This will be a short post to capture an idea that is intriguing but requires some thought. Posted on Zero Hedge by Dr. Tim Morgan of Tullet Prebon, The End Of An Era examines certain trends leading us to economic disaster. He writes:
This report explains that this acceleration towards ever-greater immediacy has blinded society to a series of fundamental economic trends which, if not anticipated and tackled well in advance, could have devastating effects. The relentless shortening of media, social and political horizons has resulted in the establishment of self-destructive economic patterns which now threaten to undermine economic viability. We date the acceleration in short-termism to the early 1980s.
The emphasized phrase is an idea we have often used in conversation – nice to see it validated. Another ide we are familiar with:
there has been a relentless shift to immediate consumption as part of something that has been called a “cult of self-worship”. The pursuit of instant gratification has resulted in the accumulation of debt on an unprecedented scale.
He identifies four underlying trends:
- the madness of crowds
- the globalisation disaster
- an exercise in self-delusion
- the growth dynamo winds down
It is the fourth point that was new to us and grabbed our attention:
In modern societies, manufacturing, services, minerals, food and even water are functions of the availability of energy. The critical equation here is not the absolute quantity of energy available but, rather, the difference between energy extracted and energy consumed in the extraction process. This is measured by the mathematical equation EROEI (energy return on energy invested).
The path we are on has this characteristic:
Research suggests that the global average EROEI, having fallen from about 40:1 in 1990 to 17:1 in 2010, may decline to just 11:1 by 2020, at which point energy will be about 50% more expensive, in real terms, than it is today, a metric which will carry through directly into the cost of almost everything else – including food.
This is not a future that standard monetary or fiscal policy will be able to touch. It is based on the real state of energy production for which there are no easy solutions if solutions at all, and certainly not in time-frames that society has become adapted to as mentioned in the beginning of this post. As we mentionned, this post is a teaser, a place holder while we dwell upon this at length.