Cascading Collapse: Navigating the Tumultuous Future of Global Economy and Energy
So, no beating around the bush, right? We're looking at a big-time economic slump, and without some sort of energy game-changer, the whole world's economy's gearing up for some serious changes. Remember when we chatted about how GDP isn't all it's cracked up to be in that piece last week? And how, believe it or not, economic growth's been more or less stuck in the mud for like 18 years now? Well, time to shift our focus. What's next for the global economy after this crisis hits? How're the big shots in charge gonna handle it? Is there a chance that gold or bitcoin might be our lifelines here? Let's jump into this and see what's up.
Alright, let's get this straight. There's this huge disconnect between what we're producing in the economy and the mountain of debt piling up. Sure, on paper, GDP looks like it's going up, but if you look at what counts, like how much energy we're using, it's been pretty flat for almost 20 years. And because of that, Western countries, once top dogs in the global economy, are now on a downhill slide. Why? Well, their energy situation's getting worse, and they rely way too much on importing stuff.
Now, here's the kicker. This isn't just about cash or the lack of it. Governments have been printing money like there's no tomorrow, but there are two things they can't just magic into existence: cheap materials and energy. And hey, despite what everyone thinks, this whole shift to green energy isn't some miracle cure. It's just a costly add-on to the oil and gas we're already using. And shale oil? That was supposed to be our big fix, but it's hitting its peak and then it's all downhill from there.
We're not talking about a money problem here. It's all about the hard facts of geology and the nuts and bolts of economics - running out of resources and the costs skyrocketing because of it. Printing more money? That's not fixing anything. It's just going to make inflation worse.
Okay, let's break it down real quick: industrial civilization? We've been going way overboard. For the past couple hundred years, we've been living like there's no tomorrow – burning through minerals and natural resources faster than Mother Nature can keep up. And the pollution? Don't even get me started. We've been dumping stuff like CO2 into the air like it's going out of style, way more than what the planet can handle.
It's like we've been blowing through a massive inheritance, and guess what? Now it's payback time. The consequences are starting to show up on our doorstep, and they're not looking pretty. We're in for a reality check, and it's not gonna be fun.
Alright, here's the deal: using credit as a band-aid for our real problems? Bad move. It's just been inflating a giant bubble that's ready to pop any second. The real economy can't back up all this debt we've piled up. And when the energy production – I'm talking everything, oil, gas, renewables – starts to drop, there's no way we're paying all that back. And yes I do know a lot about the MMT. It will not fix this.
What's the endgame here? Looks like a big-time financial crash is on the menu. We're talking about wiping out the big bucks of the rich with a massive default, and at the same time, hyperinflation is gonna burn through whatever cash regular people have left. Predicting when this whole mess will kick off? That's pretty much a shot in the dark. But it's worth shooting the breeze about what might go down shortly.
The Horror: Cascading Collapse
Get this: there's this study talking about how if we hit the peak and then a drop in global oil production, it's game over for the whole financial and trade system. It's like knocking over the first domino and watching everything else topple. (By the way, if you're short on time, just check out the Summary on pages 2–4. It's a real eye-opener.)
So, here's the scary part: if the banking system crashes – because there's just too much debt that's impossible to pay back – then bam, all lending stops dead in its tracks. And since global trade runs on letters of credit (that's banks promising to pay once goods are shipped), a big banking mess means global trade grinds to a halt.
What happens next? Well, we're looking at shortages of everything, from food to clothes. The West, with its economies that are all about finance and making money from money, and hooked on cheap imports, is going to feel this big time. People in these countries will get a rude awakening when they realize that neither their governments nor the so-called free market can meet even their basic needs. What follows? Social collapse, chaos, and, yeah, it's going to look a lot like a zombie apocalypse.
I can tell you firsthand, the risk of a total shipping freeze. It's real. During that financial meltdown, we were this close to everything coming to a standstill. But does that mean we were on the brink of the total collapse scenario I just talked about? Here's where I've got my doubts.
See, even in the worst of the 2009 chaos, folks everywhere were bending over backwards to find a way out. From the guy on the factory floor to the big-shot bankers, everyone was all-in on keeping the system afloat. Stuff we thought was impossible just a year before? Suddenly, we're pulling it off in days. That's when I saw it: when the system's on the line, people can pull off near-miracles in no time.
Now, I'm not saying we're about to crack hydrogen fusion or start hauling cheap methane from Titan. With the best of our minerals and energy resources already used up, that's off the table (if it was ever really on it). But keep in mind, we're talking about a potential 5–6% yearly drop in oil production post-peak, not a total shutdown. Sure, it's going to be harsh – businesses, maybe whole countries going under, trade disruptions, shortages, sky-high prices, the whole nine yards. But the downward spiral will level out at some more sustainable point.
Finance? It's make-believe. And since about 95% of resources will still be in the game, ready to go, we'll spin up some new fictional story to keep trade limping along. It's not going to be a walk in the park, but hey, never underestimate what people will do to save their paychecks
So, to get a handle on how tough the financial system might be when we hit peak oil, check out this nugget from that study I mentioned: 'Investors will start freaking out about peak oil, right? They'll try to dump their 'virtual' assets like bonds, stocks, and cash, and switch them for 'real' stuff before everything goes kaput. But here's the twist – the value of all these virtual assets is way, way more than the real stuff out there. Once peak oil gets official, and the fear and market downturn kick in, it'll set off this crazy feedback loop in the financial markets.'
Okay, so we did see a spike in commodity prices when conventional oil production peaked in 2005, but guess what? It didn't crash the whole system. And if you think about it, oil production – including the unconventional stuff like shale – hit its peak in November 2018 (yep, that's five years back), and yet here we are. The world economy is like this giant, adaptive beast or AGI with a lot of fight left in it. I'm not saying we're out of the woods and can just chill. What I am saying is that it's going to take more than just a couple of years of dropping oil production to knock us off our game.
Bitcoin to Save the Day?
Alright, let's park the doom and gloom for a second and check out some of the 'hip' theories about post-meltdown futures. Take Bitcoin, for example. Its fans are all about how it's going to revolutionize finance – make it independent, decentralized, and transparent. No more government messing with the money supply. No more inflation, because you can't just print Bitcoin. And boom, the dream of a truly free market becomes reality.
Bitcoin might even boot banks out of the picture, cutting out the middleman in financial deals. Now, I'm no crypto-whiz, but I can see a scenario where, post-financial apocalypse, traders might jump on Bitcoin to get shipments moving again.
But here's my big worry: Bitcoin and other blockchain stuff don't scale up easily. They gobble up crazy amounts of computing power. If suddenly millions or billions jump on the Bitcoin bandwagon, it'll crash. Then, as more miners see it as a gold rush, it'll strain our already tight resources and energy.
In a world with endless resources and energy, Bitcoin is a star. But in our finite, shock-bound world? Eh, not so much.
Sure, crypto might ease the first sting of the 202X financial crisis but don't bet against governments slamming the brakes on it (think bans, surveillance, emergency laws). If there's one thing I've picked up from past crises, it's that the powers that be don't waste a crisis. They'll make sure their rich buddies take a tiny hit, while Joe and Jane Average get the short end of the stick.
The Return to the Gold Standard? Think Again
So, let's talk about going back to gold for currency. Honestly, I don't see it happening. I mean, even if a big trading group decided to use gold to balance their books, they'd soon find out it's not fixing their inflation headaches. A growing world needs more money, a shrinking one needs less. But the amount of gold? That's not shrinking anytime soon.
It might sound backwards, but it's bank credit – making money out of thin air – that's helped the world economy grow for centuries. Imagine if the US had stuck to the gold standard in the '70s and later. The same pile of gold chasing more and more stuff – from TVs to grain – would've led to a deflation death spiral: lower production, lower wages, less demand, plummeting prices. And since you can't just print more gold (unless we're talking some crazy high-price nuclear science fiction), central banks would be helpless to stop it.
On the flip side, in a shrinking economy, a fixed gold-based currency would chase fewer goods, causing never-ending inflation until we hit some sustainable level in, like, the 22nd century. A steady-state economy's fine and dandy, but we're not getting there overnight.
Now, the real kicker? Government-controlled digital currencies (CBDCs), the ones that can self-destruct (not literally, of course), might be a better fit. They'd let the powers that be perfectly control the money supply, managing our economic downhill ride. Plus, they'd offer total control over everyone's lives. 'Wrote something sketchy about the government? Oops, now you can only spend your digital cash on food for three months. Enjoy!'
But here's the ultimate irony: even that dystopia can't last. Sure, governments will grab more control post-financial apocalypse, but the nosedive in energy production will make even the strictest digital dictatorship pointless. How do you enforce digital rules or run crypto when the power grid's down? No electricity means no internet. 'No problem,' right?
Dissolution: The Endgame Scenario
So, what's the final act in this drama? After hitting the peak in oil production and starting the long slide down, we'll have less fuel for mining all those minerals our oh-so-modern world needs, and for moving raw materials, food, and people around. Sure, a financial crash sounds like the end of the world, but even if the economy drops 5–6% a year, that still leaves 95% chugging along.
Here's a twist: the faster we fall, the quicker we hit bottom. Our global economy is like a house of cards – a slight nudge in energy supply can cause a huge mess. Like, losing 5% of oil production might trigger a 10% economic nosedive, taking down countries and companies in one fell swoop. But once the dust settles, there might be just enough energy left for a little bounce back – until the next big hit, that is.
Fast forward a couple of decades, and we could lose half the world's economy, facing major food shortages. It's like pulling blocks from a Jenga tower – eventually, it collapses. When energy supplies dip below a certain level, not even dictatorships or mega-corporations can hold up. Every society, no matter how strong, is headed for a fall. It's just the harsh reality of a planet with limited resources.
This isn't a quick collapse, though. It's a slow burn over decades, starting with inflation, then a debt crisis, and trade disruptions. Wars, and revolutions – they'll be the norm until energy gets so scarce we can't even make enough military hardware. Then it's guerilla warfare time, with pickup trucks and drones.
As big nations fall, law and order give way to militias and mob rule. It's like after the Roman Empire fell – the 'barbarians' stepped in. Without a miracle in energy, everything gets smaller and more local. Gold? It'll be hoarded by the new warlords and chieftains, showing off their power.
But it's not all bad news. Despite a century filled with rough times, those who find a relatively clean, climate-stable spot could lead a decent life. Dark ages aren't as dark as you'd think. Cultures and arts will evolve, and humanity, though in smaller numbers, will keep going, telling tales of how industrial civilization was its own downfall.
Until next time,
Malte
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