My
Irish relatives have been emailing me from time-to-time about a sorry economy
and clueless politicians. Here is my response, which is a re-hash of my
prior emails.
----------------------------
We
have about the same here.
Guess
we shouldn't take it too hard, as this is exactly what I've predicted. Big
picture is world population is going up about 220,000 per day, and the resources
that sustain life are getting used up, and are not as easily available as
before. Of course, the most critical resource is oil, as this makes
everything "go."
The
key number to watch is the daily delivery of oil to the entire world
market. This number is kept track of, and not too hard to find.
(Check "peak oil" + wikipedia.) Right now it's about 88 million barrels
per day.
Now
the world population goes up about 1.4% per year. This has become
"inevitable," and is "unstoppable." So, there are four
cases:
FIRST. The population goes up 1.4% and oil deliveries also
go up 1.4% (next year's oil deliveries are 89.23 million barrels per day).
In this case, things will stay about the same as they are
now.
SECOND. The population goes up 1.4% and oil deliveries go
up, say, by 2.5% (90.23 million barrels of oil per day). In this case,
there will be boom times, and businesses and government will add
jobs.
THIRD. The population goes up 1.4% and the oil deliveries
stay the same at 88 million barrels per day. In this case, there will be a
recession, and businesses and government will lay some people off from their
jobs.
FOURTH. The population goes up 1.4% and oil deliveries
actually go down, say to 87 million barrels per day. In this case, there
will be a depression, as businesses and government lay people off from their
jobs, and the rate of layoff will be catastrophic.
Another number to watch is the WORLD PER CAPITA availability
of oil. Actually, there is nothing to watch here, because this
number hit a peak in 1979, and has been going down steadily every
year. In fact, the rate of population increase (1.4% per year) has been
greater than the increase in the daily delivery of oil, so we are now
always in a situation where the oil deliveries don't go up as fast as the
population does. Since 1979, we have been consistently between the FIRST
and THIRD alternative.
These
are really simple concepts to think about, yet NO ONE talks about them.
Why? Well, because they are really bad news, and it is believed that the
public has a psyche of a 5-year-old child, and will throw a tantrum if it is
told the truth. Actually, I would appreciate it if the politicians and
news media would level with people, and get it over with.
In my
various emails to people I have learned some valuable new things. One of
these is that apparently, for most people, maintaining a "happy outlook" and
"positive attitude" are put forward as being the MOST IMPORTANT way
for them to be, and therefore they'll refuse to hear "dark" or
"unpleasant" news, and in fact they don't hear it. It's like their
brains have a shield, and anything "dark" or "unpleasant" just bounces
right off. In particular, they have responses to the energy thing that are
all the same, and they recite them all the same way too: there is a
new oil field discovery, and that's going to take care of the problem;
technology is going to bail us out; they are working on electric cars, and you
can get electricity from anywhere. If you press them, they will take on
a Louis XV, and say: the oil will last my lifetime, and I don't care
what happens after I die. And neither should
you.
As I
was trained in science, one of the attributes of this training is that you are
trying to SOLVE problems, and therefore you absolutely MUST look at
problems UNemotionally. You must take YOURSELF out of this process.
What you "feel" about the problem is not relevant. So, you get used to
looking at the problem without bringing YOURSELF into it. Then you set
about to try to "solve" the problem. The same thing has to happen with
surgeons, otherwise they wouldn;t be able to make that first incision of a
surgery. Also maybe to lawyers, otherwise they wouldn't be able to defend
a person who they suspect is guilty anyway. But for the general
population, now I know that they absolutely MUST bring themselves into things,
and personalize things, and maintain a "happy outlook" at all costs. This
is what comes naturally to them, and also what they have been trained by
society to do. So, they are just incapable of looking at "unpleasant"
or "dark" realities. Therefore, they have no hope of actually solving
problems that concern these realities.
When
you actually solve a problem, that is actually a "happy" thing. But first,
it may happen that you MUST look at "dark" or "unpleasant" realities. In
fact, "reality" doesn't give a whit about what you think about
it. "Reality" is not really personal to YOU, and this realization
is one of the keys to being able to solve problems
effectively.
So,
it's not surprising that the politicians and media people don't tell us the
truth. Most of them can't figure it out for
themselves.
Oil
is the most critical resource that is under pressure from increasing
population. Most of the other resources are just barely able to keep up
too - these include metals, timber, grain/food. But the PER CAPITA
availability of these things should be watched too. But this is harder to
find. I'm pretty sure, however, that these numbers are behaving like oil -
probably hit a high about the same time, 1979, and falling steadily ever
since.
Now
what this all means is that people, on the average, are going to get
poorer. And this is no mystery either, because there are only just a few
ways that people actually CAN get poorer:
Prices rise, but wages don't rise as fast
(inflation)
Asset values fall (stock and bond
market, our own house, other real estate)
Wages are stagnant, and
government keeps raising general taxation anyway
Unemployment goes up (people lose
their jobs)
Markets swing wildly up and down,
increasing investment risk
General rates of return on investments go
down
Well,
surprise-surprise. Since 2008, we've already experienced ALL of these
situations, and therefore, PEOPLE, ON AVERAGE, HAVE GOTTEN POORER. The
only exception is that some assets that are tied to basic natural resources
(like forests, mines, farmland), and maybe some transportation assets (railroads
and shipping) have actually gone up in value, relative to other assets.
However, the general public normally doesn't invest in this type of asset.
(Warren Buffett completed his purchase of the BNSF Railroad just after the 2008
crash - this is an example of a rare success story.) However, these
natural resource investments are not exactly risk-free either. Generally
speaking, even here the RATE OF RETURN per dollar invested has gone down in the
last 40 years, so that they may reward your balance sheet, but not do much
for your income statement. In other words, we all have had to run faster
and faster, just to stay in place, even those people who invested in basic
resource assets. This is another attribute of a world in which PEOPLE ARE
GOING TO GET POORER.
Now
the population and its financial condition depend on three things:
the natural resource base it has available to it to exploit; the level of
technology that it has available with which to exploit the resources; and the
level of organization it maintains (chiefly government, religion, and culture)
in order to exploit the resources. Since 1500, the level of
technology (plus some spillover to organization) has increased by leaps and
bounds, and this has enabled the world population to go from its "basic"
steady-state number of about 1 billion all the way up to 7.3 billion
today. Technology has performed so amazingly well during this
period that now people EXPECT that this long 500-year run of
success MUST continue. But there is no reason to expect that to
happen. Sooner or later, technology will falter, and when it does, then
the population will fall.
There
are plenty of examples in history of falling populations. (See the book
"Collapse" by Jared Diamond for a discussion of these.) A good example is
what happened when the Romans left England. When they came to England, the
population has been estimated at about 1 million. When they left, the
population had risen to about 5 million. A hundred years after they left,
the population had fallen back down to about 1 million again. In this
case, the resource base was still healthy; and technology remained
unchanged. The catastrophe was caused by a failure of organization.
And, all it takes is ONE of the three elements faltering to create a
catastrophe.
In
our present case, the organization will remain about the same, and the
technology also. What will cause the collapse will be a failure of the
resource base. Unless technology and organization improve by leaps and
bounds, we will not be able to avoid this result. When there is a collapse
brought about by the failure of one of the three elements, eventually it will
bring the other two elements down too.
Around the world, once you understand these forces, you can
observe how different places are coping with these new stresses. The chain
breaks at its weakest link first, so countries like Somalia and Afghanistan
already have descended into chaos. A few years ago, Russia was also
descending, but the big rise in the price of oil rescued it, temporarily.
In July 2010, the price of wheat abruptly, and without warning, moved from its
long-term steady value of about 4.25 a bushel up to 10.00 plus. In
the Western World, food prices went up, and people tightened
their household budgets. However, in the Middle East - which has a
high birthrate, and few resources except oil (and the oil is controlled by a
small elite), what this meant was that the lower half of the population could no
longer balance their household accounts. Bread tripled and quadrupled in
price. In this situation, people have no alternative but to blame the
government, and go into the streets. And, that is exactly what
happened. Lately, Russia is making a play to retake the Ukraine.
Actually they MUST be successful here, because Russia as it now exists is
not able to feed itself. It has oil and gas, but is too far north to have
the farm fields. Those are in the Ukraine. For the long-term
viability of this region, both oil/gas AND food must be obtainable. Putin
knows this, and he is making his play. After 2008, southern Europe
crumbled (including Ireland, apparently). This is because these areas are
relatively resource-poor, on a per capita basis. Since Europe had tied
itself together (one type of survival mechanism, banding together for safety),
its union was now under pressure. The dominant partners - Germany and
France - banded together with a lot of policy, the net effect of which was to
preserve their own standard of living by drawing away wealth from the South and
Ireland. This was called "austerity" and "financial responsibility,"
but it actually was an attempt of one region to live from the pain of
another. Organization was also to be changed in the South - socialist
societies were to be changed to fascist ones. (Here the definition of
fascism is a government which has few employees or real estate of its
own, and therefore must contract out to for-profit enterprises, controlled by
"special" people, whenever the public demands community projects and
tasks.) Midway through this process, France installed a socialist
government, and Germany continued, more-or-less alone. France bears
watching, as the ultra-nationalist party appears to be gaining strength.
However, until today, Germany has been successful in maintaining its
standard of living. In the US, we have had this odd situation where the
independent Fed has expanded the money supply in force, and driven interest
rates down to unprecedented levels, but the Republican-controlled Congress
has refused (for social reasons, favoring their constituency of the very
wealthy) to lower tax rates for the general population.
This combination of policies has caused the "recovery" to be anemic and
ephemeral. And it also cause the Fed to lose control of the money supply,
because to raise interest rates will plunge the economy back into ruin, and
also, the government itself has issued so many debt instruments, that it ALSO
can't afford higher rates. Here, the realization is setting in,
nevertheless, that the "power" that the US has enjoyed since 1945 is slipping
away, and our ability to undertake monumental tasks, or influence world events
for our profit, is slipping away. Why? Well for the very basic
reason that we can no longer afford them.
So,
the reactions have varied. Nevertheless, the population keeps growing, and
the resource base that sustains life continues to decline. So ultimately,
no matter what policy alternatives are chosen, all people around the
world, on average, will continue to get poorer.
