Living on credit, the 10% & the Remainder

Part 9 of Looking down the barrel — the Tooth Fairy & the Dragon-King

Dr Louis Arnoux
Aug 29, 2017 · 36 min read


This is our 11th GB Post on the emerging global demand for something else than what we currently have. This series focuses on the consequences of the end of the Oil Age on energy supplies and on all other aspects of living in the globalised industrial world (the GIW), between now and about 2030. In particular, this series of posts concerns the end of fiat currencies over the next few years and their unavoidable eventual replacement with cryptocurrencies backed with sustainable energy supplies.

The posts gradually explain the rationale for the solutions that we are developing to address that global demand for something else. A subsequent series will explain our solutions themselves and our entire approach to creating a sustainable and scalable energy backed cryptocurrency. A link to our previous posts is provided at the end of the present post.

In the previous posts we have seen how the rapid fizzling out of net energy from oil is triggering a global avalanche of events that we have called the Oil Fizzle Dragon-King (OFDK). In our assessment, short of rapid, decisive responses, OFDK will have destroyed the GIW as we presently know it within 10 years, 15 years at most, including the present monetary and financial order. The two previous posts focused on the interlinking of OFDK and global ecological threats. The present posts turns to the interlinking of OFDK with global financial matters and how this interlinking variously impacts people globally.

Of course, no one likes to hear about such matters as OFDK. Recently an engineer and physicist colleague commented about the energy analyses that enabled us to spot OFDK:

“People from the oil industry don’t like it at all.

People from the car industry don’t like it at all.

People from the finance industry don’t like it at all.

Politicians don’t like it because their voters don’t like it.

‘Green’ people concerned with climate change don’t like it if their jobs depend on public money spent for climate research… [and] because the whole story for mitigation of climate change must get rewritten.

And normal people don’t like it because it does not promise a bright future.

In addition, oil and car industry will never discuss [it], because even a discussion reduces their revenue. And they are able to spent money for suppression of the discussion.

In contrast, we both and some others feel the obligation to make [it] public…”

Not only are we making our findings public but we are also intent to show that a response to OFDK is feasible, affordable, profitable, that it concerns foremost new means to access and use energy, new means of networking and new means of transacting value in cryptocurrency mode, all sustainably and that we are building into GB.

The end of living on credit

Figure 1 — World GDP dips its nose

In earlier posts we have seen how world GDP has been faltering since about 2012 (Figure 1) and how this is a direct consequence of OFDK. OFDK is completely changing the game not only about global warming and the ecology of the whole planet, it also impacts everyone’s livelihood directly, wherever they live and regardless of their degree of wealth or poverty. It forces a complete re-think of the whole of consumerism, of money, finance and debt.

How could OFDK be the most fundamental cause for the dip in world GDP shown on Figure 1? The matter is rather simple: faltering net energy supplies from oil directly lead to a faltering GDP.

Figure 2 — Tight coupling of GDP and energy use

As shown on Figure 2, oil and other forms of primary energy supplies are tightly interlinked with GDP, that is, with all forms of economic activity. Notwithstanding many partial claims, when considered in aggregate at the global level there has not been yet any significant “uncoupling” of GDP from total energy or oil use — while energy intensity has declined in some parts of the world it has increased in other parts.

As we have seen in previous posts, more specifically, it is the net energy supplied to the GIW that matters. That is, the energy that is left when energy supplying industries have used energy to access primary forms of energy, convert them into forms usable by the GIW, transporting this and delivering it to the GIW.

As depletion progresses, more and more energy is used in the energy sectors, meaning that net energy available to the GIW tends to decline per unit of primary energy (declining energy returns to energy investments, EROI). The consequence is that more and more primary energy has to be brought into play for economic growth to possibly happen. This has been called the “Red Queen” syndrome in reference to Alice in Wonderland: “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” In other words due to the decline of net energy, energy industries must “run” faster and faster, that is, keep accessing more and more primary energy to meet the GIW’s net energy requirements. After a while the Red Queen runs out of breath… and the GDP begins to dip.

The key element in the above Red Queen running out of breath is oil. In earlier posts we have highlighted that oil is the primary energy for all other forms of primary energy. Net energy from oil is required to access all other forms. This is the heart of OFDK. As net energy from oil fizzles out all other energy industries and then the whole of the GIW are affected…

Figure 3 — Credit is not like diamonds; it’s not for ever

Until now, the thermodynamic decline of the GIW that is under way since the early 1970s, the Red Queen syndrome and OFDK have been masked under piles of fiat money called debt and debt derivatives. Figure 3 summarises the global trend since 2000.

Fiat currencies are built on debt. Debt is a bet on the future, that is, a bet that things will turn out bright enough so that at least debt interests will be able to be serviced.

All is fine so long as enough economic activity keeps growing. The “slight detail” most people conveniently forget is that economic activity requires net energy, and most specifically net energy from oil, and this is in the process of fizzling out. Figure 3 reminds us that the amount of energy that would be required to repay the global debt and derivatives is in the order of 9,300 Exajoules.[1] The world presently operates on about 552EJ/year. It would take about 17 years of global activity to clear the full debt burden, in addition to what the GIW requires to operate and feed people each year. Even considering just the global debt and not its derivatives, some 5 years would be required over and above normal GIW operation. Under OFDK this is clearly never going to happen. The end of the Oil Age marks the end of “living on credit” that has been going on since at least the early 1970s, globally.

The end of living, the beginning of tribute paying

In other words, the GIW faces a big bulge of “debt-that-cannot-be-repaid” (DTCBR). By about 2022 net energy per average oil barrel will have fizzled out to about zero. By then, most remaining oil will have lost all value and will stay underground. The OFDK avalanche will reach full momentum. And we can expect an avalanche of very bad debt matters in consequence. DTCBR, what an awful acronym! In one form or another we are going to hear more and more about it.

Usually, small players cannot survive the burden of debt for very long; they go bankrupt. When it is a rather small country that can no longer face its debt burden, things can also turn ugly. The Greek case comes to mind. Lending institutions, essentially the EU and the IMF provide financial assistance against endless reforms that place the burden of the situation mostly on the poorest fraction of the population who suffer badly. We know that the matter is very different for players that are big and strategically critical (the “too big to fail” syndrome). For them the matter is not just different, in the sense of it being more or less of a problem. Instead the matter is other, all the more so when vital energy supply is at stake. This is where and when DTCBR comes in.

In fact, in the oil industry DTCBR is already in full play. Especially over such a short timeframe, 15 years at most, the GIW simply cannot do without oil-derived transport fuels. So, no matter what the debt levels may be, “the show must go on”. At such a point DTCBR takes on a new “colouring”. It becomes a kind of new financial product, albeit handled discreetly so far. In this kind of situation, DTCBR becomes the new, post-modern, form of an ancestral transaction: levying tribute. Recall that tribute levying used to be the main activity of Rome until its Empire collapsed — the conquered and dominated people had to pay tribute to Rome in exchange for the “Pax Romana”, Roman infrastructures, Roman administrative management and Roman networks of commercial exchanges…

DTCBR as the emerging form of tribute levying is a matter of power relationships — the thermodynamic, the economic, the military, and the political kinds. Consider the US shale oil industry. Since its inception, in aggregate, it has never returned a profit. It is over $200 billion in debt and counting. Under OFDK this debt cannot be repaid, ever; and many players know this. Numerous analysts have expressed their bafflement at this over 10 years old phenomenon. It will remain incomprehensible short of factoring DTCBR as tribute that the GIW must pay the oil industry to avoid an even worse fate: abrupt collapse.

And, at heart, what is the DTCBR of the petroleum production system (PPS) about? In earlier posts we outlined the big mad energy scramble (BigMES) precipitated by OFDK. Under BigMES, to survive, the PPS’ first reaction is self-cannibalising. This cannot stop OFDK though. It merely slows down the disintegration of the industry as net energy from oil fizzles out. With net energy from oil dropping towards nil, oil ceases to be a primary energy and oil-derived transport fuels become mere energy carriers like electricity or hydrogen. To somehow keep going the PPS thus needs to access other forms of primary energy than oil — coal, gas, biomass, wind, solar, anything it can lay its hands on… and this entails a lot more debt of the DTCBR kind — fundamentally because presently there is no way the thermodynamics of PPS-augmenting by accessing other forms of primary energy can be balanced.

We have seen in earlier posts that in modest forms some aspects of PPS-augmenting using other forms of primary energy have been going on since the late 1990s. Under BigMES this cannot but accelerate. This is where DTCBR comes into full play, much beyond what we already see in the shale oil industry, and it is global. In effect, instead of self-cannibalising, DTCBR is the PPS cannibalising the GIW even more than it had been doing since the 1980s (see Post 5, Figure 7)…

However, not all countries are equal in the face of OFDK, BigMES and DTCBR. It is of course, a matter of who has got what technology to respond to OFDK. As the Roman Empire precedent highlights, it is also a matter of who has got the military to impose tribute payments. It is also a matter of who has the financial and political power and financial systems to impose such DTCBR matters and financialise them. However, above all it is a matter of who has got on its own territory primary energy resources located close enough to oil resources that it can draw from to augment their PPS by way of DTCBR levying on others, that is, levying on their own part of the GIW and, of course, preferably on other parts of the GIW in other countries. This, fundamentally, is how the new BigMES game of “everyone to themselves and the devil take the hindmost” is being played.

Now, one country ticks all of the above “boxes” and does so to a much greater extent than any other, and by a wide margin. That is the US. It has the technology. It has the military, way above any other country. It has the financial cum legal system and has been imposing it on the remainder of the GIW for decades (think of the litany of sanctions imposed on “bad guys” and the enormous fines levied on banks and other businesses that infringe US rules, regardless of whether they are base in the US or abroad). And the US still has huge primary energy resources on its own soil that it can mobilise to augment its part of the PPS, subject to levying DTCBR over the remainder of the GIW. In fact, the US has been in the process of augmenting its PPS in this fashion for a while. This does not only concern the supply of electricity to the PPS from coal or gas. For example, in Texas, wind farms are now substantial energy contributors to the US oil industry. Overall, it may well be the case that most of this PPS-augmenting cannot take place in thermodynamically sound ways. After all this is already the case with the shale oil industry. The point is that DTCBR enables circumventing this matter by shifting the thermodynamic burden elsewhere, on others — as in the children’s game, it is a case of “pass the parcel”, till the music stops, and stop it will — pity those caught holding the “parcel” at that point.

Beyond the rhetorics of the present US Presidency and of the political forces supporting it, in our view, none of what is currently happening in the US is intelligible if one does not factor in the above. In Occam’s razor fashion, this is the simplest perspective that renders intelligible the most of those matters. Under OFDK, the BiGMES cum DTCBR game leads the US to act as it presently does, for example, withdrawing from the climate change Paris Agreement. In the BigMES game, this Agreement is useless to US interests. It is even an impediment. The same applies to policies concerning oil pipelines, coal, the EPA, various trade agreements and much more. This is not to say that we consider US moves “good” or “wise”, not at all. Given what we have explored in previous posts, it should be clear that approaching BigMES in this fashion is most likely to end badly.

Note that none of the above requires any master plan, any plot or conspiracy. In fact most of the players involved in the BigMES game are not even aware of what they are doing. This is a feature of many complex systems. For example, many ecosystems self-regulate without involving any form of consciousness. Under OFDK, US dynamics push it to play the BigMES game in this fashion. Of course, players within the US systems do so largely flying blind. They remain under the sway of the Tooth Fairy (see Post 7), so instead they elaborate and propagate a whole lot of myths about whatever it is that they believe they are doing, from denying climate change or sea level rising, through becoming energy independent, to “making America great again”

Of course, the US (and with it, to some extent, Canada, such as concerning its tar sands and cheap hydro) is not alone in playing BigMES in such mythical, magical thinking fashion. Russia, with its still large oil, gas and other mineral resources, as well as its military power, comes to mind. China as well, however, as we saw in Post 7, Figure 5, China is far from having the thermodynamic power per head of population of older industrialised countries, and it lacks the oil resource base that the US or Russia still have (but has been stockpiling oil in very large amounts). In this game, most of Europe appears in a weaker position. However, it is home to four of the global oil majors, has sizeable military powers, and a powerful financial nexus. BigMES can be played in many diverse ways and we must expect that it will.

None of the other countries, with perhaps the exception of Australia (natural gas and mineral resources base), is in a strong BigMES position. Some are aware of this, or at least intuit it enough. The Kingdom of Saudi Arabia (KSA), for example, is planning what increasingly looks like a partial fire sale of Aramco and intends to take a rapid tangent towards solar, albeit in amazingly inefficient fashions. More broadly BigMES underpins the entire MENA (Middle East, North Africa) saga that has been unfolding since the later 1990s.

The points remain, though, BigMES is being played on the one and only planet Earth, with all the thermodynamic and other resource limits and boundaries that we have previously reviewed, and at the global level it is being played outside any thermodynamically viable domain. In other words, BigMES is, well, going to be very messy…

Financially BigMES, compounded with DTCBR levying by the powerful and countless debt failures of the weakest, is bound to be disastrous to most, wealthy or poor, and bring down the global financial system, fiat currencies, and business practices, rules and regulations as we still know them. Some commentators on previous posts have expressed their puzzlement as to why we are bringing together oil, energy, sustainability and cryptocurrency matters. Maybe now, they begin to see the links. There is absolutely no way any one can emerge through OFDK unscathed by playing BigMES and DTCBR levying as outlined above. The emerging situation calls for something else, something major, that can circumvent, tunnel through, escape BigMES both and simultaneously energy-wise and financially. In this matter cryptocurrency technology understood in its broadest sense has a major role to play.

The 10% & the Remainder

Figure 4 — Something somewhat obscene at the end of the income spectrum

We will come back to the above point in conclusion to this post. Before we must examine further how OFDK bears on everyone globally. Figure 4

cites a striking diagram from the Financial Times, 2016. The US income profile for 1971 was showing a big “beer belly” bulge corresponding to the then lower to middle income fraction of the US population, with a small “uptick” at the high income end of the spectrum (blue curve). By 2015, the beer belly had substantially deflated, the so-called middle income had shifted to the right (no pun intended), but the most striking feature is that kind of “finger” sticking out somewhat obscenely at the extreme right. This is, of course, related to the famous 1% who control most of the wealth and wealth creation in the US and globally.

This emergence of the 1% wealthiest from the 1070s onwards can be regarded as a Dragon-King in that it was bound to happen but it nonetheless surprised most. It was bound to happen fundamentally because, as the US and the world entered thermodynamic decline, the antecedents of the present BigMES began to creep in (e.g. recall the two first Oil Shocks and related Middle-East upheavals) and did so in an “everyone to themselves and the devil take the hindmost” mode. The smartest at that game won, not necessarily in the energy part of the game, but regardless where and how they played, the key dynamic was thermodynamic decline — some could win big time while most had to lose; thermodynamics is a finite sum game.

Figure 5 — The 10% versus the Remainder

Figure 5 highlights the situation globally. It shows the striking contrast between the 10% wealthiest globally (and within them the 1% wealthiest) versus the 90% Remainder of the global population, energy-wise, in terms of everyone’s access to power. How could this be?

In 1990 the 20% wealthiest controlled about 82.7% of global wealth. By 2016, the 10% wealthiest controlled about 89% of global wealth and the 1% wealthiest controlled some 51% of global wealth. This is the same Dragon-King phenomenon as shown on Figure 4 for the US. During that period the thermodynamic decline of the GIW had become a worldwide affair and was accelerating. The same “everyone to themselves and the devil take the hindmost” dynamic prevailed leading to the present BigMES game.

The above wealth numbers translate into energy terms as shown on Figure 5. Recall from previous posts that wealth creation is directly derived from installed power. Prof. Tim Garrett established that until about 2010, there has been a fairly constant relationship of 9.7 ± 0.3 mW per inflation-adjusted 1990 US dollar of wealth.[2] As a first approximation, based on Garrett’s evaluation, the 10% have access to about 20kW of power per head. This does not mean that they all have 20kW of power at their homes (although some do, and much more). Instead it means that in addition to whatever power they may have access to at home, they have access to that much in terms of installed power in the region where they live and in terms of access to transport means, in direct relation to the economic power that they wield.

In turn, the Remainder, the 90% poorest who live on less than €9,000/year/head, have access to less than 400W/head on average, that is, the equivalent of four 100W light bulbs. Let’s stress this. 400W/head is an average over the whole of the 90%. Some at the wealthiest end of the Remainder have access to a few kilowatts, while some 2 billion people at the poorest end have access to next to nothing at all…

It does not require much effort to realise that the above situation is already explosive. This is not a matter of ideology or morals (although these are, of course, in play socially). It is a matter of survival for all. The 10%, that is, about 740 million people, live mostly in the older industrialised countries and in the “islands of development” in the so-called “emergents”. In both cases, the 10% are utterly dependent on the 90% (but most of them do not realise this).

Already a substantial part of the 10%, the less well-off among them, and most of the 90% are massively withdrawing their trust in the ability of elites to deal with the emerging issues that are now being engulfed in the OFDK avalanche. Many are orienting towards populist leaders who are all flying blind into the OFDK maelstrom… In other words, the great “silent majorities”,[3] are massively withdrawing their trust in the ability of politicians to deal with the emerging issues and are becoming increasingly vocal about it regardless of efforts on the part of powers-that-be to act and be seen to act.

For example, by the early 2010s it was becoming clear that over 50% of people globally see climate change and financial instability as global threats.[4] In turn key supranational and national institutions were also manifesting a growing sense of emergency. In 2014, the World Bank acknowledged that a “frightening world” of global instability lies ahead.[5] In an essay on Democracy, The Economist noted that “even though around 40% of the world’s population, more people than ever before, live in countries that will hold free and fair elections this year, democracy’s global advance has come to a halt, and may even have gone into reverse. Freedom House reckons that 2013 was the eighth consecutive year in which global freedom declined, and that its forward march peaked around the beginning of the century.”

Many recent statistics show a major disaffection from the political process in the older industrialised countries that have been the birth place of contemporary democracy, while progress towards more democracy is stalling in the remainder of the world: over 80% of US people disapprove of US Congress performance (source: Gallup); political party membership is dropping drastically in most EU countries since the 1980s (source: European Journal of Political Research); participation in elections is also dropping drastically since the 1980s in the EU, in Russia and in the USA (source:[6]

Ortiz et al., also show a global rise in outrage and discontent from 2006 to the present where issues of economic justice and austerity, and failure of political representation and political systems loom large. They note that “the crisis of political representation… is coming from every kind of political system, not only authoritarian governments but also representative democracies which are failing to listen to the needs and views of ordinary people”. They also stress that “not only traditional protesters (e.g. activists, unions) are demonstrating; on the contrary, middle classes, youth, older persons and other social groups are actively protesting in most countries because of lack of trust and disillusionment with the current political and economic system” and that the analysed data shows “significant discontent with the working of current democracies and demands for real democracy”.[7] Think of the Indignados in Spain, the Occupy Wall Street in the US, the Nuit Debout in Paris, the Yellow Umbrellas in Hong Kong, etc.

In France, as another example, 62% of people surveyed in 2014 considered that political parties are not useful, 75% that they are not able to reform themselves, 82% that they are not adapted to the country’s situation and 85% that they are not in tune with the daily reality experienced by French people.[8] The 2017 presidential election saw the impact of those views; all traditional parties lost; and yet, since then, the popularity of the new President, elected by only 24% of the voting population, has dropped to an all time low, less than 100 days after his election.

While in Germany, as early as 2008, Leggewie and Welzer observed that “rising energy costs and the eco-social consequences of climate change are causing anxieties about the future to increase, while trust in the ability of political elites to solve these problems is evaporating”, pointing out that “up to 90 per cent of Germans believe that the democratic parties are simply incapable of solving difficult problems, and almost all believe that elites are primarily interested in their own wellbeing”.[9]

In short, globally, existing political institutions are increasingly seen as failing, and much worse, as being unable to address the key global challenges of our times. There is a drastic drop of perceived and accepted legitimacy globally; what the Chinese traditionally used to call the “loss of the mandate from heaven” supposedly held by the ruling powers…

With OFDK impacting progressively all within the 10% and the Remainder alike, directly and through BigMES, DTCBR levying and global financial breakdown, the 10% versus Remainder split becomes untenable.

Historically, no known civilisation has ever managed to survive a “loss of the mandate from heaven”, i.e. surviving a time when the masses began to realise that the ruling powers they were manifesting allegiance to were no longer able to deal with the challenges of their times, or in other words, when they intuited that their world no longer had any reasonably ensured future. Such times have always been marked with profound turmoil and much loss of life. For example, the extremely abrupt Bronze Age civilisations breakdown of some 3200 years ago looks like a rather tame dress rehearsal. This breakdown is probably the most relevant precedent to the present global situation — many cities went up in flames, many people migrated and looted, and it took centuries before new brilliant civilisations could emerge again, most notably classical Greece… This concerned only the East Mediterranean region. Under OFDK, it’s global, it’s far, far worse, and reactions to the 10%/Remainder split are bound to play a key role.

Of cartloads and magical thinking

In the above respect, as historical precedents show vividly, the parties most at risk are part of the 10%, and most specifically the 1%. Most of the 90% have known for centuries, sometimes for millennia, how to live on very little, in harsh conditions. Most of the 10% have no knowledge of this. In fact in the span of two or three generations most of them lost all contact with thermodynamic realities of the most basic kind, such as how to grow and store food in the absence of industrial means.

For example, where I live, people in medieval times had an intimate knowledge of energy returns on energy investments (EROI). This was a 100% photosynthesis based society. Energy came in the form of food and feed for people and animals as well as wood (with the odd water wheels and windmills added). Land and tax transactions that appears in records kept by local monks show that often land was not measured by the area (such as the acre) but in EROI terms. One can read, for example:

“…there is a pigeon loft outside the village near which he owns an amount of arable lands of 14 loads and a meadow of seventeen days of scything by one man…”[10]

The loads are to be understood as cartloads. These would have been probably loads of cut wheat bound in sheaves to be carted to the “aire” that is, the round plaza paved with stones where the wheat was thrashed by hand to separate the grain from the straw. This quote tells us that what mattered to these peasants and their lords was not the acreage of each field as such but the productivity of the land that they could muster. Here is a piece of land that on average produces 14 cartloads per year (without fertilisers beside some manure from time to time). This is the return to expect from the energy invested in ploughing it and harvesting the wheat. Then there is the meadow. It concerns “transport fuel”, i.e. hay harvested in late spring, an essential resource. In this part of Provence in the dry summer season there is no grass and ditto in winter; hay had considerable value. The size of the property is assessed in terms of days of harvest because this is the energy requirement (food for the harvesters) one has to have at one’s disposal to be able to bring the harvest in. Similarly the 14 cartloads are an equivalent to days of harvest, since all involved knew the amount of work/scything corresponding to one cartload. This example shows that at that time the locals were thinking both in terms of what each specific piece of land produces (energy out) and what it takes to get it (energy in) in relation to what they required to live on, rather than acreages. In case of crop failure, in most cases, the size of the population was adjusting to the reduced energy incomes; it was called famine; some people died.

Our ancestors had an intimate knowledge of wealth, real wealth. [11] They were aware of the direct link between energy harvested and wealth and thus between energy harvested and gold as money. Gold was used as the symbolic equivalent of past work and energy stored as food, feed or fuel. It was a lot easier to cart around a coin of a known weight in fine gold or silver than a cartload of wheat or hay.

Centuries later, with urbanisation, development of banking and the Industrial Revolution, this direct, physical knowledge was progressively lost. My rural grandparents’ generation still mostly knew it. Very few of my generation have retained this knowledge and also know what it takes to feed oneself without oil-derived energy inputs. Nowadays the younger ones in the 10% have lost it. Without substantial oil-derived energy, they could not feed themselves for even a few weeks, even if their lives depended on it. With OFDK, EROI matters and the direct links between energy, power, and money are coming back with a vengeance, and urbanites, rich or poor, are wholly helpless in the face of it.

Figure 6 — Symbols of stored energy

Interestingly in medieval times, around here, one cartload of wheat traded mostly for one coin (called ecu) of fine gold (Figure 6 left). In 2012 this same cartload was still trading for about the same weight of fine gold — the energy/staple food versus gold link was still holding, unbeknown to most (albeit harvested by an oil-fuelled combine-harvester and then pulled by an oil-fuelled tractor).

Similarly, around 1870, one Napoleon gold coin was tradable for about 3 barrels of sweet crude and in 2012 this same Napoleon coin was still trading for about 3 barrels of sweet crude — the fossil energy versus gold link was still holding (Figure 6 right).

Now, under OFDK, access to both phytomass and fossil sources of energy, and thus access to all other forms, even “renewables”, is getting lost. Old relationships are getting broken; everything is tumbling in the OFDK avalanche.

Based on 47 years experience, I can say that the majority of people who are part of the 10% have no idea of the thermodynamic realities of their lives and of how the Remainder live. Of course, they know about world poverty, statistically. Some have even worked on “development projects”, however, this does not mean that they actually know life within the Remainder, in experiential terms, when you are stuck there with no prospect of exiting it. Furthermore, the majority of people presently in NGOs, universities, research institutes or governmental organisation, working on “energy transition” matters aimed at combating climate change and sometime, accessorily “Peak Oil”, are part of the 10% and have no or little idea of the thermodynamic cliff separating them from the 90% Remainder. Most are far from realising that the solutions that they are working on or advocating, the models they are developing, the policies that they are proposing, are in the main not appropriate to the Remainder, especially not under OFDK, and often will aggravate matters substantially under OFDK… The same applies, of course, to most of those working in the private sector, in manufacturing or in consulting businesses.

The paradox, of course, is that a great many of the Remainder have an acute experience of thermodynamic realities, in their own ways. It’s called finding it hard to “make ends meet”. It’s called living in destitute suburbs or slums and forever trying to find the energy to get the next meal in. It’s called hunger, reduced IQ because of iron and other nutrients deficiencies during childhood and/or because of EDCs. It’s called low life expectancy, forever living on the brink, and so on.

Sometimes, some commentators react to what some of us are pointing at by saying things like, “Yawn; another ‘EROEI too low means we are doomed’”… completely missing the point. Similarly, we can also scan countless articles about climate change or its denial, “Peak Oil” having happened, about to happen, or never to happen, or about “Peak Demand” superseding “Peak Oil”… or not, an “oil glut” bringing oil prices down, the market about to “rebalance”… or not, the “OPEC cuts” working… or not, oil prices going up because of X, and then prices going down because of Y… endlessly. All of them have no idea of what’s about to hit them. They wouldn’t remotely know how to think about it if they ever saw it coming, and even less how to respond when it hits them.

More worryingly, none of the decision-making elites that we are aware of who are involved in BigMES or in responses to climate change… or not, are equipped to think through and deal with something like an OFDK and its consequences.

All are wholly disconnected from the thermodynamic realities many of our ancestors were familiar with. Let’s clarify this. Of course, they all know about things like power stations, refineries, internal combustion engines, photovoltaic panels, and so on. The point is that they all believe that these things happen with money of the fiat kind. It’s magic. You “need” a car. You get a loan and get your car and you will repay the loan later… maybe. At the global level, if the GIW gets into trouble, it “quantitatively eases” itself. They all believe that energy, net energy that is, will always be available where and when needed with a bit of “fiat easing” — it’s a kind of religious faith. This is the enormous disconnect that crept in since medieval times. This is the belief in “economics”, wholly disconnected from thermodynamics, as a perpetual motion machine fantasy that we refer to as the Tooth Fairy syndrome (Post 7), aka development, growth, endlessly “more of the same” consumerist lifestyles, all based on magical thinking that anything can be had with fiat money, regardless of thermodynamic realities that all ignore.

So far the magic has worked, after a fashion, for the 10%… Except that since 2012 it has stopped working. Thermodynamics’ dictates began to come back home to roost. In consequence oil prices crashed in 2014. The PPS and GIW have not recovered yet; they won’t (Posts 4 to 6). We are now going towards an Oil Pearl Harbor-like strike far worse than the 2014 price crash; one that may actually blow up the entire global monetary system… and elites, pundits, trolls, and other commentators, still have not seen it coming. It would be utterly comical if so many lives were not at stake.

Ominous price signals

In Post 5 we observed how an increasing number of analysts and decision-makers in the PPS and on “Planet Finance” have begun to detect signs of OFDK by “reading tea leaves and writings on walls”… but without ever recognising what it is that they are dimly seeing. And so they, at best, engage in BigMES and DTCBR, without ever knowing what it is that they are doing. And yet, prices do carry what in our view are clear signals of something ominous.

Tooth Fairy believers usually talk of the price of gold in dollars or Euros or other currency of their choice. This is wholly aberrant to anyone attuned to the realities of life and thermodynamics, people for whom money symbolises past work and stored energy, be it food or barrels of oil… So let’s consider the evolution of fiat currencies in realistic terms, thermodynamic terms.

Figure 7 — A golden signal carried in the prices

Figure 7 tracks the price of fiat currencies in gold, with gold taken as proxy for energy. Figure 7 zooms on the recent past. In the “good old days” prior to the beginning of the thermodynamic decline of the GIW, the US dollar was traded for some 1.5 grams of fine gold. It is now down close to 0.02 grams. Figure 7 shows only the tail end of a long term dynamic that actually began with the Great Depression. The signal in the time series is clear. The value of fiat currencies is on a course to drop to the floor in a not too distant future… Tooth Fairy believing pundits may exclaim that this is only a trend… oblivious that they are looking at a trend that has been going on for some 85 years and that is nearing its term.

Figure 8 — The fizzling out of value

Figure 8 shows something far more definite and ominous. This is something pundits can’t see because as Tooth Fairy worshippers they remain wholly ignorant of net energy matters…

Instead of milligrams of fine gold Figure 8 tracks the value of the US dollars in terms of net energy available per average barrel of sweet crude. As Figure 7, Figure 8 zooms on the recent past. The trend has been going on for the same period of time. The US dollars is now down to about 0.007GJ… By the time PPS and GIW as we know them have disintegrated the whole saga will have lasted about a century.

Figure 7 and Figure 8 point at the same time horizon: the near future — a kind of Oil Pearl Harbor the first signal of which we saw in the 2014 oil price crash (Post 4).

Let’s not be “possums in the headlights”

A chief point to realise in all of this, is that there is absolutely no reason for the 10%/Remainder thermodynamic split, no reason for the thermodynamic decline since the 1970s, no reason for all of us now tumbling down OFDK, no reason for bound-to-fail BigMES, nor for being subjected to DTCBR levying… and there is no reason to be like “possums in the headlights” in the face of what’s looming ahead, increasingly near.[12]

Technically, socially, thermodynamically and financially there was never any necessity for falling into this situation. Other courses were perfectly feasible. It’s not that the course many call BAU, “business-as-usual”, was the most profitable to the 10% or even the 1%. Other courses were feasible that would have resulted in sustainable prosperity for the great majority of people globally, generating far more profits for the profit oriented lot… instead of the something unsustainable for the 10% that is in the process of disintegrating… By this we mean that instead of the current, unsustainable, global average of about 2.3kW/head it was perfectly feasible to arrive at an average of about 4.4kW/head, sustainably.

In other words, fundamentally, we are in the present OFDK situation as a result of too many people within the 10% having let themselves be disconnected from thermodynamic realities and having fallen under the sway of the Tooth Fairy.

Now that we are caught in OFDK, the challenge is to accomplish now what could have been accomplished decades ago. That is, to do it, while still in the Gold Spot, just when we have begun to tumble down the thermodynamic cliff (Post 6, Figure 9).

However, the danger, once we have begun to realise what’s happening to us, is to become transfixed by it and feel powerless. There is no reason to feel like this. There are solutions. We have been hinting at this and providing pointers to them all along this series of posts. In our subsequent series we will outline the solution we, at GB, are developing. However, to understand them and adopt them it is vital not to get caught in the headlights.

Not getting caught like “possums in the headlights” requires letting go of beliefs in the Tooth Fairy, and admittedly this is not an easy thing to do. Consider for, example, someone who is not a pundit, someone with a successful financial track record. UK-born, Boston-based, Jeremy Grantham cuts a high profile figure. He has had a very good track record with a number of investment plays. He is on record for having pointed out the following:

“Why is it that several dozen people saw this crisis coming for years? [the 2008 crisis] I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even U.S. Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke — none of them seemed to see it coming… So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored”[13]

“People simply do not get the point that you can’t have sustainable growth forever. You can have sustainability forever, or growth for a few years. Capitalism does millions of things better than the alternatives. However, it is totally ill-equipped to deal with a small handful of issues. Unfortunately, they are the issues that are absolutely central to our long-term well-being and even survival.[14]

Grantham felt miffed that he (too) missed the 2014 oil price crash… Among others, he is intent on not missing the next opportunity, one that he called the “carbon bubble” (versus Climate Change). His prevailing view is that “bubbles revert to mean”. Concerning oil, statistically, he is apparently not wrong and, still apparently, what is happening may look like a reversal to the mean (the 100 year median oil price for the world is at $32.50/bbl, in 2010 $, and the mean at $37.93/bbl). However, in our series of posts to this point we have shown that instead of a “reversal to the mean” the empirical and thermodynamic analytic evidence points to a Dragon-King, with oil prices trending to the floor — the Oil Fizzle Dragon-King that Grantham, in spite of his long experience and in spite of having reflected critically on the 2008 crisis, remains blind to, focusing instead on the mythical “carbon bubble”.

So let’s reiterate it. Like it or not, OFDK is happening. OFDK changes everything. None of the current policies, strategies and technology developments, whether BigMES or climate change focused can succeed in the face of an OFDK commingling net energy fizzling out of oil, global warming, other major ecological issues, debt and other related financial and currency matters and the 10%/Remainder split. This is why Bedford Hill, who pioneered the analysis we presented in Post 5 and anticipated the price crash of 2014, exclaimed in early 2015:

“A good time to take stock of our situation, and begin changing how we do things would be now!” [15]

Extricating ourselves from OFDK requires a radical re-think of everything we take for granted, and above all coming back to our senses regarding thermodynamic realities: one does not get energy with fiat money, nor with cryptocurrencies that are nothing more than fancy forms of fiat money; instead energy is got with energy. Like it or not, the GIW is losing access to all the forms of energy it depends on. This loss will be complete in about 15 years time at most, most likely within 10 years. Like it or not, there is absolutely no way anyone can emerge from OFDK unscathed by playing BigMES and DTCBR levying.

The emerging situation calls for something else, something major, that can circumvent, tunnel through, escape, BigMES, both and simultaneously energy-wise and financially. In this matter cryptocurrency technology understood in its broadest sense has a major role to play, so long as it is grounded in thermodynamically viable ways of accessing and using energy.

We acknowledged it. We re-stress it. The challenges are daunting and mounting by the day. At GB we have known this was coming for over 20 years. Addressing ODFK as it progressively appears in full sight may sound like an impossible task. However, we have established that developing something else that enables handling OFDK successfully it is not only doable, it is also somewhat simple once one has let go of the Tooth Fairy-like beliefs and ways of doing things that have led us into this mess.

The point is, none of this is going to happen, the global demand for something else will not be met by any government, supra-governmental institution, mainstream Planet Finance, BAU businesses or even would-be “green” ones — simply because all remain caught in and blinded by the Tooth Fairy syndrome, and the amount of time that would be required for them to get away from under her sway and discover what is actually doable is far too long in regard of the remaining timeframe.

So the proverbial “ball” is in the entrepreneurial camp. The challenges are (1) to retrieve sustainable access to energy, (2) sustainable means of using it, (3) sustainable means of networking energy, information and value, and (4) sustainable means of storing energy, information and value, hence the vital importance of cryptocurrencies. Here “sustainable” means first and foremost thermodynamically viable in the present and the long-term.

Furthermore the challenges include doing all of this wholly independently from current Tooth Fairy-believing “powers-that-be” while remaining compatible with current rules, regulations and legislative frameworks while they last (knowing that they will soon have disintegrated out of their own momentum under OFDK…), which is also why cryptocurrency technology is vitally important.

Meeting the above challenges is a matter of priority. Nothing else may be viable, without having first obtained the above means. With those means at hand, then human creativity can come into full play to tackle all the other multifarious issues.

Recall our inverse Shadok wager: never mind whether climate change is for real or not, never mind OFDK, why live as we do presently, in hard, complicated, often dangerous, expensive, insecure, polluted conditions, when we could live prosperously in vastly improved, safe, secure, inexpensive, enormously simplified fashion?

It is in response to this wager that we have found it possible to address OFDK and all that it entails, profitably, affordably for all and extremely rapidly. We have found how to do this relying at the outset only on the available “Lego set”, that is, using only existing, proven, technology components, albeit integrated in novel ways. Not only is this doable with the present Lego set, but also it is necessary to use only this set, because within the remaining timeframe this is the only one that is available. Like it or not, we have to make do with that. This is what some of us realised some 20 years ago, and yes, it has taken us that long to put it together, notwithstanding quite a number of spanners thrown into our wheels… For now we call it GB.

In our next posts we will pursue the review of what OFDK is precipitating, by focusing on what we consider the most pressing of OFDK impacts, food security, the very challenge used to tackle relentlessly in the acute knowledge of energy returns on energy investments and of the fundamental source of all wealth in energy harvesting.

* * * * * *

If you have followed our posts to this point, a reminder:

This series focuses on the emerging global demand for something else than what we currently have concerning energy and all other aspects of living in the globalised industrial world (the GIW). Most importantly it concerns money, the end of fiat currencies over the next few years and their unavoidable replacement with cryptocurrencies backed with sustainable energy supplies.

The posts gradually explain the rationale for the solutions that we are developing to address that global demand for something else. A subsequent series will explain our solutions themselves and our entire approach to creating a sustainable and scalable energy backed cryptocurrency.

You can find all the previous posts at:

[1] It takes between 8 and 20MJ to generate $1 of GDP, depending on the character of the production, from low energy intensity ones (e.g. a hair cut) to highly energy intensive ones (e.g. cement, steel, infrastructure projects) — see e.g. Jessica Lambert, Charles Hall, Steve Balogh, Alex Poisson, and Ajay Gupta, 2012, EROI of Global Energy Resources, Preliminary Status and Trends, State University of New York, College of Environmental Science and Forestry. Here we use a conservative value of 12MJ/$,

[2] Garrett, Timothy J. Long-run evolution of the global economy: 1. Physical basis. Earth’s Future. 2014:2(3):125–151. Available from: doi:10.1002/2013EF000171; and Garrett, Tim J. Long-run evolution of the global economy: 2. Hindcasts of innovation and growth. Earth Systems Dynamics. 2015:6(1):655–698. Available from: doi:10.5194/esdd-6–655–2015.

[3] Baudrillard, J., 1978, In the Shadow of the Silent Majorities, Semiotext(e) Inc., New York, transl 1983.

[4] Kohut, Andrew, 2013, Climate Change and Financial Instability Seen as Top Global Threats, Pew Research Center,

[5] World Bank, 2014, Turn Down the Heat: Confronting the New Climate Normal, World Bank, Washington, DC.

[6] The Economist, 2014, What’s gone wrong with democracy?

[7] Ortiz, Isabel, Burke, Sara, Berrada, Mohamed and Hernàn Cortès, 2013, World Protests 2006–2013, Initiative for Policy Dialogue and Friedrich-Ebert-Stiftung New York, and

[8] Le Monde, 2014, “L’image catastrophique des parties politiques [catastrophic image of political parties]”, 31 August.

[9] Leggewie, Claus, Welzer, Harald, 2008, “Can democracies deal with climate change?” in Eurozine,

[10] Ledoux, Marc. J., 2011, Histoire de Néoules (Var) [History of Néoules, a village in the Var Department/district of France], DFS+. The quote is from footnote 164, page 143.

[11] With wealth being understood in the etymological affluence or abundance cultural sense of the word, from Middle English welthe derived from (1) well, that which is satisfactory, from Old English wel(l), of Germanic origin; related to Dutch wel and German wohl; probably also to the verb will, originated in the English wyllan, of Germanic origin; related to Dutch willen, German wollen, from an Indo-European root shared by Latin velle meaning “will, wish” and from (2) weal, that which is best for someone, from Old English wela of West Germanic origin and evocative of “well-being”.

[12] Kiwis talk of “possums”, they are a pest that was introduced in New Zealand by mistake and that chew on around twenty thousand tonnes of biomass, typically native forests, every night; many get squished every night; replace possum by whatever gets caught in head lights wherever you live.

[13] Wikipedia entry about Grantham.

[14] Confino, Jo, 2014, “Rethinking prosperity: exploring alternatives to the economic system — Guardian Sustainable Business launches a new section delving into what it takes to create a more socially and financially equitable society that operates within ecological limits, The Guardian Professional, Monday 15 September. See also John Elkington, John, 2014, “A sustainable future is now in reach — True systems change means transforming capitalism — but that’s been talked about for years… So what’s changed?” The Guardian Professional, Thursday 18 September;

[15], 02/02/2015.

Dr Louis Arnoux

Written by

Louis is the catalyst and main author for the Cool Planet entrepreneurial collective. Louis and Cool Planet write under the GB collective name (GeeeBee).

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