Predicting the 'Super GFC': two very different views

But the decreasing EROEI means these debts can never be repaid and will have to be written off at some stage. He estimates that trillions of dollars worth of value have been destroyed already through the Global Financial Crisis and its aftermath. He calculates the remaining notional value that must be destroyed for a return of the financial world to a solid base in the real economy to be $90 trillion in 2012 and increasing at around $7 trillion per year.

Morgan also regards globalisation as 'madness'. By this he means the process of rich nations outsourcing work to low wage nations, which involves cutting their production, while continuing to increase consumption and make promises of increased expenditure into the future, thus creating massive debts.

His last point is to argue that official statistics have been corrupted to minimise inflation and unemployment while inflating GDP. This process, which has spanned several decades, has reduced pressure for realistic action to remedy continuing economic decline in rich nations. The failure to act has made life worse for most workers in these countries while the rich have got even richer.

He names specific decisions by the relevant governments and assesses the impact on current figures. One example in the US is the imputation of owner-equivalent rent. This is the calculation of rent that would be paid on houses that are owned outright by owner-occupiers if they were in fact rented. The amount of imputed rent is then added to GDP even though no money actually changes hands. There are other imputations where cash values are given to transactions that are only imagined to happen. These together are equivalent to around 15% of US GDP.

If a more realistic calculation of GDP is made then the national debt to GDP ratio is much higher than currently calculated.

The minimisation of inflation enables governments to pay out less on indexed pensions and benefits, while the minimisation of statistical unemployment reduces pressure for job creation.

Morgan gives much more detail, with the conclusion that most of the rich world has been in recession for the last decade but hidden that fact from itself by manipulation of official statistics.

"Life After Growth" is only 159 pages long and a very easy read. The key projection is for a huge economic collapse when reality forces us to abandon self-deception and recognise increasing energy costs and the impossibility of continuing to debt-fund our life styles. The most likely timing is around 2020 but it could easily happen much sooner.

All those folk who believe in magic, such as primitive economists, will deride Morgan and claim the system will automatically fix itself as it always does. They will continue their deep fundamentalist faith that everything will get back to normal as long as we ignore all heretical thoughts.

For those interested in reality Morgan has some interesting concepts and views. The book is very broad brush and leaves open debate about many points, including how well-placed Australia would be in such a crisis situation.

Meanwhile all political parties argue about the insignificant and our so-called think tanks endlessly recycle old ideologies.