Perfect Storm - Energy, Finance, and the End of Growth

[MWKXJ]

"The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge..."

http://ftalphaville.ft.com/files/2013/0 ... orm-LR.pdf

[ochotona]

So gold is the only thing that "works" as this future unfolds? Or nothing works?

[MachineGhost]

So gold is the only thing that "works" as this future unfolds? Or nothing works?

It sounds deflationary, so stick to the PP.

[sixdollars]

In terms of wealth protection, I still see no better option than the PP (except perhaps being all in with precious metals, but that's if you want to bet all your eggs on the SHTF basket...)  I do sometimes like to sit and ponder about such a perfect storm, but I have no idea when and how it would all play out.  It's definitely interesting to think about though...

Consider that there's a pretty strong correlation between recessions following a spike/rise in oil prices.  Correlation is not causation, but given that trade and manufacture is so dependent on oil, I don't think it would be taking a huge leap to connect the two.  It seems the IEA already pretty much came out and said we've passed peak conventional ("cheap") oil, but not a complete peak (once unconventional crude is added in we are still shown to be increasing).  I wonder how our economy will handle increasingly more expensive and lower quality crude as time goes on and how it will affect economic growth going forward.  The state of the possible fracking bubble might add to that worry.  Given the data shown in studies from the University of Texas and geologist David Hughes, I'm skeptical that we'll really be able to add this much more unconventional crude to keep the curve increasing as they are hoping, but I could be wrong.  Couple this with the large amounts of economic uncertainty that people already have and it's not hard to come up with some grim predictions.

Here was a forecast posted by the IEA in 2010 showing the conventional peak had likely already occurred...
[img width=600]http://i61.tinypic.com/2wdrloi.png[/img]


These concerns definitely drew me to the PP.  Typical investing philosophies are not agnostic and seem to completely ignore these sorts of risk.  The more I look at the PP, the more I come to realize how well it is designed to protect and increase wealth.  Who knows what the future holds..

[ochotona]

Oh, that chart is anchored in 2008. That was the thinking, even here in the oilpatch, in 2008, while the shale revolution was unfolding. I am a geophysicist, and I missed it. Talk about groupthink. By 2012 I was catching on. No, I don't think we're going to have oil problems really, not for a while, and we may transition to other forms increasingly by then, or conserve. My wife bought a Ford 4-door sedan which gets 45 MPG. Impressive.

[fnord123]

I agree that the oil/energy part is not the big problem.  Solar, wind, and other renewable energy forms are all benefiting from technological progress, just as oil has (fracking, horizontal drilling, etc.).  There isn't any clear indication that this progress will stop, which means that energy prices may slowly rise or they may fall, but it is unlikely they would go parabolic, which is what some of the peak oil folks claim.

That being said, the other three things (debt bubble, globalization, data massaging) are serious problems as are demographics, which taken together could be a perfect storm of their own.

[Pointedstick]

Parabolic energy cost is a fearmongering doom porn myth, nothing more. Solar power is increasingly defining the price's upper bound, given the fact that it is almost all upfront costs with virtually no ongoing running costs, and the installation costs is dropping like a stone all over the world. When the energy produced by solar PV falls below the price of oil extraction for an equivalent amount of oil-burned energy, that's the end of oil extraction, and infrastructures will very rapidly shift to electrically-powered systems. The biggest challenge is probably cars, but that's doable and we're already seeing it. There's no reason why electric cars won't eventually be fairly cheap. In many ways, they can be more mechanically simple than combustion engine vehicles. For grid power and building heating, all-electric from PV is going to eventually be a no-brainer. In some places, like where I live (sunny high desert), it already is for new construction, and it's rapidly getting there with retrofits.

[MachineGhost]

vehicles. For grid power and building heating, all-electric from PV is going to eventually be a no-brainer. In some places, like where I live (sunny high desert), it already is for new construction, and it's rapidly getting there with retrofits.

Still hard to believe you moved from the posh urban Bay Area to a dry, arid, desert shithole in a relatively poor state full of illegals.   Very few actually walk the talk on getting off the Hedonistic Treadmill.  Anyway, what do you do now?  Are you a full-time entrepreneur or still an employee working for some evil corporation?

[Pointedstick]

vehicles. For grid power and building heating, all-electric from PV is going to eventually be a no-brainer. In some places, like where I live (sunny high desert), it already is for new construction, and it's rapidly getting there with retrofits.

Still hard to believe you moved from the posh urban Bay Area to a dry, arid, desert shithole in a relatively poor state full of illegals.   Anyway, what do you do now?  Are you a full-time entrepreneur or still an employee working for some evil corporation?

The latter. I took my job with me.

I love New Mexico because nobody understands it, including apparently you! There are actually relatively few illegals here compared with California; a large proportion of the hispanics here have lived here for hundreds of years. It's also the high desert; we got snow last month. The poverty is certainly true, though. But it's not universal; you just avoid the impoverished areas, same as everywhere else.

[MachineGhost]

I love New Mexico because nobody understands it, including apparently you! There are actually relatively few illegals here compared with California; a large proportion of the hispanics here have lived here for hundreds of years. It's also the high desert; we got snow last month. The poverty is certainly true, though. But it's not universal; you just avoid the impoverished areas, same as everywhere else.

Wow, isn't that even worse by being elevated?  You gotta deal with the snow in addition to all the other negatives about a desert?  Then again, I'm sure its more sparsely populated than the desert I live in.  If I had to take one or the other, guess which one I would choose!

[Mountaineer]

I love New Mexico because nobody understands it, including apparently you! There are actually relatively few illegals here compared with California; a large proportion of the hispanics here have lived here for hundreds of years. It's also the high desert; we got snow last month. The poverty is certainly true, though. But it's not universal; you just avoid the impoverished areas, same as everywhere else.

Wow, isn't that even worse by being elevated?  You gotta deal with the snow in addition to all the other negatives about a desert?  Then again, I'm sure its more sparsely populated than the desert I live in.  If I had to take one or the other, guess which one I would choose!

New Mexico is a fine place.  It is proof life follows trinity. 

... Mountaineer

[Pointedstick]

I actually really like the desert. I grew up in the midwest and have not-so-fond memories of practically drowning in summer. The dry air is really useful in a lot of ways. It allows me to air-dry my laundry indoors for the whole year, and it allows me to use a swamp cooler in summer to cool the whole house for maybe 10-20% the running cost of an average air conditioner (and also a similar fraction of  he installed cost of a high-efficiency air conditioner). In the shade, it's really pretty nice outside even when the air temperature is 100. But 90 degrees at 100% humidity and you're practically dying unless you're standing in front of an air conditioner!

Also, the high altitude and lack of clouds most of the time make solar PV almost irresistibly good.

Gardening and growing my own food is a challenge, I admit. But they make for fun projects.

[I Shrugged]

PS, where in the midwest did you grow up?

[Kriegsspiel]

I actually really like the desert. I grew up in the midwest and have not-so-fond memories of practically drowning in summer. The dry air is really useful in a lot of ways. It allows me to air-dry my laundry indoors for the whole year, and it allows me to use a swamp cooler in summer to cool the whole house for maybe 10-20% the running cost of an average air conditioner (and also a similar fraction of  he installed cost of a high-efficiency air conditioner). In the shade, it's really pretty nice outside even when the air temperature is 100. But 90 degrees at 100% humidity and you're practically dying unless you're standing in front of an air conditioner!

Also, the high altitude and lack of clouds most of the time make solar PV almost irresistibly good.

Gardening and growing my own food is a challenge, I admit. But they make for fun projects.

I lived in Boulder, CO for a couple of years in my relative youth.  Probably my favorite climate of the 5 places I've lived.  Not desert, but definitely semi-arid.  Low humidity was a big plus.

* Summers were very pleasant.  Even when it was 90, you didn't sweat.  And it would cool off at night to the mid 50's, so you didn't really need A/C very much at all.

* Though it snowed alot, it wouldn't stay on the ground very long (dry air!).

You know, I really like deserts too. I thought Afghanistan had a great climate, and from what I understand, it is pretty similar to CO. I thought the area north of Santa Fe towards Taos looked almost exactly like Afghanistan. But without the disagreeable people. I really liked it. I'm also a midwestern guy.