NEW PAPERBACK EDITION WITH ADDITIONAL INTRODUCTION AND END NOTE FROM THE AUTHOR
Why, years after the banking crisis, is the global economy still mired in recession and burdened by enormous debts? Why have the tried-and-tested economic policies of the past failed us this time?
In Life After Growth, leading City analyst Tim Morgan sets out a ground-breaking analysis of how the economy really works. Economists are mistaken, he argues, when they limit their interpretation of the economy to matters of money. Ultimately, the economy is an energy system, not a monetary one.
From this, it follows that we need to think in terms of two economies, not one - a 'real' economy of work, energy, resources, goods and services, and a parallel, 'financial' economy of money and debt. These two economies have parted company, allowing the financial economy to pile up promises that the real economy cannot meet.
Starting with the discovery of agriculture, Tim Morgan traces the rise of the economy in terms of work, energy and resources. The driving factor, he explains, has been cheap and abundant energy. As energy has become increasingly costly to obtain, the potential for prosperity has diminished, to the point where growth in the real economy has ceased.
An immediate problem is that our commitments - including debt, investments and welfare promises - cannot be honoured, which means that we can expect the financial system to be wracked by value destruction. At the same time, we need to adapt to a future in which prosperity can no longer be taken for granted.
Author(s): Tim Morgan
Publisher: Harriman House
Year: 2016
Language: English
Commentary: How the global economy really works,the two economies money and energy
Pages: 192
Tags: How the global economy really works,the two economies money and energy
Publishing details
Introduction to the Paperback Edition
MORBID CURIOSITY
CRISIS? WHAT CRISIS?
CRASH-AND-CARRY
THROUGH THE LOOKING-GLASS
Foreword by Terry Smith
PART I: THE END OF AN ERA
Chapter 1: An Economy That Has Run Out of Road
The corner that is never turned
In search of the real economy
The end of cheap energy and the death of wealth
Endnotes
Chapter 2: How the Economy Really Works
Two economies, not one
The real economy – an energy system
Fig. 1: Energy return ratios are non-linear
Fig. 2: Energy returns are nearing the cliff edge
The subservience of money
Recklessness – the creation of excess monetary claims
Fig. 3: The debt-GDP ratio in the United States since 1945
Fig. 4: American real GDP and debt since 1945
The madness of crowds
Fig. 5: Changes in British real debt and GDP
Fig. 6: British real debt and GDP
The globalisation disaster
Dodgy data – an exercise in self-delusion
Where do we go from here?
Endnote
PART II. THE REAL ECONOMY
Chapter 3: The Energy Economy
What is the real economy?
The commonality of energy
Endnotes
Chapter 4: The Great Breakthroughs
The first great breakthrough – agriculture
The second great breakthrough – the heat-engine
Chapter 5: Growth and Risk
Energy, population and exponential risk
Fig. 7: Fossil fuel consumption since 1750
Fig. 8: American real GDP since 1750
Fig. 9: An exponential progression – compound interest
Fig. 10: A real-world exponential – the global population
Fig. 11: Energy consumption and the global population
Fig. 12: Exponential risk
Towards peak oil?
Fig. 13: An illustrative peak oil supply pattern
Fig. 14: Oil – feature …
Fig. 15: … or blip?
Right answer – wrong question
Endnotes
Chapter 6: The Real Threat
Energy returns – the killer equation
Table 1: EROEIs in energy units and percentages
Fig. 16: The energy returns ‘cliff’
Fig. 17: The energy cost of energy
Fig. 18: Trends in energy returns by fuel source
Where are we now?
Fig. 19: The underlying cost of energy since 1965
Fig. 20: Time development along the EROEI curve
The road from wealth to poverty
Fig. 21: A high EROEI economy
Fig. 22: A low EROEI economy
Removing the foundations?
Fig. 23: Energy and commodity prices, 2012 vs 2000
Knowing the score
Endnotes
PART III. THE FINANCIAL ECONOMY
Chapter 7: The Servant, Not the Master
The subservient role of money
The creation of money
Endnote
Chapter 8: The Madness of Crowds
When it didn’t pay to go Dutch
“An undertaking of great advantage, but nobody to know what it is”
An eastern bubble
Fig. 24: Japanese economic performance since 1960
The biggest bust
Figs. 25 and 26: Borrowing and growth in the United States
Something old, something new
Endnotes
Chapter 9: The madness of globalisation
Dangerously simple, simply dangerous
Credit market distortion
‘Taking in each others’ washing’
Fig. 27: The composition of American GDP since 1980, inflation-adjusted
Fig. 28: Consumption and production in America since 1980, inflation-adjusted
Fig. 29: The American trade balance in goods since 1963, inflation-adjusted
Deep in the hole
Fig. 30: American debt since 1980, inflation-adjusted
Table 2: Changes in American debt and GDP, inflation-adjusted
Gravity reasserts itself – the debt crash
Fig. 31: The expansion of the Federal Reserve balance sheet since 2007
Compounding errors
Energy takes away the punch bowl
Fig. 32: American oil and import costs
Fig. 33: OECD oil and import costs
Endnotes
Chapter 10: The Madness of Statistics
The high price of understated inflation
Fig. 34: British inflation in detail, 2002–12
Fig. 35: Annual changes in British wages and inflation, 2002-12
Fig. 36: British wages adjusted for inflation, 2002–12
Fig. 37: Trends in American government bond yields since 1981
Grossly Distorted Prosperity
Table 3: American GDP – the impact of imputations
What growth, what jobs?
Fig. 38: American GDP growth
Fig. 39: American unemployment
Government finances – smoke and mirrors
Table 4: Liabilities in 2010, selected governments
The understatement of government commitments
Fig. 40: American government debt, quasi-debt and GDP, 2011
Endnotes
PART IV. LIFE AFTER GROWTH
Chapter 11: Welcome to Life After Growth
The end of an era
Chapter 12: Value Reduction – the Real Economy
Energy – from abundance to scarcity
Options for the future
Costs – the energy sprawl phenomenon
Fig. 41: An illustration of future energy price trends
Real incomes under pressure
Business – the model nears obsolescence
Endnote
Chapter 13: Value Destruction – the Financial Economy
Unfit for purpose
Fig. 42: An illustration of the ‘claims gap’ and value destruction
Thinking the unconventional
Are we printing inflation?
When inflation is not enough
Chapter 14: An End or a Beginning?
How do we think?
Action this day?
The dangers of stasis
Afterword: “What Does This Mean to Me?”
End Note to the Paperback Edition
