to destroy/remove money from the economy so that the government can continue to spend/create more money on the services it provides. Without taxes, the amount of money in circulation would become too great leading to inflation.
      Taxes also create a demand for the currency. Try paying your taxes in anything other than the Treasuries Central Bank Reserves. You can’t (for a reason)

      If the government has the monopoly on money creation (try printing your own money and see how long it takes before you end up in jail) why does it need to “borrow” the very thing that only it can create?
      What a government is doing when it “borrows” is to offer people/institutions a place to save that pays interest. The government offers this facility to create stability in financial markets and to remove money from the economy (temporarily, 10, 20, 30 year bonds). This again allows the government to spend/create more money into the economy.

      The national debt is the difference between what a government spends into the economy and what it taxes out.
      What’s left (the national debt) is credit that sits in people’s tax accounts.
      For a government to pay off the national debt it would need to tax out every penny of savings out of the economy. Why is this such a good thing?

      This all is reliant on an ever expanding economy. The government can afford to not tax out exactly what it spends in because an expanding economy can absorb the money left in the economy. In fact an expanding economy requires that the money supply expands as well. The trick is to control by how much.

      Of course, in a de-growth situation, non of this will work any more. As the economy contracts, so must the amount of money in the economy. The government will have to tax out MORE than it spends in!

      I can’t see how money in its present form can function in a de-growth economy.

  31. Can Biology Suggest Something About Government?

    I am reading Denis Noble’s book Dance to the Tune of Life: Biological Relativity. He attacks the Neo-Darwinian synthesis, pointing to a much less restrictive system of evolution allowing faster response than waiting for random mutations. On page 200 he describes Barbara McClintock’s work which was roundly dismissed, but which got her a Nobel at the age of 81. She wrote an article for Science which stated:
    “In the future attention undoubtedly will be centered on the genome, and with greater appreciation of its significance as a highly sensitive organ of the cell, monitoring genomic activities and correcting common errors, sensing the unusual and unexpected events, and responding to them, often by restructuring the genome. We know about the components of genomes that could be made available for restructuring. We know nothing, however, about how the cell senses danger and instigates responses to it that often are truly remarkable.”

    In a nutshell, the NeoDarwinian synthesis frequently gets things wrong. We are not dealing with “selfish genes”, we are dealing with cells and organisms which want to survive and, when they sense danger, diversify. We can think of it as people who have been pushed out of their comfort zone doing things they would not do absent the stress. I first became aware of this about 10 years ago when a microbiologist I knew made some compost and, instead of using it as soon as the pile was “cooked”, waited a full year. This was during the early phases of practical genetic testing, but he had a connection to one of the National Labs which did the testing for him. As the microbes depleted the carbon in the leaves he was using as the feedstock for the compost, the microbes diversified like crazy…apparently looking for some combination which might survive the crisis.

    What lessons might this suggest to us in terms of how governments and businesses and ordinary citizens might react to the crisis provoked by a decline in available energy? I suggest:
    *Nothing will happen without feedback. Obscuring feedback with financial legerdemain is counterproductive.
    *In response to stress, both businesses and individuals will try out a wide variety of responses, looking for those which might work.
    *Governments seem to be congenitally resistant to bottom-up experimentation. Governments pursue standardization. We have seen this in spades during the Pandemic. Any movement outside the narrow channel of approved vaccines has been repressed. While the currency which moves the public and businesses is relief of stress, what moves the governments is the level of control they can exert.
    *There may well be no solution for individuals and businesses which involves a “next generation” energy system which provides even more available energy than fossil fuels. So the hope for the future will consist of more intelligent usage of low density, but hugely extensive, solar energy plus careful usage of remaining fossil fuels.
    *The bulk of current institutions may simply not be up to the job. Diversification is likely the best choice along with the best feedback loops we can devise. Think like compost.

    Don Stewart

    • Hi Don.

      I’m not sure that biological evolution and government/cultural shifts are the same thing or are governed by the same forces.

    • @John Adams
      Consilience, which was championed by the late E.O. Wilson, argues that scientific principles can hold across many different subjects, especially if they are in the same layer. So, for example, we might expect quantum effects at a very low level which might not be important at a higher level. One can make the case that both single celled organisms and economies and governments perform many of the same functions, so are in that sense on the same level. They are all open systems, taking in energy and resources and creating entropy which is eliminated as waste. They all seek homeostasis or a sense of thriving. Therefore, it would be surprising if they behaved in radically different ways. One can argue that economies and governments and individual humans SHOULD have more wisdom, but I suggest that the wisdom comes mostly from experience.

      For some support for that last statement, you can consult this interview with Lisa Feldman Barrett, a widely cited neuroscientist:

      216: Seven and a Half Lessons About the Brain by Lisa Feldman Barrett

      I think that what makes problems such as resource depletion or overshoot so hard to deal with is that most people have no experience to guide them, so they continue to plow ahead with behavior that is leading to disaster. As I said earlier in this blog roll, I saw on a small farm what were the consequences of both carbon depletion and climate change. So it is much easier to convince me that both are very serious problems indeed.

      Don Stewart

    • Hi Don.

      Interesting article.

      I would question her assumption that the primary function of a brain is to regulate the systems of the body.

      I prefer Giulia Enders’ explanation in her book GUT. She says that brains evolved to allow organisms to move. Every other brain function stems from this evolutionary trick. Movement.
      The more complex our processing/senses of external stimuli, the better able we are to avoid hazards and increase our chances of survival.

      I’m still not convinced that society is an organism in the way that individual creatures are. Specially with humans. Perhaps and ant colony may get close.

      Just because they may appear to have similarities, that doesn’t mean that the study of organisms will explain the actions of societies.

      I’m reading through

      The Dawn Of Everything
      By David Graeber and David Wengrow.

      One of their main points is that humans have throughout history, consciously changed the way the organise in groups. Sometimes choosing to return to earlier forms of social structure.

      The reason that we can’t do this at this present time maybe is because society is more complex than it has ever been and there are vested interests that don’t want the truth out there.

      I still have faith that if people (not all perhaps, but enough) were told the truth of our predicament, change would happen.

      The “cost of living crisis” unfolding here in the UK is perhaps a shift in the public discourse. I can but hope.

    • Barry.

      Interesting times ahead! Whatever the government does, it isn’t going to help.

      Tackle inflation with interest rates and people default on their loans.

      Leave inflation to do it’s thing and people find it harder to pay for essentials and discretionary spending takes a hit leading to unemployment.

    • I can’t see the authorities accepting the asset price slump and defaults that go with raising rates by enough to curb inflation – or accepting the squeeze on discretionary sectors implied by the rising real cost of essentials – or simply accepting the political results of being seen to do nothing about the “cost of living crisis”.

      I hope I’m wrong, but this does seem to point to ‘subsidize, borrow and print’.

    • If the inflation is caused by supply chain disruption or EROI of oil declining, then interest rates will not be able to stop it.

      The only way is to get the supply chain moving again or find some more “cheap” oil.

      Reducing people’s access to money/loans isn’t going to create more oil.

      But it might pile on the pain for people.

    • it’s arguable that higher interest rates could help depress demand for non-essentials. If production of discretionaries is reduced, so is the use of energy, easing some of the pressure on supplies.

    • Dr Tim.
      Yes. That is true, but by reducing discretionary demand through interest rates, there is going to be a lot of mortgage defaults and unemployment.

      A declining EROI is not going to stop. A drop in energy demand in the discretionary sector may slow the increase of energy prices in the short term. But it can’t reverse the trend.

      The shit will really hit the fan when a falling EROI starts to bite into the essentials sector.

  32. @John Adams
    For a very broad view of subjects which invite a “Consilience” viewpoint, IMHO, take a look at Rachel Donald’s current interview:

    https://www.youtube.com/c/planetcritical

    “Follow the science!” This value-neutral field with its objective logic and cold reasoning is our beacon of hope in an ecological crisis. But should we celebrate its lack of values, or is it time to shift our scientific paradigm?

    That’s the argument of this week’s guest, ecologist Dan Fiscus, who says the very nature of science as value-neutral is a driving force in the climate crisis. He argues science will never be able to tackle the scale of the problem posed by the climate crisis until we infuse the field with ethics.

    It’s a fascinating proposition. Dan explains how the modern paradigm is ROAM: Reductionist, Objectivist, Analytic and Mechanistic. He describes its failures to understand and treat the environment as inseparable from Life, and proposes a new paradigm for the future.

    Back to me. Near the very end of the interview, Fiscus reflects on how the very conservative rural people in western Maryland, where he grew up, are simply unwilling to talk about systems malfunction subjects such as climate change or ecological overshoot. How is it that these people that he grew up with, and he himself, have come to such divergent positions? And my suggestion is that Fiscus has had extensive experience actually looking at systems collapse and he understands from education how human life is totally dependent on non-human life, which is heavily dependent on a stable climate. But most of these “rural” people are now deeply immersed not in hunting and farming, but instead are truck drivers and loggers and similar occupations, and many are deeply in debt and don’t have the luxury of taking a broad view which might incite them to self-destructive behavior, such as opioids.

    Interestingly, at the other end of the social spectrum from the loggers and truck drivers, Denis Noble also expresses his dissatisfaction with the disconnection of science from any sense of values. One of Fiscus’ heroes is Aldo Leopold, author of A Sand County Almanac. Leopold also came up with a “life affirming” set of values. Leopold had a day job at the University of Wisconsin plus his experience of working with his hands on his worn out farm, bought on the cheap because it was worn out. In a way it is tragic to see the people who have the experiences which have educated them to understand the dynamics…but who are unable to connect with the great majority. The few, such as Extinction Rebellion, who seem to be allies are, I predict, fair-weather friends who will promptly abandon the cause once they really understand the consequences.

    Don Stewart

  33. I think that saying some group of people can’t see the “big picture”, are not “system thinkers” because of this or that set of circumstances, is really missing the point. People, in general, cannot and will not understand their (less than miniscule) place in the universe for some real good, biologically driven reasons. To cut to the chase, they, except for a few freaks here and there, could never stand the psychological strain of being a bit of genetic flotsam and jetsam.

    Zapeffe talks about this, and the coping methods in use, in his essay “The Last Messiah”. Feud talks about it in “Civilization and Its Discontents”. This phenomenon has also been fleshed out in terms of genetic theory, Agit Varki and Danny Brower, for example.

    My own thoughts run along the lines: No one ever said that a dissipative structure cannot have a personality, that must be satisfied. But that personality is still in service of the Maximum Power Principal, just like all other bits of matter.

    Something like that…

    https://philosophynow.org/issues/45/The_Last_Messiah

  34. There’s a guy on the internet, who used to run a blog called “Megacancer”. I know him only as James. Anyway, the analogy he used, and I thought was apt, was one of humans as RNA. RNA’s basic function is to make enzymes to attack and reform various substrates in the body. The basic function of humans is to make tools (enzymes) to attack and reform substrates in the world.

    That “is” the system.

    • Dave, don’t bore the world with reality, the ROI in dopamine terms is negative and the associated anxiety is to be avoided. The most desirable reality is a rewarding one, like becoming a specialized RNA by acquiring and using specialized knowledge to do something like create a new tool to unlock additional energy. The day-to-day reality of “making money”, consuming and preening a hirsute head is all the reality most human dissipatives need. The metabolism marches onward unabated towards its sputtering destiny. Let no idea stand in the way of destiny.

  35. Rachel Donald’s Experience and her Changes

    I find Rachel’s journey to be fascinating. She has started following up her interviews with provocative people with a relatively short monologue on what she took away and how she is changing her perspective. I suggest that her approach is similar to Lisa Feldman Barrett’s actions in her own life and her advice given in interviews.
    Don Stewart
    PS. At my age, it is also nice to see really smart young people.

  36. @John Adams
    Re: Lisa Feldman Barrett and Movement
    Lisa says that the two most metabolically expensive things a brain can do is move our body and learn something new. Regarding movement, the preparation of the body’s systems by the brain to get us out of bed without falling over in the morning is an amazing process. in terms of metabolic cost, deciding that it is Monday and I really do have to go to work costs a lot less than preparing all of the different body systems required to execute the move.
    Don Stewart

    • Hi Don

      I think that we have “retired” much of our brains evolved functions.

      I hardly use my senses as “designed”. My sense of smell, taste, hearing are mitted. I shut out sounds and smells in particular. I think, as hunter gatherers, these senses would have been acute and integrated with eachother to give a much “fuller picture” of the world “outside”.

      I think a lot of that brain function has been “piggy backed” onto by our “scientific” thoughts. After all, our very complex brains did not evolve to do algebra. The brain evolved to process information from the outside world via our senses and then move/react accordingly.

      I think this is the primary function of the brain and yes, it takes a lot of energy to perform.

  37. Hi Tim

    I know it’s a bit off topic, but I’d be interested in your views as to how you think the energy equation and cessation of Nordsteam 2 in response to an invasion, might impact Putin’s decision to invade Ukraine or not.

    • First, I hope Russia doesn’t invade Ukraine (and that the West doesn’t pick a fight with Russia over this).

      If it happens, it’s bound to have an adverse effect on European gas supplies. But let’s be clear that Europe is severely energy-deficient, and I have only limited belief in the ability of renewables to counter this problem. There are ongoing and impending falls in nuclear output, too.

  38. a new piece from Tim Watkins,

    https://consciousnessofsheep.co.uk/2022/01/29/welcome-to-the-age-of-cuts/

    it puts into words quite a lot of my rambling private thoughts, I’d imagined at some point austerity would hit a wall where there was nothing left to be cut in the way of services for people at the bottom end of the income scale and austerity would have to reach further up the food chain,

    in the article Tim points to cuts to layers of managerial staffing in different businesses that we’ve seen reported in the media, maybe delayering will become the media codeword for austerity that reaches the salaried classes?

    it occured to me that a while back foreign aid came under the axe, this may be the beginning of austerity measures directly aimed at the state, at some point they might have to consider the swollen intel services budget that seems to mostly be spent on disinformation operations (propaganda), psy ops (destabilisation programmes abroad) and weapons giveaways to foreign freedom fighters (nutters we back and egg on)

    at some point people will chafe at the idea of Universal Credit top ups (overdue rate rise) being withdrawn and National Insurance hikes whilst at the same time giving the Ukraine 100 tons of military equipment and offering further manpower and assistance to help provoke a war that no one wants,
    we also know know that covid emergency business loans were handled so badly that up to £4.9 billion seems to have been lent to fraudulent claimants and will likely be written off,

    https://www.theguardian.com/politics/2022/jan/29/how-the-uk-government-lost-49bn-to-covid-loan

    there ought to be a lot more intolerance for govt. squandering of funds, HS2 has seen mounting criticism, it’s already taken a haircut, expect more of the same.

    • A good article from Tim W, as usual. I can best reply to you by mentioning two points that I’ve made here a number of times.

      First, I’ve mentioned quite often my ‘taxonomy of de-growth’, which includes de-layering as well as simplification, loss of critical mass and adverse utilization effects.

      Second, I’ve said that credit and monetary expansion creates activity rather than value.

      If you put these two together, what results is that responses to de-growth will reduce activity more than they reduce prosperity/value.

      The private sector is likely to lead here. Businesses will pursue efficiency and resilience, cutting costs, simplifying products and processes, and de-layering their operations. As well as reducing management overhead, they will cut back on bought-in services within a new emphasis on cost control. This is bad news for ‘white collar’ employment, and for intermediate and intermediary stages.

      Governments will be slower to follow, but there is enormous scope for cost reduction through efficiency improvements, de-layering and re-addressing priorities.

    • Dr Tim.

      Tightening the belt in one sector will just shift the problems to another.

      Unemployment as a by-product of delayering comes with a whole load of political and financial problems.

      Could bring down the whole housing market.

    • I think that the article is a little misleading.
      Much of the government’s recent “borrowing” is from the Bank of England. It’s the BoE that hold lots of the bonds that have been issued/sold by the treasury.
      Both the BoE and the Treasury are branches of the “State”. The BoE will never call in the interest payments on the bonds. It doesn’t need the money. (What is it going to use it for?!!!) It will be in effect, the government paying itself.

  39. This is an interesting look at how various countries are addressing the spiralling cost of energy. The word that summarises it is ‘subsidy’. This tends to be aimed at worst-off consumers, and can do little to help business users.

    My view is that subsidy, in one form or another, is the likeliest pattern of response. This cannot be financed from taxes without causing unrest. This suggests that borrowing, underpinned by monetization, may be inescapable. Put another way, it’s hard to tackle inflation (through ‘virtuous’ policies like rate rises and QT) when the economy is being hit by rising energy costs.

    This point is reinforced by the effect that higher energy costs are having on the prices of energy-intensve essentials – do we subsidize (borrow/print) these as well?

    https://www.bbc.co.uk/news/business-60112068

    • The US and Gas. Things are deceptively quiet in the US, as our natural gas prices have not increased by very much. What is not understood by the public is that a preponderance of natural gas in the US is produced as a by-product of oil production. So if the sweet spots are becoming scarce in the fracking zones, then gas production will decline…unless gas prices go up sharply and more gas only fracking is done in the Marcellus zone.

      The important point is that there are a couple of optimizations which were achieved in the past which can fail in the near future both due to government bungling and the natural evolution of fossil fuel supplies. On the government bungling issue, the policies on electric vehicles are blind to the reality that gasoline and diesel are joined at the hip. If government attacks gasoline production by subsidizing EVs, then the entire cost of looking for and producing oil will have to be borne by the heavy equipment sector which is powered by diesel. On the natural evolution issue, we are simply facing the end of the cheap by-product of oil production we know as natural gas.

      I’m not smart enough to know if the US will fall apart in the near future like Europe is falling apart in the present. This SHOULD be a wake up call to government. But governments have somehow convinced themselves that attacking Russia is the solution. Can governments continue to fool all of the people all of the time? The Canadian Truckers seem to have struck a nerve in that country, with a whole lot of citizens being in open revolt. E.g., “Truck Trudeau”.
      Don Stewart

    • Don,

      I have friends in Europe, and it is not “falling apart” in their opinions. Yes, energy prices rose a lot. But there are not riots, mass starvation, crime surges, etc. The US has been experiencing sharp increases in semi-organized wholesale shoplifting in urban and suburban areas on both coasts. People with large garbage bags walk through aisles taking whatever they want by the dozen, and walking out.

      As to:
      “But governments have somehow convinced themselves that attacking Russia is the solution.”

      I think you’ve got it backwards. Russian well being has been in decline for years (like in many developed places), and Putin’s ratings are in decline. Russia already took Crimea by force. This is in direct violation of the UN Charter. Besides threatening Ukraine, Poland, the Baltics, indeed the whole former Eastern Bloc which Russia took by force over half a century ago fear Russian aggression.

      These are sovereign nations, and are protected under the UN Charter. Nato should offer to deploy troops to any and all countries which *invite them in.* The reason this hasn’t happened is money and related economic fears. The US and Europe are thinking about internal politics and the economic mess that insane levels of deficit spending has wrought.

      Gary Kasparov has it right. (I follow him on Twitter) A corrupt elite in the west doesn’t care about democracy. Never really did despite the rhetoric.They’re ready to let sovereign nations be re-annexed by Russia rather than face the music and lose face at home. Putin is in a pickle, but the UN is a eunuch.

    • Steven
      I don’t see anything at all that Putin might gain from the conquest of the territory held by the Kiev government. It has nothing that would benefit Russia. Except that it would put the missiles a little farther from Moscow, which can be resolved with negotiations. But the US is unwilling to negotiate. Putin covered the “distance from Moscow” in his last press conference. I believe he put the distance at 4 minutes. 4 minutes leaves absolutely no time for caution. This is, in my opinion, one of the most potentially deadly situations in the world. Coupled with Putin’s repeated statements that there will be no conventional military confrontation with the vastly larger NATO forces, that puts nuclear as the first option, to be exercise in 4 minutes or less.

      Putin does have an interest in maintaining economic relationships with the Donbass. And that was specifically covered in the Minsk agreement. But now, of course, Kiev and the West want to walk back their insistence on Russia negotiating in place of the Donbass representatives in Minsk. The Donbass region did a referendum and the majority voted for being an autonomous region, not a part of Russia. Russia is quite willing for that to go forward. But it requires a negotiation between the Kiev government and the Donbass government…which Kiev will not agree to do.

      What does the US (and Britain) have to gain by creating problems for Russia? A basic theory of geopolitics is to create hurt for your enemy. Both the US and Russia have now declared Russia to be an “enemy”. Despite the fact that Russia does not, to my knowledge, put any limitations of trade with the West. So the West imposes economic sanctions and, if those don’t work, it tries to create extremely dangerous military threats with which to hurt Russia and potentially lead to its conquest and the gain of what would essentially be a western colony.

      Don Stewart

    • Missiles are symbolic. This is Putin trying to save his reputation in Russian history books. He and his crew stole many billions from the country. The people know it but have no recourse. I’m with Gary Kasparov. He’s lived through the past half century and knows the inside stories.

    • @Don S. Non Sequitur or straw man? 50 years ago, missiles weren’t as fast and long ranged as today, so placing them in Cuba was significant – far more than symbolic.

      “So you think that the Cuban Missile Crisis was symbolic?”
      Don Stewart

    • Steve says, “… Putin’s ratings are in decline”. Lets see … who else has lousy ratings. It’s called projection. 😉

      “ Russia already took Crimea by force”. Nope, the people there are Russian and voted twice in free and fair elections monitored by the UN and others to invite Russia in.

      Look at a world map that shows the location of US military bases outside the US. Compare it to a world map that shows Russian military bases. Who is the aggressor?

      And, where is Europe gonna get its gas if they keep poking the bear?

    • Putin is in his last decade of being a dictator. It is said that he is among the richest men on Earth. The younger generations know that they are being screwed, and would prefer a democracy to a dictatorship. I fully agree that Biden’s ratings are poor. That wasn’t the topic! Non sequitur.

      Perhaps you’d prefer a Russian style oligarchy to the US style. The wealth gap is bad here, but we can protest without being poisoned or jailed like Novotny.

    • Now I see your first post which wasn’t sent to me by email. You have your version. See this:

      https://www.cnbc.com/2022/01/27/how-russia-invaded-ukraine-in-2014-and-how-the-markets-tanked.html

      How Russia invaded Ukraine in 2014.
      PUBLISHED THU, JAN 27 20222:22 AM EST
      Matt Clinch

      Russia’s seizure of Crimea from Ukraine had its roots in a long history between the two former Soviet states.
      But it was a destabilized government and street protests in Kyiv in early 2014 that led to Russian President Vladimir Putin making his move.
      On March 21 that year, Putin signed legislation that completed the process of absorbing Crimea into Russia, defying Western leaders.

      The recent tension has revived memories of the early stages of a conflict that began eight years ago, which saw the Russian annexation of Crimea from Ukraine, and the start of bloodshed in the Donetsk and Luhansk regions in the east of the country, which still continues until this day.

      Russia’s seizure of Crimea had its roots in a long history between the two former Soviet states, but it was a destabilized government and street protests in Kyiv in early 2014 that led to Russian President Vladimir Putin making his move.

      Yanukovych’s rejection sent angry citizens onto the streets of Kyiv. The unrest escalated over several months and security forces attempted to clamp down on the protests. Dozens died on Feb. 20, 2014, at Kyiv’s Independence Square, the bloodiest day of the violence.

      By late February, Yanukovych had fled and the capital had fallen into the hands of various pro-European opposition parties. The focus turned to Crimea, a peninsula in the south of the country home to an ethnic Russian majority, where Russia’s Black Sea Fleet was headquartered.

      Putin dispatched his army to Ukraine’s borders for an unexpected military exercise, and fighter jets along Russia’s western borders were put on high alert. Then on Thursday Feb. 27, gunmen with no insignia on their uniforms seized government buildings in Crimea, and then took control of two Crimean airports the day after.

    • I think this trend is likely to continue. One problem with debt fueled subsidies is that the political possibility relies on the wide held belief that the future is one of growth – not permanent austerity. Optionally, subsidy at the level of the producer, whether true nationalization or not, will likely be tried,too. The debt funding would ultimately be deflationary. But print financing directly to producers may confine inflation to industrial sectors.

    • Indeed so.

      Personally, I’m finding the situation increasingly frustrating. Letting events take their course would mean allowing the rising cost of essentials to squeeze discretionary sectors, resulting in job losses, business failures and defaults. Politically, doing nothing about the “cost of living crisis” would be suicidal for incumbent parties. Subsidies can only worsen inflation, and/or hasten a financial crunch, but might be favoured as a way of “kicking the can down the road”.

      The door of opportunity is surely opening wide for a left/populist agenda of handing cost of living support to the majority, nationalizing ‘fat cat’ utilities, and letting the better off pay for it all.

      This is frustrating because we here understand what’s happening. (At this site we can even quantify it). Effective responses are possible, but not whilst the mantra of ‘growth in perpetuity’ continues to hold sway.

    • Steve B K.

      The story goes that Gorbachev allowed the unification of Germany on the promise, from Bush (senior), that NATO didn’t move eastward.

      The US, sensing a weakened Russia, ignored/denied that there was ever an agreement.

      Russia holds the (energy) cards now and can flex it’s muscles. Europe isn’t going to oppose any actions in Ukraine as it needs Russian gas too much.

      Crimea was always Russian until Krushchev “gave” it to Ukraine, never expecting the USSR to collapse.

      Russia had to secure the naval bases and it has always seen the countries on its western border as a buffer zone between itself and possible invaders. Let’s not forget it was invaded twice from the West.

      A good book on general geopolitics is

      Prisoners of Geography.

      We in the West see it from our perspective, but can you imagine Russian or Chinese military bases in Mexico on the US boarder? Uncle Sam would never allow it to happen. (Cuban missile crisis). Yet it is ok to have NATO weapons sitting just across from the Russian boarder.

      Just need to see it from the other side.

    • Stories about promises are a dime a dozen. USSR was crumbling.

      Russia desperately needs to sell gas. Europe can play hardball as Spring is coming soon. In any case, I hope Putin gets ousted from overplaying his weak hand. Novalny is a black eye in jail. The population knows a lot as does Kasparov.

      I hate dictatorships.

      Steve

    • Steve B K

      It’s an interesting point. Who has the advantage? Russia with the gas that Europe needs or Europe with the money that Russia needs?
      Global energy demands ever increasing and supplies shrinking. In the short term, I rather be in Russia’s position.

      In the long term, there will be no winners.

      I don’t like dictators either but that has not stopped Uncle Sam with his poodle (UK) from putting plenty of them in power round the world.

    • Steve B K

      Would you consider Russian (or Chinese) missiles in Mexico as just “symbolic”?

      I pretty sure Uncle Sam would not!

      In a way, missiles in Mexico would be symbolic, because if it ever happened, it would symbolise the decline of US power. But more than that, it would be a strategic threat to the US.

      North Korea is propped up by China, not because China likes Kim Jong, but because it doesn’t want US missiles sitting on its boarder with the Korean peninsula.

    • John A. and all,
      This topic is a joke. I already answered Don tha missiles 50 yeas ago were not like the hypersonic ones of today. Missiles in Germany can get to Russia nearly as fast as from Ukraine. And who says Ukraine wants US missiles on its land?

      My point was about sovereign countries being free to choose to remain independent, and the UN Charter protecting them from invasion. I wrote that NATO and UN troops should be used to help protect them *IF*they asked for that help. Period.

      I realize that the US has stuck its nose in other countries, sometimes unasked. And that was wrong in my view. But two wrongs don’t make a right.

    • Steve B K.

      But perhaps it’s no joke for Russia.

      Missiles on the Russian boarder threatens Russia’s nuclear deterrent.
      Russia has to believe that their nukes can get through any missile defence systems.

      Missiles on it’s boarder, threatens Russia’s ability to retaliate. Nuclear deterrents only work if both sides think that
      M.A.D still holds true.

      Hence the new hypersonic cruise missiles being developed by all sides.

      Would you be happy for Russian/Chinese missiles on the US/Mexican boarder?

      Two wrongs don’t make a right. Indeed but it’s not about right or wrong, it’s about realpolitik. Russia is pushing back against NATO expansion.

    • John A.,

      My original post and repeated again was for UN and NATO troops to be deployed *IF* the country asked for that. Neither UN nor NATO have ICBMs as far as I know.

      Of course any country would feel more comfortable if missiles weren’t at their border and aimed at them. That’s not exactly rocket science! (pun intended)

    • Steve B K.

      In reality the US is NATO. Let’s not pretend that it is a membership of equals.

      The diplomatic course would be for the former Warsaw Pact countries to be neutral giving Russia the buffer zone it needs to feel secure. Regardless off if they want to join NATO or not.

      US/NATO eastward expansion was/is a direct threat to a weakened post cold war Russia. It’s a provocative action designed to press home an advantage.

      I guess you are not too keen on Russian missiles in Mexico? If there were, what should the US reaction be?

    • John A. It seems you don’t care about the rights of individual countries to decide for themselves with whom they want to form friendships and alliances. I strongly disagree. The US may be strong, but it gets one vote at the UN and in international organizations. France has disagreed with the US before, and likely others as well.

      You are also fixated on missiles, something I never suggested at all. My post from an hour ago is awaiting moderation. I’m going to alter the html so it might go through. MAD will likely prevent all out nuclear war by the major powers. I do fear a smaller country with a lunatic (religious-like?) leader pushing a button, though. I fully support the Baltic states and whole Eastern bloc remaining independent. If they fear Russia, let them join NATO.
      ==========

    • Steve B K

      George Kennan summed up US foreign policy post WW2.

      “We have about 50% of the world’s wealth but only 6.3% of its population…. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction…. We should cease to talk about vague and unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.”
      George Kennan, secret U.S. State Department memo, 1948

      The US likes dictators as long as they stay in line. Once they don’t, they are gone. US foreign policy is about maintaining access to the world’s natural resources. Period. It’s not or never has been about spreading democracy and self determination.

      Sure, the US only has one vote at the UN. But it also has the Veto along with Britain, France, Russia and China. I’m all for one member, one vote, but the 5 permanent members will never agree to it.

      I’m all for the the neutrality and independence from Russia, of the former Warsaw Pact countries, but allowing them into NATO is an act of provocation by the US towards Russia and makes the world a much more dangerous place.

  40. The Blind Leading the Blind
    Kurt Cobb today on how we now face only really bad choices:

    https://resourceinsights.blogspot.com/2022/01/fossil-fuels-vs-climate-action-not-so.html

    But what I want to focus on is this passage:
    “We humans made no such adjustments and so we now find ourselves faced with only draconian choices. But we do not seem to understand that we’ve arrived at a destination far from the one we imagined in 1950. An example is the celebration in the environmental community of a recent federal court decision to invalidate oil and gas leases offered by the U.S. government on 80 million acres of the Gulf of Mexico. (It turns out that oil and gas companies only bid on 1.7 million of those acres.)”

    The “do something at the COP in Glasgow” crowd bemoaned Biden offering up a record amount of acreage for lease. Republicans staunchly maintained that Biden’s squelching of fossil fuel growth is the cause of the increase in fossil fuel prices. Courts block the action because the Administration did not consider the effect on the environment. But the most important truth, which nobody (except probably the petroleum companies) seems to understand, is that offering up more acreage hasn’t solved any real problem, and the court decision didn’t solve any real problem. From my perspective, the events show that the prospects for further increases in oil production in the US are very limited in the short term, and negative in the intermediate to longer term. So all the noise which was generated was without any real meaning.

    Don Stewart

  41. Re China, N. Korea, other dictatorships incl. Russia:

    China: Media freedom declining at ‘breakneck speed’ – report
    https://www.bbc.com/news/world-asia-china-60174238
    ——

    And Russian tactics in Ukraine: https://www.france24.com/en/europe/20220131-ukrainians-cope-with-fake-bomb-threats-as-moscow-mounts-hybrid-war

    Nice way to treat people you want to entice back into your loving arms…These are not power to the people socialists! If any of you like their style of governance, go give it a try. 😉 As Churchill (I think) said Democracy is the worst kind of government, except for all the rest. I realize that oligarchy is the rule in most places. But there are varying degrees of freedom…

    • “Steve B K.

      Putin’s Russia made a lot of things but “Socialist”, it is not.
      “Gangster Capitalist” more like.

      The word “socialist” has different emphasis/meaning here in the UK than the US. I don’t think North. Korea, China or Russia would be described such.

      Democracy is a Nobel course, but get real. US foreign policy has never been about spreading democracy and self determination. It’s always been about securing natural resources.

      George Kennan summed up the US post war position in 1948

      “We have about 50% of the world’s wealth but only 6.3% of its population…. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction…. We should cease to talk about vague and unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.”
      George Kennan, secret U.S. State Department memo, 1948

  42. (revised format of URLs)

    Re China, N. Korea, other dictatorships incl. Russia:

    China: Media freedom declining at ‘breakneck speed’ – report
    www DOT bbc DOT com SLASH news SLASH world-asia-china-60174238
    ——

    And Russian tactics in Ukraine: www DOT france24 DOT com SLASH en SLASH europe SLASH 20220131-ukrainians-cope-with-fake-bomb-threats-as-moscow-mounts-hybrid-war

    Nice way to treat people you want to entice back into your loving arms…These are not power to the people socialists! If any of you like their style of governance, go give it a try. 😉 As Churchill (I think) said Democracy is the worst kind of government, except for all the rest. I realize that oligarchy is the rule in most places. But there are varying degrees of freedom…

    • @Steven B Kurtz

      My own take on the situation in Ukraine, is that it’s probably as much about control of resources (economic security), as it is about military security. I’ve heard Ukraine referred to as the breadbasket of Europe. However, in recent years, Russia has become not only self-sufficient in grain production, but has become the World’s leading exporter. A remarkable turnaround after being a highly dependent importer of grains not too long ago. So if Putin the Practical wants to get his hands on Ukraine’s grain, it’s not because his own country is going short. Is it part of some kind of grand plan to control the market for natural resources in a resource constrained world?

    • Neill,

      Russia is largest in wheat, not in total grains. See:
      https://agenciabrasil.ebc.com.br/en/economia/noticia/2021-03/study-brazil-be-worlds-top-grain-exporter-five-years

      The largest grain exporter in 2020 was the US, with 138 million tons. Brazil’s 122 million came second. “In the next five years, Brazil should overtake the US in exports. Based on this history and with high product prices worldwide, Brazil’s output is likely to reach three percent of the world’s growth,” he said.

    • “Is it part of some kind of grand plan to control the market for natural resources in a resource constrained world?”

      Or, maybe its about an oligarchy that spends a trillion dollars a year supporting the military-industrial complex. Part of that complex is the intelligence agencies who get there employees from the military almost exclusively. Those people have been trained to find threats, and they don’t like the Russians, so the threat appears. I don’t want to make it sound like a conspiracy, rather it is just the type of person that gravitates to those jobs, and of course, the corporations involved have their mandate as well – increase stockholder wealth.. Regardless, give a large group of people a trillion dollars, and they will find a way to keep that money coming. How does an arms manufacturer increase stockholder wealth?

      I hate dictatorships, but I hate having my granddaughters die in a nuclear firestorm. And for what? So that the people in the western part of Ukraine can continue with their puppet government that was installed by the US and NATO, and so that the Russians in the Eastern part are denied the attachment that they want with their natural homeland?

      I have seen a lot about how terrible Putin is, and how wonderful and stable and happy the people of Ukraine are, but I have not heard anything about why Americans should care one way or the other.

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