But....... I see so much of what I consider misreading of the current economic crisis that I thought; What the hell? Can't possibly be any more wrong than a lot of that hog swill I've been reading. So here goes.
The vast majority of economists, politicians and business leaders seem to believe - at least for public consumption - that the current economic crisis, like all past economic crises, is a temporary problem that will soon be corrected and we will get back on the growth gravy train. Politicians and pundits spend a good part of every day in front of TV cameras and media microphones trying to convince you that recovery is just around the corner and that you should take the padlock off your wallet and get out there and spend. What else are they going to tell you? The truth? God forbid!
There are probably just as many unlistened-to people at the opposite extreme, who believe that this crisis is unlike any other and that the end of our high-tech, virtual society is at an end. Though, in my opinion, neither group is right, the latter is more right than the economic optimists.
This is not the end. It is, again in my opinion, a strong foreshock of the final, devastating economic crisis to come. I do not believe we are that far away, for reasons I will detail below. I believe the Big One will be upon us within three years. Actually, I'll qualify that a little tighter; within three years of the beginning of the economic recovery. Why?
If we do not find some way of loosening the grip of finance and economics on the running of human society I can't see, given so many resource constraints and the rapid devaluation of money in the current financial crisis, how we can possibly have or even think we have a full economic recovery and long-term future for human society as it is currently constituted.
- Almost all proposed political, financial and economic solutions to the current economic crisis assume that the resources to restart and maintain the growth economy to achieve recovery are there. The harsh reality is they are not. We have already passed peak oil and the peak in countless other resources. Continuous growth simply is not possible when available resources are in decline. The continuing denial of this reality gets in the way of designing effective solutions.
- Even in a global recession we are still using up around 30 billion barrels of oil a year. We hit peak oil in spring 2005 (The Oil Drum suggests it was in 2008). That has been disguised by bringing alternative fuels (like biofuels, CTL, GTL and tar sands) on line, by switching from reporting crude oil to reporting all liquids, and by the current economic crisis reducing demand and distracting attention from energy concerns.
- If demand rises from present levels by 2% per year, and supply continues to fall from those peak oil levels by 2% per year, by 2020 demand will exceed supply by over 17-billion barrels/year and rising. The negative economic impact, even if nations agree to stabilize oil prices, will be in excess of $20-trillion/year globally and rising (each barrel of oil is the foundation of well over $1000 of economic activity).
- Energy projects throughout the world, particularly oil, are being cancelled or put on hold every day - waiting for oil prices to recover to and stabilize at levels the world could not cope with a year ago - since the beginning of this financial crisis. Such projects will not be restarted quickly, even when the credit tap is turned back on.
- Even if the global economy begins to recover this year (which looks increasingly unlikely), there will not be enough oil (or other energy resources or many other resources) next year to satisfy demand. Recovery/growth plans will fall short by nearly $5-trillion. By 2015 they will fall short by over $10-trillion annually. There simply are not enough energy resources left in the world to power enough economic growth to recover from the current economic crisis where tens of trillions of dollars (some say hundreds of trillions) of wealth have been lost. If product demand returns and continues to track the promises of economic growth, rather than the reality of diminishing supply, then hyper-inflation should set in within the next three years as product demand will, by that time, exceed product supply by over $10-trillion/year.
- In the U.S., and probably other newer western nations like Canada and Australia, as suggested in joeplanner.blogspot.com "at least as much land has been developed .... in the last 15 years as in the previous 400 years of our history." And all of that land development has been for the expansion of auto-dependant residential and retail suburbia through the use of ever-escalating debt. The infrastructure development and maintenance costs for all that new developed land are threatening to bankrupt governments at all levels.
- In the past several decades in North America retail space per person, mostly in malls, has risen from four to nearly 40 square feet. That is 10-30 times greater retail space per person than in any of the nations of Europe. Even with the current economic crisis, as much as a quarter of that retail space now sits empty and suburban malls are dying at an alarming rate. And this is just the beginning.
- The Baker-Hughes Rig Count survey suggests that operational drill-rig counts in North America are down 10-15% since the beginning of the economic crisis in 2008, with further declines in rig count continuing every week. The oil industry is not gearing up for an economic recovery. They are betting on continuing declines. And are not likely to be on the leading edge of the recovery, like they were in the 1990s when they got burned badly. The cost of oil projects is magnitudes greater than it was then and they need a much higher oil price to justify development.
- The Baltic Dry Index, which tracks global trans-oceanic shipping, reports massive declines in shipping contracts throughout the world. The downside of that is that many ship owners, already running at the margins due to increased fuel and docking costs, are decommissioning their ships. The fleet available to support a rebuild of global trade to the levels needed for an economic recovery will not be there in the short run. With continued failures in the ship building industry, not to mention shortage of energy and raw materials, the ability to ramp up global shipping will be seriously constrained.
I am often accused of talking doom and gloom. Guilty as charged. Unrealistic optimism and unbridled greed have brought us to the point of a global financial crisis that will, by the time this is over, make the Great Depression look like a picnic. A pessimist, as the saying goes, is an informed optimist. I strongly believe its time for a little of what the majority insist on calling pessimism but is, in reality, REALISM. Perpetual growth is not sustainable, is not possible. It is a myth, a ponzi scheme.
As politicians, industry leaders and the media succeed in breaking down your resistance and convince you that the economy is headed into recovery and you return, even if slowly, to your old debt-based spending habits the reality of the barriers to that recovery will begin to be very apparent. Not enough oil. Not enough coal. Not enough natural gas. Not enough uranium. Not enough progress in wind energy. Not enough iron. Not enough copper. Not enough lithium. Not enough. Not enough. Not enough.............
The public reaction to this economic crisis has been, considering the depth and magnitude of it, surprisingly muted and passive. The demonstrations and riots have been very limited. It is as if we are all in a state of shock. And our leaders would like to keep us there, thank you very much, until recovery is under way. But every day more and more people are waking up. More and more people are opening their eyes and ears and reading between the lines. It is very unlikely that that passivity will characterize public response to the next and more major crisis just around the corner. Enough is enough already. No more bailouts. No more golden parachutes. No more unsustainable growth. It's time to face reality and redesign the system for the resource depleted world that is quickly becoming reality. It is time for true leadership, for leaders in touch with reality. End the greed. End the pork barrel spending. End the pie-in-the-sky pipe dreams. Give us that hard dose of reality and tell us how to deal with it. I think our leaders will be surprised at how ready and able people are to deal with. But that's just my opinion.