The End Of An Era

Tyler Durden's picture


Authored by Dr. Tim Morgan, Tullet Prebon,

The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge.

Through technology, through culture and through economic and political change, society is more short-term in nature now than at any time in recorded history. Financial market participants can carry out transactions in milliseconds. With 24-hour news coverage, the media focus has shifted inexorably from the analytical to the immediate. The basis of politicians’ calculations has shortened to the point where it can seem that all that matters is the next sound-bite, the next headline and the next snapshot of public opinion. The corporate focus has moved all too often from strategic planning to immediate profitability as represented by the next quarter’s earnings.

This report explains that this acceleration towards ever-greater immediacy has blinded society to a series of fundamental economic trends which, if not anticipated and tackled well in advance, could have devastating effects. The relentless shortening of media, social and political horizons has resulted in the establishment of self-destructive economic patterns which now threaten to undermine economic viability. We date the acceleration in short-termism to the early 1980s.

Since then, there has been a relentless shift to immediate consumption as part of something that has been called a “cult of self-worship”. The pursuit of instant gratification has resulted in the accumulation of debt on an unprecedented scale. The financial crisis, which began in 2008 and has since segued into the deepest and most protracted economic slump for at least eighty years, did not result entirely from a short period of malfeasance by a tiny minority, comforting though this illusion may be. Rather, what began in 2008 was the denouement of a broadly-based process which had lasted for thirty years, and is described here as “the great credit super-cycle”.


The credit super-cycle process is exemplified by the relationship between GDP and aggregate credit market debt in the United States (see fig. 1.1). In 1945, and despite the huge costs involved in winning the Second World War, the aggregate indebtedness of American businesses, individuals and government equated to 159% of GDP. More than three decades later, in 1981, this ratio was little changed, at 168%. In real terms, total debt had increased by 214% since 1945, but the economy had grown by 197%, keeping the debt ratio remarkably static over an extended period which, incidentally, was far from shock-free (since it included two major oil crises).


From the early 1980s, as figs. 1.1 and 1.2 show, an unmistakeable and seemingly relentless upwards trend in indebtedness became established. Between 1981 and 2009, debt grew by 390% in real terms, far out-pacing the growth (of 120%) in the American economy. By 2009, the debt ratio had reached 381%, a level unprecedented in history. Even in 1930, when GDP collapsed, the ratio barely topped 300%, and thereafter declined very rapidly indeed.

This report is not, primarily, about debt, and neither does it suggest that the problems identified here are unique to the United States. Rather, the massive escalation in American indebtedness is one amongst a host of indicators of a state of mind which has elevated immediate consumption over prudence throughout much of the world.

This report explains that we need only look beyond the predominant short-termism of contemporary thinking to perceive that we are at the confluence of four extremely dangerous developments which, individually or collectively, have already started to throw more than two centuries of economic expansion into reverse.

Before the financial crisis of 2008, this analysis might have seemed purely theoretical, but the banking catastrophe, and the ensuing slump, should demonstrate that the dangerous confluence described here is already underway. Indeed, more than two centuries of near-perpetual growth probably went into reverse as much as ten years ago.

Lacking longer-term insights, today’s policymakers seem bewildered about many issues. Why, for instance, has there been little or no recovery from the post-2008 economic slump? Why have traditional, tried-and-tested fiscal and monetary tools ceased to function? Why have both austerity and stimulus failed us?

The missing piece of the economic equation is an appreciation of four underlying trends, each of which renders many of the lessons of the past irrelevant.

trend #1 – the madness of crowds

The first of the four highly dangerous trends identified here is the creation, over three decades, of the worst financial bubble in history. In his 1841 work Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay (1814-89) identified a common thread of individual and collective idiocy running through such follies of the past as alchemy, witchhunts, prophecies, fortune-telling, magnetizers, phrenology, poisoning, the admiration of thieves, duels, the imputation of mystic powers to relics, haunted houses, crusades – and financial bubbles.

A clear implication of Mackay’s work was that all of these follies had been consigned to the past by intelligence, experience and enlightenment. For the most part, he has been right. Intelligent people today do not put faith in alchemy, fortune-telling, witchcraft or haunting, and – with the arguable exception of the invasion of Iraq – crusades have faded into the history books.

But one folly remains alive and well. Far from confining financial bubbles to historical tales of Dutch tulips and British South Sea stock, the last three decades have witnessed the creation and the bursting of the biggest bubble in financial history.

Described here as ‘the credit supercycle’, this bubble confirmed that one aspect, at least, of the idiocy identified by Mackay continues to wreak havoc. Insane though historic obsessions with tulip bulbs and south seas riches may appear, they are dwarfed by the latterday, ‘money for nothing’ lunacy that, through the credit super-cycle, has mired much of the world in debts from which no escape (save perhaps hyperinflation) exists.

Perhaps the most truly remarkable feature of the super-cycle was that it endured for so long in defiance of all logic or common sense. Individuals in their millions believed that property prices could only ever increase, such that either borrowing against equity (by taking on invariably-expensive credit) or spending it (through equity release) was a safe, rational and even normal way to behave.

Regulators, meanwhile, believed that there was nothing wrong with loosening banking reserve criteria (both by risk-weighting assets in ways that masked leverage, and by broadening definitions of bank capital to the point where even some forms of debt counted as shock-absorbing equity).

Former Federal Reserve boss Alan Greenspan has been ridiculed for believing that banks would always act in the best interests of their shareholders, and that the market would sort everything out in a benign way. But regulators more generally bent over backwards to ignore the most obvious warning signs, such as escalating property price-to-incomes ratios, soaring levels of debt-to-GDP, and such obviously-abusive practices as sub-prime mortgages, NINJA loans and the proliferation of unsafe financial instruments.

Where idiocy and naïveté were concerned, however, regulators and the general public were trumped by policymakers and their advisors. Gordon Brown, for example, proclaimed an end to “boom and bust” and gloried in Britain’s “growth” despite the way in which debt escalation was making it self-evident that the apparent expansion in the economy was neither more nor less than the simple spending of borrowed money.


Between 2001-02 and 2009-10, Britain added £5.40 of private and public debt for each £1 of ‘growth’ in GDP (fig. 1.3). Between 1998 and 2012, real GDP increased by just £338bn (30%) whilst debt soared by £1,133bn (95%) (fig. 1.4).


Asset managers have a very simple term to describe what happened to Britain under Brown – it was a collapse in returns on capital employed.

No other major economy got it quite as wrong as Britain under Brown, but much the same was happening across the Western world, most notably in those countries which followed the disastrous Anglo-American philosophy of “light-touch” financial regulation.

trend #2 – the globalisation disaster

The compounding mistake, where the Western countries were concerned, was a wide-eyed belief that ‘globalisation’ would make everyone richer, when the reality was that the out-sourcing of production to emerging economies was a self-inflicted disaster with few parallels in economic history. One would have to look back to a Spanish empire awash with bullion from the New World to find a combination of economic idiocy and minority self-interest equal to the folly of globalization.

The big problem with globalisation was that Western countries reduced their production without making corresponding reductions in their consumption. Corporations’ outsourcing of production to emerging economies boosted their earnings (and, consequently, the incomes of the minority at the very top) whilst hollowing out their domestic economies through the export of skilled jobs.

This report uses a measure called ‘globally-marketable output’ (GMO) as a metric for domestic production, a measure which combines manufacturing, agriculture, construction and mining with net exports of services. By definition, activities falling outside this category consist of services provided to each other.

At constant (2011) values, consumption by Americans increased by $6,500bn between 1981 and 2011, whilst consumption on their behalf by the government rose by a further $1,700bn, but the combined output of the manufacturing, construction, agricultural and extractive industries grew by barely $600bn. At less than $200bn in 2011, net exports of services did almost nothing to bridge the chasm between consumption and production.

This left two residuals – domestically consumed services, and debt – with debt the clincher. Between 1981 and 2011, and again expressed at constant values, American indebtedness soared from $11 trillion to almost $54 trillion.

Fundamentally, what had happened here was that skilled, well-paid jobs had been exported, consumption had increased, and ever-greater quantities of debt had been used to fill the gap. This was, by any definition, unsustainable. Talk of Western economies modernising themselves by moving from production into services contained far more waffle than logic – Western consumers sold each other ever greater numbers of hair-cuts, ever greater quantities of fast food and ever more zero-sum financial services whilst depending more and more on imported goods and, critically, on the debts used to buy them. Corporate executives prospered, as did the gateholders of the debt economy, whilst the vast majority saw their real wages decline and their indebtedness spiral. For our purposes, what matters here is that reducing production, increasing consumption and taking on escalating debt to fill the gap was never a remotely sustainable course of action. What this in turn means is that no return to the pre-2008 world is either possible or desirable.

trend #3 – an exercise in self-delusion

One explanation for widespread public (and policymaker) ignorance of the truly parlous state of the Western economies lies in the delusory nature of economic and fiscal statistics, many of which have been massaged out of all relation to reality.

There seems to have been no ‘grand conspiracy’ here, but the overall effect of accretive changes has been much the same. In America, for example, the benchmark measure of inflation (CPI-U) has been modified by ‘substitution’, ‘hedonics’ and ‘geometric weighting’ to the point where reported numbers seem to be at least six percentage points lower than they would have been under the ‘pre-tinkering’ basis of calculation used until the early 1980s. US unemployment, reported at 7.8%, excludes so many categories of people (such as “discouraged workers”) that it hides very much higher levels of inactivity.

The critical distortion here is clearly inflation, which feeds through into computations showing “growth” even when it is intuitively apparent (and evident on many other benchmarks) that, for a decade or more, the economy has, at best, stagnated, not just in the United States but across much of the Western world. Distorted inflation also tells wage-earners that they have become better off even though such statistics do not accord with their own perceptions. It is arguable, too, that real (inflation-free) interest rates were negative from as long ago as the mid-1990s, a trend which undoubtedly exacerbated an escalating tendency to live on debt.

Fiscal figures, too, are heavily distorted, most noticeably in the way in which quasi-debt obligations are kept off the official balance sheet. As we explain in this report, the official public debts of countries such as the United States and the United Kingdom exclude truly enormous commitments such as pensions.

trend #4 – the growth dynamo winds down

One of the problems with economics is that its practitioners preach a concentration on money, whereas money is the language rather than the substance of the real economy. Ultimately, the economy is – and always has been – a surplus energy equation, governed by the laws of thermodynamics, not those of the market.

Society and the economy began when agriculture created an energy surplus which, though tiny by later standards, liberated part of the population to engage in non-subsistence activities.

A vastly larger liberation of surplus energy occurred with the discovery of the heat engine, meaning that the energy delivered by human labour could be leveraged massively by exogenous sources of energy such as coal, oil and natural gas. A single US gallon of gasoline delivers work equivalent to between 360 and 490 hours of strenuous human labour, labour which would cost perhaps $6,500 if it were paid for at prevailing rates. Of the energy – a term coterminous with ‘work’ – consumed in Western societies, well over 99% comes from exogenous sources, and probably less than 0.7% from human effort. Energy does far more than provide us with transport and warmth. In modern societies, manufacturing, services, minerals, food and even water are functions of the availability of energy. The critical equation here is not the absolute quantity of energy available but, rather, the difference between energy extracted and energy consumed in the extraction process. This is measured by the mathematical equation EROEI (energy return on energy invested).

For much of the period since the Industrial Revolution, EROEIs have been extremely high. The oil fields discovered in the 1930s, for example, provided at least 100 units of extracted energy for every unit consumed in extraction (an EROEI of 100:1). For some decades now, though, global average EROEIs have been falling, as energy discoveries have become both smaller and more difficult (meaning energy-costly) to extract.


The killer factor is the non-linear nature of EROEIs. As fig. 1.5 shows, the effects of a fall-off in EROEI from, say, 80:1 to 20:1 do not seem particularly disruptive but, once returns ratios have fallen below about 15:1, there is a dramatic, ‘cliff-edge’ slump in surplus energy, combined with a sharp escalation in its cost.

Research suggests that the global average EROEI, having fallen from about 40:1 in 1990 to 17:1 in 2010, may decline to just 11:1 by 2020, at which point energy will be about 50% more expensive, in real terms, than it is today, a metric which will carry through directly into the cost of almost everything else – including food.

crisis, culpability and consequences

If the analysis set out in this report is right, we are nearing the end of a period of more than 250 years in which growth has been ‘the assumed normal’. There have been setbacks, of course, but the near-universal assumption has been that economic growth is the usual state of affairs, a rule to which downturns (even on the scale of the 1930s) are the exceptions. That comfortable assumption is now in the process of being over-turned.

The views set out here must provoke a host of questions. For a start, if we really are nearing a cliff-edge economic crisis, why isn’t this visible already? Second, who is to blame for this? Third, how bad could it get? Last, but surely most important, can anything be done about it?

Where visibility is concerned, our belief is that, if the economy does tip over in the coming few years, retrospect – which always enjoys the 20-20 vision of hindsight – will say that the signs of the impending crash were visible well before 2013.

For a start, anyone who believed that a globalisation model (in which the West unloaded production but expected to consume as much, or even more, than ever) was sustainable was surely guilty of wilful blindness. Such a state of affairs was only ever viable on the insane assumption that debt could go on increasing indefinitely. Charles Mackay chronicled many delusions, but none – not even the faith placed in witchcraft – was ever quite as irrational as the belief (seldom stated, but always implicit in Western economic policy) that there need never be an end to a way of life which was wholly dependent on ever-greater debt.

Even to those who were happy to swallow the nonsense of perpetually expanding indebtedness, the sheer scale of debt – and, relevantly in this context, of quasi-debt commitments as well – surely should have sounded  warning bells. From Liverpool to Los Angeles, from Madrid to Matsuyama, the developed world is mired in debts that can never be repaid. In addition to formal debt, governments have entered into pension and welfare commitments which are only affordable if truly heroic assumptions are made about future prosperity.

At the same time, there is no real evidence that the economy is recovering from what is already a more prolonged slump than the Great Depression of the 1930s. We are now more than four years on from the banking crisis and, under anything approaching normal conditions, there should have been a return to economic expansion by now. Governments have tried almost everything, from prolonged near-zero interest rates and stimulus expenditures to the creation of money on a gigantic scale. These tools have worked in the past, and the fact that, this time, they manifestly are not working should tell us that something profoundly different is going on.

The question of culpability has been the equivalent of Sherlock Holmes’ “dog that did not bark in the night”, in that very few individuals have been held to account for what is unarguably the worst economic disaster in at least eighty years. A small number of obviously-criminal miscreants have been prosecuted, but this is something that happens on a routine basis in normal times, so does not amount to an attribution of blame for the crisis. There has been widespread public vilification of bankers, the vast majority of whom were, in any case, only acting within the parameters of the ‘debtfuelled, immediate gratification’ ethos established across Western societies as a whole.

Governments have been ejected by their electorates, but their replacements have tended to look very similar indeed to their predecessors. The real reason for the seeming lack of retribution is that culpability is far too dispersed across society as a whole. If, say, society was to punish senior bankers, what about the thousands of salesmen who knowingly pushed millions of customers into mortgages that were not remotely affordable? The suspicion lingers that there has been a ‘grand conspiracy of culpability’, but even the radical left has failed to tie this down to specifics in a convincing way.

The real causes of the economic crash are the cultural norms of a society that has come to believe that immediate material gratification, fuelled if necessary by debt, can ever be a sustainable way of life. We can, if we wish, choose to blame the advertising industry (which spends perhaps $470bn annually pushing the consumerist message), or the cadre of corporate executives who have outsourced skilled jobs in pursuit of personal gain. We can blame a generation of policymakers whose short-termism has blinded them to underlying trends, or regulators and central bankers who failed to “take away the punch-bowl” long after the party was self-evidently out of control.

But blaming any of these really means blaming ourselves – for falling for the consumerist message of instant gratification, for buying imported goods, for borrowing far more than was healthy, and for electing glib and vacuous political leaders.

Beyond visibility and culpability, the two big questions which need to be addressed are ‘how bad can it get?’ and ‘is there anything that we can do about it?’

Of these, the first question hardly needs an answer, since the implications seem self-evident – economies will lurch into hyper-inflation in a forlorn attempt to escape from debt, whilst social strains will increase as the vice of resource (including food) shortages tightens. In terms of solutions, the first imperative is surely a cultural change away from instant gratification, a change which, if it is not adopted willingly, will be enforced upon society anyway by the reversal of economic growth.

The magic bullet, of course, would be the discovery of a new source of energy which can reverse the winding-down of the critical energy returns equation. Some pin their faith in nuclear fusion (along lines being pioneered by ITER) but this, even if it works, lies decades in the future – that is, long after the global EROEI has fallen below levels which will support society as we know it. Solutions such as biofuels and shales are rendered non-workable by their intrinsically-low EROEIs.

Likewise, expecting a technological solution to occur would be extremely unwise, because technology uses energy – it does not create it. To expect technology to provide an answer would be equivalent to locking the finest scientific minds in a bankvault, providing them with enormous computing power and vast amounts of money, and expecting them to create a ham sandwich.

In the absence of such a breakthrough, really promising energy sources (such as concentrated solar power) need to be pursued together, above all, with social, political and cultural adaptation to “life after growth”.

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Sun, 01/27/2013 - 07:01 | 3188854 Colonial Intent
Colonial Intent's picture

Obama Socialist kidnap daughter from loving father

He admitted to St. Paul police that he had pointed the gun at his wife and daughter but said it wasn’t loaded and he had checked the chamber beforehand.
Sun, 01/27/2013 - 09:43 | 3188929 GetZeeGold
GetZeeGold's picture



Thanks for your application to write for Pravda......we just don't think you're ready yet.


Besides...we're sorta pro 2nd amendment should have applied 20 years ago.

Sun, 01/27/2013 - 08:08 | 3188876 strangewalk
strangewalk's picture

Those simplistic, tunnel-vision economists who somehow still defend the incomprehensible stupidity of globalization under the dishonest mantra of “Free Trade is Always Good (even when it’s clear your trading partners are conducting mercantilist driven, economic warfare against you)” might, but no doubt won’t, benefit from a purview of this analysis.  

Sun, 01/27/2013 - 08:11 | 3188879 Grand Supercycle
Grand Supercycle's picture

Wile E Coyote sell off awaits...

As mentioned – central bank intervention prolongs and postpones but can not oppose natural market forces indefinitely.

Sun, 01/27/2013 - 08:32 | 3188891 Notarocketscientist
Notarocketscientist's picture

Great article.

But CHEAP ENERGY is not the solution - it only accelerates the disaster.

We've had cheap energy for 100+ years and look what it's gotten us - 7 billion people raping the earth's finite resources - fish will be gone in a generation... imagine desalinating the oceans for fresh water to bloom the desert - that will only result in even BIGGER populations.  Which puts even heavier demands on our increasingly scarce resources.

A new source of energy would kick the can - but it would not solve the problem



Sun, 01/27/2013 - 09:41 | 3188940 Karlus
Karlus's picture

Make the drive between Dallas and San Antonio. Tons of land.

Im not making a case for more people, just to say our country has lots and lots of the most important Tell that to Japan or Europe

Sun, 01/27/2013 - 10:46 | 3188990 TNTARG
TNTARG's picture

I think the article is not regarding the US but the World. However, it's a West centered vision. I also live in a country which is basically self sustainable and capable to feed 7 hundred milion people. But nobody is safe under the Western paradigm.

On the other hand, it's absolutely possible to organize us in a better and perfectly viable way of living: It should involve, however, the whole Humanity instead of being settled at the expenses of the rest of us all, as it is and was to carry out the "developing" of the so called "First World". 

The first and most important thing to do is stopping wasting resources by killing people and devastating the environment on invented, stupid and sucidal "wars on terror" and other barbarian actions in progress.

Americans and their allies should stop the madness but there's no sign of mental recovery in the "leaders" of the "developed world" with the Nobel Price President of the most powerful death machine ever built bombing and contaminating here and there, and a bunch of idiots accumulating for themselves more wealth that they could spend in 10 generations.

Sadly their stupidity has been driving us to this point so there's little hope those powerful guys can do any better. One example just to expose their kind of "brightness" on decision making:  The japanese government. Quote (about radiation) "They have also multiplied by 20 the maximum doses recommended by specialized international organizations: 20 mSv per year in Japan and only 1 mSv in the rest of the world." (

This kind of assholes are perfectly capable of killing us all (including themselves!) before we come up with a better paradigm.



Sun, 01/27/2013 - 14:25 | 3189275 Seer
Seer's picture

"I also live in a country which is basically self sustainable and capable to feed 7 hundred milion people."

Your country could stop all imports and exports and continue, even with (perpetual) growth?

"it's absolutely possible to organize us in a better and perfectly viable way of living"

Yeah, I do that with my animals... and then I eat them.

Who the fuck is going to be responsible for doing the organizing?

And what is "better" and "perfectly viable" as pertains to "living?"

Again, what about growth?  And, what about the carry-on effects of what humans have done so far?

"Americans and their allies should stop the madness"

Did you miss the points made in the article (in the full paper) that this isn't something NEW?  It's HUMAN NATURE, and it's based on human deception.  We have a mass psychology at work in which we believe that there are infinite resources available (esp energy).  "Americans and their allies"may be the most visible/blatant engagers of self-deception, but that don't mean that others aren't also doing it (anyone promoting "growth" is participating in self-deception, perhaps just not as gregariously).



Sun, 01/27/2013 - 15:03 | 3189344 TNTARG
TNTARG's picture

Infinite energy resources nop. It was estimated that the sun will last approximately 10 billion years.

Sun, 01/27/2013 - 15:54 | 3189401 Seer
Seer's picture

"Infinite energy resources nop. It was estimated that the sun will last approximately 10 billion years."

How do you people continue to survive thinking in TWO dimensions in a THREE dimensional world?

WTF is the RATE of consumption?  And what is the rate in the GROWTH of consumption!

Fuck, I give up arguing with TWO-DIMENSIONAL thinkers!  You're like my ex, whom was always thinking that MORE money needed to be brought in and made no effort to understand expenses!

Sun, 01/27/2013 - 22:36 | 3190158 TNTARG
TNTARG's picture

"Two-dimensional thinkers"? You don't know me. You shouldn't insult people just because they don't agree with you.

I know for a fact that this World is absolutely sustainable for we the 7 billion people. Thing is, it's not likely to be sustainable, let's say, the "western way" (you know what I mean) but I hardly believe this is what most people want. 

I'm not willing to throw myself into armageddon theories without thinking specially when they come from people who made a living (and huge wealth) by dealing with hedge funds, private equity and real estate funds.

See, I read this: "The economy as we know it is facing a lethal confluence of four critical factors" and I think about who is "we" and what economy is he referring to. There's no such thing as ONE ECONOMY. Economy is a social science (many have forgotten about it and here we are) and should be properly approached. What in the hell means "The economy as we know it"? And for whom the bells ring? For Tullett Prebons?

And it's me who is thinking in two dimensions...

Mon, 01/28/2013 - 01:35 | 3190538 Seer
Seer's picture

"You shouldn't insult people just because they don't agree with you."

And I should do so because?

Sorry, but it's got nothing to do with ME and everything to do with logic and reason.  And with this I do challenge thee to show that thee are not a two-dimensional thinker .

Let's take your rip-roaring come-back:

"I know for a fact that this World is absolutely sustainable for we the 7 billion people."

That there are now 7+ billion people on the planet is in fact a fact.  Very good on this point!  Now then, perhaps you can entertain me by quantifying the "sustainable" part.  Is this for today?  For next year?  For HOW LONG?  The ancient sunlight and endowed soils are depleting by the day...

OK, I'll just punch though it all and stat that NO number of humans can exist on this planet forever.  I'm assuming that you understand that inconvenient fact that the sun will one day burn out.  Clearly THEN life on earth is going to be problematic.  What I point out here is that your statements of absolutism are groundless, AND, dangerous (fail logic).

Again, for HOW MANY YEARS?

And, what about that little fact that humans tend to multiply?  Are you setting the limit at the current 7+ billion?  Or, are you going to say that there's no limit? if so please clarify so that I can analyze that.

"There's no such thing as ONE ECONOMY. Economy is a social science (many have forgotten about it and here we are) and should be properly approached."

What they're saying is that the "economy" is basically been made up out of pure fiction.  Yes, it's stated as though there's only one "economy," but, as they state clearly (and repeatedly), they are referencing the US, UK and western economies (the dominant ones, whether we want to admit it or not).

If the "economy" that you have in your head differs then let's hear about it: but, really, that's not likely what is driving all of this shit.  If it relies on growth, which, as the authors state as being tightly connected to energy, then the undeniable fact that perpetual growth on a finite planet is not possible would shut it down.

"What in the hell means "The economy as we know it"? And for whom the bells ring? For Tullett Prebons?"

How about thinking outside of yourself?  It's the economy that you and everyone else is tied to.  We're NOT talking about an alternative.  The authors are pretty clear to define what they are talking about.

"I'm not willing to throw myself into armageddon theories without thinking specially when they come from people who made a living (and huge wealth) by dealing with hedge funds, private equity and real estate funds."

But you're willing to throw yourself into theories about "alternative" energies from people who are raking in lots of money (and have produced no real scalable solutions)?

Who the fuck are YOU?  Does it really matter to someone like me?  FUCK NO!  What you say, what your arguments are (and any facts [which I'm not seeing any being presented]]) ARE pertinent.  I don't (often) do what so many others here do, engage in character assassinations- it's a waste of time (and childish).  People die.  Ideas/thought live on.  If Kissinger had any meaningful, factual information of use I would use it, despite the fact that I detest the fucker.

I am not willing to throw myself into the "cornucopian" theories, as these are the predominant themes presented from our current leaders (they promise everything, not matter if it's possible or not), especially when we need only look at EVERY piece of media and see them profiting...

Sun, 01/27/2013 - 11:27 | 3189031 TimmyM
TimmyM's picture

Just don't make that drive on a holiday weekend! It ain't what it used to be.

Sun, 01/27/2013 - 14:16 | 3189259 Seer
Seer's picture

"Make the drive between Dallas and San Antonio. Tons of land."

Because land is "open" that don't automatically mean that it can be made productive (and to any scale that YOU might think it could- if you think it could then buy some and make money!).  Perhaps one could create a parking lot; or, one could plop housing developments there as like around Las Vegas, but that don't mean that it can support people long-term (the article notes the short-sightedness we've had; given a short enough time-frame just about anything is workable): think supply lines.

Sun, 01/27/2013 - 09:57 | 3188951 Vagabond
Vagabond's picture

We must seek equilibrium.

Sun, 01/27/2013 - 14:27 | 3189283 Seer
Seer's picture

Sadly, I'm afraid, we don't have a clue as to what it is.  IT, however, is sure to find "us."

Sun, 01/27/2013 - 15:19 | 3189358 mkhs
mkhs's picture

Don't wory.  It will find you.

Sun, 01/27/2013 - 08:40 | 3188895 Chartist
Chartist's picture

Yes, we sacrified a whole generation of good paying jobs which got shipped off to China.  But, i believe we are going to see a burgeoning middle class in China which will benefit everybody.  Of course, that will mostly benefit my young children while the current middle class from the rust belt realizes a rising misery index.

Sun, 01/27/2013 - 09:39 | 3188938 falak pema
falak pema's picture

lets not mix cause and effect. To put it simply, the 7 billion population is the result of human innovation based on the natural riches of the world. Cheap energy, abundant arable land, the seeds of mass agriculture and then the industrial revolution that racheted up the exponential growth and the consequent hangover today as we run out of cheap energy and limited RM.

First consequence : our previous model is INOPERTATIONAL unless we find a source for new energy at acceptable  price/productivity trade off. This is the challenge of today as the ecological degradation means it has to be "clean energy".

Second consequence : our demographics are compromised; 10 billion becomes a problem if the energy crunch based on cheap peak oil is the future. We have no viable alternative as TMI in 1979 and Fuku have destroyed our belief in boiling water with nuclear deadly sparkle.

Third consequence : Our super consumer model is unsustainable based on these projections as we cannot pollute the planet and denature the earth of its abundant crust of oil/gas and metals without inordinate consequences for our own species. 

Apart from the legacy of past economico-financial-politico-social crisis currently, we face the redoutable challenge of the future as described in terms of asymptotes  above.

This article says the essential : the world has to change its paradigm from uncontrolled consumerism where we guzzle 90 million barrels of oil for NOTHING in pure waste, to something more sustainable.

We will be on that Noah's ark of old if we don't read the writing on the wall of our current momentum; and this goes beyond current crisis of finance; its crisis of civilization. 

Not that I am a biblical man in substance but biblical lessons have the intuitive wisdom and flavour of what is our true conundrum, without the dogmatic finger pointing to Armageddon leading to the final resurrection and man's deliverance from this material existence on the day of redemption.

I stay agnostic on that plane and believer in man's non fatalist destiny. 

This analysis of the coming age paradigm is something worth delving into. Its true gold.



Sun, 01/27/2013 - 10:25 | 3188971 Inthemix96
Inthemix96's picture


Your comment got me thinking back to "Live Aid" back in the early eighties, for the plight of the famine victims in Ethiopia.

I can remember vividly the pictures of emanciated women with a plethora of children to support all in the same situation.  The Brits donated millions to the cause, and what happened?  Nowt, thats what happened, god knows how many of them poor fuckers left this mortal coil in anguish and starvation and still things stay the same.

I guess what I'm getting at is greed knows no bounds and human stupidity the same, be thankfull of what you have now because who knows whats coming our way.

Sun, 01/27/2013 - 10:37 | 3188976 falak pema
falak pema's picture


That story beckons an image to my mind, a true humanitarian and iconic woman of our past times : Audrey Hepburn, who spent so much of her energy on that mission to bring the plight of those children front stage to first world. 

We should never bow to stupidity nor forget those who went out of their way to do the opposite. 

She was something...ethereal fairy and queen. And, she got laid! 

Sun, 01/27/2013 - 11:09 | 3189017 Inthemix96
Inthemix96's picture

I truly believe falak that a time will come when the honest, decent and moral folk will overturn this cart and return to some sense of normality.

I really do believe it will happen.  We cant go on like this friend, we really cant.

Sun, 01/27/2013 - 14:48 | 3189320 Seer
Seer's picture

We're completely torn by compassion.  It's the greatest conundrum that there is.  If we provide "aid" we will only likely be able to do it for so long, and then what?

Think Green Revolution.  We cranked up agricultural production only to see it decimate land/soil.  One day, when mechanized, chemicalized farming can no longer be afforded it'll be one big POP!  And for all those "we'll switch to a [yet to be "discovered/invented"] alternative" folks out there- good fucking luck finding any such solution to depleted soils (NO ONE THROUGHOUT HISTORY has been able to do this- the ONLY "solution" has been painstaking work and time, means that won't be available in the future, as they are not now only possible by the good graces of cheap fossil fuels).

My wife is from the Philippines.  I have a bit of an understanding of the precariousness of the "poor."  The Philippines, as do other countries, includes remittances from abroad as GDP.  In the case of the Philippines it's 10% of GDP!  Care to guess what happens when jobs decline outside of the Philippines?

On the whole humans are consuming more than is sustainable.  Scattering the "wealth" around doesn't change the over-all picture, no more than the notion of spreading risk around was supposed to cure the problems of "risk."

Don't get me wrong, I am more than pained by the notion of folks starving: it's why the only thing I can look to do in my remaining time on this planet is to move to produce food (and, I am pained here as well knowing that only a hunter-gatherer mode of living is likely truly sustainable- I'm not ready/able to live as such).

If there's some undeniable/quantifiable proof of my assessment being wrong I'd be happy to hear it.  I just think that the significance of this is FAR to great to be waving magic wands or stating feel-good phrases (not like I would object to these IF they had a positive effect).  Always ask what the consequences of being wrong might be: the Green Revolution just might turn out to be the biggest (ultimate) failure in human history.

On top of all this is the notion that we've ALWAYS pursued growth.  One cannot "stabilize" in the face of growth: "sir/madam, all is fine, your cancer is stabilized AND growing!"

Sun, 01/27/2013 - 10:48 | 3188999 joego1
joego1's picture

Very good article. I see globalization as the biggest problem in the short run. Americans need to demand viable local economies if they are to survive. I think we can solve our energy problems over time if we can avoid major conflicts. Our delusion with telling ourselves lies about our current situation is a serious problem which needs to be solved soon. Unfortunately it won't change much until we suffer some sort of shock. I expect that to be another financial melt down of some sort. ZH readers need to galvanise into a political force with some excellent plans coming out of the crisis when people will be looking for solutions. How can we do that?

Sun, 01/27/2013 - 10:49 | 3189000 Stuck on Zero
Stuck on Zero's picture

Pretty good up until the statement:

...expecting a technological solution to occur would be extremely unwise, because technology uses energy – it does not create it.

Technology has always solved our energy problems and always will.  For example, if technology can boost the efficiency of a PV cell to 50% all of our energy problems are over.  That's an absolute given.


Sun, 01/27/2013 - 15:01 | 3189338 Seer
Seer's picture

The statement was a non-sequitor.  Or, at the very least, fails to introduce the notion of quantification.  Your reply, however, fails 100% on the quantification side of things.

"if technology can boost the efficiency of a PV cell to 50% all of our energy problems are over.  That's an absolute given."

HOW MUCH ENERGY DOES IT TAKE TO PRODUCE THAT 50% increase in efficiency?  Do we have enough energy to create REPLACEMENT sources? (keep in mind that any energy used here would have to be removed from the existing stream of uses)

Also, how sure are you that we'd have enough surface area on the planet to generate the required energy NEEDS (which you do not account for)?  Can we do this all in your YARD? (the point of this question is to force quantification- clearly your yard couldn't do it)

Further, you do NOT account for growth.  And it is this very point that gets you a big FAIL! (given a short enough time-frame [think integral calculus] just about anything can be seen as approaching zero, even growth)

Not that it matters but for abstract logic thought, but be careful about assuming that intercepting solar energy won't have some side effects.  As a farmer I KNOW that it's important that soils achieve proper temperatures in order to grow things.  A test of this can be made by placing a bunch of reflecting surface around a plot of land and then measuring the soil temps; compare this to soil temps in the plot without any reflective surfaces.  It is IMPOSSIBLE for this difference to NOT be measurable: if that were the case then the earth's weather systems wouldn't exist, as all surfaces would respond the same to their surrounding (different) masses.

Of course, those same minds that said that it didn't matter for nukes to be built near coastlines ([and] earthquake zones) would tend to pass over any such attempt to quantify anything that might detract from their profiting.

Sun, 01/27/2013 - 21:18 | 3189957 Cloud9.5
Cloud9.5's picture

If Custer had only had assault rifles, but the technology arrived a little too late.

Sun, 01/27/2013 - 11:02 | 3189013 BubbleSurfer
BubbleSurfer's picture

Although updated for our decade, pretty much every point made in this essay was made in a book called 'Future Shock,' written by Alvin Toffler in 1970. This is not to say that it's invalid, only that Toffler made the same observations a generation ago.

Sun, 01/27/2013 - 15:24 | 3189365 Seer
Seer's picture

Are you're presenting a book review?  What about YOUR view?

IMO it seems like you're making a subtle attempt to ridicule.

Not to say that you're an idiot...

Re-read the above sentence for FULL effect.  What was YOUR reaction?

"This is not to say that it's invalid"

You see, if he were alive today Edward Bernays would smile on you and think of you as a viable student.

The "it hasn't happened yet, so it's unlike to happen in the future" argument/position is easily derailed.  Just because one hasn't had cancer yet it does NOT prove that they will not.  Up until it happened in the US in 1970/1971 the doubters of M.L. King Hubbard's peak oil theory were putting up the same "it was forecasted a generation ago!" rebuttal: these people grabbed the money and ran off (hid behind other schemes or retired and died comfortably).

Mon, 01/28/2013 - 08:13 | 3190828 BubbleSurfer
BubbleSurfer's picture

You have both completely misread what I wrote, and rebutted an argument I didn't make.

Not to say that you're a flamer...


My point is not that this essay is invalid, but that it's unoriginal; as is your boring attempt  to pick a fight.

Sun, 01/27/2013 - 11:24 | 3189029 mess nonster
mess nonster's picture

Excellent article, especially the EROEI, which is spelled P E A K O I L B I T C H E Z.

Seems we have two options,  a-la Woody:

1. One World Centrally Planned Government and Economy.

"You- live. You- die! On a 1/14 ratio, former to latter. Lethal injection too expensive, lead is cheaper, you'll just feel a little pop behind your ear, but starvation is cheapest, just put them in a pen and don't feed them until they're all dead.

2. Continued status quo free for all, in which consequenses amount to the same, except maybe the survivor/casualty ratio is closer to 1/9, due to the chaos of the hunger-fuelled bloodbath.

Oh, damn, I forgot about all those 450 nuke plants, and in the confusion, so did everyone else, but they didn't forget about us.

That ratio is looking closer to 1/100, and who wants to be a survivor in a radioactive wasteland?

Just trying to be positive!

Oh, right. Sorry.

Thorium nukes and concentrated solar energy, combined with new laws against usury and the prosecution of all bankers as guilty of crimes against humanity have both stopped the debt crisis and the energy crisis. Abundant free energy allows for the use of safe hydrogen cars, which are non-polluting, and the levels of prosperity world-wide have gone up so dramatically, that everyone spontaneously limits themselves to zero-population growth- all families are two children, max.

All barbarous relics, such as internal combustion engines, crude oil, guns, and gold, are displayed in holocaust museums across the globe.

The ratio of poets to workers is 1/1, and each is given a status equal to the other. Political offices are merely used as tell-tale traps for emergent sociopaths, who are institutionalized as soon as they win the election. Once re-educated, many of these become excellent musicians and/or poets.

The population naturally declines, within 20 years, to a manageable level of around three billion, and vast areas of the earth are voluntarily set aside as nature preserves. Those who do not fit in well to modern society are free to join primitive tribal structures and live off the land in stone age simplicity within these vast preserves. This cuts down on psychiatric problems and most violence.


Sun, 01/27/2013 - 15:31 | 3189370 Seer
Seer's picture

Seems perfectly do-able! </sarc>

If I were to take the counter-argument that many have used to deny resource depletion, I'd have to say that this could NEVER happen because it has never happened in the past and that others have made this claim (basic premise of it) for thousands of years! (mixture of <sarc>)

I find that the infinite-world/technology-will-save-us-all folks are quite good at practicing self-denial.  Pretty easy to do, all one needs to do is to NOT think about the unthinkable: heck!, after all, what sense does it make to try and think about something that's unthinkable? </sarc>

Sun, 01/27/2013 - 11:34 | 3189034 Mad Muppet
Mad Muppet's picture

All I can say is thank God for ammo cans and mylar.

Sun, 01/27/2013 - 12:16 | 3189080 smacker
smacker's picture

"...the massaging of data to the point where economic trends are obscured..."

I believe this is a far bigger problem than many people realise.

Any analyst with an IQ bigger than a boot size will tell you that trying to measure anything using measurement points and data which at best is irrelevant and at worst corrupt, will never tell you anything useful. How can any government implement good policies based upon this farce?

But this is what has evolved over a number of decades. Official government stats have been bastardized by the political elites and their number-crunchers to the point that they never tell you what's really going on. Several examples are: CPI, GDP, sovereign debt levels and unemployment figures. There are plenty more.

The elites have constructed a system of the real world that we all live in and The Matrix which they've constructed and is intended to mislead and fool MSM and voters.

Sun, 01/27/2013 - 15:38 | 3189378 Seer
Seer's picture

"Official government stats have been bastardized by the political elites"

Ever consider that they were voted/place in positions of power for This very reason?

Further, how come no mention of the bastardization by the PRIVATE sector?  Again, the Fed is PRIVATE, and it's the consolidator of all this is PRIVATE in the way of finance.

"The elites have constructed a system of the real world that we all live in and The Matrix which they've constructed and is intended to mislead and fool MSM and voters."

Yeah, it's called perpetual growth on a finite planet.  It makes us all feel good, until, that is, it doesn't...

The KEY point of the article, which is a bit hard to pull out (because there's so much other good stuff), is that the bubbles are necessary to float the elites.  The entire notion of stratification DEMANDS that there be bubbles: there is NO adjustment because the System is working just as it has always been made to work; the "problem" is only seen when the winds pick up and the curtain gets swayed to the side and we see the men behind it- the winds die down (because the masses can't stay focused) and the curtain covers things back up and the game continues.

Sun, 01/27/2013 - 17:46 | 3189538 smacker
smacker's picture

You may have missed the central point of my earlier comments, which were about official govt stats and the way they've been bastardized by the political elites, usually to hide the truth.

Most people don't understand stats. So, I don't think we vote for political elites for them to bastardize the stats. It's the other way round: the elites bastardize the numbers to fool us into believing how well everything's going, and then we vote for them because we think they're doing a good job.

On the private sector...yes of course they do it too, but usually for different reasons.

I see this topic has now been posted about on ZH:

Great minds think alike ;-)

Sun, 01/27/2013 - 18:51 | 3189616 Seer
Seer's picture

"You may have missed the central point of my earlier comments, which were about official govt stats and the way they've been bastardized by the political elites, usually to hide the truth."

Trust me, I didn't.  And, really, I think that we're saying the same basic things.  I was just trying to point out that we sometimes look to ascribe failings to institutions when in fact it's a failing of human nature (which really doesn't have any means for real corrective action).

"the elites bastardize the numbers to fool us into believing how well everything's going, and then we vote for them because we think they're doing a good job."

I'll concur with this as it stands! :-)

"On the private sector...yes of course they do it too, but usually for different reasons."

Same results though.  It's ALL about retaining a position of power (being recognized as lotto winners picked to ride the surf of the bubbles).  If one looks at all the lobbyists in DC, however, it's hard to imagine that it's really the dog that's waging the tail: as such I'd still think that the most power is driven through the PRIVATE entities (when the banksters [Fed et al] jumped up and told the US govt that they'd blow it all up if they didn't get their bailouts, well... actions speak pretty loudly]).

Again, pretty petty differences here.  In my mind I caution about instilling in the rooting class out there (popular opinion) a false target.

Mon, 01/28/2013 - 05:53 | 3190741 smacker
smacker's picture

Yeah, I agree with you. My earlier comments were obviously limited to the issue of official government stats which have become of little use due to manipulation & distortion of the basis of measurement by the political machine over the years. But of course this is not limited to a single political party and, as you say, the bigger issue involves the private sector too.

Sun, 01/27/2013 - 12:16 | 3189082 shovelhead
shovelhead's picture

No worries,

Our friends at the CDC/ NIH are busy working on that problem with the weak lethality of Avian/swine flu. Once they can insure a 40/60% mortality rate our problems will be solved.

You're gonna love it down on the farm. A nice simple life.

Plenty of tallow for candles.

Sure, a few of the old timers will be jealous of the folks in the big house having electricity but envy will disappear as they die off.

Now eat your porridge and get back to work.

Sun, 01/27/2013 - 15:29 | 3189368 TPTB_r_TBTF
TPTB_r_TBTF's picture

The End of an Era:

huge blast at Iran nuclear plant


The United States recently added a weapon that officials believe could do significant damage: the “Massive Ordnance Penetrator,” a bomb that is designed to attack deep, hardened sites.  NY Times

Sun, 01/27/2013 - 15:44 | 3189385 Seer
Seer's picture

It's the male thing to do!  Build stuff and then blow it up!

The "civilized" people (the "good guys," the ones that bring us modern finance) people build energy plants (containing built-in failures, or not) and the "uncivilized" people (aka "terrorists/bad guys") try and blow them up.

The "civilized" people (the "good guys," the ones that bring us modern finance) "remove" the "plants producing WMDs" (aka "energy plants") that the "uncivilized" people (aka "terrorists/bad guys") built.

Sun, 01/27/2013 - 22:05 | 3190087 TNTARG
TNTARG's picture

Plus... Something I don't like about this:

Tullett Prebon is one of the largest inter-dealer money brokers in the world.

Among other things, "Tullett Prebon Alternative Investments ( provides its institutional investor base with the opportunity to access primary and secondary markets in all types of alternative investments such as hedge funds, private equity and real estate funds."

Meaning: Is Tullett Prebon free of particular interests, objective enough for us to take seriously into consideration their men's assesments, theories?

Mon, 01/28/2013 - 00:45 | 3190474 Seer
Seer's picture

And what about you?  Do YOU have an agenda?  You've been dogging the fuck out of this (and getting shit horribly wrong).

How about you present some sound reasoning against anything that they present?


I don't fucking care about the messengers, as they distract from the information that IS of importance.

Mon, 01/28/2013 - 07:04 | 3190779 TNTARG
TNTARG's picture

What about me? "Dogging"! Wow!

I'm a free person, independent, not government, not working for any corporation at all! In fact, I've created my own business, enough for me and 155 employees. An advice: always look at the messenger and the source of the message. It's crucial. We always need to consider the author's purpose. What is he trying to convince you about? Why did he wrote the piece? What do he (they) want you to think, to do, as a result of the reading? What unsaid, unstated contents are in it (implicit contents)? How the explicit and implicit content affect you an others?



Tue, 01/29/2013 - 00:12 | 3193867 Seer
Seer's picture

You have challenged NO position taken by the authors.  Yet, you feel content in stating that they are wrong because of their business, or, perhaps, because their message isn't what you wanted to hear?

You have managed to turn this into a discussion about me (and you) rather than the content of the article (actually, the discussion should be around the COMPLETE content of the PAPER itself, as it contains much more detail).  If this is what you pass as critical thinking then I will be sure to not invest in your company (as I know the outcome).

Do NOT follow this link or you will be banned from the site!