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« How is that political process working out for you? | Main | Three Books That Could Save Your Life! »

November 15, 2010


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Iaato Anchorage

Nice one, George. I am looking forward to the day that the bankers realize that all of their ill-gotten gains are really just 1s and 0s representing the way things were, but not the way things will be. It IS all about the oil.

Nathan Chattaway

Hi George,
Excellent paper! I think you mean "sleight of hand" rather than "slight of hands", but that's being picky.
Your succinct summary of money put me in mind of the far more long-winded but fascinating trilogy of books by Neal Stephenson collectively titled "The Baroque Cycle". Have you read these? They deal with the concept and history of money and are very witty and informative historical fiction. Highly recommended.
Also, you've gone quiet on your attempts to form a Permaculture based community in which to attempt to preserve sapience through our upcoming descent. Is that due to a desire on your part to practice security by obscurity? I know of one collapse preparer who had to sell his spot in just such a community in Equador due to persecution of his family by big pharmacy. His blogging created powerful enemies etc. Anyway, keep up the good work! Just don't neglect your own personal situation while doing it, OK?

Robin Datta

The primary economy – what Nature gives us – sunshine, water resourtes, wind, arable land, flora (including edible plants, stands of timber, etc.) & fauna (earthworms, honeybees, ungulates, lagomorphs, etc.) are worked upon by humans (the secondary economy) througn the control of energy flows: their own labor and the use of animal, wind, solar, water and (in the past couple of centuries) fossil fuels, producing items of food, clothing, shelter, luxuries and the inflastructure for management of primary economy resources (canals. dams, levees, windmills, watermills, soil and environmental restoration, roads, culverts, bridges, etc.).

The tertiary economy is the creation and (often diabolical) manipulation of symbols purported to represent values in the primary and serondary economies. These symbols can include cowrie shells, wampum, discs of metal – precious or otherwise, pieces of paper with green pictures of dead presidents, pixels on a computer display, mortgage-backed securities, collateralized debt obligations. etc. It is this latter economy that, when divorced from the primary and secnodary economies, can grow rampantly on just the promise to make good at some future date its purported value in assets from the primary and secondary economies.

The wanton degradation of the primary economy and the constraints from fossil fuel depletion on the (now fossil-fuel dependent) secnodary economy make it impossible to keep that promise when it comes time to pay the piper. The temporary solution is to postpone the payment even though this runs up the liability by accreting further debt. It can only work so long as there are counter parties willing to buy into that play.


Well done. I was in 100% agreement until the last paragraph when you blamed the bankers. The more I learn and observe the more I conclude that we are all to blame. Humans are genetically programmed to compete for status and unfortunately we measure status today by energy consumed. The bankers don't make us commute to large suburban homes in SUVs. And bankers would be poor if we citizens decided to live within our means.


Hi George,

Will you clarify what you mean by this:

"But the really dramatic costly extraction is from the newest sources such as shale oil and tar sands. Here the extractions take so much additional energy that the net return is closer to 10 barrels for every 100 extracted!"

Do you mean we get 100 barrels for 10 barrels of work? I understand that EROI estimates for tar sands range betwee 2.5 to 10.

Between, I greatly enjoy your thoughtful and well-reasoned writings.

George Mobus


Thanks. Hard to eat 1's and 0's, eh?


Thanks for spotting that. This makes the second time I've made that exact mistake! Must be hardwired into my brain.

I have not read those books. They do sound interesting. If I can only find time to read fiction. These days the real world is about as fantastical as I can handle!

My next blog will be returning to the village theme, so stay tuned if you can.


And those counter parties are going to get further and far between.


I'll admit I laid in hard on the bankers, but not so much in the spirit of blaming them as that they are the best representation of what is going on all around. In many other places I've tried to make it clear that this is a result of all of our lack of sapience. We are all to blame for lack of wisdom and good judgment. It is just that the sum craziness resulting is magnified in the banking system as it has evolved.



No. I mean that for every 100 barrels of oil out, we needed to use 90 to get it out. Thus we have 10 barrels net to the economy.

The EROI for tar sands is still being developed. I'd be interested to learn where you got that number (many have been claimed, but like corn ethanol, the more inputs are considered the lower it goes.)




Thanks for the clarification, George. I got the estimates for the EROI for tar sands and shale from the set of articles here:

John Lair

"Each unit of money is simply a message about the use of energy in the economy." Whew! I must say George, your analysis is very good! I have never read a simple but meaningful article about economy. So that's probably one of the many reasons why some business owners - beginners and veterans rely on merchant loans. Perhaps because of energy shortage.

George Mobus



John L,

I suspect there is a very strong causal relation between net energy gains and profits in monetary terms. If the former are growing, the latter will grow. The former means more work per unit time, which translates into more profit per unit time. And that, in turn, is what could be reinvested in future production.

Under those circumstances the need to borrow cash for on-going operations (like payroll) would be greatly reduced. Today, because of the constraints of net energy and real profits it is impossible to operate from reserves. Companies have to borrow just to meet payroll. That should be a tip off itself.


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