Blog

Exponential Money in a Finite World

Tuesday, July 6, 2010, 12:19 AM

I'm going to repost this article for any newcomers and any old-timers because it is worth reviewing from time to time.  It's the center of my thesis about how the world works and what's likely to come.

Once you've read this, if you have not done so it's time to either watch the 45 minute 'short version' of the Crash Course, or begin the Crash Course itself.

And if you happen to be brand new to the site and are wondering what it has to offer and how to navigate it, I would invite you to visit our Welcome Page.

Now, onto the article.....


Exponential Money in a Finite World

The greatest shortcoming of the human race is our inability to understand the exponential function.

~ Dr. Albert Bartlett

Within the next twenty years, the most profound changes in all of economic history will sweep the globe. The economic chaos and turbulence we are now experiencing are merely the opening salvos in what will prove to be a long, disruptive period of adjustment. Our choices now are to either evolve a new economic model that is compatible with limited physical resources, or to risk a catastrophic failure of our monetary system, and with it the basis for civilization as we know it today.

In order to understand why, we must start at the beginning. While it was operating well, our monetary system was a great system, one that fostered incredible technological innovation and advances in standards of living, two characteristics that I fervently wish to continue. But every system has its pros and its cons, and our monetary system has a doozy of a flaw.

It is this: Our monetary system must continually expand, forever.

The US/world monetary system was designed and implemented at a time when the earth’s resources seemed limitless, so few gave much critical thought to the implications that every single dollar in circulation was to be loaned into existence by a bank with interest. In fact, most thought it a terribly “modern” concept, and most probably still do.

But anything that is continually expanding by some percentage amount, no matter how minuscule, is said to be growing geometrically, or exponentially.

Geometric growth can be seen in this sequence of numbers (1, 2, 4, 8, 16, 32, 64), while an arithmetic growth sequence is (1, 2, 3, 4, 5, 6, 7). In 1798, Thomas Malthus postulated that the human population’s geometric growth would, at some point, exceed the arithmetic returns of the earth, principally in the arena of food. To paraphrase, he recognized that the exponential growth of human numbers would meet with the constraints imposed by a finite world. As seen in the chart below, human population is growing exponentially, and is on track to reach 9.5 billion by 2050. To put this in perspective, it was only in 1960 that the world first passed 3 billion in total population, the same amount that is projected to be added over the next 42 years. Each new person places additional demands on food, water, energy, and other finite resources.

In parallel with exponential population growth, our monetary system is also exhibiting exponential behavior. Consider this evidence:

1) Money supply growth (see chart above). It took us from 1620 until 1973 to create the first $1trillion of US money stock (measured by adding up every bank account, CD, money market fund, etc). Every road, factory, bridge, school, and house built, together with every war fought and every other economic transaction that ever took place over those first 350 years, resulted in the creation of $1 trillion in money stock [1]. The most recent $1 trillion? That has been created in only 4.5 months. The dotted line in the chart is an idealized exponential curve, while the solid line is actual monetary data. The fit is nearly perfect (with a correlation of 0.98, for those interested). Data from the Federal Reserve.

2) Household debt has doubled in only 7 years, growing from seven to fourteen trillion dollars. Think about that for a minute. It is a stunning turn of events. Have household incomes also doubled in 7 years? No, not even close; they have grown less than half as much, calling into question how these loans will be repaid, let alone doubled again. Data from the Federal Reserve.

3) Total credit market debt (that’s all debt) had finally exceeded $5 trillion by 1975, but has recently increased by $5 trillion in just the past 2 years (from 2006 - 2008), and now stands at nearly $50 trillion. In order for the next twenty years to resemble the last twenty years, debt would have to expand by another 3 to 4 times, to somewhere between $150 trillion and $200 trillion. How likely do you think this is? Data from the Federal Reserve.

How do we make sense of money numbers this large and growing this fast? Why is this happening? Could it be that the US economy is so robust that it requires monetary and credit growth to double every 6-7 years? Are US households expecting a huge surge in wages, to be able to pay off all that debt? If not, then what’s going on? The key to understanding all three of the above money and debt charts was snuck in a few paragraphs ago; every single dollar in circulation is loaned into existence by a bank, with interest.

That little statement contains the entire mystery. As improbable as it may sound to you that all money is backed by debt, it is precisely correct, and while many of you are going to struggle with the concept, you’ll be in good company. John Kenneth Galbraith, the world-famous Harvard economist, said, “The process by which banks create money is so simple that the mind is repelled.” [2]

Here’s how money (and debt) creation works: Suppose we wipe the entire system clean and start over, so that we can more easily understand the process. Say you enter the first (and only) bank and receive the very first loan for $1000. At this point the bank has an asset (your loan) on the books, and you have $1000 in cash and a $1000 liability owed to the bank. After a month passes, and the first interest accrues, we peek into the system and observe that the $1000 in money still exists, but that your debt has grown by the size of the interest (let’s call that $10). Now your total debt to the bank is $1000 plus the $10 interest or $1010 in total.

Since there’s only $1000 floating around, and that’s all there is, clearly there’s not enough money to settle the whole debt. So where will the required $10 come from? In our system it must be loaned into existence, taking the form of $10 of new money plus $10 of new debt that must also be paid back with interest.

But if our system requires new and larger loans to enable the repayment of old loans, aren’t we actually just compounding the total amount of debt (and resulting money) with every passing year? Yes, that is precisely what is happening, and the three money/debt charts supplied above all provide confirmation of that dynamic.

In other words, our monetary system, and by extension our entire economy, are textbook examples of exponential systems. Yeast in a vat of sugar water, predator-free lemming populations, and algal blooms are natural examples of exponential growth. Plotted on graph paper, the lines tracking these populations start out slowly, begin to rise more quickly, and then, suddenly, shoot almost straight up, yielding a shape that resembles a hockey stick.

The key feature of exponential functions that our species desperately needs to understand is illustrated in this next example: [3]

Suppose I had a magic eyedropper that could dispense a drop of water with a most unusual trait – it will double in size every minute – and I place a drop of water in your hand. At first you’d just have a lonely drop of water sitting in your hand, but after one minute it would double in size, and after six minutes you’d have a blob of water that could fill a thimble. Do you have a sense of that growth? Now, follow me to Fenway Park, where I am going to place a drop from my magic eye dropper on the pitcher’s mound at 12:00 pm on January 1st of 2008. To make this interesting, let’s assume that the park is water-tight, and that I’ve handcuffed you to the highest row of bleacher seats. Way down there, on the mound, I bend over and plop a magic drop of water, so small you could not possibly see it from where you are sitting, and it begins to double. My question to you is, at what date and at what time would the park be completely filled? That is, how long do you have to escape from your handcuffs? Days? Weeks? Months? Years?

The answer is this: You have until 12:49 pm, on that same day, before the park is completely filled. You have only 49 minutes to escape your handcuffs. And at what time do you suppose that the park is still 97% empty space (and how many of you will appreciate the seriousness of your predicament)? The answer is that at 12:44 pm the park is still 97% unfilled. The first 44 minutes filled just 3% of the park, while the last 5 minutes filled the remaining 97%. From all of history until 1960 to reach a population of 3 billion humans; only 42 years from now to add another 3 billion.

And that’s why we need to appreciate exponential functions. For quite a while, everything seems just fine, and a few minutes later your park is overflowing. Time runs out in a hurry towards the end of any exponential growth system, forcing hurried decisions and limited options.

So how does this pertain to our economic problems, and why should you care? The truth is, there’s nothing inherently wrong with exponential growth, as long as you have unlimited room and resources. However, there are clear signs that several key resources on our planet are in their final minutes, to use our Fenway Park example.

And none of these are more important than crude oil. “Peak oil” is the global extension of the observation that individual oil fields, without exception, produce slightly more oil each year up to a point (“the peak”), after which they produce incrementally less and less oil each year, until their economics force abandonment. It is a fact that the US hit its peak of oil production in 1970 at approximately 10 million barrels a day and now produces barely more than 5 million barrels a day. It is now widely recognized that oil is a finite resource, and another cold, hard fact is that global oil discoveries peaked some 45 years ago. Because discoveries precede production (you’ve got to find it before you can pump it), we can be certain that production will peak too. We might disagree over the timing, but not the process.

I’m focusing on oil because energy drives an economy, not the other way around. The engine of any economy is energy, while money is merely the lubricating oil. Without energy, no amount of additional money would make the slightest difference in our lives. Economists love to say that higher oil prices will stimulate new oil production, as if demand could magically create supply. (Joke: If you lock three economists in a basement they won’t worry about starving, because they know their grumbling bellies will soon cause sandwiches to appear.) But just as there is no amount of additional price hikes that will cause more cod to come from the depleted oceans, oil fields will yield their treasures in accordance to geological limits, not human desire.

And here’s where the enormous monetary design flaw comes into the story. As Meadows, et al., in The Limits to Growth (1972) brilliantly predicted, we humans are now encountering physical, resource-constrained limits to our economic and population growth. So, on the one hand we have a monetary system that, by its very design, must expand exponentially in order to merely operate, while on the other hand we live on a spherical planet with finite resource limits.

When we started our exponential monetary system, initiated by the Bank of England around 1700 but kicked into high gear in 1971 with the international abandonment of gold settlement, nobody ever thought that the day would come when we’d find our ball park filled nearly to the brim. Who ever thought that oil production would hit a limit? Who knew that every acre of arable land, and then some, would someday be put into production? How could we possibly fish the seas empty? Yet all of these things have come to pass, and our monetary system demands that even more follow.

This is clearly an unsustainable arrangement. Someday soon, it will cease to be.

Repeating an opening sentence, our choices now are to either evolve a new economic model that is compatible with limited physical resources, or risk a catastrophic failure of our monetary system, and with it the basis for civilization as we know it today. I wish this collision between a finite planet and an exponential money system was far off in the future. Alas, it is certainly within the lifetime of people alive today, and likely already upon us.

We are leaving a legacy of debt to our children, born and unborn. Just as the direct printing of money favored by Wiemar Germany in the 1920s destroyed German’s purchasing power, so, too, does America’s debt accumulation promise to ruin our economy. Thus the moral argument beneath exponential growth in a finite context is: Should one generation consume beyond its means and either expect or hope that the next generations will somehow pick up the tab?

In summary, because our economic model and our entire system of money enforce a doctrine of limitless growth, they have become anachronisms incompatible with the well-being of the planet on which we live and depend. Our global money system might be complicated, and it might be sophisticated, but it is soon to be a vestige of the past.

Your job, your savings, your investments, and your future prospects and standard of living depend on the continuation of an unsustainable system now drawing to a close. You owe it to yourself to get ahead of the immense changes that are coming like water roiling up the steps towards the bleacher seat to which you are chained.


[1] Having trouble picturing a trillion? Think of it this way: If you had a single thousand-dollar bill, you could have a pretty good night on the town with your friends. If you had a stack of thousand dollar bills that was 4 inches high, you’d be a millionaire. If you had a stack just 40 inches high, you would be worth ten million dollars. How high would your stack have to be in order for you to be a trillionaire? The answer is, a solid stack of thousand dollar bills 68.9 miles high.

[2] If you need more help on this concept, please visit chapters 7 & 8 of my free, on-line Crash Course at http://PeakProsperity.com/crashcourse.

[3] I gained a much deeper appreciation for the power of exponential functions from transcripts of speeches given by the mathematician Dr. Albert Bartlett. This link goes to an exceptional example of his ability to make this complex subject startlingly clear.

(Originally published in September 2008)

Related content

175 Comments

jdownie's picture
jdownie
Status: Bronze Member (Offline)
Joined: Apr 7 2008
Posts: 58
Re: Exponential Money in a Finite World

Perhaps the problem is that there needs to be a proper definition of money?

Your graph states that there is some $14 trillion in US money stock, but if you look at the balance sheet of the Federal Reserve you'll see there isn't literally $14 trillion of US dollars in existence.

Maybe the money market needs to be renamed the 'money substitutes' market.

dillonlisa1's picture
dillonlisa1
Status: Member (Offline)
Joined: Aug 12 2009
Posts: 13
Re: Exponential Money in a Finite World

Hi there,

I am a layman with no banking experience but what you say makes complete sense. It is logic.

We have all our life savings in cash in the bank. What do you recommend Jo Blog punters like me do with our money?  I was thinking ½ into property (with manageable mortgage to take advantage of inflation if this arises) & the other ½ into gold/oil/other metals.

Does that seem like a good idea to you? What else could we do to diversify?

RJE's picture
RJE
Status: Diamond Member (Offline)
Joined: Aug 31 2008
Posts: 1369
Re: Exponential Money in a Finite World

Chris, I have followed Peak Oil for some time now. All my interests, research, and analysis has rotated around this concept. It is in fact what led me to you.

I will keep this very simple, everyone on this sight should take heed to prepare as best they can their futures without many of the things they have today. Their focus should be food, clothing, and shelter.

This is not intended to scare anyone but to make aware that our energy is running out, and our monitary system is broken beyond repair. Energy (OIL) is the most important commodity (gift) man has, and we have not prepared this country for its inevitable decline. Fact is we are on the back end of Hubberts curve now.

Matt Simmons, Jim Kingsdale, Cambell, Boone Pickens, and so many others have made a dent in making  us aware of this immense problem. I fear we are late to the party. I know we are.

Our most recent shot across the bow occured last year when oil went to $147.00 a barrel. It will be $500.00 a barrel maybe as early as 2015. So if anyone needs proof just stop, take a moment and look around. STOP AND SMELL THE ROSES.

The time to have reacted was in the Carter administration, he was spot on, and we blew it. Unfortunately a Marshall type plan will be in order to change to an electrical economy. I fear that may be difficult because of  the resourse limitations,

WE ARE IN SERIOUS DOO-DOO!!!

Thank you, your street level observer...Regards

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2489
What Do We Do To Fix It?

Dr.M,

I know this post is probably directed to new members, but I've been around here for a year and all that reading this again has done for me personally is create more frustration. I feel the need to find answers to our problems, not rehash them over and over. Surely, since you understand the problems better than almost anyone, you are the most capable of formulating and proposing solutions.

In regard to our monetary system, how do we "fix" it?

Please respond to this.

Jeff

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Exponential Money in a Finite World

One emerging item I'm a little curious about is natural gas. Prices were in a historic collapse a little while ago, purpotedly drive by excitement over the tight shale gases that were now feasible. I wonder if anyone has heard of news that these are playing out well or if there is another fundamental reason for the nat. gas price rebound?

Even to the lay observer, it becomes obvious that the only way to keep oil prices under control is through recession (yummy!) But it seems natural gas might have a little more time and might be the best hope for mitigating peak oil in the short term. Perhaps Boone Pickens is on to something.

Really, though, I think there is plenty of oil left for us to have an orderly dismantling of some of our systems. Probably the biggest challenge will be the beliefs and political whims of people themselves. That is why Chris's message is so important.

Nichoman's picture
Nichoman
Status: Gold Member (Offline)
Joined: Nov 1 2008
Posts: 420
Re: Do "they"..."get it" yet?

cmartenson wrote:

I recently attended and presented at the Association for the Study of Peak Oil (ASPO) conference in Denver.

The entire summary of everything I heard boils down to this:  We are already past peak oil.

Chris...

Agree.  Data and Analysis leads one to this conclusion for a while now.

What would be revealing is how much (quickly/slowly) this realization and acceptance has spread recently from your visit throughout the whole energy community, and any progress to enlightening key players (organizations/leaders/governments)?

Surely this must have been broached.

My point.  If key decision makers are still unable, or unwilling to grasp...what does this say about shaping our vision of the future...

Nichoman

ejanea's picture
ejanea
Status: Bronze Member (Offline)
Joined: Oct 2 2008
Posts: 53
Re: Exponential Money in a Finite World

I am aware that gas is being used to heat water to pump into tar sands and to heat shale oil... in order to retrieve those supplies of oil.   Perhaps that extra demant for gas has driven up the price.

China is buying liquefied natural gas also.

http://www.theaustralian.news.com.au/business/story/0,28124,25950461-500...

Gas is mentioned in this talk from Stanford University....

I found it interesting.

Jane

tekewin's picture
tekewin
Status: Member (Offline)
Joined: Sep 19 2008
Posts: 2
Re: Exponential Money in a Finite World

Chris,

Great article. 

I wanted to comment on loan failures a bit and how they work through the system.  What happens to a loan that can't be repaid?  It gets written down by the bank as a loss, and the asset is destroyed on the bank balance sheet. Enough loan losses and bank becomes insolvent and is shut down by its regulator (FDIC, NCUA, OCC, or OTS). When enough banks fail, you get a credit crisis, which is what happened at the end of 2007 and we are still working through it.  A financial or credit crisis tends to last a long time, a decade or more.

I find it helpful to think of credit as "future money".  Banks can create it at will, and people can spend it now pulling demand forward, but always at the cost of future consumption because the debt must be repaid.  We are so overloaded with debt now that it will drag down the economy for a long time.

As you point out, when money/credit supply is not growing, the economy is not functioning very well.  The broader measures of money (M2 and MZM) have been shrinking this year and credit has also been shrinking.  The game with fiat money can go on a long time, but ultimately they all fail.  Unfortunately, what often happens is the game is reset and started over with another fiat currency. 

What is stark about the eventual failure of the US dollar is that it is the world reserve currency.  The origianl Bretton Woods system only lasted from 1945 to 1971, failed and was replaced with Bretton Woods II.  Now, 38 years later, we stand on the edge of the Bretton Woods II failure.  Talk from the Chinese and other emerging powers is about creating a new reserve currency based on the IMF SDR, a synthetic currency based on a basket of other fiats.  The transistion to a new world reserve currency will have a negative effect on the average US standard of living.

suesullivan's picture
suesullivan
Status: Gold Member (Offline)
Joined: Oct 6 2008
Posts: 305
Re: diversifying cash

Chris has written a great deal about what to do to prepare and diversify, you'll find in poking around the site.  Essentially, he recommends starting out by making sure one is prepared for economic dislocations caused by a series of oil shocks and financial crises -- stock up on storable foods and other staple necessities.  The list of imported (and hence oil-dependent and oil-price-tied) necessities in our life is huge and worth considering at length.

Only after making preparations to ensure that basic needs can be met for an extended time in the case of an economic dislocation does he recommend a portion of remaining cash be in metals under your own physical control (safe deposit box or well hidden). Buying land outright, if you're inclined to live on it and work it, has gotten kudos from many on this site. Taking on debt is not advised -- as I understand it even a small fixed-rate mortgage will represent a growing debt burden in deflationary times, though it seems like a safe option in an inflationary world, which we all seem headed to at some point.

The real estate markets are in the middle of an unprecedented collapse right now and it may well be we come out of this realizing that we have massive oversupplies of housing and commercial RE (there was a time when generations lived together under one small roof, and pernicious un- and underemployment could well return us to that historic norm) so there may be little market for rentals. I'd be leery of buying property that needed a renter to pay the mortgage.

I know there's more detailed advice in the subscriber sections and throughout the site, it's worth poking around here for a long afternoon.

Good luck with your preparations,

Sue

jackdykes's picture
jackdykes
Status: Member (Offline)
Joined: Oct 17 2009
Posts: 1
Re: Exponential Money in a Finite World

I'm relatively uninformed about all this,and agree with most of what you say. You did mention ,in relation to peak oil,that "some miracle energy breakthrough" might be part of what could save us.  I've been reading about the huge natural gas finds in the Marcellus shales and other locations. I know it's early,but could this be the "miracle energy breakthrough"?

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Exponential Money in a Finite World

Chris, I have followed Peak Oil for some time now. It is in fact what led me to you.

I know this post is probably directed to new members, but I've been around here for a year and all that reading this again has done for me personally is create more frustration. I feel the need to find answers to our problems, not rehash them over and over. Surely, since you understand the problems better than almost anyone, you are the most capable of formulating and proposing solutions.

In regard to our monetary system, how do we "fix" it?

I second this . One reason people come to these sites is to find answers from people they feel are smarter than themselves IMHO. It is great to have all the data where we can make up our own minds but it is nice to see how you are specifically preparing since you have been way ahead of this curve.

It is starting to look to me that our financial structure may implode before peak oil which in turn strings peak oil on down the road, that & all the new Nat Gas that has been coming around.

The oil hitting $149 a barrel plus all the BS loads that came to surface so close together really did a number on things.

I wish you could express your near term feelings (IMHO feelings are not investment advice)about where you see oil prices going in the short term. Also wonder what thoughts you might have on the USO being a safer place to be than cash. Wouldn't a bank holiday hurt the cash more than being in the USO? A lot of analysts (for what that is worth) feel oil is better than gold now. IMHO we need oil far more than gold.

Thanks

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 420
Re: What Do We Do To Fix It?

JAG wrote:

Dr.M,

I know this post is probably directed to new members, but I've been around here for a year and all that reading this again has done for me personally is create more frustration. I feel the need to find answers to our problems, not rehash them over and over. Surely, since you understand the problems better than almost anyone, you are the most capable of formulating and proposing solutions.

In regard to our monetary system, how do we "fix" it?

Please respond to this.

Jeff

Hi Jeff,

I don't intend to speak for Chris here but I did want to offer a comment to your post since I have been dealing with similar issues. I have been delivering the Crash Course on Thursday evenings now for over five months and well over 150 people in this area have now been through it. After about the third series a number of grads began asking very similar questions to yours. My comments are basically facts that I have derived from delivering the CC and I will note my opinions which are offered from the perspective of a Martenson Brigade member.

We have since started an "After the crash Course Group" open to any graduates that are interested. Those who attend this group are almost 100% people who understand the fundamentals of our predicament as being one where we will need to learn to survive with much much less energy and that our dependence on fossil fuels will greatly determine how our survival will play out. There is a tremendous desire for participants to want to know what the solutions are ..... what does Chris say to do.  We replay chapters 19 and 20 sometimes to restudy this issue.

The basic point here is that those who make the jump into being able to cause something to happen rather than simply being the effect of the system note that their frustrations tend to dissappear almost one for one.These are the facts of getting into action.

IMHO it will be the recreation of community and the working out of local solutions to the questions of currency, food, shelter, transportation and security that will "solve" the problems we are going to deal with from now on in a "speeding up" of the process of learning to live in a world with an energy source which is getting lesser. I do not see that we are going to "fix the economy". It simply will not function where we are going.

There is one more observation I have to post here. I have watched the CC many times now with the participants. I continue to be amazed how much I continue to learn!  Last Thursday after we watched Part One - The Fundamentals,  a fellow who decided to do the course again  came up to me after the discussion and said ......" I'm glad Chris produced a new Crash Course, this one was much easier to follow!"  I said to him that it is the exact same course. He persisted, "That is amazing, I don't remember this information from the first course at all!"

So I offer to all who are feeling frustrated ...... take some form of action no matter how small and see if it doesn't help the frustration.  If it persists, try delivering the CC to a small group.....you will be amazed how theraputic that can be!

Coop

xraymike79's picture
xraymike79
Status: Diamond Member (Offline)
Joined: Aug 24 2008
Posts: 2040
Re: Exponential Money in a Finite World

Chris Martenson said:

...One of my central contributions centers on the idea that it is our monetary system itself that is out of step with reality.  Everything else we see around us economically is merely a symptom, while the cause of our current and future ills is the dependence of our monetary system on perpetual exponential growth.  A profound and important set of conclusions immediately result from the acceptance of this argument....

My hope is that we can have a vigorous discussion here.  I am constantly looking for evidence to either bolster or refute this hypothesis.  Where is this wrong?  What could mitigate this argument, besides some miracle energy breakthrough?  Is there another way to view this?   Is it somehow possible for our money system to be tweaked into compliance with reality?

As always, higher style points are offered for comments that are fact-based and logical over arguments that are grounded in beliefs and opinions.

To fix any of these structural problems you speak of, we need political will. Turn on the TV and you still hear the phrase "economic growth" being spewed forth ad infinitum. That's #1. Number 2 is a social/cultural problem -- the spiritual and physical separation of the outer world, nature, from modern man.  Changes in these two major points are what is needed for a paradigm shift to save us. You can talk and rehash the problems until you are blue in the face, but until we impart a social/cultural change and a drastically different political leadership, the inevitable Orlov outcome will occur.

bluebird's picture
bluebird
Status: Bronze Member (Offline)
Joined: Sep 4 2008
Posts: 75
Re: Exponential Money in a Finite World
 
I think the number one issue is going to be the lack of obtaining credit. Most people on unemployment compensation probably still have a credit card to buy necessities, until it's denied.
 
   
At some point in the near future, I think the access to credit is going to be denied, for just about everyone, both businesses and people, until all the debts are cleared out. No credit card, no job, no income, no savings, no house, no food, no transportation of goods. Hardley anything moves in today's world without credit.
 
   
It isn't so much the money system needs to be fixed, it's going to be how to survive without having a credit card, businesses and people. Peak oil means nothing, unless you have credit to move the oil from the refinery to the suppliers to the gas station to the people.
Perhaps when people return to bartering, trading skills for food and other things, that a new monetary system can be developed. The system we have now, has to break completely, before it can begin anew.
  
 
Edit: Our monetary system today is based on credit. When credit goes away, there is no system. No money. Nothing.
   
dps's picture
dps
Status: Martenson Brigade Member (Offline)
Joined: Jun 27 2008
Posts: 442
Re: Exponential Money in a Finite World

Suggestions on what you can do:

Build community resilience by getting to know your neighbors and building friendships.  Learn a bit about Permaculture gardening techniques, find some land and grow a garden with your friends and neighbors.  True prosperity is eliminating dependencies.  Learning to grow your own food is one way to eliminate dependencies.  Stock staples ... start thinking about those staples as your savings account.  Reduce your dependence on oil.  Get a job you can walk to if at all possible.  Or move so you can walk to work.  Get a bike, think of it as your savings account.  Change how you think about everything you see around you ... think about how much oil was involved to get it there, less oil needed is more resilient.  You can find many of these ideas expanded by searching for information on Transition Towns in your area.  You will be surprised at how many other people are involved already.  People are thinking and doing things about these issues.

Best wishes ... dons

Gibber's picture
Gibber
Status: Bronze Member (Offline)
Joined: Oct 4 2008
Posts: 35
Re: Exponential Money in a Finite World

I found some information about "The Growth Lobby".

http://researchbank.swinburne.edu.au/vital/access/manager/Repository/swin:5219?start=331

The term growth lobby describes those who want governments to increase immigrant numbers for economic reasons. Since the 1970s a number of researchers have emphasised the pivotal role of this lobby in shaping Australian immigration policy. Its core consists of business interests that profit from population growth, especially property developers and operators in the housing and construction industries.
..
The growth lobby is distinctive insofar as it has a vested economic interest in immigration, and its key players are rich and powerful

There are other industries closely associated with development and housing which also support the growth lobby. Most notably, the Australian media derive a large part of their advertising revenue from developers and real estate agents. And like the housing industry, the media have a limited capacity to export their products so an expanding domestic market suits them well. Media proprietors have supported immigration for a long time

All of this may mean that, rather than having growth for growth’s sake, Australia has growth for the growth lobby’s sake.

Bit of a light bulb moment. May helpt to explain why the Economic Growth Mantra has such a dominance in the MSM.   Grow the population, Grow the MSM market.

thefroggydude's picture
thefroggydude
Status: Member (Offline)
Joined: Oct 7 2008
Posts: 13
Re: Exponential Money in a Finite World

This post is in reply to Jackdykes' comment:

<quote>I'm relatively uninformed about all this,and agree with most of what you say. You did mention ,in relation to peak oil,that "some miracle energy breakthrough" might be part of what could save us.  I've been reading about the huge natural gas finds in the Marcellus shales and other locations. I know it's early,but could this be the "miracle energy breakthrough"?<quote>

I asked a specialist geologist in tight gas reservoirs this very same question.  Here is her reply:

"The one caveat that they don't mention is that each unconventional reservoir has its secrets that need to be unlocked. People in this industry tend to not realize that they're not just some massive reservoir that is homogeneous throughout. Look at the Haynesville for example. It is getting a lot of press lately but it is definitely not a slam dunk. It is quite heterogeneous and therefore you can't expect the same results everywhere. These reservoirs take a lot of sciencing and trial and error.
 
I think it's great that we've changed our perspectives of tight rock reservoirs but there needs to be caution in the thinking of how quickly we figure them out."
Patz6588's picture
Patz6588
Status: Member (Offline)
Joined: Apr 22 2009
Posts: 1
Re: Exponential Money in a Finite World

Jack Dykes wrote: "I'm relatively uninformed about all this,and agree with most of what you say. You did mention ,in relation to peak oil,that "some miracle energy breakthrough" might be part of what could save us.  I've been reading about the huge natural gas finds in the Marcellus shales and other locations. I know it's early,but could this be the "miracle energy breakthrough"?

Jack if you read through CM's post again you will realize there is no  "miracle cure." Supposing some scientist figured out a way to cheaply modify a few molecules to change water---sea water even---into high grade energy. Problem solved right?! Wrong! We would then face a short upspike in population followed by a crash as a result of running into our old friend Mr. Exponential in population, food, water, garbage etc. Cheap energy like oil or natural gas aren't the solutions now  (if they ever really were) they're the problem. I know this must seem counter intuitive to you now but stay with the program and you'll be as mordantly depressed as the rest of us. 

We are headed for a population crash that may be gradual, unlikely, or it may be sudden and violent. But the best estimates of a sustainable population of the planet are 2 billion but more likely 1 billion or less. 

Hope that's not too much to swallow right now. 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Exponential Money in a Finite World

I don't think so......  read this:

http://www.odac-info.org/newsletter/2009/10/16#ar8928

Mike

Thomas Hedin's picture
Thomas Hedin
Status: Platinum Member (Offline)
Joined: Jan 28 2009
Posts: 815
Re: Exponential Money in a Finite World

Here is some help in picturing what a trillion dollars of debt looks like.  Can someone calculate how much 1 trillion dollars of interest bearing debt adds to the cost of doing business at a mear 6%

http://moneyaswealth.blogspot.com/2009/03/what-does-1-trillion-look-like.html

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Exponential Money in a Finite World

"One reason people come to these sites is to find answers from people they feel are smarter than themselves IMHO. It is great to have all the data where we can make up our own minds but it is nice to see how you are specifically preparing since you have been way ahead of this curve."

I've been mulling over this comment, wondering how to respond...... you can be as smart as you want, but it actually makes little difference, because, I being one of the smart ones :-) and having started preparing six or seven years ago. now realise that it is IMPOSSIBLE, no matter how smart one is, to transform one's lifestyle as we have, unless the new economic system Chris craves in his article comes to fruition. We did it, some of you might do it too, but it is IMPOSSIBLE for everyone to do it....

The ONLY way people can be allowed to transition to a sustainable civilisation is by unshackling them from debt.

People in debt MUST (usually) drive a car to work everyday (sometimes for two jobs!) entirely because they have debts to service. Believe me, once you unshackle yourself from debts, you discover a whole new world of possibilities out there you never knew existed! Today instead of standing in front of a shaving mirror, and putting a tie on to go to work in the morning, I walk down to the goats and milk them! Then I feed the ducks and change their water, and.......

I call it abandoning the Matrix (it was interesting Chris mentioning the red pill......  TAKE THE RED PILL for goodness sake!)

For me, the red pill is debt cancelation. Either TPTB do this in the form of a DEBT JUBILEE (google it), or we force it upon the crooks who own the banks by refusing to dervice our debts any further. Either way it will be a revolution, we do indeed live in interesting times....

Mike

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Exponential Money in a Finite World

" I think the number one issue is going to be the lack of obtaining credit."

No it won't...... the number one issue will be not being able to get food!

In a post Matrix world, all credit issuance will be banned. That's after all debts are canceled of course!

Mike

ernie's picture
ernie
Status: Bronze Member (Offline)
Joined: Feb 18 2009
Posts: 39
Re: Exponential Money in a Finite World

This is a very interesting interview with Morgan Downey, Author of the book “Oil 101″ from this weeks Financial Sense newshour:

http://www.netcastdaily.com/broadcast/fsn2009-1017-2.mp3

Well worth a listen for anyone who want’s to know what drives oil prices, production costs, and how it’s going to effect our global economic expansion in the near future. Is

- Ernie.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Exponential Money in a Finite World

You've got money..?  WOW!!!

If I were in your shoes, I would do exactly what we did! Buy a property with decent soil and rainfall, not too close and not too far from the madding crowd, learn Permaculture, and practice it.

Stop thinking of wealth as "money", "gold", or "oil".

TRUE wealth is being free of the shackles of debt, and having a roof over your head (as modest as you can make it), and a convenient and reliable supply of food and water. Everything else is a waste of wealth!

Mike

bluebird's picture
bluebird
Status: Bronze Member (Offline)
Joined: Sep 4 2008
Posts: 75
Re: Exponential Money in a Finite World

Damnthematrix - Definitely people need food, and clean water. I was thinking that when credit stops, the delivery trucks won't be able to bring food to the stores, because they wouldn't be able to get the credit to process the food, then wouldn't be able to get the credit to put gas in those delivery trucks. Or vice versa. Credit stops, it's over. But first, it should be the food...Buy the seeds to grow the food, stockpile extra provisions, and have animals for milk and meat. Very true, if you plan ahead. However, most people are still clueless, and perceive there is no crisis. For them, it will be over when credit stops, as they have no food, no preparations, no stockpiles. Most likely, they have no savings and living paycheck to paycheck, if not already on unemployment.  Family and friends tell me not to worry, nothing's going to happen, and there isn't anything that can be done. I'm told I talk like a meteor is going to hit the world, and that is never going to happen. But I worry, and stockpile. Because the world has too much debt and toxic investments, and it's all going to implode. Edit: we will run out of food and credit, before we ever run out of oil.

dps's picture
dps
Status: Martenson Brigade Member (Offline)
Joined: Jun 27 2008
Posts: 442
Re: Exponential Money in a Finite World

bluebird:  Trust yourself.  The only folks that can hear are those willing to listen.  best wishes ... dons

alcatwize's picture
alcatwize
Status: Bronze Member (Offline)
Joined: Dec 24 2008
Posts: 78
Re: What Do We Do To Fix It?

How do we fix it?  Well a good start would be to abolish the Federal Reserve and end fractional reserve banking.  Now would be a good time to support Ron Paul's audit the FED bill.  http://www.ronpaul.com/on-the-issues/audit-the-federal-reserve-hr-1207/

Why abolish the Fed?  The Fed is a private bank.  Private banks (companies) have one motive... that is to make money.  That's it folks.  There is the priority and they have made a LOT of money for themselves and the other federal banks.  Banks are do NOT care about the economic welfare of the county as a whole.   We need to take away banks ability to create money, hence no more fractional reserve banking.  We need to put money creating back in the hands of the government, possible a fourth branch of government.  I could go on as to why this is, but one needs to really do their homework to get to this point.

And no, the answer is not to go back to the gold standard.  The gold standard can be too easily manipulated by foreign governments (as it has been several times in the past).  Again, one must spend the time to understand why, but if you have come this far then finishing the quest is worth it.

So the real quick summary fix is... abolish the fed.  Abolish fractional reserve banking.  Understand the money is NOT a commodity and should be a creation of law.

Unfortunately, these things will never happen because bankers would rather be dead than give up their power, so it looks like it would take a revolution.

codeblue's picture
codeblue
Status: Member (Offline)
Joined: Apr 21 2009
Posts: 13
Re: Exponential Money in a Finite World

I must first say that I am thankful to Dr. Martenson for enlightening me to many of the challenges that lie before us.  I will be eternally grateful.  Also much thanks to many of you for your continued insight.

I have a question:  It seems to me that the premise of Exponential Growth is at the heart of the message of Dr. Martenson.  Meaning it is assumed that we will continue to have exponential growth regarding money, population, debt, etc.,  My question is:  why will the growth most likely be exponential?  In other words, why wouldn't logistic growth or an S curve type growth (logistic growth has a period of exponential features, but then levels out) likely apply to the categories previously mentioned (maybe one, maybe all)?  Just as there are many examples of exponenital growth, there are just as many (if not more) examples of logistic growth that apply to the world we live in. 

Thanks in advance for any insight.

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Exponential Money in a Finite World

Codeblue,

I think that whole point is that even though growth now is looking like it is exponential it cannot continue this way because it will run smack into real limits. That is like a logistic curve.

For example as Dr. M points out our debt based money must continually grow because that is the way it was designed. However, this means that the economy must continue to grow forever - which it can't - it will crash.

Ken

bluestone's picture
bluestone
Status: Gold Member (Offline)
Joined: Dec 29 2008
Posts: 263
Post peak oil

Dr. Martenson

I have read that truly determining we have reached peak oil can only be done 5-10 years post facto.  What was the compelling evidence presented at ASPO that we are past peak oil?  I suppose in the end the timing doesn't matter, but personally I wouldn't mind if we could it back another 5 years.

Thanks

Brian

bluestone's picture
bluestone
Status: Gold Member (Offline)
Joined: Dec 29 2008
Posts: 263
Re: What Do We Do To Fix It?

Jeff

In a way, i think you answered your own question (Dr. Martenson IS directing his post at new members).  I think that sometimes it is easy to forget what is the purpose of the site is for Dr. Martenson.  I have followed this site for over a year now.  I have read many of your posts over the past year and realize you probably know a 100x what I know.  But how much you and I know or do is really not the problem.  We have already changed our mindset and begun preparing.  It is what the people around us are doing.  It seems to me that 99% of the people in my community still don't have a clue whats going on.  And that is the biggest problem.  I've started gardening, purchasing PMs, trying to change to a sustainable lifestyle.  But so what!  None of us can live in a vacuum.   If the community at large around me is not prepared when TSHTF, I won't be prepared...I'll be a target. 

So, some of Dr. Ms posts may seem repetitive or seem like rehashes... but he doesn't need to get through to you anymore...  What we all need is to get through to that other 99% of the population.  Wouldn't it be great if all of your neighbors figured out that it would be a good idea to start gardening.  Even a simple adjustment like that could really cushon our fall.

Having said that Jeff, I really could use some advice on how to spread the word.  My wife and I have have told at least 100 people about the Crash Course.  I fear that only 2 or 3 people have watched the whole course and actually taken  it seriously.  a lot of people got back to me and say they made it through a few chapters, then gave up on it.  Kind of disappointing    

Brian 

printfaster's picture
printfaster
Status: Bronze Member (Offline)
Joined: Sep 30 2009
Posts: 52
Re: Exponential Money in a Finite World

What I see is quite different.

Energy supply is being managed politically.  I had this discussion with a friend.  Basically between clathrates, primordial oil, gas and asphalt (yes primordial, where do you think the dinosaurs got their carbon? A space ship), and  deep offshore (it may be primordial, it is too deep for sedimentation), we have far too much oil.  The US is not drilling deep, the Russiand and Brazilians are.  It is just like diamonds when the Russians came up with a huge supply, DeBeers took control to manage pricing.  Same with synthetic diamonds which can be made large,and very cheaply at standard pressures using a hydrogen furnace at 600C --Rustum Roy, Penn State or Pitt, whichever.

The people of the earth are being led like sheep to a an abattior to be killed off for the entertainment and benifit of the few.  Having too many peasants around is so, dirty, and ugly.  Global warming is a clear hoax.  It is now called climate change since temperatures are dropping.

I refuse to be cowed by the abort now, euthansia, one child per family, to save the earth crowd.  Hey after all, the quickest way to stop "global warming" and excess CO2 is mass suicide.  Jamestown is the solution to all of society's problems.  To me restriction in growth and limiting the future is a form of suicide.  Like being put in jail.  It is a loss of freedom to benefit others who lack imagination.

TJF's picture
TJF
Status: Member (Offline)
Joined: Sep 30 2008
Posts: 1
Re: Exponential Money in a Finite World

I think a miracle energy breakthrough is something more along the lines of nuclear fusion.  Something that can provide all the energy we need.  A new natural gas find  is not really a breakthrough, but it may delay the chaos.

I think the hardest thing to grasp about all of this is that the timing is the most uncertain part about it.  I can find no fault with the logic and reasoning behind peak oil, our exponentially growing money supply, the exponentially growing world population all pointing to a massive disruption - a perfect storm.  But I really don't know whether to prepare because we are on the verge of it, or if it will be upon us 20 years from now.

zxcvb1234's picture
zxcvb1234
Status: Member (Offline)
Joined: Jul 19 2009
Posts: 1
Re: Exponential Money in a Finite World

I'm relieved that throughout my life I've had to deal with living with so little involvement in maintaining an unsustainable lifestyle like, investments, cars, mortgage, and credit cards, and overall not being so materialistic. Now that I'm aware of what is coming, it should be far easier for someone like me to cope with the changes on the horizon, because I have not mired myself in debt, and not by choice. With a credit rating that always came back saying "insufficient credit" was truly a blessing in disguise. I pretty much know that there will be no "miracle energy breakthrough" that will yield the same net energy that only oil can, and that may very well be a good thing, considering all the ugly things that have transpired as a result of oil, such as unprecedented fraud, greed, corruption, and aggressive warfare resulting in hundreds of millions killed, and not to mention the contamination of our planet due to strip-mining and the like, as just a few examples. 

It will always boggle my imagination as to why anyone would even want to save such a nasty system. Are people really so brainwashed? Let this fraudulent and corrupt system fade into an ugly memory and let's start over with something new and cleaner. It would be better for us all.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1501
Re: Exponential Money in a Finite World

Humans are the only species aware of their own exponential growth.  My hope is that this distinction saves us from the fate that meets other species.

Chris, I do not think there can be an argument against growth reaching the limits that finite resources place upon it.  There can only be an argument, and a large degree of error, in the timing.  This is especially so with exponential functions, where time, from most human perspectives, is a tricky thing to, pardon the pun, time.

Chris, if you made this argument in 1979 instead of 2009, would the graphs look any less scary?  This is an honest question - I would really like to know what they'd look like from a 1979 perspective.  30 years is a long time from a personal perspective.  It's a grain of sand on a beach in the larger view.  Could we have another 30 years before TSHTF - what about 60 or 90?  I would really like to know.

The margin of error inherent in all this is very important.  The more time we have, the greater the chance that a revolution in energy harvesting takes place.  I have not given up on that possibility.  I do not expect anyone to have the ability to pinpoint where we are +/- 30 years on an ideal exponential curve, much less 5, 10 or 20.  The danger is real and the possibility of us (I'm 38) living through a quantum-crash are likely.  I just wish there were a way to narrow this down.

As far as the money argument goes, as far as I'm concerned, and after being around here almost a year, I am surprised this isn't taught in pre-Kinder by now. I do not think it has much to do with exponential human population growth though.  Don't get me wrong, of course I see the connection between an infinite-growth-requiring-money-supply and a finite world, but when energy supply starts crashing, I really won't care what's going on with money.  Money will be old news and not on my radar screen.  If money cannot buy energy, there won't be much point in it.

Thanks again for all the good work.

printfaster's picture
printfaster
Status: Bronze Member (Offline)
Joined: Sep 30 2009
Posts: 52
Re: Exponential Money in a Finite World

Perhaps my message got a bit muddled.

My way to resolve exponential growth is through struggle, not extinction through suicide.  Yes it is Darwinism, not control or management.

ernie's picture
ernie
Status: Bronze Member (Offline)
Joined: Feb 18 2009
Posts: 39
Re: Exponential Money in a Finite World

TJF wrote:

I think a miracle energy breakthrough is something more along the lines of nuclear fusion.  Something that can provide all the energy we need.  A new natural gas find  is not really a breakthrough, but it may delay the chaos.

I think the hardest thing to grasp about all of this is that the timing is the most uncertain part about it.  I can find no fault with the logic and reasoning behind peak oil, our exponentially growing money supply, the exponentially growing world population all pointing to a massive disruption - a perfect storm.  But I really don't know whether to prepare because we are on the verge of it, or if it will be upon us 20 years from now.

We will be out of oil to build the fusion reactors with by the time they actually get one to work. Even fission reactors will not fill the gap of oil in time at the rate they are building them. Oil is mainly used for transport. Nuclear isn't very good at that with the exeption of big ships and the ocassional deep space satellite.

- Ernei.

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Exponential Money in a Finite World

Two things that could occur are (1) the development of practical thermonuclear fusion, as noted above, and (2) the development of an advanced propulsion system.  With nuclear fusion, the electrical energy could be used to hydrolyze water for hydrogen for fuel and also could be used to charge supercapacitors used to drive electric motors for transport such as cars, buses, trains, and perhaps, even certain types of aircraft.  With regards to the second topic, I had read an article approximately 5-8 years ago where the former head of the European Space Agency had gathered a team of scientists who were working on the math for understanding how intense electromagnetic fields could be used to warp gravity (yep, the mythical Star Trek warp engine).  His statement at the time was that he felt they could begin building a prototype engine within 5 years.  He predicted travel faster than the speed of light such that the travel time to the nearest star (Alpha Centuri, 4.37 light years away) would be a few months rather than years.  The article was fascinating but I have seen nothing about the concept since.  Such a breakthrough would allow to break the confines of this finite sphere and then, .... yee haaah!!!  Big breakthroughs is economic progress have typically come through energy and one particular expression of energy ... transport (sailing ship, steamship, railroad, automobile, airplane, ???). 

surfersdsb's picture
surfersdsb
Status: Member (Offline)
Joined: Oct 16 2009
Posts: 3
Re: Exponential Money in a Finite World

I agree with much of what Dr. M  says and I am positioned financially out of the dollar, I have a significant amount of precious metals and I have extra assets spread about in a variety of safe vehicles which are easily transferrable.

I am also a long term wall street oil trader and one of the issues that does not ever seem to be mentioned is the effect of productivity gains on growth of the economy and growth in the supply of oil. Recent discoveries due to technology advances has doubled our domestic natural gas reserves in 24 months. The historical relationship between natural gas being close to a 7 to 1 price ratio has widen to 22 to 1. Is it possible that we will see advances in coal to liquids, natural gas powered transportation or a high price of oil which will encourage significant renewable technology advances? 

While I believe that peak oil is a distinct possibility I would like to to see a greater discussion of the affects of technological advances which can push Dr. M's timeline of crisis further into the future. In my 30 year experience in trading I have learned that an illogical market can last longer then one's ability to keep a position on. For the record I am long energy at this time.

I also believe that our current politicians are only capable of doing the wrong thing. Still the issues of productivity and the advances in technology might save us yet.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Exponential Money in a Finite World

I'm amazed that after doing the CC, anyone can still believe in "safe vehicles"...... Don't you understand that EVERYTHING's about to change?

Peak Oil is no "distinct possibility", it happened in 2005. 2005 was the year when the AVERAGE MONTHLY extraction rate (Mbbls/day) was the highest for the entire year, and there have only ever been one or two months in the 2005/8 period when extraction rates exceeded the highest month in 2008. It's all over Rover.....

We don't need "significant renewable technology advances", we knew how to do all this stuff well 20 years ago.....  our house is fully solar powered. When I found out 20 yrs ago that it was possible to "fully solar power houses", I could not understand why nobody was doing it.... Twenty, or even better, thirty years ago, was the time to get ready for this, Jimmy Carter was right all along.... but nobody listened.

Regarding "the effects of technological advances", you are confusing technology with energy. Technology RELIES on energy, technology CANNOT create energy, because nothing can create energy. Technology can convert one energy source into another kind, and usually badly and inefficiently. It is BECAUSE fossil fuels are so good at generating cheap and abundant energy that we have all of today's techy gadgets. Even this very computer I'm typing into right now requires 500 pounds of fossil fuels JUST to make it...... never mind booting it up!

Technology will not save us, it will sink us.

Mike.

Psycho's picture
Psycho
Status: Member (Offline)
Joined: Mar 17 2009
Posts: 4
Re: Exponential Money in a Finite World

Dear Chris,

Wonderful post again, youre good hearted rational analyses brings us insights in the world not 10, uhm 100 economist can give nowadays.

I want to give you a few thoughts on the subject. Already consciousness for quite a while about both the expanding and exponentially money system, the coming end of cheap oil and the environmental destruction we enforce on this planet, my mind always ponders about solutions, implications and the like.

In Holland, where I live, we have had political discussions about the necessity of growth and how this is opposite to environmental values. The debate was never as thorough as it can get on these sites, and because we have few minds really understanding the nature of the system, the main 'political' conclusion from this debate was the following. To pay for environmental care and progress, we (read: the gov.) need a growing economy. There is a strong believe in technological improvement that can save us from continuing depleting and polluting earth' resources. The argument was centered around the concept of 'decoupling'. The idea is: we can decouple our environmental impact from our growth system. Wonderful idea, that, when you make the right statistics, can even be strongly defended. Especially when you make stats like impact/product, impact/$ added value instead of 'impact in total' and do not consider the environmental impact from imported goods.

Though I found the argument of 'grow $ to save environment' very bliss, there are some emprical and theoretical points that do not necessarily make this idea totally insane.

First, wealth (for a person, company, or gov.) gives you opportunity to invest, if you do this in the right way, you can possibly reduce environmental harm or make yourself less dependable. Most important: being convinced, motivated and seeing the necessity to make such investments.

Second, and this point focusses especially around energy, but is in fact valid for all scarce and difficult to cheaply replace resources, scarcity will induce growth and helps the moneysystem to expand! Simply put: when the same amount of people bag for a similar amount of pie, when the pie got smaller, prices rise. When costs of production stay roughly the same, profits rise and so does the return on investment in this particular sector. I've seen it last year when food prices rose, partly due to rising energyprices. The extra added value of food was not because food was different, but because inputs were scarcer, hence more added value, more profit to pay debt and create more debt in the future. The example is even stronger with warming your house with gas. You pay more for the same comfort; see there how extra value is added compared to last year, and money got it's way to expansion.

Third, the intrinsic money-expansion of the system does not necessarily implicate more resource use (theoretically). That fully depends on what people,company's, gov's, and other institutions find valuable! If i earn 10.000 a month, and if i spend 90 % of that on a very expansive messages by an extremely equipped person who studied this stuff his whole life and is now world famous, this hardly costs environmental resources. The same when I would consult a psychological advisor, or pay a technican to reduce the energycosts of my house. 
Well, in this world where 1+ billion live from 1 dollar a day and are begging for a little more wealth, and more are slowly or rapidly emerging in middle and high-class households, this will not count as much as the theoretical idea.

But, as a European, i see quite a significant group of people that are hardly interested in expanding their material wealth, but are more focused on what i could call 'quality of life', valuing spare time, being with their kids, valuing relationships, personal growth, improving skills. All kind of values that have far less environmental impact than buying a second car and the like.

Last but maybe not least. The dollar and other fiat-currency expansion will, in the next 5-10-20 years, encounter strong inflation. First from crazy money printing, second from slowly collapsing currency-rates, making Yuan's and Real's way more expansive. Our natural cheap countries from which we import are not so cheap anymore, and substitutes for them may not so easy to take over their place (Africa?).  Ah, and third because of expansive fossil energy, of course.

Not having a job will probably way more common than we experienced last decades, and with the inflating money, debts and monetary posessions will lose their value. I have the strong feeling that alternative currency systems can experience rapid growth in this environment. Alternative, so not dollar-based. Maybe not backed up by anything, but maybe regional and without intrinsic devaluing system (money creation). And maybe with some smart-inbuild system that makes investments valuable for the environment. Hopefully not to be forbidden by your authorities and Wall $treet bankers, it could save you (and us) a lot of future troubles, and make people more independent from central governed institutions. In Argentina alternative money system where flourising after their currency collapse.

Till so far! Greetings,

okubow's picture
okubow
Status: Bronze Member (Offline)
Joined: Aug 16 2009
Posts: 67
Re: Exponential Money in a Finite World

I've been visiting this site pretty regularly for the last few months with breaks here and there. Based on the information Chris and others have provided, and the research I've done off the site, I'd say the probability that human beings are in for a painful period of readjustment is significant (this would include me, and I'm definitely not looking forward to it). The threat of large scale wars is also significant. In the words of Gerald Celente, "when people lose everything, they lose it."

The same can be said for world powers and world leaders watching their empires rapidly decay and their people turn to civil unrest and lawlessness. As they reach for those last few oil fields in central Asia they will be reaching with shallow gasps of desperation and with a cold sweat on their brows. If everything is on the line you might as well launch your nukes at your enemies. Why not? If it's win or die, people will pull out all the stops and take the gloves off.

In the end, if we can't solve our problems, nature will solve them for us. If over population really becomes a problem expect wars, famine and pandemic disease as solutions. We won't have to choose. The choices will be made for us (Professor Bartlett). Human beings are funny because they think they're at the wheel and they control the planet, when the truth is they are organisms just like other mammals and plants and trees and algea and toads. On an atomic level, nothing seperates us from the earth. We are one and the same, and when we die, we return to the earth. Nothing changes this.

Professor Bartlett also mentions that many of our technogical solutions simply breed more problems. He uses a dam in Egypt as an example of this in his video presentation on the exponential function on youtube, which you can watch here.

Also, I'm often amazed by the new religion of "progress" and technology. Many people seem to worship growth and gadgets. Human superiority is not to to be questioned. Our greatness is unrivaled. Perhaps this is true, but let us not forget our greatness in destruction.

I'm a big fan of Peter Schiff and I share his belief that recessions and depressions are solutions that clean out the decay of a decadent system. The only problem is Schiff applies this idea too narrowly and only focuses on the economy. In my opinion the entire debt based monetary system is a problem and its impending destruction is the cure. We need the crash and the pain so we can move on. There is a lot of decay in our minds that needs to be thoroughly purged and brought back to reality (I'm no exception, and again, I'm really not looking forward to this). In the absence of an oil substitute we will continue to head toward a great purging wether we like it or not, wether we want to believe it or not.

This is the future I see. This should be all the more reason for each of us to talk to our friends and neighbors. Goal 1 should be to stop the train from going over a cliff. Goal 2 should be explaining why it went over the cliff after it does. If a horrible 'everything crash' does occur and we lose the lesson, then we've lost everything. At the very least, let's try to learn our lesson.

I think we should all try to reach as many people as we can. I teach intermediate and advanced English in Warsaw, Poland and I work aspects of the Crash Course into class discussions. Most of my students are adults with advanced degrees and high positions in the corporate world, and most of them have never even heard of peak oil. When I ask them; "are you guys interested in talking about peak oil," they say; "what's that?" In response I reply, "that question means you're interested. Let's talk about it."

My mom and step dad are now part of a co-housing community in Oregon. I applaud them in this. We need to band together for support as we reach out to others. Co-housing and self sufficiency are excellent ideas. Personally, I'm not directly pursing either at the present moment, but they're on my radar screen.

I'm sorry I can't offer any facts to repudiate your post Dr. Martenson. I'm not aware of any at this time.

I'll close with the words of Ice Cube. This statement might as well being a warning to the human race . . .

"Check yourself before you wreck yourself."

bluebird's picture
bluebird
Status: Bronze Member (Offline)
Joined: Sep 4 2008
Posts: 75
Re: Exponential Money in a Finite World

Damnthematrix said  "Technology will not save us, it will sink us."  Yes, indeed. The time to get ready was 20, 30 years ago, but nobody listened then, and very few are even listening now.  As Dr M says, the next 20 years are going to be different than the past 20 years.  Most people have no clue how different life is about to change for them. Unfortunately, nobody can predict what/when/where will trigger this life-altering era.

zulu's picture
zulu
Status: Member (Offline)
Joined: Apr 21 2009
Posts: 8
Re: Exponential Money in a Finite World

Dr. M thanks as always for this discussion forum.  It's been a full year for yours truly - hardly missed a single day of this blog.  I must admit that opening my eyes to these life-shifting topics has been simultaneously empowering and rather stressful.  But something about this particular thread has finally helped wash away some of the anxiousness.  I suddenly feel much more at peace.  Why?  Because I can answer the question posed in several different ways throughout this thread.

Q:  "I understand that there are big problems looming 'out there', but what can I do to fix it?"  A:  Absolutely nothing.

There, doesn't that feel better?

That is not to say the problems can't be fixed.  They certainly can be.  All we need is a concerted, coordinated effort by most of the powerbrokers and policy makers around the world (politicians, business leaders and central bankers, to name a few) to eschew all of the current systems that have led them to their powerful and lucrative positions, and instead simutaneously begin to follow a path that leads toward sustainability without regard for personal gain.  Yep.  That's all.

(It goes without saying that if you believe there is even a 1% chance of this happening, I have a bridge I need to talk to you about.)

Folks, please stop all the handwringing about how to fix these problems.  It is in all likelyhood too late to fix them, and even if it's not too late, as a previous poster noted, the bankers will gladly accept death before unfisting a single greenback (or euro, or yen).

Your question should be:  How do I prepare for the coming changes?  Now that's a more manageable question.

A:  Do whatever you need to do to ensure the safety and well-being of your family.  If you have energy left after that, try helping your neighbors and community get ready.  And then sit back and watch the show.

z

r's picture
r
Status: Gold Member (Offline)
Joined: Oct 2 2008
Posts: 262
Re: Exponential Money in a Finite World

I agree with DamntheMatrix on almost all counts.

1. Getting out of debt is the most important thing to do first.  However, my advice is to declare bankruptcy because that is the moral and legal thing to do.  And the punishment is not being able to borrow more money which I think is a fair deal.  So for most families deep in debt the first thing to do is position finances to survive bankruptcy -- that is to survive having no credit.

2. Technology -- invention -- uses up all available energy.  It doesn't create it, as DamntheMatrix pointed out.  There was a chart I posted a while back that showed that even though refrigerators and air conditioners were more efficient homes in the US were using more energy -- because all the other new devices were soaking up all available energy.

3. If enough people declare bankruptcy that will bring at least part of the banking system to its knees -- the part that lends money to the average consumer -- Bank of America, for example.  For the system to understand it has to change the other part involved in global investments, Goldman Sachs and JP Morgan, for example, hs to be affected.  I don't believe that part can run independently forever -- companies may grow with fewer employees but they need more consumers as well.

okubow's picture
okubow
Status: Bronze Member (Offline)
Joined: Aug 16 2009
Posts: 67
Re: Exponential Money in a Finite World

bluebird wrote:

The time to get ready was 20, 30 years ago, but nobody listened then, and very few are even listening now.

Hehe. I wasn't even alive 30 years ago.

Maybe we should look on the bright side here? Some are predicting that the crash could be the trigger for a great renaissance.

In nature, natural disasters destroy, but they also bring forward new opportunities and growth (and I don't mean growth in the narrow economic sense). A big tree may be uprooted and destroyed in a tornado or hurricane, but it creates room and light for sapplings which otherwise may not have had a chance. There's a lot of stuff I like about modern society, like modern medicine and the internet, but I'm not that crazy about shallow pop culture/ consumerism and I wouldn't really feel perturbed if it went by the wayside to make room for something better.

Right now, people are mostly defined by what they buy or can buy (they're professions are only relevant to one another in terms of the buying power they provide). In the future, we may all be defined by what we can make and produce. I find this exciting and attractive, as I feel the things that we produce are much better representations of ourselves than the things we pick out off of a shelf at the mall. We may end up mattering more to each other as human beings than we do as customers, consumers and "revenue emitters."

Certainly there will be some rough times, but I don't think it will all be bad. People who are overly attached to the way things are now will have a horrible time. People who are more adaptable and less attached will still find time for fun and joy.

Even cavemen and women and cavekids had fun sitting by the fire banging sticks together and chanting old caveman tunes. They lived hard lives, but they still managed to have some fun and enjoy some good times inspite of the hardships.

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Exponential Money in a Finite World

If there's one issue that worries me the most, it's energy and specifically, Peak Oil. There's no way around it, our world is built on oil. To wean off of oil will take decades, decades that we most likely don't have. I was too young to live through the Oil shocks of the 70's, but having read Jimmy Carter's speeches from that era, it makes me wonder what in the world people were thinking ignoring his advice. And it makes me even more pessimistic when I look around and see people's attitudes towards cars and gas and energy. Some people have woken up to the realities, but it's a shamefully low minority of the population, unfortunately.

Sure, the economy can always be fixed by fixing the monetary system. The environment can be fixed somewhat with some regulations, say against overfishing and pollution, to name a few things. But energy is a tough one. Technology can help us, but it will not save us. With this in mind, all of my preparations and planning are centered around a Hope for the Best, Plan for the Worst scenario. I'm planning for a fire, hopefully I won't need to use the fire insurance.

bluebird's picture
bluebird
Status: Bronze Member (Offline)
Joined: Sep 4 2008
Posts: 75
Re: Exponential Money in a Finite World

okubow said  "Certainly there will be some rough times, but I don't think it will all be bad." Probably that's true for us who are aware and can prepare. But for the clueless majority, what's coming is going to be a devastating shock, like in a natural disaster (hurricane Katrina). Eventually, they bring opportunities and growth, but the initial reactions are fear and panic.

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Exponential Money in a Finite World

Farmer Brown wrote:

The more time we have, the greater the chance that a revolution in energy harvesting takes place.  I have not given up on that possibility. 

Hey FarmerBrown!

In doing the car conversion and the ride on mower conversion and as a result I have done a lot of "Googling". What I am seeing is what I saw when fax machines came out and when I first got on the "Internet" with dial up and "message boards". I'm seeing a new trend forming in energy. I don't know if some revolutionary energy will shape sooner as opposed to later. I certainly see the band aid taking shape though. Hopefully things like series hybrids will bridge the gap. Since all of the band aids require conservation I think that the world is in for a sustainability adjustment.

Take care

Thomas Hedin's picture
Thomas Hedin
Status: Platinum Member (Offline)
Joined: Jan 28 2009
Posts: 815
Re: Exponential Money in a Finite World

Each new person places additional demands on food, water, energy, and other finite resources.

I'm confused as to how food, water, or energy is a finite resource or am I reading into this incorrectly?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments