I am an ‘accidental biophysical economist’ (being neither a biophysicist nor an economist), having hit upon and written about the connection between GDP and energy consumption over a decade ago. The connection should come as no surprise to people who think like engineers and technologists. The notion that energy, combined with human ingenuity and inventiveness, is a lever for increasing the quantity of goods and services that humans can produce is easy to believe. And the quantitative relationship shown in the various data in this article demonstrate that notion clearly.

Rutherford’s problem is not convincing folk of those truths but in persuading them to live simpler lives. They just don’t want to, or if they claim they do then they have no idea of how to achieve that aim. The data are clear. The only way to use less energy (and this must in principle be true for other earth resources) is to become poorer. Individual consumption choices make no difference. A family earning say $80,000 per annum will account for about the same amount of energy regardless of what they do with their money, unless they actually burn it. Heading for the bush and living in a shack won’t cut the mustard. However one spends the money, energy will be consumed. That’s what the data say.

Promoting poverty is a hard sell. On the bright side (for some, that is) more expensive energy helps reduce living standards. And energy must become more expensive as we move away from fossil fuels towards low-emissions energy. The irony is that environmentalists keep cheering on the claimed ‘plummeting’ costs of renewables and the battery storage they require. They should really be urging for the opposite.

THE ENVIRONMENT? STAGNATION?

Well talk about confronting issues both blindfolded and with the ears completely plugged!? Just look at the recent fair pay decision that cuts the income of folk already well below the poverty line!

Why? Because diabolically dumb green activists won the day and replaced manufacturing etc, with tourism.

And just as it had to happen and has happened elsewhere, too many people became dependant on the tourist dollar to survive. Thereby allowing too many operators, some none too sharp, to overpopulate the industry!

And as one might imagine, too many operators means they have to get costs down in order to make a quid!

So what's first? Water, energy, transport costs and taxes?

No!

The penalty rates of folk already living well below the poverty line!

Cutting the fat from folk who just don't have any! And that in turn may well result in some of our best and brightest, being deprived of a higher education!

And so the chain of consequences become a never ending circle that makes the environment the very last concern!

Thus ends the biophysical story behind 'secular stagnation'!
Alan B.

Tombee, we have enough thorium in our dirt to power this planet for a thousand years and thousands more when we mine thorium from igneous rock.

When you are the one expected to hand wash everything for a family of four with water you first have to fetch and carry; then heat with firewood you went far and wide on foot to cut, collect and carry? (up to two thirds of humanity) You might begin to understand two things?

This can never ever be a case for poverty unless and until it is universally applied to all, but particularly those who propose it!
As in do unto others etc/etc!

If I were to step outside my door and gather dirt, enough to fill a one cubic metre box, then using ultra simple gravity separation extract from it the most energy dense material on the planet, thorium and around 8 grams of it, and from almost anywhere and any paddock or backyard!

It'd cost me around $100.00 dollars to dig and process, then and without enrichment or further processing, use that 8 grams of thorium in a walk away safe molten salt reactor, I'd have enough energy to power my house and car; and an abundant lifestyle for around 100 years!

Do the sums, that's just a dollar a year and the principle reason for not having it, as it would decimate the (4 tillion a year plus) fossil fuel/coal fired and current nuclear industry!

And already tried and test and not found wanting fifties (carbon free) technology abandoned in the seventies, because, there was no weapons spin off and no prospects of any ever!

Take a butchers at U tube and google tech talks, to listen to eminent scientists, as Kirk Sorensen and others make an undeniable case for thorium as far forward into our future as is possible to foresee.

Recent advances in very low cost desalination, which if coupled to the cleanest safest lowest costing energy on the planet, simply make a complete and utter nonsense out of socially engineered poverty, just the very opposite!
Alan B.

While our politicians are simply facilitators of corporate globalism, at the expense of consumers which ultimately drive the growth, nothing changes till the ship hits the rocks!
And how I love the glib example of the Asian economic phenomena and its place in the great money making scheme.

Most parts of Africa are a good example of a deserted global economy. This will be the way of the West.

There is a bottom line and there are plenty of global examples to draw on.
But it defies logic to believe that the way forward is to promote a fire sale mentality, in order to prop it all up!

The evidence to refute the "biophysical story" is pretty clear.

As acknowledged in the article, oil prices are low. Therefore it can't be credibly argued that they're the current limiting factor for economic growth. So Jonathan Rutherford resorted to arguing that "it was a consequence of fundamentally sick global economy, worn out under the weight of 14 years of almost continuously high oil prices and ever growing debt – the upshot being that investors and consumers simply could no longer afford the higher price". But that too fails to stand up to scrutiny: it was the subprime loans crisis, not an oil shock, that caused the GFC, and the problem since then have been financial not technical.

Jonathan (and indeed Gail Tversberg, whose article he links to) have failed to notice that debt repayments aren't a constant; they're a variable which gets adjusted by central banks as needed.

While there is much in what you say Adian, and the house price bubble burst being the last straw on the camel's back. Nonetheless every western style economy rests on just two support pillars, energy and capital. And when the combination of over abundant credit created to offset energy prices that have become unaffordable, collapsing economies are the inevitable foreseeable result. And assisted by the sheer madness of concentrating to much of our finite or shrinking wealth in too few hands.

Now you seem to think we can just create debt forever and a day, as a way to prop up the economy? Well that's already been thoroughly debunked by the on the ground results in prewar Germany, Italy and basket case economy Zimbabwe, where you needed a barrow load of cash to pay for a loaf of bread. While keynesian economics works with largely borrowed cash or huge deficits, there's limits beyond where we should not go! And often defined by overvalued over leveraged assets!

Moreover energy is critical given nothing is planted, grown, harvested, processed, manufactured, pumped or transported without an essential energy component!

So the price we pay for it is reflected in everything we buy or grow, with irrigation and the obligatory energy consuming pumps! I mean I've read estimates that calculate, that it takes 55 gals of water to produce an egg?

Water is critical and central to most manufacture. And indeed central to steel production.

That said, there's good debt and that debt is almost as limitless as the income earning projects we can build with it. And it helps if you still own your economic sovereignty or are able to reclaim it without going to war!

You should move to Zimbabwe mate where you'll find plenty to agree with your limitless debt economic theory, just don't expect any more success with hoodoo economics mark two than mark one. Did you say or infer you were a CPA?
Alan B.

There is supporting evidence in the finances of the major international
oil companies. Exxon, Mobil, BP & Shell all report low profit results.
Of those only Shell comes out and spells it out loud.
Shell has stated that they are planning to leave the oil industry and
concentrate on natural gas.
Shell has been selling oil assets so that they can pay dividends.
Those are only straws in the wind of intention so do not expect Shell
service stations to disappear overnight.

Declining EROEI doesn't necessarily mean that prices (like that of oil) will rise since squeezed net incomes could reduce affordability. We interpret lower prices as a sign that things can't be too bad but hypothermia sufferers sometimes take off their jacket as they no longer feel cold. The antidote in both cases is more energy or warmth.

The middle class got to where it is today after WW2 through oil, coal, hydro, rich mineral deposits, vast forests and increasing numbers of willing workers. Now we have the workers but not increasing resources. With oil depletion some industries like aviation must shrink whether fares go up or not. Food production and distribution with an EROEI of 0.1 must get more difficult. That is 10 kJ of tractor fuel, fertiliser, packaging, refrigeration and transport for every kJ eaten.

If as some suggest we need an EROEI > 8 for major energy sources then solar PV with batteries with an EROEI of 1.5 (according to Weissbach et al) can no longer grow the world economy. We'll find this out the hard way. Alan B. has suggested an energy source with a high EROEI but the punters don't accept it.

Jonathan has no idea like most of our delusional elites. It is the debt money creation system that is causing economies to stagnate. When they went off the gold standard in 1971 the creation of money as debt by our private bankers began in earnest.

Debt compounds like interest and after 46 yrs, the debt is 3 times the GDP of the planet and cannot be repaid.It now takes exponentially more debt creation to pay for the debt of yesterday.It is like you using one credit card to pay off another.

Even if they have a debt jubilee i.e. debt forgiveness, the system cannot be saved since the system has sold our debt back to us in the form of bonds which many of our super funds invest heavily in.
After the 2008 crisis,the new debt went into propping up shares,derivatives and the bankers and not the real economy. The debt has doubled since 2008.They knew this system would collapse and now our MSM warns us about Economic Armageddon, but this is too late. http://www.news.com.au/finance/economy/australian-economy/australia-headed-for-economic-armageddon/news-story/998390d5128ed69e8799db3de9efe52d

Well Arjay, debt is the problem. The reason such debt got generated
was because the falling GDP and growth caused the need for debt.
If growth does not generate surplus GDP the money is not there to do "things".
So debt is the way around that.
However this era of low or zero growth is permanent so there will
never be the surplus GDP to repay the debt.

Once the financial world wakes up to this then it will hit the fan.
Leave you money in the banks and the Financial Stability Board will get it.

Jazz you will find this very interesting . http://www.youtube.com/watch?v=-NAxzPGp7yk&feature=share The Asian banks are going to use block chain technology to eliminate cash. If the bankers eliminate cash then there will be no run on the banks when TSHTF.

Bazz,
Money doesn't have to be borrowed into existence.
It's ink and plastic no different than you find in a recycle bin.
Private Central Banking forces this ideology of borrowing onto us.
It's essentially a Ponzi Scheme.

I suggest watching 'All Wars Are Bankers Wars'.

http://www.youtube.com/watch?v=SKnF1HEUwuo

Arjay,
Before the current debt based money system, the gold backed system we had was far worse. Because the currency values were fixed, trade imbalances weren't self correcting, and speculators were making huge amounts of money at government expense (and in some cases creating a hyperinflation risk). And there was still as much need for debt as there now is, but governments had limited capacity to borrow.

You seem to have overlooked the fact that if productivity increases
and//or if interest rates fall
and/or if inflation occurs,
the capacity of the private sector to borrow increases.
Individual loans will be paid back, but aggregate debt can keep increasing for ever.

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Armchair,
Apart from the US Federal Reserve, all the world's central banks are 100% government owned, despite what conspiracy nuts claim.

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Bazz,
The reason debt is needed is simpler than that; without it, only the rich would have the means to invest in the equipment they need to improve their own productivity.

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Taswegian,
Not only does EROEI not have to exceed any arbitrary figure, but IIRC Weissbach's calculations are way off because he "converted" non energy inputs to energy values.

Alan B.,
There's a lot more to energy than oil. Solar cell prices have been falling rapidly and will continue to fall.

Only countries with their own floating currencies have unlimited capacity to borrow (and only in the currency they create). Anything with a fixed value (whether against gold, the US dollar, the Euro or anything else) creates a hyperinflation risk when it's held above market value.

Countries with their own floating currencies still run the risk of hyperinflation if they print money and immediately sell it to pay off foreign currency debt. Indeed that was one of the causes of Weimar Germany's currency collapse. But AFAICT the last time printing money for domestic investment caused hyperinflation in a country with a floating currency, it was the Confederated States of America (in the American Civil War) which was blockaded thus couldn't trade its way out of trouble.

As for Zimbabwe,I couldn't think of a worse way to run an economy if I tried. It had:
a fixed currency,
foreign currency debt,
policies that discouraged foreign investment,
a lot of its resources devoted to fighting a war in the Congo, and
a government effectively declaring war on the farmers who were the countries main exporters!

I oppose all forms of economic mismanagement. You seem to support one form of economic mismanagement (failure to run deficits when required) because your understanding of what causes a currency to collapse leads you to panic about a danger that isn't really there.

BTW I've never been a CPA.

An interesting group of replies.
Money doesn't have to be borrowed into existence.

That is right, you can get a printing press and print it.
You might have to borrow to pay for the paper & ink.

The reason debt is needed is simpler than that; without it, only the
rich would have the means to invest in the equipment they need to improve their own productivity.

That is the point, productivity is delining, growth is very low.

Weissbach's calculations are way off because he "converted" non
energy inputs to energy values.

ie he took into account other necessary inputs;
The vehicle the maintenance man uses, his wages, the house he lives in,
the food his family eats !
They are all paid for by part of the outputs of the renewable system,
they are sold and passed to the maintenace man.
The rent paid to the farmer on whose land it is installed is also an overhead.

Aldan ,I'm not promoting a gold standard.We can have a better monetary system that is not created as debt if there are rules everyone abides by.The gold standard did stop them from creating too much money and thus your savings and wages were not eroded by too much inflation.

The real rate of inflation created by their debt money system is at least 6% so at 3% bank interest ,you are still losing another 3%. Serious inflation in the USA will begin this yr as many countries trade directly and do not use the US $ as the reserve currency.There is at least $16 trillion out side the USA and when this comes home,serious inflation will begin.

Bazz,
For modern economies, paper money and electronic money are in equilibrium. Thus even if you start off by printing paper, you're likely to end up with electronic (debt based) money because that's what most customers prefer.

"productivity is delining, growth is very low."
But growth is still positive. Across the economy, productivity is rising, even if it's declining in the oil industry.

I made a mistake: Weissbach's calculations are worthless because he used old data; he wasn't one of the people who fudged the figures by "converting" non energy inputs to energy values and still claimed it to be EROEI (which by definition shouldn't take into account any non energy inputs).

In your example, the maintenance man and his family would eat whether he did that or something else. And the formula used for the conversion of money to energy wrongly assumes that money exists from when a profit is made. But in reality the money's borrowed into existence long before there's any profit; the correct formula should be to multiply by zero.

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Arjay,
"We can have a better monetary system that is not created as debt if there are rules everyone abides by."
Well there is the Sharia alternative, but good luck trying to convince people that that's better!

Anyway, why do you think it would be better if money were not created as debt?

"The gold standard did stop them from creating too much money and thus your savings and wages were not eroded by too much inflation."
In some countries. In others it destroyed them by hyperinflation. And in case you haven't noticed, there hasn't been much inflation lately.

"The real rate of inflation... is at least 6%"
How do you figure that?

Countries have been trading directly for years.

IF America's creditors decide they don't want US bonds any more, there will be significant devaluation, but that doesn't necessarily lead to serious inflation. As the US dollar falls, US exports will become more competitive; US industry will become more profitable; the US dollar will become more attractive to investors, and its value will stabilise.