Why The Next Downturn Will Be The Most Destructive In Modern History — And Why You Must Act Now In Order To Preserve Your Wealth (and the Planet!)
Our society’s pursuit of endless economic growth is unsustainable.
We’re at the point where we’ve sabotaged our future by taking on too much debt, while at the same moment, we’ve started to run dangerously low on the resources necessary to run our modern way of living, straining key ecosystems in the process.
But rather than change our behavior, we’re doubling down on our faith in growth, creating dangerous financial bubbles that threaten to ruin our economy when they burst.
And worse than that, we’re depleting our remaining precious resources — such as energy deposits, rich topsoils, underground aquifers, ocean fisheries, key commercial minerals — at rates that can never recover in our lifetime.
At this stage, it’s unrealistic to expect our government to ride the rescue in time, if at all — even if it weren’t dysfunctionally focused on protecting the very status quo that’s killing us.
Instead, we need to become our own heroes.
For better or worse, we live in a time that calls us to greatness. The key question is: Will you answer the call?
We can make better choices, enjoy a better way of living — one much less vulnerable to the coming crisis, and which will help create a future worth inheriting for our children.
But there is precious little time remaining to act.
Since you’re reading this, you’re among the fortunate few with your eyes open to the true state of the world. But that awareness isn’t enough.
You must act — NOW — to secure your future prosperity, for yourself and those you care about, before the approaching massive crisis arrives.
To learn what actions to take and how to get started, read on.
In order to understand the nature of the challenges we face, we first need to understand Exponential Growth.
Why? Because it drives EVERYTHING in this story.
As Dr. Albert Bartlett famously explains in the above video, the human mind is poorly constructed for understanding exponential systems. Yet they are all around us, and we ignore them at our peril — because as the baseball stadium example demonstrates, by the time you first see you have a problem inside an exponential system, it’s FAR too late to avoid the consequences:
FREE Resource #1: Watch our full Crash Course video streaming series, explaining the most important trends shaping our future and what you need to do to prepare for them.
We’re now living through the mother of all financial bubbles. We’ve been living with it so long now that we have to take three giant steps backwards to even detect its broad outlines.
As a reminder, a bubble exists when asset prices rise beyond what incomes can sustain. Florida swampland in the 1920’s, tech stocks in the late 1990s, bitcoin in 2017, or Toronto real estate today — all are fine examples of this.
The US government and the private banking cartel known as the Federal Reserve, in cahoots with a very compliant and complicit mainstream media, are doing everything in their vast and considerable power to convince us that we are living in an golden era of risk-free prosperity. And that tomorrow will be even better.
Now, regular readers of PeakProsperity.com’s reports will know there’s a mountain of evidence contradicting this. But it’s critical to understand that our leaders are following the same playbook politicians have used since time began: Deny, deny, deny… and then finally admit the obvious.
So let’s take those three giant steps backwards and see if we can spot the flaw in the ‘everything is awesome!’ meme that the Federal Reserve and its fellow world central banks are trying to paint for everyone by flooding the system with so much freshly-printed money that nobody has any clue what anything is truly worth anymore.
Giant Step Backwards #1: Infinite growth is impossible.
This is such an easy concept that I’m continually surprised at how poorly appreciated it is and how much resistance it receives when raised. But it works like this: the earth is a sphere and therefore has a defined surface area and a defined amount of resources available for use.
The availability of these resources ranges across a spectrum from dense/concentrated on one end to dilute/useless at the other. Humans have already extracted and consumed most of the easily obtainable stuff. Now it gets harder.
Regardless of the economics of these resources, they are finite. And as our economy requires resources in order to function, if we want our economy to grow from here, that means consuming more resources at a faster rate then we have been. If resources are finite, then growth will one day prove finite, too.
This should be utterly, blindingly obvious to everyone. But it’s not, apparently. The Federal Reserve and the central banks in other nations are unified in their call for more economic growth, always and forever. That’s plan A. There is no plan B.
Giant step backwards #2: You can’t print your way to prosperity.
History is replete with the failed attempts of nations to print their way to prosperity. This pursuit operates on the same principle as alchemy: trying to get something for nothing. It has invariably and always ended the same way. In tears.
At first, issuing more currency feels good because those closest to the money printing get stinking rich while doing practically nothing. As that trickles down, everybody initially feels smarter and wealthier, especially those running the system.
After a while, though, all that feel-good activity is revealed as fraud. It turns out prosperity wasn’t printed; instead, it was redistributed. From one party’s pocket into another. And in most cases, from poorer pockets into those of the already-privileged.
The same is happening today with the “thin air” money printing being conducted by the world’s central banks. We are now living with one of the most extreme wealth gaps in US history, with the top 1% (really, the top 0.1%) owning a greater percentage of the nation’s wealth than they ever have.
But it’s even more nefarious than that. Because the Fed is not simply stealing from today’s public; it’s also stealing the prosperity of future generations. When the party being stolen from hasn’t been born yet, it can’t fight back.
In short, you cannot print your way to prosperity. Yet somehow we’ve forgotten that. And we’re dooming ourselves (and our children and grandchildren) to becoming serfs in the process.
Giant step backwards #3: You can’t grow your debts faster than your income forever.
This, too, should be completely obvious. You know perfectly well this holds true for your personal life or your business. And it’s equally true for a nation, which is simply an aggregation of individuals and businesses. But somehow this simple truth has been either forgotten or deliberately ignored by today’s economists and politicians.
Our grand experiment in debt-based fiat currency — unbacked by anything tangible, like gold — began on August 15th, 1971 when Nixon unilaterally broke the Bretton Woods agreement and forced the entire world off of the gold standard. Not that the world minded much, because this then meant that politicians and monetary hacks everywhere could ignore centuries of economic wisdom and begin making exorbitant promises by printing currency like mad.
The giant step towards monetary (and debt) expansion this represented is clear to anybody with eyes, as the following chart proves.
Here’s the total credit market debt in the US. It has exploded higher at a near-perfect exponential rate since that fateful day in 1971:
But what we really need to do is compare what has happened with the ratio of debt-to-income since then. Remember, you’re not supposed to grow the former at faster rate than the latter. So let’s add (nominal) GDP to our chart and see what comes up:
As you can see, those lines began diverging a long time ago (aha! Right around 1971. Imagine that.). They’ve been diverging at an increasing pace for pretty much the entire adult lives of everybody in power. At this point, our leaders just assume “This is how the world works.”
“Reagan proved that deficits don’t matter”
~ Vice President Dick Cheney
The little wiggle in the exponential curve there, during 2008-2009, was the wiggle that almost destroyed the world. Our entire system of credit and money came very close to full-scale collapse, simply because it didn’t grow for a few brief years. Makes you shudder to think what would have happened had it actually contracted…
But back to the main point. If we compare the beginning of this wanton debt-binge in 1971 with the state of things today:
We see that debt has shot up by a factor of 40(!) while income has only increased by a factor of 17. We have indeed grown our debts wildly faster than our income over the past 45 years
And, it should be noted, a lot of that GDP ‘growth’ is the byproduct of borrowing and spending money we don’t have on things we don’t need. Said differently: the debts will remain during any serious future economic downturn but the GDP that is fraudulently based on excessive rates of borrowing will vaporize as if it never existed in the first place.
That, my friends, right there, is the very definition of unsustainable.
If something cannot go on forever, it won’t.
But the Federal Reserve, under the leadership of academics like Ben Bernanke and Janet Yellen or lawyers like Jerome Powell, cannot conceive of any approach other than perpetuation of the same system that has been in place while they’ve built their careers.
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Exponential Energy Consumption
Nothing happens within the economy without energy to power it.
To truly understand how inextricably linked our future economic growth is to energy, watch this video from our Crash Course series:
Given the criticality of energy to both our economy and our modern way of living, we’re not being alarmist when we predict there will be an extremely painful oil supply shortfall sometime between 2020 and 2022. It will be highly disruptive to our over-leveraged global financial system, given how saddled it is with record debts and unfunded IOUs.
Due to a massive reduction in capital spending in the global oil business over 2014-2018 and continuing into 2019, the world will soon find less oil coming out of the ground.
Because oil is the lifeblood of today’s economy, if there’s less oil to go around, price shocks are inevitable. It’s very likely we’ll see prices climb back over $100 per barrel soon. Possibly well over.
The only way to avoid such a supply driven price-shock is if the world economy collapses first, dragging demand downwards.
Not exactly a great “solution” to hope for.
To visually understand how important oil still is to the world economy, you need to fully digest this next chart. It shows the amazingly tightly-coupled linear relationship between economic growth and energy consumption:
This chart above says, if you want an extra incremental unit of economic growth you’re going to need to have an extra incremental unit of energy. More growth means more energy consumed.
And today, oil is still THE most important source of energy. It’s the dominant energy source for transportation, by far. A global economy, after all, is nothing more than things being made and then moved, often very far distances. Despite what you might read about developments in alternative and other forms of energy, our dependency on oil is still massive.
However, resulting from the start of oil’s price decline in 2014, the world saw a historic plunge in oil investments (exploration, development, CAPEX, etc) as companies the world over retracted, delayed or outright canceled oil projects:
In the chart above, note the two successive drops in oil investment from 2014-2015 and then again into 2016. Levels remained depressed through 2018 cementing this period as by far the largest spending slump in oil’s entire history. So what’s happening here is actually quite unusual.
This isn’t just a slump. It’s an historic slump.
Next, take note of the dotted blue arrow in the chart. See how far oil investment climbed during the years from 2009-2014? Not quite a doubling, but not far off from one either. Remember those years, I’ll return to them in a moment.
The key question to ask about the 2009-2014 period is: How much new oil was discovered for all that spending?
Turns out: Not a lot.
There is one hard and fast rule in the oil business: Before you can pump it, you have to find it.
The growing problem here is that oil discoveries were horrible over the past five years. This recent stretch is the worst in the data series going back to the early 1950s:
Again: you have to find oil before you can pump it. And around the world, oil companies are just not finding as much as they used to.
Now it’s clear why the oil companies pulled back their investment dollars so rapidly when prices slumped: They were spending more and finding less throughout the 2009-2014 period, so they were already feeling the pain of diminishing returns. When the price of oil cracked below $100 a barrel, they wasted no time reining in their investment dollars.
Should we be concerned about this record lowest level of oil project funding in 70 years? Why, yes, we should. Everyone should.
This bears repeating: Oil is the most important substance for our economy, we’re burning more of it on a yearly basis than ever before, yet we just found the lowest amount since the world economy was several times smaller than it is now. And all this is happening while we’re reducing our efforts to find more at an unprecedented rate.
More economic growth requires more energy. Always has and it always will. Oil is the most important form of energy of them all. But everyone assumes — especially today when it appears as if we’re “awash” in it given the current supply glut — that we will always have access to as much as we need.
That’s not going to be the case soon. And you are one of the few to understand why.
You get to use that awareness to make conscious decisions about your own life right here and right now. You can position yourself for safety, as well as to take advantage of what are likely to be once-in-a-lifetime investment opportunities.
But before you do, you need to also understand that oil isn’t the only essential resource we’re running out of. Far from it.
Exponential Depletion of Key Resources
Sadly, it’s on the ecological front that human denial seems to be at its most extreme. Hollywood visions and SciFi fantasies aside (where humans live in sealed capsules and subsist entirely on artificially-made foods), humans today are still 100% utterly dependent on the natural world for their survival. Food, water, oxygen, and predictable temperatures and rainfall patterns provide the basics of life.
To focus on just one part, which we also detail in our Crash Course book, humans are rapidly degrading our soils upon which everything depends.
Not only are we losing topsoil to erosion and generally turning fertile land into lifeless ‘dirt’ by stripping out its biological diversity, we’re continuously strip-mining these soils for their micro and macro nutrients yet have no coordinated plan for replacing them.
Obviously if you take minerals like calcium and magnesium out of the soils in the form of harvested grains and vegetables, they’ll need to be replaced. But right now they’re mainly flushed out to sea, never to be economically recovered.
The situation is pretty grim as we recently outlined in a recent report detailing our nation’s poor soil management practices. Here’s some more context for that view:
Intense over-farming means there are only 100 harvests left in the soil of the UK’s countryside, a study has found.
With a growing population and the declining standard of British farmland, scientists warned that we are on course for an “agricultural crisis” unless dramatic action is taken.
Despite the traditional perception that there is a green and pleasant land outside the grey, barren landscape of our cities, researchers from the University of Sheffield found that on average urban plots of soil were richer in nutrients than many farms.
“With a growing population to feed, and the nutrients in our soil in sharp decline, we may soon see an agricultural crisis,” Professor Dunnett said.
“Meanwhile we are also seeing a sharp decrease in bio-diversity in the UK which has a disastrous knock-on effect on our wildlife Lack of pollinators means reduction in food.
Scientists in the UK are being matched by scientists elsewhere, noting that humanity’s general approach towards soils and farming are obviously destructive and exceptionally unsustainable. It should be setting off alarm bells that urban plots are found to be more nutrient-dense than many farms.
The loss of biodiversity is something that we just cannot yet fully comprehend, as all of nature is an enormously intertwined set of complex relationships. Of course, our failure to understand and appreciate the true role(s) of biodiversity will not protect us from the consequences of destroying it.
Any culture that ruins its soils cannot claim any sort of sophistication at all. That just flunks the basic IQ test. It’s not unlike watching a brilliant piano prodigy starve to death because he can’t manage the details of making his own meals despite a well-stocked kitchen. No matter how beautifully he can play, he simply lacks the necessary skills to sustain himself.
Steadily and alarmingly, humans have been depleting Earth’s soil resources faster than the nutrients can be replenished. If this trajectory does not change, soil erosion, combined with the effects of climate change, will present a huge risk to global food security over the next century, warns a review paper authored by some of the top soil scientists in the country.
The paper singles out farming, which accelerates erosion and nutrient removal, as the primary game changer in soil health.
“Ever since humans developed agriculture, we’ve been transforming the planet and throwing the soil’s nutrient cycle out of balance,” said the paper’s lead author, Ronald Amundson, a professor of environmental science, policy and management at the University of California, Berkeley. “Because the changes happen slowly, often taking two to three generations to be noticed, people are not cognizant of the geological transformation taking place.”
Notice the shifting baselines phenomenon happening here. Because the changes have taken place over three generations, our culture is incapable of recognizing the threat, let alone properly responding to it.
Instead of a bucolic pastime, farming has become just another mirror reflecting our destructive ways. Rather than carefully working within natural cycles, the average farming practice seeks to dominate and override nature.
Just spray and you’re done! Easy-peasy. Of course, this has the chance of knocking out your birds and your bees as well as the butterflies and who knows what other essential and beneficial insects as laid out in our report: Suicide By Pesticide.
Pesticides kill the bugs we don’t want and many more besides. Herbicides knock out weeds, but also lots of other life-forms we do need and want kept alive. Fungicides knock out bad funguses and good ones alike.
This lazy approach to farming, although chemically sophisticated, lacks any real connection to the cycles of nature the most obvious one being the strip-mining of the macro and micro nutrients.
The bottom line is this: We are destroying the natural world. And that means that we are destroying ourselves.
I know that the mainstream news has relegated this conversation to the back pages (when they covered it at all) and so it’s not “front and center” for most people. But it should be.
Everything we hold dear is a subset of the ecosphere. If that goes, so does everything else. Nothing else matters in the slightest if we actively destroy the Earth’s carrying capacity.
At the same time, we’re in the grips of an extremely dangerous delusion that has placed money, finance and the economy at the top spot on our temple of daily worship.
Any idea of slowing down or stopping economic growth is “bad for business” and dismissed out of hand as “not practical”, “undesirable” or “unwise”. It’s always a bad time to discuss the end of economic growth, apparently.
But as today’s young people are increasingly discovering, if “conducting business” is just a lame rationale for failed stewardship of our lands and oceans, then it’s a broken idea. One not worth preserving in its current form.
The parade of terrible ecological breakdowns provided above is there for all willing to see it. Are you willing? Each failing ecosystem is screaming at us in urgent, strident tones that we’ve gone too far in our quest for “more”.
We might be able to explain away each failure individually. But taken as a whole? The pattern is clear: We’ve got enemy action at work. These are not random coincidences.
Nature is warning us loudly that it’s past time to change our ways. That our “endless growth” model is no longer valid. In fact, it’s now becoming an existential threat
The collapse is underway. It’s just not being televised (yet).
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The Increasing Demands Of An Exponentially-Growing World Population
“Can you think of any problem in any area of human endeavor on any scale, from microscopic to global, whose long-term solution is in any demonstrable way aided, assisted, or advanced by further increases in population, locally, nationally, or globally?” ~ Al Bartlett
All of the above exponential trends are directly tied to the continued exponential increase in the world’s human population.
The American Museum of Natural History recently put out an amazingly good and informative video on human population growth over time. As it notes, it took over 200,000 years for there to be 1 billion homo sapiens living on the planet. It only took 200 years more to exceed 7 billion.
As you watch the video, notice how the clicks denoting the frequency of another million souls added resembles the sound of a Geiger counter detecting maximum radioactivity:
If you overlaid human’s exploitation of fossil fuels with the final population curve in the above video they would overlay to an astonishing degree. Not astonishing because it’s some sort of mental leap requiring acute intellectual agility, but because of how little attention the tight relationship between the human organism and its primary energy (oil = food) source receives practically anywhere in the halls of power or academia.
Because of this failure by our major institutions to acknowledge the predicament we’re in, waking the masses up to the challenges we face remains an extremely vexing challenge
It’s not due to a lack of convincing numbers, or more data — that’s for sure. If numbers and data ‘worked’ then we’d have taken a very different path sometime back in the 1950’s.
As Admiral Hyman Rickover said back then:
“I think no further elaboration is needed to demonstrate the significance of energy resources for our own future. Our civilization rests upon a technological base which requires enormous quantities of fossil fuels. What assurance do we then have that our energy needs will continue to be supplied by fossil fuels: The answer is – in the long run – none.
The earth is finite. Fossil fuels are not renewable. In this respect our energy base differs from that of all earlier civilizations. They could have maintained their energy supply by careful cultivation. We cannot.
Fuel that has been burned is gone forever. Fuel is even more evanescent than metals. Metals, too, are non-renewable resources threatened with ultimate extinction, but something can be salvaged from scrap. Fuel leaves no scrap and there is nothing man can do to rebuild exhausted fossil fuel reserves. They were created by solar energy 500 million years ago and took eons to grow to their present volume.
In the face of the basic fact that fossil fuel reserves are finite, the exact length of time these reserves will last is important in only one respect: the longer they last, the more time do we have, to invent ways of living off renewable or substitute energy sources and to adjust our economy to the vast changes which we can expect from such a shift. Fossil fuels resemble capital in the bank.
A prudent and responsible parent will use his capital sparingly in order to pass on to his children as much as possible of his inheritance. A selfish and irresponsible parent will squander it in riotous living and care not one whit how his offspring will fare.”
His logic was as irrefutably sound then as it is today. Such information was known at the highest levels throughout government and academia. But there was no, and continues to be no, sustained and well-funded efforts to grapple with the basic dilemma posed by increasing population as dramatically as we have all the while living on, literally eating, fossil fuels to encourage that rapid population growth.
Again, Hyman Rickover linked the population and economy firmly to energy and prosperity way back in 1957. He was extraordinarily influential. President Carter took a few important steps but then something happened. The idea of limits and thoughtful planning gave way to something else… a headlong rush into endless growth and a profound, almost pathological aversion to facing the simple math that says “exponential growth on a finite planet is impossible (and irresponsible).”
The rapidity of population growth has not given us enough time to readjust our thinking. I suggest that this is a good time to think soberly about our responsibilities to our descendants – those who will ring out the Fossil Fuel Age. ~ Hyman Rickover, 1957
The predicament we face is really quite profound. I submit to you that people know this in their guts and the fact that they do goes a long way towards describing the feeling dread many people report they are carrying here at the start of 2017 and cannot seem to shake.
And of course they are. Not having a plan for how to even feed 7.4 billion people, heading to 9 or 10 billion people, without massive fossil fuel calorie subsidies is an extremely troubling prospect.
The Threat To Our Future Prosperity
Numerous powerful trends including population growth, soil depletion, money printing, debt accumulation, species loss, ocean acidification, climate change and weather instability, and declining petroleum net energy are all converging on the same narrow window in the future.
Perplexingly, even as these trends become more and more obvious, they are still largely ignored to the same extent that they were ten years ago. The explanation for this is denial.
Understanding the denial mechanism, which operates in each of us, offers both explanatory and predictive power. We can predict that humanity will not ‘snap out of it’ before forced to by some event. We can understand why the numerous serious things happening all around us at an accelerating pace are not being widely or seriously discussed. Further, even when simple denial is abandoned, the next layer of the conversation usually slips into minimization where people either rationalize