#244. In search of illusory value



If you own a portfolio of stocks whose value has risen over time, or a property whose market price has increased, you are at liberty to cash in those gains by selling your investment. This, though, does not apply to investors in the aggregate because, by definition, any sizeable selling activity drives prices down, thus reducing, eliminating or reversing prior capital appreciation.

Put another way, the tidal-wave of cheap money poured into the economy over the past fourteen years, whilst it may have enriched some, has created paper, notional or non-realisable gains for the majority of investors, including those ‘ordinary’, non-wealthy people whose savings are managed by institutions, and whose wealth is often based on inflated property values which, in the aggregate, cannot be turned into cash.

The principle is that, unlike incomes from dividends or rents, aggregate gains in asset prices cannot be monetized.

Though critical, this point is entirely missed by any media reporter who writes about the billions (or trillions) ‘gained’ by investors over a given period of time, and by those statisticians who, by multiplying the price of the average home by the number of properties, purport to put an aggregate ‘value’ on a nation’s housing stock. The multiplication of aggregate quantities – such as the numbers of stocks, bonds or properties – by marginal transaction prices creates valuations which are as meaningless as they are often impressive.

This needs to be borne in mind when we look at the gains supposedly made ‘by investors’ since the authorities adopted policies which, by driving down returns on capital, have created enormous increases in the market values of assets.

The subject of ‘investors’ has become almost toxic since the global financial crisis, when the authorities were accused of ‘rescuing Wall Street by plundering Main Street’. Inequalities of incomes and wealth have undoubtedly widened dramatically, and some governments have actually made this worse by ‘helping’ young people to go deeply into debt in order to shore up property prices to the benefit of their elders. There is nothing here that any reasonable person would try to defend.

Analytically, though, something fundamental has happened to returns on capital. Income returns – in the form of bankable cash – have been crushed, and replaced by non-bankable capital gains which, in the aggregate, can’t be monetized.

We know how this has happened, and we can be pretty sure about where it ends, which is in falls of varying (but generally severe) magnitude across the gamut of asset classes.

But why has the financial system behaved in this way? The view set out here is that an economy characterised by cosmetic “growth” has been forced to resort to replacing bankable investment returns with cosmetic, non-monetizable “returns” on capital.

What follows is not, in any sense ‘sympathetic’ to investors, still less a defence of the paper beneficiaries of the divergence between incomes and asset prices. Rather, the aim is to examine the abandonment of market and capitalist principles in the face of unacknowledged economic contraction.


Time was when investors earned solid (and, for the most part, reliable) returns on their capital, in the form of cash incomes from stock dividends, bond coupons and property rentals. They would, of course, hope that these returns would be augmented by capital appreciation, but saving and investment remained viable so long as, over time, both incomes and asset prices at least matched inflation. The relationship between risk and return could be calibrated in these terms, with growth potential known to be in an inverse relationship with yields.

Latterly, yields – the rates of income earned on capital – have been crushed, making capital appreciation the primary form of return on investment. But there’s a fundamental difference between investment income and capital gains – whilst incomes are bankable, capital appreciation, in the aggregate, is not. As remarked earlier, the individual can sell his or her stocks, bonds or property in order to bank asset price appreciation, but investors collectively cannot do so.

In short, investors, as a class, have been stripped of cash incomes and fobbed off with paper capital appreciation that cannot, in the aggregate, be monetized, and may very well evaporate as markets back away from the frenzied pursuit of purely paper gains.

The mechanism by which this has happened is clear enough, and is traceable to the adoption and continuation of ultra-low interest rates in response to the global financial crisis (GFC) of 2008-09. But the rationale for this process is far from immediately obvious.

Critics allege that the motivation has been a desire to enrich a wealthy minority at the expense of everyone else, but this explanation, for all its apparent appeal, is faulty. This may well have been the intention but, to be effective, it would have to mean that the wealthiest people could turn all or most of their inflated wealth into cash, which is something that they cannot do at any significant scale. They can use their notional wealth as collateral, but this adds new forms of risk to the ever-present possibility that asset price slumps could diminish their wealth.

The real explanation is simpler. It is that the economy can no longer afford to pay significant levels of bankable income to investors. As the economy has deteriorated, policy responses have, knowingly or not, prioritized the support of demand over returns on capital. What this in turn means is that the system of market capitalism has been abandoned, in all but name.

Let’s be quite clear about this. The fundamental, indispensable principle of capitalism is that investors receive real (above inflation) returns on their capital. A market economy, meanwhile, requires that markets are allowed to perform their critical functions – which are price discovery, and the pricing of risk – without undue interference.

An economy cannot be described as ‘capitalist’ once real returns on capital have been driven into negative territory, and markets cannot be said to be functioning properly when they have been subjected to massive intervention in the form of huge quantities of money created out of the ether.

Throughout its existence, capitalism has been opposed by ‘left wing’ thinkers and actors who have aspired to its destruction. The irony now is that market capitalism has been brought down, not by its enemies, but by its friends.

The obvious question is “why?”, and the true (though less-than-obvious) answer is economic deterioration. We are making do with cosmetic, ‘in name only’ capitalism for the same reason that we are deluding ourselves with cosmetic economic “growth”.


In recent weeks, American markets have rallied – and the dollar has weakened – on speculation that the Federal Reserve might be softening its stance on monetary policy. There’s no evidence, in the Fed’s statements or actions, that any such softening is actually taking place or planned but, as the poet Alexander Pope almost put it, ‘hype springs eternal’.

Central banks use a range of inflation measures in the setting of policy rates but, for our purposes, the best yardstick for comparison is the headline rate of inflation in each currency area. On this basis, the Fed policy rate (4.0%) is 3.7% below inflation (7.7%). Real policy rates in Britain and the Euro Area are -8.1% and -8.0%, respectively (which, in a wiser world, might tell us all we need to know about both of those economies).

There’s a recognized connection which links deflation to economic recession, and this means that monetary policies intended to tame inflation risk inducing or exacerbating recessionary pressures. With this in mind, let’s think this situation through, imagining that, whilst the Fed does indeed, as expected, raise rates by a further 100bps, American headline inflation has retreated to, say, 6% by the time that this has been accomplished.

This scenario would leave US real rates at -1% on this basis of comparison. In such circumstances, would the Fed carry on raising rates? This seems implausible, not least because economic deterioration would prompt a chorus of demands for monetary loosening. In short, it’s unlikely that American policy rates will ever rise above inflation.

The situation is even more stark in the Euro Area and the United Kingdom. The only factor that is likely to tame European and British inflation is a severe and protracted recession, something which has already started to unfold. The British economy, in particular, shows many signs of shaking itself to pieces.

If headline inflation rates were to fall because of economic deterioration, would the European Central Bank or the Bank of England carry on raising rates? This is surely almost inconceivable. The British and European economies seem to be condemned to real rates remaining in deeply negative territory in perpetuity.

And ‘condemned’ is the mot juste. Negative real rates are not just anomalous, but extraordinarily harmful, yet, as the following charts show, they have been the norm since the GFC of 2008-09. Over that same period there has been a dramatic increase in the assets of the main Western central banks, which rose from $2.7 trillion at the start of 2007 to a recent peak of $26tn.

Fig. 1


As everyone presumably knows, rate repression was adopted during the GFC, and methods of implementation fell into two main categories. First, central banks slashed policy rates as part of ZIRP (zero) or negative (NIRP) interest rate policies. Second, they used newly-created money to buy huge quantities of fixed-interest securities, thereby driving prices up and yields down. QE can be regarded as complementary to NIRP and ZIRP, because it drives market rates down to levels consistent with policy rates.

Beyond methods and terminology, the overall effect was, and has remained, to keep nominal interest rates below inflation.

At the time, these innovations were described as “temporary”, to be operated only for the duration of the “emergency”. Adjectives do have a certain amount of elasticity, but negative real rates have now been with us for fourteen years, a period longer than the combined duration of the First and Second World Wars, and it’s too much of a stretch to describe this as “temporary”. The original intention, we might assume, was to restore the normality of positive real rates ‘as and when conditions allow’ – but this has simply never happened, and it’s become progressively less likely that it ever will.

Negative real rates have become ‘the new abnormal’.

As remarked earlier, a climate of negative returns on capital abrogates the fundamental principle of the capitalist system, whilst intervention at the enormous scale experienced since 2008 critically undermines markets’ ability to fulfil their essential functions of price discovery and the pricing of risk.

These might be regarded as purely theoretical objections, but there have been numerous adverse practical consequences of adopting an open-ended acceptance of negative real rates of return on investment, consequences which range beyond the dangers implicit in the creation of the ludicrous “everything bubble”.

Just one of these has been the driving of a wedge between the (generally older) people who already owned assets back in 2008-09 and the (generally younger) people who aspire to acquire them. It’s unlikely that the eventual bursting of the “everything bubble” will do much to assuage the resentment of the latter because, even if asset prices fall to levels they could once have afforded, their financial circumstances are likely to have deteriorated.

Another important consequence has been the stymying of the necessary process of creative destruction, whereby the failure of some enterprises frees up both market space and capital for new, more dynamic businesses.

Creative destruction cannot function when ‘zombie’ companies are kept afloat by ultra-low interest rates. Low rates further create an incentive for lenders to avoid declaring borrowers to be ‘non-performing’, a process which leads to write-offs and capital impairment. With rates at ultra-low levels, it becomes comparatively easy to avoid this, by adding ongoing interest to outstanding capital, especially when it’s recognized that ultimate loan repayment isn’t actually going to happen anyway.


When QE was introduced, traditionalists warned that this was a latter-day version of ‘money printing’, and must result in inflation. Defenders of QE have since pointed to low headline inflation rates to support claims that QE ‘hasn’t caused inflation’. The irony here is that such claims are routinely made within the shadow of the “everything bubble” in all classes of assets.

What makes such claims possible is the convention which confines the measurement of inflation to consumer prices, and disregards rises or falls in the prices of assets.

The latter should, of course, be included in any measure of systemic inflation, for at least two main reasons. First, the scale of asset-related transactions makes it impossible, in practical terms, to disconnect the two – the day-to-day activities of insurers, lenders, agents, brokers and many others are directly connected to the prices of the assets that they insure, buy or sell. Second, asset price inflation has very real consequences, good or bad, most obviously for savers, retirees and young people who wish to purchase homes and acquire assets.

The SEEDS economic model has its own measure of systemic inflation, which is RRCI (the Realised Rate of Comprehensive Inflation). Some examples of RRCI, compared with the broad-basis GDP deflator, are illustrated in the next set of charts.

Fig. 2

Historically, as you can see, systemic RRCI inflation has tended to be higher than the GDP deflator in most years and in most locations. Based on the GDP deflator, compound global inflation between 2001 and 2021 was 1.6%, but this rises to 3.8% on the basis of RRCI. Over that same period, the RRCI rates of inflation were 3.6% (rather than 2.0%) in the United States, 3.4% (rather than 2.2%) in Britain, and 2.4% (rather than 1.6%) in the eight-country Euro Area group covered by the SEEDS model.

You will have noted that, had systemic RRCI been used instead of the GDP deflator in the preparation of economic accounts over the past quarter-century, a large proportion of the “growth” reported over that period would have been eliminated.

But the relevant point in the rate policy context is, of course, that the extent of negativity in real rates becomes even more pronounced when nominal rates are measured against systemic inflation. Though this may have been unintentional, there’s an element of sleight-of-hand in operating negative real rates which inflate asset prices, when this asset price inflation is then excluded from the inflation measure against which the extent of negativity in real rates is calibrated.

In short, the assurance that QE ‘doesn’t cause inflation’ is only valid when inflation is measured in a way which excludes the very kind of inflation that is created by QE. This is comparable to the adoption, during the early 1970s, of “core” inflation measures which excluded energy and food at the very time when the prices of both of these necessities were soaring. No wonder this was described as ‘inflation with the inflation taken out’.

By way of illustrating of the working of QE, let’s imagine that a latter-day Isaak Walton – the author of The Compleat Angler – had been put in charge of monetary policy during the GFC, and had started handing QE largesse, not to the markets, but to fishermen. The prices of rods, reels and all other items of angling paraphernalia would have soared. Rivers, lakes and beaches would have been crammed with zealous – and affluent – people in pursuit of the denizens of the deeps.

This, of course, isn’t what happened, and QE money was directed, not to anglers, but to investors. The same principle of selective inflation applied, but it was the prices of stocks, bonds and property, rather than those of floats, flies and lures, that adopted exponential trajectories.

The point is that QE does cause inflation, but does so at the point at which new money is injected into the system. By a quirk of economic history, rises or falls in the prices of assets are not included in headline measurements of inflation, but are part of the systemic pricing picture nevertheless. The convention of limiting the definition of inflation to consumer prices thus enables commentators to state that QE ‘isn’t inflationary’ at a time of rampant inflation in asset prices.

Between the GFC and 2019, the bulk of the QE enacted by the central banks was poured into the markets, creating huge inflation in asset prices. With the onset of the pandemic, though, this pattern changed. Essentially, governments started running enormous fiscal deficits to support households (and employers) affected by lock-downs, and these deficits were funded by central bankers, who used QE to purchase existing government bonds.

For the first time, to any significant extent, QE was now flowing, not just to investors, but to consumers. This was followed, as surely as night follows day, by surges in consumer prices.

What this demonstrates is that the statement that QE ‘doesn’t cause inflation’ needs, at the very least, to be modified to ‘QE doesn’t cause consumer price inflation, so long as it doesn’t flow to consumers’.


The central contention made in this analysis is that investors have been deprived of adequate income returns – and fobbed off with non-monetizable capital gains instead – because of a fundamental deterioration in what is affordable for the economy. Regular readers will be familiar with the issues involved – and a comprehensive analysis of the economy is planned for forthcoming publication – but a brief synopsis is appropriate here.

Because nothing that has any economic value at all can be supplied without the use of energy, material economic prosperity is a function of the quantity, value and cost of energy available to the system.

Another way to put this is that the economy is a dissipative landfill system, in which energy is used to extract raw materials and convert them into products whose ultimate destination is disposal. The rapid growth in the size and complexity of the modern economy has been made possible by the use of fossil fuels, with the result that climate-harming gases are a sizeable component of the waste heat which is the outcome of the energy dissipation process.

Over time – and as we have seen – there has been remarkable consistency in the rate at which primary energy is converted into economic value. The absence of efficiency gains in the conversion process may be a product of the depletion of non-energy resources. But the end result has been that economic output has increased or decreased in line with the quantities of energy consumed.

Critically, though, output isn’t the same thing as prosperity, in much the same way that total and disposable incomes are not the same thing. The difference between the two is cost and, at the macroeconomic level, the cost involved is the Energy Cost of Energy. The principle of ECoE is that, whenever energy is accessed for our use, some of that energy is always consumed in the access process. This is a deduction from output, because energy value consumed as ECoE cannot be used for any other economic purpose.

Once the cost-reducing processes of geographic reach and economies of scale had been exhausted, depletion became the principal driver of the ECoEs of fossil fuels. These – and the overall ECoE of a system dominated by oil, natural gas and coal – have been rising exponentially, undermining prosperity.

This process first began to make its presence felt during the 1990s, when it created the economic drag which was then labelled “secular stagnation”. This term referenced a non-cyclical deterioration in growth, though orthodox economics has never made the necessary connection between economic deceleration and rising ECoEs.

Because GDP is a measure, not of material value but of transactional activity, we have been able to inject cosmetic “growth” into the system through an expansion in credit, with each $1 of reported increase in GDP being accompanied by more than $3 of net new borrowing over a period stretching back to the 1990s. Economic historians of the future are likely to date these processes from the 1990s, and to identify the GFC of 2008-09 as the first demonstration of the reality that using liability expansion to create synthetic “growth” is not a workable solution. The subsequent sequence has involved supplementing “credit adventurism” with “monetary adventurism”, leading, inevitably, to the second and larger crisis which looms on the near horizon.

The problem, of course, is that a rapid expansion of debt dictates an equally rapid rise in the cost of servicing that debt. This is the equation that forced us into crushing rates – debts had become so big that we could no longer afford to service them as we had in the past.

The charts in Fig. 3 illustrate some central aspects of this process. The use of rapid monetary expansion has driven a wedge between aggregate prosperity and reported GDP (see Fig. 3A), whilst average prosperity per person has trended downwards as ECoEs have risen (3B). At the same time, the real costs of energy-intensive essentials have been rising, imposing a progressively tighter squeeze on living standards (Fig. 3C). Along the way, efforts to create “growth” using exponential expansion in debt and broader liabilities have introduced worsening instability into the financial system (Fig. 3D). Incidentally, the forward projections shown in Fig. 3D assume the continuity of current practice, though it’s very probable that we are now at, or very near, the point of inflexion.

Fig. 3


It’s not entirely true to say that the implications of crushed returns on investment have gone wholly unnoticed. The new context was addressed in an important report on pension prospects published by the World Economic Forum back in 2017.

Looking at the United States, the WEF stated that annual real returns on equity investment were likely to be 3.45% in the future, compared to a historic 8.6%. More tellingly – because of the lesser scope for capital appreciation included within total returns calculations – real returns on bonds were likely to fall to just 0.15% in the future, from 3.6% in the past.

The inference to be drawn from this is that paper capital gains – being, by definition, non-monetizable in the aggregate – cannot be used to pay pensions. This is partly why the WEF report, which looked at eight countries, warned that a pensions “gap”, then measured at $70 trillion, was likely to expand to over $400tn – at 2015 values – by 2050. For reference, global GDP in market dollars was $75tn at that time.

A summary of where our investigation has taken us is that, as the underlying economy has decelerated towards contraction, so cash returns on investment have been replaced by cosmetic capital gains, ‘cosmetic’ in the sense that they cannot, in the aggregate, be turned into cash by investors. This has not, remotely, been coincidental.

This ties in with the “wealth effect”, in that increases in paper wealth have two effects. The first is to make people more relaxed about taking on additional debt. The second is that it disinclines them to ask awkward questions.

The issue now is when belief in the supposed reality of purely notional gains will be replaced by hard-headed assessment – or, perhaps, outright fear – which takes over from the long-standing penchant for irrational hope over solid fact.

Thus far, the effects of dawning reality have largely been confined to the wilder fringes of “tech”, where we’ve been witnessing collapses in the absurd market values once ascribed to cash-burning businesses in a frenzy of IPO and SPAC activity.

But we cannot assume that investors are going to stop asking questions at the point where only the most obvious froth has been blown off the markets. The search for substance isn’t going to end with the discovery that it cannot be found in a bright idea, adept marketing, leased office space and a mailing list.

As we know, there are a number of salient features of the economy that have been ignored during a long period of what we might term ‘the voluntary suspension of disbelief’.

Observers may come to recognize that there are limits to how long we can proclaim “growth” on the basis of the injection of cheap credit and cheaper money into the system. The divergence from economic reality is reflected in the first of the following charts (Fig. 4A), which plots the disequilibrium that has come to characterise the relationship between the ‘real’ economy of material prosperity and the ‘financial’ economy of transactions, of which an ever larger proportion neither creates nor represents material value. If we apply percentage equilibrium downside (calculated here at 40%) to the sheer scale of financial exposure (Fig. 4B), we can identify truly vertiginous levels of financial risk.

Even if this point is not recognized quite yet, market participants must surely be aware by now that standards of living are trending downwards, creating an affordability squeeze which puts at risk, not just discretionary (non-essential) consumption, but also the reliability of financial flows from households to the corporate and financial sectors.

What we can now anticipate is the replacement of starry-eyed gullibility with hard logic, inclining investors to get into a competitive retreat from the unrealistic. Portfolios will be weighted increasingly towards non-discretionary sectors, those with solid material value, and those which do not depend on income streams from increasingly hard-pressed households. Other asset classes, including residential and commercial property, will be part of the decline that sets in as ‘keeping up the payments’ gets ever harder, and as investors start to turn against anything exposed to affordability compression.

And it’s axiomatic that, when investors rush for the exit-doors, those doors get smaller.

Fig. 4

377 thoughts on “#244. In search of illusory value

  1. Weather hmm… could it have anything to do with the weakening magnetic field? It has weakened a substantial amount over the last two decades. Pick it apart please.

    • Red

      Ben makes a compelling case for solar micronova and crustal displacemen, with all the attendant earth changes that might come with it. Reading Chan’s publication seems like it might be time well spent. Generally I would say that preparing for the senecan cliff and preparing for rapid geomagnetic polar reversal are similar preparations, with some minor but important differences.

      For example, my property is steep, and it has a small year-round creek running top to bottom. The headwaters of the creek is an artesian spring about 300ft above my North property line. There’s another 1000ft of elevation gain to the top, to the ridgeline. Some years ago a logger friend who knows the hills around here well remarked on the unusually large depth of the draw through which the creek runs relative to the strength of the creek. An ideal spot for some additional infrastructure would be in a bowl off to the side of the creek, which is in a central location, but thinking about what the logger said and thinking about this topic, here, is making me think harder on that bowl as a suitable site. It’s always better to be safe than sorry, and another nearby site on a saddle would also do. Thank you.

  2. A Little Less Conspiracy Theory Here. As all of you know, Google and Amazon know everything. Here is the new book recommendations I just received from Amazon. I don’t want to get on some government list. Trudeau in Canada would probably freeze my bank account. I used to get innocuous science book recommendations. I’m in a bad neighborhood now. Don Stewart:

    One Nation Under Blackmail – Vol. 2: The Sordid Union Between Intelligence and Organized Crime that Gave Rise to Jeffrey Epstein Vol. 2

    Clinton Bush and CIA Conspiracies: From The Boys on the Tracks to Jeffrey Epstein (War on Drugs)

    A Spy in Plain Sight: The Inside Story of the FBI and Robert Hanssen―America’s Most Damaging Russian Spy

    Perversion of Justice: The Jeffrey Epstein Story

    Aberration in the Heartland of the Real: The Secret Lives of Timothy McVeigh

    The Secret Team: The CIA and Its Allies in Control of the United States and the World

    D. B. Cooper and Flight 305: Reexamining the Hijacking and Disappearance

    The Spider: Inside the Criminal Web of Jeffrey Epstein and Ghislaine Maxwell

    Secret CIA: 21 Insane CIA Operations That You’ve Probably Never Heard of

    Chaos: Charles Manson, the CIA, and the Secret History of the Sixties

    • Some of the recommendations are probably because you recently ordered Nabokov’s “Lolita”. The others are because your phone is tapped.

    • Lol joe
      “America” – all we care about is can we sell you more stuff. Have you seen our section on aliens and why they are already here?

    • “A Little Less Conspiracy Theory Here. As all of you know, Google and Amazon know everything. Here is the new book recommendations I just received from Amazon.”

      read it again

  3. Ian Welsh makes some cogent observations about the importance of vertical integration in an era when civilization is slowly collapsing.


    Here’s a picture of a vertically integrated business from my home state of Pennsylvania. They’re so vertically integrated that they even produce their own workers and won’t turn them over to go fight in their “country’s” wars.


  4. Americans are sorting themselves by political positions. This will facilitate the eventual break up of the nation and fuel secession movements.

    “It’s key to remember, when thinking specifically about political segregation, that net population changes shown in census numbers don’t really matter. Net population changes may be small or large for any given state, but they say nothing about the gross numbers moving in and out, which are always far higher than the net. If those gross in and out numbers are based on politics, then the nation is politically segregating at much faster pace than is apparent.

    The implications for America are huge. As right-of-center people move to more right-of-center places and vice versa, their new jurisdictions will be more inclined to accommodate them politically, expanding the division and becoming more still more unwelcoming to the other side.

    We’ve seen much of that already. For example, Illinois voted in November to constitutionally outlaw right-to-work while Tennessee voted to enshrine it; some conservative states strictly limited abortion after the Dobbs decision while some liberal states moved to further protect it; and many states adopted voting procedures designed to favor the party in power.

    If the net result is accelerating population gains for conservative states, their political power will likewise expand. If just the most recent interstate migration trends continue, without any acceleration, the next Congressional seat allocation in 2030 will mean gains of four House seats for Texas and three for Florida, with losses of 5, 3 and 2 for California, New York and Illinois, respectively, according to Michael Li, an analyst at the Brennan Center.”


    • With the exception of California, this is a net move from the US rustbelt to the sunbelt. As James Kunstler pointed out in his book ‘The Long Emergency’, the sunbelt’s building stock was mostly constructed since 1950 and it’s even more car-dependent than the places these people are leaving. So they might have to move yet again when the oil runs low(er).

      Oh dear …

    • Tagio

      By the time the US breaks up, liberal cosmopolitanism will no longer exist anyway, because there won’t be enough energy to underpin it. And neither will bourgeoise conservatism. The contemporary political divide will be in the dustbin of history by that point. Will birds of a feather always flock together? Sure they will. In a spiraling depressionary economy, secession movements will be strictly based on regional grievances with the federal government over allocation and not over identity politics. Maslow’s hierarchy will be a foreshortened hierarchy by then, and middle- and upperclass politics will have no place on it. It’s gonna be a ‘git er done’ world by then. If the federal government wants to survive that world then citizens will need to regard it as a net positive. That means that the government will be an earnestly Unitarian government or else. Divide and Conquer (complexity) is an artifact of growth phases. Consolidation (unification at a simpler level) happens under stress, and dissolution happens at the final breaking point.

    • There’s another factor to consider here, which is the decline in sectors which influence opinions. The context here is that discretionary affordability is being crushed, and won’t recover.

      FB shares are now down more than 70% from their high. Twitter is no longer quoted, but we know it’s struggling. The market value of the world’s big media stocks fell by more than $500bn last year, though I don’t have that to hand as a percentage. This makes perfect sense – subscriptions are an early cutback for struggling households, and cutting ad spending is an easy cost reduction for corporates. Much of the really big tech stocks have comparable exposures, notably to ad revenues and subs. Disenchantment with the capabilities of tech is one of the easier predictions for the coming year. Most are discretionaries, and/or streams-of-incomes sectors.

      The point is, how does influence and public opinion change if both social media and conventional media are in severe decline, joined there by some of the biggest names in tech?

    • @Dr Tim

      “The point is, how does influence and public opinion change if both social media and conventional media are in severe decline, joined there by some of the biggest names in tech?”

      Good question.

      Ruling elites have always found ways of influencing public opinion long before the internet.

      Newspapers in the 19/20th century.

      The pulpit before then. The threat of being burnt at the steak for having the wrong opinions, can be quite persuasive.

      He/she who tells the story, controls the narrative. We all do it. When we read our kids a bedtime story, we are trying to influence the way they think.

      The internet is a great place for sharing ideas. (Such as this blog)
      I use it for ideas/innovations on projects I undertake.
      The flip side, is that a whole lot of guff is out there too. I guess you can’t have one without the other.
      I would miss the internet if/when it goes

      We will all become more isolated/local in our thoughts.

  5. @timmorgan:
    “The point is, how does influence and public opinion change if both social media and conventional media are in severe decline, joined there by some of the biggest names in tech?”

    Reduction of advertising and paywalls would be welcome for me personally, but as Noam Chomsky outlined in ‘Manufactured Consent’, control or ownership of public information becomes concentrated in fewer hands and starts to conform to a narrow scope. Many of us might argue about countries with State control of information and media, but is corporate control that much different?

    Throw in the increasing cyberwarfare and I would suspect increasing distrust of commercial tech orgs. As happened in Australia last year, a major national telecommunications provider was hacked and millions of identity/financial details were stolen. The company had to foot the bill for people to get replacement drivers licences, credit cards, even passports. A few weeks later same thing happened with a major private health insurance company.

    So if corporate tech giants are declining, and demand for their commercial services declines with both distrust and affordability crunch, then that would also feed into increasing controls on publicly available information, more countries putting in regulatory mechanisms, social discontent, more fuel for the continued rise of hard-right populist/nationalist movements etc and conspiracy theories.

    • There are a number of different issues here. First, as the saying goes, ‘when the product is free, you’re the product’. A lot of businesses operate by collecting data and selling it to advertisers. That model, and indeed advertising itself, is heading for severe deterioration. This is part of why “big tech” is heading downwards, just as conventional media, social media and hyped ‘fringe tech’ did in 2022. Other service providers which rely on customer subscriptions face similar problems. I expect the values of sporting, streaming, music and other rights to fall markedly. Those rock stars who’ve already sold their back catalogues will be happy with the prices that they got.

      Hacking is a problem, of course, and could worsen if data users cut corners on security as part of the cost-cutting needed to try to remain profitable. At the same time, though, the value of hacked data could decrease. Nobody, as far as I know, saw the media, social media and hyped-fringe tech slump of 2022 coming, and I don’t imagine they see the tech slump of 2023 coming either.

      I can see why states would want to interfere more, but their resources are declining, and there’s likely to be less to interfere with.

      It seems to me that extremists (of all hues) will be weakened as the media space contracts. At the moment it gives them a lot of free access to the public.

  6. @timmorgan
    “I can see why states would want to interfere more, but their resources are declining, and there’s likely to be less to interfere with.
    It seems to me that extremists (of all hues) will be weakened as the media space contracts. At the moment it gives them a lot of free access to the public.”
    I don’t see that, there is always open spaces! Stadiums, parks etc
    I could be way, way wrong, as not living in the UK – but all I saw of the Brexit dramas on my side of the planet – was placards and slogans all over the streets with occasional crowd punchups. Even reputable pundits and journos could not explain the ‘issues’. What information sources were voters getting? Some social media rumours of the leavers wanting to kick out all the immigrants, anger over financial arrangements with Brussels, dumping of Syrian refugees, the Calais camps etc, but never stated bluntly because .. perhaps.. well, that would be ‘rude’ wouldn’t it?

    A former New Zealand PM, burst out laughing in an interview when asked about Brexit. ‘Bread and circuses’, help keep the masses under control. People will want an alternative for their ‘circuses’ when they can no longer afford playing in Twitter storms, Netflix or I-Pads. Tent revivals, evangelicals, open-mike gatherings, Speakers Corners, on this, that n’ tother topic, but especially towards “others” of whatever stripe and hue.

    I recently watched a documentary on ‘Walls’, and mass diasporas, including climate refugee migrations (eg I hadn’t known before that India had completely walled off their Bangladesh border) – but it did describe how quickly humanitarian compassion in the last 20+ years has turned into walls.

    • I think there’s a big difference between taking to the streets to air legitimate grievances and sitting at a computer making extremist (and often very nasty) statements from the shadows. Social media could have been, and perhaps is, a positive force, connecting people with friends and families, and enabling collective compassion when supporting responses to humantarian disasters. My point is neither pro- nor anti- social media, but that it’s financial model is failing. The same is happening to conventional media, and will happen to Big Tech as well.

      The “leave” vote was an informal coalition, with various strands involved. Some were the kind of people who elected Liz Truss, others were extreme or misguided nationalists, and others simply wanted ‘to give the establishment a kicking’ in a very divided and unequal country.

  7. Tim, Happy New Year. Liz Truss opposed Brexit….and Rishi Sunak supported it, although he was a very lukewarm campaigner. Most of the people who voted for Brexit were ordinary people who simply wanted a real say in the running of their country, like the Welsh Chartists in the 19th century. You can hardly blame them when you consider the likes of Ursula von der Leyen and the way the EU treated ordinary Greeks in the financial crisis. There were very few extreme nationalists involved, at least on the Leave side. There was of course the awful murder of Jo Cox by a loner……and I doubt we have ever been told the full story about that episode.

    • Happy New Year to you, and indeed to everyone here.

      Liz Truss opposed Brexit, probably because the leadership at that time took that line. As you may know, I was neutral on this issue. One has to respect the democratic vote. I don’t think we can infer that “leave” voters wanted a hard-line Brexit as delivered by Johnson’s crew. The EU side, too, mishandled the negotiations. Mrs May might have delivered a better deal if her party (and/or the opposition) had put the national interest before their own. The economy seems undoubtedly to have suffered, though “leavers” might regard that as ‘a price worth paying’ for sovereignty. It’s an odd kind of sovereignty that can’t keep out illegal migrants whilst closing the door to legal ones, travelling to the UK to work. If the vote were held again now, polls make it clear that “remain” (“rejoin”) would win comfortably.

      In short, it’s a mess. I’m relatively relaxed about Mr Sunak, though I can’t see how he can rid his party of the extremists. Some pundits are saying that, if there’s no recovery in Tory support by the spring, he could be ousted and Boris could return. That, to quote a debate between Gladstone and Disraeli, would turn a disaster into a catastrophe.

  8. @timmorgan
    Re their financial model failing and what might happen to public opinion and access to news and information.

    I can only guess that with market contraction, competing with each other to take whatever market is left, they start a lot of mergers and acquisitions, shedding jobs and costs as they go, evolving into just one or two players with govt subsidising public service access in health, education, universities, emergency services etc.

    Maybe stop trying to screw the public for which it will increasingly become an unaffordable luxury, and focus only on specific sectors/industries which need it as a necessity and will have to pay more for.

    Perhaps the open-source alternate services (eg MeWe, phpBB, Linux-based platforms) without investment, shareholders, marketing or customer pay models will get a boost in popularity?

    I wish Fox News and their equivalents would die, but will probably do even better in the decline of tech, catering as they do to the LCDs. As more and more and more people fall to the bottom layers, this will build a bigger market for them.

    Netflix has recently changed it’s financial model, offering supercheap subs plans with advertising, and several intermediates. Along with restricting accounts to single households, offering cheap ‘associate’ subs plans. Remains to be seen how that works out.

    Then there are all the ones that generally aren’t players in official stock/share markets. Pornhub seems to continue doing well with focussing on a large set of free content and paid, and remains a haven for money-laundering. Gambling, prostitution, remains big money even in hard times. Check out the billionaires on Interpol’s top 20 most wanted for human trafficking (ie slavery) drug cartels etc. Some investors are still making good returns in some industries which also need tech to operate.

    The EU have been encouraged to increase arms manufacturing, to support Ukraine, or so they say on my free EuroNews service. Armaments need tech and comms platforms too.

    In Australia, TV networks still bid obscenely high (record-breaking billions) for exclusive rights to broadcast live sports which presumably brings in even more advertising revenue, as they seem to be hanging in there with healthy profits and returns to investors.

    As for news, I get mine mostly from public broadcaster television networks.
    In Australia we have 2, one is tax-payer-funded with no ads, the other subsidised with some unobtrusive ads.
    Usually for luxury items, like the latest Tesla and Club Med type holiday packages. But they both have low-ratings, they tend to cater to the tertiary educated *intelligentsia* class.

    Speaking of Tesla. I saw it’s stocks have plummeted, and plants are slowing production.

    • Thanks.

      I think my general point is about affordability compression. It’s ceasing to be possible for households to use cheap debt to live beyond their means – though that’s another issue that we need to think about* – whilst the costs of necessities are on a continuing up-trend. This means that discretionary consumption will fall, and businesses in discretionary sectors will shrink and, in many cases, fail. These businesses, in particular, will cut their ad spending, though businesses in most sectors are likely to see this as a comparatively easy way to cut costs. For households, it’s easier to cancel your news, entertainment or sport contracts than to reduce other outgoings.

      Investors have noticed this where both mainstream and social media are concerned. Streaming seems not to be living up to expectations, and I’ve read that unit advertising prices are falling. The markets haven’t yet joined up all the dots on this for Big Tech, though no doubt they will. Ad-supported and subscription-based business models are extremely exposed to downside. Sports finance is particularly exposed – broadcasters often have multi-year, multi-billion rights deals which are only viable if revenues from ads and subscriptions keep growing or, at least, don’t shrink.

      *The overall credit picture, meanwhile, is worrying, and the declining proportionate role of conventional, regulated banks – ‘deposit-taking institutions’, in the jargon – is significant.

      Fixed-rate mortgages are not retained by banks, but packaged and sold to investors – in the US, part of this is underwritten by the government. This reduces risk to banks, but transfers it to investors, important where the latter are leveraged. Meanwhile, various forms of consumer credit are now provided by NBFIs, known colloquially as “shadow banks”. If you buy something and pay for it in instalments, it’s likely that the credit provided by the supplier comes not from a bank but from an NBFI. Banks themselves seem to have sizeable exposures beyond their orthodox (regulated) lending-books. The data on non-bank (or should I say non-regulated banking) loans is incomplete, and delayed, and this sector, though partially monitored, is NOT regulated on a consistent basis (and I question how effectively it is regulated even within individual nations’ borders).

      In short, there is enormous scope for financial failures outside of the conventional banking system, together, of course, with huge transmission risk. We do know something about proportional national risk where, if we ignore specialist financial centres like the Caymans and so on, the exposure league-table is headed by Ireland, the Netherlands and the UK.

  9. Tim, you are right that it is a mess…..not least because the UK nomenklatura has spent the years since 2016 doing its utmost to ignore the wishes of the electorate, not least in relation to controlling immigration. Theresa May was installed pronto to expedite this process. Johnson, the opportunist’s opportunist, continued it, just as Sunak and Hunt will do. Sunak and Hunt also have no ideas for rejuvenating the UK economy, least of all in a way that benefits ordinary people. Witness Sunak’s hapless remarks at a homeless hostel the other day.

    Anyone who thinks that nirvana lies on the other side of the English Channel needs to take a close look at the unfolding economic mess in France and Germany in particular. They are no better than the UK and in some ways worse. Furthermore the EU’s steady authoritarian drift, accelerated by Covid, is impossible to ignore. But the EU has long ceased to be a topic of rational debate for many in this country. It has become a cargo cult.

    PS who are the “extremists” Sunak should get rid of?

    • The UK operates a grossly dysfunctional economic model. Asset prices, especially property, are extremely inflated, and act as collateral to lenders and give confidence to borrowers, allowing the economy to run on perpetual credit expansion. This results in the UK living beyond its means, reflected in serious trade and current account deficits. These are covered by asset sales, but this has at least two snags. First, you can run out of things to sell. Second, each asset sale sets up a new outwards stream of profits and dividends. Meanwhile, UK exposure to the global financial system remains excessive, even though it has been contracting as the City is overtaken by other financial centres. We saw just a brief preview of what can happen in the immediate aftermath of the Kamikwazi budget.

      The extremists are those who, as well as advocating the hardest possible Brexit, backed Johnson to the hilt, then supported Truss, and thought Mr Kwarteng had the right ideas. If you’ve met any of these people, you’ll know how extreme-ideological they are.

  10. There is, and always will be, a fundamental problem with the European common market. And that is the common currency.

    In some ways it has a similar flaw to Bitcoin in that it has common ownership and no single point of ownership.

    Right from the start I could see the fault-line with Bitcoin and kept away. The Euro has a similar resonance.

    • The problem with the Euro is that it tries to combine 19 sovereign budgets with a single monetary policy. Any economics student advocating this pre-Euro would have failed his or her exams. There are huge imbalances within the Target2 clearing system, with Germany owed about 1 trillion EUR by the system, and Italy and Spain (in particular) owing huge sums to the system, in excess of EUR 500bn each last time I looked. The compliance parameters (a maximum fiscal deficit of 3%, for example) have been blown wide open by the events of recent years.

    • Fundamental difference. Bitcoin’s monetary policy is hardcoded. We know how many will be issued at any point in time. This is impossible with any fiat currency or indeed a commodity like gold or silver.

  11. The reality of the Euro is that it is an entirely political project designed to forge a United States of Europe through crisis. Although it has not worked out that way. It works for the heads of German industry but not for ordinary Germans nor for most of the rest of Europe. The Target balances will never be repaid and the whole structure can only be kept going by infinite money printing and not controlling inflation. The BOE looks hawkish compared to the ECB.

    • A little while ago I cited and linked an excellent article by Ann Pettifor. A striking point made there was how little most economists know about monetary economics, including banking, let alone non-bank financial intermediaries. She said that someone could get an economics degree, and even go through an entire career in economics, without understanding this. I will admit to having had to go through a steep learning-curve myself on monetary economics, my speciality of course being energy economics.

      Yet it’s impossible to understand financial risk, and/or the markets, without at least a grounding in monetary economics. Was such knowledge available to Kwasi Kwarteng, did he understand it himself, or did he just ignore it? I can think of several previous chancellors of whom the same question could be asked. Indeed, I can name only one – Alistair Darling – who I’m sure understood this stuff.

      The point is, if even most economists don’t understand monetary economics, and can’t tell their OFIs from their NBFIs, what chance have officials and ministers got? The ECB has now raised rates, and started sizeable QT, but very late in the day. It’s hard, perhaps impossible, to set rates that suit so many diverse economies, especially when each of them has budgetary independence. That was difficult in normal times, let alone now!

  12. Pingback: It’s ceasing to be possible for households to use cheap debt to live beyond their means | ORCOP.COM

  13. The ECB will never get on top of inflation, any more than the BOE will. Without ultra-cheap debt, the Eurozone in general and Italy in particular cannot function. Real interest rates will remain deeply negative after inflation is factored.

    The same will be broadly true in the UK, because of the UK economic model you describe above. Of course neither Sunak nor Hunt will reform that model. They and their City cronies are wedded to it. Hunt was a key member of the Cameron Government which talked about austerity but massively increased public and private debt, while targeting savers with financial repression. None of this has anything to do with Brexit.

  14. Brexit was always going to be difficult for the UK precisely because it meant withdrawal from a freetrade arrangement that UK businesses were long adapted to. That doesn’t mean it was the wrong thing to do. For a number of reasons, the EU doesn’t have much time left as a functional institution. The German industrial model is kaput without Russian gas. And the EU is bankrupt without German industrial exports. So the Ukraine war and EU sanctions on Russian gas meant game over for the EU as a functional economic bloc.

    The mistake that the UK made was failing to come up with an alternative. The obvious solution for the UK was to forge a CANZUK economic and political alliance with its former dominions. The Auzis, Canadians and Kiwis have all shown interest in kindling this arrangement. But Britain’s elites didn’t want to see it because it would have looked like anglo-whites ganging together based on common racial solidarity. Britain’s political classes remain as toxic, anti-white and self-loathing as ever, regardless of Brexit.

    The UK’s future is now likely to involve being eaten alive by the US. In exchange for entry into NAFTA, the US will demand every humiliating concession you can imagine. We can expect to see an end to the NHS. The US will demand whatever the UK has remaining in terms of overseas assets. Ultimately, a dismembered UK may end up applying for statehood in the US.

    • @drtimmorgan
      “I think my general point is about affordability compression. It’s ceasing to be possible for households to use cheap debt to live beyond their means.. whilst the costs of necessities are on a continuing up-trend. This means that discretionary consumption will fall, and businesses in discretionary sectors will shrink and, in many cases, fail. ”

      Yes! I am seeing more business failures just in my local small city. The “food & wine” district I visited with out-of-town friends over the holiday week – ie the district once full of restaurants, small pubs, wine-bars, cafes, indie theatres etc I would estimate last week, around half have closed their shopfronts since early ’22 when I last visited the district for a night-out. Along with far more ‘closing down’ sales of gardening stores, clothing chains, and all sorts of various businesses catering to ‘discretionary consumption’.

      These business failures started from late 2021 when the CoVID cash-splash to support businesses/employers, ran out. Only ones doing well, on our ASX stocks are, predictably, supermarkets, and the foundations of the Australian economy, mining, drilling, mining, and more drilling and mining. No slowdowns in iron ore, nickel, lithium, cobalt, copper, gold, aluminium, silver etc all still going gangbusters.

      On top of that, the Australian Tax Office also deliberately slowed down their business/corporate tax debt recovery protocols during the CoVID years, and have just announced (during the sleepy holiday week) that these tax bills are now due, and 500,000 letters have been sent in the first tranche. It is expected to take 12-18 months to stage manage it slowly, and will put a sizeable chunk of SMEs, and some bigger national businesses & franchises into receivership and rake in $45+ billion.

      Presumably, this will also have a ‘knock-on’ effect in job losses, and onto other larger, but currently stable, businesses in the most affected supply chains as creditors, feeling the pain in both reduced demand for their ‘supply’, along with contract defaults, and limited returns after the taxman (and hopefully employees) get their share.

    • Thanks – this is certainly consistent with how I, and the SEEDS model, interpret what is happening.

      It seems to me that there are two things for us to concentrate on. The first is affordability compression, created by the costs of necessities rising at the same time that material prosperity is shrinking. As well as putting suppliers of discretionary products and services under relentless pressure, affordability compression will degrade financial flows from households to the corporate and financial sectors.

      The second is financial exposure. Between 2002 and 2021, each $1 of reported “growth” was accompanied by $3.10 of net new debt. But broader liabilities, on which data is incomplete, seem to have increased by $7.50 for each growth dollar over that same period.

      These are the issues I plan to concentrate on in 2023.

  15. Peter Cassidy, some interesting comments especially about Germany’s woes, which you cannot blame on Brexit. Also don’t forget that the current coalition is weak not least because it contains the German Greens. They are very doctrinaire and see the current situation as a golden opportunity to deindustrialise Germany. Hence their hyper-aggressive stance on Ukraine.

  16. Interesting article in the Telegraph which links to recent threads in this forum.

    The article is entitled “Putin Kickstarts de-industrialisation of Europe’s factories”

    The commentary identifies German and Italian industrial sectors as being particularly at risk from the starvation of Russian gas supplies.


    It quotes some data from Goldman Sachs indicating a permanent reduction of 2-3% of European industrial output. That’s a lot less impact than Peter Cassidy suggests, but nonetheless, still a big hit. Biggest losers include chemical industries and metals production. No shocks there, as both are huge energy consumers. Apparently BASF’s largest chemical plant in Germany consumes the same amount of gas as the whole of Switzerland.

    It looks like Europe is on the leading edge of a forced energy decent and permanent economic contraction. It seems there’s been an accumulation of too many bad calls when it comes to energy policy within Europe. It’s not just the reliance on Russian gas but a much broader picture, including Germany’s rapid phase out of nuclear, and the UK’s obsessive determination to rid itself of the last remnants of coal fired power generation.

    Meanwhile, according to a New Scientist report in April 2022, China was still adding massive amounts of coal fired plants, and it’s also been benefitting from re-orientation of Russian oil & gas supplies. President Xi must be laughing at the ineptness of western governments.

    I would like to take the opportunity to wish Dr. Tim and all forum participants a happy New Year. Normally I start the New Year charged with enthusiasm and optimism, but for some reason it’s not shown up this Year. Hopefully 2023 will be less bad than I anticipate.

    • Thanks Neill, and a Happy New Year to you.

      In some ways, 2022 was particularly difficult for me, but I’m starting 2023 with a determination to build on and enhance the progress that we made here last year.

    • @Peter Cassidy
      “The mistake that the UK made was failing to come up with an alternative. The obvious solution for the UK was to forge a CANZUK economic and political alliance with its former dominions.”

      Short answer – its Geography.

      Long, long time ago, in a galaxy far, far away *grin* –
      we had those alliances through the CHOGM, (Commonwealth Heads of Government) – with lots of trade deals between UK and all the other countries small, and large of the Commonwealth. Even those that became Republics still remained in the Commonwealth trading bloc and welcomed Lilibet (bless her!) with respectful pomp and pageantry.

      Indeed, it always made me smile, because the collapsing of the post-war Empire had some almost-friendly organised withdrawals — but also lots of bloody, violent, revolutions to evict the Colonisers …. but almost within days, or so it seemed, the ex-colonies and Brits were playing friendly cricket, football (ie soccer, rugby) sitting down in replicas of English stately country gardens with cups of tea, and swapping recipes for the Sunday roast 🙂 along with diplomatic gestures of ‘No Hard Feelings, Mate’ and making co-operative trade alliance deals.

      Just my own opinion, but I think this arrangement and the trade alliances between Commonwealth countries collapsed with the ‘free-trade’ globalisation in the 90s, coinciding with the rise of the WTO, the rise of China in Asia-Pacific including India moving further away from the West, and the FTA’s like NAFTA dominated by the USA, and Britain presumably went to forging closer ties with European zone.

      Geography, has become increasingly important as globalisation declines.

      And these days, without surplus cheap energy, freight shipping to-from countries like Australia & New Zealand to UK/Europe has become far too expensive, with too long, and complex a supply-chain, although Australia supports China’s ‘Belt-and-Road’ initiatives, (developing a modern version of the ‘Silk Road’) and our new government is bowing low, diplomatically, respectfully, reforging our diplomatic & trade ties with China with formal visits in recent times, and also our South Pacific island nations.

      This is because in recent years, Aus-NZ were hit hard by the US-China Trade Wars imposing punitive trade tariffs, sanctions on us, because we are US military Allies along with major cyber-hacking incidents during our elections, Chinese airplanes taking “prank” potshots at our Coast Guard etc. China also took opportunistic bribing, bullying of several of the South Pacific Island states, into enabling Chinese “security” forces & naval port privileges etc in the region. Previous govt just shrugged it off. First thing our new Aussie govt did, day after the election, was send our Foreign Minister (the delightful Penny Wong) touring and dealing to undercut China’s “activities” in the South Pacific. Followed by more formal Aus govt visits to China in the last 6 months.

      So, over time China and its neighbours has become our most important critical trading/economic partner, ahead of the US. Along with other Asian nations like India, Indonesia, Japan, Malaysia, Cambodia, Vietnam etc etc – UK/Europe affects us less and less over recent decades.

      We sailed through the 2008 GFC with only a “mild” recession because of it. Our banks were only mildly exposed to what was happening in the US and elsewhere. We got a ‘dip’ but had a ‘soft landing’. I suspect that our current govt is ‘hoping’ for the same again by continuing the policy of keeping our exposures to USA/UK and Europe to the absolute minimum.
      Our eyes are more firmly on China.

      Geography is becoming an important driver of most economic alliances now.
      Probably why Putin is trying to Divide-and-Conquer Europe.

    • @Neill61
      “I would like to take the opportunity to wish Dr. Tim and all forum participants a happy New Year. Normally I start the New Year charged with enthusiasm and optimism, but for some reason it’s not shown up this Year. Hopefully 2023 will be less bad than I anticipate.”

      *ditto* from me! I also follow climate news/opinion, as well as economics. I just finished a deep-dive into the climate news wrap-up for the ’22. It would appear that a broad consensus is that ’23 will be just as hot, or hotter than ’22, and affecting most of the same northern hemisphere regions as in ’22 again. Us richer countries can probably cope with the “losses and damages” (including fiscal ones) of individual climate events, but can we do it back-to-back, year after year, season after season? Let alone pay our “fair share” of losses & damages to the poor nations as agreed in-principle at COP 27. Could/should climate “losses & damages” be incorporated into future economic modelling?

      However Neil – if you want economic New Year ‘enthusiasm and optimism’ (especially for the USA), you might want to check this Bloomberg article. While the headline is dire, scroll to the bottom with the extracts of Wall St opinions:


    • The first point that I noted in the BB article was “humility is the order of the day for prognosticators who largely failed to predict the 2022 cost-of-living crisis and double-digit market losses”.

      This is true, but hard to fathom – deteriorating prosperity, the rising costs of necessities and the resulting “affordability compression” (as I call it) were surely obvious before 2022 even began.

      I didn’t, at least during a quick perusal, find references to continuing/worsening pressure on discretionaries, or deterioration in streams of income from households to the corporate and financial sectors.

    • @ Dr Tim,

      You subtitled this article “whatever happened to returns on Capital” My view is that we’ve entered an era where “return of capital” rather than “returns on capital” should be an investor’s priority. Sadly, many (if not most) investors are unlikely to achieve this objective. The consequences of that simple statement are enormous of course. It will shake the foundations of pension system for a start.

      Scanning the Bloomberg articles, even the most pessimistic commentators seem to have it sugar coated. Then again, it’s really not in the interest of investment banks to make the case for an era of negative returns on risk capital.

  17. https://www.bbc.co.uk/news/world-europe-64151166

    One of those discretionary sectors that will disappear.

    The article suggests that skiing will soon only be enjoyed by the very rich. Surprise surprise!!!!

    Snow cannons can’t be used because the water is needed to run the hydro power plants. Even more so, since Russia has turned off the gas!!!!!

    What will those communities do without a ski season? Thin out in population for starters I guess.
    Can mountain bike holidays, fill the gap?

    • This particular story seems to be weather/climate-related, but travel and tourism are obviously very exposed to the discretionary contraction that we understand here, but the mainstream does not.

      These industries are very important to some economies, so governments might consider subsidies, to the extent that this is affordable. But the future is pretty grim.

    • @Dr Tim

      Yes. It’s a double whammy of climate change and ECoE that is heading out way.

      If one doesn’t get you then the other will. Or both in tandem.

      Here in the UK it will be people heading from the city to the countryside as cities begin to malfunction. In a place like Switzerland, it will be people heading down the mountain as the local economy contracts.

    • John

      Finance will be the primary functional driver to the downside. Were we already in a conservative national socialist order then ECOE might be the primary driver for another handful of years or whatever before it reached its limits to degrowth, but since we’re in a finance capitalist global order there’s a lot less structural tolerance for Degrowth. So the monster financial dislocation brought about by the transition from FC to NS over the next several years will be the main show.
      Of course, the transition will continue to be masked by war until NS platforms are formally in power. CC is obviously operating in the longest timescale. To be sure, though, it’s a triple-whammy.

    • @reante.

      I’ve always thought of finance as a made up story. When it no longer fits reality, then we will create another fairytale.

      Climate change and a rising ECoE don’t come from the world of make-believe. They exist whether we want to believe them or not.

      So, I agree that the finance system will break first but for me tits of much less worry than climate change and ECoE.

    • Quite so John.

      The point about the fairy story of finance is, I think, borne out by these numbers, all of which relate to 2021.

      GDP was USD 97tn. End-of-year debt was USD 252tn. But we can only estimate broader financial liabilities, with data available for only about 85% of the world economy measured as GDP. This can be estimated at USD 593tn. These numbers overlap, meaning liabilities divide into USD 252tn of debt (which is regulated) and USD 341tn of other liabilities (which are not regulated, or even completely monitored).

      All of these numbers have grown rapidly since 2008-09. Since then, it has been impossible (and has been made unnecessary) to pay real (above-inflation) interest on them.

      Leaving the public sector out of it, private liabilities are about USD 516tn. Of this, USD 96tn is in the regulated sector of loans by banks. This leaves cUSD 420tn of other credit, which is neither monitored in full, nor regulated.

      The idea that this lot can be ‘honoured for value’ is a fairy story.

      ECoE and climate change, on the other hand, are real. The former is obvious – energy is never ‘free’ – and climate risk is recognized by virtually all scientific opinion.

    • John

      That was nicely put, about creating another fairytale.

      If that’s the way we’re going to frame finance — and I like it’s self-reliance — I suppose, then, we could say that ECoE, too, assuming we’re talking about the ‘free’ energy embedded in fossil fuels; I mean, I don’t know about you but I’ve never done anything to deserve having fossil fuels at my disposal. Which means that in holistic truth the cost is zero and always will be, no matter the price at the pump seeing as how they say that a gallon of fuel has the energy embedded in it of a grown man doing hard labor 9-5 for a year – what a fairytale; in that very real sense the cost of FF were zero before they were ever extracted, zero during the fairytale, and zero after the fairytale is over, when it’s back to reality.

      Which leaves only climate change.
      Which makes it a single whammy.
      And then there’s the negative ecological costs of the free energy fairytale, like spent fuel pools and reactors, and biodiversity collapse: the Ecological Cost of Energy or, Real ECoE, as opposed to the fairytale version.

    • @reante.

      Can’t quite follow your “cost of fossil fuels as being zero” line of thought.🤔

      To me finance/the economy are human constructs. They exist, because we collectively accept that they do.

      Climate change and a reduction in the availability of “excess” energy exist regardless of whether we believe in them or not. (Some don’t)

      If the financial system implodes, climate change and reductions in surplus energy will still exist.

    • @Dr Tim

      I’ve always had my suspicions about “finance”. Ever since I had a meeting with a financial advisor in the mid 80’s (on my sister’s instruction). The sales pitch was all very “double glazing”. I decided that I was never going to make it to a pensionable age and that age was going to get older and older. That, I would be too decrepit to enjoy the benefits of all that investment.
      Seems like my gamble will pay off, as pensions are in for a rough ride on the way down.

      Have a friend who has recently done the maths on his private pension. He has worked out that he won’t break even on his investment until he is 90🤣. He’s decided to stop paying into it🤣🤣🤣

    • @John Adams
      “..I’ve always had my suspicions about “finance”…. The sales pitch was all very “double glazing”. I decided that I was never going to make it to a pensionable age and that age was going to get older and older. That, I would be too decrepit to enjoy the benefits of all that investment.
      Seems like my gamble will pay off, as pensions are in for a rough ride on the way down…”

      On pensions, in the early 90s, Australia instituted cross-the-board mandatory retirement pension fund contributions (or ‘minimum compulsory savings’) for all wage/salary workers coupled with mandatory employer-based retirement fund contributions of 9% (minimum) of employee wage/salaries right down to minimum wage part-time casual by-the-hour employees. Private sector employers had their choice of the retirement fund to invest in, and the government also instituted fairly heavy regulation/vetting of all the investment funds. It was seen as a way of a) reducing Union led wage demands after the turbulent rolling strikes of the 70s/80s, particularly in blue-collar industries/sectors that historically did not provide retirement benefits – and b) reducing the potential welfare-state/social security burden of the ageing baby-boomer generation.

      My own kids were young teens at the time with the usual afterschool/weekend casual jobs, and were most upset at having 20c or so, taken out of their pay for their ‘retirement’. I told them don’t worry, your boss has to put in double or more of that, and it might actually be worth something when you are 70! *roll eyes*.

      During the 2008 GFC, the worst hit sector was the residential (nursing homes) and assisted-living Aged Care/Disability Service sector, (mixed public/private sector) which operated using the pension funds/life-savings of the wealthiest class of self-funded aged folks. They hand over their capital/retirement fund as a ‘bond’, and the service providers draw down the monthly rent/service costs, while using the bulk capital to invest for their operational funding as well as profits etc. These funds were the most exposed at the time, as an industry they had sought the most aggressive high-risk and international investment markets – and so they crashed very hard. And the government had to bail them out.
      With mandatory voting, and no FPTP (ie we use a preferential vote counting system) even the elderly demented have citizen’s obligation to vote LOL. Also led to the development of a huge impressive package of govt reforms in the Aged Care sector, inter alia, more government investment in the not-for-profits.

      Most other sectors, including commercial and investment banks and the more heavily regulated retirement pension funds, also dropped – but not disastrously so – as we didn’t have much in the way of sub-prime mortgages, currency speculation, or bundled derivatives (whatever they are? LOL) and most investment was in the relatively enormous mining commodity and FF export markets and Chinese/Asian trade, so the overall economy continued BAU, with some nasty bumps for some people, but a much smaller proportion of the population were ‘losers’ on the swings-and-roundabouts of the GFC.

      Perhaps that is also why our current fed government has announced a further set of reforms in Aged Care, disability and related welfare service sectors (except unemployment) – and securing the domestic FFs & energy sectors with pricing caps and mandatory reserves — they probably know the ‘signs and portents’ of the current international situation in UK/Europe and USA, and are trying to shore up the most exposed.

      Also the “affordability crunch”, we all are experiencing to a greater or lesser degree? May be why our government doesn’t want to increase cash benefits for unemployed. They must know increased unemployment is coming as businesses in discretionary spending sectors crash and burn, so have focussed on non-cash benefits – reducing subsidised prescription medicine prices, increased childcare subsidies for lowest paid workers (ie women), more Medicare benefits, subsidising removal/replacement of expensive FF household appliances etc etc.

      Will still all fall in the global dominoes of course, but perhaps slower than our northern hemisphere counterparts?

      My elderly Canadian aunt, (who got stuck in Oz during CoVID, but decided to stay on as an illegal, and is a very hardcore ‘doomer’) – It looked better to spend her last years in Oz, rather than going back to eastern Canada – as she is betting it might be one of the last industrialised nation-states to fall 🙂

    • John sorry it wasn’t better formulated and executed.

      Structural energetic surpluses are every bit as much a human construct as finance/economics. They’re equally as unnecessary as finance/economic. In fact they always go together; you can’t have one without the other. Finance is just bookkeeping for the surpluses and the field of polieconomics just represents

    • John

      Sorry I must’ve hit the post button by mistake.

      To finish the thought:

      …the field of political economics just represents the cultural form that the bookkeeping takes.

      It’s a good thing that surplus energy economics is an unnecessary cultural phenomenon, otherwise we’d be in real trouble.

    • Tim

      When I poach a sheep from a sheep station it’s essentially free energy to me, minus the inconsequential energy it takes to poach it, which is energy I’d be using otherwise anyway. When we poach FF from the earth it is the same thing. We’re stealing stored sunlight in order to reburn it, and the energy we put into the stealing was also stolen for free! 🙂 When a paper-pusher can drive to the fuel station to resteal stolen stored sunlight from the hardworking fauna and flora of the Past, he has exchanged ten minutes to an hour or two of pushing papers for a decade’s worth of hard manual labor. That’s essentially free by any measure of the word. There are externalized costs of course, but that’s another matter, and why I refer to the acquisition of FF as poaching and stealing, because doing so at scale robs the existing equilibrium from the biosphere.

      You quote fairytale bookkeeping numbers. Those fairytale numbers are based on the collateralizing of fairytale FF reserve estimates.

      If we’re playing the fairytale game then I must insist on its being a single whammy. All of civilization is the cumulative fairytale.

    • I’m with John on this. Surplus energy and the environment are material entities, whilst money and finance are human constructs for the management or mismanagement of these material realities. This is why I emphasise the practical distinction between the ‘real’ (or ‘material’) economy of energy, products and services and the ‘financial’ (or ‘proxy’) economy of money and credit.

      When you steal a sheep, you steal it from the farmer to whom it belongs. We could only ‘steal’ fossil fuels if we could postulate an owner who is being deprived.

  18. Tim, just as in 2008, most of the highly-paid “talking head” pundits are not independent voices. They are paid to push a line. The “ultra-cheap-money/ QE does not cause inflation” model suited many institutions just fine. Their tame experts were never going to rock the boat by calling that model into question……at least not in public. Behind closed doors, institutions are probably working overtime to reduce their exposure to the trends you have identified. They want to be through the exit door before there is a stampede.

    • I understand this, and the CEO of a US company familiar to me once asked an aide to sort analyst recommendations into buy and sell, ignoring neutral calls. More than 90% were positive. The reason for this seemed to have a lot to do with bond issuance commissions.

      This said, my own experience has been rather different. As an analyst, one’s reputation depends on integrity. Institutional clients aren’t idiots, and can work out whether an analyst’s argument makes sense. They don’t follow analyst recommendations blindly. One certainly doesn’t want to put one’s clients into losers, least of all the big ones, and those whom you know personally, and they certainly don’t keep quiet if you do.

      I can recall two significant instances of where my principles wouldn’t let me go along with the party line. In both instances I was allowed to say nothing, i.e. not promote the house line but not go openly against it either. In one, which obviously I won’t name, I wasn’t going to urge my own client contacts to buy something that I knew would fail (as it duly did). I did, after all, want to keep my clients!

    • Thanks for that EJ, I enjoyed hearing some of the positive climate mitigation/adaptation techniques being promoted by some, and the panels unpacking the blocking by finance & geopolitics. How do you make such things attractive to private (or public) sector capital investment for these things?

      And 1.5C – 2C targets? Dead. I also appreciated a panel commenter repeating the fact, that reported global warming temperatures, are exponential, not linear, in their expected impacts. Should have something similar to a Richter earthquake scale to indicate that the impacts rise 10x or whatever, for every one-tenth (0.1 C) of a degree rise.

      I also liked their conversation around taxation reforms to raise finance, (eg carbon taxes/offsets, loss and damages etc) as a possible financial ‘solution’, but pointing out all the problems, including that such schemes always hit the poor the hardest. eg Mouvement des gilets jaunes.

      My biggest takeaway was – that it’s just too late, not enough time for even the easiest, cheapest and most scientifically valid & effective mitigation solutions to be implemented.

    • I think Don’t Look Up captures Humanities predicament perfectly.

      All the answers to why we seem incapable of changing our trajectory are in the film.

    • @Rainsinger

      I thought it was a confused garble of buzzwords aimed at appeasing a plus ca change.
      They spoke of trillions in finance, but no handle on the realities of how energy functions, and devoid of any biological literacy. It’s no wonder that any attempts at implementing policies from such thinking meets strong resistance, and also why many folk are then inclined to dismiss the premise of climate breakdown as yet another scam to impose punitive measures on those that can least afford the plus ca change tech ‘solutions’, especially when the those offering the PR aren’t currently experiencing the same real-time degrowth themselves.

      Tim Jackson, came close with a nod to a shift in metrics and value systems, but other than that, it’s an utter mess, imho.

    • @EJ
      I filtered out a lot of the ‘white noise’ in those podcasts. I spent decades managing Secretariats for federal govt committees, stakeholder meetings, conferences etc so its become ingrained habit.

      In the BBC podcasts you posted – the panels were too large, and the BBC chair wasn’t very good at his job of leading discussion points.

      I thought several noted the energy base, not just Tim Jackson. And several had excellent science, biology etc but didn’t get a chance because the Chair was a poor discussion leader. The thing about the energy costs in climate mitigation strategies is that the energy investments are usually ‘one-off’ in their initiation phases . once established, natural geological and biological system processes can take their course without constant ongoing energy/resource inputs.

      Industry, corporates, govts don’t seem to like that idea. No ongoing returns on investments. No money to be made. So what little investment there is in addressing climate change, is in things like renewable energy tech, hi-tech ‘3d printing’ of meat, and the whole narrow focus on mitigating carbon emissions and nothing else.

      I also recall the “trillions” bandied about, but since there was no unpacking, I have no idea what’s included in that sort of ballpark figure.

      The Bangladeshi speaker pointed out that Bangladesh started major flood mitigation works in the 90s, and so spread it over decades and wanted to help Pakistan, India etc with their “lessons learned” … but no interest. He also briefly mentioned Oz’s red seaweed animal feed additive which blocks methane production in ruminant guts etc Science is solid, safe and 98% effective (hopefully going commercial scale, during 2023 with domestic Oz/NZ Ag authority approvals for commercialisation, but again, not much international interest).

      then linking lack of implementation to the lack of interest .firstly .. especially when the ideas, the science, the research, the papers comes from poor countries that rarely get a tokenised ‘observer’ seat at the table, let alone an actual ‘voice’ in multinational gatherings.

      so… lack of interest, (scientific or otherwise), which means lack of finance and investment etc.

      This has been going on for so long now, that my takeaway from the podcasts just confirmed my belief that it’s now too late. Not enough time left.

    • Thanks Rainsinger. The seaweed additive for the ruminant grain rations is a part of the white noise. Biological literacy would have us not do more of the same thing, in chasing complex mitigation strategies for negative externalities that got us into the problem in the first place, while expecting different results. Biological literacy would have us act sanely by not cheating biologically in feeding grain to grass eaters, so that they stop farting and belching almost completely, and return the animals to perennial, combined pasture/hayfields. It’s a can of worms besides;


      These people aren’t serious. They’re rearranging deck chairs for effect, on the orders of the captain, in order to model to a vapid intelligentsia a continued bargaining with reality. Keep calm and carry on bargaining.

    • ETA – Regardless of poor examples, or good ones -I think the Bangladeshi speaker’s point he was trying (and unsuccessfully) to make was more along the lines of:
      *we* had/have the science, the engineers, the geologists, biologists and workable ‘solutions’ for both small, and large scale, adaptation and mitigation strategies – maybe 20-30+ years ago – but we didn’t invest the time, effort, research etc, let alone finance, into any of it. Throwing money at it now is shutting the gate after the horse has long bolted.

      Almost a race to the bottom – a guess on which collapses hit first and hardest – climate disasters or financial/economic ones.

  19. Dave Pollard Reflects on the Nihilism of Liberalism
    Many of the comments on this site reflect that nihilism, I suggest.

    Two movies spring to mind. The first is an examination of the dead end of selfishness:

    *The second is the story of a drab bureaucrat who finds meaning:

    You will note the influence of Tolstoy, who remains ever relevant.

    I suggest that the nihilism that seems to many thoughtful people to be the dominant impulse of our times is actually not new. The stories written by Tolstoy in Russia and Marcel Pagnol in France both captured something which was translated into the two films which have, I believe, stood the test of time. An American film which might also be cited is The Devil and Daniel Webster.

    I suggest that in all cases it was not a new “vision” from the top, but concrete action locally, that broke the logjam.

    Don Stewart

    • the future after Tolstoy was 110 years of massive FF extraction.

      the next 110 years will indeed need much more “concrete action locally”.

      the opinions of today’s nihilists and denialists will be inconsequential.

  20. John Rubino…markets to fall into blind panic

    Lots of facts and trends which will be familiar to most of us here.
    Don Stewart
    PS. No more complaints from the Peanut Gallery about Adam Taggart only posting optimistic scenarios

    • @Don.
      Admittedly, I did only skim-listen to the discussion, but I did pick up on..’invest in real assets, such as agricultural land’,… and to segway to your point on…

      ‘ I suggest that in all cases it was not a new “vision” from the top, but concrete action locally, that broke the logjam’.

      Then it would appear logical that local communities should cooperate with each other, and collectives investment into Agroecological production in immediate localities, whilst building networks and bonds along the way.

    • @reante
      “..Being a hard worker –being able to be a hard worker — is the greatest asset we have where we’re headed, regardless of our personal circumstances…”

      And long-distance walker! LOL

      “…Then it would appear logical that local communities should cooperate with each other, and collectives investment into Agroecological production in immediate localities, whilst building networks and bonds along the way…”

      I suspect a more mobile life or even semi-nomadic. Indigenous First Nations folks in Oz which do still live a mostly traditional lifestyle on their own lands move around on a large Hub & Spoke model across large territories – where small ‘outstations’ run along the ‘spokes’. The central ‘Hub’ may have a few buildings – a rough ATV only track, a few even have an airstrip, but has some tech, eg radio, sat phone, satellite internet, small-scale electricity source, health care supplies, permanent water, maybe even a rough clearing for bushrules football, or open sheds for other ball games. If/when they do want access to modern healthcare services, radio comms to farther communities, educational centres, and spaces for large communal gatherings and trading with other communities, they even have small outback music festivals and outdoor film screenings in the jungle or desert. “Don’t you know they saw it? on a July afternoon, saw a man named Armstrong walk upon the Moon”.

      These guys, the Chooky Dancers went viral about 15 years ago.

      The reason these groups have not made permanent settlements – is because so many areas are marginal lands, not superfertile river valleys, farming wouldn’t last a single crop and food sources often run too low in such ‘marginal’ lands by the season or year …. so when they notice its becoming difficult, they move on to the next spot – often replanting seeds, using deadfall to landscape, checking lands, trees, insect colonies, water sources as they pass through if it needs a *nudge* with moderate burn-offs, replacing/relocating brush for birds, mammals and reptiles around ground dweller dens, using cuttings from trees etc before they leave, and also along the way to the next place to sit for awhile.

      With climate change continuing regardless of economies or industrialisation collapsing, I don’t think we will be able to rely on areas local or otherwise being able to support us on a permanent settlement basis. No sooner we start to get established, one really bad season from Nature’s fury could wipe out the lands we had just claimed – and would have to move anyway.

      And we can also go back to scavenging – we were scavengers before we were hunters in Africa, before making fire too. Following herds and their predators – waiting for the predators to finish their meal and move off before getting in amongst the leftovers, especially bones. Might catch a carrion bird or two as well. Break the bones and suck the bone marrow – very high calorie food source – one sucked shin bone can give an adult a day’s easy energy.

      Scavenging abandoned towns and cities – find an old overgrown backyard garden with onions, potatoes, carrots gone wild … collect seeds, for planting elsewhere. I saw a documentary recently, about the decline, and subsequent abandonment of the USA’s ‘Rust belt’ – and thought ‘Scavenger’s Eden’ 🙂

  21. Tim, thanks for your earlier comment. All I can say is that I have vivid memories of going to a meeting in midsummer 2008 where a very senior banker told me that two major UK banks (you can guess which ones!) were in terrifyingly bad financial shape. Indeed, said banker drew comfort from the fact that the competitor bank was even worse off than the one s/he was working for. There was not even a whisper of this in the financial press or among the well-heeled financial punditry…..although by then we had already had Northern Rock and Bear Stearns.

  22. @reante
    “…Biological literacy would have us act sanely by not cheating biologically in feeding grain to grass eaters, so that they stop farting and belching almost completely, and return the animals to perennial, combined pasture/hayfields….”

    Just to add – Australia/NZ don’t use grainlot production, our beef, dairy sheep, goats etc are all pasture-fed, hayfields etc additives go in the water. And it doesn’t prevent farting and belching, it just doesn’t form methane in the mix of the gases being farted and belched. I’m neither for, or against it, because its such a small-scale thing and it can be done manually on small-scale – it can be manually harvested from the sea, dried and scattered onto grasslands. Australian and sub-saharan african desert-dwelling indigenous peoples did it – and because – you are totally correct in that it wouldn’t make any difference because any reduction in methane from current agricultural practices wouldn’t do diddly squat 🙂

    The better example was flood mitigation in the Bangladesh riverine deltas, some engineering to begin with, but mostly decades of manual regional labour in building overflow channels.

    Same with permaculture and all those far, far better examples of agricultural reform – along with renewable energy sources – they can work well enough on a small-scale for small areas and small populations – but it can’t support large populations. Not enough suitable land to start with, and/or too much time needed for the long preparation.

    Speaking of carrying on bargaining LOL Its the same with that lovely video of an American farmer working for years to convert his lands with cattle and sheep and goats and chickens regenerating land in symbiotic relationships – I remember thinking one or two ‘Katrina’ style hurricanes, a megadrought reducing his once good annual rainfall to a desertified landscape, or the other extreme of long years of biblical flooding would destroy the lot.

    Not that either approach matters for us down-under this last few years!
    With the massive scale of flooding for 3 long years throughout the entire length and breadth of the Murray-Darling river basin, which followed on from the 19/20 ‘Black Summer’ fires. The constant flooding covers land area about the same size as the Mississippi basin, (with a chunk of the Colorado basin) – wiping out all the healthy organic permaculture symbiotic regenerated pasturage and acreage, along with everything else, including countless small and large towns (thousands are still living in tents and vans from ’21)…. whatever people like reante think, who just want to blame and shame and/or promote a different kind of presumably ecologically sound “bargaining”, instead of coming up with better ideas to share – because even smaller ecologically sound sustainable agricultural ideas on their smaller-scale will just go the same way as all the bad ones. That is, the good land use goes the same way as the degraded.

    And we still have several weeks, possibly months to go before the last of those walls of water reaches the sea at the river mouth. But the ‘clean-up’ has started in the north to work its way down the 1500 miles of river basin Removing mountains of flood debris, through the remains of stagnant ‘black-water’ toxic algae pools, ponds, lakes and newly formed billabongs and swampland (ie ‘ox-bow’ lakes). Armies of volunteers knee-deep in flooded wheat fields and pasturage as well as swathes of natural bushland, manually trying to save remaining fish which suffered heart-breaking mass fishkills along the entire basin.

    Apart from massive stock losses in the flooding itself, even the higher grounds became so deeply waterlogged that many of the remaining stock are ill, explosions of parasites, insects etc, with farmers mumbling on the TV about the exhaustion of having to move stock to higher ground 4 times in 6 weeks, as the multiple flood peaks went up and down, over and over and over again, and would you fancy some toxic weed contamination like deadly nightshade mixed in with your fresh green veggies?

    Even in my relatively high and dry high-altitude outer suburban neighbourhood with my own backyard veggie garden and healthy grass and insect feeding chickens and wild native birds, the rainfall was so heavy, for so long, I had to abandon it. I even lost two mature trees (40+ yr old), because their root bowls drowned.

    On the upside, however, heaps of native frogs have come back, (hopefully they will make a dent in the insect plagues) along with native reptiles – found big fat huge blue-tongue lizards in my yards for the first time in decades, very fat &well-fed critters – must be eating up all the mice and rats which also come along after such heavy prolonged rain.

    • rainsinger

      my sheep and goats rarely, rarely fart — if it does happen it’s usually forced out by a cough — and they belch only vary occasionally. My dairy goats belch the most, which happens every time they get on the milking stand and we have a cuddle, and then after a bit they belch in contentment which signals that it’s head in the stanchion time.

      I’m surprised to hear that all the sheep and goat milk in Australia and NZ is all grass no grain. Surely the cow milk isn’t.

      Sounds like you guys are having a hell of a time down there with CC. Sorry for your personal losses with the rain.

      We’re relatively well-situated here in western Oregon, USA. We’re up in the hills on very sandy soil which is a nice for drainage in the considerably wet season. Not a good combination for the 3-4 month seasonal drought every summer but I can’t complain even though a year-round grazing climate like Ohio or NZ would be awful nice.

      It’s not my intention to shame and blame as you say. I just calls em as I sees em and I don’t believe in half-measures or people who get paid way too much to run their worldly mouths and push their policy papers around instead of dropping the phony act and getting real and doing what needs to be done in order to meet the basic needs of our families to the best of our abilities.

    • @reante Pacific Northwest gorgeous, how lucky you are in possibly one of the best survivable pockets on Earth. I visited there on my one tourist trip of a lifetime in 2005. I fell in love with Oregon and Washington on a 10day road/camping trip.

      I grew up in that sort of lifestyle, last of 6 kids. Dad was half French Canadian, his mother native American. My mum English midlands village. We had milking goats, an old mare and a milker housecow, fruit and veg plots on a few acres, and chooks (chickens). Our goats stinky farted. A lot. Most of my baby photos are of me sharing my human-made glass baby bottles with one or other new kid. Came a cropper with trying the same thing with a newborn calf though. Mama cow didn’t want anyone near. I still have the scar where she horned me.

      We even hunted when we were really hardup for food, learned to shoot kangaroos, ducks with a rifle, do our butchering. We even did midnight raids of nearby sheep stations. Sheep stealing, hanging offence LOL

      I was told our soils are very different from northern hemisphere, different pH, different biota makeup etc and hence different grassland species and ecology. Maybe they fart different too. Why we can’t grow your most beautiful trees.

      You are probably right about NZ, particularly the South Island with its cold snowy winters they would have to barn feed.

      We pastured our critters all over the small outback town of maybe 150 people max, I used to joke that they added in all the horses cows and pet kangaroos to make the town look bigger on paper. .as well as having to lead them into the few thousand sq kms of surrounding scrubland. Dad told me if a kangaroo can eat there, so can the cows, sheep and goats. So me and my brother would go looking for patches of ‘roo poo and stake our critters on long ropes to do their munching. We handfed hay during droughts, but out on the big stations and dairy farms -it depends on the region, some dairy farms have several milking barns scattered all over their pasturages with chook barns, with lots of chooks underfoot which suits the twice-a-day to and fro for both species.

      Dropping hay bales and long portable water troughs in dryest seasons where you can check the herd for health or if they need vet meds/additives in the water or corralling them for drenching/spraying. Our biggest charity fundraiser for farmers in need is “buy-a-bale”.

      But for me, I thought of my childhood as just hard physical work with chores, chores, and more chores. I’d rather do math homework. So I did. I did well at school, and the little bush school library was my favourite hideout.

      I graduated high school and gained a place in Australia’s largest university, in Sydney. (Medical Science) The big city life blew me away. Cinemas, movies umpteen TV channels, ocean beaches, theatres, music, restaurants, farmers markets, and bookstores and library stacks that go on forever….everything push button, no more wood chopping for winter…yeeeharrr…
      Never went back to the land 🙂

      Though I did take a year or two to hitchhike and bum my way around Australia, working in fisheries. mining sites etc – even around Indonesia and a horrific month crewing on a deep-sea prawn trawler…. But back to University, jobs, marriage, kids etc .. and the rest is history as they say 🙂

    • rainsinger

      sounds like we switched places. 🙂 though you guys obviously had it harder than I have so far. you got a head start in life. I got friends around here that grew up like that in the Ozarks or Appalachia out East. Didn’t own a pair of shoes before they were ten, hunted all the way down to squirrel when they had to. To this day they never buy meat. Almost ended up in the Ozarks myself.

      I grew up in big cities chasing balls around. Didn’t stop doing that til I was in my early 30s. Had the opportunity to do that professionally in England where I was born but always had a wild streak and walked away from it because i didn’t want to be shuttled around the country and put on display despite my love for basketball. Then I grew up when I learned of our predicament. We bought forestland to convert to coppicewood pastures with the amazing Oregon yellow maple, and the physical workload is my replacement for working my body hard in sport, so I enjoy all the woodcutting that you were happy to be free-of.

      Being a hard worker –being able to be a hard worker — is the greatest asset we have where we’re headed, regardless of our personal circumstances. I don’t doubt given your upbringing that you are instilling that into your children. Second is a steadfast refusal to be taken advantage of while recognizing that there are occasional exceptions to that rule, because not all disadvantaged circumstances are foreseeable. Cultivating that refusal kills two birds with one stone because a willingness to stand your ground lays bare the foolishness of encroachment once the state cedes its authority over neighborhood affairs, due to inadequate surpluses. Having five siblings growing up with you as you all did theoretically houses a lot of potential. Cheers.

  23. Essential Viewing:

    Nate Hagens and Tom Murphy
    Is there any hope for civilization?

    • Yes, essential viewing.

      Nate summarized the discussion succinctly:

      1. What does a more sustainable future look like?
      2. How to get there from here?

      It seems to me that one of the results of the discussions in this place is a confident view of the likely future of fossil fuel use.

      Does this mean that as a result of the declining use of FF a day will come when the future looks less threatening?

      If so, maybe we don’t need to do anything.

      The natural evolution of things will save the world.

    • @reante:
      “Thus the only possible Degrowth Agenda is the non-public version. Consumer demand destruction managed by subterfuge early on in collapse, in order to stay ahead of supply collapse — as we’ve seen for three years now — and then an equally enlightened managerial flip to national socialisms and the prevention of the runaway effects of a cataclysmic global dieoff from famine (third world) and discontinued medical treatment of chronic disease (first world) caused by the financial collapse of global fascism.”

      May I quote you on that? 🙂
      A kind of logical, sane, reasonable ‘conspiracy theory’ I can actually accept 🙂

      I have been speculating about the necessary population crash(es) which must come. As an aside, my honours thesis was on population biology & evolutionary genetics, reproductive behaviours etc – comparing selected mammals canids, felids, primates and a minor side-tangent into flowering plants and insect populations. Ended up as a public service population data analyst.

      Just recently, a new ‘Population Report’ was published, and all the talking-heads are going on (and on) about the “problem” of lowering birth-rates, It was hilarious to me, seeing population projections extrapolated on graphs from the last 30 years to the next 30 – along with the famous Twitter post by Elon Musk saying the planet need lots more babies 🙂

      Chatting with one of my brothers, an engineer, who has really bought into the Kool-Aid fairytale of renewable energy infrastructure development, ‘industrial-technological’ revolutions from innovations etc to save us all. His vision of the future is so bright, he needs to wear shades!

      At one point he said something like ‘degrowth, reforming agriculture etc will never be able to support these billions – are you making the decision on who will die? I replied, no, but I’m betting that *somebody* will 🙂
      Just don’t know *how*, and that bugs me.

      So thanks very much again, reante, and drTim *et al*.

      I can now link the *how* to socio-economic forces
      as in “….Consumer demand destruction managed .. to stay ahead of supply collapse…” For the fewer, while the many are left for nature to play out as it will.

      China’s opening up and letting SARS-Cov-2 rip through the 60+ population will help nudge things along. Anti-Vaxxers always made me giggle too – a global experiment to kill us all.. blah, blah.. *roll eyes* – vaccines only went to the industrialised nations, in an attempt to save our slowly deteriorating public health systems from crashing too early in the decline. What no government or Chief Health Officers or the WHO etc, told anyone publicly (big public *shhhh*) was the biggest risk factor with CoVID after the senior age-groups, was obesity in the younger age-groups.

      Most Western industrialised countries have very high population rates of obesity and related chronic conditions like diabetes and general poor health and fitness. Big difference between mortality (death) rates and morbidity (serious illness) rates, and it was morbidity rates that were the underlying factors in decisions on lockdowns and vaccine mandates for ‘essential workers’, (especially all the fat ones) and even children – and even more so, in countries with more-or-less freely accessible public health systems.

      Also why those with free or cheap public health systems are often called “nanny states” with stronger regulation of medicine consumption, programs to stop smoking rates, improving healthy diet / exercise education especially in children. And if govts think trying to negotiate with FF industries is tough or impossible, try negotiating with the ‘junk food’ industries. As they say, you can’t negotiate with terrorists 🙂

      In short, they need to “stage-manage” the crashes, not prevent them.

    • “The natural evolution of things will save the world.”

      yes, the natural end of massive FF usage will reduce population sooner or later.

      meanwhile, CC makes weather patterns better in many places, and perhaps worse in others.

      to focus on economics, Russsia has just had an all time high record wheat harvest.

      in a longer view, a slight bump in global temperatures has likely ensured that there will be no next ice age anytime (relatively) soon, and this delays the devastating economic impact that the next ice age will have on humans. Imagine the impact on the Canadian economy, oops where did Canada go?

      this delay will be enormously beneficial to future generations.

      que sera sera.

    • Re: Ice Ages and Human control of Climate

      Albert describes the long struggle to get some of the Climate Scientists to recognize that humans began to influence the climate about the time we mastered fire. In Albert’s view, we do have tools which we can use to cool the Earth, as well as the warming we began to generate tens of thousands of years ago. You can get into those as much as you like.
      Don Stewart

    • Barry

      It was essential thinking. It’s good to see Nate and Tom accepting the radical nature of truth. The apocalyptic beauty of mature peak oil and collapse theories is that it unveils the whole truth to the fearless among us who continue venturing forward towards it. I was fortunate that my entry point into the collapse community was at The Automatic Earth blog during it’s heyday. As a greenhorn asking dumb questions, I watched the greatest minds of that commentariat work their way back to sussing-out the anti-civ truth over the course of a year. All led
      by Nicole Foss’ pure guidance.

      Of course, being anti-civ — anti- surplus energy economics — isn’t enough. A person has to be *for* something in order to really live. And that’s what animism is for, which is our universal anti-civ heritage. All ‘primitivism’ based itself in the intelligent patterning of cause and effect in the local ecology. It’s no surprise that primitivist philosophy is universally derided and framed by the establishment as the province of adolescent, rebellious, and idealistic anarchism; that is exactly the tack that an exploitative shadow psychology *would* take, along with the establishing of a deterministic ontological narrative for the rise of civilization, to which even noob anti-civ thinkers like Nate often fall prey. Given the human’s superdominant ability, civilization was inevitable to be sure, but Nate was wrong to ‘push back on Tom in advocating that that inevitability has any bearing on human nature beyond it obviously being evidence of the human *capacity* for structural selfishness. To take the (structural) metaconscious capacity for structural selfishness and institutionalize it as being an endemic social trait across the whole species is the very definition of religious thinking. Specifically, it’s the Judeo-Christian false narrative of the Fall, and we need to heal from that.

      Indeed, Barry, the royal we doesn’t need to do anything, about collapse. Shouldn’t do anything. The royal we doing stuff about collapse constitutes organized death panels by its very nature; picking winners and losers; genocide. The only thing that the elites should be doing, and for their own sakes as well as ours, is to decommission the most dangerous aspects of industrialism while they still can.

      But if the me we wants to be a part of the natural evolution as you put it, then we’ll find ourselves doing everything our subsistence requires, and the self-organizing under natural law will take care of itself.

  24. Tim

    “When you steal a sheep, you steal it from the farmer to whom it belongs. We could only ‘steal’ fossil fuels if we could postulate an owner who is being deprived.”

    When can do better than postulate, we can identify. That ownership would be the collective ownership under natural law, right? What today we call the Commons. The natural commons. Has privatization suffused our consciousness so thoroughly that we’ve forgotten that?

    Seeing the twin FF-driven climate change and sixth mass extinction is to see a definitional, epic robbing of the Commons right to exist. As I said before, when we burn the FF we steal the hard-earned equilibrium from the 4B year old dynamic equilibrium. I really don’t see why that should be such an abstract concept to a firm believer in CC. Stealing the biospheric balance is stealing relative stability of the future itself. To not see it as knowingly stealing for one’s own selfish purposes and at the direct expense of future generations is just another — an ethics-based — form of climate change denialism; it acknowledges that humans are forcing the climate change but it *implacably* denies that such a self-awareness of force is ‘illegal’ from an ethics standpoint.

    Climate change denialism includes the denial of personal responsibility. Just because we are imprisoned by current political law into a system that forces us into using FF doesn’t mean that natural law — the intelligent patterning of cause and effect — no longer applies such that we no longer know when we’re stealing.

    • In principle, I don’t disagree, but you will permit me to say that this is a philosophical rather than a practical way of looking at things. As things stand, though – with the world fracturing economically, financially, politically and intellectually – I believe that our emphasis has to be on the practical.

    • The reality of the degrowth agenda is that we are not talking about farming chickens and processing meat goats. A substantial portion of the herd is a fierce and territorial member of the apex predator species capable of resistance. The WEF modeling is great if you ignore their fantastic narratives on how to deal with “useless eaters” and a few “isolated pockets of self-sustaining community” that opt out of incentives, refuse to respond to behavior levers and flunk compliance tests to usher in digital transformation. Degrowth is going to require a more effective narrative along with eminent donain, state violence and cancel culture to force submission to the same elite that built the FF dependent apparatus. See Dutch Farmers, Ontario truckers. Based on the effectiveness of exaggerated modeling, media/narrative control and appeals to authority and collectivism to gain compliance with new “therapies” we don’t have the numbers for a transition. I would suggest the practical step would be to adopt some form of local/regional resilience network focusing on voluntary relationships, food security and mutual aid outside of the confines of centralized government. This is “the essier softer way” as they say in recovery circles.

    • Thanks Tim. It’s both philosophical and practical. Good philosophy is practical. Animism was our common human cultural heritage based in the pure practicality of Reason, which is the intelligent patterning of Cause and Effect. In privatization, we exploit (egregiously steal the independent right to exist) from the Commons, and to practical effect. Ancient stored sunlight is so powerful that when we get addicted to stealing its power the practical consequences are a sixth mass extinction and a climate dislocation.

      Practical philosophy aside, this conversation started with the practical suggestion that we include financial collapse to the list of converging crises because presently it is a very real and distinct dynamic operating concurrently with energy collapse, but soon to be in total collapse which will make the current rate of energy collapse look like child’s play. Finance is a fairytale but it’s also the ruling practical ‘philisophy’ of homo economicus.

  25. New year has provoked a bunch of reflections on 20thC life; I’m old enough to know that’s where I’m from too.
    Tim’s work shows us the way that money’s claims on energy play out across countries and economies; the resource wars we predict are with us now – the Donbas has gas and coal aplenty.

    But if we’re not just going to be abstract and philosophical, we need to shape our discussion to real futures. With this in mind I have been pondering three socioeconomic interventions, which might act as stimuli to discussions about the making of lower energy futures.

    Tim has proposed that car engine size might be limited to 1500cc (60kW). Personal transportation is an obvious target; this would allow people to live suburban lives, but limit speed and energy consumption generally, flagging up ‘limits to energy’.

    China tried limits to population with a one child policy; its surplus males remain a danger to peace. Indonesia has just proscribed sex outside marriage; arguably the whole wokeness debate arises from a collectively unconscious fear of overpopulation – sexually reproductive behaviours need to be limited. Western values have resulted in marriage failure and lower than sustaining reproduction rates. Rather than individual consent as our preoccupation, shouldn’t we focus on its effects? What about birth permits, wherein consenting potentially reproductive behaviours are sanctioned socially?

    As a final taster I’d propose a limit to pensions. Kwarteng’s September UK budget threatened the steady returns required to underwrite institutions’ ability to deliver pensions. Yet expectations of future pension commitments far exceed the capacity of an energy restricted future to provide them. I propose that the maximum defined benefit pension or annuity be limited to the average working income level. Why should people who enjoyed higher earnings in work be entitled to higher income in unproductive retirement? The retired are an enormous source of fossil fuel pollution through travel, health and other lifestyle expectations. Surely we should be limiting these in our imaginations of the future?

    These interventions are part of what I think of as a hierarchy of utility, wherein delayering and simplification can be stabilised at lower levels of energy consumption; allowing us to conceive of degrowth as an ordered process rather than a slide down a Seneca slope. The exponential growth imperative must be confronted after all.

    Anyway, Happy New Year!

    • Thanks, Jeremy, and a Happy New Year to you.

      Let me assure you that we’re not “going to be abstract and philosophical” in the future. My near-term plans include a comprehensive assessment of where we are in terms of the economy and finance – principles, methods, numbers, projections, implications. Our techniques and understanding have moved on, as have economic and financial conditions. The number of people visiting the site at least once has, again, increased markedly over the past year, so there are thousands of people who are quite new to what we do. I think we, no less than they, would benefit from a comprehensive statement of the state of play.

      I’ve long been in favour of limiting engine sizes. I would also mandate all-hybrid model ranges. Actually, a 1500cc maximum wouldn’t necessarily limit speeds very much – we can get plenty of power out of that size of engine. But the limit would indeed send a signal.

      Pensions, as a general topic, are a huge financial black hole. The WEF did a study in 2017 identifying, in a group of eight countries, a “pensions gap” of $67tn, at 2015 values, and predicting it will increase to over $400 tn, also at 2015 values, by 2050. I calculated that a person who had put 10% of his/her income into a pension in pre-GFC conditions would now need to invest c27% to have the same fund at retirement, and this isn’t feasible, least of all with the cost of living rising.

    • Jeremy

      The Degrowth Agenda can never be public policy. Degrowth as public policy is anathema to the civilizational bargain that trades away human freedom for protection and provision. To make public a degrowth agenda would have humans choose to further restrict their own freedoms for less protection and provision. Cultural anthropology makes clear that humans, like all other species, are Reason-based, and therefore all of their sensible decisions are based on a sober cost-benefit analysis (of cause and effect). Humans would never choose to have their freedoms further constrained under the auspices of public degrowth policy and in exchange for fewer protections and provisions because humans know that if the fewer protections and provisions are a structural necessity of degrowth/collapse, then reduced enforcement is also a structural necessity.

      Thus the only possible Degrowth Agenda is the non-public version. Consumer demand destruction managed by subterfuge early on in collapse, in order to stay ahead of supply collapse — as we’ve seen for three years now — and then an equally enlightened managerial flip to national socialisms and the prevention of the runaway effects of a cataclysmic global dieoff from famine (third world) and discontinued medical treatment of chronic disease (first world) caused by the financial collapse of global fascism.

      The elites know that when TSHTF they need to be good Taoists and go with the flow. There’s don’t fight the Fed and then there’s when pigs fly. They know they can’t fly.

  26. If I may deviate from blaming and shaming for a moment, I’d like too see Don’s essentially viewing and raise it with another, from a commercial shaman named Peter Sage:

    Okay now that the moment’s passed I have just two minor quibbles with the whole 18min talk, and the rest is perfect imo. First, he should be using the term subconscious instead of the term unconscious. But that’s a wing of the very fine house that Jung built that Peter’s living in. The unconscious is properly understood as the consciousness that inhabits the intelligent body. And the subconscious is the part of the mind out of which the conscious mind — properly called metaconsciousness — emerged, just as did the subconscious emerge out of the unconscious.

    The other quibble is his brief and allusion (and pregnant pause) to reincarnation, in choosing your parents. Uh, no lol. That’s him inhabiting the house of eastern religion.

    It’s a great motivational talk.

    Thanks for indulging me, Tim.

Comments are closed.