#232. All crises great and small

NUMBERS AND INNER NATURE

As explanations fail – ‘temporary’ post-coronavirus disruption, “transitory” inflation, ‘unexpected’ hardships caused by the war in Ukraine, and all the rest of it – hard facts are emerging, and few of them are palatable.

One of these unpalatable realities is escalating risk. We can’t, for instance, be sure that a relatively gradual retreat in capital markets won’t turn into an autumnal rout. Neither can we assume that some of the worst-managed Western economies will succeed, this time, in ‘muddling through’.

Part of this predicament can be quantified here, and framed, using the SEEDS economic model.

But it’s equally important that we understand the inner nature of a rapidly-unfolding crisis situation.

Prosperity is heading downwards, hardship is being worsened by the rising costs of necessities, and these material trends are invalidating two assumptions on which decision-makers have hitherto relied.

One of these failing assumptions, of course, is that we can deliver ‘happy outcomes’ using fiscal, credit and monetary gimmickry.

The other is the assumption that an economic consensus, generally labelled ‘liberal’, can prevail, by some kind of triumph of hope over reality.

We – or rather, millions of people in the former Soviet bloc, in pre-Deng China and elsewhere – have tried extreme collectivism, and it didn’t work.

But this gives us only a negative answer, in the sense of what not to do, when liberalism fails.

A rule of three

There’s a cardinal rule which states that, if you’re giving any kind of speech or presentation, you should limit yourself to making no more than three headline points.

These points may be as simple or as elaborate as you like, and as circumstances might require.

But their number should not exceed three.

On the basis of this useful discipline, our first point needs to be that prior growth in material prosperity has gone into reverse.

Our second is that systems – including the financial and the political – have been built on the contrary assumption of ‘growth in perpetuity’.

Our third is that this inherent contradiction is not understood.

This isn’t because it’s hard to grasp – indeed, its fundamentals are stark and obvious – but because we have a tendency to believe, not the factual and the obvious, but whatever it is that we want to believe.

Together, these points explain why we face crises of adjustment.

We have to adjust our financial system to a post-growth reality, and adjust our political systems to a situation in which it’s no longer enough to offer the public “jam tomorrow”, telling people that they’ll all be better off in the future if they just ‘keep the faith’ in the present orthodoxy.

Hard realities

Let’s start with the reality about prosperity. The large and complex modern economy has been built on an abundance of low-cost energy sourced from coal, oil and natural gas. This fossil fuel energy has already ceased to be cheap, and is now ceasing to be abundant.

Back in the 1950s and 1960s, we thought we had a replacement in nuclear power, which was going to be “too cheap to meter”. Today’s alternative narrative is that ever-cheaper and more abundant energy will be obtained from renewable energy sources (REs), such as wind and solar power.

This new narrative actually has even less plausibility than the old one about nuclear, but it fills the aspirational gap created by TINAR (“There Is No Acceptable Reality”).

We know that money has no intrinsic worth, but commands value only as a ‘claim’ on the ‘real’ or material economy of energy.

But money differs from the material by giving us time arbitrage – we can create monetary claims now, on the basis that they will be honoured (by exchange) in the future.

Investment is interwoven with the time arbitrage of money.

Investment began in agrarian societies, where a person could invest by surrendering present consumption for future improvement. Instead of consuming all of today’s harvest now (or its equivalents purchased through exchange), a farmer could trade some present consumption for an asset (perhaps a barn, or a plough) that would increase his prosperity in the future.

The principle of investment is, and always has been, that of making sacrifices now in return for greater prosperity at a later date.

Most of us today are not farmers, or millers, or bakers, able to surrender current consumption of bread or beer for a better future founded on efficiency-enhancing capital assets like barns and ploughs.

Our version of investment is a financialized one, and involves exchanging consumption now for returns on accumulated capital at some later date. But “later” has to mean “bigger” for this process to function.

The saver lends money on the basis that the return from the borrower will exceed what has been lent today. The investor in a business is motivated by the assumption that the value of the business, and hence of his or her investment in it, will rise over time.

A whole science has been built around this process of time arbitrage, and includes ‘rates of return’, the ‘time value of money’, and the relationship between ‘risk and return’.

Unfortunately, all of this is ultimately dependent on growth. If a person lending $1000 now is to receive $1,100 at a later date, the borrower has to improve his own circumstances by ‘putting money to work’. For the investor to get back more than he or she put into a business, that business has to grow.    

There are exceptions to this rule under any set of conditions. A borrower or an entrepreneur may fail even under favourable conditions of growth. Some lenders and investors may profit even if the economy has, as now, started to contract.

Indeed, the trick now is to work out which sectors will expand even as the economy as a whole gets smaller.

But a generality of growth is required if the generality of lenders and investors are to profit.

Of need and discretion

After the energy reasons for growth reversal, and the dependency of investment on growth, the next step in a logical progression is the hierarchy of needs.

Whatever the resources of the individual or household may be, the first call on those resources is made by necessities.

A person or family spends first on those things that are indispensable, some of which are food, water, accommodation, necessary travel and domestic energy. Only after these essential needs have been met can remaining resources be allocated to discretionary (non-essential) forms of consumption, which might be holiday, a trip to a restaurant or some new gadget.

This makes discretionary consumption a residual, meaning a number arrived at through the relationship between two primary factors, which in this case are prosperity and necessity.

Residuals, by their nature, are leveraged, because they are affected by changes in more than one primary factors.

An era of abundant, low-cost energy has applied positive leverage to the discretionary piece of the equation. Cheap energy has driven prosperity higher at the same time as holding down the cost of necessities.

Now, though, rising energy costs have turned this into negative leverage, with prosperity declining whilst the costs of essentials are rising.

By way of example, SEEDS indicates that, whilst British prosperity per capita declined by a comparatively manageable 10% in real terms between 2004 and 2021, the cost of essentials rose by an estimated 18%, again in real terms, over the same period. The leverage effect was to reduce the affordability of discretionary consumption by 15%.

This raises two particular problems.

First, discretionary contraction isn’t pleasant, particularly for anyone who’s been told that discretionary prosperity is supposed to carry on increasing over time.

Trying, both individually and collectively, to buck this trend – to increase discretionary consumption, even though discretionary prosperity is decreasing – worsens indebtedness, simultaneously exacerbating insecurity, and breeding discontent wherever it appears that a favoured minority is enjoying increased discretionary prosperity.

Promises can turn pretty quickly into expectations, and expectations into feelings of entitlement. The failure of promises, the disappointment of expectations and the denial of supposed entitlements can lead directly to resentment.   

The second problem is that these adverse trends are accelerating, worsening the effects of negative leverage. Having decreased by 15% over a period of seventeen years, British discretionary prosperity per capita is now set to contract by a further 35% over the coming decade.    

Of money and politics

When we apply these straightforward (though unwelcome) trends to the financial and the political systems, we unmask pressures for which very few people seem prepared.

The first of these is financial, where we can draw two conclusions from the foregoing.

One of these is time arbitrage, which for present purposes means that a futurity – a set of shared expectations for the future – is incorporated into the financial system. Another is the adverse leverage effect of discretionary contraction.   

Depending on how you define “essential” – which varies both geographically and over time – roughly 60% of economic activity in the modern Western economy is discretionary.

This means that about 60% (and probably more) of equity valuation, and of loans outstanding, is dependent on positive futurity as it affects discretionary prospects.

In other words, if the consensus expectation of discretionary expansion were to turn instead into a realization of discretionary contraction, the financial system would face pressures which have no precedent in the industrial era.

In government, the equivalent of futurity is expectation, which means that people expect – and have been led to expect – a continuous improvement in their material circumstances over time.

Economic ‘liberalism’ is particularly at risk because it is based on a claim, which might otherwise be called a promise, that the prosperity being enjoyed by the more fortunate in the present will, in the course of time, come to be enjoyed by everyone else as well.

Historically, there’s been some vindication of this promise. Back in the 1950s, only the wealthiest could afford to own a car, or to take holidays abroad. Growth in subsequent years has extended car ownership and foreign travel from the thousands to the millions.

Market liberals have always been able to assert, with considerable justification, that this progress wouldn’t have happened under a Marxist-Leninist system – as somebody once said about America, “if we’re so awful, we’re so bad, go and try the nightlife in Leningrad”. As a young citizen of communist Czechoslovakia once put it, “I don’t want to be a capitalist – I just want to live like one”.  

Unfortunately, this ties the fortunes of economic liberalism to a continuity of growth. If the majority ever has to told that, far from aspiring in the future to the standards of living enjoyed today by the fortunate, their own conditions of life are going to deteriorate, a new system will be required.

93 thoughts on “#232. All crises great and small

  1. .”a new system will be required”
    I suggest that the current conversation between Nate Hagens and Daniel Schmactenberger may be useful in sorting out the possibilities. Daniel has given a lot of thought to the game theory alternatives. He promises to suggest some alternatives in the next video. He discusses our predicament in terms of several familiar “games”, such as the tragedy of the commons and arms races and first mover advantage. It’s a long interview, but considering the stakes involved, may be worth your time.

    Out of left field, I also suggest that one might take a peek at psychedelics. Traditionally, someone who worked hard all day looked for an escape in the evening. Dystopian novels from the 1950s thought that the marriage of televisions and propaganda might characterize our future. For a brief period, it seems that we thought that the free inventions of people shared through social media might provide an escape. But now we have a lot of evidence that social media are destructive…although the point is still in dispute. (See Lex Fridman and Jonathan Haidt).

    Waiting in the wings are psychedelic plants (and some lab synthesized compounds), which have been used by almost every historical society. During the Nixon years, the US demonized psychedelics. Two plausible explanations: middle class mothers wanted their children to go to college and get on the success track, not “turn on and tune out”; and the Pentagon, experimenting with the effect of drugs on enemies by subjecting soldiers to the drugs, found to their horror that the soldiers subsequently refused to fight. Psychedelics are back, but the PTB are determined to keep them strictly pharmaceutical. (Covid vaccines, anyone?). Which will keep the prices high. But the natural cost of “tuning out” is actually much lower than trying to achieve the same effect by burning fossil fuels. No plane to Spain required.

    So when we are trying to figure out what sort of program might make sense in Dr. Morgan’s world, from the standpoint of the mythical politician who has our broadly defined best interests at heart, it may be worthwhile to keep psychedelics in mind. As one researcher said, “everything they told us was wrong…the acceptable drugs were the most dangerous, and the most reviled drugs were the safest.”

    Don Stewart

    • Not sure I’m clear about the psychedelic angle here, unless it means drugging people into acceptance of conditions they would not tolerate in a normal state of mind. I understand that drug use was pretty rife in US forces in Vietnam, with an adverse effect on military efficiency.

      The issues around social media and TV are going to be how to pay for them. I see advertising contracting markedly as discretionary consumption falls, and this trend is likely to put even greater pressure on subscription models, as subs seem to be amongst the first things that people drop as the cost of living pressures household budgets.

    • I will posit another point…America proved rather convincingly that taking away something that humans evolved with will lead to dire consequences. The crime rate in America was never higher than the years after Prohibition was passed. America then took that crime wave worldwide by waging a war on naturally occurring plants which has resulted in a wide range of negative outcomes for America, the World and potentially a more “healthy” lifestyle for the populace at large.

      I think there are benefits that humans receive from naturally occurring plants as long as they are used in a way that is understood by the users. I will not go deep into those benefits and I do not know if my periodic use of magic mushrooms altered my perspective, they certainly did not hurt.

      This is an energy based discussion and ending the war on naturally occurring plants certainly lessens the use of petroleum from an enforcement as well as immigration perspective. I will posit and Sebastian Junger agrees that America would not have lost in Afghanistan if the US would have made poppies legal. In addition I believe our immigration problem at our southern border would cease if Coca leaves were legal. We waste a great deal of energy creating narco terrorism around the world with our outdated view of naturally occurring plants.

  2. Firstly, just wanted to say that I love your work. I thoroughly enjoy your thoughtful analysis and direct discussions of the position we now find ourselves in.

    > Indeed, the trick now is to work out which sectors will expand even as the economy as a whole gets smaller.

    I feel like you dropped this one-liner into your article and had more to say but didn’t say it. I’d love to hear your thoughts about which sectors are likely to expand and which are not.

    Thanks and keep up the good work

    • Many thanks.

      I don’t do investment advice here, because it’s a regulated activity.

      In general terms, though, discretionaries are not a good idea, and neither is anything with too much leverage, or dependency on growth.

      There are some areas, neglected now as ‘un-sexy’, which could have good prospects as lower-cost (if less glamorous) alternatives to things that are getting too costly.

      There’s no harm in my saying, again as a general proposition, that I see more merit in buses, trams and trains than the alternatives!

    • Thank you for your reply, you’ve given me food for thought.

      > I don’t do investment advice here …

      I was looking more for career advice rather than investment advice. I am a software developer with a teenage family. I had originally thought that my career would last another 10 years but with blackouts in the news and the state of the economy that’s starting to look over optimistic. My family will need financial support for a number of years yet, and the obvious place to look are sectors of the economy that are growing.

    • Hey Tim, does anything else come to your mind besides busses, trams, and trains?

    • I can’t really give short answers to that, but let’s think context a little.

      I call this knowledge and nuance.

      ‘Knowledge’

      What we’ve been discussing here for a long time – and quantifying, using the SEEDS model – is a situation that directly contradicts ‘received wisdom’, the ‘consensus’ and, of course, whatever happens to be the official line of the moment.

      We’ve been saying that (a) prior growth is going (and has now gone) into reverse, (b) the real costs of essentials must rise, (c) discretionaries get squeezed, (d) the financial system is based on the wrong predicates (‘growth forever’) and (e) these fundamentals are not generally understood.

      I think this puts us in an advantaged position. It makes us, at the overview level, wary of discretionaries, even more so of ‘growth-hype’, and cautious, especially about leverage. We also know some of the by-products, as it were, of this set of conditions – simplification, de-layering, critical mass effects, adverse utilization effects.

      ‘Naunces’

      But there are variations within sectors, even those which, in general, are very badly exposed.

      As mentioned, land travel is one example. Our scenario is bad for cars – including EVs – but it could be good for buses, trams and rail.

      So nothing is a total bust – not even air travel, though that sector has greater downside than most. As near as I can get to it, the consensus is – or maybe that’s now “was” – for air travel globally to grow by c3% annually, in perpetuity. That was never feasible (though try getting anyone to believe it, even a year ago).

      Within this, though, whilst the low-margin/high-volume model is finished, some individual airlines can buck this trend, offering quality, albeit at a price, to those still able to pay for it.

      Likewise, foreign holidays may contract rapidly, but that gives opportunities for more local alternatives, where these can get their offer right.

      I can’t pick through every sector here, but my advice would be (a) we have a leading edge by understanding what’s really happening, and (b) any of us can pick out the ‘contra-trend nuances‘.

    • Look back in time and observe what was in demand then.

      Makers and menders. De-manufacture of items into useful components. This will be huge.
      Commodity extractors…… farming, woodsman, fisher, especially using traditional modes.
      Horse husbandry – can you breed, break and treat horses, mules and donkeys. This will be massive.
      Using wood to produce energy : Wood gasification, rocket stoves and furnaces, producing charcoal.
      For the coast : Making sea salt.
      Replacements for plastic : wooden, glass and other containers.
      Domestic Service for the ‘rich’.

    • @orsotorro

      My rocket stove had its first trial run last weekend.

      Took a bit of starting but once running I could boil water and fry eggs using twigs. No need for a chainsaw any more🙂👍

    • “Horse husbandry – can you breed, break and treat horses, mules and donkeys. This will be massive.”

      Yes! I will posit that if we concentrate people in larger places with enhanced public transport between those places, while enhancing industrial farming where it makes sense then letting the rest of the country turn “wild” would be ideal. The farming would be done by technology and fossil fuels, but the wild places could only be reached by air or by horse…. In America we can see where Native practices of collecting meat through Bison/wildlife was far less energy intensive than the gas guzzling cow.

  3. @Dr. Morgan
    Regarding the efficiency of the military killing machine and the fallout in terms of PTSD. It turns out that MDMA (ecstasy) is probably an effective treatment. Whether our society may soon accept MDMA for people suffering loss of job or a house or a spouse remains to be seen. I’m not confidently predicting, since deregulated psychedelics wouldn’t be very profitable, and not very taxable. So why would TPTB permit them?
    Don Stewart

    • @Don Stewart.

      The psychological aspects of de-growth on the population are interesting.

      The “shock/loss/grief” that people are going to experience is going to impact people’s mental health.

      It’s been a difficult journey for me to get my head round the predicament we all find ourselves facing, but I’ve got a head start on most. What happens when the “penny drops” for large chunks of the population?

      There’s going to be a lot of mourning for the world we have lost.

      A spot of MDMA or magic mushrooms may be in high demand.

  4. Your “new system” might actually be more like the communist systems that failed to marshal energy as fast as liberal capitalism in the days when energy was cheap and abundant. Those totalitarian systems couldn’t deliver much economic growth or general prosperity, but they could deliver social stability under trying circumstances. Might we all have the governance of North Korea to look forward to?

    If the present liberal economic paradigm cannot work in a continuously shrinking economy, something will replace it. Unfortunately, a great deal of violence may accompany the replacement process as it often has in the past. That violence will tend to generate popular support for anything that can provide stability, with or without economic or legal justice. I fear that it’s going to be very difficult to maintain what remains of “Western” values as economic collapse accelerates, since social collapse tends to follow right on the heels of economic collapse. SEEDS can give us valuable information about the economic decline ahead, but I wonder what we can use to navigate the decline of political stability?

    • @Joe Clarkson

      “If the present liberal economic paradigm cannot work in a continuously shrinking economy, something will replace it.”

      I fear, that “something” will be a return to feudalism.

  5. Given the still substantial cost of legalized cannabis, it is likely that other recreational drugs including hallucinogens will run into demand issues with declining prosperity.

    • @Steven Kurtz
      I don’t know about Canada, but governments in the US see it as a source of taxable consumption. If it became common to simply grow it in one’s garden, then I think a lot of the profitability for both industry and governments would vanish. HOWEVER, it is also true that the legal induced scarcity prompted a lot of genetic engineering to increase the potency of cannabis. What effect that has I am not sure.

      What has become very clear is that the endocannabinoid system is ubiquitous in the human body.

      Don Stewart

    • Don,
      My post was strictly about personal affordability as prosperity continues declining. Of course state and the Federal governments see it as a revenue source, just like alcohol and gambling.

    • @Steven Kurtz
      I’m not an expert on psychoactive drugs. But from what I have read, one example of which is Michael Pollan’s recent book:
      “How to Change Your Mind: What the New Science of Psychedelics Teaches Us about Consciousness, Dying, Addiction, Depression, and Transcendence”
      there is a fundamental difference between maintenance drugs, which includes anti-depressants and alcohol and tobacco and perhaps cannabis, and more life-changing drugs, such as the ones Pollan talks about. One or two LSD experiences are enough to prompt some rather profound changes in at least some people. I recently heard a middle aged man talk about one experience with magic mushrooms that he credited with turning his life around. That is very different from using cannabis every day. It is also very unlike a heroin addiction.

      If one dose of LSD, which is not expensive to make, can turn people’s lives around, then it becomes the drug of choice to create fundamental change…when fundamental change is required by the circumstances.
      Don Stewart

    • @Don Stewart, listening to Pollan, et al, that is indeed the hope of psychedelic interventions at this point. I’ll expand a little by referring to Dmitry Orlov’s observation was that when the USSR collapsed, the people in positions of leadership, with the associated status and prestige and income, did particularly poorly in the immediate aftermath of the collapse. I feel it’s these ‘captains of industry’ who have the most to lose, and therefore potentially most to gain from psychedelic therapies of the sort that are being investigated globally.

  6. Can Peyote Be Profitable, if Deregulated?
    “The peyote (/peɪˈoʊti/; Lophophora williamsii /ləˈfɒfərə wɪliˈæmziaɪ/) is a small, spineless cactus which contains psychoactive alkaloids,[2] particularly mescaline.[3] Peyote is a Spanish word derived from the Nahuatl peyōtl([ˈpejoːt͡ɬ]), meaning “caterpillar cocoon”, from a root peyōni, “to glisten”.[4][5][6] Peyote is native to Mexico and southwestern Texas. It is found primarily in the Sierra Madre Occidental, the Chihuahuan Desert and in the states of Nayarit, Coahuila, Nuevo León, Tamaulipas, and San Luis Potosí among scrub. It flowers from March to May, and sometimes as late as September. The flowers are pink, with thigmotactic anthers (like Opuntia).
    Known for its psychoactive properties when ingested, peyote has at least 5,500 years of entheogenic and medicinaluse by indigenous North Americans.”

    And here is a satellite view of Pyote, TX. Note the lush, green and fertile farmland between all the fracking sites:

    http://www.maplandia.com/united-states/texas/ward-county/pyote/

    Don Stewart

  7. @Dr. Morgan
    “I see advertising contracting markedly as discretionary consumption falls,”
    When thinking about more or less radical alternatives, it is perhaps worthwhile to think about what the advertisers are attempting to do, and the AI support for advertising, as compared to psychoactive drugs. Are you familiar with the movie Double Indemnity. It is widely considered the first complete film noir, made by Billy Wilder. It is a tale of insurance fraud and murder. Fred McMurray says that it all might never have happened if he hadn’t noticed Barbara Stanwyck’s ankle as she descended the stairs. So, a smart AI camera back in 1944 might have picked up on the fact that Fred was in over his head, and might possibly be a good mark for selling pistols or poisons. It would be much less certain to reason that Fred is male, and therefore susceptible to some exposed part of the female anatomy. The modern advertising model is built on the notion that things like surveillance by the camera in your computer can tell advertisers just how promising you are as a potential customer. Nate Hagens knows all about this…he says there are micro-second auctions for your eyeballs depending on whether you are looking at the scantily clad model or the beach or the car or the steak or whatever.

    The whole point is more consumption which creates profits for some people, while arousing enough dopamine in the mark to cause them to part with some money, but, in almost all cases, not create lasting satisfaction.

    The ancient and new lab produced psychoactive drugs include quite a few which enlarge one’s horizons to include “my place in the universe” and “what is really important”. The drugs were used by Native Americans during rites of passage and also pivotal moments when wisdom was needed. Sitting Bull, for example, was up on a mountain meditating during the Battle of the Little Bighorn. There was a lot to meditate about. The Plains Indians were dependent on the bison, and the US Army had hired hunters, including Buffalo Bill, to indiscrimiately kill as many bison as possible. The goal was to force the Natives onto small and generally worthless reservations through starvation. Quanah Parker said that peyote was part of the reason the Comanches accepted Christianity and movement to the reservation rather than fight to last man.

    My point is that, if change is inevitable (e.g., the bison are gone or rapidly declining), then we might try to adapt the advertising model using AI and mass media, or we might depend more on psychoactive plants and lab produced pills and powders. The psychoactives are likely to be more reliable inducers of change and a lot cheaper, IMHO. But they likely won’t be very profitable.

    I doubt very seriously that mass movements such as the Extinction Rebellion in Britain will be effective.

    Don Stewart

    • @Don Stewart. ‘The time to drop a red hot poker is before it burns your hand off’ Fred McMurray as he realised he was in out of his depth. Good film. The first essay I wrote at university nearly 40 years ago was a comparative study between Double Indemnity and the 1980’s remake Body Heat starring William Hurt, Kathleen Turner and introducing the wired young actor Mickey Rourke. Edward G Robinson was also in the original. Sorry, total divergence from the subject of this blog which is brilliant by the way but couldn’t resist.

  8. A very good summary of our situation, clearly presented.
    In my latest newsletter I said this about the relationship between the money economy and the real economy:
    Money is the “hole” that is defined by the “doughnut” of real goods and services; it is the nothing that serves only to account for that which is available in the real economy. When pseudo-money can be created by fiat, apart from anything of real value, confusion and madness ensue. — T. H. Greco, Jr.

  9. Astute observations.

    However, unless we go to free markets governments will continue to allocate resources to inefficient avenues.

    Due to some human traits such as psychopathy, irresponsiblity and the mindset of wanting a free lunch it will be a scenario of same as it ever was.

    Politicians will continue to make false promises they know that cannot be kept to get elected.

    Wash, rinse and repeat.

    And that is basically the history of civilisation going back as far as recorded history goes.

    I cannot foresee any politician coming onto the scene who has the knowledge and responsibility to influence the necessary changes.

    Furthermore, even if there was it is highly unlikely they would get elected.

    Here in the UK I am convinced we are heading to more socialism.

    With residents getting subsidies for their energy that is a guaranteed outcome.

    Which will be higher energy costs further down the road.

    Which will then require more subsidies and so on until we get to the next guaranteed outcome.

    The energy companies cannot make any profits and the government takes over.

    Which then will bring us to our next guaranteed outcome.

    More and more government tax payer funds to pay for energy and a group of corrupt, inefficient management on fat pensions making Ill informed decisions on what type of power plants get built and where they get built.

    This is the path I see for the UK.

    I hope to be proven wrong.

    Some might say my views are pessimistic and that might be a fair comment. There is an area of subjectivity to it.

    My view is it is realistic based on human nature, human history and the culture I see around me.

    These are very troubling times we are in and I can’t seem to keep up with developments on the world scene.

    The ship is beginning to get too many leaks.

    I do not think think the holes can all be patched up quickly enough.

    Perhaps we should just let it sink and build a new one from scratch?

    • @freemsrketthinker

      I think that the present system is going to fail. What’s coming will not be either socialism or “free markets”.

      These ways of framing how an economy works only apply to a growth economy.

      Feudalism may be a better description of what may transpire? Or some more egalitarian alternative.

      Will this involve a centralised system of governance or with the “centre” fracture and decisions will be made at a more local level.

      I think a combination of both depending on local conditions.

    • John, FMT:

      Let me come at this in a different way.

      Over time, increasing prosperity has given us many luxuries, and these have included the luxury of failure. We can engage in sub-optimal or outright disastrous behaviours and policies and get away with it, thanks to growth bailing us out.

      This no longer applies, so there might be a benefit in that we can no longer afford extremes. It seems to me pretty uncontroversial to say that extreme collectivism failed in the COMECON bloc in 1991, and extreme ‘liberalism’ actually failed in 2008-09 (and what we’ve had since has been a patch-and-mend system that isn’t really a market economy).

      It follows, I believe, that a mixed economy of private enterprise and public provision works best. We might find our way to this because we can no longer afford the luxury of extremes.

      Additionally, the imperative now will be to ensure that the essentials are available to all. Keeping a majority too poor to afford essentials, so that a minority can enjoy excess, has tended to end in failure (1789, 1917 but many other examples).

    • @Dr Tim.

      I guess a good starting point would be to see how people organised themselves prior to the harnessing of fossil fuels.

      What did the economy look like? I believe that in England, tally sticks were used to record “transactions” rather than coins for most people.
      (David Graeber talks about this in his book. Debt. The First 5000 Years.)

      I think access to land will be key. People will need to provision more and more of their own food. A good starting point would be that anyone who wants an Allotment has the right to one. Local councils given the responsibility to provide them through “compulsory leasing”.

      People are resourceful and creative and will come up with novel ways of tackling problems, but they will need the ability/space to work in.

  10. Physics and Biology
    Here is a link to 3 distinguished physicists discussing various problems at the foundation of physics. I find it curious that, at about 40 minutes, very near the end, Lee Smolin opines that perhaps biology is a better guide to physics than the other way round. I believe it is Sabine Hossenfelder who remarks that perhaps focusing on the ever smaller scale has been a mistake, and thinking in terms of optimizing some macro outcome is required. I think of the way the search for homeostasis is a unifying way to think about biology and sociology. So…if we are at the end of the rope of reductionist pseudo-physics economics, could some sort of organization around a biological principle like homeostasis offer a way forward? If so, we have to ditch a lot of baggage.

    Don Stewart

    • @Don Stewart.

      On a slight tangent……

      I’ve been pondering people’s (I include myself in this) interest in aliens, UFOs and all things extraterrestrial.

      I think the appeal of believing that we are being visited by aliens, is that this implies that interstellar space travel is possible. And if the aliens have “cracked” the knowhow/technology, it’s only a matter of time before we do.

      Psychologically, it’s comforting to think that we can “up sticks” and “boldly go…..”

      However, the reality is that the distances involved are so vast that it is probably going to be impossible to achieve.

      The nearest star is 4 light years away. Any propulsion system that is “sub lightspeed” is going to be travelling for a very long time. Even with cryogenics, how long does tech last before it starts to malfunction? Have we ever build anything as sophisticated as a spaceship that last 100 years or more.

      The only human made things that I can think of that still work after 10,000 years or more are flint lithics!!!!

    • I agree. Couple of interesting things on the frontiers of physics:
      *Some are seriously considering that the future may influence the present. For debate in high school philosophy class: if there is no free will, and the future is already determined, can that future influence the present?
      *What is time, anyway? Most everything can run backwards. Can time run backwards?
      *Amount of energy in a humble rock is staggering. Is anyone certain that we can’t gain access to that energy?
      And then we add some psychology:
      *If having a certain mix of neurotransmitters and hormones is what makes a happy human, why do we think we need oil and gas and coal to accomplish that?
      *Humans are extremely influenced by status. How could we re-arrange society to give everyone their 15 minutes of fame? Social media seems to be generating poor health outcomes.
      *Psychedelics have demonstrated ability to expand horizons in the short term. But re-immerse the person in the old world and 6 months later, the effect is largely worn off. So it is the environment that keeps people imprisoned? If so, how can we structure the world so that those who graduate from “psychedelic kinder and gentler” training can actually live in a world which the first President Bush promised to deliver?

      I am sure you can add a lot of other very fundamental questions to that list.
      Don Stewart
      PS. At the opposite extreme, Stephanie Pomboy on Adam Taggart’s show says that deflation of everything is the most likely problem over the next year or two. The last time we had deflation of everything was 1930-33. Oil, which was as valuable then as it is now, went nearly to zero. There were massive layoffs in the Texas oil patch. Cotton was down to “a quarter a pound and I’m busted”, according to an old song. Pomboy thinks holding dollars is smart. So…the burning question, “where do you put your billion dollars come Monday?”

  11. Thanks for the essay Dr. Morgan, I look forward to reading your insights.

    My speculation on the likely outcome of our current predicament is a contraction of economic activity to predominantly local economies as the cost of globalization becomes unsustainable. The people providing necessities at local scales will do well while the enterprises dependant on global supply chains will fail spectacularly.

    • Fink said recently that globalisation is over …
      https://www.ft.com/content/0c9e3b72-8d8d-4129-afb5-655571a01025

      One wonders what the point of it was, if the current version only lasted ~30 years. Ah, I forgot … it made quite a few people billionaires.

      Apparently the UK supermarket system for supplying people with food uses 2.5x as much transport fuel as its pre-1960 equivalent, which featured mostly small shops and regional wholesalers, with fewer lorry movements. But the older version was more labour-intensive.

  12. Lots of Advice from Tim Watkins (Consciousness of Sheep)

    Tim was professionally involved in dealing with mental health issues. He and Nate Hagen’s discuss the challenges people will face in the future, and how best to deal with them psychologically and physiologically. This relates to my previous comments about psychedelics.

    You will note that throughout the discussion (which happened back in April), Watkins seems to be more pessimistic than Hagens. Hagens wants to walk back from Energy Armageddon. It seems to me that Watkins thinks things are going to unravel very quickly.

    Don Stewart

  13. Black Box Warning: Amateur About to Speak
    In the popular imagination, physiological tools like mindfulness based stress reduction and targeted breathing and walking to reduce stress are all about the reduction in the stress hormones. But the body makes stress hormones for a reason: to get us to move purposefully. We get stress hormones every morning when we wake up, which motivate us to get out of bed. It seems to me that there are two significant divides that we need to pay attention to, particularly in times of trial:
    *Unproductive levels of stress which just cause us to cycle. between panic and fear…but don’t result in any targeted action. This can result in either quick suicide or slower suicide such as the Soviet executives who drank themselves to death. It seems to me that mainstream news outlets specialize in cycling us between panic and fear…if it bleeds, it leads.
    *The physiological ways to manage stress levels (such as Nate Hagens and the breathing exercises) will ideally put us in the best position to clearly assess the risks and the possible actions to get us across the raging river. That is, “blissing out” is not a desirable action. Doing something productive or at least with potential is the desirable outcome. This is hard enough to accomplish in our individual lives or as a family, and much more difficult for a society. Leaders are almost required to be less than totally truthful when serious risks are staring us in the face. It is not helpful to just create panic. On the other hand, simply distracting people from the real problems is destructive in the long term but may win elections in the short term. I think that Tim Watkins advice to young people to grab the bull by the horns is his way of telling them to expect nothing much from our current “leadership”.

    I have a very small sample of what the young people are thinking…other than Tic Tok ing away their time. My two grandchildren, aged 22 and 20, have both remarked that they will probably never be able to afford their own house. I don’t perceive panic, just a sane response to a real situation.

    Don Stewart

    • There is part of this story that most tend to miss out. This bit of Heinberg’s article just glosses over the real problem…

      “and may end up being limited by materials requirements for panels, turbines, and batteries.”

      It’s not just materials for panels, turbines and batteries. It’s materials for the whole system to keep growing so that renewables can grow by 15%+ per year. All the new factories and mines need to be built to make them need to be built at 15%/yr as well. All the new industrial equipment inside these factories need to be made at an increasing rate of 15%/yr, plus the factories that make the equipment need to increase in capacity and output.

      The chain of what needs to be done is much longer than most realise. If the system itself is contracting, how is it possible to expand one part greatly?? It means the rest of the economy must shrink faster. Dr Morgan’s own graphs clearly show that it is investment spending that will continue to shrink as a percentage of total spending.

      Looking at numbers gained from various sources the total amount of energy production in 2021 from wind and solar is around 2,850 Twh. This number is not the 3% often touted, but only 1.7% of total world primary energy consumption of around 170,000 Twh in 2021. If total wind and solar energy grew by 15%/yr for the next dozen years, these renewables would still only be 10% of total world primary energy consumption, if we assume zero growth in primary energy consumption.

      If world primary energy consumption were to grow at around just 1%/yr over the next dozen years, while solar and wind grew at 15%/yr, then solar and wind would make up less than 8% of total energy supply, plus would not have replaced any fossil fuel use, as total primary energy consumption would be up to 191,000 Twh/yr an increase of 21,000 Twh on 2021 levels, while total wind and solar production would be 15,248 Twh/yr.

      Also remember that as we approach 15-20 years since the initial big increases in wind and solar roll outs, a lot of old solar and wind will be retired, meaning future increases of 15%/yr in total production will need higher rates of growth in new production.

      This from a speech Admiral H. Rickover gave in 1957… “A reduction of per capita energy consumption has always in the past led to a decline in civilization and a reversion to a more primitive way of life.”
      https://ourfiniteworld.com/2007/07/02/speech-from-1957-predicting-peak-oil/

      The reduction of energy use and a nuclear or renewable future is not possible. Just quickly on nuclear, to replicate today’s primary world energy consumption, without any growth in energy use up to 2050 would require 21,500 nuclear power plants of 1Gw size running at 90% capacity factor. It means we would have to complete 2 new nuclear power plants every single day for the next 27.5 years. We don’t have the materials, nor the nuclear fuel for that.

      By around the end of this year, we will pass 8 billion humans on this planet. We are in deep overshoot. There is no easy fix or answer. Despite all the talk and action over decades, one look at the Keeling curve clearly shows humans are not serious about the obvious well known climate problem, so the mostly unknown energy problem is still way off the agenda..
      https://keelingcurve.ucsd.edu/

    • @Hideaway
      I have been convinced by the Overshoot story since I met the late Bill Catton and then read his book years ago.

      Nate Hagens puts a pretty good story together:
      View at Medium.com

      If you read the discussions Nate has with, for example, Tim Watkins of Consciousness of Sheep, you can see his ambivalence. He wants to tell the truth, and motivate action, but (IMHO) also wants something which is politically actionable which requires that it be acceptable to humans who regard themselves as God’s Unique Creation. Telling the majority of people that they are just the latest, and probably doomed, product of 4 billion years of evolution…and nothing really special….shuts down conversation.

      When the Great Financial Crisis hit the fan, some of the leaders of the Peak Oil movement decided to tone down their rhetoric in order to avoid adding to the panic. It seems that experienced leaders mostly think that head-on collisions with reality must be avoided. Which is, I suppose, why everything tends to devolve into green-washing.

      Don Stewart

  14. In the absence of any new oil production though, the Brent oil price just kept on rising… $54.38 in 2006, $72.52 in 2007, and $96.99 in 2008 – rising to a high of $147.50 in July of that year. These price increases were enough, in and of themselves, to plunge the global economy into a major recession. The central banks – whose primary purpose is to protect the banking and financial corporations – in attempting to slay the oil price dragon with the alchemy of higher interest rates, turned a major economic downturn into an existential crisis.

    The big lie – which persists to this day – is that in 2008 the banks experienced a “liquidity crisis.” That is, the banks claimed to have plenty of valuable assets with which to meet their obligations. However, a loss of confidence had placed unexpected demands on them so that, while they could pay their way eventually, they couldn’t pay their way today. A colloquial analogy here would be someone borrowing £10 from a friend to tide them over until they get paid at the end of the week. The reality though, was the banks were more like a friend who borrows £10 but forgets to mention that they got fired and there will not be a pay packet at the end of the week after all.

    https://consciousnessofsheep.co.uk/2022/06/17/literal-insanity/

  15. A tale of two power plants.

    The South Koreans have recently completed two new 1400MWe nuclear power reactors at a total cost of $6 billion.
    https://en.m.wikipedia.org/wiki/Hanul_Nuclear_Power_Plant

    Contrast this to Hinkley Point C, where two 1600MWe power reactors are now projected to cost £26 billion ($30bn).
    https://world-nuclear-news.org/Articles/EDF-revises-Hinkley-Point-C-schedule-and-costs

    On a per kWe basis, The South Korean plant will produce some of the cheapest electricity in the world.  Hinkley C, some of the most expensive. 

    Nuclear power is the most efficient energy source, in terms of power density and embedded materials needed per MWh.  When done properly, it is also the cheapest form of energy.  Western countries have somehow managed run it into the ground.

    • America had a nuclear navy based on a standard design of plant. The French adopted this model while the free market, capitalists in America let managers of coal fired units build nuclear plants.

      My father worked for Dayton Power and Light which was one of the investors in the Zimmer “Nuclear” power plant. It was 97% completed before being converted to a coal fired unit. Capitalism killed nuclear in America.

      https://en.wikipedia.org/wiki/William_H._Zimmer_Power_Station

    • @TonyH

      I have my doubts that Hinckley will ever be operational.

      Has the sister plants in France and Finland started producing electricity yet?

    • Olkiluoto 3 went critical in december last year, but has yet to be grid connected.

      The Koreans built a 5380MW nuclear power plant in UAE for $24bn. It took about 8 years. That is in the UAE, which has very little industrial base.
      https://en.m.wikipedia.org/wiki/Barakah_nuclear_power_plant

      Maybe the UK should be talking to them instead of the French for any future nuclear capacity. They seem to be better at it. A 5390MW plant would produce about 20% of UK electricity.

  16. I like the logic of this argument, and do not disagree with it.
    However, it is not all doom and gloom: there really are alternatives, and they are quite nice ones.
    I’ll restrict myself to three key points.
    #1: Consuming less is good for you: proven fact, we have become bloated both physically and metaphorically. We waste good resources like crazy: good ripe fruit falls off our trees and rots because nobody can be bothered to pick it.
    #2 There are massive untapped and sustainable resources out there. You do not need to spend much money to enjoy a great life: re-use, recycle, make things from scrap materials, dig up your lawn and grow food.
    # We are obsessed by social status, and this is determined by advertising agencies as the excess materials we own and consume, rather by the contribution we make to society. This needs to change.

    • Bayrock,
      We are social mammals. Hierarchy and status are strong behavioral traits. Mating selection is affected by them. Advertising taps into this, but is not the primary driver.

      As to bothering to gather and grow food, laziness is also innate in us. That was selected over tens of thousands of years, as conservation of energy was a survival mechanism. Of course obtaining food and other necessities were skills also selected and taught.
      It’s a complex situation with the lawns being part of the status thing. Not so easy to swing fashion in a generation unless survival or necessities are involved.

  17. Thank you once again, Dr Tim. Things are quickly deteriorating in the UK, as noted by someone in The Guardian’s comments today.

    “11% inflation, 15% food inflation, eat or heat, 2.1 million meals issued by foodbanks, deferred state pension, 7% interest on university fee loans, houses at 9X income, 14.5 million living in poverty, 275% increase in sovereign debt to £2.4TRN (£878BN 2010).

    20,000+ people living in 468 unrepaired tower blocks with unsafe cladding five years after Grenfell.”
    To this can be added industrial unrest with rail strikes and lawyers thinking the same.

    I was talking to a senior analyst at a very large asset manager a short while back – “we think there will be significant civil unrest in the Uk; it just takes three hot nights, too much booze, and windows start getting broken.”

    It’s hard to disagree, and our appalling ‘government’ seem utterly clueless.

    • Indeed so – in fact, I think preparations for a “sterling crisis” should already be being made.

      One point that needs to be considered is the question of public sector pay – what is the government likely to offer?

      In terms of potential for unrest, I’ve not forgotten the dreadful scenes at Wembley during last year’s Euros final.

    • these are all legitimate concerns, but they may pale into insignificance shortly, the Atlanticists seem hell bent on stirring up a hornets nest in the Ukraine,
      the big picture looks somewhat like a slow motion train wreck.
      I’m sorry to be despondent but I see no benefit from sugar coating it.

    • I take your point, but I’m noting significant differences between the circumstances of the US, the UK and the Euro Area.

      America is in the best position, for two main reasons. First, the US is less import-dependent than the UK or the EA where energy and resources are concerned. Second, the Fed’s monetary tightening may not have been all that impressive, but at least it hasn’t backed off in the face of the emerging bear market.

      Additionally, the fiasco in Afghanistan might suggest a lack of resolution on foreign policy, which might mean that commitment to Ukraine may be less than wholly resolute.

      The UK has long been following a failed economic model – debt dependency, collateralized by inflated asset prices, with trsade deficits financed from asset sales – whilst the Euro is a dysfunctional currency, based on political rather than economic principles. On this basis, Britain may face a currency crisis very soon – and seems ill-prepared to meet it – whilst the EA may suffer from monetary policy paralysis.

    • @Dr. Morgan
      The US energy policy is contradictory but maybe not incoherent. The Biden administration’s officials have been throwing roadblocks in the way of additional investment in fossil energy, but Biden himself has lately been castigating the oil industry from not producing more oil and gas. The petroleum companies fought back by pointing to the roadblocks erected by his appointed officials, and noting that refineries are running at capacity. What they did not note is that 10 percent of the petroleum is being exported as finished goods (e.g., gasoline and diesel). So one question is whether Biden will bow to “America First” concerns or let American prices equilibrate with the world average. If the latter, then the EU and Britain may be badly damaged.

      Many have observed that the petroleum companies, who have suffered from low stock market prices for a long time, are enjoying the cash flow, and are not quite as eager to invest in new capital projects as Biden would like.

      It’s hard to actually pinpoint the nature of America’s energy policy…if there is one.

      Don Stewart

    • I wouldn’t question for a moment your conclusion that out of the Dollar, Euro and Sterling zones Britain has succeeded in digging the most impressive and inescapable hole,
      so what will a Sterling crisis likely entail?

    • This would involve a loss of market confidence in Sterling. As its value falls, anything denominated in foreign currencies escalates. This includes essential imports, such as energy, food and components, and also includes the value of debt, and the cost of servicing it. Inflation would soar, and interest rates would have to rise dramatically.

      This happened to GBP in 1976, and was halted by an IMF bail-out, with policy strings attached.

      Currency crises have often occurred in emerging economies, but I can’t recall this happening to any Western currency since Sterling in 1976.

    • Matt,
      the UK is in a deep hole that is for sure, but it is not quite “inescapable”.
      You will have noticed over the past few days that the “Western powers” are Hell-Bent on starting a war with Russia.
      That is how they get out of this !
      “When all else fails – They take you to War.” ( quote Gerard Celente, Trends Journal )
      We and our families will pay the heaviest price, while the Establishment sits back enjoys the show, and after all the shooting is done, they will buy up our assets for pennies.
      None of us are going to get the chance to see what a Sterling Crisis actually looks like, because they will start a war before it gets to that stage.

    • @Johan
      We may get a historic opportunity…to witness the first war which STARTED with nuclear weapons rather than ENDED with nuclear weapons. Russia has made it very clear that it will not fight NATO with conventional forces. Let’s hope its bluster, and politicians looking for cover. If it starts with the destruction of US carrier groups, it cannot be stopped (IMHO).
      Don Stewart
      PS. theoretically, it might have never started if Germany had just let Russian gas come through Nordstream 2. But if the financial peril of the West was already perceived by the respective Security States, then where we are today was inevitable.

    • ok, thanks for a rundown of what a currency crisis would entail,
      if you think preparations for a ‘sterling crisis’ should already be being made, what form do you think they could or ought to take?

      and you mention the 1976 sterling crisis that was addressed with an IMF bail-out, am I right in assuming the policy strings attached were the typical austerity and privatisation measures?
      if so, am I right in thinking there would be scant room for further austerity and privatisation in todays Britain if a bail-out package was sought?

    • I think there were austerity conditions attached, but I don’t know about privatisation.

      Given the scale of the nunbers involved, no bail-out package would be feasible today.

  18. Don,
    The Russians don’t “Bluster”.
    Putting a road and rail blockade on Kaliningrad will prove to be a costly mistake.
    As for the Germans, well your average German did not have any say in the matter.
    Nordstream-II was decided in Washington.
    I just hope that the coming winter on the European continent is exceedingly severe.
    Some people just need to be taught a lesson the hard way.
    If Scholz and Co. are not gone by January, then my fellow countrymen deserve every hardship coming to them.

  19. Tim. As always, I really appreciate your analysis and insight. Sadly you seem to be accumulating a strange assortment of socialist nutters and cookie conspiracy theorists in your comment section. I will stick with the generics ad hominem as engaging with their warped perspectives is pointless. As polite as you are, they unfortunately drag down the credibility of your site no end.

    • Alan Shaw’s post rings true to me. Few ideologues will make charitable wagers on actual outcomes. Like conspiracy theorists, they often make claims without shareable evidence. And, their posts rewind and replay the same tapes month after month.

      Overshoot, biodiversity loss, toxification, resource decline…are scientific facts.

    • @Steve B Kurtz

      It’s all just part of “life’s rich pageant”.

      One person’s nutter is another person’s prophet.

      It’s as old as the hills. Aren’t organized religions, going back into antiquity, just “conspiracy theories of old?

      The ability to imagine things that don’t actually exist is, perhaps, what makes us “human”?!🤣

    • Agree, John. Over 80% of us believe in supernaturals according to social scientists. I’m one of the mutants who don’t. Search Innovation Journal, The Spirit in the Gene, and my last name to read a short book review I wrote.

  20. “Stocks Set To Drop Further Due To Margin Contraction, Warns Money Manager Peter Boockvar”
    That’s the headline from Adam Taggart’s podcast, Wealthion. So how can it be that the consumers are worse off, the corporations are worse off, and the government is running record deficits? It’s obviously not that one sector is getting better off at the expense of the other sectors…they are all getting worse off. Inflation is not doing anybody any good.

    Many of us here would agree that this situation is a sign of thermodynamic exhaustion…every sector is losing cheap energy. If we were in Europe, we might vilify the Russians for taking more than their fair share. But the headline is from the US, which is exporting more energy than we have for many decades. Is it possible that exporting more energy makes a few companies more profit, but drags down everyone else? That would be another sign of thermodynamic exhaustion.

    I would say that the evidence is piling up.
    Don Stewart

    • Perhaps an analogy to Las Vegas may help?
      “Rake is the scaled commission fee taken by a cardroom operating a poker game. It is generally 2.5% to 10% of the pot in each poker hand, up to a predetermined maximum amount. There are also other non-percentage ways for a casino to take the rake.”
      So…the rake has been increased so that ALL of the players are statistically likely to be worse off. The occasional short seller may come out ahead, but everyone will be a probable loser.

      Don Stewart

  21. Yes, but….
    At least the house is still winning! Yes, but the house has to pay the Mob, which is strictly friction. Maybe the Mob is better off? Well, the mobsters bodies are now being exposed to sunlight as Lake Mead dries up to a puddle and 40 million people are being exposed to the costs of drought. So, soon, there will be only bleached bones. Maybe a victory for Gaia, but that’s not the game we signed up to play.
    Don Stewart
    PS. Kenny Rogers song The Gambler:
    “Every gambler knows
    That the secret to survivin’
    Is knowin’ what to throw away
    And knowin’ what to keep
    ‘Cause every hand’s a winner
    And every hand’s a loser
    And the best that you can hope for
    Is to die in your sleep””

    Or else??? Change the game one is playing?

  22. Alternative Explanation
    John Michael Greer provides an explanation for the peculiar situation of the US with some attention also to mostly European client states:
    https://www.ecosophia.net/the-twilight-of-empire/

    The notion of thermodynamic exhaustion does not exclude the possibility that there is a simultaneous collapse of empire. In fact, I would argue, the thermodynamic exhaustion explanation makes the collapse of empire more likely…because maintaining empires is costly in terms of energy. But empire may still be working in favor of the US. For example, Biden is proposing to declare a holiday on the collection of gasoline taxes in the US. Because the US has the reserve currency, he can more or less simply transfer some of the cost of empire to the Rest of the World. So the Rest of the World gets to make up the shortfall as tax receipts decline. How long that will remain true is a good question.

    Don Stewart

  23. The slowly declining prosperity indicated by SEEDS model gives a false sense of security in my opinion. Having reviewed some of the work of geopolitical analysts like Peter Zeihan, it is has become clear to me that the world is reaching multiple crises simultaneously.

    We are past peak oil and probably past peak surplus energy overall. But just as problematic is the fact that most countries in the developed and advanced developing world are facing demographic declines that is robbing them of working age population, consumer base and investment money simultaneously. The world is running out of people, or at least people that are likely to be a useful part of the economic system. It is demographics that lie behind Russia’s decision to annex eastern Europe. Their population is aging so fast that they will otherwise lack the military capacity to secure their borders within another decade. In China the demographic situation is so bad that total population is going to halve within the next thirty years. This makes it unlikely that China will remain a functioning state a decade from now.

    On top of that, geopolitics is shifting in ways that effect supply lines. The shale revolution allows the US to be almost self-sufficient in energy. Mexico provides a low to medium skilled workforce for US industry to outsource to under NAFTA2. The US is now withdrawing from the globalised system and will soon have no incentive to continue to police the sea lanes. This will make it difficult to sustain global supply lines, which are already strained by COVID and Chinese lockdowns. The sanctions against Russia are withdrawing a significant fraction of global oil and gas production from international markets. They are also withdrawing food, fertiliser and many of the mineral resources that the world needs for green tech. Between loss of mineral supplies, the collapse of China, and the decline in investment volumes from a retiring 1st world population; we are unlikely to see a big expansion in renewable energy infrastructure beyond the next few years. The resources that woukd allow that just don’t exist.

    Put all of these things together, and human life across much of the planet begins to look precarious. Far from being the next superpower, China could soon cease to exist as a unified nation state. North Africa and the Middle East are facing outright mass starvation. Europe is facing both a demographic and energy crisis, that may turn political alliances on their heads. The USA is insulated from the ensuing chaos to a much greater extent. Far from being a declining power, the US will have an increasing proportion of global GDP over the next thirty years. The rest of the world really looks screwed.

    • Lots of interesting points Tony but I don’t think the US is insulated. As a population it has a per capita biocapacity deficit of
      -4.7 gha which means it needs to source this deficit from foreign biocapacity. This will mean it will continue policing global supply chains as well as capturing more foreign biocapacity where possible.

      In this respect, Russia is rightly nervous because it has as a population a per capita biocapacity reserve of 1.4 gha. Your demagraphic explanation certainly adds to the impetus of Russia protecting their own biocapacity as well as forcibly capturing foreign biocapacity.

      Lastly, Russian oil is going to China and India at knock down prices which is strengthening BRIC countries in relation to EU countries due to cheaper energy and thus lower more competitive prices on global markets.

      I think BRIC now understands how the liberal global economy works and is now manipulating it to their advantage which includes understanding the fundamental importance of energy in relation to economic activity and prosperity.

      https://data.footprintnetwork.org/?_ga=2.28859900.115563970.1650107829-1338938494.1645981830#/

    • Steve G,

      Re:
      “Russia is rightly nervous because it has as a population a per capita biocapacity reserve of 1.4 gha. Your demagraphic explanation certainly adds to the impetus of Russia protecting their own biocapacity as well as forcibly capturing foreign biocapacity.”

      If population declines, the p/cap biocapacity increases ceteris paribus. Protection their own is rational, but capturing foreign is not driven by shrinking domestic p/cap biocapacity.

    • I’d imagine biocapacity may well reduce due to depletion, especially energy stocks, so in the future per capita biocapacity may the same or lower depending on actual population size then. They might start accepting mass migration as a 2nd tier class.

      I think the main impetus for invading Ukraine is to capture Ukrainian oil supplies and better protect their pipelines from nationalisation. This generates more energy leverage against the EU/NATO which in my mind includes any diversion to BRIC countries so they can economically grow.

      Similarly, the Black Sea enables them to better control global supplies of grain, fertilizer and other essential goods including their price. Again stocks can be diverted to client States or used for domestic consumption. Either way, the impetus is to sustain Russian prosperity and consolidate BRIC interests.

    • Tony:

      I agree with you on the worsening sense of crisis, a sense which I share.

      My approach is to interpret economic issues by applying sound principles (which for me are energy and ‘two economies’) and modelling the economy on this basis. Properly managed, what should be happening is what SEEDS describes – gradually deteriorating prosperity; rises in the costs of essentials; rapid deterioration in discretionary sectors; and extreme problems with a financial system built on the false predicate of ‘growth in perpetuity’.

      But no model can predict events such as covid and our reactions to it, or the invasion of Ukraine and, again, responses to that. Taking the UK as simply one example, nobody could have anticipated the sheer idiocy playing out now.

  24. I’ve been recently framing this economic crunch as an ecological crunch and in so doing have been utilising human ecological principles which seeks to understand the relationship between population, GDP, biocapacity, trade, community and ecocide in order to shift to a steady state economy. (Ecocide because we need to deeply acknowledge that we need to kill in order to survive).

    Whether a post-growth steady state economy is intentional or nonintentional, I feel the same human ecological principles will apply in terms of muddling through whilst we gain a much better understanding of the trade offs between the human ecological principles.

    In very broad economic terms, a shift towards a steady state economy whether intentional or unintentional will highlight that low income earners capture 25% of UK national income, middle income earners capture 63% of UK national income and high income earners capture 12% of UK national income. So if essential public services are to improve under conditions of population growth, then middle income earners will need to be taxed more.

    Income restructuring and increased distribution could also occur in the percentile of high middle income earners whereby £100k jobs and their consolidated roles are split into decent £30k jobs with the splitting enhancing productivity and efficiency of the roles.

    I say this because I am aware that Council officials being paid £100k as a result of streamlining roles for example is resulting in under performance and reduced productivity due to the limited capacity of a single person doing all these streamlined roles as a result of cost cutting organisational simplification.

    I think the same is happening with the rail services which will only reduce over organisational performance.

    Thus, as you say Tim, good economics and bad economics becomes a very important feature of a steady state economy and ideally one that can incorporate the human ecological principles as well as take into account the human economic principles of productivity, efficiency, capacity, resource availability, equal opportunity and redundancy .

    Ideally this high middle income job splitting would be accompanied by automation of low income jobs where possible to provide the labour to move into £30k jobs rather than relying on population growth which simply increases our dependency on foreign biocapacity and increases our trade deficit within steady state dynamics.

    (This analysis is for the UK specifically which already has a high biocapacity deficit).

    However Tim, as you starkly point out, whilst people are expecting more and more (without being willing to be taxed in order to realise their public sector entitlements for example) then rather than bravely facing ecological/economic realities together, liberal politics quickly turns into individual resentment and fury.

    I honour your bravery Tim.

  25. We all know that SEEDS cannot predict tipping points where discontinuities (see how I don’t use the word “collapse”!) occur. Thus we can be “surprised” when comparing events in the real world against the SEEDS trendline.

    Months ago I linked to the troubles in Sri Lanka, which was having difficulty affording fuel. The article I linked to noted that the lockdowns had caused a significant decline in SL’s tourism business (loss of discretionary spending dollars/euros of others). Well matters are now much much worse. Trigger warning: the below article uses the “C” word.

    Coming to a place near you likely much sooner than you think:
    https://news.sky.com/story/sri-lankas-pm-says-its-debt-laden-economy-has-collapsed-12638329

    • Here’s the predicament, as I see it.

      Using the knowledge that we have here, and SEEDS, we know what’s happening in underlying terms – I might even say that we know the ‘facts’ of the situation. I think we’ll also known, all along, that when the illusions based on ‘perpetual growth’ were destroyed, the results would create stresses.

      But what has taken me by surprise is the sheer scale of irrationality that has come to the fore so rapidly. I can’t model that.

      Britain isn’t the only example – I could cite plenty of others – but the UK seems to be behaving suicidally, almost inviting a Sterling crisis , the one thing that the British economy couldn’t survive. Already in a trade war with Russia, they now seem to want a trade war with the EU as well. The government plans to give pensioners (who vote, and often vote Tory) a 10% rise, but offer younger workers – and public sector employees – perhaps 2% or 3%, combined with higher taxes. Where do they think that leads?

      There are plenty of equivalent idiocies in other countries.

      The facts, globally, are ugly, and can’t be sugar-coated. Prosperity is contracting. The costs of essentials are rising. Discretionaries are getting crushed. Whole non-essential sectors, some of them huge, have no future. A financial crisis is inescapable.

      But does any of this justify collective insanity?

    • Tim, maybe they are thinking that a dust up with the EU is inevitable because of the Irish problem. Maybe it is better to have it now whilst we still have some North Sea oil production that lifts balance of payments and the EU is about to fall on very hard times due to the Russian energy crisis. Because of their ageing population, the EU economies are increasingly export dominated and the trade deficit between EU and UK may mean that disrupted trade could actually strengthen sterling. But I am speculating.

      The decline is prosperity is even worse than it seems because a declining working age population is having to carry a growing retiree class. The reduction in wealth due to declining surplus energy, comes on top of a demographic problem.

    • @Dr Tim

      I think the 10% rise for pensioners is no surprise. The UK government has always put winning/ maintaining power above all else. They have no real ideology/political philosophy other than to do what it takes to win. If that involves social unrest, then so be it. “Divide and rule” and starting “culture wars” are it’s tools/strategies.

  26. snapshot of UK population
    Go to 6:30 for bar graph, followed by Dr. Tim Spector’s comment
    These data are collected from the public using smart phones, and have been used to track Covid 19 for many months now. As perhaps comic relief, the UK government initially funded the effort (which is cheap), but then decided to defund it. Can anyone guess why?
    Don Stewart

    • Did they decide to defund the effort for the same reason they stopped publishing a detailed breakdown of C-19 cases, hospitalizations and deaths by status?

    • @Replenish
      I think the UK government defunded them because they were providing the best, most up-to-date facts about what was happening….but they were not part of the UK government and thus could not be forced into whatever propaganda line the government was telling at the moment. Covid has been making a rebound in at least Europe and the US very recently. Immediately after a high official in London declared it all to be over.

      Certainly neither the UK nor US government are happy to see the almost real time reporting on the mood of people in the respective countries.

      Don Stewart

    • I haven’t watched the video yet but agree the funding will have been cut because it doesn’t fit the political narrative.

    • Covid has been a global fraud (Drosten’s PCR test at 45 cycles). Henegan et all (Oxford University) show IFR of 0.03%. Big Pharma making lots of money though. Spector is funded by Gates. Dont get me started on the toxic injections (now going into infants). Read The Real Anthony Fauci by Robert Kennedy.

    • My suggestion to look at one chart had nothing to do with Covid. It was the bar chart showing what is on people’s minds in the UK.
      Don Stewart

  27. Adam Taggart and Luke Gromen on Destruction of US dollar and Global Sovereign Debt Crisis

    Unlike most interviews, this one gets into some questions that lead to awkward pauses where words are groped for. I don’t think these are canned answers. Gromen suspects that the bondholders are going to get fleeced one way or the other. Taggart asks him whether the US social bonds can survive, and suggests that a UBI is required. He asks Gromen whether half the US population is going to become dependents of the government. Gromen says that is the way things are going. Don’t take these summaries as anything other than my reading of the desperate tone of the conversation. Listen and make up your own mind.

    Don Stewart

    • This is the wrong link. I’m trying to get the correct link. If this one doesn’t work, check the Wealthion You Tube website and click on the Gromen interview…Sorry for confusion….Don Stewart

  28. Pingback: LifeBoats – REAL Green Adaptation

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