Friday, October 26, 2012


I call this post reality, because there are some ugly realities we will have to face as a species on this planet.  The present economic downturn only shows the true problem of what we face.  Everyone expects growth to return and we can continue on our merry path.  I am sorry I do not see how that is possible.

To balance the US budget both parties claim that their plans will institute growth and by that growth the deficit will shrink and the budget will be balanced.  Even Wall Street plays with hundreds of trillions of dollars in options and futures.  This is money that only exists in the imagination of Wall Street.  This estimate is greater than the GDP of the entire planet.  All of it is based on the concept of infinite growth.  The problem with infinite growth is that we have finite resources.  There is only so much petroleum and precious metals on this planet.  I say precious metals, because even items like iron and bauxite can be considered precious as demand increases and cannot be met by supplies.

We have all seen the price of crude oil bounce up and down, but have you honestly asked why? Well the market is set up according to supply and demand.  The higher the supply and lower the demand means the price is lower.  The opposite is also true; a high demand and low supply means high prices.  Now remember our modern economy relies on petroleum like a drug.  So what happens when the prices rises to a point that the market cannot support?  The price instantly drops off.  A record peak of $145 a barrel was hit in 2008 and then the US and world economy went into a free fall.  Now I am not saying oil prices are the reason for the economic collapse, but they did not help it any.  Since then prices have climbed back up, but every time they get in the $130 range demand drops and they fall.  This can be said because the market cannot support a price that is above this mark.  At that point an entire section of the economy figures that it is cheaper to just shut down or dial back production rather than pay the increased cost.  The price falls and those producers start buying again and the price rises until, you got it, a repeat.

This tells me that to grow the economy beyond this glass ceiling we need more or different resources that business can use.  Please remember this is just petroleum I am talking about.  It is not hard to believe we are facing a similar potential problem for every resource on this planet.  The Earth can support only 1 billion people if everyone lived a lifestyle that is based on western standards.  The Earth has 7 billion people and all of them strive for such a lifestyle.  China alone has over 1 billion people and they are trying to bring their people on to par with western standards rapidly.  India also has over 1 billion people; they are beginning to put forth efforts to modernize as well.  Then we take in account the USA, EU, Canada, Japan, Australia and New Zealand; that is about another billion people who are already living the western lifestyle.  This is completely and utterly unsustainable.

Alternative resources are possible but not likely.  Resources from space (other planets/asteroids) might be feasible, but the technology does not support it as of yet.  Massive inflation and a decline in living standards is a likely outcome, but every country will resist such a result with all of its being.  Inflation and lowering stand of living will put those governments at risk.  That means that countries will reach a point where they are willing to go to war for resources.  It has happened all throughout history.  Even recently the Iran/Iraq war was Sadam Hussein’s desire to control Iranian oilfields.  Guerrillas in Nigeria attack oil pipelines to hurt the government in a way that they cannot accomplish militarily.  They hurt the economy and that helps to destabilize the country.  When the country is destabilized that increases people who are willing to fight the powers that be.

Can this negative possibility be avoided?  I do not see it happening to be honest.  Every country will always seek to do what is best for itself and does not want to compromise its goals in any way.  The United Nations is an impotent organization that only puts pretty curtains over a window that shows the ugly reality.  If we, as a species cannot commit to alternative energy and resources, dedicated space exploration and lower life style standards.  Well we may as well start preparing for war.  Already our species is pushing concepts of violence to new extremes that have not been seen since we were mostly illiterate.  So as a species and not as a people we can choose to work together toward a positive goal.  Or we can plan on going to war and give up on the illusion of some sort of higher moral ground.  

We can argue that technology has blessed us with our present gains, but it cannot make resources out of nothing.  Even solar, wind, geothermal power needs the metals to make the turbines and transport the electricity to its point of usage.  In the USA we have missed the price increases due to the increased demand for raw materials because manufacturing jobs have been sent to countries with cheap labor.  It will be very interesting to see how things develop and how quickly they fall apart.  That in itself is the nature of the Chinese curse, “May you live in interesting times.”

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