This chapter discusses fundamental physical limitations to establishing a so-called ‘circular economy’. Although attempts at maximising efforts to recycle as many products and materials as reasonably possible do make sense, circular economy proponents tend to create expectations that contradict physical realities, especially the Second Law of Thermodynamics. Recycling invariably costs energy. To recuperate valuable materials from complex products requires huge amounts of energy. Only if sufficient energy from solar sources is available, does such recycling make sense from an ecological perspective. We cannot take for granted that this is the case. Already in the 1960s, overly optimistic expectations of recycling on the part of economists and policy makers were systematically dismissed by prominent natural scientists. Forty years later, the same unjustified optimism on recycling scenarios was put forward by policy makers and their consultants in the form of ‘circular economy’ strategies. These strategies convey an image of endless use and recycling of materials in the economy, presenting a utopian idea of a ‘circular’ instead of ‘linear’. Again, real limits in terms of energy needs and energy availability are systematically being neglected, presenting to policy makers beautiful dreams, not taking into account hard physical limitations. The most radical and dramatically misleading narrative is given by the so-called ‘Cradle-to-Cradle’ (C2C) philosophy, embraced by many policy makers but built on wrong assumptions. The article concludes that the circular economy concept – strongly based on the weak Cradle-to-Cradle narrative – is very weak and is underestimating the difficulty of creating better resource use and recycling that makes sense. Policy makers should no longer be misled by empty slogans such as ‘circular economy’ in an idealised word but rather focus on real solutions in a real world.