Global Economic Growth Ended in 2000

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life after growth

The main premise of Life After Growth: How the Global Economy Really Works – and Why 200 Years of Growth are Over  is that global economic growth has ended. Western governments conceal this fact through debt creation, inflation and clever manipulation of statistical economic indicators. According to Tim Morgan, leading analyst at the London financial brokerage Tullett Prebon, economic growth ended in 2000 and the economy has been shrinking ever since.

Morgan attributes the end of global economic growth to the high cost of fossil fuels.* This is because the real economy (which many people confuse with the financial economy) is a direct function of surplus energy. In pre-agricultural times, there was no energy surplus: human beings derived exactly the same amount of energy from their food as they expended acquiring it. With the advent of farming, they managed to produce a small surplus of energy that enabled a small minority to engage in work other than food production.

In the 18th century the invention of the heat engine enabled surplus energy (and the real economy) to grow exponentially over the next 200 years. Now that the cheap fossil fuel has been used up, our energy surplus is declining. This, in turn, is reflected in the gradual shrinkage of the global economy.

Measuring Surplus Energy

Energy surplus is measured as EROEI (Energy Returned Over Energy Invested), the ratio between the energy produced and the energy consumed in the extraction or production process. 1930s oil fields had an EROEI of 100:1. Once the easily accessible oil was used up, the EROEI began to decline. It was 30:1 in 2000 and it declines by about 2% a year. In 2014 it stood at 14:1. Unconventional oil sources have an extremely low EROEI (eg tar sands and fracked shale oil have an EROEI of 3:1).**

Declining EROEI’s are always accompanied by a spike in oil prices. This translates into higher prices for everything, due to the energy required for food production and manufacturing. Owing to higher prices, people consume less and the economy slows.

Globalization Has Been Extremely Damaging

Morgan is highly critical of politicians who fail to distinguish between the real economy of goods and services and the shadow economy of money and finance. He also feels globalization and rampant consumerism have been extremely damaging to the real economy. The mistake western countries made with globalization was reducing their production without reducing consumption. Instead they increased consumption levels by increasing borrowing and debt. Globalization was extremely beneficial for banks, due to the voracious demand for their product (loans). Meanwhile the diversion of large sums from production to the finance sector – aggravated by consumerism and the rise of consumer debt – hastened the decline of the real economy.

This wholesale debt creation and the widening split between the real economy and the financial economy is largely reflected in inflation and the destruction of the value of money. The US dollar lost 87% of its purchasing power between 1962 and 2012, which the government systematically conceals through misreporting of key economic indicators.

All economies function best when the financial economy coincides with the real economy. At present the primary methods of debt destruction are quantitative easing*** and inflation (it’s always easier to repay debts with devalued money). Other methods in the wings are cuts in pensions and Social Security payments and eventually bank failures and government defaults. Morgan feels that resource poor countries like Japan and the UK are at highest risk for default.

How Governments Lie with Statistics

My favorite chapter details the decades of statistical manipulations that have made government indicators of inflation, growth, output, debt and unemployment totally meaningless. John Kennedy was the first to exclude “discouraged” workers (who weren’t actively seeking work) from the unemployment rate. Johnson was the first to conceal the size of the government deficit by including the Social Security surplus in the federal budget. Nixon was the first to exclude energy and food costs (which rise the fastest) from core inflation calculations.

I was most shocked to learn that 16% of GDP consists of “imputations” or dollars that don’t actually exist. The largest single imputation the US government adds is “owner equivalent” rent. This is an amount equivalent to the rent all rent homeowners would have to pay if they didn’t own their own home. In 2011, this added up to $1.2 billion (out of a total GDP of $12.7 trillion).

The second largest imputation involves non-cash benefits employers give their workers (medical insurance, meals, accommodation, etc) and free banking services.

The US Government is Technically Bankrupt

This over-reporting of GDP, combined with under-reporting of inflation, makes it appear that the US economy is growing when it’s not. .

Morgan estimates that as of 2011 true US debt (government, business and personal) was 449% of GDP. Technically this means the US is insolvent as collective liabilities far exceed any realistic prediction of future income.

Politicians Need to Stop Lying

Morgan maintains that industrialized societies urgently need to living with less surplus energy. Rather than continuing to delude themselves (and us), our political leaders must face up to the reality that our claims on future energy surpluses (aka debt) are totally unrealistic.

They need to end globalization and rampant consumerism and enact policies (support for renewable energy, public transport and strong local economies) that will help people adapt to the new economic reality.


*Most analysts predict oil prices will return to $100+ a barrel in June 2015, once the US surplus is used up.
**Some other EROEI’s (for the sake of comparison):
• Coal 8:1
• Solar PVC panels 8:1
• Solar concentrating power: 17:1
• Large hydro generation: 22:1
• Small hydrogenation 32:1
• Landfill/sewage gas cogeneration 40:1
• Onshore wind 20:1
*** Quantitative easing (QE) is an unconventional form of monetary policy where a Central Bank creates new money electronically to buy financial assets, like government bonds. This differs from conventional money creation, in which private banks create money out of thin air as new loans (see Money as Debt).

9 COMMENTS

  1. “shadow stats” has been meticulously adjusting gov econ data according to the gov’s own earlier methodologies, never honest to begin with, proving everything issuing from official sources has been a lie for decades. Forty pct of growth is siphoned off the economy by regs every year, that is, diverted to bloated bureaucracies, while taxes take another third. Congress has structured regs and laws so that financial profits are about eight times the burden any economy can sustain. Fifty-something thousand factories and millions of high-paying jobs are gone forever to enrich Goldman and its ilk, also asset stripping our corporations, which in effect is no different than congress and the past 4 admins bombing our manufacturing base and causing the impoverishment and dislocation of tens of millions of Americans to serve its owners. For example, the iconic Sears has been asset-stripped by Chabad frontman Lampert and once it’s sucked dry (it’s stock goes to zero), it’ll be tossed on the dust heap like the rest of our economy soon enough. Growth?

  2. …on a given signal – we, the 99%, will just suddenly stop accepting the 1%-ers paper fiat money. We will instantly, overnight, switch to gold coins, gold bars and gold nuggets (and all carry pocket scales). None of your paper trash will be accepted, none of your oversees bank accounts will carry anything useful for payments. We will see it as an ideological statement to just not touch or go near any dollar, yen, euro, pound etc,

    pass on!

  3. Cheap oil has not been used up.
    The Soviets proved, in the 1930s, that oil was not “fossil” fuel. It is a natural product of the earth’s core that replenishes itself.
    The until the financial sector decided to manipulate the price of commodities, the price of oil was based primarily (approximately 80%) on consumption/demand, and 20% future trading. For the last dozen or so years it has been 80% oil futures and 20% demand. The oil hasn’t been used up, there is a glut.

    • Russia has not proved that oil is a regenerative substance. Their oil production has moved almost entirely offshore, and has been in depletion for 15 years. What the Russians do, is pump until a well reaches a certain threshold of pressure, whereupon they rest the well until it repressurizes. Repressurization is not the same thing as regeneration.
      Conventional world oil production has remained essentially flat since 2005, with production increase due to unconventional oil-read fracking and tar sands. No unconventional oil is extracted without severe long term damage to the systems that support life. In the case of fracking, huge areas of once potable ground water are being transformed into toxic waste dumps. Better hope you are not drinking fracking fluid, because the damage to human health is going to be extensive, and irreversable.
      If the supply of sweet crude replenished itself, there would be no desperate destruction of the health of future generations through fracking, no en masse movement of oil extraction into the seas, no destruction of climate regulating ecosystems for tar sands.
      We do not know for certain whether oil is fossil or anarobic in origin, but we do know we are stealing every last bit of energy from the future for today.

    • @Mike Kay
      The “Soviets” are not the “Russians”. Stalin had his scientists investigating in the 1930s. How much plant and animal material would have to decay to have Saudi Arabia alone, produce 27,000 barrels (1 million US gallons) per day?

      In spite of what the oil industry spin is, there have been capped wells that have replenished themselves.

      As for the Russians, they have drilled in areas where there isn’t supposed to be oil, and found it. Like anything else, the rate of replenishment may be outstripped by the rate of consumption. That doesn’t mean we are at “peak oil”.

      My comments about the price of oil are correct. The price is being driven by oil futures, not oil consumption.

    • The facts simply do not bear out the hypothesis of regeneration of oil. See my above comment regarding this topic. Key factor here is depletion. If there was regenerative oil, there would be no depletion. If there was no depletion, there would be no need for any new wells, new exploration, or new finds.
      In terms of oil field discovery, this is the realm of geologists, and a good geologist always reviews conventional wisdom regarding where the oil is.
      There is no glut of oil supply, but there is a serious inability of most of the world to continue to afford to support punitive oil prices. China is the major growth market for oil, yet China itself is now facing its own slow down, thus the demand for oil is slackening, making it appear as if there is oversupply.
      The entire world, not just the USA, is downing in debt, entirely created by a banking cabal gone rogue. All monetary policies of the past several decades have been designed to destroy their targets, which exposes the wealth to be raped freely by rogue banksters. This is playing out in the fracking patch.
      Politicians love this, due to the kickbacks they receive for enabling the destruction and theft. It won’t matter what mechanism you describe for price setting, when prices are manipulated to the point of meaninglessness, and price discovery is not allowed to occur.
      Ultimately, the last word is from the rogue bankster, so be prepared for way more of the same.

  4. Most of what is written here is undeniably true. The eclipse of the manufacturing economy by the finance economy was a planned event, in which American politicians took a prolific role, lying as usual about all those illusory benefits. It didn’t happen all at once, and just like with the (not) federal reserve, and the non-ratified 16th and 17th amendments, it was done in the dark of night, when these incompetent nincompoops figured they could get away with it.
    It is impossible to restart the manufacturing economy with the current debt pile invented by the international banking cabal, and the moronic lack of vision displayed by the current crop of self appointed leaders.
    Oil is the lifeblood of the current bankster economy, and oil production is in deep trouble.
    Without the possibility of producing anything but poison “food”, and war, the sane American would do well to consider options beyond sitting in front of the TV with a bowl of gmo’s to munch down. This is not going to end well. However, when it does, hopefully there will be enough wisdom left in the populace to step down to sustainable energy demands, and to return to making the essentials of life.
    Of course, this is not all that will need rebuilding, just a small aspect of the work to do after the giant kaboom of engineered suicide quiets down.

  5. The financial gangsters cannot actually stop what they do. They are hardwired to gamble – like the drunken husband that staggers home on pay day night – to explain to his wife and children that he gambled away all of his wages on a dead cert and it lost – just like he did the last time.

    I have always maintained that there are two things which the human race do NOT need. One is SPECULATION – and the other is GROWTH. Only the money gamblers and money exchangers need speculation – NOT the rest of us. Only the 1% need ‘growth’ figures in order to play their game. The TV and media will continually tell us all about ‘growth’ and the stock market indexes – although it is utterly irrelevant to the 99% of us. What the 99% actually require is STABILITY AND SELF SUFFICIENCY instead of ‘growth’. It is also time to criminalize SPECULATION. Once this has been done – money and wealth will only accumulate in the hands of the people who CREATE it.

    This is even more important now – because there is plenty of evidence to show that all stock market and financial ‘growth’ figures are not even REAL anymore – and are simply falsified and manipulated in order to keep the plunder games going. This way those in favour at the top literally invent their own successes – and any that rebel or object to the cabal find their stock diminishing. FIAT currency is finally disappearing up its own arse.

    • Much of the current “growth” appears to be highly leveraged. I can’t help thinking the wholesale debt creation has hastened the decline of society let alone the economy. Society has been under attack since WW1. And not by accident, the gods of money want everyone to be an isolated individual consumer, not a citizen, or member of a family or even a nation or a race. They want individuals to look to the government for answers and their televisions for information.
      They will fail, but it’s going to be painful.

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