The Three Great Crises Of Our Time

The world is at an interesting precipice, where three great crises threaten our way of life, our standard of living, and our very existence.

Let’s take a look at them in turn:

1. Peak Oil
2. Climate Change
3. Greater Depression

As we have discussed before, Peak Oil is the peak in oil production (and oil consumption). Since our society is based on increasing growth, and growth is facilitated by increasing energy consumption and transportation, this means that Peak Oil has impacts on our standard of life and our economy.

Tied to Peak OIl is Climate Change. Climate Change is the consistent influx of pollutants into the Earth’s ecosystem. Almost all of these pollutants are a direct cause of humanity’s use of fossil fuels. Not just the first order effects of carbon dioxide production and acid rain, but second and tertiary order effects as well. Fossil fuels have allowed humanity to live “high on the horse”, since we are spending down the Earth’s inheritance without any thought (or hope) of finding a way to replenish it. Thus, fossil fuels have allowed the population to explode and the landscape to be subjugated for society’s benefit. Climate change is the natural reaction to fundamental changes in the ecosystem. These changes will almost certainly not be benevolent to humanity and decreasing food production, increased volatility in the weather, and rising sea levels seem a certainty.

Lastly, we have the Greater Depression. The Greater Depression is somewhat tied to Peak OIl and Climate Change, as the increase in productiveness has allowed be to be perfectly unproductive (i.e. the financial community) and any constraint on a normal system would bring the entire system of endless debt growth down. I would contend that the effect of Peak OIl and Climate Change on causing the Greater Depression is limited though. High oil prices did not kill the economy, high indebtedness levels due to reckless monetary and fiscal policies, unsustainable trade deficits due to structural deficiencies in the global markets, and complete lack of regulation and foresight are the main causes, in my opinion. The Greater Depression will not be solved quickly or easily. The problem is that the causes of the Greater Depression are systemic, and no steps to rectifying these fundamental problems are being undertaken. It is certain that the unemployment rate around the world will get higher, wages in the developed countries will be depressed, and the value of houses will continue to go down for some time.

How should humanity as a whole respond to these crises? The answer to that depends on your priorities. In my opinion, the problem to tackle first is Peak Oil. Peak Oil is now in the past. We will never be able to take more oil out of the ground on a daily basis than was done in the summer of 2008. This isn’t such a problem now, since the global economy has tanked, but it will become one as soon as the economy picks up again. And unlike the manmade crisis that is the Greater Depression, Peak Oil is a physical crisis. To “solve” this problem, society as a whole needs to radically reorganize and quickly. Economists and fools like to say that the markets and market participants will change behavior to react to increased prices, but given how fundamental oil is to our very lives, it is unlikely that the needed changes can be implemented in time if we wait until AFTER the event. Thus, we need to act now to make the changes needed, LIke any other problem, the transition will be painful, but a successful adjustment will be very worthwhile.

As Peak Oil is reached, it is a virtual certainty that Climate Change will accelerate. The main reason is due to the fact that all of the major powers, USA, China, and Russia, have major coal resources. The USA and China will attempt to fill in the oil shortfall with increased coal use. Coal is the dirtiest of the fossil fuels and increased use is guaranteed to accelerate Climate Change. The impacts of Climate Change have the potential to be extremely devastating. Food shortages, flooding, increased hurricanes, and more are all possible. Normally, Climate Change would be the most important issue in our lifetimes, unfortunately, Peak Oil is more fundamental, directly linked, and happening sooner. Although, it is uncertain how much sooner. New research has indicated that Climate Change can proceed extremely rapidly, in 8 to 10 years. If this is true, it would be due to effects that are never experienced until a certain threshold level. An example of this is a rubber band. To a person that has never seen a rubber band break, they assume that the band will always go back to normal or near-normal. However, if you stress the band too much, it breaks and no goes back to the original shape. The earth has something called methane hydrates. It is literally natural gas frozen in water. There is decent science that shows that if the temperature of the ocean rose enough, the methane hydrates would melt, releasing the methane. This doesn’t sound bad, until you realize that there is possibly 10 times as much methane in the methane hydrates compared to all the drilled methane and that methane is 20 times worse as a greenhouse gas compared to carbon dioxide. In other words, this is an example of an irreversible event. If it happened, the climate would change extremely rapidly and we would never get it back. Th only solution to something like that is prevention.

Lastly, there is the Greater Depression. We have talked a lot about the causes of the financial crisis and the solutions. The short and sweet summary is: nationalize the banks, enforce the Rule of Law, accept the pain of decreased prosperity, rebuild the manufacturing in those nations with are net importers and give raises to the workers in those places that are net exporters. Anything short of this will mean that the Greater Depression will last much longer than it needs to and have a much more negative effect.

What can you do as an individual? I will discuss that next time.