#255: The emerging ‘modified consensus’


As you may know, the interpretation long set out here is that the underlying ‘real’ or physical economy of products and services has deteriorated, via stagnation, into contraction. Partly because of a mistaken belief that monetary gimmickry can promote material expansion, a huge gulf now yawns between the ‘real economy’ and its ‘financial economy’ proxy. The financial system itself, understood as an aggregate stock of monetary ‘claims’ on the real economy of the future, is poised to fall into this chasm.

To understand this situation, we need to recognize the parallel existence of the ‘real’ and the ‘financial’ two economies, a concept which was examined at length in Life After Growth, first published in 2013.

A perennial question about this situation concerns how much ‘they’ – meaning decision-makers, or ‘the powers that be’ – know about these trends, as they are understood here.

A much better question, though, is ‘what would they do if they did understand it?’ The one thing of which we can be sure is that, if the situation was indeed understood, nobody in a position of authority could possibly come out and say so. To do this would be to precipitate a market crash, itself a prelude for the onset of generalised chaos.

In this situation, the only realistic course of action for the authorities would be a gradual retreat from over-sanguine assumptions around economic growth. They would need to manage expectations downwards, and this would require the crafting of a modified consensus. The authorities would not, and could not, say that economic growth has ceased, let alone that it has gone into reverse, and neither would any practical purpose be served by doing so. Instead, they would seek to steer expectations towards successively, but gradually, lower levels.

The view set out here is that this modified consensus has started to emerge. We need presuppose no conspiracy in this, or much in the way of co-ordination, because there’s no reason why different people and different institutions shouldn’t follow the same evidence to the same conclusions. For anyone in a position of authority or influence, the managed retreat labelled here ‘the modified consensus’ is the only practical form of response to economic deceleration.

Economic projections issued last month by the World Bank provide the first concrete evidence that just such a modified consensus is emerging. We might slot President Macron’s warning about “the end of abundance”, and Huw Pill’s highly controversial remarks about reduced prosperity, into this same trend.

Be that as it may, the astute observer needs to take early cognisance of this switch in perceptions, work out what it’s going to mean for expectations, and respond accordingly.

Anyone aspiring to a career in politics needs to start thinking about what happens when the existing reality of the rising cost of necessities collides with the soon-to-be-admitted fact of economic deceleration. For business leaders and investors, this would be a very bad time indeed to put capital into anything that presupposes resilience – let alone future growth – in households’ discretionary consumption.

Of logic and evidence

Those of us who understand the economy as an energy system rather than a financial one can advance two types of argument in support of the interpretation that prior growth in prosperity has been trending towards reversal as the fossil fuel dynamic winds down.

The first of these is the logic which connects the supply, value and cost of energy with prosperity in the form of material products and services. But logic can be a surprisingly hard sell, particularly where its conclusions are unwelcome. The generality of opinion is not about to be swayed by mere logic away from its insistence that control of money will enable us to enjoy ‘infinite growth on a finite planet’.

But the second category of argument – evidential observation – is a very different matter, and much harder to disregard. The Surplus Energy Economics view, evidenced in abundant statistics, is that we have been going to ever-greater extremes to fake ‘growth as usual’ over a very long period. Ever since the 1990s, we’ve been buying each dollar of reported economic “growth” with $3 of net new debt, supplemented, in recent years, by a rapid expansion in the aggregate of non-bank credit. Since the global financial crisis (GFC) of 2008-09, we’ve also been using extraordinary forms of monetary gimmickry to sustain a simulacrum of continuing expansion.

All gimmickry has its limits, and this legerdemain has now collided with reality in the form of two wholly predictable outcomes. The first of these is the resurgence of inflation, and the second is the emergence of extreme and worsening risk in the banking and broader financial system.

From evidence to modification

In short, the observational evidence in support of economic deceleration has become unanswerable. If the authorities sustain their commitment to monetary tightening, the consequences can be expected to include both a banking crisis and a severe recession. If, conversely, they revert to the easy money conditions of the recent past, runaway inflation beckons. If they are more fearful of the latter than of the former, their conclusion would be hard to fault, though their determination might be hard to sustain.

As we have noted, the authorities couldn’t possibly state publicly that the previous orthodoxy of robust growth in perpetuity has turned out to be fallacious. Their only recourse would be to managing expectations through gradual reductions in their forward guidance about economic prospects. In short, they would set to work on crafting a modified consensus.

It’s not too much of a stretch to perceive the first signs of just such a modified consensus emerging in the reassessment of economic prospects issued by the World Bank during its recent biannual conference with the IMF. This document repays study, and can be found here.

Essentially, the World Bank states that global growth capability, having fallen from 3.5% between 2000 and 2010 to 2.6% between 2011 and 2021, may now decline further, to 2.2%, during the remainder of the 2020s.

Moreover, the wording here is instructive – 2.2% references “potential” growth, and, says the Bank, the out-turn could be even worse “if financial crises erupt in major economies and, especially, if they trigger a global recession”. Many observers, perhaps even a majority of them by now, presumably recognise that both a financial crisis and a recession are likelier to happen than not.

The not unreasonable inference, then, is that global economic growth will be less than 2.2% between now and 2030.

Neither the World Bank nor any other institution in a position of authority is likely to make (or acknowledge) the connection between economic deceleration and energy deterioration, as those connections are routinely described here. Moreover, they do not need to do so, and the decline in growth can instead be explained by reference to conventional factors such as ageing demographics, weaker-than-expected international trade and investment, and the worsening consequences of environmental change.

All they need to do – for now, anyway – is to steer growth expectations downwards. There’s plenty of time between now and 2030 to introduce further caution into their guidance.

The emergence of a less sanguine ‘modified consensus’ has far-reaching implications. It counsels that governments’ resources in the future are likely to be lower than has hitherto been supposed. It has stark implications, too, for the affordability of discretionary (non-essential) consumption by households. It also, incidentally, feeds through into lower expectations of the energy likely to be needed by the economy in the future.

Scenario analysis

The emergence of a modified consensus takes us into territory familiar to planners in the spheres of government and business. Typically, scenario planning sets out three forward cases, combining the expected or ‘central’ case with higher and lower alternatives. This technique allows planners to apply sensitivity analysis to deviations from their central set of projections. I propose to do some of this here, using three distinct scenarios.

The ‘high case’ in this exercise is the former consensus, which assumes trend annual world economic growth of 3.5%.

The ‘central case’ is the modified consensus, where I’ve taken the liberty of assuming that ‘2.2%, if nothing goes wrong’ equates to ‘1.8%, if quite a lot does’.

The low third case is, of course, the prosperity trajectory projected by the SEEDS economic model.

The assumptions used in each of the three case-studies are summarised in Fig.1. The tables show annual percentage rates of growth, plus GDP aggregates stated in constant dollars at 2022 values.

As you can see, the cumulative differences between the ‘consensus’ and ‘modified consensus’ case-studies are sizeable – by 2030, overall growth from the 2022 baseline falls from almost 32% on the former basis to less than 15% on the latter. At a projected $191 trillion (at constant 2022 values), global GDP in 2030 is 11% lower on the modified consensus case than on the consensus basis ($215tn).

Fig. 1

Additionally, it remains the consensus assumption that global population numbers will continue to rise, albeit at decelerating rates. With this taken into account, economic output per capita is projected to be 23% higher in 2030 than in 2022 on the consensus case, but this projected improvement falls to only 9.4% on the modified consensus analysis. Per capita equivalents of the aggregates are set out in Fig. 2, in which you will also see that SEEDS analysis puts per capita prosperity 8.5% lower in 2030 than it was in 2022.

Fig. 2

Broad implications

It will readily be apparent that a reduction in forward growth expectations has profound consequences, of which three are of primary significance.

First, we – and the authorities – know that the real costs of household essentials have been rising rapidly. An optimistic view might be that the rate of increase in the costs of necessities might slow, though monetary tightening exerts comparatively little pressure on products and services which consumers have to purchase.

But it would be extremely fanciful to suppose that any of the recent inflation in the cost of essentials might be reversed. Housing might, perhaps, become cheaper than it is now, but this isn’t going to happen to the costs of food, water, energy, transport or any other household necessity.

Our concept of the ‘real’ and ‘financial’ economies informs a specific interpretation of varying household experiences. Those whose fortunes are tied to the financial economy have fared pretty well during the ‘easy money’ era, whilst those whose incomes and costs are tied to the material economy have suffered worsening conditions. This goes a long way towards explaining the apparent dichotomy which is reflected in islands of affluence within a widening ocean of hardship.

Economic deceleration, taken in conjunction with continuing rises in the cost of living, suggest that popular demands for help will only increase. At the same time, though, government resources are going to be undermined by lower-than-expected economic growth. A global growth trend of between 1.8% and 2.2%, sharply lower than the previously-assumed 3.5%, means that some economies can anticipate no growth at all, whilst others might start to experience contraction.

What, then, can resource-constrained governments do about expenditure commitments? Public spending falls into two categories – the provision of services, and the enactment of transfers (such as pensions and benefits) in support of the less well-off members of society. It’s axiomatic that, as economic hardship worsens, the need for transfers increases, and so do the demands placed on public services.

This implies that two political pressures will arise – growing demands for redistribution, and an increasing need both to boost efficiency and to tighten priorities in the delivery of public services. States may feel compelled, not just to ask for larger contributions from the affluent, but also to take some necessary services into public ownership. The political battleground of the future might take on some of the characteristics of the past debate between ‘collectivist’ redistribution and ‘liberal’ preferences for lower taxation and a minimised state.

Second, the combination of lower-than-expected growth and rises in the cost of essentials implies significant contraction in sectors supplying non-essential products and services to consumers. This is an issue that needs to be watched, and might soon start to be reflected in expectations for, the activities of, and the market valuations applied to businesses operating in consumer discretionary sectors.

Thirdly, of course, even a deceleration in growth, by conflicting with prior expectations, can be expected to increase stresses in the financial system. This is a topic that we’ve addressed before, and that we might revisit, just as we might look further into the political and business consequences of affordability compression.

Extended scenarios

The charts set out in Fig. 3 carry global scenario analysis forward to 2040, and set out the equivalents for the United States, the United Kingdom and China. If the early forecast period for the British economy looks a little odd, it’s because nobody expects much in the way of growth in the near term.

In carrying the modified consensus forward, the assumption is made that the projected rate of global growth is revised downwards again by 2030, this time falling from 1.8% to 1.4%. By the 2030s, of course, the SEEDS trajectory has become decisively negative.

Even on the ‘modified consensus’ scenario, though, the world economy is likely to be almost 30% smaller by 2040 than it would have been on the prior-consensus basis.

As remarked earlier, the outlook for government and businesses are issues to which we can, and perhaps should, return.

For now, though, we can conclude that expectations are critical to behaviour, not least in government and in the capital markets. If we are indeed witnessing the emergence of a ‘modified consensus’, there is a compelling need to anticipate the way in which expectations are likely to be steered in the near future.

Fig. 3

88 thoughts on “#255: The emerging ‘modified consensus’

  1. The members of the political class and professional bureaucrats realize that speaking truthfully of the predicament we face in terms of the rising costs and availability of energy (and resulting economic contraction) has historically been the “third-rail” of politics. Touch it, and you get electrocuted. Avoid the truth. Tell the voters what they “want” to hear has been a safer approach to keeping their station in life.

    In short, the hope that things will improve must not be crushed.

    The modified consensus emerging is the painful admission that the public is now ready to accept lowered expectations, though I think we’re well past that point anyway. Many are waking up to the reality that their standard of living is declining, and the “recession” being experienced isn’t turning around. The path of rapid changes in culture, standard of living, economics, politics and so on seem to be accelerating.

    Dr. Morgan, the economic output plots you’ve provided above are excellent illustrations of the gap between reality and expectations, and reflect the differences in the “real” material economy and the “artificial” monetary gimmickry economy. It remains to be seen if this gap can be closed slowly through a “soft landing” and mitigation, or if the gap is closed much more quickly via an economic crash and widespread suffering. Let’s hope we can get some “adults in the room” soon, ’cause it’s looking more bleak now.

  2. I am unsure what proportion of pensions and benefits support the poor, and what proportion support relatively affluent, and rather long lived, public-sector index linked pensioners such as my wife and I.
    I do know that disability payments for adults must increase – if for nothing else due to the astonishingly steep and continued rise of Autism, which now affects about one in 40 boys, many of whom will never work.

    • With some benefits, it would, apparently, cost more to try to target them than paying them to everyone who qualifies.

      In this article, and apart from including one chart and a passing comment, I avoided referring to the UK, or any other national economy. However, if global “growth” is going to fall from 3.5%/2.6% to 1.8% or thereabouts, the UK number is likely to be negative, even though that’s not how I chose show it here.

  3. A major war would give governments the excuse to implement a “temporary “ rationing scheme.
    Something to consider.

    • Indeed so.

      In this article, it seemed imperative to concentrate on the emergence of the ‘modified consensus’. It’s profoundly important, I think, for governments, businesses and investors, and to the best of my knowledge, though I can’t of course be sure, the concept of a down-trending consensus hasn’t been picked up elsewhere.

  4. There seem to be different ongoing overshoot issues with different timeframes. Rising ECoE, environmental degradation, phosphorus depletion and many others. Of those ECoE seems to be the most pressing one, from a completely egotistical human standpoint, that is.

    I guess it’s a good thing media and politicians are respectively spreading climate awareness and introducing regulation, as the solutions to it will also soften the blow of the consequences of the energy cliff.

    • creating a cult of climate is not a solution, its in fact just as or more dangerous than the reality.

    • There’s nothing wrong with a cult of climate in principle, since the climate measures will alleviate the impact of rising ECoE. Of course it can be used as a power grab by TPTB with malicious intentions.

      I am trying to be matter-of-fact. For the record I fully believe they don’t have our best interests in mind and I see some concerning trends. Especially MSM being such blatant propaganda to the point it often makes me burst in laughter.

      Also for the record I see nothing wrong with a *just a little* increase in authoritarianism as conditions worsen. Do revolutions really bring better outcomes that often?

    • If the increasing Energy cost of Energy is a major factor in reducing living standards, then the Cult of Climate will put rocket boosters into this as it is radically increasing the cost of energy through requiring an entire parallel infrastructure to be built alongside the toys that are the so-called renewables – in practice these are hugely expensive pieces of virtue signalling that are practically useless as a reliable source of energy.

    • problem is it seems to be a power grab by asian powers who have helped to convince the west that they reduce conentrated energy usage while it frees it up for asian powers… this can lead to eventual subjugation by the asian powers of the west… even slavery… there are some definite ramifications to viewing the world through the lens of those looking to hoard fossil fuels

  5. Science of Emotions; New Consensus; SEEDS alternative
    The reaction of individuals and groups of people and the public at large will be expressed in terms of emotions. Emotions are created by the brain when it tries to put its experiences (input from the outside world and also interoception from the body) into some predicted environment. For a quick primer on how this happens and what some of the implications are, check the current Twitter posts from Lisa Feldman Barrett.

    An unanswered question: Can propaganda or group-think or wishful thinking change the experience that the brain is receiving? If so, we can expect concerted efforts to “control the narrative”.

    Don Stewart

    • The left is told the story of climate. The right is told the story of the left preventing fuel exploitation.

      Both sides are delusional and angry; it is not a solution; it is a problem

  6. Perhaps Global Warming, now Climate Change, decarbonization initiatives are TPTB’s way to make us feel good, virtue signaling our efforts to power down, rather than to crash markets by acknowledging the energy predicament.

    • Ultra rich people, who do everything in their power to remove themselves from the commoners, would never ever have any plans that they wouldn’t tell the commoners. They love us, class was obliterated ages ago and anyone who says different is a white nationalist racist misogynist who hates everything and just wants to destroy the world.

    • This has been obvious for a while. What has arisen is a cult of climate however where even some people who many would assert should know better believe the religion hook line and sinker.

    • @Mr. House

      I know our host fights tooth and nail to not assert the various string pullers in the world never collude in their strategy and tactics, but it is quite obvious they do. One need only to look at the released (leaked) video from the FDIC a while back where they tell you how they plan to control the narrative. This acting as if conspiracy theories, or as I call them, theories, are somehow beneath educated people needs to stop its nonsense on its surface and below. People with similar interests always talk, always plan. There is nothing weird about saying certain forces collude.

    • I would state my position rather differently! I’m not denying collusion, or conspiracies, or even that these conspiracies sometimes succeed.

      Here’s the thing. I so often hear that the economy, and the worsening hardship being experienced by increasing numbers of people, wouldn’t be problems if it wasn’t for conspiracies X, Y or Z.

      That’s not the case. Even if everyone ‘played it straight’, the economy would still be contracting, and we would still have no plan for coping with it. The issues are a deteriorating energy dynamic, the lack of a complete replacement for fossil fuels, a mistaken economic orthodoxy and a bloated financial system inflated on the basis that ‘the monetary can fix the material’

      I believe we need to concentrate 100% on the fundamentals.

    • @Dr Tim.

      I agree with you (and Chomsky) regarding conspiracy theories.

      I’m not sure that going down rabbit holes looking for the “truth” is very constructive.
      If there are cabals running the show, then little old me, isn’t going to know about it.

      I’d rather work with what is known than what is speculated.

      And as you say, the fundamentals of energy decline trumps it all anyway.

    • Thanks John. As I see it, what are the alternatives here? We can concentrate on fundamentals, or we can have an open season for conspiracy theories, generating an enormous amount of heat, but very little light.

      The powers that be must love conspiracy theories, acting as great distractions from what’s really going on.

    • “I agree with you (and Chomsky) regarding conspiracy theories.”

      Oh yeah that bastion of liberal thinking who went full nazi during the “pandemic” and now we also find out was buddy buddy with epstein? Who better to tell you what is and isn’t a conspiracy theory.

    • @drtim
      fair enough… I do find myself pushing back against the various theories when energy contraction pretty neatly explains most things going on. A lot of people think that everything has fraud underlying while the reality is more likely fraud lying on top. But i have taken to calling them theories not ‘conspiracy theories’ because conspiracy theories is a term used for cover imo

    • @Mr House

      ““I agree with you (and Chomsky) regarding conspiracy theories.”

      Oh yeah that bastion of liberal thinking who went full nazi during the “pandemic” and now we also find out was buddy buddy with epstein? Who better to tell you what is and isn’t a conspiracy theory.”

      Who, Dr Tim or Chomsky????🤔

      Play the ball not the man.

      Not that that sporting analogy works with the American variety of football 🏈🤣!!!

    • Thanks John.

      “Play the ball not the man” is the principle here, and I was considering removing the comment, for that reason and also because covid is off-limits here for reasons that, I think, most people understand.

    • “Play the ball not the man.”

      I’ve always thought this is one of the dumbest sayings. The game was made by men, the rules were made by men, it is upheld by men. It’s all fair game, and if you haven’t realized that yet, you haven’t been paying attention. Noam is not probably what you think he is, just like we learn more and more often these days. But anyone who advocated for people to be excluded from society because they would not accept a mystery jab (does anybody know what the ingredients are yet?) does not strike me as liberal or openminded.

    • On the contrary, the aim here, as I see it, is to work out what economic and broader conditions actually are, rather than what anyone opines that they are. The realities of energy supply, ECoE, financial overstretch and so on are not changed by what anyone says about them.

      You wouldn’t expect me to alter SEEDS methodology because of anything said by a president or a prime minister, so why would we be interested in what they, or anyone else, has to say about it? The only views that I take seriously are those of, for example, the World Bank, the IMF and so on, and these opinions only matter in that they influence consensus expectations.

    • In fact Dr. Morgan i’m not sure what the aim is. Most of the people who comment here have been well aware of what you’re saying long before you started this blog or they came across it. Its been quite clear since 2008. So what do you accomplish by preaching to the choir?

    • Easy one, though I don’t for one moment accept your description.

      First, we’ve maintained and widened a reasoned debate on the fundamentals of the economy, not distracted by conspiracy theories and off-topic issues. Well over 80,000 different people worldwide visited this site at least once last year.

      Second, the technical tools that I use here have expanded very markedly – essentials, PXE, RRCI, harmonised analysis, and so on – and the inputs of readers have been extremely helpful.

    • As I’m sure you know, the pandemic is off-limits here, so we can concentrate on economic fundamentals. But the economics of this article don’t add up. The global financial system was at grave risk in late 2019? Yes, but it’s at even greater risk now. The plan was to direct QE money to households and businesses without triggering inflation? That’s a contradiction in terms – in fact, pushing more demand into the system whilst engineering a decrease in supply is the combination best calculated to drive inflation upwards.

    • So people who were on unemployment in 2020 who were making 50k a year is not a direct injection? What was the US deficit in 2020 Dr. Morgan? Sending out money to companies as grants is not a direct injection? Why are you willfully ignoring these things?

    • “The plan was to direct QE money to households and businesses without triggering inflation? That’s a contradiction in terms – in fact, pushing more demand into the system whilst engineering a decrease in supply is the combination best calculated to drive inflation upwards.”

      And how did the author state they avoided hyperinflation while doing that? Again you are ignoring a large part of his argument.

  7. I can cope mentally with the two economies discussed here. I can’t cope with three if the “modified consensus” is added.

    Would you then explain your views as “Of course, I don’t believe these figures”?

    I’m not sure what you are seeking. Do you want to gain the support of the financial people?

    If the penny is beginning to drop, I think it would be better to watch it drop and maintain your “promotion” of the real economy.

    I expect an increasing number of people will understand this and be ready to support it openly when they find that their friends agree. The shrinking economy is already accepted by many and talked about openly.

    • Don’t worry, I’m quite content with two economies, and we have no need for a third!

      Rather, this is about expectations, and exactly, as you put it, about “the penny beginning to drop”. Expectations do not determine outcomes, but they do shape perceptions and decisions.

  8. Ok Dr. Morgan, you’ve finally convinced me due to the strength of your argument “its not a conspiracy”. But one little thing bothers me, why was the 2008 GFC handled the way it was if you are correct?

    • What I’ve actually suggested is that we don’t need to see a conspiracy in the managed downgrading of expectations for which I’ve chosen the label ‘modified consensus’. It’s the only way in which ‘the powers that be’ could react to the discovery that the prior assumption of ‘growth in perpetuity’ has turned out to be mistaken.

      Many of us have long argued that the scope for growth is limited by material constraints. This has always been dismissed by the orthodoxy. Evidence is now demonstrating, even to those hardest to persuade, that the orthodox assurance of perpetual growth is becoming untenable. They cannot, even if they understand this, come out and say so. Managing expectations downwards is the only option on the table.

      I believe it’s important to – in market parlance – try to ‘call the moment at which expectations start to shift’. This has far-reaching implications in everything from politics to investment.

    • Managing expectations downwards is the only option on the table.

      If only this were true!

      I expect an extreme counter-narrative to the ‘modified consensus’ will dominate expectations, at least in the US. We’ve seen it before, as in “make America great again” and “morning in America” and “the American way of life is not negotiable”. American politicians will pander to fantasies of ever greater prosperity, at least for “our people” if not “those people”.

      Since this counter-narrative will have no basis in reality, a great deal of frustration, anger and political antagonism is likely to develop. The narrative will involve an ‘evil cabal’ (our political opponents) holding us back from our righteous and glorious path to ever greater prosperity.

      Prosperity has actually been drifting down for some time, as you often point out, but when economic recession starts to really accelerate, a caste war won’t be far behind. Managing expectations will likely be supplanted by managing populations with armed force.

    • As I see it, Joe, I’m trying to call the turn in informed opinion, one that, moreover, market sentiment is likely to follow. This is where economists and institutions start to perceive the need to scale back expectations.

      I don’t for one moment expect politicians to accept this, though trying to buck the trend in informed opinion seldom gets them very far – there was a ‘make Britain great again’ moment back in September, and we know how that turned out.

      It’s worth adding that these trends aren’t going to leave the media, and therefore the popular dialogue, unchanged.

      SEEDS has, indeed, identified the long deterioration in average prosperity per capita in the US, but this has been comparatively gradual, and unevenly distributed. We’re getting into different (though predicted) territory now, with (a) inflation calling time on palliative gimmickry, (b) the costs of necessities rising, and (c) financial sector risk ratcheting upwards.

  9. Bullseye! Yet again you express and clarify the half-formed ideas swirling around in my head. It occurs to me to wonder about the mental health of politicians, treasury officials and central bankers.
    For any one individual, there seems to be three broad options:

    (a) Delusional: they still genuinely believe in endless GDP growth, green or otherwise, leading to the glossy mag lifestyle for all;

    (b) Sociopathic: they are aware that we are flouting planetary boundaries – but are utterly cynical, and happy to do so in order to maintain their own wealth and status;

    (c) At Risk: they are aware of resource limitation issues but feel obliged to maintain an optimistic public persona or they’ll get voted out. But when alone and being honest, they are deeply conflicted.

    It’s seriously concerning that decent people find themselves in option (c), and therefore don’t last long in power. That leaves the way open for (a) and (b).

    • That is a good split for the archetypes of our leaders.

      My current thinking is to treat the leaders as if they were drug addicts (though they are in denial) and approach them in a way that slowly weens them off the wagon. Perhaps the “modified consensus “ sensitivity is just enough on the edge of their vision that it can at least start the conversation

  10. In general I am broadly in line with your thinking.

    Ever since the 1990s, we’ve been buying each dollar of reported economic “growth” with $3 of net new debt

    Sums up the fallacious decoupling of GDP from energy use and is the perpetuation of Keynesian madness (he had no children).

    I really think demographics; birth dearth and immigration should be recognised as a greater factor in stagnation of economies and the attempts to prop them up.

  11. Thanks Tim.

    I’ll try again to present my case to the leader of my company (a national planning body of some significance) on how we need to add a strong downside additional sensitivity. I need to keep up consistency with this argument and not worry too much about being seen as “radical”. Everyone in my company I ever try and talk about EROI etc are definitely operating under a different paradigm making it hard to build up a consensus. Labeling it as a “sensitivity” could give me some wiggle room as it won’t disrupt their “well consulted” (ie bland and pro growth) scenarios. Lining up with people in other agencies seems the sensible route for having a contingency network of energy descent risk planning.

    Just reflecting on that tension you mentioned between rate rises as a recessionary driver vs printing money as an inflationary driver reminded me of the tension between the modern state and the modern market that Karl Polanyi called the Market Society with its fictitious commodities as land, labour and money.

    Polanyi argues that once the free market attempts to separate itself from the fabric of society, social protectionism is society’s natural response, which he calls the “double movement.”

    Polaanyi reckoned that there are three general types of economic systems that existed before the rise of a society based on a free market economy: redistributive, reciprocity and householding.

    I’m already seeing aspects of these three systems again (eg homesteaders, repair cafes, local food movements).

    However once a critical mass of people begin to lose faith in the state and market, we would see more though of course not necessarily by choice nor as organized

  12. “Housing might, perhaps, become cheaper than it is now …”

    Remember, the cost of housing has two components: the site value and the cost of the structures and other improvements on the site. The latter will likely follow the the costs of food, water, energy and transport, while the former is also influenced by population size (and, therefore, immigration) and “planning/zoning decisions” that can generate windfall increases (rarely decreases, but HS2 shows they do occur).

    Much economic activity revolves around positioning and leveraging to maximise windfall profits, or other wealth transfers that do not require direct energy inputs.

  13. “… the enactment of transfers (such as pensions and benefits) in support of the less well-off members of society …”
    Don’t ignore the squishy area of transfers in support of well-off members of society. A poor person in the UK is paying VAT that will go into consolidated revenue and pay age pensions of people far wealthier than they are. Australia has a means-tested age pension that works well and is not controversial.

    • That is only because of our superanniation system which delays pension access for a lot of people.

      I think our superannuation system is about the best in the world in terms of reducing access to government transfer payments for people who do not really need them.
      People who own their own home can live reasonably OK on a pension if they have good frugality habits. I see retired couples regularly checking out the local thrift shop for all sorts of non-essential options like furniture, clothing, second hand appliances etc. People on a pension who are paying rent as well are way more stressed on a day to day basis.

  14. Dear Tim,

    Thank you for your most interesting comment.

    Here is one vision of the future that TPTB in Washington, D.C. may be envisioning and that I encourage you to read: « The End of the World is Just the Beginning » by Peter Zeihan.

    Best regards,


  15. This analysis is most-usefully laid out as a public service to working and aspiring politicians.
    I am hopeful that Bobby Kennedy Jr. reads it, and hopeful that his new economic-advisor, Ed Dowd (former BlackRock asset manager) reads it, also.
    Bobby is sincere, intelligent, and is working to raise difficult issues. Media is not interested in letting him do so, not at all.

  16. Simon Michaux and Nate Hagen’s

    The new paradigms which will be necessary to survive in the new environment. Please note at 21 minutes how Simon is using ideas from BioMimicry to help visualize how the new economy and society might function.

    My gloss on the biomimicry angle is that nobody tells the jungle how to regenerate. The minor players who were ignored in the old paradigm, but who have the ability to survive in the new paradigm, come to rule the jungle simply by selection processes. But a centralized government intent on maintaining the status quo can make everything a lot harder.

    Don Stewart

  17. “modified consensus”

    I like it.

    It reminds me of an electrician friend of mine. He jokingly says that, when dealing customers, it’s all about “managing expectations”.🤣

    What you say Dr Tim makes perfect sense. A Modified Consensus is the first step in switching perceptions.
    It’s already happening. I hear the saying that “our kids are the first generation that will be poorer than their parents” a lot.

    I think the end game of de-growth is going to be an economy based on biomass through photosynthesis with a bit of wind and water power thrown in. The implications of this are probably beyond what most people are happy to contemplate.

    However, us readers of this blog take strange pleasure from looking into the abyss 🤣.

    • seems better than an autocratic technocracy fully equipped with complete digitization and AI monitoring

    • @Raymond Flagstaff

      I’m with you on that one.

      I’m actually not too bothered about an autocratic technocracy fully equipped with complete digitization and AI monitoring. That all needs lots of tech and electricity to run/maintain, which I don’t think will be available some time soon.

  18. View at Medium.com

    “It’s not yet well established, why such a rapid change, and such a huge change is happening. We have doubled the heat in the climate system the last 15 years, I don’t want to say this is climate change, or natural variability or a mixture of both, we don’t know yet. But we do see this change.”

    I post this from the ocean heat discussion among scientists and point to the bafflement. Note the striking similarity with economists who are baffled by the reaction of the financial system to increasing density of debts.

    The point, I think, is that both the monetary economy and the global energy circulation are complex adaptive systems. Both can exhibit large fluctuations which were unexpected and which don’t have any immediate solution.

    The “wise ape” has a tiger by the tail….Don Stewart

  19. Same song, second verse
    Shadowstats continues to point to the extreme level of ready-money liquidity as the engine of inflation. Therefore, the Fed is missing the point by raising interest rates.

    “but it will do little to contain inflation, which otherwise is being fueled by heavy Money Supply and Liquidity growth, not by an overheating economy.”

    A second alarm bell from ShadowStats is the continued depletion of the Strategic Petroleum Reserve…presumably to keep retail prices lower and give an artificial boost to exports.

    Meanwhile, Shadowstats and Stephanie Pomboy speaking on Wealthion think that body blows are being inflicted, particularly for insurance companies and pension funds.

    And to one of Dr. Morgan’s points, the non-bank credit creators have greatly reduced the creation of new money. The commercial banks picked up some of the slack, but are now also cutting back. Pomboy, “we need an ever expanding growth in credit”. Stephanie thinks we are heading for another 2008.

    Regarding the strength of the labor market, Wealthion posts a chart showing that tax with-holding data is not consistent with strong employment growth. Small business sentiment is the lowest it has been in 10 years.

    Don Stewart

    • “One big reason to continue to believe this is no 2008-style financial crisis in the making is the housing market, which has held up well. That means, we’re more likely to experience a garden-variety recession, and I think it will happen sometime later this year.”?


    • Can’t agree with that. There are severe and worsening affordability issues, with rates rising at the same time as cost of living pressures are acute. Widespread use of fixed-rate deals may slow the decline, but not prevent it. Despite landlords passing on mortgage cost increases to tenants, BTL is already contracting. Tourist properties are at elevated risk as discretionary incomes contract. In some places, property prices might hold on as owners hope better times will return, but this is normal.

    • As compared to 2007
      There is now a large number of houses which are owned by corporations and then rented out. My grandson, who is on the verge of graduating from college, will be working for one of them this summer. At the present time, the corporation can borrow long term money and rent to people who either can’t or won’t pay the high monthly costs for an individual taking out a mortgage. The same phenomenon seems to be driving some of the apartment building boom.

      Many people are assuming that there will either be no landing, with the Fed keeping the liquidity flowing and people buying what they want (or renting it in the case of housing) and going where they want to go. If that is the dynamic, the Fed is simply shifting behavior without doing much about inflation. Perhaps their obsession with their particular selected indicators is blinding them to reality?

      Stephanie Pomboy, in the Wealthion talk, uses language very much like Dr. Morgan in describing the diminishing returns from debt. Which suggests to me that a whole lot of people are guessing wrong. Same with the draining of the Strategic Petroleum Reserve: how sure is Biden that he will be able to refill it at any reasonable cost?

      Don Stewart

    • The US Strategic Petroleum Reserve is an assetwhich is being stripped. The US is being asset stripped and loaded with debt to benefit “activist shareholders”.
      It’s the same business model that took down Sears and Bed Bath & Beyond.

    • There’s a lot of very strange stuff happening. For instance, CBs are committed to tackling inflation, yet inflation is the only possible way out of our debt trap, and rates are most unlikely to rise above inflation, which means borrowers are still being subsidised, which means we go on adding to debts that can’t be honoured, which means…………..well, a mess.

      The Western country most conspicuously asset-stripped is the UK, which has sold off a large proportion of its assets (everything from utilities to football teams) to prop up consumption in excess of production, and also to prop up inflated asset prices.

  20. Rent Inflation in the US
    Up 8.8 percent from a year ago. Despite a huge number of apartment buildings being brought on the market. Renters face the unpleasant choice of either paying more rent or buying a house with a very costly mortgage. Since the dominant narrative is that this will all soon be over, and interest rates will fall and mortgages become less expensive…it pays to rent. Consequently, prices for houses are falling almost everywhere.

    What to do becomes an exercise like investing in the bond market. It’s a risky business.

    Don Stewart

  21. I work for a big color company, so a lot of our products go into things like packaging, inks, paints, coatings and almost everything that gets manufactured and sold. So our business tends to be to a bit ahead of the rest of the economy. This year is becoming increasingly bad. Like 25-35% down from last year and seems to be getting worse.

    A big storm is coming.

    • I work in higher education, the professional graduate degree market. Most of our degress are for training in energetically intensive discretionary or investment sectors (e.g commercial RE, IT management, etc). 80 percent of buyers are financed with student loans. They take programs on the expectation of future income increase providing more than enough to pay off the loans.

      For the semester about to begin, we are down 25 percent YoY and recruitment for the upcoming semesters is also trending significantly below normal, a steeper drop than pandemic-era Summer 2020. And higher-ed is known as a counter-cyclical. Not this time.

      There is palpable panic around the leadership table.

  22. Some horseback math
    (Warning…I slept through arithmetic in the second grade)
    Long term high grade corporate bonds now yield around 5 percent. Mortgage rates are around 7 percent. So if a mortgage is 250,000 dollars, it costs a corporation about 2 percent less to service the debt, which amounts to 5,000 dollars per year.

    And so we get room to maneuver for companies such as the one who is employing my grandson this summer.

    Throughout my life I had a fear of the sheriff taking the farm…a legacy from the Depression which formed the attitudes of adults in my childhood. But now, paying down the debt on a house no longer makes the same sense (barring a collapse of BAU). What makes sense is to rent from corporations with low costs of capital. Plus, when you need to move, you don’t have the real estate fees to pay.

    The Fed’s interest rate repression is busily making Frankenstein’s monsters.

    Don Stewart

    • Almost every day I take a walk in the woods wearing a rucksack and carrying some weight. On the way to the woods from my house I pass through a section of “villas” which are rented to people who are mostly going to end up in the assisted living facility owned by the same company. It is astonishing to me to see the extent of renovation which happens when one moves out, or even stays longer than most people stay in these half-way houses. The appliances and carpets and even the plumbing are subjected to wholesale change. It’s not unusual for workmen’s vans to be parked in the driveway for a month. So what we are looking at is essentially “disposable”. It’s certainly not the “durable” house passed down through generations that we might have once idealized.

      I assume that the house rental companies also assume the same sort of renovations as renters come and go. I guess this is what the Davos people mean when they say “you will own nothing and you will be happy”. I’m skeptical about it:
      *I’m part of what is left of a much older generation which had different values
      *Is building a bank account the same as building a durable home?
      *Aren’t “neighborhoods” and “community” still meaningful concepts?
      *Can a healthy human thrive in such instability?
      *Isn’t this whole thing dependent on the survival of the debt based economy which we have many reasons to doubt?

      Don Stewart

  23. Warning…. I spent much of my late teens and early twenties standing on the shoulders of mathematical giants such as Euler, Fourier and Laplace.

    From my very elevated position, it has always looked as though only a very tiny number of people have any idea at all about what is happening to them (or should I say being done to them) when really all that is needed is a small amount of self-awareness and critical thinking.

    Put simply, folk should be encouraged to stop thinking about the dollar, pound sterling, euro, yen etc and start thinking in terms of the joule. For example in my first job for every joule of work I did in the office I needed 10,000,000 more joules of work done for me by (in the late 1960s, mostly) fossil fuels.

    This is of course way outside of the world most folks are comfortable in. The world they are conditioned to
    live in. In other words a world outside of their comfort zone.

    Indeed a world they don’t even know exists.

    A parallel universe in which the 2008 crash due to problems over creditworthiness, was all but inevitable as is the inevitability of the next (and final?**) crash when it is realized that none of the major currencies are backed by anything at all.

    But fear not! Those who know anything of the history of fiat currencies will know that the fate of the petrodollar was sealed, even as it was being born, with Nixon’s closure of the gold window in August 1971,
    and therefore know “they” have something up their sleeve, ready to do the heavy lifting.

    Now much like it must have taken months to wire building 7 for demolition so that it was ready to fall at the appropriate time, so the world’s fiat currency
    system (outside of the BRICKS area) has also been wired for demolition in advance in order to bring it down at free-fall speed when it suits them. To be replaced by… well nothing other than CBDCs of course.

    ** And why final? Because CBDCs and the total control they enable are crashproof. Me? Give me a good old-fashioned crash any day than the horrors of the dystopian future they have planned for us all.

    Another warning…Standing on the shoulders of giants means you will inevitably see a very long way but it can be a rather lonely life and so not for the faint-hearted. In other words, don’t try this at home!

    Dr Tim. Thanks very much for all the hard work. Apropos selling off the family silver, I was living in L.B. of Lambeth in the 80s when they run into some cash-flow problems. One of the solutions? Well to sell off all their lamposts and lease them back. Simple. For those who have been looking, this coming collapse has been many decades in the making.

    • Thanks Paul

      I have a sense that we are now getting very close indeed to a denouement – we can’t exactly know “when”, of course, but I think we have a pretty good idea about “what”. The emergence of a modified consensus, if I’m right about how I’m describing it here, might be an attempt to finesse the situation by managing expectations.

      Speaking personally, I’m pleased that the SEE project is essentially completed, and SEEDS is doing what it was designed to do, ahead of ‘the big event’.

    • CBDCs are very crashable. They absolutely require a stable 24/7 internet to work, and that is unlikely to be the case going forward.

  24. Don,
    I’m a few years your junior and grew up in the UK but like you(?) I was taught to always respect my elders. With that in mind on 22/11/63 I was a 15 yo. schoolboy and you were a young man. Now of course I just repeated what the BBC told me about the events of that day until my best friend’s dad encouraged me to take a 2nd look at it all. So for the best part of 60 years, that day has always said to me; look what we can do. We can gun down the POTUS in broad daylight in front of all the world’s press with total impunity in the sure knowledge that we have all angles covered.

    In other words, the people running America

    • Oops.

      In other words, the people running America had shown their hand, much like the people running the UK (the markets) showed their hand a few months ago and rid us of that silly woman Liz Truss. And the American public on being confronted with the ugly truth about what the USA had become did their collective best to pretend they didn’t know to what extent their once great Republic was in tatters.
      Now, Don, I’m about to suggest that just as you slept through arithmetic in the second grade you, for whatever reason, may well have slept through the last 60 years during which the cancer which in 1963 was at the very heart of American public
      life has metastasized to reach every corner of the nation.
      You ask

      *Aren’t “neighbourhoods” and “community” still meaningful concepts?

      yet when it appears to much of the world that the rule of law has been missing from the US for at least the last 60 years it seems to me simply not possible to build “community” in such a country unless, of course, it’s a Facebook “community” whatever that means ROFL. Excluding Amish Mennonite, Morman etc who of course are almost guaranteed to flourish.

      Now I suspect in your heart you know very well that both “community” and “neighbourhood” each borne from the almost childlike innocence of the 1950s (itself a product of Tinsel Town?) were both manufactured to replace real community which is created out of real struggle. Notable examples in the US and UK being the Coal miners of WV vs. the mine owners and the NUM(National Union of Mineworkers) vs. the UK’s Coal Board. Funny we are right back with energy again. I wonder why?

      However to look on the bright side, in the very near future when Kunstler’s World Made By Hand has come about, then sure, communities will flourish again, everywhere, as you all rediscover the joys of simplicity and realize that, like so much else, borne of almost free energy, the idea of “America” was unsustainable.

      [Now don’t get me wrong as your elites only copied what they learnt about government from the people who ran the world’s last empire!]

      But in general does it not go:

      The Age of Pioneers
      The Age of Conquests
      The Age of Commerce
      The Age of Affluence
      The Age of Intellect
      The Age of Decadence
      The Age of Decline & Collapse

      Now without law and order, decline and collapse are inevitable and it sure looks like that old can will fall apart the next time it is kicked

    • People running America?

      “22:17 when you move 42 billion Within 48 hours
      22:22 that is a reaction that is reaction to something that happened in other words this didn’t
      22:29 happen to another bank in the country now are other Banks a little nervous
      22:34 well two things one what’s their exposure to drug cartels
      22:41 and then maybe they’re reactionary but I can tell you this we have a direct
      22:46 connection the the Silicon Valley Bank has is a is is a part of a group Silicon
      22:55 Valley Bank group look at who the group is
      23:00 Boston Private Bank and Trust okay that is part of the bank
      23:07 they are New Hampshire Corporation their business is foreign
      23:16 investment foreign profit okay their agent
      23:23 is CT Systems Corporation of CT Corporation systems
      23:30 it’s a front that’s their agent this is how Pandora papers work and why
      23:39 932 billion is being hidden in assets through those agents remember
      23:46 trust companies dummy Corporation LLCs you’ll see a
      23:53 picture of CT Corporation it’s it’s inside of a warehouse with a half of an
      23:59 address we’ve we found it now you’re ready this Bank and Trust
      24:07 Boston Bank and Trust guess what you know who the directors were previous
      24:14 two separate attorney generals of the State of New Hampshire
      24:20 Foster in Delaney what did I tell you that they ran for
      24:26 cover for the cartel what did Shaheen and Hassan put together Hassan appointed
      24:31 Foster as the AG they protected the money laundering Network they are
      24:36 literally directors in this company Greiner goes back to this company it is
      24:44 Drug Money now here’s the real question what made them move and they moved fast
      24:52 could it be the investigation of the Pandora papers because those corrupt politicians in
      24:58 Washington have the evidence and have the names . . . “ ?

      “Mike Gill (whistleblower) speaks about the ongoing corruption, that he has witnessed in the United States.”?

  25. I live in a fairly affluent part of the East if England and I love walking (hiking over mountains when I have a chance). I regularly walk for 10 miles and recently I have focused on walking around my home town rather than heading to the country-side, which is close-by. Being on the spectrum, I observe small things/subtle changes. I am noticing a palpable deterioration and reduced maintenance everywhere; roads, private property, gardens , houses , fences, open spaces, public amenities, commercial buildings, bus stops, lighting, private cars (bald tyres on high-end SUVs), retail .. the list goes on. The ‘Big Wind Down’ perhaps.

    • It isn’t only in the U.K. In the U.S. we have serious maintenance problems as well.

      P.S. I am also on the spectrum.

    • Not far from my farm here in the US they repaved the main road a few months ago. The new surface seems fine, but the newly “painted” (laminated?) dividing lines are emblematic of the decline. The lines warble and wobble, sometimes over lapping each other, or veering off to one side of the road which can be quite confusing when driving. Elsewhere they are peeling up, bunching into a scribble of white and yellow on the side of the road. It’s quite comical and surreal, like something out of a Wile E. Coyote cartoon.

    • I work as a food delivery driver in Plymouth, Devon and the streets here off the main roads are atrocious. Pot holes everywhere. When you consider around 60% of all fuel sales go to HMRC and we also pay vehicle tax on top of that it’s disgusting and yet they still can’t even do simple things like this.

      The UK is well on its way to becoming a 3rd world nation. By the end of the decade it will be completely finished.

      The rise in foodbanks over the last 10 years has been rapid with millions now dependent on them.

      It’s rotten to the core. Corrupt and inefficient railway management, NHS management, local councils who all are on big pensions for delivering a very poor service.

      I am hearing of long waiting times to see a GP. The water service infrastructure needs modernizing as we have many leaks due to the monopoly the companies have who just siphon off all the profits and don’t re-invest any of it.

      Britain ticks all the boxes that will guarantee its decline in the coming years. Here’s a few:

      1) Trade deficit
      2) No energy or natural resources
      3) Big importer of food
      4) Big pension deficit which is massively underfunded
      5) Declining productivity due to high taxes and high house prices removing the incentive for people to work hard
      6) Welfare state
      7) Many young people leaving higher education with big debts
      8) Inflation out of control
      9) Government still deficit spending with no real responsibility to balance the books
      10) Big service economy with very little production and low production of food
      11) Poor energy infrastructure with many bad policies wasting resources on solar panels etc.
      12) A housing system that is totally backward, corrupt and parasitic with features such as leasehold and extortionate monthly ground rents with poor people being squeezed by freeholders that offer nothing in return
      13) Corrupt councils on big pensions with their local tax bills increasing year after year

      We can go on and on.

      I am still amazed people buy UK government debt with yields less than 5%.

      The GBP in my opinion will lose at least 50% of its purchasing power from here by the year 2030. If it does not I will be amazed.

      I have to sit and laugh about all this because it is that absurd you would probably lose your mind otherwise.

      If I was wealthy I would have left or would be planning to but not practical in my situation and where do you go anyway?

      Here’s a video of a recent tour around a wealthy part of London showing all the closed down stores:

    • With the travel restrictions of recent years, it’s a while since I was in the UK, but it was in a sorry state even then. Like you, I can’t understand why any international investor would put money into UK govt debt or, for that matter, into GBP. On present trajectories, the UK will be the first large advanced economy to fail. What I can’t figure out is why this isn’t prompting a re-think by the electorate, but this clearly isn’t happening.

    • Individuals within the electorate are re-thinking the social contract, no?
      It’s not to be discussed amongst the hoi-ploi.
      “When I want your opinion I’ll give it to you” sort of situation/
      Everything (almost) which can be sold from the commons for extraction of rent has been “privatised”.
      The “owners” only want to talk about getting paid more rent…

  26. Acceleration Toward the Void
    Since the SEEDS project is now more or less complete, according to Dr. Morgan, I will be commenting much less in the future. But as my last contribution, let me point to two you tubes:


    The first is the current post from Wealthion, which recounts the dire predictions from Warren Buffett and Stanley Druckenmiller. The second is from a distringuished panel of medical people who make dire predictions about the state of health in the world and especially in the US…but with the usual advice from some that “we will have a drug for that”.

    Money and behavior can be separated into silos, but in rhe end we have to deal with borh of them because both are leading to the same sort of debacle.
    Don Stewart

    • I hope you won’t be reducing your involvement. Perhaps I should clarify where the project is now.

      Back in 2013, we knew that the economy was an energy system with a financial proxy, the ‘two economies’ concept set out in Life After Growth. We also knew that ECoE was the difference between output and prosperity.

      The first challenge was to model the economy on this basis. This involved calculating underlying or ‘clean’ economic output, from which the deduction of ECoE identifies prosperity. Calculating the ‘real’ and ‘financial’ economies separately re-referenced financial liabilities, and identified disequilibrium in the system.

      Since then, we have made progress on a number of fronts. One of these is essentials, another is the RRCI concept of prices and inflation, and a third is harmonized segment analysis, projecting PXE and narrower discretionary consumption. We have a good handle on affordability compression, with its financial as well as consumption measurement. We’ve also brought broad financial assets into the equation, including the ‘near-debt’ component of NBFIs.

      My view is that we now have a pretty comprehensive set of tools The challenge now is how to use them. That might be a tougher call than making them in the first place. Time hasn’t stood still while we’ve been doing this. In fact, time seems to be running out for large parts of the economic, financial and broader system.

    • Thank you, Dr. Tim for your incredible work and persistence on SEEDS. On the topic of how to use the tools, I find I am seeking a set of heuristics for managing in degrowth. None of us have experience with this, and simply laying off x percent and hoping things turn around isn’t going to cut it. Raiding the Jones’s, barbarian style, instead of keeping up with them, would accelerate the descent. Prepping in a bunker isn’t possible unless one is skilled at ‘home dentistry’ (ouch). Michaux’s concept of The Arcadians is compelling but he hasn’t mapped out how to get from here to there. Perhaps the incremental consensus-shifting is the only way, but I agree that it seems to be shifting too slowly to keep pace with events.

    • Thanks Fidra. I do think we have the tools, the question being how to deploy them, and I’ll reflect on your comments here. When you say ‘managing in degrowth’, do you mean managing in the sense of a business, or managing personally, meaning coping?

      I’m quite convinced that ‘incremental consensus-shifting’ is under way, not just about decelerating growth, but also on the financial narrative that we can tame inflation without triggering a recession or a banking crisis. Have people yet thought through what this consensus-modification means, in terms of a smaller ‘credit impulse’ and contraction in discretionary sectors? I doubt it. Bunkers are a complete non-starter

    • A small town with fairly stable population for a century, mixed economy and a rail line is a good place to start. Is there a good water table for a well? Solar power for a well pump & tank is an ideal use of solar power.

    • Dr. Tim, I am thinking of managing in the sense of strategic management of a business. I imagine one component would be intentional contraction. I think you referred to ‘delayering’ in a post a few months back. A business would also have to shift toward serving the shrinking pockets of prosperity, ideally before one’s competitors did so. Dropping any marginal product lines exposed to discretionary collapse might also be prudent. Insourcing ‘commodity’ functions? Unwinding partnerships and joint ventures? Shortening and simplifying supply chains? Basically doing the normal business game but in reverse, whittling down the operation until some level of stabile equilibrium is reached.

      An analogue for this is what many of us commentariat here seem to be doing on the home front… Moving out of the city, obtaining some land, growing our own food, increasing our ability to provide for ourselves and build resilience. I wonder what may be the business equivalent of these attempts, as John Michael Greer says, to “collapse now and avoid the rush?”

  27. This might be of interest to readers.

    This excerpt is largely about capital controls but acknowledges the disparities and unequal dynamic between the real economy of goods and services and the financial economy and how financial interests inflate assets using international trade whilst diverting investment away from the real economy especially within a domestic context.

    It’s taken from a weekly newsletter.

    Book of the Week
    Our recommended book this week is Trade Wars are Class Wars, by Matthew C. Klein and Michael Pettis, in which the authors argue that trade disputes are not really conflicts between countries, but between competing interests within countries:

    Trade war is often presented as a conflict between countries. It is not: it is a conflict mainly between bankers and owners of financial assets on one side and ordinary households on the other – between the very rich and everyone else. Rising inequality has produced gluts of manufactured goods, job loss, and rising indebtedness. It is an economic and financial perversion of what global integration was supposed to achieve. For decades, the United States has been the largest single victim of this perversion. Absorbing the rest of the world’s excess output and savings at the cost of deindustrialization and financial crises has been America’s exorbitant burden.

    But Americans are not the only victims. All the peoples of the world suffer from this arrangement, because the U.S. financial system and consumer market function as a safety valve for exploitation elsewhere. America’s openness to international trade and finance means that the rich in Europe, China, and the other major surplus economies can squeeze their workers and retirees in the confidence that they can always sell their wares, earn their profits, and park their savings in safe assets…

    By preventing political and industrial elites in the surplus countries from facing the consequences of their actions, the open system has enabled destructive behavior in the rest of the world. From a certain perspective, the United States – and the United Kingdom, Canada, and Australia, all of which play a similar role in the global economy – therefore resembles the imperial colonies of Europe of the late nineteenth century. Back then, subject peoples were forced to buy Europe’s excess production in exchange for taking on unneeded debt. Remarkably, a similar situation exists today. Instead of violence, however, the modern regime depends on the English-speaking countries’ political commitment to open markets. This is a choice, but in democracies, the people have the option to change their mind…

    Addressing trade imbalances through tariffs is likely to be ineffective at best and harmful under certain conditions. That is why it matters that capital controls are becoming increasingly popular, especially in the other English-speaking economies. New Zealand recently banned all nonresidents from buying residential property. Australia limits foreign buyers to new homes, which has helped stimulate construction, and it taxes foreign purchases, although the rates vary by state. Some local governments in Canada have begun taxing foreign purchasers of housing. The United States could go even further. On July 31, 2019, two U.S. senators one a Democrat, one a Republican-introduced a bill that would direct the Federal Reserve to force the current account deficit to shrink to zero by discouraging foreign investment with a “market access charge”…

    plenty of Americans have prospered producing financial assets to accommodate the rest of the world’s excess savings. The world’s preference for American markets and the U.S. dollar inflates the incomes of the financiers who control access to these markets – as well as their domestic political clout. For decades, the U.S. Treasury’s approach to international finance was driven largely by what made sense for the major American commercial and investment banks and the owners of financial capital. The interests of everyone else in the economy were largely ignored, if not outright opposed by counterproductive commitments to maintain a strong dollar. This was always justified on the grounds that deregulating capital and increasing its mobility would lead to the best possible investment outcomes.

    The resulting increases in wealth, they explained, would inevitably trickle down to all Americans – never mind that international capital flows are far more likely to be driven by speculation, investment fads, capital flight, and reserve accumulation (often for mercantilist purposes) than by sober investment decisions about the best long-term uses of capital. Many American companies adapted to the massive financial inflows coming into the United States by relocating their production to countries where workers are underpaid and then selling goods back to U.S. consumers at higher margins.

    • Steve wrote: “the United States – and the United Kingdom, Canada, and Australia, all of which play a similar role in the global economy – therefore resembles the imperial colonies of Europe of the late nineteenth century. Back then, subject peoples were forced to buy Europe’s excess production in exchange for taking on unneeded debt. Remarkably, a similar situation exists today. Instead of violence, however, the modern regime depends on the English-speaking countries’ political commitment to open markets.”

      Oh, there might still be some violence enforcing a neo-colonial global financial regime where countries with natural resources are coerced into exporting them raw, and attempts to process them into value-added products are met with bombs and blockades…

      The optimization of investment means an optimization of wealth extraction for global financiers. Industrialization in resource-producing countries works against that, by containing value in the home country.

  28. Pingback: #256: A path of logic | Surplus Energy Economics

Comments are closed.