

Pablo Picasso Bull plates I-XI 1945



Nicole Foss has completed a huge tour de force with her update of the Automatic Earth Primer Guide. The first update since 2013 is now more like a Primer Library, with close to 160 articles and videos published over the past -almost- 10 years, and Nicole’s words to guide you through it. Here’s Nicole:

The Automatic Earth (TAE) has existed for almost ten years now. That is nearly ten years of exploring and describing the biggest possible big picture of our present predicament. The intention of this post is to gather all of our most fundamental articles in one place, so that readers can access our worldview in its most comprehensive form. For new readers, this is the place to start. The articles are roughly organised into topics, although there is often considerable overlap.

We are reaching limits to growth in so many ways at the same time, but it is not enough to understand which are the limiting factors, but also what time frame each particular subset of reality operates over, and therefore which is the key driver at what time. We can think of the next century as a race of hurdles we need to clear. We need to know how to prepare for each as it approaches, as we need to clear each one in order to be able to stay in the race.

TAE is known primarily as a finance site because finance has the shortest time frame of all. So much of finance exists in a virtual world in which changes can unfold very quickly. There are those who assume that changes in a virtual system can happen without major impact, but this assumption is dangerously misguided. Finance is the global operating system – the interface between ourselves, our institutions and our resource base. When the operating system crashes, nothing much will work until the system is rebooted. The next few years will see that crash and reboot. As financial contraction is set to occur first, finance will be the primary driver to the downside for the next several years. After that, we will be dealing with energy crisis, other resource limits, limitations of carrying capacity and increasing geopolitical ramifications.

The global financial system is rapidly approaching a Minsky Moment :

“A Minsky moment is a sudden major collapse of asset values which is part of the credit cycle or business cycle. Such moments occur because long periods of prosperity and increasing value of investments lead to increasing speculation using borrowed money. The spiraling debt incurred in financing speculative investments leads to cash flow problems for investors. The cash generated by their assets is no longer sufficient to pay off the debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. This is likely to lead to a collapse of asset values. Meanwhile, the over-indebted investors are forced to sell even their less-speculative positions to make good on their loans. However, at this point no counterparty can be found to bid at the high asking prices previously quoted. This starts a major sell-off, leading to a sudden and precipitous collapse in market-clearing asset prices, a sharp drop in market liquidity, and a severe demand for cash.”

This is the inevitable result of decades of ponzi finance, as our credit bubble expanded relentlessly, leaving us today with a giant pile of intertwined human promises which cannot be kept. Bubbles create, and rely on, building stacks of IOUs ever more removed from any basis in underlying real wealth. When the bubble finally implodes, the value of those promises disappears as it becomes obvious they will not be kept. Bust follows boom, as it has done throughout human history. The ensuing Great Collateral Grab will reveal just how historically under-collateralized our supposed prosperity has become. Very few of the myriad claims to underlying real wealth can actually be met, leaving the excess claims to be exposed as empty promises. These are destined to be rapidly and messily extinguished in a deflationary implosion.

While we cannot tell you exactly when the bust will unfold in specific locations, we can see that it is already well underway in some parts of the world, notably the European periphery. Given that preparation takes time, and that one cannot be late, now is the time to prepare, whether one thinks the Great Collateral Grab will manifest close to home next month or next year. Those who are not prepared risk losing everything, very much including their freedom of action to address subsequent challenges as they arise. It would be a tragedy to fall at the first hurdle, and then be at the mercy of whatever fate has to throw at you thereafter. The Automatic Earth has been covering finance, market psychology and the consequences of excess credit and debt since our inception, providing readers with the tools to navigate a major financial accident.

Ponzi Finance

Nicole: From the Top of the Great Pyramid

Nicole: The Infinite Elasticity of Credit

Nicole: Look Back, Look Forward, Look Down. Way Down

Nicole: Ragnarok – Iceland and the Doom of the Gods

Ilargi: Iceland To Take Back The Power To Create Money

Ilargi: The Only Thing That Grows Is Debt

Ilargi: Central Banks Are Crack Dealers and Faith Healers

Nicole: Promises, Promises … Detroit, Pensions, Bondholders And Super-Priority Derivatives

Nicole: Where the Rubber Meets the Road in America

Ilargi: How Our Aversion To Change Leads Us Into Danger

Ilargi: Debt In The Time Of Wall Street

Ilargi: The Contractionary Vortex Of The Lumpen Proletariat

Ilargi: Hornswoggled Absquatulation



Fred Stein Evening, Paris 1934



The Velocity of Money and Deflation

Nicole: The Resurgence of Risk

Nicole: Inflation Deflated

Nicole: The Unbearable Mightiness of Deflation

Nicole: Debunking Gonzalo Lira and Hyperinflation

Nicole: Dollar-Denominated Debt Deflation

Nicole: Deflation Revisited: The Studio Version

Nicole: Stoneleigh Takes on John Williams: Deflation It Is

Ilargi: US Hyperinflation is a Myth

Ilargi: Everything’s Deflating And Nobody Seems To Notice

Ilargi: The Velocity of the American Consumer

Ilargi: Deflation, Debt and Gravity

Ilargi: Debt, Propaganda And Now Deflation

Ilargi: The Revenge Of A Government On Its People

Markets and Psychology

Nicole: Markets and the Lemming Factor

Ilargi: You Are Not an Investor

Nicole: Over the Edge Lies Fear

Nicole: Capital Flight, Capital Controls and Capital Fear

Nicole: The Future Belongs to the Adaptable

Nicole: A Future Discounted

Ashvin Pandurangi: A Glimpse Into the Stubborn Psychology of 'Fish'

Ashvin Pandurangi: A Glimpse Into the Self-Destructive Psychology of 'Sharks'

Ilargi: Institutional Fish

Ilargi: Optimism Bias: What Keeps Us Alive Today Will Kill Us Tomorrow

Nicole: Volatility and Sleep-Walking Markets

Real Estate

Ilargi: Our Economies Run On Housing Bubbles

Nicole: Welcome to the Gingerbread Hotel

Nicole: Bubble Case Studies: Ireland and Canada

Ilargi: Don’t Buy A Home: You’ll Get Burned



Berenice Abbott Murray Hill Hotel, New York 1937



Metals, Currencies, Interest Rates, and the War on Cash

Nicole: Gold – Follow the Yellow Brick Road?

Nicole: A Golden Double-Edged Sword

Ilargi: Square Holes and Currency Pegs

Nicole: The Special Relativity of Currencies

Nicole: Negative Interest Rates and the War on Cash

Ilargi: This Is Why The Euro Is Finished

Ilargi: The Broken Model Of The Eurozone

Ilargi: Central Banks Upside Down

Ilargi: The Only Man In Europe Who Makes Any Sense

China’s Epic Bubble

Nicole: China And The New World Disorder

Ilargi: Meet China’s New Leader: Pon Zi

Ilargi: China Relies On Property Bubbles To Prop Up GDP

Ilargi: Deflation Is Blowing In On An Eastern Trade Wind

Ilargi: China: A 5-Year Plan And 50 Million Jobs Lost

Ilargi: The Great Fall Of China Started At Least 4 Years Ago

Ilargi: Time To Get Real About China

Ilargi: Where Is China On The Map Exactly?

Commodities, Trade and Geopolitics

Nicole: Et tu, Commodities?

Nicole: Commodities and Deflation: A Response to Chris Martenson

Nicole: Then and Now: Sunshine and Eclipse

Nicole: The Rise and Fall of Trade

Nicole: The Death of Democracy in a Byzantine Labyrinth

Nicole: The Imperial Eurozone (With all That Implies)

Ilargi: The Troika And The Five Families

Ilargi: Globalization Is Dead, But The Idea Is Not

Nicole: Entropy and Empire

Ilargi: There’s Trouble Brewing In Middle Earth



Giotto Legend of St Francis, Exorcism of the Demons at Arezzo c.1297-1299



The second limiting factor is likely to be energy, although this may vary with location, given that energy sources are not evenly distributed. Changes in supply and demand for energy are grounded in the real world, albeit in a highly financialized way, hence they unfold over a longer time frame than virtual finance. Over-financializing a sector of the real economy leaves it subject to the swings of boom and bust, or bubbles and their aftermath, but the changes in physical systems typically play out over months to years rather than days to weeks.

Financial crisis can be expected to deprive people of purchasing power, quickly and comprehensively, thereby depressing demand substantially (given that demand is not what one wants, but what one can pay for). Commodity prices fall under such circumstances, and they can be expected to fall more quickly than the cost of production, leaving margins squeezed and both physical and financial risk rising sharply. This would deter investment for a substantial period of time. As a financial reboot begins to deliver economic recovery some years down the line, the economy can expect to hit a hard energy supply ceiling as a result. Financial crisis initially buys us time in the coming world of hard energy limits, but at the expense of worsening the energy crisis in the longer term.

Energy is the master resource – the capacity to do work. Our modern society is the result of the enormous energy subsidy we have enjoyed in the form of fossil fuels, specifically fossil fuels with a very high energy profit ratio (EROEI). Energy surplus drove expansion, intensification, and the development of socioeconomic complexity, but now we stand on the edge of the net energy cliff. The surplus energy, beyond that which has to be reinvested in future energy production, is rapidly diminishing. We would have to greatly increase gross production to make up for reduced energy profit ratio, but production is flat to falling so this is no longer an option. As both gross production and the energy profit ratio fall, the net energy available for all society’s other purposes will fall even more quickly than gross production declines would suggest. Every society rests on a minimum energy profit ratio. The implication of falling below that minimum for industrial society, as we are now poised to do, is that society will be forced to simplify.

A plethora of energy fantasies is making the rounds at the moment. Whether based on unconventional oil and gas or renewables (that are not actually renewable), these are stories we tell ourselves in order to deny that we are facing any kind of future energy scarcity, or that supply could be in any way a concern. They are an attempt to maintain the fiction that our society can continue in its current form, or even increase in complexity. This is a vain attempt to deny the existence of non-negotiable limits to growth. The touted alternatives are not energy sources for our current society, because low EROEI energy sources cannot sustain a society complex enough to produce them.

We are poised to throw away what remains of our conventional energy inheritance chasing an impossible dream of perpetual energy riches, because doing so will be profitable for the few in the short term, and virtually no one is taking a genuine long term view. We will make the transition to a lower energy society much more difficult than it need have been. At The Automatic Earth we have covered these issues extensively, pointing particularly to the importance of net energy, or energy profit ratios, for alternative supplies. We have also addressed the intersections of energy and finance.

Energy, EROEI, Finance and ‘Above Ground Factors’

Nicole: Energy, Finance and Hegemonic Power

Ilargi: Cheap Oil A Boon For The Economy? Think Again

Ilargi: We’re Not In Kansas Anymore

Ilargi: Not Nearly Enough Growth To Keep Growing

Ilargi: Why The Global Economy Will Disintegrate Rapidly

Ilargi: The Price Of Oil Exposes The True State Of The Economy

Ilargi: More Than A Quantum Of Fragility

Ilargi: (Re-)Covering Oil and War

Nicole: Oil, Credit and the Velocity of Money Revisited

Nicole: Jeff Rubin and Oil Prices Revisited

Charlie Hall: Peak Wealth and Peak Energy

Ken Latta: When Was America’s Peak Wealth?

Ken Latta: Go Long Chain Makers

Euan Mearns: The Peak Oil Paradox – Revisited

Ilargi: At Last The ‘Experts’ Wake Up To Oil

Ilargi: Oil, Power and Psychopaths

Nicole: A Mackenzie Valley Pipe-Dream?

Unconventional Oil and Gas

Nicole: Get Ready for the North American Gas Shock

Nicole: Shale Gas Reality Begins to Dawn

Nicole: Unconventional Oil is NOT a Game Changer

Nicole: Peak Oil: A (Short) Dialogue With George Monbiot

Nicole: Fracking Our Future

Nicole: The Second UK Dash for Gas: A Faustian Bargain

Ilargi: Jobs, Shale, Debt and Minsky

Nicole (video): Sucking Beer Out Of The Carpet: Nicole Foss At The Great Debate in Melbourne

Ilargi: Shale Is A Pipedream Sold To Greater Fools

Ilargi: The Darker Shades Of Shale

Ilargi: Debt and Energy, Shale and the Arctic

Ilargi: London Is Fracking, And I Live By The River

Ilargi: And On The Seventh Day God Shorted His People

Ilargi: The Oil Market Actually Works, And That Hurts

Ilargi: Drilling Our Way Into Oblivion

Ilargi: Who’s Ready For $30 Oil?

Ilargi: US Shale And The Slippery Slopes Of The Law

Electricity and Renewables

Nicole: Renewable Energy: The Vision and a Dose of Reality

Nicole: India Power Outage: The Shape of Things to Come

Nicole: Smart Metering and Smarter Metering

Nicole: Renewable Power? Not in Your Lifetime

Nicole: A Green Energy Revolution?

Nicole: The Receding Horizons of Renewable Energy

Euan Mearns: Broken Energy Markets and the Downside of Hubbert’s Peak



Underwood&Underwood Chicago framed by Gothic stonework high in the Tribune Tower 1952



In the aftermath of the Fukushima disaster, TAE provided coverage of the developing catastrophe, drawing on an earlier academic background in nuclear safety. It will be many years before the true impact of Fukushima is known, both because health impacts take time to be demonstrable and because the radiation releases are not over. The destroyed reactors continue to leak radiation into the environment, and are likely to do so for the foreseeable future. The vulnerability of the site to additional seismic activity is substantial, and the potential for further radiation releases as a result is similarly large. The disaster is therefore far worse than it first appeared to be. The number of people in harms way, for whom no evacuation is realistic despite the risk, is huge, and the health impacts will prove to be tragic, particularly for the young.

Fukushima and Nuclear Safety

Nicole: How Black is the Japanese Nuclear Swan?

Nicole: The Fukushima Fallout Files

Nicole: Fukushima: Review of an INES class 7 Accident

Nicole: Fukushima: Fallacies, Fallout, Fundamentals and Fear

Nicole: Welcome to the Atomic Village

The Automatic Earth takes a broad view of the context in which finance, energy and resources operate, looking at issues of how society functions at a macro level. Context is vital to understanding the bigger picture, particularly human context as it relates to the critical factor of scale and the emergent properties that flow from it. We have continually emphasised the importance of the trust horizon; in determining what functions at what time, and what kind of social milieu we can expect as matters evolve.

Expansions are built upon the optimistic side of human nature and tend to lead to greater inclusiveness and recognition of common humanity over time. Higher levels of political aggregation, and more complex webs of trading relationships, come into being and achieve popular support thanks to the benefits they confer. In contrast, contractions tend to reveal, and be driven by, the darker and more pessimistic side of human collective psychology. They are social and are political as well as economic. In both directions, collective attitudes can create their own self-fulfilling prophecies at the societal level.

Trust determines effective organisational scale, extending political legitimacy to higher levels of political organisation during expansions and withdrawing it during periods of contraction, leaving political entities beyond the trust horizon. Where popular legitimacy is withdrawn, organisational effectiveness is substantially undermined, and much additional effort may go into maintaining control at that scale through surveillance and coercion.

The effort is destined to fail over the longer term, and smaller scale forms of organisation, still within the trust horizon, may come to hold much greater significance. The key to effective action is to know at what scale to operate at any given time. As we have said before, while one cannot control the large scale waves of expansion and contraction that unfold over decades or centuries, understanding where a given society finds itself within that wave structure can allow people and their communities to surf those waves.

Scale and Society

Nicole: Scale Matters

Nicole: Economics and the Nature of Political Crisis

Nicole: Fractal Adaptive Cycles in Natural and Human Systems

Nicole: Entropy and Empire

Nicole: The Storm Surge of Decentralization

Ilargi: When Centralization Scales Beyond Our Control

Ilargi: London Bridge is (Broken) Down

Ilargi: The Great Divide

Ilargi: Quote of the Year. And The Next

Nicole: Corruption, Culpability and Short-Termism

Ilargi: The Value of Wealth

Ilargi: The Most Destructive Generation Ever

Ilargi: Ain’t Nobody Like To Be Alone

Trust and the Psychology of Contraction

Nicole: Beyond the Trust Horizon

Nicole: Bubbles and the Titanic Betrayal of Public Trust

Ilargi: Why There Is Trump

Ilargi: Who’s Really The Fascist?

Ilargi: Ungovernability

Ilargi: Comey and the End of Conversation

Ilargi: Eurodystopia: A Future Divided

Nicole: War in the Labour Markets

Nicole: An Unstable Tower of Breaking Promises

Ilargi: Libor was a criminal conspiracy from the start

Affluence, Poverty and Debt and Insurance

Nicole: Trickles, Floods and the Escalating Consequences of Debt

Nicole: Crashing the Operating System: Liquidity Crunch in Practice

Ilargi: The Impossible and the Inevitable

Nicole: The View From the Bottom of the Pyramid

Ilargi: The Lord of More

Ilargi: The Last of the Affluent, the Carefree and the Innocent

Ilargi: The Worth of the Earth

Nicole: Risk Management And (The Illusion Of) Insurance



Fred Stein Streetcorner, Paris 1930s

Finally, TAE has provided some initial guidance as to how to position one’s self, family, friends and community so as to reduce vulnerability to system shocks and increase resilience. The idea is to reduce the range of dependencies on the large scale, centralised life-support systems that characterise modernity, and also to reduce dependency on the solvency of middle men. The centralised systems we take so much for granted are very likely to be much less reliable in the future. For a long time we have uploaded responsibility to larger scale organisational entities, but this has led to a dangerous level of complacency.

It is now time to reclaim responsibility for our own future by seeking to understand our predicament and take local control of efforts to mitigate its effects. While we cannot prevent a bubble from bursting once it has been blown, we can make a substantial difference to how widely and deeply the impact is felt. The goal is to provide a sufficient cushion of basic essentials to allow as many people as possible to preserve the luxury of the longer term view, rather than be pitched into a state of short term crisis management. In doing so we can hope to minimise the scale of the human over-reaction to events beyond our control. In the longer term, we need to position ourselves to reboot the system into something simpler, more functional and less extractive of the natural capital upon which we and subsequent generations depend.

Solution Space, Preparation and Food Security