Lethal Trajectories - Michael Conley [194]
The dream is now on a collision course with the immutable laws of supply and demand. And, as the dream enablers—cheap energy and abundant resources—disappear, the dream we knew is no longer sustainable. The things we once took for granted, such as agricultural abundance, fresh water, clean air, and a robust global economy, are no longer givens; the times are changing.
Caught in the blur of a paradigm shift we don’t understand—a shift from the sunlit dream into the harsh winds of the perfect storm—we are uneasy about the future. We respond ineffectively by applying old-paradigm solutions to new-paradigm challenges, or we simply dismiss our feelings of uneasiness as something that modern technology will somehow resolve. Perhaps our transitional journey can only be achieved through the painful cycle of denial, anger, bargaining, depression, and finally acceptance, but one thing is clear: until we recognize the disconnect between our expectations and the new reality, we can do little to address the coming crisis. The challenge is daunting, and time is working against us.
It must start with building a better understanding of the perfect storm and the threat it poses. It means identifying the threats, connecting the dots, plotting trajectories, and initiating proactive solutions. Broadly speaking, the major threats—detailed in chapter 50 of my research notes—can be summed up as follows.
Energy threats: As the oil supply-and-demand curve tightens, we will increasingly look to OPEC countries to feed the hungry beast. But, due to constraints of geology and national policy, they are unlikely to meet future demand. As access to oil dwindles and prices skyrocket, the economic engines of the world will sputter. Nations will realize how ill prepared they are to replace their oil-based energy systems with renewable and alternative energy models. They will rue the time wasted in not developing new energy infrastructures, given the long timeframes required for such efforts, and pay a fearful price in the economic stagnation that will follow. Ironically, the favorable cost structures of oil have long deterred those nations from committing the time and capital required to develop new—albeit costlier—energy models. Perhaps higher energy prices will now spur their growth, but it may be too late.
Economic threats: The global addiction to debt will intensify as the energy crisis worsens. The United States, with its crushing and unsustainable debt loads, future entitlement obligations that can’t be met, and debt-servicing charges now exceeding $200 billion per annum and climbing rapidly, will be further hampered by its massive transfer of wealth to foreign oil exporters. As the GDP stagnates, any opportunity we had to grow our way out of debt will vanish. The temptation to print money and monetize debt will be irresistible, causing our balance sheets to deteriorate even further. A recent S&P review lowering the outlook on U.S. government debt from “stable” to “negative” reflects an uneasy concern with long-term debt; clearly a major issue in the next presidential campaign.
As a debtor nation relying on foreign governments to finance its deficits, the United States’ financial picture will grow murkier. The need to raise interest rates to attract and retain foreign capital—and avoid any form of disintermediation—will hamper growth still more. Of perhaps greater potential concern is the risk of losing the fiat reserve currency position or the petrodollar status now held by the American dollar; the loss of either could have a catastrophic effect on America’s financial position. Sound impossible? The Roman and British empires were probably equally complacent at the height of their global economic power.
Climate and ecology