In this corner, sporting green trunks trimmed in red, white and blue, we have the debt-based, exponential-growth-dependent, neo-Keynesian economies of the world.
In this corner, sporting black trunks trimmed with gold, we see declining natural resources, especially energy resources, epitomized by peak oil.
These two paradigms are mutually exclusive. One of them is wrong. One of these proud fighters is going down for the count. Which will win out in the end?
There are limits to growth. Money doesn’t “grow” the economy. Energy does. It’s the master resource. It wasn’t Reaganomics, free-market capitalism, Greenspan’s low interest rates, or the Bush tax cuts. No, it’s been cheap liquid fuel that has propelled exponential growth and made modern economies possible.
Just one problem. We’re running out of the stuff. This does not bode well for any exponential-growth-dependent model.
Debt-based currencies created by the modern welfare states were designed with exponential growth as a defining characteristic. Aye, now there lies the rub. How stupid, how greedy, how short-sighted? Is any system dependent on exponential growth sustainable? No. Unless you’re part of an infinite system, (which we’re not) there’s always a point where the whole thing collapses on itself.
Mix the already fatally flawed Keynesian theory with declining oil reserves and you’ve got a recipe for disaster. World GDP can not increase in the face of a declining fuel supply. We do not have an unlimited supply of energy, therefore any economic policy that depends on exponential growth will fail. There are signs that our current policy on its way to failing right now. We don’t need stimulus, we just need a better plan.
People tell me: “Oh, but we’ll find other sources of power eventually. We always have. Alternative powers sources can save us, right?” Uh…no they can’t. Show me how alternative resources can will provide us with 495 quadrillion BTUs by 2035 and I’ll eat my hat.
I’m optimistic though. Maybe if we send a distress call into space the Vulcans, Romulans, or Klingons will come to our rescue. Actually, the Feringi might be best. They’d fit right in with the Keynesian-Neoliberal-Fascist-Mafia that are currently running…uh, I mean ruining this planet.
In reality, no one is coming to save us. Mr. Bernanke, Mr. Trichet, and Mr. Shirakawa will lose. We will all lose, because our current paradigm ignores reality. Our concept of economics must either 1) radically change or 2) collapse.
The Rookie Cynic 
Posted by Steve on October 4, 2010 at 4:33 pm
So, if there is a finite supply of fuel that is in decline, doesn’t it stand to reason that we should invest in any stocks that are fuel related? Shouldn’t those stocks skyrocket as the demand for fuel continues to grow with all the emerging markets consuming more than ever? (and of course the price of fuel domestically will go through the roof as well)
Posted by therookiecynic on October 4, 2010 at 10:07 pm
It stands to reason that the price of oil would increase as it becomes more scarce. Short-term, oil related stocks (EXO, USO) might be a good play. However, oil stocks will suffer in the long term because it will take more and more energy to get the “tough to get at oil” out of the ground. Additionally, we can count on disasters like the gulf oil spill to occur again as companies try to exploit riskier, harder to get at fields. This will cut into profits eventually. For example, if you have a deep water field of oil that consumes the equivalent amount of energy to develop as you stand to get out in production, why bother? There will be a lot of oil left in the ground for just this reason. Thanks for commenting.
Posted by Loki on October 17, 2010 at 9:32 pm
OK. Peak oil is a likely near term crisis. No current alternative fuel can replace oil at current population levels. Even if it could, the massive infrastructure build needed to implement changeover needs to be getting underway soonest, and it is not happening.
Also not happening is any move to open the US east and west coast offshore areas to exploration and drilling, or further developement of the north slope (ie. Anwar et al) or opening of the “secret” reserves (Gull Island etc.)
So why is that? I don’t know.
Hypothesis 1. Some oil producers have secret reserves and this is known to our fearless leaders.
Hypothesis 2. A massive war or (un)natural disaster is coming that is expected to reduce global population by half or more.
Hypothesis 3. Due to unrelated factors, the elites will be hiding in their bunkers before peak hits, and the less energy WE have the safer they will be.
Hypothesis 4. They are stupid. (not likely)
Like you, i have to discount completely for lack of verification, the rumours indicating the powers were given an anti-gravity method (or EMF method) by aliens and are holding it because releasing it would destroy their profits.
The ordinary man can do little but prepare as best he can for the likely crisis.
Posted by the rookie cynic on October 19, 2010 at 8:59 pm
It’s likely that we’ve passed the peak energy/capita on planet earth. From and energy point of view, we will be on a long slow decline from here. Here’s my “off the cuff” stab at your hypotheses: I don’t think there are “secret reserves.” The elites often use war for profits and control so that is definitely “in the cards.” Elites are unlikely to need bunkers because they control the military and the press. They can hide behind guns and propaganda, so they don’t need bunkers for the most part. The elites aren’t stupid, but they are short-sight and limited by the political constraints of the day.
Hope for the best and prepare for the worst my friend.