Bill Totten's Weblog

Wednesday, May 31, 2006

Be Prepared

by Charley Reese

King Features Syndicate (May 19 2006)

One of the most pervasive and damaging myths in modern society is the belief in perpetual economic growth. Like the perpetual-motion machine, perpetual economic growth is an impossibility.

This notion is particularly difficult to dislodge from the American mind because economic growth has been part of our lives. We've seen it with our own eyes. Of course, part of what we've seen is an illusion of growth created by gradual devaluation of the currency and statistical games played by the government.

But nevertheless, there has been real economic growth, and it has been powered by cheap fossil-fuel energy. "Cheap" is the operative word here. Subtract cheap fossil-fuel energy, and the life we know will be altered drastically - perhaps, if we don't prepare for it, catastrophically.

For 99 percent of the time man has been on Earth, he has had to rely on human and animal energy,
with some assistance from water and wind. The bulk of civilization was built with human labor, which is why slavery came into existence and lasted so long. When the planet was thinly populated, human labor was a valuable resource and became part of the booty in war. Right now, the planet is overpopulated, and there is a surplus of labor.

But our cheap fossil-fuel energy is on the verge of running out. According to essayist Wendell Berry, 99 percent of the oil burned has been burned in the lifetime of people still living. Something that took nature thousands of years to create is being consumed in decades. Oil production in the lower 48 of the United States peaked in 1970. It will begin to peak in various foreign countries in the not-too-distant future. At the same time, more and more nations are attempting to industrialize. Hence, competition for the dwindling supply will increase. At best, that will bid the price up, and at worse cause oil wars.

How did the notion that six billion people couldn't deplete Earth's resources ever get started in the first place? The constants in human nature throughout history have been selfishness, greed and a willingness to sacrifice the future for short-term gain. That's exactly what we are doing by laying a trillion dollars' worth of debt on our posterity.

Another concept we need to understand is the difference between ephemeral or temporary value and permanent value. The permanent value of a house is the land on which it is built and the labor and materials used to build it. The market value is a temporary and ghost value. It does not even really exist until the moment the house is sold. It is based on what people are willing to pay and on what the owner is willing to sell for. That can fluctuate. In the late 1920s, Florida land that sold for $6,000 an acre almost overnight couldn't be sold for $2 an acre. People who lived through the Great Depression can tell you a lot about the myth of perpetual growth. That wasn't the first economic upheaval, and it won't be the last.

Energy represents a temporary value. Until it's used, it has no value, but to use it is to destroy it. Military expenditures represent yet another ghostly and temporary value. A bomb has no value at all until it is used, but it is used to destroy human life and human property, and is destroyed itself in the process. War is always a net subtraction of human wealth.

Paper is another impermanent value. If you think the paper your shares of stock are printed on has any permanent value, ask the people at Enron, who one day were well off and the next day were flat broke.

We just need to start thinking about the post-cheap-energy era. If your house, for example, is 25 miles from work, what will happen to its market price if gasoline is $6 a gallon? What will happen to public education if cheap energy becomes a thing of the past, as it surely will? Can we then afford to power the buses and the air conditioners and the lighting?

I don't mean to sound alarmist, but the Boy Scouts are right about being prepared.

Copyright (c) 2006 by King Features Syndicate, Inc.

Bill Totten


  • Nice article bill. How would you recommend that we become prepared?

    Obviously we all need to rush out and stock up on flashlight batteries, toilet paper and rice, but what about stock holders?

    If cheap oil is almost gone, then expensive oil is on the horizon. But what about the moral implications of investing in oil companies that are charging your mother or children extortion fees to fill up at the pump? If recent profit margins are any indication, there is a false price hike based on scare tactics that results in lining the pockets of big oil men. The administration is not finding fault with global price gouging because their pockets are being lined as well.

    So where do we put our investments for the greatest return to ride out the coming downturn, and what else do you recommend as preparations?

    By Blogger Jim Robb, at 3:37 AM, June 02, 2006  

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