#242. The dynamics of global re-pricing



There is a growing acknowledgement that the World economy has entered a new era. We know that the cost of capital is trending upwards, with adverse consequences for asset prices. But there’s been remarkably little inclination to examine the underlying processes that are causing this to happen. Neither is there much in the way of recognition that entire sectors could be crushed, or even eliminated altogether, as re-pricing becomes more selective.

We need to dismiss any idea that this is temporary. There are some linkages connecting the resurgence of inflation with pandemic-era QE, and with the war in Ukraine, but these are little more than symptoms.

The underlying dynamic is that the economic driver of the industrial era – the supply of low-cost energy from oil, natural gas and coal – is winding down, and there is no assured replacement at hand. Transition to renewables is imperative, but there’s no guarantee that an economy based on wind-turbines, solar panels and batteries can be as large as the fossil-based economy of today. The probabilities are that it will be smaller.

Had we been prepared to do so, we could have seen this coming. The chain of causation starts in the 1990s, when the authorities responded to “secular stagnation” with deregulation programmes that made credit easier to obtain. The subsequent financial crisis forced the adoption of QE, initially to prop up the banking system, and latterly as a self-standing form of stimulus. We were assured, quite wrongly, that QE would not be inflationary, but it has created a systemically-dangerous “everything bubble” in assets.

The fundamental issue is that the material costs of energy supply have been rising relentlessly. We cannot “de-couple” the economy from energy use, and this report describes a remarkable linearity between the quantity of energy that is used and the economic output that ensues. Meanwhile, and whilst economic output is poised to contract, material prosperity will be further impaired by rises in the Energy Cost of Energy (ECoE).

The true cause of inflation is the worsening disequilibrium between the ‘real’ economy of products and services and the ‘financial’ economy of money and credit. The only way to tame inflation is to eliminate the anomaly of negative real costs of capital. Combined with deterioration in material prosperity, this points towards a fundamental re-pricing of the economy.

With the real costs of energy-intensive necessities continuing to rise, two parts of the economy are at particularly elevated risk. One of these is the supply of discretionary products and services to consumers. The other is those parts of the corporate and financial system which rely on flows of income from the household sector.


The global economy is heading for re-pricing, which means a fundamental change in the relationship between economic flow (including output, incomes and expenditures) and financial stock (the valuations of assets, collateral and liabilities). This process has already commenced – and is going to be chaotic – but its real causation has yet to gain recognition.

As we shall see, there is no non-inflationary way in which economic flow can be increased. This means that, as dynamics of this relationship change, stock valuation must fall.

The reduction of the global balances of assets and liabilities will be an uneven process, both geographically and between sectors, but the generality of financial stock degradation is likely to be of the order of 40-50%, measured from the start of 2022. Sectors providing necessities to consumers will fare better than those supplying discretionaries, for whom the outlook is grim.

The ‘why?’ of re-pricing is simple to describe, but making sense of it requires a major change in how we think about the economy. We need to move away from the economic orthodoxy which continues to assert that the economy is entirely a financial system, not subject to material limitations.

As well as meaning that there need never be any end to growth, the classical conception also asks us to believe that the flow of economic output can be measured by counting financial transactional activity. But transactional activity can be inflated using monetary policies, and it’s perfectly possible for transactions to take place which add no economic value at all. This makes GDP a particularly poor metric for the measurement of prosperity in the economy.

The prerequisite for effective interpretation is recognition that the economy is a system which supplies material goods and services to consumers. The provision of these products and services is a function of the use of energy.

Once this is understood, we need to draw a distinction between economic output and prosperity. Output is analogous to the income of a household, whilst prosperity corresponds to how much of that income remains after the costs of necessities have been met.

The economic output side of the equation involves the conversion of primary energy into economic value. This energy conversion ratio is remarkably static, hardly varying at all over the past forty years. Globally, economic output rises or falls in accordance with increases or decreases in the availability of energy.

The prosperity dimension of the equation is determined by the Energy Cost of Energy. This has been rising relentlessly over a very long period, and there are no realistic grounds for expecting it not to carry on doing so.

The pricing of assets is a function of a process of the futurity which links current prices with forward value expectations. The consensus forward projection has been, and remains, one of continued economic expansion, albeit with minor setbacks along the way.

But material trends are invalidating the money-only notation of classical economics. As this reality sinks in, the consensus futurity will be degraded, introducing a wholly new dimension into equations linking current pricing and forward expectations.

This is going to induce the equivalent of vertigo, as market participants realise that we’ve been pricing a future that cannot happen. The degradation of futurity will trigger chain reactions right across the interconnected, collateralized World financial system.


How can we know that this is going to happen? The answers lie, not in the ebb and flow of market sentiment or, for that matter, of policy, but in the fundamentals.

The effective interpretation of economic processes requires some straightforward foundation principles.

The first of these is that the economy is an energy system, because nothing that has any economic utility whatsoever can be supplied without the use of energy. This applies, not just to products and services, but to the entirety of the economy. The creation and maintenance of infrastructure and capacity is entirely reliant on the availability of energy. Access to raw materials – ranging from minerals, chemicals and plastics to food, fertilizers and water – is a function of the energy required to supply them.

The second principle is that energy is never ‘free’. 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. This is the principle of ECoE.

Oil isn’t ‘free’ because it exists beneath your land – you still need wells, pipelines, refineries and the rest of the supply system. Solar and wind power aren’t ‘free’ just because the sun shines and the wind blows – we still need solar panels, wind turbines and distribution systems, with the added complication of storage capacity to offset intermittency. None of this infrastructure can be built or maintained without the use of energy.

The third foundation principle is that money has no intrinsic worth. Rather, it commands value only as a ‘claim’ on the output of the material economy. This is the principle of money as claim.

From these principles, two conclusions naturally follow.

First, material prosperity is a function of the surplus energy which remains after ECoE has been deducted from total supply.

Second, the economy, as presented financially, is a representation or proxy of the underlying material economy determined by the supply, value and cost of energy.

This wouldn’t be a problem if conventional financial notation was an accurate representation of the material economy.

Unfortunately, though, it is not. We have to take a brief journey into history to see why.


The widening gap between material fact and financial representation can be traced all the way back to 1776. The huge, complex and energy-intensive economy of today began when James Watt unveiled the first really efficient device for converting heat into work, giving us access to the vast energy resources contained in fossil fuels.

Adam Smith’s The Wealth of Nations, published in that same year, was the foundation treatise for a school of economics which seeks to explain everything in terms, not of energy, but of money alone.

Writing as he was in an agrarian, low-energy economy, Smith cannot be blamed for not anticipating the transformation that would result from work that his fellow Scot was at that moment completing just a few miles away. But his successors can, and should, be criticized for a blind adherence to precepts which, by insisting on the financial, rigorously exclude the material.

With material factors disregarded, it becomes perfectly possible to predict infinite economic growth on a finite planet, a proposition which no sensible person should accept. Perhaps Kenneth Boulding, co-founder of general systems theory, put it best, when he said that “[a]nyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”.

On the flimsy foundation of immaterial, money-only interpretation, classical economics has erected what its adherents are pleased to call the “laws” of economics. These, of course, are simply behavioural observations about the human artefact of money, and are in no way analogous to the laws of science.

One example is the assertion that price is the outcome of the interaction of demand and supply, both of which are, of course, stated financially. The inference is that price movements create an automatic adjustment whereby supply increases in accordance with rises in demand.

If demand increases, this logic runs, prices rise such that producers have sufficient incentive to deliver a corresponding increase in supply. Higher prices also reduce demand, but the assumption remains that rising prices create additional supply. Supply is thus a function of demand, mediated by price.

But this could only work if the possibility of unlimited expansion of monetary demand was matched by a correspondingly infinite potential for material supply.

The reality, of course, is that no increase in demand, and no rise in price, can supply anything which does not exist in nature. The banking system cannot lend low-cost energy into existence, any more than central bankers can conjure it ex nihilo from the ether.

Instead of the outcome of some theoretical equation involving financial supply and financial demand, prices should be defined as the monetary values assigned to material products or services. If the balance between the financial and the material changes, prices change with it.

This should be obvious, even to those who insist that QE ‘doesn’t cause inflation’. To be clear about this, the use of QE during and after the GFC (global financial crisis) of 2008-09 may not have caused consumer price inflation, but it most certainly triggered harmful asset price escalation. When, during the pandemic, QE was aimed directly at households rather than, as hitherto, at asset markets, consumer price inflation necessarily ensued.

The mythology of economic infinity remains tenacious, and is evidenced whenever political leaders offer assurances of economic “growth” to the public. The problem at the heart of the ongoing fiscal fiasco in Britain has been the insistence that growth can be manufactured through a carrot-and-stick blend of incentive and need – if the financial framework is right, the argument runs, the better-off will have the incentive to invest, and everyone else will be compelled to work harder, thereby improving productivity. At no point has it been considered that, with global material conditions as they are, meaningful economic “growth” cannot be delivered at all.

Even the conventional calibration of productivity is misleading – dividing economic output by the quantity of human labour is of little real relevance, given that labour is a truly tiny component of the energy used in the modern economy.


Until comparatively recently, the divergence between the material and the classical-financial hasn’t been readily apparent. The heirs to Watt have carried on growing the economy, and the heirs to Smith have carried on representing this growth as the product of financial rather than thermodynamic processes.

Now, though, the energy dynamic is winding down. The supply costs of oil, natural gas and coal are rising through the effects of depletion. There is no assured, like-for-like replacement for the energy value sourced from fossil fuels. Prior growth in material prosperity has gone into reverse.

This is not reflected in financial calibration of economic flow. This calibration will become mistrusted before a new system of economic interpretation and quantification arrives to replace it.

Simply stated, market participants will suffer a loss of faith in what they’re being told about the economy. This will result in downwards revisions of ‘futurity’, a term describing those perceptions of the future that are priced in to the valuation of financial stock. Rising risk premia will be the first manifestation of a much more fundamental realignment between the financial and the material.

We have a choice between getting ahead of the curve on material recognition, or hewing to the tried-and-failing notions of wholly immaterial – financial – causation and explanation.

Based on the principles outlined earlier, there are three things that we need to know. First, how much energy supply can we expect in the future?

Second, how does the use of energy translate into economic value? Third, to what extent will cost trends cause prosperity to deviate from output thus calibrated?

These are complex issues, made more so by orthodox economic conventions which, as exemplified by GDP, conflate transactional activity with material economic output.

A relatively brief set of answers to these questions requires the use of no less than three sets of charts (Figs. 1, 2 and 3), sourced from SEEDS (the Surplus Energy Economics Data System).

The measurement unit used here for energy is the tonne of oil-equivalent (toe). Financial numbers are stated in international dollars, converted from other currencies, not at market rates, but on the more representative basis of purchasing power parity (PPP), which is the convention used for measuring and forecasting global growth. Unless otherwise stated, financial numbers are expressed at constant 2021 values, so the notation is $PPP 2021.


Historically, we can observe that, whilst global real GDP almost quadrupled (+292%) between 1980 and 2021, World consumption of energy slightly more than doubled (Fig. 1A). The implication is that the efficiency with which energy is converted into economic output improved by 85% between those years (Fig. 1B). This makes it easy to understand the popularity of the mistaken notion that we can somehow “de-couple” the economy from the use of energy.

Accepting this at face value, though, would involve disregarding the rapid build-up of debt. Whilst energy use rose by 112% between 1980 and 2021, and GDP expanded by 292%, debt exploded, increasing by about 925% (Fig. 1C). (Comprehensive data for global debt gets hard to find as we scroll backwards from the 1990s, but the estimates used in Fig. 1C are intended to be consistent with subsequent trends – and, in any case, of the additional debt incurred between 1980 and 2021 [estimated here at $323bn], almost three-quarters [$239bn] has been taken on since 2000).

We may have increased GDP per toe of energy consumption by 85% since 1980, then, but the quantity of debt carried per toe of energy use expanded by 380% over that same period (Fig. 1D).

Fig. 1

The fact of the matter is that GDP and debt are not discrete series, because increasing debt boosts the transactional activity measured as GDP. If we reined in credit growth, GDP would, at best, stop growing and, if we tried to reduce outstanding debt, it would slump.

What we have witnessed in modern times is that reported GDP has been inflated artificially by super-rapid debt expansion.

It’s worth reflecting that, if this were not the case, we could reach a point of complete absurdity – the economy would become both extraordinarily wealthy (in terms of GDP), but also bankrupt (through the sheer weight of liabilities which the system couldn’t possibly honour).

The ratio between borrowing and growth has averaged slightly less than 3:1 since 1980, meaning that almost $3 of debt has been added for each $1 of reported growth in GDP. There has been an upwards tendency in this global trend, and the ratios in many of the advanced economies of the West have been appreciably higher than World averages.

This relationship is pictured in Fig. 2A, which compares GDP growth with debt expansion, the latter expressed as a percentage of GDP. Between 1980 and 2021, real GDP expanded at a compound annual rate of slightly less than 3.4%, but the real rate at which debt increased exceeded 5.8%. Reported “growth” of 3.4% was achieved by borrowing at an average annual rate of 10% of GDP.

The SEEDS economic model strips out this ‘credit effect’ to calibrate underlying or ‘clean’ economic output, known here as C-GDP. The annual rate of growth on this basis was materially lower between 1980 and 2021, at slightly less than 1.9%, rather than 3.4% (Fig. 2B). Accordingly, underlying output increased by only 114% – rather than the reported 292% – over that period (Fig. 2C).

Critically, the calculated expansion in C-GDP (of 114%) tallies almost exactly with the increase in energy consumption (112%) over this forty-year period. Put another way, the relationship between underlying economic output and the use of energy is linear.

This was not an anticipated finding during the financial calibration of C-GDP back to 1980 from its previous start-date in 2000. But it reinforces the view, which has been demonstrated in various financial and non-financial ways, that “de-coupling” the economy from the use of energy cannot happen. The European Environmental Bureau reached this conclusion in 2019, describing the case for de-coupling as “a haystack without a needle”.

In short, if we consume less energy, the economy gets smaller. Likewise, if we use less energy per capita, the average person gets poorer.

This doesn’t necessarily describe individual national economies because, just as primary energy is traded between countries, so are energy-containing products. A country can, for example, consume less energy simply by importing cars and computers – or, for that matter, food – rather than producing these items at home.

Looking ahead, though, such trades are likely to be moderated by arbitrage, to the detriment of economies which rely heavily on the import of energy-intensive commodities and products.

The overall situation is what matters, and this is that reductions in global energy supply lead to a shrinking of the World economy.

Fig. 2


SEEDS projections for World energy use are illustrated in Fig. 3A. Essentially, supply is expected to be 10% lower in 2050 than it was in pre-pandemic 2019.

Within these totals, it’s estimated that fossil fuel production will decline by 26%, a decrease of rather more than 3.0 bn toe. Though rapid, growth in output from renewable energy sources (REs) is likely to make up less than 1.2 bn toe of this shortfall. The combined contributions of nuclear and hydroelectric power are projected to increase by 28%, but these are too small a share of the energy slate to offset the decline driven by the falling availability of energy from oil, gas and coal.

As can be seen in Fig. 3B, there may be a very slight, and probably temporary, improvement in the conversion ratio between energy and economic value expressed as C-GDP. The assumption involved here is that a significant proportion of energy-intensive, non-essential economic activities will contract rapidly through decreases in affordability. But it’s extremely unlikely that there will be material or lasting deviation from the linear relationship between energy use and economic output.

Accordingly, C-GDP is projected to be 8% lower in 2040 than it was in 2021 (the grey line in Fig. 3D), matching the expected decline in primary energy supply over that same period.

As we have seen, though, output isn’t the same thing as prosperity, the difference between the two being the prior claim on resources made by the Energy Cost of Energy.

Fig. 3C shows the projected continuing rate of increase in overall global trend ECoE. The rates of decrease in the ECoEs of renewables are expected to slow, and may then start to rise. There are physical limits to the potential efficiencies of both wind (the Betz Limit) and solar power (the Shockley-Queisser Limit), limits which are well explained here. It’s extraordinarily unlikely that the storage cost-efficiency and flexibility provided by a simple fuel tank are ever going to be replicated by batteries. Moreover, fossil fuels are not subject to the burdens of intermittency.

Critically, the vast material inputs required for RE expansion can only be provided through the use of legacy energy from fossil fuels. This creates a linkage between the ECoEs of fossil fuels and the ECoEs of renewables.

It should never be forgotten – though it almost routinely is – that the potential capabilities of technology are limited by the laws of physics.

These are important points, because it’s all too easy to assume that the economy can transition, seamlessly, from fossil fuels to renewables. This mistaken assumption – and it’s no more than that – informs vast swathes of corporate, financial and government planning.

The application of ECoE to the projected outlook for C-GDP reveals that economic prosperity – shown in blue in Fig. 3D – is set to fall a lot more rapidly than material output itself. By 2040, global prosperity is projected to be 16% lower than it was in 2021. If population numbers continue to rise, albeit at historically low rates, prosperity per capita could decrease by 27% between 2021 and 2040.

At no point since 1776 – not even during the Great Depression between the wars, which caused severe hardship, but was temporary – have we ever had to confront anything even remotely comparable.

None of this, of course, is yet incorporated into the futurity currently priced by the markets. But the unfolding deterioration in underlying economic conditions can be expected to compress the gap between financial expectation and material economic reality.

Fig. 3


The foregoing should have made it clear that two diverging trends have shaped the economy over an extended period. On the one hand, the material economy of products and services, determined by energy, has been decelerating towards involuntary de-growth.

On the other, extraordinary levels of financial commitments have been taken on in an ultimately-futile effort to counteract or deny this tendency. These trends, and some of their future implications, are illustrated in Fig. 4.

Since the late 1990s, the financial economy, measured as GDP, has diverged from the material or ‘real’ economy to the point where the downside between the two has widened to 40% (Fig. 4A). There can be no indefinite prevention of the restoration of equilibrium between the material and the financial, and this has direct read-across implications for the levels of liabilities depicted in Fig. 4B.

Though the global debt mountain is serious, real exposure needs to be referenced to those broader ‘financial assets’ which are the liabilities of the government, household and business sectors of the economy. These broader liabilities include the NBFI (non-bank financial intermediary) sector, sometimes called the “shadow banking system”.

As we saw in a recent article, available data is incomplete, accounting for 85% of the global economy, but quite possibly excluding major asset exposure in specialist financial centres not included in reported numbers. A best estimate is that total financial exposure stands at about 575% of World GDP, but 925% of global prosperity.

Perhaps the single most disturbing aspect of worsening imbalances is the extent of leverage embodied in the economy and the financial system.

As we have seen, a projected decrease of 8% in energy supply between now and 2040 produces a corresponding decrease in real global economic output. But rises in ECoEs leverage this into a 16% fall in aggregate prosperity.

This implies that prosperity per capita will be about 27% lower in 2040 than it was in 2021. But the cost of energy-intensive necessities will carry on rising markedly, in response to increases in ECoE. This is illustrated in Fig. 4C. This implies a near-50% fall in the affordability of discretionary (non-essential) products and services, even though top-line economic output is only projected to fall by 8%.

Fig. 4


This leverage is critical, because the affordability connection ties the sustainability of financial liabilities, not to top-line output, but to PXE, the SEEDS term for “prosperity excluding essentials”. When we consider, for example, the affordability of mortgage payments, it’s clear that this affordability must be related, not to total household incomes, but to household disposable incomes, and much the same applies at macroeconomic level.

This is why, where the business and broader economic outlook is concerned, we have entered an affordability crisis. This has two implications.

First, and most obviously, consumers whose disposable resources are being compressed between falling incomes and the rising costs of necessities experience a leveraged reduction in what they can afford to spend on discretionary purchases.

Second, it becomes ever harder for households to sustain payments on everything from secured and unsecured credit to subscriptions and staged-payment purchases.

In short, not only will sectors supplying discretionary products and services to consumers experience a relentless deterioration in volumes and profitability, but the same thing will happen to those parts of the corporate and financial ecosphere which rely on streams of income from the household sector.

Where segmental projections are concerned, it should be noted that the data in Figs. 4C and 4D is harmonized. This means that, whilst GDP in 2021 is accepted as the baseline – enabling comparison with other sources of forecasts – prior and future trends are restated in accordance with energy-based calculations of output and prosperity. The segmental balance illustrated in Fig. 4D shows that the affordability, not just of discretionary purchases but of capital investment as well faces severe compression.


The final set of charts – Fig. 5 – looks at the broad economic structure, inflation, and the critical divergence between expectations and probable outcomes.

Fig. 5A provides an at-a-glance view of the five core components of the economy. One of these is C-GDP output, which correlates closely with energy availability. The second is ECoE, a deduction which itemises the difference between output and prosperity. Next, in this leveraged equation, comes the estimated cost of essentials. The remaining components are discretionary consumption and capital investment, which are the residuals in this leveraged situation.

RRCI – the Realized Rate of Comprehensive Inflation – is the SEEDS tool for measuring systemic price change. Historically, this has been materially understated by the GDP deflator measure used to calculate ‘real’ economic output and growth (Fig. 5B).

Barring outbreaks of monetary policy derangement, the outlook is for RRCI to trend downwards, though remaining above officially-acknowledged rates of broad inflation. Though the costs of essentials will continue to rise, we should anticipate severe and worsening deflation across the discretionary and ‘stream-of-income’ sectors of the economy.

Comparing probable outcomes with expectations is a critical component of planning and strategy – essentially, good decisions can be made by those who understand why consensus expectations are mistaken.

As shown in Fig. 5C, past misstatement of the financial equivalent of material economic performance leads to over-optimistic expectations for the future of the economy. This applies even more strongly to the affordability of discretionary products and services (Fig. 5D), where past trends provide no effective guidance at all to the impending rapid decline of discretionary consumption.

Fig. 5

492 thoughts on “#242. The dynamics of global re-pricing

  1. Thank you this excellent article, I was linked to it from interest.co. I wonder the place of carbon as the trading currency. seems to be all the rage and cryptography and digitalisation of assets carries the ability to value every single transaction on any public blockchain in terms of carbon. Regulations to crypto will focus on energy efficiency, price fluctuation and taxability ( by anyone other than the market manipulation). Carbon cost via crypto transaction paid to the dear leaders anyone? Either way I shorted fiat and invested in the crypto software that will no doubt drive the web3 integration of everything into digital. I have land, seeds and water.

  2. Election choices:
    UK: No public vote for Sunak. Hedge fund guy now in charge of UK. Good news tho, he has some primo experience with railroads. See Wall Street on Parade for the 25th.

    US: First Tuesday in November choose –
    Republicans, bravely fighting wokeness, complaining about open borders but doing nothing and promising investigations!
    Democrats, bravely fighting for abortion rights, authorized 87000 new IRS agents and ok with open borders
    Both: sending billions to Ukraine but no money for the homeland apart from the officers, directors and shareholders of the MIC.
    Did I miss anything ?

    A financial crisis and market crash can’t come fast enough to stop these clowns.

    • The situations are rather different, I think.

      The US economy is still viable, though starkly divided over many domestic issues. It’s within the bounds of possibility that the US can emerge as less damaged than most other economies, and might even achieve managed de-growth.

      Rishi Sunak has been elected by MPs, themselves elected by the voters. To be sure, those voters might make very different choices now, but that’s the system.

      But even if he was a combination of Einstein and Superman he couldn’t retrieve the British situation. There’s an old song that fits the picture – “past the point of rescue”. It would probably take one whole article to set out why this is, and another to describe what might be done about it, the latter being pointless.

    • it’s Superman!

      isn’t the physics defying nature of Superman that his energy output is greater than his energy input?

      just imagine the economic benefits.

    • Excellent, and I recommend it to others.

      I particularly noted that most people of working age didn’t vote Conservative in 2019, so Mr Johnson was elected by an older demographic that feels sufficiently financially secure not to bother about growth.

      Will this demographic still vote Tory when property prices have slumped? Probably, because I can’t imagine them voting Labour.

      The British economy seems to have passed the point of no return.

    • The same section really interested me too (about most working people not voting Conservative). This and the exclusion of the younger generations from housing/ other wealth makes me feel that we are saving up so many problems for the next few decades that could have been prevented with better management.
      I think this article and others should be on popular reading lists at school and beyond.

    • @Mark, Dr Tim, NHSDocotor1

      Most working people not voting Tory in the 2019 GE is a bit of an eye-opener!!!!
      But I’ve always thought that winning 43% of the vote on a turnout of 65% isn’t exactly a mandate to rule from a majority of the electorate. More like a mandate from a third of the electorate.

      That the majority of that third is no longer part of the workforce, is perhaps, not as surprising as it first seems?!

    • @Mark Meldon

      Wow. What a great article!!!! Perfectly sums up the UK. I’ll be passing it on to all my friends

      I especially like the bit about finding “bogeymen”. I feel a whole new raft of them are going to be rolled out soon. Not long before “Grandma” is public energy No.1🤣!!! Or even more despicable, “Woke Grandma”!

      (We might have to discuss all this in more length over a pint in the Bath Arms🙂)

  3. What does the future look like?
    Chris Smaje explores options in his Peasant’s Republic proposal:

    “The point of distributism isn’t to immediately recreate a cumbersome welfare bureaucracy oriented to social levelling. But, frankly, in a world where twenty-odd people own equivalent assets to four billion-odd, my sympathy with this argument is limited. Against the background of our present global capitalist society and its local manifestations, if it’s to mean anything at all distributism most definitely does have to involve re-distribution until everyone’s genuinely in the game and continues to have a fighting chance of staying in it. The trickier questions revolve around how best to make this happen.”

    He will follow this breadcrumb trail for the next few posts. I will suggest that it is blindingly obvious that there MUST be redistribution. But perhaps the redistribution needs to be debts and fiat money related. If TPTB are intent on maintaining debts at high levels and fiat money wealth for the wealthiest 20 people in the world at astronomical levels, then the real problems cannot be solved. Maybe Chris will have some constructive thoughts??

    Don Stewart

    • I’ve been thinking about this, and I’d like to float an idea and see what people think of it. My problem is the widespread idea that things would be a lot better if we could ‘take from the super-rich’, and the allied idea that this can’t happen, because the super-rich have too much influence for it to be allowed to take place.

      For most of the seriously rich, their wealth is in stockholdings. That’s not something that can be turned entirely, or even mostly, into cash. Any attempt to monetize large proportions of it, and take this in taxes, wouldn’t capture much value for the government or the ordinary person. Instead, the value would disappear in falling stock prices.

      I’m not saying governments can’t increase taxes on high incomes, or on realized capital gains. But people read that Mr X is worth $Y bn, and think how much that money could do for public services or people on low incomes, but it’s notional, and can’t be turned from stock (of theoretical wealth) into flow (of spendable money).

      Whether we like it or not – and most people don’t – these people have influence, and they’re likely to retain that influence, unless we picture a 1789 situation.

      Might it not be a good idea to develop solutions that they might like? They’d end up poorer, but that’s on paper, and it’s happening anyway. The NASDAQ, home of the tech billionaires, is down about 30% so far in 2022 and, since much of it is in the ‘discretionaries’ and ‘streams of incomes’ category, I doubt if it stops there.

    • @Dr. Morgan
      This is way too complicated (in my own simple mind) to deal with extensively here. But I think one of the attractions of being among the super rich is just the sense of power. Mrs. Bezos could give a fortune to historically black colleges just because she wanted to. Think about how hard it would have been to raise that money door-to-door. Musk can overpay for Twitter just for the satisfaction of making it safe for right wingers. George Soros made enough money in speculation to fund color revolutions to install governments he liked.

      All this is very far from the “democracy” which came to full flower in the US under Abraham Lincoln, “four score and seven years” after Thomas Jefferson, a slaveholder, expressed the thought.

      The attraction of having people like Bill Gates having an inordinate influence on public affairs is that something actually gets done. Like China…want a fast train, we’ll build one. But there are downsides to both rule by fallible individuals and fallible inner circles.

      Don Stewart

    • I won’t get into individual cases, as I never do. But the attractions to the super-rich would still be there, even if scaled back (and not by very much).

      Mightn’t they prefer that to collapse? In their designer shoes, what would you opt for – $5bn that’s worth $5bn, or $10bn that’s worth zero?

      If things carry on the way they are, “tech” is toast. So is much else that constitutes billionaires’ wealth. Discretionaries, ‘streams of income’ businesses – you know the score on these.

      What I’m suggesting is that we stop portraying them as an enemy – because they can’t be ‘beaten’ in a conventional sense – but come up with solutions that appeal to them better than what’s coming otherwise.

    • Don, I mentioned this way back before, but I recommend that anyone interested in this topic read Walter Scheidel’s “The Great Leveler,” an examination of events that have massively reduced wealth inequality in the course of recorded history. Short version: only massively deadly plagues (e.g, Bubonic), failed states (e.g., fall of Roman Empire), transformative revolutions (Russian, Chinese) have leveled inequality, and none of the changes last. Massive inequality, especially with a rebounding population, is eventually restored. Industrial World Wars that involve massive societal effort also work for a time, but this category consists almost exclusively of WW1 and WW2. The Napoleonic wars, despite their enormous social upheavals, barely made a dent. Land reform efforts of the type made in Latin American countries are particularly fairly short-lived.

      My take on this, when read with the work of James C. Scott, notably “Against the Grain,” is that the heart of the problem lies with the “civilization model”, based on producing surpluses that then provide a reason for plunder, provide the ability to live off the work of others while leaving enough for those others to subsist (i.e., provide the basis for also farming humans), provide support for increasingly complex work and social differentiation i.e., a greater hierarchy ladder, and the basis for “elite” formation, who then use those surpluses not to store up for the common good during the eventual “7 lean years” or for the common defense but to pursue further appropriation and self-aggrandizement.

      If history is any guide, I don’t think you can get rid of inequality and achieve the kind of distributionism that will be necessary short of the end of the civilization paradigm that humans embarked on approx 10,000 years ago. I don’t see that paradigm being abandoned by voluntary acts of good will.

      However, if the Olduvai Theory turns out to be the “winner” in the collapse chronicles, that will provide the kind of levelling we need.

    • “I’m not saying governments can’t increase taxes on high incomes, or on realized capital gains. But people read that Mr X is worth $Y bn, and think how much that money could do for public services or people on low incomes, but it’s notional, and can’t be turned from stock (of theoretical wealth) into flow (of spendable money)”

      Even if the billionaires held all of their wealth as cash in the bank, it would just lead to spiralling demand side inflation if it were distributed en masse to the poor or spent on widespread public services. The discrepancy shown by your models between the real economy and the financial claims which exist against it are almost certainly disproportionately supported by the ‘wealth’ of the billionaires and the value of their bank accounts and stock holdings.

      Isn’t this largely the reason why we could do huge amounts of QE over the last 14 years without seeing insanely large inflation figures? The majority of the QE just inflated asset values and increased the numbers in the bank accounts of the 0.1% but very little of it was actually spent in the real economy. They get to play power games, but the monetary wealth is just smoke and mirrors.

  4. I have read it. It is interesting but it has all the hallmarks of being written by someone who never ventured beyond the Beltway or the M25. My home town Stoke voted to leave the EU after decades of being ignored by London and having its often successful industrial base either shut down or offshored to Eastern Europe or beyond. Globalism in general and the Single Market in particular torpedoed their lives. The bright and fortunate (like me) left for the big city. The same very poor people voted in 2019 for Johnson’s false levelling up prospectus for much the same reason….and in desperation. They have since been double-crossed by the Tories and further hammered by Covid. The idea that they voted as they did because they are rich enough to escape the consequences is both ignorant and prejudiced. House price gains in Stoke are minimal to nil. Indeed house prices go down and fuel poverty was chronic before the latest price rises. For Stoke read many similar ignored places across the UK. Quite how the mass importation of poor unskilled people from across the world is going to help the Stokes of this world escapes me. But then I don’t have a PPE degree and have never worked for Goldman Sachs. The UK has huge problems but cross the Channel and you will see the same or indeed worse….in the Paris banlieue for example much of which is lawless and destitute. Germany is full of hidden poverty and not just in the former east. Italy and Spain too.

    • I agree with you Michael. The article is just too simplistic. What you write reminds me of the interview between Brian Walden and Sir James Goldsmith (from around 1994) where he talks about free trade, trickle down of wealth, the EU… It is available on YouTube and although he was mocked by many at the time, his predictions turned out uncannily accurate. When you watch it it almost takes your breath away. But unfortunately the outcome was probably already baked in.

  5. Everything I am reading in this wonderful learning experience is bedded in today’s top-down mindsets.

    • @Barry

      I think the transition to de-growth will need to be managed from the top down but the final destination will be much more localised with decisions being made at a community level.

    • The trouble with top-down decisions on what should happen locally is that the decisions are based on top-down mindsets and values. Whereas innovation will come from the grassroots, which is happening where I live. For example, expectation of electric power failures, which also lead to mains water failures (our mains water is pumped) is leading to people going off-grid and growing their own food.

    • @Barry

      “Where I live. For example, expectation of electric power failures, which also lead to mains water failures (our mains water is pumped) is leading to people going off-grid and growing their own food.”

      There are those who are in a position to make the changes themselves, but the vast majority of the population are not.

      Access to land, will be critical if people are going to need to provide for themselves. Redistribution of land will need to be a “top down” process organised by the “State”. And ultimately backed up by the threat of violence, much like any present laws.
      There are a few land owners who control own much of the UK land. Monarchy and M.O.D are good places to start!

      (Exactly how this is to play out is anyone’s guess🤷?)

    • when the top-down FF powered IC is gone, so are 99% of the humans.

      the survivors can attempt a bottom-up agrarian hunter-gatherer “civilization”.

      good luck with that; I hope to not live to see it.

  6. @Dr. Morgan
    The political background may be much different in Britain and the US. In Britain (and, to my surprise, in the Netherlands) is an adoration of a monarch as representing “the best of us”. The US rebelled not against the UK, but against King George. The US myth is much closer to the film Mr. Smith goes to Washington:

    The counter-revolution to all this democracy was the criticism of the movie for exposing the foul deeds in the US Senate and later the full scale emergence of McCarthyism and the witch hunts of the 1950s. Donald Trump can be seen, in part, as a reversion to the notion that the common man has more common sense and more sense of fair dealing than the elites.

    So we have a dichotomy in the US. Mrs. Bezos can donate her money based on race and nobody really complains. But if the US Congress tried to do it, there would be a very strong opposition.

    Will people get tired of those with the gold making the rules? All of the right wing propaganda is about “controlling your own money”. The facts, of course, are that most people have practically no money. They have a surface prosperity based on debt.

    I can’t predict the outcome….Don Stewart

  7. Some time ago I concluded that there WILL NOT be a solution coming from the government(s). For these “civil servants” the current issues in the energy complex and the financial world are far too complex for them to grasp. Possibly far too complex and intertwined than the majority of people can wrap their head around. Even if they tried.
    The leaders are floundering and the public is tired of hearing the same rhetoric about growth and stability as the ship sinks.
    Conservative or Labor does not matter, the problem it too complex for any of them, so the ship bobs in the waves and the outcome falls where it may. Meanwhile they keep throwing our “solutions” hoping to buy time until the next election. There’s nothing more they can do in reality.
    I think the same could be said for the majority of countries, the problems at hand most likely beyond our ability to reign in.
    So the invisible hand will decide what lives and what collapses in the coming years.
    This makes prediction very had to say the least. I repeat, the problems at hand are far too complex for politicians to deal with. It’s out of their hands. They are now far behind the curve and can only simply react to each pressing matter AFTER it happens.
    The complexity of the debt, energy, and political mix is at maximum chaos 🙂

    • Not to worry. The future will evolve “naturally” with the gradual collapse of the top-down systems and the growth of the new ways from the grassroots. As naturally as the agrarian era evolved into the industrial era.

    • “The leaders are floundering and the public is tired of hearing the same rhetoric about growth and stability as the ship sinks.”

      here’s Canada:

      “Canadian households rank among the most over-indebted in the world, largely due to housing loans. And housing prices are now plunging at the fastest rate on record. Since most mortgages in Canada are either variable-rate or fixed-rate for shorter terms, such as fixed rates for two years or five years, households see rate increases impacting their existing mortgage payments.”

      so the Canadian mortgage problem is very similar to the UK, but Canadian housing prices are already falling by record %s.

      BUT here’s the BankofCanada:

      “We expect growth will stall in the next few quarters—in other words, growth will be close to zero. But once we get through this slowdown, growth will pick up, our economy will grow solidly, and the benefits of low and predictable inflation will be restored.”

      bravo BoC, growth will return, and soon!

    • “The complexity of the debt, energy, and political mix is at maximum chaos”

      there’s a ways to go for this to max out.

      after the “growth” stage where economies (almost always) grew annually, the next stage will not be “degrowth”, but will be an ebb and flow of recessions and partial recoveries.

      because we live in a real world of 4 seasons, and Growth is often measured in quarters.

      for instance, the EU and UK most likely will be in recession through this winter, but comparing Q to Q, by Q2 or Q3 of 2023 they should have increased economic activity.

      politicians and media will be all over this, touting 1 or 2 % quarterly “growth” and trying to ignore the 3 or 4 or 5 % recession of the previous quarters.

      this scenario could go on for many years… or not… and yes, annually it might calculate to every year forward being “degrowth”, but CBs/gov/media will continue to highlight the growth quarters, and keep propagandizing about getting back to growth every quarter and year.

      the growth curve was bumpy, so I expect the degrowth curve also to be bumpy.

      hopefully we’ll still be discussing this in 2030.

  8. @Dr. Morgan
    This isn’ to argue against anything you say. Just some misgivings on my part based on the history of the US during the Depression. Populist leaders such as Huey Long in Louisiana, Ma and Pa Ferguson in Texas, and Tom Watson in Georgia. Here is the story of populism in Georgia:

    Click to access 40575768.pdf

    Will the era just ahead of us look like Georgia in the decades after the Civil War? Can we expect a different outcome? When Pa Ferguson was convicted of a crime and left the governorship, his wife was elected to replace him. If Trump were convicted of violating the Espionage Act, I can see one of his children being elected to replace him…and promptly pardoning their father.

    Just misgivings. Few answers….Don Stewart

  9. US and Saudi
    NYT article:
    U.S. Officials Had a Secret Oil Deal With the Saudis. Or So They Thought.
    After Saudi leaders pushed to slash oil production despite a visit by President Biden, American officials have been left fuming that they were duped.

    You may remember Gail Tverberg’s warning to Europe that everybody is going to be looking out for themselves.

    Don Stewart

  10. Air B and B…canary in the coal mine?

    It seems that the bubble in purchasing a house in a vacation spot is bursting in the US.

    Don Stewart

    • Makes sense, and can be expected elsewhere. The boom in short-term rentals – which I call BTL2T (buy to let to tourists) – has been a product of negative real interest rates. It’s near the top of any list of sectors exposed to discretionary contraction, with BTL not far behind.

      Looking on the bright side, maybe the general level of rents will fall, and young people will once again be able to afford to buy or rent where they grew up.

    • Can you explain this please, Tim?

      I have been thinking about Air b n b and the short term holiday lets for a while and can not fathom what directly caused it.

      My reasoning was they undercut hotels due to lack of regulation and won business at the expense of the hotel industry.

      I do hope for the general populations of the West that it completely gets annihilated.

      I live in the South West of England where many properties are Air b n b etc.

      Many regular people with minimum wage jobs can’t get housing or if they do it is very expensive.

      I have been wondering for a while how it will all play out as it is completely unsustainable and if it continues much longer the local population would have to leave which would leave a big shortage of businesses requiring staff.

      I have already noticed many staff shortages in the tourist service sector in the last year or two.

      How can you have an area that does not pay high enough wages to even cover the workers housing costs?

      I don’t think there is a precedent for this in our entire history and it smells of some major interventionist policies that has caused this insanity.

      I am in no doubt the major shortages of staff I have seen here is due to the wages not being high enough to attract people.

    • Can you elaborate on that please, Tim?

      It’s something I have been trying to get to the bottom of but can’t seem to figure out exactly what the causation is.

      This has been bothering me for some time now as I live in the South West of England and have seen the effects of this first hand.

      So many people seem to have the money not only for holidays in these digs but also to pay rather well in some cases. Enough to earn the operators tidy sums.

      There are an abundance of Air b n b operators in this part of the world and seem to be everywhere here now as well as independent operators just advertising on various travel websites etc. They seem to have come into existence at the expense of hotels (Air b n b) due to the fact they are not regulated and so can pass on their cost savings to consumers (as well as perhaps offering lower standards compared to even 3 star hotels).

      Many local people here struggle to find any property to rent (forget about even buying one with these ridiculous prices) who work for minimum wage and I knew that this would come to a head sooner or later as it is totally unsustainable.

      To my knowledge, this is an unprecedented point in our history (in the western economies) because from what I can tell we have never been in a situation where regular folk who work cannot afford to live in the area where their jobs are.

      The Air b n b and holiday let operators are making enough in 6 – 8 weeks than if they would letting out the same property for a whole year at the local rental market rate.

      Based on my reading of economics in the past usually where there is a beautiful place to live be it some idyllic town in any given country that attracts tourism or a scenic coastal area in most cases the local wages reflect the higher cost of living in that nicer area etc.

      For example, a taxi driver earning £20 per hour in one place is no better off than another earning £15 per hour in another part of the country that has a lower cost of living.

      A crude example but I think you will understand the concept.

      Due to interventionist policies we have major distortions and I have noticed in the last couple of years in the tourist service sector here that companies are desperately advertising for staff but to no avail.

      These staff shortages are due to in my opinion the wages being offered are not enough to sustain the workers to live in the area where the jobs are advertised.

      It seems to me if nothing changes soon we will have an exodus of people moving from these areas due to the cost of living to areas where living expenses are more in equilibrium with the local wage although I am more than aware that these distortions are probably in most places but not as extreme as where I live.

    • It’s been a consequence of cheap capital. Here’s roughly how it goes.

      Take an English seaside town largely, dependent on tourism. Often these were pretty depressed anyway, because of the boom in cheap foreign holidays. Tourism has long been a low-wage sector. Reflecting these factors, property prices are low.

      Using low-cost mortgages, people buy up houses, cottages and so on, spend a bit on improvement, and offer them as tourist lets. All they need to do is to earn enough in rentals to cover mortgage costs, which are low, and cleaning and maintenance, not all that expensive in low-wage areas. Meanwhile, as more buyers jump on the bandwagon, they’re enjoying a brisk rise in the values of the properties. All this looks like money for old rope. As this happens, young locals are priced out of the property market.

      Now, though, things are changing. Mortgage costs are rising. It’s getting harder to find holiday tenants, as the economy slumps and discretionary spending is compressed. Scarcity of available cleaners and maintenance people pushes up costs. Some will exit the market, and prices will fall back from over-inflated levels. If this goes far enough, young locals might once again be able to afford to live in the places where they grew up.

      This retreat seems to be happening rapidly in the US. The UK and Europe are following.

    • Astute observations and makes complete sense.

      This is similar to how I see the Western economies in general.

      Either wages go up to reflect the cost of housing or housing comes down to the current cost of wages.

      I think the latter is the fair outcome due to the fact that the cost of labour has been artificially forced low whilst assets have risen on the back of “free money” from QE etc.

      If we get the former my guess is this might force assets to rise again and ultimately put is in the same situation we are in now in real terms but perhaps it will probably be even worse as inflation could then get really out of control.

      Property owning politicians (cough Tory party) will probably do everything to at least keep house prices at these levels and obviously mortgage holders will be cheering them on.

      It’s going to get ugly one way or the other.

    • Exactly. In the UK, the tradition is, or at least has been, that homeowners tend to vote Tory, whilst renters are likelier to vote Labour. That’s why Mrs T sold off council houses (properties rented from local authorities).

      My point about re-pricing is that asset prices are a function of futurity (my term for collective expectations for the future). If you think the outlook for stocks or property is positive, you buy, and vice versa. Up to now, collective futurity has been positive. Of course, there are recessions along the way – they used to be called “trade cycles” – but the assumed underlying trend has always been upwards.

      Material (energy-based) analysis points towards this futurity being mistaken – the economy doesn’t carry on growing, profits and incomes don’t carry on rising, and discretionary affordability – leveraged by the rising costs of essentials – is at the front-end of this reversal.

      When we get even a little way into the detail, we see where exposure is concentrated. Property prices are one obvious example, as are classic discretionaries like travel and tourism.

      Markets tend not to look particularly far into the future, but now this compression is now near enough in time to affect the behaviour of investors. In the FT this morning, the headline is that investors have wiped $550bn off the value of Big Tech. This looks a lot like the start of something that many of us have long expected.

      But let’s not forget that asset values – stocks, bonds, property – are widely used as the collateral for debt. Stock price slumps make fascinating viewing, but the focus needs to be on the liabilities side of the equation.

    • I very much hope that younger people will be able to afford housing in the future. In the short term, it looks as if the situation will be harder for lots of people.
      @freemarketthinker- I can’t see wages going up much at present. Redundancies look more likely especially in areas supported by tourism. I think house prices and rents will have to fall to affordable levels. Perhaps in the longer term, British seaside towns which have lacked investment for decades because of foreign package deals might be somewhat regenerated.

  11. COPPER🧵redux. I live near one of the largest copper mines on earth (Kennecott Utah Copper – KUC). I helped manage a smaller copper mine for 8 years. Observation: Wind/Solar/Battery Proponents & ESG bean-counters are completely out of touch with copper mining & production.

  12. I’ve been watching the dramas in the tech sector, excellently reported at Wolf Street. What surprises me is why this didn’t happen much earlier. This is classic discretionary and ‘stream of income’ stuff.

    • who actually owns the tech sector?
      in the public eye we see the figureheads, the tech billionaires, but they only control a minor percentage of the stock,
      using the hotlinks within the text on Wolf’s site and in his articles you can redirect to data on each company,
      they all have major funds as major investors,
      if you look at the funds themselves, they’re huge, Vanguard $3.5 trillion, Blackrock $3.1 trillion,
      in comparison Bezos is a minnow.
      how much influence do these funds wield and how exposed are they to a downturn?

    • Please remember that prices are set at the margin. The press tells us that “billions” have been wiped off market caps, good headlines, but it’s notional – we could never have sold or bought the entirety of any of these mega-caps, at the previous price or the new price. It can be tricky to move a serious sized block of stock, let alone the whole company.

      As for exposure, it depends on financing structures. I haven’t looked at that where these funds are concerned, but I doubt if what’s happened so far is a problem. It should be no surprise that these stocks are getting hit – they’re discretionary, and/or stream-of-income, so it’s exactly what we’ve been discussing here.

      But what we need to watch isn’t asset values/prices, but liabilities. If the system crashes, it’ll be the liabs side of the equation that will do it.

    • @Tim Morgan could you help me to understand more about the liabilities side of the equation for hedge funds and other institutions and how these might impact everything else. Being a non economist, I don’t understand the structure. Presumably the generally loose regulations make failure more likely at this stage?

      It does seem amazing that the banks and the government have managed to kick the can so far down the road. I know you and others have been predicting this for years but timing and precise predictions are impossible.

  13. ShadowStats View of the US

    The money supply remains very high, so inflation is high. Gasoline has been down (thanks to the releases from the Strategic Reserve?), but will now go up again (can’t reduce the Strategic Reserve too much?). So inflation pressure remains very strong.

    “Based on Third-Quarter 2022 CPI-W inflation, the 2022 Social Security Cost of Living Adjustment (COLA) headline increase is 8.7% for payments beginning January 2023; per the ShadowStats alternate estimate, it would have been 17.0%, had the CPI-W calculations not been redefined following the CPI Inflation and COLA spikes of 1980/ 1981. Headline CPI-U year-to-year inflation in September 2022, which tends to run lower than the CPI-W over time, was up year-to-to-year in the month (not quarter) by 8.2%, versus 8.3% in August, versus ShadowStats Alternate estimates of 16.4% in September, down from 16.5% August.

    In the third straight month of both headline annual CPI and PPI inflation temporarily depressed by weaker gasoline prices, the aggregate unadjusted year-to-year, annual September 2022 Producer Price Index (PPI) was 8.55%, down from 8.66% in August, while the most meaningful Goods Sector annual inflation declined in parallel to 11.31% from 12.25% in August. Where October gasoline prices now are on the rise, upside pressure is mounting anew for inflation in October and likely beyond.”

    If you look at consumer inflation from the “non-hedonically and linked” way it was historically calculated, people’s incomes are going backward in a hurry. This is not primarily about the Fed and interest rates…at least not yet. It is about cost inflation. Social security recipients are losing about 8 percent per year in purchasing power. And gasoline may start up again…diesel has remained elevated.

    The basis for dissatisfaction and perhaps the basis for the panicked reaction by the Biden Administration to the recent events in Saudi? And the nuclear saber rattling by NATO?

    Don Stewart

    • @ nhsdoctor1

      Forgot to make some comments about your observations (and concerns?) about the NHS.

      It’s probably what you don’t want to hear but the NHS is beyond saving.

      Socialized healthcare simply does not work.

      Like all socialized markets it is highly inefficient, corrupt and burns through money due to both incompetence and the aforementioned corruptness.

      Although there is some (minuscule) private healthcare in the UK the NHS is by all counts a quasi monopoly (ie has no competition). This allows the NHS to continue to offer poor service and yet still pay high salaries especially to the upper management who are completely incompetent and if they worked in the private sector would be long gone by now and no longer getting paid to continually deliver such a poor service.

      However, because they are working in a socialized industry it is difficult to remove/sack them so the problems just get exacerbated. Their pensions (upper management) will be huge obviously because the taxpayers are picking up the tab.

      The public don’t really have any alternatives because the limited private healthcare options are scarce so the prices are high. The private hospital companies do not have a big enough market to grow and offer a cheap service because most people will use the NHS apart from the very wealthy who certainly will not and have private memberships with the best hospitals.

      A free and unregulated healthcare system would after time offer a very efficient and cheap service due to the competition especially in densely populated areas like major cities.

      If a private business of any kind be it restaurant, taxi service or even a barber shop delivered such a bad service as the NHS they would not last more than a year.

      Customers would just go elsewhere and use a competitor.

      As it stands, the government will have to continue to throw (waste) money at it which will make the service even worse until it gets so bad that it will get privatized.

      Therefore, expect waiting times to get longer, high staff turnover and more stupid decisions by management that will burn through money like no tomorrow.

      Unfortunately, Brits look upon the NHS as some kind of religious institution. It is political suicide to even hint at removing it due to the subject being such a sensitive issue.

      Not many people are educated about economics to understand that privatization would deliver a far superior service.

      Perhaps when the NHS gets to the point where the service really starts costing lives on a very big scale and loses more and more taxpayer money people will start to consider other options.

      But I certainly will not be holding my breath on that to come to fruition.

    • @freemsrketthinker.

      In my opinion, running health care as a business is doomed to fail an in itself, a strange concept?

      When profit comes first, patient care will suffer.

      I’m not sure the failings of the NHS are due to bloated upper management wages. Deliberate underinvestment over decades may be a bigger cause. Run it into the ground, then say that only the private sector can save it and sell it off. After all UK plc needs foreign investments to manage the balance of payments.

      The private sector is only interested in the quick fix stuff like hip replacements. How will those with long term illness pay for treatment? Insurance. Yeah, right!!!!! Like the insurers are going to pay out!!!!!??

      Having said all of the above, I have to agree with you that the NHS is doomed. (Along with most other public and private institutions)

      Without fossil fuels, health care will look very different to today and our expectations of what can be provided will also have to change.

      What that might look like is being discussed in the blog below.


    • @ John Adams

      It is precisely profit motive why it will work.

      I think I read a few years ago that the NHS was paying something like £8 per pack of 12 paracetamols.

      Do you think a private operation would be doing that?

      If so, how long do you think they will be in business for if they did?

      Not very long with that kind of idiocy.

      It is irrelevant if the NHS is incompetent or corrupt or both that is creating this kind of mess.

      The NHS failings are due to it not having any competition. Therefore, it can continue to offer a poor service because nobody else will (or can) take their business. They continue to lose money because they do not need to make a profit so they can continue to lose money because the taxpayers are picking up the tab.

      In that environment failure is inevitable. The upper management is not the only culprit they are just one part of the whole inefficient machine.

      If the industry was privatised you would have different companies offering different services.

      Not a one size fits all like you have now with the NHS. Some would specialise in hip replacements. Some would specialise in heart operations and some would specialise in mild illnesses etc. Depending on your problem would determine where you would need to go to.

      These specialised services will be able to operate from small building because they are not offering everything like the NHS which needs huge buildings especially in cities to offer all their services. This will allow the specialised companies to keep their costs down and pass them savings on to the customer.

      Also, due to the fact that they will be privatised the owners will choose selectively where they operate their business from. They will choose a building where the rent is cheap. The NHS does not need to worry about these things because the taxpayer is picking up the tab so they can just choose the area with the most land etc.

      Each company would have their niche. It would take years for the market to establish itself. It will not and cannot transform into a perfect solution overnight.

      If/when the government privatises the NHS they will not do it properly.

      It will be a similar mess to the railway system where the government (Network Rail) owns the track and tender out routes to the operating companies. A partly state owned and partly privatised system. They will probably sell off the most profitable hospitals to their friends and cousins (wink wink nudge nudge).

      The best way to do it would be to sell off all the NHS hospitals to the highest bidder so the taxpayer gets the best return and then make sure that only so many can go to the same company to prevent any business from gaining a monopoly.

      It would have to be done fairly. It would also have to be unregulated. Any hospital can offer their own type of specialised healthcare.

      Examples such as herbal remedies & homeopathy etc.

      They would also have to ensure hospitals have liability so if someone gets bad treatment then the hospital can be sued etc.

      This type of environment would help to ensure healthy competition in the market and keep prices down.

      However, the government would never do these things. They would put in measures that would require hospitals to buy pharmaceuticals and only buy products from certain countries etc. They would enforce minimum wages for nurses etc.

      Basically, they would regulate the industry and add on unnecessary costs which would have to be passed on to the consumer in higher prices along with not being able to offer a varied service stifling the sector.

    • @freemarkettinker

      “I think I read a few years ago that the NHS was paying something like £8 per pack of 12 paracetamols.”

      Is that actually true? I thought that because the NHS is a near monopoly, it can drive a hard bargain on drug prices from the manufacturers?

      In this privatised model that you suggest, how do we all pay for the treatment we need?

      I’m not sure I agree with your assessment that the NHS is corrupt and that management squander money at will.
      I suggest that perhaps they are trying as best as they can to provide a service under difficult financial restraints. You make it sound like the government is throwing money at the NHS and the upper management are pissing it up the wall, without acknowledging that we have had 12 years of austerity.

      Friends I know who work in the NHS have a very different take on what is going wrong with the NHS.

      On rail privatisation, Network Rail was privatised but had to be taken into public ownership because the privatised version put profit before safety that lead to some fatal rail incidents that were found to be due to poor maintenance.

      But as I note in the previous comment. Without fossil fuels there won’t be a health service anyway.

    • @freemarketthinker- I agree that the NHS doesn’t work well in its current form and that there are disadvantages to socialised healthcare although there are also considerable advantages too. The NHS has been chronically underfunded and the funding remains very low per capita. Far from the government being forced to privatise the NHS, it is more likely that they continue to underfund until the population becomes so fed up that they are willing to accept privatisation.
      I think it is fair to say that there are inefficiencies, plenty of them, and this is always the case when there is tax payer’s money to be spent. I expect there is corruption in some areas but it pales into insignificance compared to the current political system, the way councils are run and the shenanigans in the financial sector.
      Fundamentally, I disagree with you that treating healthcare provision in the same way as you might treat car sales or restaurants or some entirely different type of business is ever going to work. Cutting costs might work safely in these example but it will not in healthcare. Private companies will cherry pick the easy, profitable procedures in fit patients but will not want to deal with the bulk of healthcare provision (the elderly and those with chronic disease). 90% if healthcare is also delivered in General Practice. It isn’t quick and easy cataract surgery or children’s immunisations.
      Decisions are made on the basis of money instead of clinical safety eg over investigation and even over treatment. Presumably you are advocating that people pay for medical insurance? That is a thorny issue. Some people will not be able to afford insurance or care. I could never advocate a situation such as in the US, one of the wealthiest countries in the world, where people with severe mental illness wander the streets without medical help or care and where people are bankrupted by medical bills.
      Your suggestion of local competition could perhaps be applied to General Practices, at least within an urban environment but the problem of severe understaffing and over demand remains.

  14. Population & prosperity

    I know some readers think we should say more about the population issue, and so far I’ve tended to steer rather clear of it. But doing some numbers on a possible project have raised some issues which I think need to be mentioned.

    Conventional economics looks at productivity in terms of economic out per hour worked. But output isn’t a function of labour, but of energy consumed (and converted into material goods and services). We’ve seen in #242 that lower energy supply means lower output – the ratio is remarkably linear – whilst rising ECoEs insert a widening gap between output and prosperity.

    So it’s energy-related, not population-related.

    But essentials ARE population-linked. More people means more need for household necessities (one part of the essentials equation), and more need for public services (the other part). So the cost of essentials is a function of unit real rate of cost change AND rate of change in population.

    Countries with low or negative rates of population change are, accordingly, in a far better situation than those where population numbers are growing more rapidly. This wouldn’t matter if aggregate prosperity WAS a function of human labour, but it’s not – it’s connected to energy consumption, as we have, I believe, demonstrated here in #242.

    Where population growth is particularly rapid, PXE gets compressed quicker, meaning the gap between prosperity and essentials narrows, and could well close – essentials end up costing more than aggregate available prosperity.

    We don’t need to get Mathusian over this – we can, for example, re-define, over time, what’s really “essential” and what isn’t.

    But it seems like a subject to think about.

    • it’s all I think about!
      Britain is very densely populated, very import reliant and probably the least autarkic nation on Earth,
      if you removed imports from the equation, what would be the energy production per capita, the food production per capita and the finished goods production per capita of the average Briton?

      US pop. den. = 35ppl./sq km
      China’s pop. den. = 150ppl/sq km
      UK pop. den. = 280ppl/sq km !!

      if the UK population was contracting and we were also becoming increasingly autarkic, increasing production, heading towards self sufficiency, aiming one day to produce a physical surplus that was globally marketable, then I’d be a lot more optimistic.

      financialisation and the favoring of the speculator is about to blow up, in it’s absence we’ll become reliant on a physical economy that ought to favor production,
      currently we couldn’t be further from where we’re likely to need to be.

      we can only shun Malthusian thinking because we rely on the kindness of strangers,
      we’ve been importing fertilisers since the guano islands of the 19th century,

      this is an interesting article on how China manages to feed itself and generate a surplus for export.

      I know that declining surplus energy is a long term trend involving a gradual adaption and transition,
      but a collapse of Sterling could wreck our ability to import and change the situation almost overnight.

    • Something definitely to consider.

      What about the advantages of a higher population?

      The importance of the division of labour cannot be ignored.

    • The division of labour is important, but can be achieved at a comparatively small level of population – I doubt if this is a problem in countries like Ireland, Greece, Denmark and Norway.

      Moreover, as the economy contracts, complexity will reduce, so the number of specializations will decrease.

      The problem is that output and the cost of essentials are linked to different metrics – essentials costs rise with population numbers, but output (and prosperity) rise or fall with energy availability.

    • Also, with nations that have high debts in relation to GDP if the population is contracting/declining the money supply would have to decline in proportion.

      This could be disastrous and highly disruptive.

      If it doesn’t, depending on the decline rate inflation could be very high.

      Obviously, we are shooting in the dark on this subject because it is a topic that has not really had serious consideration by any scholars.

      The work of Malthus is poppycock and full of flaws.

      However, the current global predicament of 7 billion souls reliant on cheap abundant energy that appears to be getting more scarce does require great minds to look into how we adjust/adapt or change our ways of existing should the worst case scenario does unfold.

      The problem is it will be all theory because humanity has not really been in this situation before or at least there is no recorded history of it.

      There is no historical record of global population growth in comparison to the last 200 years.

      That makes this situation potentially dangerous on many levels.

      For example, we see already a global elite championing “carbon neutral” and “green” policies.

      Then we have “smart” cities and social credit systems which we have in China.

      Very dangerous times we are living in.

    • This is interesting and something I hadn’t considered in this way as I think many of us still tend to think in terms of financials.
      As you are aware, there is a great deal of anti immigration feeling in some quarters in the UK, particularly amongst those who are less prosperous and have seen more of a reduction in their own prosperity since the GFC. Of course, this was one factor behind the Brexit vote. Despite this, immigration is apparently still rising. I understand that there is a huge overseas nursing recruitment going on at present (again).

      @Tim Morgan, are you saying that, despite gaping holes in certain sectors right now (NHS, social care, etc), that it is a mistake to recruit from abroad and that management should instead be rapidly improving pay and conditions in these sectors to recruit and retain individuals who are already in the UK? From personal experience, it has always amazed me how terribly the NHS management treat their own loyal and conscientious staff. They seem to find it acceptable to treat permanent staff poorly but are then more than happy to bring in agency staff at double the cost with less knowledge of the patients and without the same loyalty to the department. Crazy, short term thinking which, of course, mirrors our political system.
      I think what you are saying in your response to @freemarketthinker is that the economy will adjust so that workers will naturally move to essential sectors (provision of food, essential transport, health and social care, trades, etc) and away from more discretionary ones and those linked to discretionary sectors (some of which involve jobs that are currently very well paid).
      My question is how this will work in terms of current demographics in the UK and other countries which are very ‘top heavy’? How will a relative reduced working population, quite possible with lower incomes support the very large population of retirees?

    • I think we have to be more clear than most observers are about the role of human labour in the economy. The idea that we can measure productivity simply by dividing economic output by the number of hours worked has never made sense.

      I once tried to work out the proportion of energy use provided by labour in the modern economy – a tricky and largely pointless calculation, but the answer came out at less than 1%. Most labour isn’t physical effort and, even where it is, it’s usually assisted by equipment of one sort or another. Even a person digging a market garden tends to use tools that are the products of industrial energy, and uses others – cars or buses – to get to and from his or her place of work.

      So the real role of human labour isn’t physical work, but either (a) providing particular skills, and/or (b) directing equipment powered by exogenous energy. Humans also perform the important role of consumer – robots can make cars, but not buy them.

      Therefore, what boosts the supply side in human terms is skills. We’ve made efforts down the years to provide mechanical substitutes for these skills, but this is becoming a road to nowhere. If electricity, say, is going to be in short supply, whilst labour is not, there’s not much point in trying to replace workers with robots.

      As the balance of costs – labour vs energy – changes, it seems logical that there will be more use of human physical labour in the future. In the nearer-term, it makes sense to encourage the immigration of people with skills, because these people can add more value than they add to the costs of providing them with necessary products and services.

    • “But our research debunks that myth, finding instead a strong statistical link between an increase in the number of managers and the performance of hospital trusts on a number of measures.
      In fact, according to the data, the NHS would be wise to put aside a portion of the annual £20 billion to hire more managers, especially as the Government will apply five tests on plans to use the money, which are:
      Improving productivity and efficiency
      Eliminating provider deficits
      Reducing unwarranted variation in the system so people get consistently high standards of care wherever they live
      Getting much better at managing demand effectively
      Making better use of capital investment” ?

    • @ nhsdoctor1

      Any significant increase in population requires additional money (credit etc) in some kind of proportion based on the economic model the West has had over the last 100 years (deficit spending and bank credit expansion etc).

      Because we have lived in a constant inflationary system (which is based on many fallacies such as Keynes theories and macro modelling etc) any significant reduction in population would cause some severe problems based on this model.

      Fortunately, the population dynamics of the last 100 years have supported/helped this warped economic model function to some extent but if this trend reverses due to many causes one being obviously scarce cheap energy then it cannot be hard to imagine the disruptions this will cause.

      Bank credit might contract naturally in relation to population numbers but if we have intervention especially by governments because obviously population reduction is deflationary then certain problems could be exacerbated.

      My thinking is it will probably be the best solution to leave the banks alone and let them adjust their models to less demand for loans and credit and not permit governments to increase their deficit spending.

      But in relation to your recruitment from abroad it looks as though the UK government in particular will continue down this path to compensate for a declining population.

      I have harboured the opinion for a long time now based on some writings by aristocrats and published work by very wealthy individuals that the real movers and shakers are highly intelligent and plan very far ahead (10 years, 50 years and even a 100 years ahead).

      The politicians are just dumb power hungry degenerates that serve these masters and follow their plans without actually knowing what their true long term strategies are.

      When you see the UK government encouraging immigration especially on the illegal front too because they can eliminate all unlawful people entering the country via the English channel if they wished (if governments ever want things done they can and do so with immediate effect) it because that is their plan to do so.

      The reasons for this policy are numerous.

      1) UK citizens have not been having large families to replace the current numbers for a long time and this has been disguised by immigration over the last 20-30 years which has increased the numbers.

      2) They need to increase the population for the division of labour and yes I believe the real movers and shakers are aware of this.

      3). They need worker bees to help pay off the national debt. I think this was even mentioned by Margaret Thatcher back in the day.

      4) It culturally changes the nation including dividing the population due to race and religious beliefs etc. This helps central powers manipulate the public for their own benefit and makes it very hard for any serious political movement to get any steam due to the differences in culture and ethnic backgrounds etc.

      The problem the powers that be have now though is that population numbers will be declining around the globe so there is going to be less trade and demand etc.

      If they continue to increase the UK population through immigration then we are going to have serious problems that the country has not faced before and it looks as though we might be in this situation now especially as the UK has no natural resources or energy independence.

      The recent u-turn on fracking by the new Prime Minister is a strange decision because the way I see it things will deteriorate even more quickly.

      One cannot help but look and think the political class around the West are deliberately destroying the economies as soon as possible.

      I can only think of one reason why this would be a deliberate policy if we assume they are not intellectually bankrupt (including the real movers and shakers) and that would be to prevent any more population growth across the whole west.

      If you have no cheap energy then you have to assume people will not be having families.

      The rise in fossil fuel usage and population growth over the last 100 years is a direct correlation so my guess is the powers that be have decided that we use less energy to reduce the global population and get it down to whatever their target is over a 50 year or 100 year period.

    • what I object to is the encouragement of immigrants with skills when the govt. is making little effort to guide and retrain the existing population for new roles,
      we don’t provide enough training places for nurses compared to the number of nurse we know we will require,
      why can’t we invest in our own population?

    • Is there any way you can check my comment, Tim?

      My reply to nhs doctor has not been added to the site and when I try to re-enter it states “duplicate comment detected”.

    • @ matt

      I have an answer for your question which is included in my response to nhs doctor but the website has not added it to the other responses here.

      Hopefully, it can be added somehow.

    • @ Dr, Tim.

      Productivity in some cases can be measured by the calculated cost to produce an item and the time it takes to produce that item.

      For example, a Toyota factory in Japan might be able to produce 100 vehicles per hour on average at a calculated cost of $1,000 per vehicle.

      VW might be able to produce 50 vehicles per hour at their factory in Germany at a cost of $1,200 per hour.

      Therefore, productivity is more efficient in the Japanese plant.

      A combination of time and cost per product.

      There is a name for this calculation in economic jargon but I have forgot the terminology.

      I read it in Thomas Sowell’s “Basic Economics”.

      The corporations have knowledge and are fully aware of these measures of efficiency but I think governments in their measurements use pointless metrics that don’t really tell us anything.

      That might be by design but I am not certain.

    • Half a dozen comments, including yours, had been tagged as spam by WP. I have no idea why, and will keep an eye out for that in the future.

    • Thanks, Tim.

      It’s happened a few times in the past where I have lost posts.

      At least 3 times before.

    • @ nhsdoctor1

      I have left out one key reason for why governments encourage immigration and why they will in all likelihood double down on the matter.

      5) It keeps the cost of labour down. Even more important now with high inflation and people demanding wage increases and going on strike etc.

      I am personally for the free movement of people and capital.

      The problem I have with the UK government is they have social policies so immigrants can just move here and find a way to get benefits one way or the other. They should be free to move here and work not sit idle and receive taxpayer benefits.

      They also indirectly in my opinion ensure illegal immigrants enter the country one way or another along with immigrants going through the proper channels.

      The dilemma with the free movement of people and capital is you need other nations to have open and free societies and not heavily socialised policies and burdened with high bureaucracy.

      Where do we truly have those in our world?

    • Cheaper to let other countries pay for training them?

      well this appears to be the case, but the ethics are questionable,

    • @postkey-thanks for the link.
      The author doesn’t give any details of their research at all nor even what factors they measured at the various trusts. I’m not denying that there are some efficiency savings that can be made (particularly the use of management consultants are very high daily rates) but I’m not convinced that even more management is the way forwards. For starters, it has to be high quality management (and HR) and a lot of the quality in the NHS is pretty poor, possibly because they get paid less than in the private sector and sometimes because the sort of clinicians that tend to be attracted to management roles are not always the brightest and best clinicians if you understand me (a bit different for nurses as they get paid a lot more in management roles). There is often a real divide between the clinicians doing the clinical work and management, some of whom seem to only view things in £££ and numbers. In my opinion, the onus is on the managers to form productive working relationships so that everyone works together but, often, the opposite is what actually happens.

      @Matt- I totally agree with you. It is very sad that successive governments have chosen to poach overseas graduates rather than train British ones. I think most of the population would be pro training UK citizens. Partly, this seems to come back to short term policy and lack of strategy.

      @freemarketthinker- fair points (lots of them!). I definitely agree that we are manipulated and deliberately divided and given ‘other groups’ to blame. As you say, there may be a tipping point when the UK hits a crisis and can’t sustain the population. Surely at this point, the UK would also become a far less attractive place for non UK citizens to work. I suspect it already is for lots of Europeans.

    • @ nhsdoctor1

      I have made a few comments about the NHS in relation to your earlier posts on the subject.

      Unfortunately, I posted it in the wrong thread.

      It is above this one under a post by @ Don Stewart

    • Regarding depopulation. It has happened before.

      The Black Death caused up to a 50% drop in the population over a relatively short period of time.

      For those serfs lucky enough to survive, conditions improved (for a while) as there was a shortage of labour for the aristocracy to exploit. Giving peasants more bargaining power.

      Perhaps a shrinking economy, (due to a rising ECoE), will benefit
      from a shrinking population?

    • @Matt

      “Britain is very densely populated, very import reliant and probably the least autarkic nation on Earth,’


  15. It used to be said “follow the money”. It would appear that BMW is about to “follow the energy “ by moving production of the EV mini from Britain to China due to cheaper energy .Thus making the battery plant in NE England superfluous.

    Regarding EVs in general in UK . Due to impending UK power outages the problems of road blockages by eco protesters could soon be compounded by road blockages from immobile EVs.

    • One of the significant unnoticed trends of 2022 has been the rapid increase in the costs of building and charging EVs. They’re quite capable of capturing the high end of the market, but can’t replace all or even most of the world’s 1.1 billion cars. I suspect that mass car ownership is a thing of the past – which is good news for bus and tram operators, of course.

  16. Some of the most fervent advocates of recruiting NHS staff overseas often claim to be “progressive”. I have never understood what is “progressive” about ransacking the human capital of African healthcare systems to shore up the NHS…..even if it is good for the individuals concerned.

    • in the context of a secular world where orthodox economics has taken on the form of a quasi religion;

      “Fanaticism is always a sign of repressed doubt. You can study that in the history of the Church. Always in those times when the Church begins to waver the style becomes fanatical, or fanatical sects spring up, because the secret doubt has to be quenched. When one is really convinced, one is perfectly calm and can discuss one’s belief as a personal point of view without any particular resentment.”
      Carl Jung.

  17. Regarding the NHS in Britain, and the global health care crisis in general
    Britain is not alone in its problems funding and managing sick care. I will give you three references from Down Under:
    *An attack on the bureacratization and the influence of the trillionaires:

    *A root cause analysis of modern, non-communicable diseases (where the vast majority of the money is spent):

    Note the unifying nature of the theory and simple, straight-forward solutions.

    *A journal article with tons of references supporting the above talk:

    Put together these two talks plus the evidence marshaled in the journal article and we have a pretty good description of how things have gone horribly wrong and the simple steps most likely to get us out of the mess. The good news is that this “essential” service can accomplished far more economically. The bad news is that a whole raft of sacred cows are going to haver to be sacrificed.

    Don Stewart
    PS. I would also add the evidence that physical activity is more influential than diet for true health. If a person is not drowned in junk food, the best indicator of their health is their strength. Strength comes from exercising muscle. So human muscle may be a very minor part of a modern economy, but it is one of the non-negotiables in terms of human health.

    • Thank you @DonStewart. I hope to look at these before long.
      Agree about prevention rather than cure and vested interests which I think is the general thrust.

  18. More power to your elbow, Dr Tim! From today’s Guardian Business Online.

    Martin Beck, chief economic advisor to the EY ITEM Club, an leading economic forecaster, has looked at today’s mortgage data from the Bank of England.

    Mortgage activity weakened in September after a surprise increase in activity in August. Approvals for home purchase were 66,789 in September, down from 74,422 in August and a little below the average of the year-to-date. Net lending held steady at £6.1bn in September.

    The rise in swap rates following the mini-Budget caused a sizeable increase in quoted interest rates for fixed rate mortgages, meaning that house prices looked heavily overvalued based on mortgage affordability. Swap rates have since fallen back, with mortgage rates set to follow.

    However, interest rates are likely to remain well above the levels seen in the first half of this year, and house prices will continue to look stretched. This is likely to cause new buyer demand to fall in the short-term. While the high share of fixed-rate mortgage deals will slow the pace at which borrowers have to face higher debt servicing costs – and so limit the extent of ‘forced’ sales – a correction in house prices still remains likely.

    Net unsecured lending fell back to just £0.7bn in September, down from £1.2bn in October and a nine-month low. This was due to both another rise in the already-high level of repayments and a fall in gross lending. At the same time, the monthly increase in household deposits of £8.1bn was at a 15-month high.

    The monthly data can be volatile and prone to revision. However, this combination is indicative of a household sector that is low on confidence and either unable, or unwilling, to borrow more and save less to try to push back against the squeeze on real incomes. The EY item Club thinks that with many mortgagors facing significant increases in their debt servicing costs in the next couple of years, they could begin to save more to try to absorb the higher payments.

    • Thanks Mark!

      It might be worth rehearsing how property price mountains turn into (fairly) slow-motion landslides. When purchaser conditions – real incomes, mortgage costs and so on – turn negative, the first thing that happens is that buyers become reluctant to pay current inflated prices. But sellers are equally reluctant to reduce asking prices. As a result, activity (the number of sales) decreases, and so do mortgage applications. In due course, sellers work out that taking a modest price reduction now is better than facing a bigger cut later, as well as bearing carrying costs for longer. Then we witness competing price reductions, and the bubble finally bursts.

      In the past, the authorities might have worried about bank solvency if the property market implodes. Nowadays, though, with fixed rate mortgages prevalent, lenders tend to securitize mortgages, so that the losers are investors, not banks. This frees central banks to tighten monetary policy without too much concern. Those who think that worries about banking solvency might stay the hand of central bankers are out of date. In the modern economy, property prices can fall without putting banks at undue risk.

      There’s still no free lunch, of course, and a property price crash will cause real-world financial losses, but not within the primary area of central bank concern.

    • Yes.

      Whoever came up with the idea for banks to sell on mortgages to third parties was a genius.
      Completely removed a lot of risk from their side of things.

      However, they will lose a lot of future income as the mortgage industry slows down to a trickle so will have less mortgages to sell on to other investors.
      I am now starting to think would it be in the banks interest to completely crash the housing markets to so low a level it increases demand and thus their revenue.

      Many people don’t realize when a mortgage is created after a buyer has paid a deposit and signed the relevant papers issued by the bank that the bank then creates the money from nothing (the money did not exist before the mortgage was completed) to purchase the property outright for the buyer and then gets that “money” back from the mortgage buyer in repayments and interest or at least before it sells the mortgage on to a third party.

      The interest charged is actually not created into existence. This makes it mathematically impossible for all debts in society to be paid back but that is a whole other subject entirely.

      When that bank sells the mortgage on to another party it is no longer its problem but whatever price it gets is pure profit.

      For example, if it sells on a mortgage to a third party for £10,000 or £50,000 it is pure profit except for administration fees, employee wages and rent for their building etc.
      Therefore, if the mortgage market slows down and let’s say the market goes down 20% on average it probably won’t be enough to create a lot of demand in the environment we are currently in and perhaps the one we are about to go into which will be even worse so it would be in the banks interest to hope for lower prices.

      Would you rather be able to sell one mortgage for £80,000 or two for £50,000?

      This is why they always expand credit into the economy as much as they can before something breaks (which is what they have done). Give credit to every Tom, Dick and Harry and get as much revenue as possible.

      It is in their interest to do so.

    • It’s not surprising that mortgage activity has reduced. I think the higher activity in August and before this was due to people rushing to secure lower rates and home owners worrying and choosing to remortgage early. The rates are now relatively high so this is surely likely to reduce from now onwards.
      I’ve seen increasing numbers of reductions in my areas in the last few months and this seems to be replicated in other areas. So far, sellers are reducing ambitiously priced properties mostly by fairly small amounts (a minority have had 20%+ reductions). Some are selling but much more slowly and others are sticking despite reductions. It seems that we have a bit of a ‘stand off’ between buyers and sellers.

      @TimMorgan- I hadn’t realised that the banks sold off all the mortgage debt nowadays. Would the investors be pension funds and hedge funds. Would this be what you were referring to above as ‘liabilities’? I was trying to understand this better.

      @MichaelMcGowan-I agree that the BOE seem incredibly cautious with regards rate rises. I had assumed that this was because they were concerned about crashing the banks as a result of crashing property prices but it seems it is just the property market. It would seem that they prefer Tim’s more prolonged soft default rather than hard default. Perhaps they don’t want to have to shoulder the blame?

    • @ nhsdoctor1

      The banks sell off their mortgages to anyone stupid enough to buy them.

      Hedge funds. pension funds and any other suckers.

      I will tell you a story.

      In 2006 during the run-up to the crazy housing market crash and financial crisis in 2008 when they were giving mortgages to any human with a pulse a relative managed to get an interest free mortgage.

      That’s right. One of those mortgages where you put down no money whatsoever. No deposit. Nothing. A risk free proposition from the buyer angle because if you default you have not lost anything.

      Anyway, this mortgage has been sold on to so many parties since the original seller due to some of them going bust.

      One went out of business during the financial crisis so a new company bought the mortgage. Then that one went bankrupt. I have lost count how many different companies/hedge funds have bought the mortgage since its inception.

      The funny thing is the mortgage runs until 2028. Up to now the relative has been lucky because the payments were linked to the BOE interest rate which has gone to near zero.

      Therefore, over the years the monthly payments have gone down from the original £600 – £700 per month in 2006 to around £160 per month or so today (crazy I know).

      Now, with interest rates going up the monthly payments are going up so disposable income is getting squeezed.

      But here is the kicker. Despite me trying to encourage saving cash during these cheap years to be able to buy the mortgage in 2028 when it ends (the mortgage holder is obligated to buy the house outright contractually which is a condition of an interest only mortgage) the buyer has not been saving any money whatsoever and when 2028 comes around there will be no money to buy the property.

      Therefore, whoever currently owns the mortgage (hedge fund or pension fund or whatever) will not be collecting £200 when they pass go.

      It will be a default event.

      Someone who is expecting to get paid is not going to get a penny.

      I think there are at least a few hundred thousand interest free active mortgages currently in the UK.

      Let me ask you a question.

      How many of them have £50,000, £60,000, £70,000 or even £100,000 in their banks to pay off their mortgages when the bill comes due????

      Don’t forget if you have an interest free mortgage it is because you had no money in the first place as you could not afford a deposit.

      How many pension funds have bought these mortgages????

      By the end of this decade we will have the answer.

  19. All agreed Tim but in the case of the BOE, it seems a main concern is the political goal of keeping house prices high. Even after their modest rate-raising efforts to date, interest rates post-inflation are deeply negative. And the BOE is already briefing that less rather than more will happen on Thursday.

    • House prices in the UK are political as well as economic. I would draw a distinction here – ministers favour high house prices for purely political reasons, whilst the Bank recognizes that a property price slump could do serious harm to the economy. They have the same concern, but for different reasons.

      As I see it, rates aren’t the only or even the biggest threat to the property market – the big one is affordability, and there’s nothing they can do about that, meaning they’re boxed in.

    • Wouldn’t they both be just as important as the other, Tim?

      Higher rates make the house less affordable assuming prices stay the same.

      Even if prices come down if rates are high the repayments will still be less affordable than previously at higher prices.

      I have not made the calculations but I am assuming rates of 8% on a £150,000 mortgage is more money paid back on a mortgage than 1.5% on a £200,000 mortgage.

      I now what you mean though especially with electricity bills going stratospheric here in the UK. That is going to decimate peoples income and remove any potential for folks to make any significant repayments on mortgages (or rent for that matter).

      This is what I find surprising about the political class here in the UK.

      It should really be priority number 1 to secure as much cheap energy not only for the short term but medium and long term so the population can get cheaper bills and therefore more money to spend in the economy. Sunak cancelling the fracking in the UK is a bit puzzling.

      My thinking is 2nd or 3rd quarter 2023 will be a bloodbath in the UK economy where it will probably really hit the political class hard about what they have done.

      It’s not going to be long now before the top 1% start losing money and they recognize it.

      That’s when it will start to get interesting as the sharks begin to eat each other kind of like they have done recently with the Truss debacle.

      Only it will be much more dramatic and extreme.

  20. Either way I cannot see the BOE doing enough to prevent Sterling weakening further. They have shown no real inclination to do so. So that means more inflation and potentially higher interest rates further down the road……which will in turn affect the property market adversely.

  21. Assoc Prof Simon Michaux – The quantity of metals required to manufacture just one generation of renewable energy powerplants.  This is one of the most important seminars on energy that I have seen to date.

    A summary of his work is given here:

    In most political circles, the idea that the world will transition from fossil fuels to renewable energy is taken on faith.  This man’s work demonstrates that there is no possibility of such an economy providing more than a small fraction of the energy that we presently obtain from fossil fuels.  The mineral resources that would be required to meet existing delivered energy services simply do not exist.

    The obstacles against expansion of nuclear power would appear to be more political and institutional. Material resource limits are far less applicable to nuclear power because of the very high power density of nuclear reactors.

    The root problem is that people are frightened of it. Decades of political and institutional barriers have been built up with the deliberate intent of impeding the construction of nuclear powerplants. This has made the construction of nuclear powerplants cumbersome and expensive. Build times have increased from 3-5 years in the 1970s, to 10-20 years today. All of this needs to be undone in a hurry.

    In a world without abundant fossil fuels, power can be produced in the large amounts needed for industrial civilisation, only by using nuclear reactors.

    • Let me know when all the nuclear waste generated by exisiting and past nuclear powerplants has been sequestered for the next hundred thousand years and when the Fukushima and Chernobyl plants are completely cleaned up. Then we can tally up the levelized cost of nuclear electricity. Fukushima alone is estimated to cost $470-660 billion dollars to clean up. Based on past history, we can expect a Fukushima or Chernobyl disaster every 25 years or so.

      Then there are the decommissioning costs of old plants. Industry decommissioning funds are often far less than actually needed. Based on experience with other energy sector assets, like orphan oil wells, I expect many owners of no-longer-operable plants will declare bankruptcy and walk away from decommissioning. We can then tally up those costs and wonder where the money and energy will come from to complete the job.

      Just like with fossil fuels, nuclear plant operators have been able to privatize the income from energy sales and socialize the costs of externalities. In the US, the federal government is responsible for insuring nuclear plants and taking their waste for long-term storage. If those burdens were assumed by power companies, I doubt that a single nuclear plant would be built.

      In the long run, perhaps it would be better to do without industrial civilization rather than power it with nuclear (or fossil fuels).

    • Nuclear waste is irrelevant. Spent fuel from a 1000MWe nuclear reactor amounts to a few cubic metres of material per year. Compare that to the gigatonnes of waste material that society produces each year. It is lost in the noise. We could continue using nuclear power for millenia without waste becoming a big problem for us. The volumes are just too small.

    • The bottle neck for a ‘fission-future-will-save-us’ is uranium supply. Filter it from seawater? Maybe but very energy intensive. Thorium? See India. Breeders? See Russia. Nuclear waste is irrelevant, not only as Peter Cassidy writes, due to low volumes, but also further waste and war heads can also be recycled yielding ten or so times more energy that first pass through standard fission reactors. See PRISM.

      Even if all nuclear’s input limits were solved, electricity is only 15% or so of average global energy consumption. And nuclear can’t replace much direct process heat fossils provide, which is the hard nut to crack.

      However, nuclear is by far the best parachute we have during the descent out of the fossil fuel age.


    • adapting to a supply-side shock gradually must mean people abandoning energy intensive discretionary activities, due to unaffordability, until demand equals supply,

      I’m in favor of a war time style energy efficiency drive, it’s all about learning to live within our means,
      with a limited energy budget you should spend it wisely.

      we have turned a corner, on the way up Jevons Paradox played a strong role, on the way down we are in the hands of Liebigs Law of the Minimum.

    • Understood, though let’s be wary about giving governments more power than they already have.

      What I’m working on now is tracing forward process, which is like 3D chess with far more than the conventional number of pieces!

  22. Replying to Matt, there was an energy efficiency drive in many developed countries c. 1974 onwards. The UK one was called ‘Save It’. The Canadian govt produced a 1976 booket for homeowners called ‘Keeping the Heat In’. Acquaintances of mine wrote a 1975 UK book entitled ‘Keeping Warm for Half the Cost’. A lot of people in the USA pioneered building techniques that drastically reduced heating bills and US electric and gas utilities were incentivised to help their customers use less energy. The UK and US governments had fewer powers in the 1970s, yet achieved more.

    At some point in the 1980s, the policy changed to depleting world oil and natural gas reserves as fast as possible. Smaller cars and (in the USA) 55 mph speed limits started to be forgotten. N. Sea oil revenue helped pay the UK’s 1980s unemployment bill. Arguably that huge bonanza was the reason for the economy’s ‘recovery’; previously the UK had been called ‘the sick man of Europe’.

    Since then, the range of technologies for using less energy for the same service (e.g. lighting) has expanded faster than the rate at which they’ve been implemented. Unlike the 1970s, so far as I can understand at a distance no-one in the UK government who is in a position to influence ministers is aware of this. I’d be surprised if electricity consumption (excluding cars and heating of buildings) couldn’t be halved, at less cost than investing in nuclear or wind to increase supply.

    • I was a child in the 1970’s, I remember getting out the candles during power cuts, getting posters from school about switching the lights off when you left the room and most of all, my somewhat eccentric father habitually coasting down any hill in his car to save petrol,
      his generation grew up in wartime and the austerity that followed, all my parents friends had vegetable patches,
      I think I inherited much of the ethos, it’s what I consider normal and sensible!

      I’ve pretty much hated every trend since 1979, we’ve consistently gone in the wrong direction, rampant consumerism.

      in my research in the last decade or so I found that Denmark in the 1970’s was developing windmills that turned the wind energy directly to heat by pumping water through a water brake and using close fitting rotors and chambers that generated heat through friction upon the water being passed through them,
      it was looking quite promising until the new oil fields came online and the technology got shelved.


      I’m very interested in direct drive, avoiding energy conversions and efficiency losses and also reducing complexity and cost.

    • Matt:

      My belief is that we’re living though ‘the last hurrah’ of excess.

      I’d say that this final chapter has extended over a lengthy period. The party-goers – to borrow an image from a former chief of the Fed – are getting increasingly frenetic. They’re filling their glasses one last time before someone or something ‘takes away the punch-bowl’.

      It’s said that generals and admirals are always better prepared to fight the previous war than the one that turns up next. Our societies are in an even worse position, not knowing that the first economic shots are already being fired.

    • I agree, David, that advanced states could massively economize on energy through technical and social means of conservation.

      However, it’s a well known phenomenon that economizing on energy in this way does not reduce energy consumption. In fact, it tends to increase it because reduced demand for energy lowers its price, making goods cheaper, which in turn leads to increased consumption.

      This is called the Jevons Paradox, first described in “The Coal Question” by William Stanley Jevons. With the exception of Karl Marx, Jevons was the only 19th century economist I know who seemed to grasp that the forces of energy production lay at the root of every economic system.

    • Hi Bazarov,
      I appreciate the Jevons Paradox, but it applied in an environment where demand could be stimulated through efficiency and additional supply brought online to satisfy it,
      but I think you’ll find we are in a supply constrained environment, high energy prices ought to stimulate additional supply but there just isn’t enough energy available, even at a high price,
      so I think Liebigs Law of the Minimum is now the determining factor, energy becomes the shortest stave of the barrel, no matter how much industrial capacity you have, with a constrained energy supply energy becomes the limiting factor,
      though by making efficiencies you do free up energy to be used elsewhere, but it’s more about keeping existing energy consumers within an existing market, not growing the market or the customer base.

      in a way Liebigs Law is the inverse of Jevons Paradox.

    • No rise in prices, or increase in demand, can supply something that doesn’t exist in nature. I’ve not thought about Jevons specifically, but the reality of supply limitations undermines a whole raft of the “laws” of economics.

    • Matt and Dr. Morgan:

      Yes, I agree if there’s no more capacity to satisfy increased demand, then it won’t be satisfied. In such a case, Matt, the Law of the Minimum would indeed rule.

      But I wonder if we’ve reached that point yet. It seems to me that the big countries will try to take as much of the shrinking energy pie for themselves as possible so as keep the party going as long as it can be sustained. I suspect that the Jevon’s paradox will continue to be relevant to those countries until even they are scraping the bottom of the energy barrel.

      In other words, green efficiencies will continue to serve the growth paradigm until they can’t. This end point will be reached in different countries at different times, depending on how much of the world’s energy they can pilfer for themselves.

      In this respect, the Jevon’s paradox should accelerate the speed with which advance economies eat up all their seed corn.

  23. Matt: I was a child in the 1940s. When, from today’s perspective, there were no discretionary markets and essentials were handed down by the previous generation. Including children’s tricycles and bicycles.
    An abiding memory is of my mother telling me not to bring Billy home to play again, because he smelt.
    Billy had a wonderful catapult made form inner tubes. On the two mile cycle ride home from school he shot rooks to take home for tea. In season we scrumped apples, and arrived home with tummy aches.
    The little tumble-down cottage he lived in then, looks very different now.

    • you’ve seen a lot of change over your lifetime, you have a ‘then’ to compare to ‘now’.
      I wonder about the 20 and 30 somethings, all they’ve ever known is ‘now’ they might find a descent back to a ‘then’ as disconcerting and very unfamiliar.

      I find old film fascinating, all the little details of a world that is less mechanical, more powered by muscle, where materials are less likely to be synthetic and more likely to be of natural origin,
      this is a short documentary filmed in Porto, Portugal in 1931, it show a mix of the modern and some things that are almost timeless,

  24. The unrequited faith of a true believer …..even one as intelligent as Larry Elliott….is a marvel to behold. In today’s Guardian, he clings to the dogma that Britain “cannot run out of money” because it has its own currency. He then holds up the Sunak-Bailey money printing exercise during Covid as an example of how to do it……even though this was highly inflationary. We will see what the BOE comes up with later……but in the light of the Fed’s move yesterday, it is no surprise to see Sterling on the slide again. Even if (and it’s a big if) the BOE raises rates to 3%, that still leaves them 7% adrift of the inflation rate.

    • Quite so. I like a lot of Larry Elliot’s work, but beg to differ on this one.

      My next article here is likely to be about inflexion-points and cyclicality – in the markets as well as in the economy – and the draft version already addresses this and kindred issues. UK CPI is over 10%, so 3% rates are hardly ‘austerity central’. The observation that a country can’t go bankrupt in its own currency is one of those ‘true, but meaningless’ factoids – ask Zimbabwe, or Russia in the late 90s.

      Critically, and as I keep saying, Britain, like other countries, isn’t just dealing with CPI, but with systemic inflation – which I measure using RRCI – and the “everything bubble”, which they need to try to deflate in preference to letting it burst. Yes, that means higher mortgage rates and lower property prices, but bubbles usually have this sort of aftermath.

      Even CPI rises may have started with external developments – frankly I question even that, thinking QE as primary causation – but it’s become thoroughly domesticated (?) now, as we can see in the services sector. It’s easy to say, as some do, that the authorities shouldn’t try to please or placate the markets, but does it make sense to unsettle them? I’d say not.

  25. Pingback: Inflection – REAL Green Adaptation

  26. It seems that @Michael McGowan was spot on about BOE priorities. They are making the opposite noises from the Fed. It looks as if inflation, apparently the government’s top priority, will be allowed to remain hot.

    “We can make no promises about future interest rates,” said BoE governor Andrew Bailey. “But based on where we stand today, we think [rates] will have to go up by less than currently priced into financial markets. That is important because, for instance, it means that the rates on new fixed-term mortgages should not need to rise as they have done.” 

    • This is a bit hard to interpret. Does it mean that mortgage rates don’t need to go up again by as much as they already have, or that they can come down?

    • Hard to say but it’s interesting that he picks out that specific example and also that he saying the very opposite of what The Fed said yesterday. Michael was saying that the BOE hasn’t shown any resolve to protect £ and this comment seems to support that.

  27. The projections as portrayed at the BOE committee Peres conference today were stated to be based on reducing energy prices “going forward”.
    As readers here are well aware that ECOE cannot decrease so the projections are completely useless .
    The “energy blind” are in control.
    The committee should all be issued with white sticks.

  28. Matt: This book – “After the war is over” written by an school friend is a very good recollection of how things were in our days. It has been compared with Laurie Lee’s book.

  29. Re: Liebigs Law of the Minimum, with reference to SEEDS, particularly, just speculation, but I suspect that diesel fuel supply and/or fertilizer that is declining at a faster rate than the overall increasing rate of ECoE (a general rate), will be more impactful and telling on an economy and social stability than simply watching the increasing rate of ECoE. I.e., it will be more closely associated with tipping points (or points of discontinuity along a line or curve in math-speak!) than the ECoE.

    I note also that failure to maintain a stable electric grid is highly associated with material economic damage if not outright economic collapse, and that it apparently doesn’t take a whole lot of problems with very aged infrastructure and/or increasing costs of coal or gas to threaten serious electric generation capacity if not outright collapse. It’s not getting media attention — in fact I think Sri Lanka received more — but South Africa (ranked 89th by GDP, and the highest in Africa) has been having blackouts for some time been and is facing the possibility of a total grid collapse.


    In the same vein, there’s a good likelihood of rolling blackouts in the UK and/or Western Europe this winter, which won’t be good. Frankly, it’s not beyond the pale in New England here in the U.S., either, because for 50 years N.E. fought gas pipelines. Not picturesque or eco friendly and NIMBY, I guess. Someone has already pointed out that cell towers have about 30 minutes of backup battery power so 2 hour blackouts could leave a lot of people without communication including calls to police and ambulances. Not to mention what that does to computer and internet reliance. So, hospitals and other critical operations will have to have at least 2 hours per day of backup generation, fueled by diesel or natural gas, which is in short supply and which short supply with concomitant increased cost is the reason for the rolling blackouts to begin with. That’ll work out well!

    We wait and watch, I guess.

    • @Tagio
      I agree wholeheartedly with the importance of The Law of the Minimum in an economy with declining resources. Complicated industrial products, from power plants to AA batteries to nitrogen fertilizers are only as available as the least available component. While biological mechanisms, such as plants or humans, generally have built in work-arounds, industrial components generally do not…they are either complete or they just don’t work at all. The economy is, IMHO, far more fragile than most people want to admit. Purely financial analysis can get us to the point where supply chain fragility is likely, but how it will play out in the real world is a much more complicated physical issue.

      Don Stewart

    • But we must have all electronic currencies! Question for the the readers: Most of my adult life has been with debit cards. Did your accounts at banks get hacked as much before debit cards were released? Also have you noticed that credit cards never seemed to get hacked, only debit cards?

    • in todays world, if the electricity supply goes down then so do all the payments systems, the entire financial economy grinds to a halt,
      my local Tesco supermarket has been hit by several power outages over the last year or so, mainly due to weather events, the store has to shut, all the chilled food is thrown away, at some point it’ll start impacting insurance premiums,
      Olduvai Theory states a predictor of imminent civilisational collapse is the onset of intermittent brown outs and blackouts,
      electricity is critical to modernity, our systems are very fragile at this point,
      my grandfather had a business and in the 1950’s he had his own generator so he could continue trading if the electric went off,
      those were much simpler times yet he found it an expedient measure.

      none of this is new, James Burke was talking about it in 1978, we’ve forgotten how dependent we are on technology.

    • Matt,

      That was a great video from Jame Burke. I was 30 years old in 1978 and everything he said had been obvious for many years. The back-to-the-land movement in the 70’s was a direct consequence of a growing awareness of energy vulnerabilities and the damage that modern industrialism was causing to the ecosphere.

      But the whole concept of voluntary simplicity, frugality, energy conservation, renewable energy and the primacy of land and natural resources for human sustenance was rejected wholesale, in the US at least, with the election of Ronald Reagan and the denigration of all “hippie” sensibilities. Anyone who warned of the trap that fossil-fueled high-energy technology posed to human civilization was laughed at.

      My family became rural homesteaders in the 1970’s and have stayed on our small farm ever since. But even though we may be tempted to “laugh last” as modern industrialism crumbles, the danger and trauma for everyone will be so extreme that it will leave a very bitter taste, even for those of us who are fairly well prepared for collapse.

      The lesson of the Burke video is that modernity can disappear literally overnight. If you are not prepared for it never coming back, you are in a very precarious situation. Everything a human needs for life comes from the land. Get some now.

    • Yes, excellent clip Matt!

      “Connections” is the highest info-content show I’ve ever seen. I had to pause it frequently to take in what he was describing (c.f. shows which pad by telling you something three times)

      You may have said this before but I will repeat, it is available at:

      A common theme in his presentation is the random zigzag nature of innovation. It highlights the unplanned nature of change, whereas a popular narrative (imo) depicts progress as having been mapped out.

      Anecdotal, though not comparable to having to work out how to use a plough:
      In the late 90s I worked at a Large British Airline. If the boarding system failed, the fallback was… numbered cardboard cards they used in the 1960s (probably the very same cards!)
      Imagine doing this all day with thousands of people – and that’s assuming all other systems are hunky dory.

  30. From Maximum Power and Jevon’s Paradox, to Liebig’s Law of the Minimum and Synthetic Nitrogen, and Back to Nature

    This is from the Acres, USA website with an update on several topics which are of interest to those trying to figure out the physics of how the world MIGHT work over the coming decades:
    “On this episode of Tractor Time podcast, we welcome Dr. James White, a professor of plant biology at Rutgers University, and Jeff Lowenfels, the author of several books, including a new one, Teaming with Bacteria.

    Dr. White and Jeff Lowenfels are also joined by Laura Decker, the owner and operator of microBIOMETER, and hosted by Ryan Slabaugh, GM and Publisher at Acres U.S.A.

    Listen in as these knowledgeable experts discuss the new science behind how endophytic bacteria supply nutrients to a large array of plants.”

    The gist of it is that contrary to what we have all been told, many plants have the ability to fix nitrogen from the air and use it to make proteins. But we have to understand what we are doing and cooperate with Nature rather than trying to bomb it into submission. We are also learning to measure nutrient value, rather than just tons of product. My reservation is that Nature follows its own drummer, and it may not have in mind supporting 8 billion clueless humans. I am quite sure it won’t support 8 billion in the style to which they are accustomed. But how many frugal humans it might support and in good health…I’m not sure.

    Don Stewart

    • perhaps a more pressing question is when the number of clueless humans begins to decline.

      I think the best bet is 2023.

    • “A major study has found that in most cases, diversified organic agriculture increases crop yields more food than monocrops. Tamburini et al. (2020) did a meta-analysis of 5188 studies with 41,946 comparisons between diversified and monoculture agriculture. The researchers found that diversification increased crop yields as well as biodiversity, pollination, pest control, nutrient cycling, soil fertility, carbon sequestration, and water regulation. Crop diversity reduced dependency on artificial nitrogen fertilizers. Diversification and organic farming also reduced soil and freshwater degradation, pollution, and greenhouse gases. Diversity was achieved with the rotation of numerous crops, hedgerows, semi-natural habitats, reduced tillage, organic material soil amendments, and the inoculation of beneficial microorganisms into the soil. “ ?

    • @postkey
      Organic agriculture, as practiced today, is heavily dependent on fossil fuels. Not as dependent as conventional agriculture, but still dependent.
      *how much agriculture will be devoted to biofuels?
      *how can the huge amount of energy devoted to “farm gate to plate” be supplied?
      *warehousing of staples like grain (in giant elevators?)
      *feeding draft animals?
      and so forth. While we can do back of the envelope calculations of how many acres of potatoes are required, the numbers get a lot larger if we try to accommodate current consumption and kitchen and restaurant practices.
      Don Stewart

  31. Two year recession forecast for the UK by BoE.

    Longest since these things were measured.

    De-growth has begun. Strap yourselves in. The rollercoaster is at the top of the curve and about to descend!!!!!

    • @John Adams
      I posted an article describing the decades long deflation in the American South following the Confederate loss in the Civil War. Probably few people looked at it. But the balance between cost driven inflation and affordability driven deflation is uncertain to say the least. Adam Taggart periodically talks with people who think that deflation is a bigger threat than inflation.

      A decline in the availability of energy would tend to drive deflation…assuming “sound money” policies. Money printing, of course, can result in prices rising to astronomical levels. IF governments perceive that sound money is essential, even if that results in deflation, then the burden of the debts could be crushing. The history of the American South shows steady erosion of small holdings as farms went bankrupt and commodity prices fell.

      In any event, we are probably faced with an unpleasant situation. I’ve been looking for some safe haven. But the US government’s exposure to a mortgage catastrophe if deflation and affordability collapse are our future make the search doubly difficult.

      Oh, what I wouldn’t pay for a good crystal ball….Don Stewart
      PS. Fossil fuel prices could collapse also. Governments need the revenue and discipline imposed by Russia and Saudi are uncertain at best. Remember the “high fives” between Putin and MBS? Can they continue to collaborate and make it stick? The US and Europe will vigorously oppose. Hard to tell about China and India.

    • The concept of recession fits within the observation and the core assumption of cyclicality, which is what I’m looking at now.

      The observation is that big metrics, like GDP and the overall value of markets, oscillate around a central trend. It might be pictured as a sine-wave. Each recession is followed by a recovery, and each market slump by a rebound.

      The core assumption, meanwhile, is that the trend line is always positive. Each high or low is higher than the one before it.

      My thinking now is that we’re experiencing the ‘great inflexion of the trend line’. There will still be cycles, but these will oscillate around a falling rather than a rising trend.

      I very much doubt if the BoE, still less the Treasury, really understands what’s happening to the British economy. There, the trend line has become severely inverted.

      The priorities surely ought to be to (a) defend the internal and external purchasing power of GBP, and (b) ensure that the essentials (including essential public services) are available for all. Rate rises might or might not have a part to play in this, but QT certainly does.

      What I fear may happen is concentration on priorities that are either (i) mistaken, or (ii) impossible. They might, for instance, cut essential services rather than increase taxation on the better off, or try yet another gimmick to prop up property prices.

      We don’t need to favour tax increases, or falling property prices, but these might be less bad than some of the alternatives.

    • The concept that human activity responds or acts in relation to cycles and has astrological influence is a very interesting theory.

      I recommend “Babylon’s Banksters: An Alchemy of Deep Physics, High Finance and Ancient Religion” by Joseph Farrell.

      It suggests (convincingly in my opinion) that all economic boom and busts are a result of astrological cycles and are not due to the creations of man.

      It also goes further in suggesting that an elite group of people are aware of this too.

    • “The priorities surely ought to be to (a) defend the internal and external purchasing power of GBP, and (b) ensure that the essentials (including essential public services) are available for all. Rate rises might or might not have a part to play in this, but QT certainly does.”

      They will not defend the currency. The last chance to do that with any semblance of success was 2008. They will give the majority of the masses what they want good and hard, “free” money!

    • The biggest lesson from recent events is the sheer incompetence of what passes for leadership – political and administrative – in the UK.

      I stand by my statement that the top priorities are defending the internal and external value of the currency, and ensuring that the essentials are available for all.

      These, unfortunately, are not the priorities. Successive governments have turned the British economy into a Ponzi scheme based on cheap money, credit expansion backed by over-inflated property values, and the sale of assets to cover trade and current account deficits.

      As for administration, this article illustrates the inability of British officials to negotiate the skin off a rice pudding. They’ve not been able to negotiate the simple exchange of driving licences with Spain, despite constant assurances, over many months, that a deal is imminent.

    • “Two year recession forecast for the UK by BoE.”

      “My thinking now is that we’re experiencing the ‘great inflexion of the trend line’. There will still be cycles, but these will oscillate around a falling rather than a rising trend.”

      excellent. The 3 century FF supercycle has now started to descend.

      recession quarters and years will become far more common than growth quarters and years.

      the discretionary segment will have to shrink to near zero.

    • The inflexion issue seems to me critical. For brevity, we might condense it into two components or sets of assumptions:

      The markets – ‘every dip is followed by a rebound’.

      The economy – ‘every recession is followed by a recovery’.

      Neither is likely to hold true going forwards.

      Dips/recessions will be deeper, and rebounds/recoveries will be weaker.

      Markets may find themselves following what I call a “ghost trend” – expecting rebounds around a positive trend-line that no longer exists.

    • @Dr Tim

      In a “conventional” recession, the primary cause isn’t a lack of energy. It is usually a “bubble” that eventually bursts.

      I’m not sure we are going to see any mini recoveries, this time.

      As sectors collapse, they won’t get recreated later. Energy usage may switch from a collapsed sector to a less discretionary one but there are going to be a lot of unemployed looking for financial support. Any boost to a sector will be artificial, as the trend will continue to be downwards.

    • You’re quite right. The energy connection is to the trend line itself. Cyclicality – sine-wave oscillation around this line – tends to be financial.

      There may not be economic recoveries, even small ones, but I do expect continued market cycles. The big risk for markets is what I call the “ghost trend” – markets may cycle around a projection of the prior (positive) trend for quite a while before realising that secular inflection has happened.

      I’m planning an article about this now. But I also want to discuss unknown knowns – things which for the generality are unknown, but are known to those of us who understand the economy as an energy system.

  32. Austria moves to ban fossil fuel burners. No more oil and gas furnaces for you! European governments really are trying to have their citizens freeze to death, it’s better than purchasing Russian natural gas! I guess if Russians are famous for their scorched earth policy, Austrians will soon be famous for their frozen citizens policy.


    Per the article, when it’s time to replace the old furnace, Austrians will be required to move to more “climate-friendly options” like heat pumps (which run off of electricity which is produced by burning . . . ?) and burning wood pellets (which will require shipment from across the Atlantic (since presumably you can’t purchase wood from Russian forests because then you would be dependent on Russia! Oh, noes!!).

    Sorry, this is all off topic, unless unhinged madness induced by rising ECoE is going to be one of our topics, but the handwriting is appearing on the wall.

    The few who can both afford to migrate and can adapt to a complete uprooting and change of their existence might want to do it sooner rather than later; otherwise, it’s going to be coping with freezing temperatures. You can go somewhere you can own several acres with your own hardwood trees, like the Northeastern United States or parts of Canada, or you can go somewhere where you’ll never have to worry about heating costs again, because they’ll be practically non-existent, and I don’t mean tropical islands that have to import everything and have hurricane problems. Here are a couple of such places in South America, with favorable immigration laws: Andean Ecuador (temperatures consistently in the 50s – 70s or 60s – 80s Fahrenheit, depending on elevation), and Andean Columbia, such as Medellin (temperatures in the 60s – 80s). Btw, I have been in Quito when it was 55 degrees F and all I needed was a long sleeve shirt. I was not the least bit cold, in fact it was perfectly comfortable, because of the intensity of the sun at the Equator.

    If you go the wood-heat route, I do mean own your own trees, because increased demand for pellets will lead to cutting down more forests (climate-friendly!) and increases in the cost of wood. If you want to control your costs and have guaranteed access, you will need to own them. Unless you can afford the costs, in which case you can just move to where there are lots of trees.

    If you want to stay in Europe, Ireland is pretty temperate. Temperatures rarely go to freezing or below. You may be more uncomfortable than you would like but you won’t actually freeze to death. Ireland imports a lot of pellets from Canada. The Irish government has an initiative to grow more trees but it is strongly resisted by the country’s farmers because trees don’t produce money like crops or sheep do. Ain’t it grand to live in a world where money is the measure and determinant of all things?

    • If the atlantic meridional overturning circulation (AMOC) fails, Ireland and all of northern Europe will see a significant reduction in rainfall. This will make growing food and trees much harder. If the AMOC keeps functioning, northern Europe will just continue to warm like the rest of the world and it might actually see an increase in food growing potential.

      I like your South America suggestion, but it might be tough for older english speakers to adapt easily. New Zealand should be very good, but it’s hard to emigrate there.

      I think you should reconsider tropical islands. I live in Hawaii, which is subtropical at the elevation where I live, and hurricanes are quite rare. The one advantage of a mid-oceanic tropical island is that climate warming will be determined by the average ocean temperature increase, which will be much less than continental increases.

      The main necessity is to get out of cities. Almost anywhere in the world will be better than an energy-deprived modern city.

    • @Joe Clarkson.

      Just as a slight aside. Have you read Cloud Atlas?

      Has a section set in a Hawaii of the future.

  33. Re: incompetence in government, both corporate and public, Eugyppius has a new article on the malign influence of the “head girl”-based selection process for managers.
    “Our governing elite are increasingly selected not for intelligence or ability, but for conscientiousness, agreeability and conformity. The consequence is a new kind of midwit tyranny.” Some good insights here, and worth the read, IMO.


  34. While the industrial revolution was fueled by using energy the actual methods of making the machines that were the industrial revolution appeared at the very same instant that Watt sold his first steam engine.

    The wealth that came from the steam engine was based upon the methods and science that were just emerging, from human minds and hands. The exact same time. 1750. What a coincidence.

    What I am saying is that no one thing, in this case Surplus Energy, that explains everything.


    • I would say there were foundation technologies before Watt, perhaps the most important being metallurgy. He didn’t invent the first steam engine, but the first truly efficient one. That’s what (Watt?!) makes him so important. Energy played a critical part in the pre-Watt era, and coal had been in use long before him.

      The surplus energy approach recognizes the existence of surplus energy long before 1776. When 20 people could be fed by the labour of 19, that was surplus energy, albeit not very much of it, which is why pre-industrial societies were, by later standards, rudimentary. We can even say that animals’ survival depends on obtaining more energy from their food than they expend obtaining that food.

      I don’t assert that surplus energy explains everything – just the economy!

    • @Rapier

      “What I am saying is that no one thing, in this case Surplus Energy, that explains everything.”

      Well……I think that all human activity can be framed in terms of excess energy.

      Those early industrial inventions were created exactly because there was an energy source to harness. The potential of which, created the thoughts that followed.

      Without the discovery/harnessing of fire on the most basic level, we humans would probably no longer exist.

    • “Without the discovery/harnessing of fire on the most basic level, we humans would probably no longer exist.”

      Or have become extinct a long time ago.

  35. But I was making the point that human invention was foundational in creating an economy. Or I should have said energy doesn’t explain everything economic. You differ.

    • I’ve never denied the human role which, aside from consumption, is the direction of the use of energy.

      Don’t get me wrong, I’m not saying that surplus energy explains everything, and the behavioural use of money plays an important role.

      Earlier today, though, I was reflecting on quite how much we – meaning those of us who understand the economy in energy terms – now know about the economy, compared with the ignorance and folly that informs so much policy and so much of the debate.

  36. drt,

    Is it possible that much of the “money” activities are mostly to solve liquidity issues when solvency has long since ceased to exist?

    • Everything that has occurred since 2008 has been exactly this. Every policy, every QE, 14 years of repressed interest rates. We’re bankrupt, the emperor has no clothes, it only took something as unfavorable as 2020 for people to start to wake up.

    I would take the concept of early energy usage to the humble wood-fired camp fire where primitive groups formed communities. In fact it probably formed the basis of communal living.
    Fire was used to cook and drive off wild animals.
    Wood was eventually replaced by peat and coal.
    Communities thrived and language capabilities improved leading to more sustainable groups. This eventually lead to what we recognise as human communities.
    Further progress, over many generations, lead to what we recognise as the industrial revolution.

  38. About that article you are planning that tries to describe the dynamics after the “grand inflection”; A cyclical pattern that trends downward instead of upward, with minimal rebounds- sounds a lot like JMGs stair stepped catabolic collapse.

    While the ripple effects of the massive decline in discretionary spending will be brutal, I think the efforts of the powerful to maintain their wealth during the cycles they don’t understand will have an even bigger impact on the rest of us.

    • I’m actually working on two themes right now. One of these is cyclicality, where my thinking is that, whilst economic and market sine-wave oscillation is likely to continue, the underlying trend has inflected.

      The second is a reflection that a great deal that is known to those of us who understand the economy as an energy system is neither known nor accepted more generally.

      You are right to highlight discretionaries, for which the outlook is indeed brutal. I should emphasise that this isn’t just very bad news for the suppliers of discretionary products and services – leisure, travel, tourism and so on – but for two other groups as well. One of these is suppliers of consumer durables – people will put off replacing big-ticket items like cars and refrigerators. The other is any sector that depends on flows of incomes from households. This isn’t just lenders but also affects, for example, media. Tech gets hit both as discretionary and as stream-of-income exposure.

    • @DrTim

      “One of these is suppliers of consumer durables – people will put off replacing big-ticket items like cars and refrigerators.”

      If we are still going to have the energy to run those big ticket items, (a big IF) they will also need to be made to last (a lifetime) and be easily repairable.
      No more throw away culture.

      But this will have a negative long term effect on the manufacturers viability, as once we all have one, the market for new ones will vanish. R and D as well as invitation will reduce right down unless the improvements can be incorporated into existing consumer durables. Product design is going to look very different.

      (I have a Morphy Richards toaster from 1957. A wedding present to my parents. Still pops up toast like a good’n.)

    • isn’t the current discretionary sector another over inflated bubble?
      there have always been avenues for discretionary expenditures but with the advent of marketing to drive consumerism the sector became an inflating bubble,

      I do think there’s been an over reach with IP law, in the quest to financialise everything it has expanded retrospectively, we could revise the laws so that back catalogues of various media can enter the public domain,

      the IT world could be liberalised, I do support open software, GNU Linux operating systems, Mozilla Firefox and Chromium browsers, Thunderbird email, LibreOffice,

      the whole lack of disposable income for discretionary spending could be ameliorated by liberalising a lot of commercial restraints allowing people to collaborate and create that which they were previously paying for,

      if people don’t have money to spend they’ll still have time to spend, let them spend it where they see fit,

      I do think that the recent fad of deregulation has been very lop sided, large commercial institutions have been increasingly free to do as they wish, but the individual has found himself increasingly restrained by laws and copyright,

      if a latter day Thomas Paine emerged, I wonder what tyranny he would be railing against?

    • Discretionary consumption is hugely over-inflated. It’s one amongst many components of my take on cyclicality. Whole non-essential sectors are heading for contraction, but so many people think they’ll bounce back. On the fundamentals, I can’t see that happening. There may be sectors where value (discounted forward earnings streams less liabilities) is negative.

      On a related front, I keep reading statements that house prices can’t fall much ‘because demand exceeds supply’. There may be huge numbers who need a house, but that only amounts to “demand” to the extent that they have the financial wherewithal to make it effective. There are many things that people want – but “want” or “need” without the requisite financial resources isn’t “demand”.

    • your model projects prosperity falling and the cost of essentials rising, eventually those two lines cross over,
      the crossover can’t actually happen in reality,
      it’s really the point where falling prosperity starts driving the re-evaluation of what is essential,
      so instead of crossing over, the falling prosperity line begins pushing down the essentials line.
      the re-evaluation of what is essential becomes the only way to mitigate the falling prosperity.

    • I have always said that the definition of “essential” will change.

      This has happened numerous times in the past – cars, televisions and lots of other things, now regarded as necessities, were once seen as luxuries. This time, though, the revision will be in the opposite direction.

      Actually, the lines could cross over, not that I’m expecting this. Inequality could result in discretionary consumption continuing for some, whilst others cannot afford the essentials. The UK, in particular, may now be in this position as one symptom of its rapidly distintegrating economy.

    • ‘Actually, the lines could cross over, not that I’m expecting this. Inequality could result in discretionary consumption continuing for some, whilst others cannot afford the essentials. The UK, in particular, may now be in this position as one symptom of its rapidly distintegrating economy.’

      I’d say we are already there in the UK. Food bank use has increased hugely since 2008. Clearly, things are set to get much worse this Winter. I don’t think politicians will take much notice until the poverty becomes much more visible either with riots or with poverty spreading to the middle earners. The housing time bomb is an additional, huge problem for the younger population in the UK. Successive governments have failed to provide basic, safe accommodation at affordable prices for the population. This isn’t a sustainable situation especially with immigration still rising.

    • I hope and believe that disorder won’t happen, but the British situation is pretty close to hopeless, and this may be cruelly exposed during the winter. The incumbent government is clueless, but Labour seems equally bereft of solutions. Many critics of the government and the BoE propose ideas that wouldn’t work either. I can’t imagine what the public make of this.

    • I think on Tim’s graph the lines are median figures, if it was expressed by quintile then the ‘gilded ones’ would be above the prosperity line, the lower quintiles on or below the line,

      I think you’re right in saying the ‘gilded ones’ are currently oblivious, what I learned from the Poll Tax Riot in 1990 is that you can only really get their attention by throwing a brick through their window!

      otherwise you have to wait for them to feel the pinch and they’re going to be the last people to feel it.

    • @Matt. I’m a bit younger so don’t remember those riots myself but am obviously aware that they happened.
      I think some people are getting desperate so it wouldn’t be surprising if violence did erupt in the UK and other countries.
      As you say, ‘the gilded ones’ don’t know or understand. Rishi himself is spectacularly poor at this (note video of him as a 20 year old).
      I think it was you who posted a link to the Swiss financier being interviewed. He was clearly extremely wealthy but also had an excellent level of awareness about other groups being in serious need and spoke really sensibly.

    • I think people have figured out that protesting won’t get you anywhere,
      as far as voting goes you’re only allowed to vote for the candidates they will tolerate,
      the new tactic being tried is The Great Resignation,


      we’re up against some pretty stubborn people, apparently in France they’re expediting work permits for immigrants so they can fill vacancies created by French people quitting,

      “After the East Berlin rising in 1953, Bertolt Brecht is supposed to have made the ironic suggestion that the Communist regime should dismiss the people and appoint a new one.” “Are we the electorate they deserve?”

      it just goes to show that any elite that gets entrenched will not give up their power easily.

  39. “Actually, the lines could cross over, not that I’m expecting this.”
    “All right, important safety tip, thank you.”

  40. Some practical and philosophical thoughts from Jim Bendell, regarding the “it’s not so bad” turn by the Media regarding climate dangers. These might just as easily be applied to concerns about our energy situation. For example, diesel fuel is in short supply. One reaction I read was to push for more nuclear …which I don’t think has any significant relationship to heavy transportation, the realm of diesel. Still, the need to believe is strong that nuclear can be our salvation and keep BAU pretty much as it is.
    Don Stewart

    • humans discount the future.

      faced with blahblahblah about the year 2100, or “hungry and freezing in the dark” this winter, it is obvious that the vast majority, EU UK Sri Lanka South Africa etc, are clamoring for more energy supplies, and NOW, and stable electricity no matter how “dirty” the source.

      only a few understand surplus energy economics, but most people at least sense the basic idea of what it takes to have a heated and lit residence.

      (this side topic is lame… almost nothing has been actually implemented to reduce CEEOHTWO, and that’s because almost nothing can be done without reducing the essential energy required for IC today, and 2022 dominates over 2100.)

      humans discount the future.

    • Don, David:

      This article is excellent. I wonder if we’re at the point where two fables meet – “the emperor’s new clothes” and “don’t shoot the messenger”?

      Nobody wants to be first to say that the Emperor’s new clothes are phoney, and not many people want to be the bearers of bad news.

      Everything I’m hearing from the UN (etc.) is that the environmental outlook is worsening. If we ‘cut to the chase’ here, our economic model involves using FF energy to strip materials out of the Earth, convert them into products and dispose of them as landfill. The hope of many is that we can carry on doing this, but using REs instead of FFs.

      Nobody in any position of the authority wants to face two realities about this. First, even a seamless transition to REs wouldn’t address the main problem, which is “the landfill economy”. Second, seamless transition isn’t possible, not least because the ECoEs of REs will never fall as low as those of FFs in their heyday.

      I take David’s point about short-termism. For example, the new British premier, Mr Sunak, didn’t seem all that keen on going to COP 27 at all, and small wonder – his focus has to be on whether the UK economy can get through the winter.

    • “Nobody in any position of the authority wants to face two realities about this.”

      and some people miss the 3rd reality, to get to a sustainable position on this planet would require far less humans…………. Who’s gonna be the first to point that out? This all could have been avoided if the truth would have been told from the get go back in the 70’s. Keep money honest, do not extend credit willy nilly. Think about it, if debt pulls future consumption into the present, couldn’t it not do the same with the human population? Instead of a gradual build up or even a level number, it exploded, along with credit.

  41. All politics devolves into two parties, stick in the mud realists and those who live in fantasies

  42. The environment is doomed because of climate change, with the continued use of fossil fuels as solar, wind and nuclear can’t replace them. Direct comparisons are needed, but rarely happen, for example…

    Take a small company mining coal here in Australia which also owns a couple of mines in South Africa. The total market cap of the company is $A730m as of today and they produce 9.36M tonnes of coal per annum, mostly metallurgical, with resources and reserves for decades. At 8Mwh per tonne of coal, this small company produces 74,880,000Mwh of ‘energy’, in the form of coal.

    To produce the same amount of energy from solar, ignoring the intermittency factor and allowing an above world average capacity factor of 5hrs per day, it would take 42.74Gw of solar panels.
    The entire solar capacity of Australia, one of the world’s leading installers on a watts/capita basis, is 28.2Gw as of September 2022.

    In other words one minor coal company at a ‘value’ of $A730M would take over $60B to replace with solar, when ignoring the intermittency. If we added batteries to overcome part of the intermittency problem, then probably over $80B.

    In over a decade of building solar capacity in Australia, we don’t even approach the energy out put from one minor coal company.

    The argument I often get is that not all the energy from burning coal goes into the electricity, which is legitimate, if we also consider the inefficiency of getting ‘products’ fertilizers, plastics, explosives via complicated (expensive and energy intense) processes from solar electricity. Of course people highlight the former and ignore the latter.

    The situation is equally bad for wind and nuclear as it is for solar, with the world having no hope of going anywhere near the energy output of fossil fuels, ever.

    Just as a final example, to emulate the small coal company of $A730M Mcap, and a yearly energy production of 74,880,000Mwh, a nuclear program in Australia would need to have an output of 9.5Gw (at 90% capacity factor) or over 8 of the USA’s Vogtle reactors ($US15B each), so a cost of ~$A180B.

    Anyone want to do the numbers on a large coal mining operation, like BHPs ‘Peak Downs’ mine with 37M tonnes of annual production and the solar or nuclear capacity to replace it??

    Any talk of replacing fossil fuels is just ignorance as there is several magnitudes difference in costs both dollars and energy to build the artificial energy producers. The man made energy production systems are in fact energy sinks, not producers, which most people simply don’t understand, or don’t want to understand. In other words denial on a grand scale, of reality.

    • As I said a few articles back, we’re in an age of TINAR – There Is No Acceptable Reality – which really means a descent into make-believe.

      We’re asked to believe in seamless energy transition, non-inflationary QE, ignoring the markets, ignoring the “everything bubble”, finding scapegoats and temporary explanations for everything, perpetual growth on a finite planet, trickle-down economics, ever more technology, an ever-growing landfill economy, technology breaching the parameters of physics…….the list goes on.

    • Yes.

      It’s insane times where the lunatics really have taken over the asylum.

      Someday in the near future I expect markets to really react in proportion to the lack of political leadership, economic illiteracy and wasteful policies including these so called “green” energy ones.

      When that day comes it will shake up their illusions in pretty short order.

      Their reactions won’t be favorable, though.

      I expect they will implement capital controls and possibly even price controls especially rent controls.

    • “I expect they will implement capital controls and possibly even price controls especially rent controls.”

      They already did that in 2020………………. But only for main street

      But you know, believe what the owners of society tell you cause lying to you wouldn’t be in their benefit

    • They put restrictions on evictions including non paying tenants.

      That is not rent control per se.

      They introduced rent controls in Ireland recently, I think. They are also considering it in Scotland too.

      But rent controls and price controls have yet to be implemented in the West anywhere to my knowledge.

      But it is a matter of time.

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