Original article: https://nakedemperor.substack.com/p/the-everything-bubble-the-end-of

I’m constantly looking for new theories to explain why the things that are happening in this world are happening. Why are governments pushing for ever greater control? Why did they unnecessarily destroy their economies during Covid? Why do they push a self-destructive Net Zero agenda? Why do they shout about reducing immigration only for it to rocket upwards? These are just a few of the many questions where mainstream answers just don’t make sense.

Simple explanations could include inept politicians who only think in the short term. A lack of critical thinking. Careers too finely balanced to upset the apple cart. Woke ideology not allowing people to be challenged. And risk being blown out of all proportion.

But perhaps there is another explanation. One that convinces politicians to pursue policies that don’t seem to be in the public’s interest.

One such theory that I am about to bastardise is by Dr. Tim Morgan. A reader called ‘Fast Eddy’ first told me about Dr. Morgan and I have slowly been absorbing his work. What follows is my take on Tim’s ideas, so apologies, Tim, if I have trashed your work. To read all of Tim’s work, go to his blog 

For those of you who have interacted with Fast Eddy on Substack, he often links to Dr. Morgan’s 2013 paper called “

perfect storm - energy, finance and the end of growth

”. This was written whilst he worked as Head of Research at Tullett Prebon, a world-leading intermediary in the wholesale financial and energy markets.

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.

Since then, Tim has written a number of books including “

”. His views have turned him into a controversial figure with newspapers calling him “Dr Gloom” and “Terrifying Tim”.

Dr. Morgan believes that there are two economies running in parallel. One is “the underlying ‘real’ or physical economy of products and services” and the other is a “financial economy of money and credit”. “Money has no intrinsic worth, but commands value only in terms of the material things for which it can be exchanged”. To better understand that concept, imagine yourself stranded on a desert island. No amount of money, whether that be coins, gold or crypto, would have the slightest value because there would be nobody with which to trade it with for food or water.

the financial economy is a proxy for the real economy

, just as money and credit are proxies for the products and services for which they can be exchanged”.

In the past these were closely linked with the industrial revolution starting centuries of economic growth. However, Tim argues that the two are becoming more and more detached from each other with real economic growth beginning to shrink. Between 2000 and 2007 world GDP increased by $17 trillion whilst debt increased by $55 trillion meaning each dollar of growth 

 $2.20 in new debt. Since then debt has more than doubled meaning each dollar of growth now costs around $3.

If you take out a loan of $25,000 and spend it on brand new shiny things, does that make you more wealthy? No, because you have borrowed it and you still have to pay it back with interest on top.

Between 2001 and 2022, reported world real GDP – a proxy for the financial economy – expanded by 109%, a compound annual rate of growth of just short of 3.6%. Material prosperity, by contrast, grew at an annual rate of just 1.2% between those years, increasing by only 30% between 2001 and 2022.

What does this all mean? Simply, we are going to become poorer. Whilst previous generations ‘expected’ to become more prosperous than their parents, according to Dr. Tim, this will no longer happen.

Quite a lot of you will probably have noticed this already. But as Dr. Morgan points out, it is “perfectly feasible for different people to have different experiences, depending upon which of the two economies – the monetary or the material – determines their circumstances”. If you have worked in the financial sector and are part of the financial economy, you are probably doing ok…for now.

The question is, why are we getting poorer?

Briefly moving away from Dr. Morgan to Czech economist, Tomas Sedlacek can start to answer that question. His book ‘

’ explains the concept of money as energy and the relationship between time and money.

For money is something like energy that can travel through time. And it is a very useful energy, but at the same time very dangerous as well. Wherever you put this energy in a time-space continuum, wherever you plant it, something happens there.

This time-travel of money is possible precisely because of interest. Because money is an abstract construct, it is not bound by matter, space, or even time.

Due to this characteristic, we can energy-strip the future to the benefit of the present. Debt can transfer energy from the future to the present.

To summarise, Sedlacek compares debt to a Saturday night drinking session. Even though you normally go to bed at 9pm, suddenly you are able to stay awake until 3 in the morning. How is this possible? Because you borrowed energy from the future. And then comes Sunday. Your debt must be repaid, you feel terrible, have no energy and you stay in bed all day.

We have had the mother of all parties for the last two hundred years and instead of slowing down at 3am, we carried on partying, but harder and with stronger drugs. It’s now Sunday morning and a hangover like you’ve never experienced before is about to start.

Rather than a financial system, the economy should be viewed as an energy one. If you think about it, all goods and services require some form of energy to produce and supply. Money only “commands ‘value’ only in relation to the things for which it can be exchanged – and all of those things rely entirely on energy”.

All economic output is therefore the product of surplus energy. But energy is also required to access and produce the energy in the first place. Whatever remains is surplus energy. Dr. Morgan calls the energy needed to access energy the Energy Cost of Energy (ECoE). So Surplus Energy = Total Energy - ECoE.

ECoE is critical to prosperity. If ECoE goes up then using the equation above, surplus energy goes down meaning economic output goes down.

The distinguishing feature of the world economy over the last two decades has been the relentless rise in ECoE. This process necessarily undermines prosperity, because it erodes the available quantity of surplus energy. We’re already seeing this happen – Western prosperity growth has gone into reverse, and progress in emerging market (EM) economies is petering out. Global average prosperity has already turned down.

Trend ECoE of fossil fuels has risen exponentially, from 2.6% in 1990 to 4.1% in 2000, 6.7% in 2010 and 9.9% today. Since fossil fuels continue to account for four-fifths of energy supply, the trend in overall world ECoE has followed a similarly exponential path, and has now reached 8.0%, compared with 5.9% in 2010 and 3.9% in 2000.

For fossil fuels alone, trend ECoE is projected to reach 11.8% by 2025, and 13.5% by 2030.

Dr. Morgan goes into detail about why renewables aren’t the answer, nor will they likely be for the foreseeable future. They may stabilise things but even in the unlikely scenario of stabilising ECoE at the current rates, global prosperity will still decline. “British prosperity has been in decline ever since ECoE reached 3.6%, and an ECoE of 5.5% has been enough to push Western prosperity growth into reverse”.

So with the ECoE going up and surplus energy going down, what does Dr. Morgan think the future holds? He outlines three outcomes that he expects to see.

Government breaking down in the face of failing prosperity; and

The acceleration of economic deterioration.

The financial shock will dwarf 2008 because at the end of the ‘90s ECoEs rose past 4% and Western prosperity petered out. However, this was masked with cheap and easy credit. Ultra-loose monetary policy meant cheap money flew into assets causing rampant asset inflation. This is the everything bubble. All assets have been pumped up with cheap money and all could now pop.

Dr. Morgan anticipates that as well as mass defaults and collapses in asset prices there will be currency crises due to a breakdown in trust.

Governments will break down in the face of failing prosperity because assumptions made by governments will differ from the underlying reality experienced by individuals.

Recent experience in the United Kingdom illustrates this process. Between 2008 and 2018, GDP per capita increased by 4%, implying that the average person had become better off, albeit not by very much. Over the same period, however, most (85%) of the recorded “growth” in the British economy had been the cosmetic effect of credit injection, whilst ECoE had risen markedly. For the average person, then,

, by £2,220 (9%), to £22,040 last year from £24,260 ten years previously. At the same time, individual indebtedness has risen markedly.

The deterioration of prosperity explains all the recent political shocks such as Brexit, Trump and the Yellow Vests in France.

And finally the deterioration may accelerate due to risk factors including worsening trends in fossil fuel ECoEs, the financial crisis discussed above and a decline in high rates of utilisation of both businesses and public services.

So we’ve identified the problem, seen how growth has ended and discussed the everything bubble but what would politicians do with this same information. Would they ‘fess up to the public that times are about to become hard, risking civil unrest and a further acceleration in the rate of deterioration? Or would they try to manage expectations downwards?

Dr. Morgan calls this the ‘modified consensus’.

The authorities would not, and could not, say that economic growth has ceased, let alone that it has gone into reverse, and neither would any practical purpose be served by doing so. Instead, they would seek to steer expectations towards successively, but gradually, lower levels.

Suddenly a lot of the unanswerable questions above start to have answers. 

Why are governments pushing for ever greater control?

 Because they will need it to control citizens as their prosperity declines. 

Why did they unnecessarily destroy their economies during Covid?

 Because it allowed them to pump up the financial system one last time whilst tamping down demand. 

Why do they push a self-destructive Net Zero agenda?

 Because they are managing expectations downwards. If you decide that you are going to use less energy yourself, you are far less likely to riot than if you are told the energy has run out. 

Why do they shout about reducing immigration only for it to rocket upwards?

 Because with a large retired population, the only way to achieve any kind of growth or pay unfunded pension liabilities, is to attract young workers into the country.

I have asked readers before about whether they think the Covid response was due to financial or energy problems. The majority weren’t convinced so what do you think of Dr. Morgan’s theories? To me it explains a lot, if not everything, but I’d be interested to hear other views.

"The Everything Bubble, The End Of Growth & Managing Expectations - 
A theory to explain everything" (repost from the Naked Emperor blog).

The Everything Bubble (repost)

Digital currencies have come a long way since the emergence of Bitcoin in 2009. Today, there are several major digital currencies, each with their own unique monetary policies. In this post, we’ll take a look at some of the major digital currencies’ approaches to monetary policy, their strengths and weaknesses, and how they compare to traditional fiat currency.

Bitcoin is the first and arguably most well-known cryptocurrency. As of this writing, Bitcoin dominates the crypto space by market capitalization. With a capitalization of over half a trillion US dollars, it accounts for about half of all cryptocurrency value. It boasts a finite supply of 21 million coins, which are created through a process called mining. The number of newly created coins halve every few years until all 21 million have been mined, which is expected to happen in approximately 2140.

One advantage of this policy is that Bitcoin’s supply is predictable and transparent, making it resistant to inflation, although it does have some drawbacks. The fixed supply means that if there is ever a massive increase in demand for the currency, the value could skyrocket, making it difficult to use as an everyday currency. Furthermore, because new coins are created through mining, Bitcoin’s monetary policy is inherently tied to its energy consumption and mining costs, which are volatile, not very environmentally friendly, and become increasingly expensive over time.

There is also a tremendous amount of wasted computational power expended on the mining process, as it is a competitive process where only the winner gets the coin reward. Bitcoin has a relatively long block time of 10 minutes, which makes using it as money in an every-day setting challenging. Finally, there is one drawback that is rarely discussed: as the coin reward keeps halving periodically, and the costs of mining increase, the end state of Bitcoin may well be a sort of deflationary black hole event horizon where holdings accumulate to a few dominant nodes as a result of transaction fees becoming the dominant form of transaction on the network.

Ethereum is a blockchain that enables the development of decentralized applications (Dapps) and smart contracts, as well as its currency, Ether. Like Bitcoin, Ethereum adheres to a fixed supply policy, but there is currently no hard limit on how many ETH tokens will be created. New tokens are created by the Ethereum network through a process called mining, although Ethereum is set to shift to a Proof-of-Stake system, which could change how new tokens are created.

Because Ethereum is designed to enable the development of Dapps and smart contracts, the network’s monetary policy is more complex than just a currency. Ether is used to pay for transactions on the Ethereum network, so its value is closely tied to the success of the network’s applications and user base. This adds an extra layer of unpredictability to its value, which could make it less attractive as a currency but is still useful as a tool for the network’s operations.

One frequent criticism of Ethereum is its transaction fee structure, which can result in extremely high transaction fees (well into the hundreds of USD) at times. While this type of demand rationing could be justifiable at times that transaction demand on the network is very high, it does not make for a pleasant user experience and will significantly hamper users' ability to conduct business at times.

Litecoin: A “Lite” Version of Bitcoin

Litecoin was created in 2011 by Charlie Lee, a former Google engineer. Its most notable feature is its faster block time (2.5 minutes compared to Bitcoin’s 10 minutes), which allows for faster transaction confirmation times. Like Bitcoin, Litecoin has a fixed total supply of 84 million tokens, and new coins are created through mining.

One of Litecoin’s strengths is its relatively simple monetary policy, which makes it easy to understand for newcomers to the cryptocurrency scene. The faster block times and lower transaction fees also make it a more practical currency, particularly for micropayments. However, Litecoin’s popularity is largely tied to its association with Bitcoin, so its success is dependent on Bitcoin’s performance.

Monero is a privacy-focused cryptocurrency that uses advanced cryptographic measures to conceal the identity of its users and the amount of transactions. This added emphasis on anonymity makes Monero more difficult to track than other cryptocurrencies and could make it appealing to those who value privacy.

Monero’s monetary policy is similar to Bitcoin’s, with a finite total supply of 18.4 million tokens and a steady decrease in new token creation over time.This makes Monero’s monetary policy deflationary, which, much like Bitcoin, is popular in the short-run against the backgroup of inflationary fiat currencies, but will eventually run into problems of its own.

Monero’s focus on privacy could also make it difficult to gain mainstream acceptance, as it could be viewed as a currency used primarily for illegal activities.

Last but not least let's take a look at Dogecoin, possibly my favorite of all the coins mentioned above. Originally created as a joke in 2013, Dogecoin has garnered a dedicated following and has even been endorsed by the likes of Elon Musk and Mark Cuban. Unlike other digital currencies, Dogecoin does not have a fixed supply limit, and its monetary policy is based on a steady supply of new coins indefinitely.

Dogecoin's lack of a fixed supply has both positive and negative implications. On the one hand, it means that there will always be new coins entering the market, which could ensure the coin's longevity. On the other hand, it means that Dogecoin's value is more susceptible to inflation and market volatility than other digital currencies with a fixed supply, such as Bitcoin and Litecoin.

Additionally, because Dogecoin's monetary policy is based on a steady supply of new coins, rather than on transaction fees like Bitcoin and Ethereum, it may have less practical value as a currency for mainstream use. Its popularity as a cultural phenomenon and store of value may outweigh its value as a medium of transaction.

Despite its unconventional approach to monetary policy, Dogecoin's memeable and lighthearted approach to branding has undeniably contributed to its cultural significance and popularity. It remains to be seen whether Dogecoin can sustain its upswing or if it is merely a temporary fad, but it has motivated a wider discussion of digital currencies and their implications for the future of money.

Overall, while each digital currency comes with its own unique monetary policy, it is important to consider how those policies impact everything from the currency's practical use to its long-term stability and value. With the rise of digital currencies, we may see a shifting definition of what constitutes money, and understanding these policies will become increasingly important for anyone seeking to navigate this new landscape.

In conclusion, each major digital currency has its own unique monetary policy, strengths, and weaknesses. While traditional fiat currency remains the dominant form of money, digital currencies have the potential to disrupt our current financial system by providing fast, secure, and decentralized alternatives. Understanding the monetary policies of these digital currencies can help individuals make informed decisions about which to invest in, transact with, or use as a store of value.

 the most common shortcomings amongst the most popular digital currencies by

introducing the concept of a monetary supply policy that’s neither arbitrarily inflationary nor deflationary but tied to the real, material world by way of looking to the most important real-world resource,

lowered thresholds to entry with a goal to democratize participation in the network across as wide of a user base as possible

while still retaining the security and quality benefits of a Proof-of-Work protocol forked from a known and trusted blockchain.

We'll take a deeper dive into the shortcomings of the biggest crypto, Bitcoin, in Part 2. We'll cover what it got right, and what it missed.

A introductory comparison of Thermcoin and some of the more well-known cryptocurrencies.

The Crypto Family, Pt 1

In viewing our tumultuous world today, one could conceivably view it through a multitude of lenses, with each offering its own unique perspective on global events. The two main perspectives that will be focused on below are those of financial and energy flows. When it comes to EU sanctions on Russia, looking at the situation through both these lenses can provide a deeper understanding of the underlying motivations behind the sanctions.

The EU imposed sanctions on Russia after its annexation of Crimea and Russia’s subsequent Special Military Operation into Ukraine and their roles in the Russia-Ukraine crisis. The sanctions targeted Russia's financial, energy, and defense sectors, among others while leaving other Russian industries untouched. This is odd for several reasons, if certain world powers (mainly the United States and The EU) wanted to truly cripple Russia, then why would it stop solely at freezing Russian banking assets and russian oil exports, while leaving other industries such as agricultural, fertilizer and petrochemical industries relatively untouched. One could cynically argue that the true target of these sanctions wasn’t Russia's government or economy as a whole, but rather a power play by the U.S. and it’s NATO allies demonstrating U.S. global hegemony vis-a-vis its ability to manipulate the U.S. Dollar writ large by essentially cancelling Russia’s global USD holdings as well as other dollar denominated assets held by the Russian government or certain Russian companies and individuals world-wide. As a major energy exporter, Russia's economy is heavily dependent on oil and gas revenue, as it supplies a sizable portion of the world’s energy consumption both regionally and globally. By imposing sanctions on its energy sector, the EU aimed to weaken Russia's economy and thereby limit its ability to exert influence on neighboring countries.

When one views the current situation through the lens of financial flows, it's clear that the U.S and the EU were targeting Russia's economy as a whole. By imposing sanctions on banks and other financial institutions, the EU effectively cut off Russia's access to international capital markets. This had a significant impact on Russia's economy, as its ability to borrow money or attract foreign investment was severely limited.

However, it's important to note that the EU's sanctions on Russia's energy sector were a key component of its strategy. As a major exporter of oil and gas, Russia plays a significant role in global energy markets. By sanctioning Russia's energy sector, the EU aimed to limit Russia's ability to use this as leverage in its foreign policy. If viewed through the lens of energy flows - that is, the idea that energy resources are a crucial component of global power dynamics, we see that money and energy can be reduced to interchangeable components or variables of the same economic equations within a global economy.

In many ways, the EU's sanctions on Russia represent a clash between these two competing worldviews. The EU saw Russia's energy resources as a tool for geopolitical influence and sought to limit this by sanctioning the country's energy sector. Russia, on the other hand, potentially views the world through the lens of energy flows and saw the EU's sanctions as an attempt to undermine its power.

From this perspective, it's clear that the conflict between Russia and the EU reflects a broader tension between two approaches to understanding global events. While both financial and energy flows are important components of the global economy, they represent slightly nuanced and different ways of viewing the world’s economic ecosystem. Ultimately, the effectiveness of the EU's sanctions on Russia will depend on whether they were successful in achieving their objectives - regardless of whether these objectives reflect a focus on financial or energy flows. That specific goal may be elusive as the Russian economy as well as the global market have been shown to be very malleable in that global energy demands will be met no matter what sanctions are in place. Where this particular crisis ends is anyone’s guess, but instinct indicates that Russia may come out of this stronger than ever in spite of a global effort to bring her to heel.  Judging by results so far, financial sanctions have performed very poorly, while vice versa the boomerang of energy sanctions had a very real effect on business and standard of living in the EU.

This result wasn't expected by most of the world. The reason why? Energy represents the 

, the material world. It's the universal currency. Finances are man-made units of account; take one fiat currency or transfer mechanism away, and another one can be made up. Any disruptions are temporary only. Leadership and economists in much of the world don't seem to understand this key Truth, confusing the financial economy for the material one. This is akin to believing that central banks can print wealth, and judging by behaviors over the past 15 years (or maybe it's 2000+ years?) this might be the case.

Thermcoin seeks to tie the financial economy and real economy together by mirroring one with the other and thereby shifting the paradigm by which people all over the world think of money. Stay tuned!...

The financial economy is a mirror of the real economy, but judging by the way policymakers behave, one wouldn't know it.

Financial Flows vs Energy Flows

Talk of de-dollarization has seen an uptick in the news recently, with commentators noticing that the pace of decline in the share of global trade that is conducted in USD has picked up pace significantly over the past 2 years. 

As many know, the dollar has been the de facto reserve currency of the world since 1945. Emerging as arguably the 

 real victor of World War 2, the United States found itself in the pre-eminent position of being the guarantor and bedrock of the world's financial system. The Bretton Woods system that was set up around that time saw a fixed conversion rate between USD and gold set up, with many nations sending their gold reserves to the United States for safe storage.

After the rampant spending on war and social programs in the 1960s and 1970s, the conversion of USD to gold could no longer be maintained and President Nixon unilaterally closed the conversion window. The world then moved over to a new system; that of the petrodollar. 

In essence, Saudi Arabia's vast oil reserves and oil production were pledged to the dollar by the Saudi government, and in return the country (and its ruling class) received security guarantees from the United States. By forcing trade of oil, the lifeblood of industrial civilization, to be settled in dollars, a new system of global dollar dominance was ushered in, whereby nations looking to trade energy or other commodities would seek to settle that trade in dollars.

This created a huge global demand for dollars, and in particular for the commodity exporters (and later on the goods exporters such as China and Japan), it created huge USD reserve surpluses.

These surpluses didn't just sit in bank accounts. They had to be invested in something, and if one is holding dollars, then the obvious place to invest them is into dollar-denominated assets, which are to be found in the United States. 

In practice, this meant that as exporters like Saudi Arabia, Japan, China, and others earned dollars, they re-invested them right back into the capital markets of the United States, buying up vast amounts of government debts, stocks, real estate, and other assets.

For those of you who've lived both abroad and in the United States and ever noticed how access to credit and fundraising just seems so much easier, so much more lubricated and well-developed, in the United States, this is the primary reason why. The global monetary system is analogous to a circular conveyor belt; dollars are printed into existence at one end, passed out into the hands of foreigners in exchange for raw materials, manufactured goods, and services, where they are further cycled around for use in global trade, and then eventually returned right back into buying American assets and investing into the United States in general.

This was evidenced by the fact that until about twenty years ago, two-thirds of global trade was settled in USD.

However, starting with the advent of the Euro and then picking up into the early 2000s, this share started gradually falling. As of this year, that figure has fallen below 50% and continues to fall. Major former holders of Treasurys, such as China, Japan, and Saudi Arabia, are selling down their reserves of dollar-denominated assets; Russia has dumped/was forced to dump its reserves completely.

If this dollar recycling mechanism continues to diminish in size, the effects will be felt directly in US capital markets. Financing deficits and taking on debt will become harder and more expensive. Asset prices will sag, as foreign demand for US assets wanes, leading to a double whammy of higher interest rates and declining prices, which in turn will weigh on debt-financed economic output. This won't be sudden; it'll be a slow burn that plays out over years.

The Federal Reserve will likely be incentivized to keep monetizing debts and buying assets in order to keep prices supported, so that the debt-money system can continue to move along. Reality won't be escapable forever, however.

The world has been used to USD being everywhere whenever needed (usually - when not, it's caused currency collapses) for the past 70 years. If it goes away, what fills the vacuum? There doesn't seem to be any single alternative currency that could fill that role at the moment, so the answer might be that it will be a mix of things. Bilateral currency swaps are gaining popularity, meaning that countries, especially in Asia and the Middle East, are preferring to transact in a variety of currencies for trade. Gold has been an age-old store of value, and indeed many central banks have been on gold-buying sprees for the past decade or so, but it's unlikely to serve as a medium of exchange due to its cumbersome nature. Cryptos are another potential candidate for ushering in a new paradigm for how we think about money.

As the foundations of the global system shift and crumble on their way to evolving into something new, we are reminded to ask ourselves, "What is money, really?"

Is money a rectangular paper note? Is it a ledger balance on a computer screen? Is it a metal coin? Is it a carton of cigarettes? What do any of these things even stand for? What do they symbolize? In each example, the only value of the medium of exchange is in its recognizability and the trust that it engenders. In this context, trust means a trust for the stability of the supply and trust that it will be accepted as a placeholder for things of 

. After all, one can't eat paper or gold. Every unit of money ever spent on any good or service in humanity's history was done in exchange for something that required transaction in energy in order to be created. The good or service is an embodiment of the cumulative input of the most fundamental resource used to produce it - energy. 

This brings us to our final point. If the transactional medium of all things on this planet is energy, and the unit of measure by which all interactions of living things can be understood is the joule or the Btu, then why not cut out the middle-men and link our (human) money more directly to the money of the Universe?

Remember: there was a reason that American politicians chose Saudi oilfields to be the underpinning of the dollar in the 1970s. 

They understood what really makes the world go around.

What will the future of money look like globally as 50-year old norms are rapidly eroding?

De-dollarization Runs Rampant

We are a group working to tie together the fields of energy economics, finance and cryptocurrency. Whereas most digital currency projects nowadays focus more-so on the tech aspect while relegating the economics aspect to second place, ThermCoin places a primary focus on questions revolving around the nature of money and exchange of value. This is something we feel hasn't been paid due attention since the days of the original generation of cryptocurrencies in the late 2000s-early 2010s.

If you haven't yet, please read the most current version of our white paper (link above). If your curiosity is piqued and you'd like more involvement, head on over to our Discord (link above as well). We welcome contribution and participation.

We will be posting updates and writing on related topics on this blog as well regularly.

Welcome!

the Three generate the ten thousand things.”

Most people are used to thinking of the economic world around them in terms of fiat currency, which depends on where one lives, but might be denominated in dollars, euros, pounds, renminbi, rupees, or a multitude of other currencies.

We track the flow of money from buyer to seller all throughout the economy, which must, at the highest level, necessarily be a circular system. A given sum might change hands from office worker to barber to electricity company to energy company back to a different office worker, and so on, moving forever in circularities, like a fish swimming forever in the same fish tank, only changing in speed of movement.

How does this closed system grow? How is new economic value, new wealth, created? A conventional response might be that new money is created via the fractional reserve banking system, which then is used to create new goods and services. The problem with this view is that money itself has no intrinsic value; one can’t perform any useful activity with a bunch of digital 1s and 0s. They are only a claim on something deeper, something more ‘real’, a claim on the products and services produced by people in the real world.

Putting aside then the idea that adjustments to claims on goods and services (changes in money supply) drive changes in outputs of tangible goods and services, we must ask ourselves what is the real underlying substrate that fuels all activity on the planet, for which money is only a proxy?

Every activity that takes place on this planet requires movement or heat, in other words, an input of ordered energy. There is nothing that can happen without this prerequisite. Nothing. Without it, the whole world would be frozen in time.

When money flows from office worker to barber to electricity company to energy company and back to a different office worker, what’s really happened is that the barber expended some amount of Btus while giving a haircut, and the electricity company consumed Btus from a variety of sources to keep the lights on in the barber’s salon, and the energy company consumed Btus to in turn create the ordered Btus that were used by the electricity company, which required employees at the energy company to consume their own Btus as they carried out their work, in the form of chemical energy which came from the food they ate, and so on, until we ultimately trace the source of energy on the planet back to the solar energy that irradiates it. Each consumption of energy must be compensated, as ordered energy is the most precious resource required for (economic) life. This is done symbolically with man-made money.

This example is a grossly simplified version of what’s really going on, as we can see by taking a deeper dive into a detour: re-examining the case of the barber, we see that the tools used by the barber required the consumption of energy by the machines and workers that made the tools, which in turn required consumption of ordered energy by the machine that built the factory structure that those machines and workers work in, and so on. We realize that flows of energy move through every living and non-living thing at all times like a billion tendrils that subdivide and reunite in all directions, a billion times a billion.

This energy substrate is the true currency of the world. 

Categories

The Everything Bubble (repost)

The Crypto Family, Pt 1

Financial Flows vs Energy Flows

De-dollarization Runs Rampant

Welcome!

Preamble