Wednesday, November 30, 2011

Exponential Money Growth vs Peak Oil/Resources

The below embedded video was definitely worth watching and sharing. This is the sort of video that should connect even with those who know nothing about money or energy. It's impeccably presented as those of you have already seen Chris Martenson's crash course have probably come to expect this.

Chris Martenson's initial presentation is 40 minutes and then he spends a further 30 minutes answering questions from the crowd (worth watching all).

In his presentation he focuses on the so-called three “Es”: Economy, Energy and Environment. He argues that at this point in time it is no longer possible to view either one of those topics separately from one another.

Since all our money is loaned onto existence, our economy has to grow exponentially. Martenson proves this point empirically by showing a 99.9% fit of the actual growth curve of the last 40 years to an exponential curve. If we wanted to continue on this path, our debt load would have to double again over the next 10 years. By continually increasing our debt relative to GDP we are making the assumption that our future will always be wealthier than our past. He believes that this assumption is flawed and that the debt loads are already unmanageable.

Martenson explains how exponential growth works and why it is so scary that our economy is based on it. In an example he illustrates how unimaginably fast things speed up towards the end of an exponential curve. He shows that an exponential chart can be found in every one of the three “E’s” for instance in GDP growth, oil production, water use or species extinction. Due to the natural limitations on resources, Martenson comes to the conclusion that we are facing a serious energy crisis.

What Martenson discusses in the presentation is not particularly new, he has covered most of it before and of course there are others across the theme as well.

I recently finished reading 'Confronting Collapse' by Michael Ruppert. In the book Ruppert provides a huge array of facts and figures (and finally an action plan) that deal with the impending crisis we face having passed peak oil. He goes on to write about our monetary system which is reliant on infinite growth (similarly explained by Martenson in the above video), but is used for purchasing finite resources. This is not a sustainable situation.

Ruppert povides a compelling case, but I think the most convincing aspect that we will face an energy/oil crisis in coming years is not all the reserve, production & consumption data that he provides in the book, but the actions of the Unites States government.

Over the last decade the US has invaded country after country, all of whom have had an abundance of oil & energy resources or have been located in a strategically important position for the sake of securing/transporting it. Chris Martenson says in the video above that his country is not talking about oil, but I would suggest discussions and action are already taking place, they are just not doing so in the public eye. It's a case of watch what they do, not what they say.

The speed at which peak oil should play a larger part in our investment themes could vary greatly based on the financial crisis that we face today. If we see another debt/monetary based collapse (continuation of the one that started in 2008) which resulted in return to a Gold standard we could see economic growth collapse and then crawl to a much slower growth rate as participating countries are restrained by their Gold reserves. 

Even if we don't see return to a money system backed by tangible resources, the deflationary debt collapse we face in Europe, Japan, the United States and elsewhere is likely to be the precursor to a global depression (which in my opinion we are already in, but may take 10 years to look back and realise). Such events could see the use of oil/energy drop off dramatically and prolong the need for immediate action.

Chris Martenson certainly calls it well at the start of the above clip, "We live in some of the most extraodinarily interesting times and it's my view they are going to become more interesting". I agree wholeheartedly.


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  1. BB,
    Do u feel gold will always rise in the long term?
    Do u feel gold "might" become another "fiat" currency in the long run? (Assuming that "history" has no meaning whatsoever in economical-terms!)

  2. Ultimately I think Gold will continue to rise over the long term, but will likely do so in cycles moving from overvalued to undervalued and back again as it has done historically. Gold has always been the fall back when governments abuse their money creation powers and I think this will remain for many, many more years.

    Gold can't become "fiat", however the level of confidence in Gold certainly means we could face times where people don't hold it in as high regard as they are starting to today, which could see the price fall. Hope that makes sense?

  3. That does make sense. :-)

  4. One of the appeals of an inflation system is that of taxation. Spend first as a government and you get things at a discount, and the market will bear the effect on it's own without even realizing what's happening.

    The alternative to this is a marked increase in apparent taxes in a finite resource based currency (or do away with governments altogether, which is a bit retarded). Do you think it'll be easy to convince people they're effectively being taxed the same portion of their labour, even though their standards of living are dropping due to past-peak economics (and thus still mostly hidden)? Apparent tax rates are increasing, and even smart people can take a while to process complex information.