Gail Tverberg on Limits to Growth

[raspberry-blower]

Another interesting essay from Gail Tverberg on the Limits to Growth and on how this is being manifested in our debt based society:

We could not operate our current economy without debt. Debt is what has allowed us to “pump up” economic growth. Consumers can buy cars, homes, and college educations that they have not saved up for. Businesses can set up factories and do mineral extraction, without having past profits to finance these operations. We can now operate with long supply chains, including many businesses that are dependent on debt financing. The ability to use debt allows vastly more investment than if potential investors could only the use of after-the-fact profits.

If we give up our debt-based economic system, we lose our ability to extract even the oil and other resources that appear to be easily available. We can have a simple, local economy, perhaps dependent on wood as it primary fuel source, without debt. But it seems unlikely that we can have a world economy that will provide food and shelter for 7.2 billion people.

The reason the situation is concerning is because the financial situation now seems to be near a crisis. Debt, other than government debt, has not been growing very rapidly since 2008. The government has tried to solve this problem by keeping interest rates very low using Quantitative Easing (QE). Now the government is cutting back in the amount of QE. If interest rates should rise very much, we will likely see recession again and many layoffs. If this should happen, debt defaults are likely to be a problem and credit availability will dry up as it did in late 2008. Without credit, prices of all commodities will drop, as they did in late 2008. Without the temporary magic of QE, new investment, even in oil, will drop way off. Government will need to shrink back in size and may even collapse.
Limits to Growth: At our doorstep, but not recognized

[emordnilap]

Very telling sentence:

We could not operate our current economy without debt

But happiness is having no debt!

No. 7 is quite nail-hitting too. Well, practically the whole article is. It should be rammed down the throats and up the arses of politicians everywhere.

[Blue Peter]

We could not operate our current economy without debt. Debt is what has allowed us to “pump up” economic growth. Consumers can buy cars, homes, and college educations that they have not saved up for. Businesses can set up factories and do mineral extraction, without having past profits to finance these operations. We can now operate with long supply chains, including many businesses that are dependent on debt financing. The ability to use debt allows vastly more investment than if potential investors could only the use of after-the-fact profits.

Money and debt, despite "not existing" have some of the properties of a time machine, since they can change the future. I'm sure that there is something profound about this, but I've never been able to put my finger on it,


Peter.

[emordnilap]

Heh heh. I like it.

For a change, there are some reasonably intelligent comments after the article (thinking about comments sections generally, not specifically Tverberg articles).

[Blue Peter]

This Gail Tverberg article is even more interesting / worrying,


Peter.

[emordnilap]

Interesting, yes. In what way does it worry you?

[PS_RalphW]

It is confirmation of non-OPEC conventional peak oil. In fact that happened in 2005, but now the big oil companies are admitting it because they can no longer pretend it isn't true. They spent many billions exploring for new oil in the last few years and found squat. Their existing fields are in decline. They cannot justify spending more money on exploration in areas like the Arctic because they have run out of even moderate prospects.

The only growth areas now are shale oil (mostly small private companies) and tar sands. Brazil deep water is not performing. Mexico deep water has limited potential. Iraq is still a very dangerous place.

How long before they start writing down their 'reserves' back to 'resources'?

[emordnilap]

Good news then (though too late).