The Great Simplification with Nate Hagens - The Biophysical Taxman Cometh | Frankly #48

Episode Date: November 3, 2023

Recorded October 31 2023   Description In this Frankly, Nate expands on our conventional definition of "taxes" to highlight nine other categories that will 'tax' our modern lifestyles. Traditionally, when we think of net and gross income, we only think of direct government taxes that subtract from what we take home. What are other taxes - resulting from our system's ecology - which will factor into the way society can pay for the goods and services we've become used to? As converging global crises intensify and each add their own 'tax', can we learn to manage with a smaller "net " resource balance sheet - and maintain our time, sanity, and humanity through the coming decades?   Watch on Youtube: https://youtu.be/27WBbdMcfmM   For Show Notes and More: https://www.thegreatsimplification.com/frankly-original/48-the-biophysical-taxman-cometh      

Greetings. Last week I did a frankly talking about Franklies. Really the purpose of listening those things was kind of a social contract to remind me to do those in the future and give a glimpse into what's going on in my mind. Of course, today is Tuesday, October 31st. Happy Halloween. I'm going as a podcast host. Today, I'm the like to talk about taxes and more specifically 10 ways that taxes and higher handicaps from the gross giving us a smaller net are coming in the near term future. So when we think about government taxes, let's just for ease of math, say we make $100,000 a year. and we get to keep 75,000.

We have to pay the government 25%. So there's a difference between the gross and the net. Everyone understands this. I'm going to talk today about the United States and the coming taxes that I can see in different categories, but this generally applies to other countries as well. By the way, I don't know what to make of this, but 38% of the watchers of this podcast are from the United States.

States. And we're, between almost 80,000 people have signed up on the various podcast platforms and YouTube. So it's growing, which is good. So government taxes are probably going to increase. Why? Because we have spent and lived beyond our means for over a generation. And instead of tightening our belt and living within our means, we're adding more and more debt. We had one trillion in debt the last three months, and the next three months we're going to add 1.5 trillion in debt. Eventually, we're either going to have to tighten our belts as a nation, or the government is going to have to reduce social programs, unlikely, or they're going to have to increase taxes. So in the future, the government, which is the manager of our countries, roads and parks and social services

and everything else, will probably require more from us. That's really when most people stop the boundaries of analysis on taxes. But I'm going to offer nine other categories of taxes. The second is interest rates. Since the 1960s, interest rates, since the 1960s interest rates, rates have, with the exception of some years in the 1980s, have generally been declining. And debt credit is easily available at low rates. This era is over. As governments around the world borrow more to keep the financial fingers in the dike, as it were, interest rates will have to go up, not necessarily due to inflation.

but due to people requiring a risk premium to buy this debt that is being monetized by more of the same. So this has also a tax implication on citizens. For instance, today, October 31st, 2023, if you buy a new car in the United States, the interest rate on that is 10%. If you buy a used car, the interest rate on that is 14%. This is much, much higher than it has been. And this effectively acts as a tax. Another tax coming in the future is a tax coming from higher energy. We've used the best and the cheapest. And now we're in the source rock, shale oil. And there's a lot of it. But it depletes very rapidly and it costs more. A lot of the world oil, comes from countries that are not so friendly, increasingly less friendly to the West.

This is all going to mean higher energy prices, which, given the ripple effect, given that energy is part of everything in our economies and the transportation and the repair and the maintenance and the discovery and the inventions and the combining and the extraction, it all requires energy, higher energy costs will act as a tax to society. Imagine that you had a motor scooter that had a one gallon tank and you could get 100 miles per hour in that tank of gas. And the gas station was two and a half miles from your house. So you would go two and a half miles, fill it up, come back to your house, two and a half miles. And you basically have 95. miles to do whatever you want it with, run errands, do your job, go on vacation.

Well, what's happening is energy depletes is that gas station is moving further and further away from you. The 5% that I mentioned, two and a half miles each way is 5 out of 100, that was the lowest that human society ever had as energy as a cost of getting energy for society. and that hit its low point in 1999. And now we're at 10%, which means that the gas station is five miles away. And we're headed towards 15% and maybe even 20% in my lifetime, meaning that society will have to spend 15 to 20% of our energy on getting the energy, which means that this gas station

will move from 2.5 miles away to 7.5 or even 10 miles away. This all will act as a tax on the rest of society. Another tax related to all this is the move from globalization back to relocalization. For the last 50 years, we've outsourced our production of goods and services around the world to the least cost area. There's a theory in economics called comparative advantage where if a country is good at making, computers and also producing bananas that the whole world is better off if nations specialize and make only bananas or only computers. But this is predicated on frictionless transaction costs and transportation cost.

And as we're becoming aware, transportation, namely oil, diesel fuel, aviation fuel is not something that is frictionless. And as transportation costs go up and become less, uh, um, dependable, maybe more sporadic for geopolitical reasons or other, this bananas and computer benefit that the whole world has received is going to decline. So there will be a reshoring, near-shoring, which is very important to do, by the way, but it will be more costly. If the United States had to make our t-shirts and our electronics and things like that

that we're currently importing, we could do it. We have the tech to do it, but it's going to cost a lot more. And that will be a tax on us, the people that buy and use that stuff. Related to that is a tax from decreasing complexity. The great simplification will necessitate a tax because we have become so efficient and so razor thin just in tight. global supply chain for inputs, that any disruption to pharmaceutical ingredients or spark plugs made in South Korea, anything like that, that all of a sudden, like I've had my dryer has been

broken since January. They keep waiting for parts. And the specific part that is needed, it can only be made in China and there's a backlog. So there are lots of, of people that are in line to get things cleaned or repaired and we can't quite get the equipment because of the snafus, which I think are only going to get worse in the future. This is what you might call a complexity tax. Another tax is I'll refer to as a tax of the machines. So humans 10,000 years ago, boosted our productivity by scaling our agriculture, reducing our free time, but increasing the scale of stuff. This boosted again a couple hundred years ago with the Industrial Revolution where we

had machines do the work for people and draft animals. But humans, the world over, got the benefit of this energy surplus combined with machines. We got to buy refrigerators and air conditioners and automobiles. And so the benefits of cheap energy combined with machines did go to CEOs and billionaires, but it also was shared widely in society. The move to artificial intelligence will change that. There's probably a thousand AIs out there owned by billionaires and nation states and corporations. You can see it that the 5,000 Russell stocks for the year, 4,933 are down for the year,

or the top seven are all the AI companies, Nvidia and Facebook and others. Those are up substantially. So what's happening with AI is the wealth that comes from AI in our lives is going to be Uber concentrated and not going to be shared in the same way that the Industrial Revolution shared wealth and power and influence. Not to mention the fact that a lot of people will be out of jobs because the machines will replace a lot of white and blue collar jobs. So there will be a tax from technology for the average person in the future. Another tax coming our way is from global heating. You can see

inexorably, every year there's more examples, most recently in Greece and Pakistan, a few years ago in Australia and British Columbia, these events that are higher standard deviation, higher wet bulb, higher impact from global weather events, not only because we've expanded our population to the coast, but because of the amount of moisture that a hotter world holds in the atmosphere and other impacts, we're going to increasingly have to spend our own money and our government's money on mitigating what's happening from the changing climate. This will act as a very real tax on our lives. Health is another tax in the United States.

40% of our population is obese. Americans have a large population of mental health. health citizens that have problems. In the United States, we have 50% of the world's medical prescriptions and only 4% of the world's population. So we're either sicker or we're more baby like wimpy or our doctors write more prescriptions or some combination of the three. Of all the developed nations in the world, the United States life expectancy is declining.

You could argue this is from COVID, long COVID or vaccines or any number of things. But the fact is that almost 20% of our GDP is in healthcare. And we're not going to have access to what we had in the last 20 years. And what we do have access to will not be evenly distributed. So there will be a very real health tax on the average person. And a lot of people spend a good portion of their taxable income on healthcare, even with deductibles. This is a growing tax.

Next to last of the taxes I can imagine for the future is a tax on our time. This isn't a biophysical expense per se, but the ghost of dopamine passed and how we've become addicted to technology and how we have more free time because we're aware. wealthier nation, but we use that free time playing candy crush or scrolling Facebook. This shortens our attention span and it makes it more difficult for us to read a book or plant a garden or do a long form thing because our attention span has been in the shallows, especially for young people who have massive health problems from so much social media use. This is going to be a real tax on our productivity and our time going forward.

Because if our brains are attenuated to very short reward cycles, this is not what the future needs. It's a very real tax on our lives. Last but not least is a tax on our sanity. Of course, I feel this. This is my job to integrate energy, ecology, debt. geopolitics, war, human behavior, climate change, endocrine disruptors, species loss, the six mass extinction, the social contract fraying. It's almost too much to pay attention to and stay on top of.

And so what's happening in the world, all the categories I've just listed effectively act as a tax on our sanity. of the people watching this program can remember the 80s or the 90s, which were the sweet spot for maybe for our culture and our species. But things were more carefree. And even if we had strifes or troubles or drama or problems, there was a quick recalibration, a refractory period where things were normal. Now every day there's chaos and drama in the news. And this weighs on the human consciousness and the quick ease to joy and contentment for an average citizen isn't what it used to be.

So all 10 of these things are going to act as taxes on our lives going forward. Holy crap, that was kind of heavy. I didn't intend for it to be such a buzzkill. But this is our reality and we have to start thinking about if we start with a hundred and we pay to the government 75, 25, so we have 75. And then all these other things, we have to start living at 50 or 45 or something like that and anticipating in our own lives in our communities and as a nation how to live with a smaller net from a biophysical perspective.

Yes, we will have subsidies. We're going to have the same subsidies that our ancestors have had a long time back. We're going to have love and friendship and my golden retriever and jokes and humor and good food and community and family and games and walking in nature and getting the best of bio-physical flows of the sun and the rain and the soil and the regenerative capacity of this blue-green earth, we're going to have all that and we shouldn't forget that. But there are taxes on the horizon. The biophysical taxman cometh.

I'll talk to you next week.