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New Publications

New publications from the Consciousness of Sheep

The reason we have been a little quite here at the Consciousness of Sheep in recent weeks – did we miss anything important? – is that we have been putting the final touches to our two latest publications.  Both explain the foundations of the existential crises that humanity now faces:  An economic crisis that threatens to plunge us into a permanent depression with the attendant risks of trade wars and hot wars; an energy crisis that threatens to leave us with an energy shortage as clean energy fails to take up the slack from a declining fossil fuel sector; and a climate crisis that threatens to wipe most – if not all – of humanity off the face of an increasingly hostile planet.

etov-cover-colourThe Energy Theory of Value… and its consequences

Did you ever wonder where profit comes from?    We know that businesses make a profit… or at least, we know that when they fail to do so, they go bust.  Those who think about the way businesses and economies operate also understand that to make a profit a business must “add value” to something.  That is, a business begins with some inputs – a factory, machinery, workers and raw materials – and ends up with a finished product that is worth more than the sum of its parts.  Profit is then realised when the end products are sold in the marketplace for a higher amount than the sum of all of the inputs – the difference between the two being the profit, which is returned to investors.

So far so good – but we have a major scientific problem with this explanation.  It defies the laws of thermodynamics.  And unlike the laws that politicians make, as Scotty in Star Trek was fond of pointing out, “you can-nay break the laws of physics”.

So what is wrong with the explanation?

To conform to the laws of physics, one or more of the inputs to production must have cost significantly less than it was worth.  The blindingly obvious – and entirely wrong – conclusion that has haunted the politics of the last 150 years is that the input that was paid less than it was worth was the workers.

We see the fallacy of this “Labour Theory of Value” when we consider the paltry 155KW/h of work that the average worker produces in a year.  Were we to attempt to run an industrial economy on that amount of work alone, we would collapse into a new Dark Age tomorrow morning.  Contrast, however, that 155KW/h with the 21,000 KW/h of work that each person in the UK derives from fossil carbon – 4,633,000 cubic feet of gas; 1,473 tons of coal; and 8.76 barrels of oil (this, of course, excludes the fossil carbon already embodied in the goods and services that we import) – and you can see where value actually comes from.

Now ask yourself what happens when an industrial economy that depends upon economic growth for its survival no longer has access to cheap and abundant fossil carbon.  What happens to our economy when we are forced to turn to expensive “unconventional” oil, gas and coal?  The answer is that an increasing proportion of the total energy (i.e. value/profit) available to society has to be diverted into increasingly expensive recovery techniques like hydraulically fracturing shale deposits, drilling in the Arctic, separating oil from tar sands, or drilling in very deep water.

Now ask yourself how long we can keep doing this?

problem-of-money-cover2The Root of All Evil: the problem of debt-based money

Counterfeiting is a crime.  It is so because it is a means of stealing from those unfortunate enough to be paid with forged notes and coins.  Let us consider for a moment however, the counterfeit currency that the Mafia prints.  That is, counterfeit notes that are printed using the same plates, on exactly the same paper, with the same ink and all of the correct security measures.  Why is that a crime?  After all, since this forged money is indistinguishable from the real thing, even if you receive it in your change you will never know and nothing can prevent you from spending it.  Similarly, if a trader is paid with this counterfeit currency, there is not a bank in the land that will refuse it because, so far as anyone can tell, it is genuine.

What is the crime in the case of this Mafia money which is indistinguishable from government money?  Who are its victims?  Why does every state on the planet make this illegal?

Mafia money is a crime because despite being undetectable by mere mortals, it creates inflation.  Because, while most of us tend to think of inflation as rising prices, it is really a fall in the value of money.  If someone prints new money that wasn’t earned – i.e. that had no wealth to back it up – it would, in effect, steal a tiny fraction of the value of all of the other money in existence.  And if the Mafia printed enough, they could cause sufficient income to have a negative impact on the most vulnerable people in society.

The Mafia, though, are mere amateurs when it comes to counterfeiting.   Today more than 97 percent of all of the currency in existence was printed out of thin air (i.e. counterfeited) by the banks every time they made loans.  As a now famous paper by the Bank of England explained:

“In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.” (My emphasis)

The impact of this practice has been clear enough – we have been led to believe that an inflation rate of 2 percent (a halving of the value of our currency every 35 years) is both natural and good.  In reality, that 2 percent inflation – the figure would be much higher if the government wasn’t cooking the books – is a measure of the wealth that the banks have systematically stolen from every member of society down the years.

But it doesn’t stop there.  The banks do not simply print currency out of thin air.  They make us pay rent on it.  That is, they charge us interest – a practice that every religion and moral code that humans have ever devised declares to be a sin on a par with murder.

Why is it a sin?  Why is it considered The Root of All Evil?

Imagine if you borrowed the first pound into existence.  That pound is all there is.  But in addition to having to pay that pound back, you must also find some money to pay the interest.  Where is that money going to come from?  Well, it has to be borrowed.  So now you have £2 and two sets of interest to pay.  So now what are you going to do?  Borrow £4… then £8, £16, £32, £64, £128, etc.

This is not a solution; it is an exercise in kicking the can down the road.  It is, nevertheless, what Western civilisation has been doing for the best part of 40 years.  But since 2008 we have hit a problem.  While the currency might have been printed out of thin air, its repayment requires the generation of new wealth.  That is, economic growth.  In order to keep borrowing enough new currency to pay back society’s collective debt with interest, we must keep extracting energy and raw materials – with all of the warming, degradation and pollution that this implies – to produce an equivalent amount of real wealth.  That is, we must have exponential growth on a finite planet.

What happened in 2008 is that we reached “peak debt.”  The mass of ordinary businesses and households are too indebted to take on any new debts.  Since 2008, governments have stepped in as the borrowers of last resort – using future taxes to fund today’s borrowing.  But this hasn’t resolved the problem of growth, and will ultimately lead to even less borrowing.  So from here on in, an increasing proportion of all of the currency in circulation will have to be dedicated to servicing and paying back the debts that we – and our governments – have already run up.

Now ask yourself how long we can keep doing this?

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