On Preaching & Teaching
Wednesday, April 29, 2009
Tuesday, April 21, 2009
Crash Course: Chapter 20
WHAT SHOULD I DO?
FOLLOW THIS LINK!
This chapter is the final integration of all the prior chapters and attempts to provide clarity around the question of, “What should I do?” Let me rephrase that. What should WE do? Because the changes that are potentially coming are not solvable alone.
Chapter 20 is not going to be a simple list of things to do. Instead, it will reflect my goal of each person assuming responsibility for their own actions.
Chapter 20 is going to provide a framework for action. This is a way of structuring all the myriad things you COULD do, into the prioritized list of things you WILL do. Consider it your personal risk-mitigation plan.
I’m already drawing up plans for a new follow-on series of videos that will lay out my proposed solutions for the nation and globe in more detail.
Okay, so you’ve seen the entire Crash Course, showing how the Economy, Energy, and the Environment are interlinked. Specifically, you’ve seen that there is a substantial mismatch between an economic model that must grow and a physical world of peaking oil and depleting resources. We cannot possibly solve any one of these main issues in isolation, because doing so will simply create new problems in one of the other “E”s. Truly non-status-quo solutions are called for.
Which means there is a very real chance that our collective path will not be a linear extrapolation of the present. Our individual challenge is to accept the possibility that the future may be quite a departure from the present.
I believe that the future is not some purely random roll of the dice, and that we can minimize future disruptions in our lives by taking actions today.
In one way I am glad to have waited to produce this final chapter, because we have had the great financial panic of the Fall of 2008, and we can more precisely map where this is all headed.
The multi-trillion-dollar bailout packages offered to banks by various governments across the globe are nearly 100% dedicated towards preserving the status quo.
But at the same time, none of these challenges or trends are going to be helped in the slightest by bailing out the banking system, and some will be made worse. The fact that our national leaders have chosen to go several trillion dollars further into debt in a desperate bid to preserve "what was" simply indicates that it is now even more probable that the burden of meeting these challenges has shifted a bit further towards private citizens and small communities.
Part of the complication with developing a “what should we do” chapter is that I have no idea where your beliefs lie. Everybody exists somewhere along this spectrum of belief, ranging from expecting a rather ordinary, if not slight, interruption in economic growth, all the way on up to a big breakdown. Everybody exists along here somewhere.
And depending on where you happen to sit, both the number of things you could do, and their urgency, increase dramatically.
Given this, where do we start? How do we get started, when there are so many variables and things that need doing?
This is why we need a framework for action.
There are four sequential steps to this framework. First, you have to decide that you are going to take action. Without this commitment, there’s not much point in continuing. Second, you need to take stock of where you are, and here I propose a self-assessment that will unearth your strengths, weakness, opportunities, and threats. Third, you’ve got to sort among the infinite list of things you could do, and then fourth, you’ve got to prioritize this list, because you can’t do everything. Together, these create the framework for action.
So let’s begin with Step 1 - the case for action.
First, let’s add some detail to the spectrum I laid out before. Here we might assess the potential for disruption as beginning with “status quo,” meaning that all the key risks dissipate relatively rapidly. Next on the spectrum would be a prolonged recession and all that that entails. Next we might place a collapse of the financial system on here, and finally we might envisage a collapse of government services at all levels
I am pretty certain that our future lies somewhere along this spectrum; the problem is, I don’t know where. The key here is that I cannot entirely rule out any particular outcome. I can’t place a probability of zero next to any of these, so I need to weigh them all.
So let’s play a little thought game with one of them and see how it might lead to making a case for action. Let’s use #3 – Financial System Collapse.
Without worrying about how likely or probable a financial crisis might be, let’s simply say it is either true or it is false. That is, it either happens or it doesn’t. Hopefully we can all agree that “true or false” pretty much covers the total range of possible outcomes.
And down on this axis, we’ll say that you either prepared for this crisis in advance or you did not. Again, it is either true or false that you chose to take steps to mitigate the impact of a financial crisis.
So what happens if it’s both true that the crisis happened and that you did prepare as best you could? Congratulations - give yourself a smiley face; you did the best you could.
And what about the case where the crisis did not happen and you did not prepare? Again, congratulations - you did the best you could. It turns out that these are essentially equivalent outcomes, and we can therefore remove them from our decision framework. In each case, we got the best outcome we could, so there’s not much to be gained from weighing and comparing them.
But what about this case, where the crisis did not happen but you did prepare? How bad could that be? What’s the worst that you could put in this box? Well, you probably wasted some money (maybe the opportunity to participate in capital gains in the stock market) and some wasted time, but perhaps worst of all, you ended up feeling foolish. That’s awful.
Now let’s compare this box to this other box, where the financial crisis happened but you did not prepare. What can we put in this box? Here it’s possible that you suffered a massive loss of wealth, had to make sudden, massive adjustments under the pressure of little time and scarce resources, and live with a sense of recrimination for having been “right” in your concerns but unprepared nonetheless. You can probably put a bunch more things in each of these boxes, and you should. But for our purposes, we’re done.
Now all we have to do is compare these two boxes. That’s it. In the scheme of things, which is worse? Where would you rather be? We are all built differently, but I am the sort that could never forgive myself for being right but unprepared. I can more easily forgive myself for being wrong and prepared. But that’s just me. Only you know which of these two boxes carries more weight for you. But if you picked the upper right box, then I need to ask, “What’s preventing you from taking action?”
Here’s a slight refinement of this thinking that allows for more subtlety than “true or false.” Suppose that we revisit our spectrum for a financial crisis that spans from “it’s not too bad” all the way to “everything breaks down and stops working for awhile.” Let’s assume that everyone has a different assessment of how likely any particular outcome is.
We might find that one person assesses the chance as very low that anything too bad will happen, while another person holds a nearly opposite view. In one important respect, they hold the same view; they both hold the possibility of a bad outcome as being greater than zero. When an outcome has a potentially huge impact, a prudent adult may decide to react to that risk, even though it is not very probable.
As long as some risk exists in your mind, and as long as the potential costs of not taking action are outweighed by the costs of taking action, then it makes sense to take action. That’s the case for action.
Okay, assuming you’ve decided that taking action makes sense, the hard part is where? We’ve been talking about some very big changes in the Crash Course, so where does one begin in this enormous universe of potential actions?
Here’s where I would recommend that you spend an hour and perform a self-assessment. There is an outline for this that you can download in the ACT section of ChrisMartenson.com.
It consists of three main areas. Your financial self-assessment should include your current & future needs, your current & future income, taking stock of all forms of wealth, and any issues concerning accessing your wealth that apply.
There are similar sorts of areas to cover that I am calling foundational that are equally as important, if not more, than the financial areas. Lastly, there are all of your physical needs to consider. A typical result of conducting a self-assessment is discovering that our lives are very much dependent on a lot of things we take for granted.
Once you’ve got your self-assessment complete, you have a pretty good idea of where you are strong and where you are not. The self-assessment, then, is your starting point – it represents your position in relation to the outside world.
Now we need to go to the outside world and rank all of the possible risks and challenges that exist, that we will then match against our self-assessment.
The three dimensions that we will use to begin bucketing the various events and risks are time (that is, how near or urgent is the risk or event), impact (is this a big deal or a little deal?), and likelihood (which is the same as the probability of the event).
To get a handle on time, consider grouping events on a timeline. In the first Horizon, which I see as running from zero to two years out, I place the housing bust, a credit bubble burst, and the possibility of a systemic banking failure. A bit further out, I foresee petroleum demand and supply crossing, issues with boomer retirement, and the possible emergence of very high inflation. Even further out, I see really big, hairy challenges like national insolvency, perhaps the end of fiat money, and the emergence of a new economic model.
Since I can’t respond to all of these at once, I mainly focus on those that are within the immediate Horizon. Again, you could place very different things in each of these Horizons, and those would be the ones you would use. These happen to be mine. For illustrative purposes, we’ll run through an example based on the possibility of a systemic banking failure.
Next, I segment things by Impact and Likelihood. If you understand insurance, you already understand this next process. Think of fire insurance on a house. We don’t carry it because such an event is especially likely (it is not), but because the impact is so catastrophic. That is, a prudent person will combine impact and likelihood to come to the decision that purchasing fire insurance makes sense.
So here’s a way to do that for the other areas in your life. Suppose we construct a simple 2x2 chart, and on this axis we break the likelihood of the event into “High” and “Low” buckets, while on the other axis we split the impact into “High” and “Low” buckets.
So something that is both low impact and low likelihood is something that we should not ever spend any of our precious time or resources on. Things that fall here are just not worth worrying about.
Anything that is high impact and high likelihood is a slam-dunk. We always attend to these, and we do them first.
Things that are of high impact but low likelihood require more thought, but generally we would usually attend to most of the things in this box next. After that, we’d sometimes attend to things that are low impact but high likelihood, especially if they happen to have easy or quick remedies.
So this becomes the area where events fall that I attend to. How you happen to fill this in will depend on your age, financial means, family situation, and a host of other factors
Because I consider there to be a 50% chance of a systemic financial collapse over the next 2 years, I place this as a high impact/high probability event, meaning that this is a risk that deserved and got a lot of my attention.
So let’s continue with the example. With this two-by-two grid in our minds, we might flesh out the risks associated with financial system collapse using a table that looks like this.
First, we might assess the likelihood of widespread bank closures to be “high,” the impact to be “high,” and therefore the rank of this event as “high.”
Then we might come to the same conclusions about our own personal banks. But we might assess the overall rank of a disruption in the food distribution network as “medium,” and dollar destruction as “medium” because it has both a high and a low which average out to medium. We might assess cuts to government spending as “low.” These are a few examples. Other things can and should be added to the list.
The point here is to assess the likelihood and impact of each event that we think applies to the scenario we are studying. When you’ve completed this, we’ll have a ranked list of events.
My recommendation is that when you do these exercises, that you do them with like-minded friends…they will think of things you will miss, it’s more fun, and will go faster.
Now you’ve got to generate a list. You do this by filtering those events that are imminent, likely, and of high impact, through your self-assessment. I guarantee when you do this, you will end up with an entirely too long list of things that you could possibly do.
It’s time to prioritize.
First, the list can quickly be broken into things that you can or will do, and things that you can’t or won’t do. One person might feel completely empowered to move their wealth around; another might have their wealth locked in an irrevocable trust.
Of the things that you can or will do, we will break those into three tiers of action, such that Tier 1 is always started and completed before beginning Tier 2, which will always precede Tier 3. This makes it much easier to get started, because the lists are much more manageable.
Of the things that you can’t or won’t do, your options include finding someone else who can do them (and this is where community comes in), or letting them go and not worrying about them anymore.
Back to our example, let’s suppose that after filtering your ranked events through your self-assessment you came up with a nice long list of actions that you’d like to undertake. Almost certainly, there are too many to do all at once, and it is time to use the three-tier system to identify and tackle the easiest, lowest cost, highest bang-for-the-buck stuff first.
So what is Tier 1? It consists of the easiest, quickest, and cheapest items that require minimal outside assistance and no substantive changes to lifestyle. In this example, then, we might decide that taking a bit of hard cash out of the bank would provide a reasonable buffer against the risk of being without purchasing power, should the banks and ATMs go “on holiday” for a while. This is easy and very do-able. Our major risk would be feeling a bit foolish later, after nothing happens and we go to redeposit that money in a bank. We might also decide to spread our bets around, just in case the bank holiday was not universal and only applied to some banks. Lastly, we might decide to hedge against the vast loss of purchasing power that the people of Argentina experienced while their banks were shuttered. Gold represents one of the few ways to hold a money-like asset entirely outside of the banking system. And we’d do all of these things before even thinking about starting the Tier 2 list.
And so we proceed to Tier 2, which consists of those Items that plug the biggest gaps in your self-assessment and require a significant investment of time, money, and energy.
For instance, implementing a saving program so that you can afford needed items, or thinking about ways to create a food buffer for your community, or getting involved with your neighbors and local scene to a greater extent.
After these items have been gone through, it is time to consider the Tier 3 items - the hard stuff. These are the biggest changes or life decisions on your list, such as changing where you live, or acquiring new skills, or maybe changing your job. The point is that you should resist the urge to spend any time or energy mulling these over until you’ve made serious progress on the Tier 1 and Tier 2 actions.
If all of this seems like too much work, and you were hoping Chapter 20 would be a more directive and simplified “here’s what you do” shopping list, I can only say that there are no easy answers for the magnitude of the challenges we face. This chapter could easily be an entire course itself, and future videos on my site will explore these questions in greater detail.
What I have been consistently trying to prepare people for, the whole way along, is that the next twenty years are going to be unlike the last twenty years.
Specifically, I think we each need to be prepared for a financial catastrophe – not because we are 100% sure it will happen, but because we can’t be 100% sure it won’t happen. Prudent adults identify and manage risks.
And I think we each need to be prepared for the possibility, the possibility, that a disruption in our basic support systems could happen. The things that surface in this line of thinking are considered very “out there” in today’s society, but barely 100 years ago our complete dependence on the just-in-time delivery of the basics of life would have been considered mad.
Lastly, I think the future is going to be about moving from an “I” to a “we” culture…back to a bygone era, where neighbors weren’t just nice to each other, but relied on each other. As an informed person, it is now your responsibility to help others as best you can. Perhaps this will be with their knowledge and consent; perhaps you will have to be more indirect if they are not yet ready to confront the changes.
And so I close with a personal call to action. Now that you’ve completed the Crash Course, I hope you’ll agree that the challenges we face are not being adequately addressed at the national or international levels. I created the Crash Course specifically to reach people, one at a time, because I hold the belief that some of the risks we face are moving much, much faster than the political process. I created the Crash Course so that you would understand what is going on and to do my very best to help you appreciate that the future could be quite different than the past.
I need your help spreading the word. The Crash Course has been seen by hundreds of thousands of people all across the globe, without any advertising on my part. This is because people like you have taken the time to pass it along to their friends, relatives, and coworkers. But I want it to be seen by millions. We need to create a tipping point of awareness around these issues.
And so I need your financial help, because I have dedicated four years, and much of my bank account, towards creating this body of work and then making it freely available to all. If you have gotten something from this, if this has touched you or even changed your thinking in an important way, then I hope you’ll consider “paying it forward” by making a financial contribution so that somebody else down the line gets to see it. How much? I would suggest an amount that is neither a stretch for you nor embarrassing.
The Crash Course needs to be seen in the halls of power, I need to train others to deliver the message, I need to travel to take the show to venues both large and small, I need to support the development of multiple language translations, and I need to expand the content, shrink it, add new material, and keep the whole effort moving forward.
In whatever way you can contribute to that, even if that’s sending the link along to one other person, I need your help. I will do my part if you will do yours. That is my promise to you. Because after all, the future will be defined by what WE do. Thank you for listening.
Chapter 20 is not going to be a simple list of things to do. Instead, it will reflect my goal of each person assuming responsibility for their own actions.
Chapter 20 is going to provide a framework for action. This is a way of structuring all the myriad things you COULD do, into the prioritized list of things you WILL do. Consider it your personal risk-mitigation plan.
I’m already drawing up plans for a new follow-on series of videos that will lay out my proposed solutions for the nation and globe in more detail.
Okay, so you’ve seen the entire Crash Course, showing how the Economy, Energy, and the Environment are interlinked. Specifically, you’ve seen that there is a substantial mismatch between an economic model that must grow and a physical world of peaking oil and depleting resources. We cannot possibly solve any one of these main issues in isolation, because doing so will simply create new problems in one of the other “E”s. Truly non-status-quo solutions are called for.
Which means there is a very real chance that our collective path will not be a linear extrapolation of the present. Our individual challenge is to accept the possibility that the future may be quite a departure from the present.
I believe that the future is not some purely random roll of the dice, and that we can minimize future disruptions in our lives by taking actions today.
In one way I am glad to have waited to produce this final chapter, because we have had the great financial panic of the Fall of 2008, and we can more precisely map where this is all headed.
The multi-trillion-dollar bailout packages offered to banks by various governments across the globe are nearly 100% dedicated towards preserving the status quo.
But at the same time, none of these challenges or trends are going to be helped in the slightest by bailing out the banking system, and some will be made worse. The fact that our national leaders have chosen to go several trillion dollars further into debt in a desperate bid to preserve "what was" simply indicates that it is now even more probable that the burden of meeting these challenges has shifted a bit further towards private citizens and small communities.
Part of the complication with developing a “what should we do” chapter is that I have no idea where your beliefs lie. Everybody exists somewhere along this spectrum of belief, ranging from expecting a rather ordinary, if not slight, interruption in economic growth, all the way on up to a big breakdown. Everybody exists along here somewhere.
And depending on where you happen to sit, both the number of things you could do, and their urgency, increase dramatically.
Given this, where do we start? How do we get started, when there are so many variables and things that need doing?
This is why we need a framework for action.
There are four sequential steps to this framework. First, you have to decide that you are going to take action. Without this commitment, there’s not much point in continuing. Second, you need to take stock of where you are, and here I propose a self-assessment that will unearth your strengths, weakness, opportunities, and threats. Third, you’ve got to sort among the infinite list of things you could do, and then fourth, you’ve got to prioritize this list, because you can’t do everything. Together, these create the framework for action.
So let’s begin with Step 1 - the case for action.
First, let’s add some detail to the spectrum I laid out before. Here we might assess the potential for disruption as beginning with “status quo,” meaning that all the key risks dissipate relatively rapidly. Next on the spectrum would be a prolonged recession and all that that entails. Next we might place a collapse of the financial system on here, and finally we might envisage a collapse of government services at all levels
I am pretty certain that our future lies somewhere along this spectrum; the problem is, I don’t know where. The key here is that I cannot entirely rule out any particular outcome. I can’t place a probability of zero next to any of these, so I need to weigh them all.
So let’s play a little thought game with one of them and see how it might lead to making a case for action. Let’s use #3 – Financial System Collapse.
Without worrying about how likely or probable a financial crisis might be, let’s simply say it is either true or it is false. That is, it either happens or it doesn’t. Hopefully we can all agree that “true or false” pretty much covers the total range of possible outcomes.
And down on this axis, we’ll say that you either prepared for this crisis in advance or you did not. Again, it is either true or false that you chose to take steps to mitigate the impact of a financial crisis.
So what happens if it’s both true that the crisis happened and that you did prepare as best you could? Congratulations - give yourself a smiley face; you did the best you could.
And what about the case where the crisis did not happen and you did not prepare? Again, congratulations - you did the best you could. It turns out that these are essentially equivalent outcomes, and we can therefore remove them from our decision framework. In each case, we got the best outcome we could, so there’s not much to be gained from weighing and comparing them.
But what about this case, where the crisis did not happen but you did prepare? How bad could that be? What’s the worst that you could put in this box? Well, you probably wasted some money (maybe the opportunity to participate in capital gains in the stock market) and some wasted time, but perhaps worst of all, you ended up feeling foolish. That’s awful.
Now let’s compare this box to this other box, where the financial crisis happened but you did not prepare. What can we put in this box? Here it’s possible that you suffered a massive loss of wealth, had to make sudden, massive adjustments under the pressure of little time and scarce resources, and live with a sense of recrimination for having been “right” in your concerns but unprepared nonetheless. You can probably put a bunch more things in each of these boxes, and you should. But for our purposes, we’re done.
Now all we have to do is compare these two boxes. That’s it. In the scheme of things, which is worse? Where would you rather be? We are all built differently, but I am the sort that could never forgive myself for being right but unprepared. I can more easily forgive myself for being wrong and prepared. But that’s just me. Only you know which of these two boxes carries more weight for you. But if you picked the upper right box, then I need to ask, “What’s preventing you from taking action?”
Here’s a slight refinement of this thinking that allows for more subtlety than “true or false.” Suppose that we revisit our spectrum for a financial crisis that spans from “it’s not too bad” all the way to “everything breaks down and stops working for awhile.” Let’s assume that everyone has a different assessment of how likely any particular outcome is.
We might find that one person assesses the chance as very low that anything too bad will happen, while another person holds a nearly opposite view. In one important respect, they hold the same view; they both hold the possibility of a bad outcome as being greater than zero. When an outcome has a potentially huge impact, a prudent adult may decide to react to that risk, even though it is not very probable.
As long as some risk exists in your mind, and as long as the potential costs of not taking action are outweighed by the costs of taking action, then it makes sense to take action. That’s the case for action.
Okay, assuming you’ve decided that taking action makes sense, the hard part is where? We’ve been talking about some very big changes in the Crash Course, so where does one begin in this enormous universe of potential actions?
Here’s where I would recommend that you spend an hour and perform a self-assessment. There is an outline for this that you can download in the ACT section of ChrisMartenson.com.
It consists of three main areas. Your financial self-assessment should include your current & future needs, your current & future income, taking stock of all forms of wealth, and any issues concerning accessing your wealth that apply.
There are similar sorts of areas to cover that I am calling foundational that are equally as important, if not more, than the financial areas. Lastly, there are all of your physical needs to consider. A typical result of conducting a self-assessment is discovering that our lives are very much dependent on a lot of things we take for granted.
Once you’ve got your self-assessment complete, you have a pretty good idea of where you are strong and where you are not. The self-assessment, then, is your starting point – it represents your position in relation to the outside world.
Now we need to go to the outside world and rank all of the possible risks and challenges that exist, that we will then match against our self-assessment.
The three dimensions that we will use to begin bucketing the various events and risks are time (that is, how near or urgent is the risk or event), impact (is this a big deal or a little deal?), and likelihood (which is the same as the probability of the event).
To get a handle on time, consider grouping events on a timeline. In the first Horizon, which I see as running from zero to two years out, I place the housing bust, a credit bubble burst, and the possibility of a systemic banking failure. A bit further out, I foresee petroleum demand and supply crossing, issues with boomer retirement, and the possible emergence of very high inflation. Even further out, I see really big, hairy challenges like national insolvency, perhaps the end of fiat money, and the emergence of a new economic model.
Since I can’t respond to all of these at once, I mainly focus on those that are within the immediate Horizon. Again, you could place very different things in each of these Horizons, and those would be the ones you would use. These happen to be mine. For illustrative purposes, we’ll run through an example based on the possibility of a systemic banking failure.
Next, I segment things by Impact and Likelihood. If you understand insurance, you already understand this next process. Think of fire insurance on a house. We don’t carry it because such an event is especially likely (it is not), but because the impact is so catastrophic. That is, a prudent person will combine impact and likelihood to come to the decision that purchasing fire insurance makes sense.
So here’s a way to do that for the other areas in your life. Suppose we construct a simple 2x2 chart, and on this axis we break the likelihood of the event into “High” and “Low” buckets, while on the other axis we split the impact into “High” and “Low” buckets.
So something that is both low impact and low likelihood is something that we should not ever spend any of our precious time or resources on. Things that fall here are just not worth worrying about.
Anything that is high impact and high likelihood is a slam-dunk. We always attend to these, and we do them first.
Things that are of high impact but low likelihood require more thought, but generally we would usually attend to most of the things in this box next. After that, we’d sometimes attend to things that are low impact but high likelihood, especially if they happen to have easy or quick remedies.
So this becomes the area where events fall that I attend to. How you happen to fill this in will depend on your age, financial means, family situation, and a host of other factors
Because I consider there to be a 50% chance of a systemic financial collapse over the next 2 years, I place this as a high impact/high probability event, meaning that this is a risk that deserved and got a lot of my attention.
So let’s continue with the example. With this two-by-two grid in our minds, we might flesh out the risks associated with financial system collapse using a table that looks like this.
First, we might assess the likelihood of widespread bank closures to be “high,” the impact to be “high,” and therefore the rank of this event as “high.”
Then we might come to the same conclusions about our own personal banks. But we might assess the overall rank of a disruption in the food distribution network as “medium,” and dollar destruction as “medium” because it has both a high and a low which average out to medium. We might assess cuts to government spending as “low.” These are a few examples. Other things can and should be added to the list.
The point here is to assess the likelihood and impact of each event that we think applies to the scenario we are studying. When you’ve completed this, we’ll have a ranked list of events.
My recommendation is that when you do these exercises, that you do them with like-minded friends…they will think of things you will miss, it’s more fun, and will go faster.
Now you’ve got to generate a list. You do this by filtering those events that are imminent, likely, and of high impact, through your self-assessment. I guarantee when you do this, you will end up with an entirely too long list of things that you could possibly do.
It’s time to prioritize.
First, the list can quickly be broken into things that you can or will do, and things that you can’t or won’t do. One person might feel completely empowered to move their wealth around; another might have their wealth locked in an irrevocable trust.
Of the things that you can or will do, we will break those into three tiers of action, such that Tier 1 is always started and completed before beginning Tier 2, which will always precede Tier 3. This makes it much easier to get started, because the lists are much more manageable.
Of the things that you can’t or won’t do, your options include finding someone else who can do them (and this is where community comes in), or letting them go and not worrying about them anymore.
Back to our example, let’s suppose that after filtering your ranked events through your self-assessment you came up with a nice long list of actions that you’d like to undertake. Almost certainly, there are too many to do all at once, and it is time to use the three-tier system to identify and tackle the easiest, lowest cost, highest bang-for-the-buck stuff first.
So what is Tier 1? It consists of the easiest, quickest, and cheapest items that require minimal outside assistance and no substantive changes to lifestyle. In this example, then, we might decide that taking a bit of hard cash out of the bank would provide a reasonable buffer against the risk of being without purchasing power, should the banks and ATMs go “on holiday” for a while. This is easy and very do-able. Our major risk would be feeling a bit foolish later, after nothing happens and we go to redeposit that money in a bank. We might also decide to spread our bets around, just in case the bank holiday was not universal and only applied to some banks. Lastly, we might decide to hedge against the vast loss of purchasing power that the people of Argentina experienced while their banks were shuttered. Gold represents one of the few ways to hold a money-like asset entirely outside of the banking system. And we’d do all of these things before even thinking about starting the Tier 2 list.
And so we proceed to Tier 2, which consists of those Items that plug the biggest gaps in your self-assessment and require a significant investment of time, money, and energy.
For instance, implementing a saving program so that you can afford needed items, or thinking about ways to create a food buffer for your community, or getting involved with your neighbors and local scene to a greater extent.
After these items have been gone through, it is time to consider the Tier 3 items - the hard stuff. These are the biggest changes or life decisions on your list, such as changing where you live, or acquiring new skills, or maybe changing your job. The point is that you should resist the urge to spend any time or energy mulling these over until you’ve made serious progress on the Tier 1 and Tier 2 actions.
If all of this seems like too much work, and you were hoping Chapter 20 would be a more directive and simplified “here’s what you do” shopping list, I can only say that there are no easy answers for the magnitude of the challenges we face. This chapter could easily be an entire course itself, and future videos on my site will explore these questions in greater detail.
What I have been consistently trying to prepare people for, the whole way along, is that the next twenty years are going to be unlike the last twenty years.
Specifically, I think we each need to be prepared for a financial catastrophe – not because we are 100% sure it will happen, but because we can’t be 100% sure it won’t happen. Prudent adults identify and manage risks.
And I think we each need to be prepared for the possibility, the possibility, that a disruption in our basic support systems could happen. The things that surface in this line of thinking are considered very “out there” in today’s society, but barely 100 years ago our complete dependence on the just-in-time delivery of the basics of life would have been considered mad.
Lastly, I think the future is going to be about moving from an “I” to a “we” culture…back to a bygone era, where neighbors weren’t just nice to each other, but relied on each other. As an informed person, it is now your responsibility to help others as best you can. Perhaps this will be with their knowledge and consent; perhaps you will have to be more indirect if they are not yet ready to confront the changes.
And so I close with a personal call to action. Now that you’ve completed the Crash Course, I hope you’ll agree that the challenges we face are not being adequately addressed at the national or international levels. I created the Crash Course specifically to reach people, one at a time, because I hold the belief that some of the risks we face are moving much, much faster than the political process. I created the Crash Course so that you would understand what is going on and to do my very best to help you appreciate that the future could be quite different than the past.
I need your help spreading the word. The Crash Course has been seen by hundreds of thousands of people all across the globe, without any advertising on my part. This is because people like you have taken the time to pass it along to their friends, relatives, and coworkers. But I want it to be seen by millions. We need to create a tipping point of awareness around these issues.
And so I need your financial help, because I have dedicated four years, and much of my bank account, towards creating this body of work and then making it freely available to all. If you have gotten something from this, if this has touched you or even changed your thinking in an important way, then I hope you’ll consider “paying it forward” by making a financial contribution so that somebody else down the line gets to see it. How much? I would suggest an amount that is neither a stretch for you nor embarrassing.
The Crash Course needs to be seen in the halls of power, I need to train others to deliver the message, I need to travel to take the show to venues both large and small, I need to support the development of multiple language translations, and I need to expand the content, shrink it, add new material, and keep the whole effort moving forward.
In whatever way you can contribute to that, even if that’s sending the link along to one other person, I need your help. I will do my part if you will do yours. That is my promise to you. Because after all, the future will be defined by what WE do. Thank you for listening.
Crash Course: Chapter 19
FUTURE SHOCK
What I am offering is a comprehensive view of how all of our problems are actually interrelated and need to be viewed as such or solutions will continue to elude us.
So let’s review the key trends, which appear to be converging on a very narrow window of the future.
We began with an understanding of money and the fact that our money is loaned into existence, with interest, and that this results in powerful pressures to keep the amount of credit, or money, constantly growing by some percentage every year. This is the very definition of exponential growth, which we can easily see in our money, and, of course, inflation charts.
Keeping this dynamic in mind, we encountered the data on debt, which is really a claim on the future, vastly exceeding all historical benchmarks. The flip side to this, but a significant sociological trend in its own right, is the steady erosion of savings observed over the exact same period of time. Combined, we have the highest levels of debt ever recorded, coincident with some of the lowest levels of savings ever recorded.
And we saw that our failure to save extends through all levels of our society and even includes a desperate failure to invest in our infrastructure.
Next, we saw how assets, primarily housing, have been in a sustained bubble and that is now bursting and will take many years to play out. When credit bubbles burst, they result in financial panics that end up destroying a lot of capital. Actually, that’s not quite right; this quote says it better:
“Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”
- John Stuart Mill, Political Economist (1806 – 1873)
So we learned that a bursting bubble is not something that is easily fixed by authorities, because their attempts to limit further damage are misplaced. The damage has already been done. It is contained within too many houses, and too many strip malls sold for too high prices, and too many goods imported and bought on credit. All of that is done. All that’s left is figuring out who ends up holding the bag, and right now these guys are working hard to assure that that’s you, the taxpayer.
Then we learned that the most profound US government financial shortfall rests with a demographic problem that itself cannot be fixed by any act of law, or any level of optimism. It is simply a fact. An inconvenient fact of circumstance, much like gravity sometimes, but a fact nonetheless.
Even more than this, we learned that the assets boomers use to describe their wealth (stocks, and bonds, and real estate) all have to be sold to somebody at some point in order to extract their value. And we raised the uncomfortable observation that there simply are fewer people behind the boomers to whom these assets can be sold. When sellers exceed buyers, values fall.
Through all of this, the economic numbers that we reported to ourselves were systematically debased until they no longer reflected reality. If false data leads to bad decisions, then it’s no wonder that we find ourselves in our current predicament. Only by returning to an honest self-appraisal can we plot a strategic and meaningful course to the future.
Then we learned that energy is the source of all economic activity, and that oil is, by far, the most important source of energy. Our entire economic configuration is built around the assumption of unlimited growth in energy supplies, but this is an easily refuted proposition.
Individual oil fields peak and so do collections of them. And so Peak Oil is not so much a theory as it is an observation about how oil fields age. We then explored the tension that obviously exists between a monetary system that enforces exponential growth and the fact that our primary energy source has either already peaked or will soon. Somehow, the US has not even begun to invest in a future without cheap oil. We have no “Plan B.”
Lastly, we noted that the environment, meaning the world’s resources and natural systems upon which we depend, is exhibiting clear signs that our exponential population is driving exponential exploitation of resources, hastening their final depletion and altering ecosystems at an alarming rate. Also, we learned that even minor changes to the systems we depend on, such as shifting rainfall patterns, can create massive, usually unplanned, costs that will take priority over other needs.
And, yes, we’ve faced problems before, and we’ll face these as well. The concern comes when we view them all at once.
Placed on a timeline, we see that a bursting housing bubble is already happening just as the first wave of boomers enters retirement. At the same time, peak oil demand will outstrip supply, forcing an enormously expensive adjustment even as unknowable costs associated with resource depletion and a shifting climate lurk in the not-too-distant future. And sitting over all of this, limiting our options, will be our national failure to save and invest, and historically unprecedented levels of debt.
This timeline, stretching from now to 2020, reveals a truly massive set of challenges, converging on an exceptionally short window of time.
The question becomes, “Where will the money come from to apply to each of these challenges, if our savings are depleted and our debt levels already in uncharted territory?”
Any one of these events will prove to be a difficult strain on our national economy, while any two could be disruptive. If three or more happen simultaneously? It’s not hard to foresee the economic destruction of our country as a result, or perhaps the dollar utterly ruined as a store of wealth.
How many trillions will be required to fund boomer retirement? How many trillions to reshape our transportation infrastructure to accommodate Peak Oil? Where will the tens of trillions come from to make up the shortfalls in pensions and entitlement programs? How do we make good on these pension and entitlement promises while burdened with the highest debt loads ever seen? Where does the money come from to clean up the aftermath of a bursting housing bubble? How much more expensive will food and minerals be in the future, when oil has peaked but many more people are placing higher demands on increasingly marginal resources?
Each of these key trends or threats will take years, if not decades, to address, and yet we find them all parked almost directly in front of us, without any serious national discussions or planning. With every passing day we squander precious time, while the problems grow larger and more costly, if not thoroughly intractable. Buying time is not a strategy and will prove to be a disastrous tactic.
The mark of a mature adult is someone who can manage complexity and plans ahead. My opinion is that, with few exceptions, the current political and corporate leadership of this country are doing neither. We need to change this.
It is long past time to give up the adolescent notion that we can have our cake, eat it too, and borrow more when it’s gone.
It is time, quite simply, to return to living within our natural and economic budgets. We need to set priorities, set a budget, and stick to both.
And you? If you haven’t already, you need to begin to embrace the possibility that the path to the future might not be straight - it may take a few twists and turns and end up somewhere entirely unexpected - and that you happen to be alive at one of the most interesting points in human history, a time when a great shift may occur. This can be frightening or it can be exhilarating, and that choice is yours.
So what do we do about all this? What can you do, and what steps should you be considering right now?
Please join me for the final chapter of the Crash Course.
Thank you for listening.
So let’s review the key trends, which appear to be converging on a very narrow window of the future.
We began with an understanding of money and the fact that our money is loaned into existence, with interest, and that this results in powerful pressures to keep the amount of credit, or money, constantly growing by some percentage every year. This is the very definition of exponential growth, which we can easily see in our money, and, of course, inflation charts.
Keeping this dynamic in mind, we encountered the data on debt, which is really a claim on the future, vastly exceeding all historical benchmarks. The flip side to this, but a significant sociological trend in its own right, is the steady erosion of savings observed over the exact same period of time. Combined, we have the highest levels of debt ever recorded, coincident with some of the lowest levels of savings ever recorded.
And we saw that our failure to save extends through all levels of our society and even includes a desperate failure to invest in our infrastructure.
Next, we saw how assets, primarily housing, have been in a sustained bubble and that is now bursting and will take many years to play out. When credit bubbles burst, they result in financial panics that end up destroying a lot of capital. Actually, that’s not quite right; this quote says it better:
“Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”
- John Stuart Mill, Political Economist (1806 – 1873)
So we learned that a bursting bubble is not something that is easily fixed by authorities, because their attempts to limit further damage are misplaced. The damage has already been done. It is contained within too many houses, and too many strip malls sold for too high prices, and too many goods imported and bought on credit. All of that is done. All that’s left is figuring out who ends up holding the bag, and right now these guys are working hard to assure that that’s you, the taxpayer.
Then we learned that the most profound US government financial shortfall rests with a demographic problem that itself cannot be fixed by any act of law, or any level of optimism. It is simply a fact. An inconvenient fact of circumstance, much like gravity sometimes, but a fact nonetheless.
Even more than this, we learned that the assets boomers use to describe their wealth (stocks, and bonds, and real estate) all have to be sold to somebody at some point in order to extract their value. And we raised the uncomfortable observation that there simply are fewer people behind the boomers to whom these assets can be sold. When sellers exceed buyers, values fall.
Through all of this, the economic numbers that we reported to ourselves were systematically debased until they no longer reflected reality. If false data leads to bad decisions, then it’s no wonder that we find ourselves in our current predicament. Only by returning to an honest self-appraisal can we plot a strategic and meaningful course to the future.
Then we learned that energy is the source of all economic activity, and that oil is, by far, the most important source of energy. Our entire economic configuration is built around the assumption of unlimited growth in energy supplies, but this is an easily refuted proposition.
Individual oil fields peak and so do collections of them. And so Peak Oil is not so much a theory as it is an observation about how oil fields age. We then explored the tension that obviously exists between a monetary system that enforces exponential growth and the fact that our primary energy source has either already peaked or will soon. Somehow, the US has not even begun to invest in a future without cheap oil. We have no “Plan B.”
Lastly, we noted that the environment, meaning the world’s resources and natural systems upon which we depend, is exhibiting clear signs that our exponential population is driving exponential exploitation of resources, hastening their final depletion and altering ecosystems at an alarming rate. Also, we learned that even minor changes to the systems we depend on, such as shifting rainfall patterns, can create massive, usually unplanned, costs that will take priority over other needs.
And, yes, we’ve faced problems before, and we’ll face these as well. The concern comes when we view them all at once.
Placed on a timeline, we see that a bursting housing bubble is already happening just as the first wave of boomers enters retirement. At the same time, peak oil demand will outstrip supply, forcing an enormously expensive adjustment even as unknowable costs associated with resource depletion and a shifting climate lurk in the not-too-distant future. And sitting over all of this, limiting our options, will be our national failure to save and invest, and historically unprecedented levels of debt.
This timeline, stretching from now to 2020, reveals a truly massive set of challenges, converging on an exceptionally short window of time.
The question becomes, “Where will the money come from to apply to each of these challenges, if our savings are depleted and our debt levels already in uncharted territory?”
Any one of these events will prove to be a difficult strain on our national economy, while any two could be disruptive. If three or more happen simultaneously? It’s not hard to foresee the economic destruction of our country as a result, or perhaps the dollar utterly ruined as a store of wealth.
How many trillions will be required to fund boomer retirement? How many trillions to reshape our transportation infrastructure to accommodate Peak Oil? Where will the tens of trillions come from to make up the shortfalls in pensions and entitlement programs? How do we make good on these pension and entitlement promises while burdened with the highest debt loads ever seen? Where does the money come from to clean up the aftermath of a bursting housing bubble? How much more expensive will food and minerals be in the future, when oil has peaked but many more people are placing higher demands on increasingly marginal resources?
Each of these key trends or threats will take years, if not decades, to address, and yet we find them all parked almost directly in front of us, without any serious national discussions or planning. With every passing day we squander precious time, while the problems grow larger and more costly, if not thoroughly intractable. Buying time is not a strategy and will prove to be a disastrous tactic.
The mark of a mature adult is someone who can manage complexity and plans ahead. My opinion is that, with few exceptions, the current political and corporate leadership of this country are doing neither. We need to change this.
It is long past time to give up the adolescent notion that we can have our cake, eat it too, and borrow more when it’s gone.
It is time, quite simply, to return to living within our natural and economic budgets. We need to set priorities, set a budget, and stick to both.
And you? If you haven’t already, you need to begin to embrace the possibility that the path to the future might not be straight - it may take a few twists and turns and end up somewhere entirely unexpected - and that you happen to be alive at one of the most interesting points in human history, a time when a great shift may occur. This can be frightening or it can be exhilarating, and that choice is yours.
So what do we do about all this? What can you do, and what steps should you be considering right now?
Please join me for the final chapter of the Crash Course.
Thank you for listening.
Crash Course: Chapter 18
ENVIRONMENTAL DATA
Congratulations, you’ve made it to the final chapter of data. The remaining two chapters are summaries and conclusions.
Let me start right out by saying that this is not going to be about global warming. Instead, I want to focus on more linear, less complicated, and, I believe, more immediate concerns.
The primary intent of the Crash Course is to show you that there’s a bit of a disconnect between an exponential money system that enforces a creed of constant growth, and living on a spherical planet. In this section, a lot of you are going to find out that the planet is a whole lot smaller than you might have thought.
Most of the reason is contained in this curve right here. Population.
Consider that the entire human population finally reached 3 billion people in 1960, and that projections call for adding another 3 billion people in only 42 more years.
Before we contemplate 50% more humans in only 40 years, let me show you the pickle in which the current crop already finds itself.
This year there will be 70 million more humans on the surface of the planet than last year. 70 million. To put that in context, that is nearly three times as many people as live in the top ten most populous US cities combined. Worldwide population growth is equivalent to three of each of these cities, each year, for the next forty years.
More people means more demand for resources. More aluminum, more food, more consumer goods shipped to more places, and more cars. Always more cars.
And in case anybody has the misperception that maybe this isn’t such a big deal, because maybe these people will be living in China in a dirt hovel with maybe a donkey and a wicker basket, let me show you one of the fastest-growing cities in the world. In many respects, it is newer and more modern than most Western cities. This is what everybody aspires to.
People are the same the world over. We all want to live in bright, shiny cities, and we want to shop for nice things in nice districts. As a quick aside, China is said to have between 1.3 and 1.6 billion citizens. This means the entire US population of 300 million people, or 0.3 billion, would be referred to by the Chinese as a ‘rounding error.’
In fact, if we combine the top five most populous cities in the US we'd find that they have fewer inhabitants than the largest city in China.
But I want to return to the earlier statement that over the next forty years another 3 billion people will crowd onto the surface of the planet.
One trait that humans share with all organisms is that we use the easiest to obtain and the highest-quality resources first. When we use the earth’s resources, we start with the richest deepest soils, the largest trees, and the richest fishing waters. That is, we naturally exploit the highest quality resources first.
At this point, I want to recall that oil is a finite natural resource, and because of this we find that individual oil fields and collections of oil exhibit a classic extraction profile that resembles a bell curve.
We can broaden this concept to create a generalized resource extraction profile, where we start with the closest, richest, and most accessible, and highest grade resources first, before moving on to successively harder, and poorer, and thinner, or more distant resources. What this means is that over time, the energy required to obtain those resources goes up, as do the costs. About this, there really can be no doubt.
Here’s an example. When we first came to this country, we were finding some pretty spectacular things just lying around, like this copper nugget. Soon these [were] all gone, and we were onto smaller nuggets, and then onto copper ores that had some of the highest concentrations. Now?
Now we have things like the Bingham canyon mine in Utah. It is two and a half miles across and three-fourths of a mile deep, and it started out as a mountain. It sports a final ore concentration of just 0.2%. Do you think we’d have gone to this effort if there were still massive copper nuggets lying around in stream bed? No way.
Let’s take a closer look. You see that truck way down there? It’s fueled by petroleum; diesel, specifically. If we couldn’t spare the diesel to run that truck, what do you suppose we’d carry the ore out with? Donkeys? These trucks carry 255 tons/ per load. Suppose a donkey could carry 150 lbs. This means this truck carries the same in a single load as 3,400 donkeys. That’s quite a lot of donkeys.
My point here is that a hole in the ground a couple miles across and three fourths of a mile deep is a pretty spectacular display of the use of energy. When energy begins to get scarce, it seems unlikely to me that we’ll be digging too many more holes like it, which means copper will become scarce.
Now here’s where the concept gets interesting. The amount of energy and money that is required to extract any mineral or metal is a function of the ore grade. We would measure that as the percent of the ore that consists of the desired substance. So a 10% copper ore, for example, would contain 10% copper and 90%, uh, other stuff. Like, I don't know, rock or something. If we plot out how much other stuff we have to extract and then dispose of in pursuit of our desired substance, we get a chart that looks like this. Does it look familiar to you? It should; it’s an exponential chart.
It tells us that if we had an ore body with only 0.2% copper in it, we’d need to mine 500 pounds of ore in order to extract one pound of copper. I used this particular value because that happens to be the concentration of the Bingham Canyon mine. This helps to explain why this hole is so big. It tells us that without these giant trucks, we probably wouldn’t be mining such low ore grades. It means that we are already on the far right edge of this bell curve, in terms of energy and cost.
Do we do this because we like the challenge of low ore grades? No, we do it because we’ve already high-graded all the other known ore bodies, and this is what we are down to. We do it because it is the best option left. We do it because, in only 200 years, we’ve already burned through all [of] the better grades.
Let’s look at another example, coal. Coal production, as measured by tons mined, has been steadily growing at 2% per year since the 1940’s. This sort of stable, continuous, exponential growth is exactly what our economy and society demand. President Bush recently said we have 250 years of coal left, implying that this red arrow can continue in this direction for another 250 years. In other words, there is no urgency here; just a whole lot of coal waiting for us to come and get it.
But there’s a wrinkle in this story. Coal comes in several different grades. The most desirable is shiny, hard, black, anthracite coal. It yields the most heat when burned, has low moisture content, and is highly valued in the steel-making industry. Then comes bituminous coal, offering slightly less energy per pound of weight. And then subbituminous. And then finally something called lignite, which is really really low energy/high moisture stuff called brown coal that is pretty much only useful for burning. The next grade below lignite is, uh, rocks, which burn only slightly less vigorously than lignite.
Let’s look at the US history with mining anthracite. Notice a trend here? The reason we are not mining more of the stuff is because it’s pretty much all gone. Our entire bequeathment of anthracite, formed over hundreds of millions of years, was largely used over a span of about 100 years.
So we moved on to the next best stuff, bituminous coal, and here we might note that a peak in production was actually hit in 1990. Was this because we lost interest in this better grade of coal? No, it simply means we started to run out of it. Naturally, we then moved on to the next grade, subbituminous coal, which we see here making up the difference. And even lignite is getting into the game, although I don't expect to see this line really begin to move up until the subbituminous coal production's peaked out.
Now we get to the REALLY interesting part. Remember I said that the heat content, or available free energy, of coal got progressively worse with each grade? If we plot the total energy content of the coal mined, instead of the tonnage, we get a very different picture. Where the tonnage has been moving up in a nice steady neat 2% climb, we note that the total energy has leveled off and has climbed by exactly zero percent over the last 9 years. Ah! So we’re using more energy and spending more money to mine more and more coal, but we are receiving less and less back from those efforts? Let’s bring back this image again. Where do you think we are on this curve with respect to coal? Are the best years still in front of us? Do you feel secure with the “250 years of coal” that the President has said we have left?
The net energy of coal varies quite widely, but, in extracting lignite, we are already pretty far down this net energy curve.
Well, that’s okay; we can switch to uranium, right?
It turns out there is a little wrinkle in this story, too. When we look at the ore grades that exist for uranium, we see that they range from a high of over 20% to as low as 0.007%. Of all the ore grades proven and inferred to exist, 30% of them are greater than 0.1% in purity, leaving 70% below the grade of 0.1% Only one country, Canada, has proven reserves at a higher grade than 1%, while 11 countries have already entirely exhausted their uranium ores.
When we consider ore grades in such extremely low concentrations, the mining yields are quite dramatic, but not in a good way. Here’s where 70% of the known uranium reserves lie, requiring that anywhere from 500 pounds to 10,000 pounds of ore body be removed and processed to obtain a single pound of the mineral uranium oxide.
Clearly, as with copper, we are slipping down a slope of declining ore concentrations for uranium, and it cannot be disputed that greater energy and cost is demanded at this end of the curve.
Just in the sake of interest, France gets 90% of its electricity from nuclear power, but their uranium extraction peaked in the late 1980s, while the US passed its mining peak in the early 1980s. Both countries are well past Peak Uranium. If uranium is the energy of the future, the future lies somewhere outside of these two countries.
In fact, this same general theme naturally applies to anything we humans set our attention to. Phosphorus (a central mineral for farming), fish in the oceans, and every single source of metal are all telling the same story: We are running out of high grade materials. For most things, there is either already a shortage, or one will soon arise within the next few decades. And even these assessments assume that sufficient energy exists, allowing us to dig as many mile-deep pits as we wish in our quest for the last low-grade ores.
The story here is that we, as a species, all over the globe, have already mined the richest ores, found the easiest energy sources, and farmed the richest soils. It is said that for every bushel of wheat taken to market, a bushel of topsoil is lost. In that sense, given that it takes hundreds of years to form a single inch of topsoil, it can be said that our farmers are actually mining the soil.
We have taken several hundreds of millions of years of natural ore body and energy deposition, and thousands of years of soil creation, and largely burned through them in the few years since oil was discovered. It is safe to say that in human terms, once these are gone, man, they’re gone.
Another measure of human activity is that certain sensitive ecosystem stress markers are showing up. Species loss is one example, but there are many others, such as the dead zones that are appearing all over the globe in the shallow seas.
In fact, if one cares to look, there are red lights flashing all over our collective dashboard, ranging from species loss to oceanic depletion, to aquifer depletion, to topsoil loss, to energy depletion, and so on.
When I get even one red warning light on my dashboard, I pull right over to see what’s wrong. So far, my sense is that the world is stepping on the gas pedal instead
And driving every single bit of this is simply this: 70 million new people arrive on the surface of the planet each year. This means that a stunning 50% increase in the number of humans clamoring for natural resources will have to be negotiated over the next 40 years.
If we get clever about this, my sense is that we can do just fine. If we simply choose to grow [though] because that’s what our money system requires and that’s the default position for our politicians, then it seems likely that we’ll simply go faster until we hit a wall. The choice seems clear – either we undertake voluntary change now, or we'll face involuntary change later.
Now, back to the economy. Its primary assumption that the future will not just be bigger, but exponentially bigger, than the present, is going to have to contend with this reality. I submit to you that these limits are going to play out in very real terms over the next 20 years.
And so we can finally put all three “E”s in one spot. Our economy is based on an exponential money system that explicitly enforces a paradigm of continuous growth and implicitly assumes that the future will be much larger than the present. Growth requires energy; there is no getting around that; so the trends in Energy stand in stark contrast to the major underlying assumptions upon which our entire economy and our entire way of life are founded. Peak Energy is a very real, very close prospect.
In the rest of the Environment we see, very clearly, that we humans have high-graded virtually every resource and we're now working our way into poorer, thinner, and deeper territory as we seek the resources that define our lifestyles. Biosystem stress is flashing warning signs on our dashboard. Pretending that we can just carry on consuming as we have, while the world population increases by another 50% over the next 40 years, is just not a workable plan. In fact, it's no plan at all.
The continued exponential extraction of resources is a difficult enough story to believe just given the depleting ore grades that we are witnessing. But when we combine that reality with what we know about our energy supplies, then the story becomes even more unworkable.
Because each of the key environmental resources upon which we depend – metals, minerals, soil, water, oceanic fish, and all the rest – have been “high graded,” their continued extraction is going to increasingly be in competition for dwindling energy supplies that we’d also like to use to transport ourselves, to construct buildings, and to stay warm.
Taken together, it becomes quite clear that our challenge is to adapt to a world of less, not more. A world where we have to put more energy into carefully managing what we have than seeking out new sources to exploit. We have an economic system that must grow, coupled to an energy system that can’t grow, both of which are linked to a world of rapidly depleting resources. Out of the three “E”s, this is the one that is going to be doing the changing, and you need to be ready for that. That’s what this entire Crash Course has been about.
Let me make this even simpler. I want to be sure to get this point across very clearly. Our economy must grow to support a money system that requires growth, but is challenged by an energy system that can’t grow, and both of these are linked to a natural world that is rapidly being depleted.
Let me close by saying that if I thought these represented unfixable problems, I would not have dedicated, full time, the last four years of my life developing this Crash Course and raided my bank account to make it freely available to all. I am an optimist, and I want a better future of our own design.
We can no longer afford pleasant platitudes about 250 years of coal left, without appreciating the actual details involved.
It’s time to think big, develop a clear sense of priorities, and cast off the adolescent view that nothing bad is going to happen to us because so far it hasn’t. And it’s time to show that we care about future generations.
For better or worse, you happen to be alive at one of the most dramatic turning points in our species’ history that ranks right up there with climbing down out of the trees. The only real question is, what role do you want to play? Shall your life be filled with fear or a resolute sense of purpose?
The only way these challenges can become insurmountable is if we let them, by ignoring them for too long.
Okay, it’s time to place all of these challenges onto a single timeline so that we can assess the urgency of the risks that we face. Please join me for Chapter 19: Future Shock.
Thank you for your attention.
Let me start right out by saying that this is not going to be about global warming. Instead, I want to focus on more linear, less complicated, and, I believe, more immediate concerns.
The primary intent of the Crash Course is to show you that there’s a bit of a disconnect between an exponential money system that enforces a creed of constant growth, and living on a spherical planet. In this section, a lot of you are going to find out that the planet is a whole lot smaller than you might have thought.
Most of the reason is contained in this curve right here. Population.
Consider that the entire human population finally reached 3 billion people in 1960, and that projections call for adding another 3 billion people in only 42 more years.
Before we contemplate 50% more humans in only 40 years, let me show you the pickle in which the current crop already finds itself.
This year there will be 70 million more humans on the surface of the planet than last year. 70 million. To put that in context, that is nearly three times as many people as live in the top ten most populous US cities combined. Worldwide population growth is equivalent to three of each of these cities, each year, for the next forty years.
More people means more demand for resources. More aluminum, more food, more consumer goods shipped to more places, and more cars. Always more cars.
And in case anybody has the misperception that maybe this isn’t such a big deal, because maybe these people will be living in China in a dirt hovel with maybe a donkey and a wicker basket, let me show you one of the fastest-growing cities in the world. In many respects, it is newer and more modern than most Western cities. This is what everybody aspires to.
People are the same the world over. We all want to live in bright, shiny cities, and we want to shop for nice things in nice districts. As a quick aside, China is said to have between 1.3 and 1.6 billion citizens. This means the entire US population of 300 million people, or 0.3 billion, would be referred to by the Chinese as a ‘rounding error.’
In fact, if we combine the top five most populous cities in the US we'd find that they have fewer inhabitants than the largest city in China.
But I want to return to the earlier statement that over the next forty years another 3 billion people will crowd onto the surface of the planet.
One trait that humans share with all organisms is that we use the easiest to obtain and the highest-quality resources first. When we use the earth’s resources, we start with the richest deepest soils, the largest trees, and the richest fishing waters. That is, we naturally exploit the highest quality resources first.
At this point, I want to recall that oil is a finite natural resource, and because of this we find that individual oil fields and collections of oil exhibit a classic extraction profile that resembles a bell curve.
We can broaden this concept to create a generalized resource extraction profile, where we start with the closest, richest, and most accessible, and highest grade resources first, before moving on to successively harder, and poorer, and thinner, or more distant resources. What this means is that over time, the energy required to obtain those resources goes up, as do the costs. About this, there really can be no doubt.
Here’s an example. When we first came to this country, we were finding some pretty spectacular things just lying around, like this copper nugget. Soon these [were] all gone, and we were onto smaller nuggets, and then onto copper ores that had some of the highest concentrations. Now?
Now we have things like the Bingham canyon mine in Utah. It is two and a half miles across and three-fourths of a mile deep, and it started out as a mountain. It sports a final ore concentration of just 0.2%. Do you think we’d have gone to this effort if there were still massive copper nuggets lying around in stream bed? No way.
Let’s take a closer look. You see that truck way down there? It’s fueled by petroleum; diesel, specifically. If we couldn’t spare the diesel to run that truck, what do you suppose we’d carry the ore out with? Donkeys? These trucks carry 255 tons/ per load. Suppose a donkey could carry 150 lbs. This means this truck carries the same in a single load as 3,400 donkeys. That’s quite a lot of donkeys.
My point here is that a hole in the ground a couple miles across and three fourths of a mile deep is a pretty spectacular display of the use of energy. When energy begins to get scarce, it seems unlikely to me that we’ll be digging too many more holes like it, which means copper will become scarce.
Now here’s where the concept gets interesting. The amount of energy and money that is required to extract any mineral or metal is a function of the ore grade. We would measure that as the percent of the ore that consists of the desired substance. So a 10% copper ore, for example, would contain 10% copper and 90%, uh, other stuff. Like, I don't know, rock or something. If we plot out how much other stuff we have to extract and then dispose of in pursuit of our desired substance, we get a chart that looks like this. Does it look familiar to you? It should; it’s an exponential chart.
It tells us that if we had an ore body with only 0.2% copper in it, we’d need to mine 500 pounds of ore in order to extract one pound of copper. I used this particular value because that happens to be the concentration of the Bingham Canyon mine. This helps to explain why this hole is so big. It tells us that without these giant trucks, we probably wouldn’t be mining such low ore grades. It means that we are already on the far right edge of this bell curve, in terms of energy and cost.
Do we do this because we like the challenge of low ore grades? No, we do it because we’ve already high-graded all the other known ore bodies, and this is what we are down to. We do it because it is the best option left. We do it because, in only 200 years, we’ve already burned through all [of] the better grades.
Let’s look at another example, coal. Coal production, as measured by tons mined, has been steadily growing at 2% per year since the 1940’s. This sort of stable, continuous, exponential growth is exactly what our economy and society demand. President Bush recently said we have 250 years of coal left, implying that this red arrow can continue in this direction for another 250 years. In other words, there is no urgency here; just a whole lot of coal waiting for us to come and get it.
But there’s a wrinkle in this story. Coal comes in several different grades. The most desirable is shiny, hard, black, anthracite coal. It yields the most heat when burned, has low moisture content, and is highly valued in the steel-making industry. Then comes bituminous coal, offering slightly less energy per pound of weight. And then subbituminous. And then finally something called lignite, which is really really low energy/high moisture stuff called brown coal that is pretty much only useful for burning. The next grade below lignite is, uh, rocks, which burn only slightly less vigorously than lignite.
Let’s look at the US history with mining anthracite. Notice a trend here? The reason we are not mining more of the stuff is because it’s pretty much all gone. Our entire bequeathment of anthracite, formed over hundreds of millions of years, was largely used over a span of about 100 years.
So we moved on to the next best stuff, bituminous coal, and here we might note that a peak in production was actually hit in 1990. Was this because we lost interest in this better grade of coal? No, it simply means we started to run out of it. Naturally, we then moved on to the next grade, subbituminous coal, which we see here making up the difference. And even lignite is getting into the game, although I don't expect to see this line really begin to move up until the subbituminous coal production's peaked out.
Now we get to the REALLY interesting part. Remember I said that the heat content, or available free energy, of coal got progressively worse with each grade? If we plot the total energy content of the coal mined, instead of the tonnage, we get a very different picture. Where the tonnage has been moving up in a nice steady neat 2% climb, we note that the total energy has leveled off and has climbed by exactly zero percent over the last 9 years. Ah! So we’re using more energy and spending more money to mine more and more coal, but we are receiving less and less back from those efforts? Let’s bring back this image again. Where do you think we are on this curve with respect to coal? Are the best years still in front of us? Do you feel secure with the “250 years of coal” that the President has said we have left?
The net energy of coal varies quite widely, but, in extracting lignite, we are already pretty far down this net energy curve.
Well, that’s okay; we can switch to uranium, right?
It turns out there is a little wrinkle in this story, too. When we look at the ore grades that exist for uranium, we see that they range from a high of over 20% to as low as 0.007%. Of all the ore grades proven and inferred to exist, 30% of them are greater than 0.1% in purity, leaving 70% below the grade of 0.1% Only one country, Canada, has proven reserves at a higher grade than 1%, while 11 countries have already entirely exhausted their uranium ores.
When we consider ore grades in such extremely low concentrations, the mining yields are quite dramatic, but not in a good way. Here’s where 70% of the known uranium reserves lie, requiring that anywhere from 500 pounds to 10,000 pounds of ore body be removed and processed to obtain a single pound of the mineral uranium oxide.
Clearly, as with copper, we are slipping down a slope of declining ore concentrations for uranium, and it cannot be disputed that greater energy and cost is demanded at this end of the curve.
Just in the sake of interest, France gets 90% of its electricity from nuclear power, but their uranium extraction peaked in the late 1980s, while the US passed its mining peak in the early 1980s. Both countries are well past Peak Uranium. If uranium is the energy of the future, the future lies somewhere outside of these two countries.
In fact, this same general theme naturally applies to anything we humans set our attention to. Phosphorus (a central mineral for farming), fish in the oceans, and every single source of metal are all telling the same story: We are running out of high grade materials. For most things, there is either already a shortage, or one will soon arise within the next few decades. And even these assessments assume that sufficient energy exists, allowing us to dig as many mile-deep pits as we wish in our quest for the last low-grade ores.
The story here is that we, as a species, all over the globe, have already mined the richest ores, found the easiest energy sources, and farmed the richest soils. It is said that for every bushel of wheat taken to market, a bushel of topsoil is lost. In that sense, given that it takes hundreds of years to form a single inch of topsoil, it can be said that our farmers are actually mining the soil.
We have taken several hundreds of millions of years of natural ore body and energy deposition, and thousands of years of soil creation, and largely burned through them in the few years since oil was discovered. It is safe to say that in human terms, once these are gone, man, they’re gone.
Another measure of human activity is that certain sensitive ecosystem stress markers are showing up. Species loss is one example, but there are many others, such as the dead zones that are appearing all over the globe in the shallow seas.
In fact, if one cares to look, there are red lights flashing all over our collective dashboard, ranging from species loss to oceanic depletion, to aquifer depletion, to topsoil loss, to energy depletion, and so on.
When I get even one red warning light on my dashboard, I pull right over to see what’s wrong. So far, my sense is that the world is stepping on the gas pedal instead
And driving every single bit of this is simply this: 70 million new people arrive on the surface of the planet each year. This means that a stunning 50% increase in the number of humans clamoring for natural resources will have to be negotiated over the next 40 years.
If we get clever about this, my sense is that we can do just fine. If we simply choose to grow [though] because that’s what our money system requires and that’s the default position for our politicians, then it seems likely that we’ll simply go faster until we hit a wall. The choice seems clear – either we undertake voluntary change now, or we'll face involuntary change later.
Now, back to the economy. Its primary assumption that the future will not just be bigger, but exponentially bigger, than the present, is going to have to contend with this reality. I submit to you that these limits are going to play out in very real terms over the next 20 years.
And so we can finally put all three “E”s in one spot. Our economy is based on an exponential money system that explicitly enforces a paradigm of continuous growth and implicitly assumes that the future will be much larger than the present. Growth requires energy; there is no getting around that; so the trends in Energy stand in stark contrast to the major underlying assumptions upon which our entire economy and our entire way of life are founded. Peak Energy is a very real, very close prospect.
In the rest of the Environment we see, very clearly, that we humans have high-graded virtually every resource and we're now working our way into poorer, thinner, and deeper territory as we seek the resources that define our lifestyles. Biosystem stress is flashing warning signs on our dashboard. Pretending that we can just carry on consuming as we have, while the world population increases by another 50% over the next 40 years, is just not a workable plan. In fact, it's no plan at all.
The continued exponential extraction of resources is a difficult enough story to believe just given the depleting ore grades that we are witnessing. But when we combine that reality with what we know about our energy supplies, then the story becomes even more unworkable.
Because each of the key environmental resources upon which we depend – metals, minerals, soil, water, oceanic fish, and all the rest – have been “high graded,” their continued extraction is going to increasingly be in competition for dwindling energy supplies that we’d also like to use to transport ourselves, to construct buildings, and to stay warm.
Taken together, it becomes quite clear that our challenge is to adapt to a world of less, not more. A world where we have to put more energy into carefully managing what we have than seeking out new sources to exploit. We have an economic system that must grow, coupled to an energy system that can’t grow, both of which are linked to a world of rapidly depleting resources. Out of the three “E”s, this is the one that is going to be doing the changing, and you need to be ready for that. That’s what this entire Crash Course has been about.
Let me make this even simpler. I want to be sure to get this point across very clearly. Our economy must grow to support a money system that requires growth, but is challenged by an energy system that can’t grow, and both of these are linked to a natural world that is rapidly being depleted.
Let me close by saying that if I thought these represented unfixable problems, I would not have dedicated, full time, the last four years of my life developing this Crash Course and raided my bank account to make it freely available to all. I am an optimist, and I want a better future of our own design.
We can no longer afford pleasant platitudes about 250 years of coal left, without appreciating the actual details involved.
It’s time to think big, develop a clear sense of priorities, and cast off the adolescent view that nothing bad is going to happen to us because so far it hasn’t. And it’s time to show that we care about future generations.
For better or worse, you happen to be alive at one of the most dramatic turning points in our species’ history that ranks right up there with climbing down out of the trees. The only real question is, what role do you want to play? Shall your life be filled with fear or a resolute sense of purpose?
The only way these challenges can become insurmountable is if we let them, by ignoring them for too long.
Okay, it’s time to place all of these challenges onto a single timeline so that we can assess the urgency of the risks that we face. Please join me for Chapter 19: Future Shock.
Thank you for your attention.
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