What if everything we’ve been taught about economics—about value, money, and growth—is fundamentally backwards? What if our projections for the future aren’t just optimistic, but delusional, because they ignore what money and debt really are and what they ultimately depend on?
For the past 75 years, we’ve lived through an extraordinary anomaly: an era fueled by cheap, concentrated fossil energy, exponential credit expansion, and an unusual stretch of geopolitical stability. Every mainstream forecast—about AI, green energy, or perpetual GDP growth—assumes this moment is the norm. But the scaffolding beneath that illusion is starting to give way.
A recent post by Nate Hagens laid bare just how disconnected mainstream economics is from physical reality. That sparked what you’re reading now.
Let’s begin where most economists don’t: with reality.
Textbooks define money by what it does: a medium of exchange, a unit of account, a store of value. But that’s not what it is. Money is a claim on future energy, labor, and resources. And that changes everything.
Modern money is created as debt—typed into existence when banks issue loans. And debt isn’t just a financial contract. It’s a bet on future surplus. Every dollar borrowed today assumes that tomorrow will produce more goods, more energy, more capacity to repay—with interest.
Figure 1. Modern money is created as debt. It’s typed into existence on a keyboard when banks issue loans.
Source: Labyrinth Consulting Services, Inc.
Click on the image to enlarge.
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But what if it can’t?
We’ve been compounding financial claims on a real world that is not growing nearly as fast. U.S. debt now exceeds $100 trillion—more than 340% of GDP (Figure 1). The $35 trillion often cited is only the federal portion.
Figure 2. Total U.S. debt was $101 trillion in 2024 (345% of GDP). Federal debt was only 35% of total debt and was 121% of GDP in 2024. Source: St Louis Federal Reserve Bank & Labyrinth Consulting Services, Inc. Click on the image to enlarge.
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Globally, reported debt is $345 trillion, but once you account for off-balance-sheet liabilities, shadow banking, and synthetic leverage, the figure likely approaches $600 trillion.
Meanwhile, the value of physical U.S. currency is just $2.3 trillion. Even if those dollars were backed—which they’re not—the leverage in the system is staggering.
From a biophysical perspective, these are not just numbers. They are promises to deliver real goods and services in the future—energy, labor, materials. If those inputs don’t materialize, the promises won’t be kept. The system will adjust: through inflation, default, restructuring, or collapse.
Lyn Alden reminds us that debt depends on trust—not just between individuals, but across legal systems, institutions, and geopolitical frameworks. That structure is now visibly strained.
This is why conventional accounting misses the point. What we face is not just a fiscal or monetary imbalance—it’s a thermodynamic mismatch between expectation and reality.
And that mismatch invalidates many of the assumptions embedded in our visions of the future. We assume, for instance, that clean energy investment can scale to $4 trillion annually by 2030. But where will the energy and materials come from to build it? Where will the capital come from in a debt-saturated world? At what interest rates? In an already overleveraged system, every new dollar of debt demands a future surplus that may no longer be physically possible.
Markets won’t solve this. Markets respond to price signals, but those signals are distorted. They reflect what the wealthy can pay for, not what society needs. They ignore declining energy returns, ecological overshoot, and the erosion of institutional trust. As Hagens notes, they confuse willingness to pay with real value.
Economics is not a natural science. It is an ideology—built on abstractions that worked briefly under the unique conditions of fossil abundance. It tells elegant stories: of rational actors, efficient markets, and perpetual growth. But those stories collapse under real-world pressure.
The problem isn’t economics alone—it’s the broader tendency to reduce complex systems to isolated parts. We optimize for the parts and are surprised when the system buckles. This approach has deep cultural roots, predating industrialism. Fossil fuels merely allowed us to ignore the consequences.
I’m not offering a solution. I’m offering a perspective—for those willing to look. Most people already sense something is wrong. Some follow populists or ideologues offering false answers. But the hunger for clarity is real.
Science, at its best, begins with observation. It asks: What is happening? What forces shaped this moment? What can we plausibly expect next?
Tolstoy understood this. In War and Peace, he wrote that once a battle begins, plans collapse. Commanders lose control. Events unfold through countless small actions, accidents, and decisions. “The course of battle is determined not by the generals, but by the thousand chances of life and death.”
I am neither pessimist nor optimist. But I know history turns when people are ready to leave behind stories that no longer work and follow those who are paying attention.
We don’t need to abandon economics. But we do need to question projections that assume the past 75 years can repeat themselves indefinitely. We need to stop trying to fix our predicament before we understand what it is.
We can’t fund our way to a better future. We won’t legislate or innovate our way out of systemic overshoot. If we want to avoid breakdown, we’ll need to write a different story—one that begins not with debt, but with the Earth.
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ABOUT THE AUTHOR
Art Berman is Director of Labyrinth Consulting Services, Sugar Land, Texas, and a world-renowned energy consultant with expertise based on over 40 years of experience working as a petroleum geologist. Visit his website, Shattering Energy Myths: One Fact at a Time, and learn more about Art here.
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