alt Hacker NewsHow wealth dies
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Despite talking about physical goods and services, there seems to be little in the article that goes into any detail about concrete reality, so I didn’t get much out of it other than a vague sense of foreboding.
Some nits:
The “energy cost of energy” metric seems a bit suspect and I wonder how it’s calculated. One reason I would expect it to go up because solar power is getting cheaper, and therefore it makes more sense to “waste” it on overprovisioning. Another is that the costs of fossil fuel are getting higher in some places. More detail is needed to see if it means anything.
Stock market valuations are in large part based on expectations about future growth. Perhaps these expectations are wrong? But I’m not sure that tells us anything one way or another about the wealth we already have. Perhaps some better way is needed to understand the present and past.
Claims that ring true:
* Energy physics puts an upper bound on material wealth
* The disparity between notional and material wealth is large and growing
* Notional wealth figures are largely speculative / fictitious
Claims that could be true (if empirically verified):
* Material wealth is decreasing
* Energy is decreasing
* The monetary system will collapse
Claims that have been implied but not demonstrated or argued:
* There is a causal link between decreasing energy supplies and monetary system collapse
Overall it smells like 2004-era peak oil doomerism. I’m not saying it’s wrong, it could just be early. Intrigued but not convinced.
While Dr. Morgan makes a few reasonable points about "real wealth" (aka points I agree with), he also hand waves many assumptions which are, at best, questionable.
Finally, be aware that he's been predicting imminent economic collapse for almost 20 years now. He'll probably be correct someday (assuming he lives a very long life), but that doesn't mean much IMO.
>> Rather, what we need to do is to calibrate the physical economy such that we can benchmark the monetary against the material. This enables us to avoid the futility of measuring the monetary only against itself.
Garden-variety Gold Standard quackery.
The goal of post-modern society is to create wealth without additional energy costs.
If I write software that schedules health care more efficiently, I've created value and therefore wealth. If I make a video game that's more fun than the previous generation of games, likewise.
> On this basis, global material prosperity has grown by 25% since 2004, which is nowhere near claimed “growth” of 96% in real GDP over that period. Moreover, the 25% rise in aggregate prosperity has been matched by the rise in population numbers over those twenty years.
This assumes that the GDP growth and the material prosperity are in a simple linear relation. I don't think this makes sense.
A small solar panel that can charge battery-powered night lights and a couple of cell phones produces negligible energy. Just a few minutes of air-conditioning consumption for a house in the US. Yet it can completely transform the life of households in an African town.
Ok, this seems like a good post. At the end of the day, what do I, as a single investor, do? I'm 50 years old, 2 kids in college, I have a $300,000 mortgage on a house presently worth $1M. I have $300,000 cash and an open eTrade account.
What do I do with the cash?
A) keep it as cash
B) Pay off the mortgage
C) Buy some QQQ
D) Buy some T-notes
E) there is no E. I am a simple man. Let's start with a simple solution.
This is a great article. It clearly explains what people like Nate Hagens have been saying for some time now. The real economy is about EROI & materials, money & financial activity can not change the amount of fossil fuels available for industrial processes regardless of any clever financial engineering.
"Yet you don’t need SEEDS analysis to know that the British economy itself is at an advanced stage of disintegration."
"Put another way, very little of the world’s supposedly enormous wealth actually exists in any meaningful sense."
Citation overwhelmingly needed. His claim that the economy is disintegrating is supported by the argument that: "you know, just look around." But what we're looking around and seeing is wealth accumulating at the very top.
The mistake he's making is thinking that if most people aren't doing well, then nobody is doing well, that the 1% aren't even really rich because their wealth is all a fiction.
In fact, wealthy people are really, actually wealthy. They are unimaginably wealthy. It is literally beyond the author's imagination how wealthy they are, leading him to the truly absurd conclusion that they're not really even wealthy at all.
"Nobody could be that wealthy, could they?!" Yes, my dude. Yes, they actually can be that wealthy. Indeed, they actually are.
> Renewables, and for that matter nuclear power as well, cannot materially slow, let alone reverse, the relentless rise in ECoEs caused by the depletion of oil, natural gas and coal. Neither can technology halt this trend, since the potential of technology, far from being infinite, is bounded by the limits imposed by the laws of physics.
Why would this be the case? Are fossil fuels uniquely low cost in terms of energy in? I can't imagine them beating the ECoE of "put this magic panel on your roof and get free energy whenever the sun is out, for decades". If the problem is that you don't get solar during the night, then that's a question of battery technology. And that's not even a problem with nuclear reactors!
And saying that technology is "bounded by the limits [of physics]" is not useful. That doesn't say where the limits are, only that there are limits. Yes, at some point, we'll have almost 100% efficient solar panels being fed into batteries with the highest practical energy density. But we're nowhere near that.
Insamuch as the western world is being hit with increasing ECoEs, it's from people who either can't or won't switch from chemical fuels to something with a lower ECoE. It would be more useful to identify those industries and show any evidence of cost disease in those industries brought about by the dependence on diminishing reserves of fossil fuels.
The true cost of energy and other resources (besides labor) is going up but that is a red herring. Above all the money supply is going up. THAT is why wealth appears to be dying so rapidly. The West is heavily invested in assets that seem immaterial, because business is only possible in the West when profit margins are high. There are multiple reasons for this but they tend to fall under the umbrella of international competition. If we didn't print so much money, it would be more obvious that there are simply not so many good opportunities in the West as a whole, as all the old money makers get replaced by outsourcing and automation.
Tl;DR computer nerd reads marx, rejects marginal revolution, writes about classical economics in turgid prose
Complete and utter horseshit
Stonks always go up!
And always have gone up for decades!
It's really great!
The problems this article outlines are very real, but the explanation for the underlying mechanics doesn't really pass any kind of a sniff test for me. The central thesis is that real economic growth is stagnating because the overhead for producing energy grows with time. But this is not the case! Fossil fuels will run out eventually, yes, but nearly every other type of energy production does not suffer from this, and is in fact getting better over time. Solar panels of today are miles ahead of those of yesterday. Similarly we're building out more and more wind and thermal energy. Nuclear is also fine, if we don't account for the regulatory difficulty in actually getting new plants up and running.