The Reinvention of the World Economy
Aug 2nd, 2011 | 9 responses
The politicians of both parties, the Federal Reserve and the Treasury Department keep telling us that at some point economic growth will return to rates we have seen in the past. They are:
- In denial
- Idiots
- Lying
This is what makes debt, both government an non government, a serious problem. The economic growth much of the world has experienced for several decades was unsustainable and has come to and end. A credit based economy is dependent on economic growth to pay the interest. The economy is going to be reinvented and we have two choices:
- We can let it reinvent itself
- We can guide it
If history is a guide we will chose number one. So why the end of growth? Richard Heinberg explains:
Many financial pundits point to profound problems internal to the economy—including overwhelming, un-repayable levels of public and private debt, and the bursting of the real estate bubble—as immediate threats to the resumption of economic growth. The assumption generally is that eventually, once these problems are dealt with, growth can and will pick up again. But the pundits generally miss factors external to the financial economy that make a resumption of conventional economic growth a near-impossibility. This is not a temporary condition; it is essentially permanent.
Altogether, as we will see in the following chapters, there are three primary factors that stand firmly in the way of further economic growth:
- The depletion of important resources including fossil fuels and minerals;
- The proliferation of environmental impacts arising from both the extraction and use of resources (including the burning of fossil fuels)—leading to snowballing costs from both these impacts themselves and from efforts to avert them and clean them up; and
- Financial disruptions due to the inability of our existing monetary, banking, and investment systems to adjust to both resource scarcity and soaring environmental costs—and their inability (in the context of a shrinking economy) to service the enormous piles of government and private debt that have been generated over the past couple of decades.
In short we are running out of resources we can afford. Peak Oil gets most of the attention. We are already at peak cheap oil – yes there is plenty of oil left but can we afford it? If we are talking about maintaining our consumption based global economy the answer is no. It’s not just oil. It’s water, phosphorus, tin and nearly every other mineral resource. It’s still there but we have picked all the low hanging fruit and the cost of discovery, production and delivery will continue to increase.
When the politicians tell you they can make things just they way they were in the 50s, 60s, etc don’t believe them.
Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.~Bob Dylan
9 Responses to “The Reinvention of the World Economy”
The resource and environmental angle dictating the economic future in scary terms. Hmmm, don’t know. I’ll have to bug a couple of friends of mine involved in statistical research and atmospheric modeling.
The future is hard to see.
Always in motion the future is.
Yoda
Of course, there’s a lot of other short-sighted foolishness that helped create our current situation.
But increasing resource cost is certainly going to limit the ability to grow of it.
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Ron, keep banging that drum. There are far, far too many people who continue to believe the pursuit of inefficient and affluent lifestyles that have been the foundation of the American dream can somehow be sustained. That is simply not true. We are already in the first stages of fallout from that mindset and it will only get worse. This is not alarmism, doomsaying, or political in nature, it is simply a reality we brought about and have to face. Diehard skeptics may want to listen to this interview for a primer:
http://thedianerehmshow.org/shows/2011-08-02/environmental-outlook-can-we-adapt-climate-change
The good news is that humans have the ability to be amazingly adaptive – they have to be, but when problems are gradual we sometimes “adapt” our perceptions instead of taking on the necessary work. Bottom line: We have to start getting on the stick NOW. Those who continue to foment bad information, politicize and spin this stuff are in truth part of the problem. We all need to get on the same page about this.
Thanks again Ron.
Ron, you’re introducing again the Peak Resources theme to an early and probably exaggerated degree.
But it’s true, in theory, at least for the cheap resources.
I wish more people were as grown up about this nation’s (and other nations’) future(s) when it comes to money (ability to raise taxes or borrow) to pay for too much. It’s going to be Peak Tax Revenue for governments (and Peak Ability probably has been passed, already), when the money runs out and the expectations of Too Much From Government smash against reality.
I suppose the only question to ask, as with physical resources, is, How will people handle it, then? Well, not not well?
Ron, you could have said we’re approaching Peak Credit (a debt trap, at the latest; concern about debt level and a lowered debt level for a government is probably that peak before then, if not actually before then).
And Peak Money Supply — inflation means we’re past the reasonable peak.
DLS
Heinberg thinks we reached peak credit about 12 years ago. If you remove credit and financial we have had no economic growth since then.
Peak “real credit”? 12 years ago (1999), or in 2008?
What do either or both you think about QE1 and QE2, with QE3 (and a likely QE4) coming soon? Is there a prediction about inflation like that or when excessive government debt in the West begins to be monetized (still more money printed) or if it’s sought to buy votes?
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