Prosperity or Growth?

January 9, 2011 • Daily Email Recap

Thanks to Joe Bish for this transcript of the talk by Chris Martenson at the Population Strategy Meeting on October 4, 2010. Along similar lines, you can read a late December letter by a Wall Street analyst who thinks the U.S. dollar is headed for collapse because of high debt levels.

To download the letter by Porter Stansberry, link to: (No endorsement of his stock recommendations is implied).

Also, if you missed the two hour special broadcast by the History Channel on January 6, called “Prophets of Doom,” you can purchase a copy at

Thanks to panelist Nate Hagens for letting me know about this broadcast. Nate’s presentation on the program was along similar lines to the talk below by Chris Martenson, focused on the possible collapse of the U.S. economy because of high debt levels. Other participants focused on population, peak oil, the water crisis, nuclear weapons, and artificial intelligence. History Channel informed me they plan to rerun the program on Saturday, January 29 from 8:00 to 10:00 pm.

Chris Martenson
Population Strategy Meeting
October 4, 2010

Thank you. It’s a real pleasure to be here. What I’m going to do here is, I’m going to give you one of the world’s fastest tours through some ideas. The point here is to raise some ideas, maybe spark some ideas, maybe spark a little bit of conversation and debate.

So, I do 3 things in life. One is, I’m out there proselytizing, if I can use that word, about a set of changes that I see coming and have seen coming for a while. That’s contained in something called “The Crash Course.” I made it freely available to everybody. You can have it as a DVD, but it’s been free online for almost 2 years now. I finished it October 23rd of ’08, right before we had an interesting market correction that drew some attention. The second thing I do is, I help private individuals manage the emotional states of transition from these changes that we see coming. Many people look at the future and become full of anxiety and fear, and I help them work through that. The third thing I do is, I work with companies and individuals who manage wealth and try to think about the future and plan for a very uncertain future.

So, this Crash Course: We don’t know how many views it’s had now. It’s somewhere between a million and a half and 2 million views, and it should have been a complete disaster. It’s awful. It’s charts and data, and it’s about 3-1/2 hours, and it took off like wildfire. What’s really been surprising to us is that it’s got full translations, which take close to 800 hours, on the part of volunteers, to do; and it’s been fully done in Spanish, Hebrew is on the way, German is really far along. It’s been subtitled, which takes less time but is still a significant commitment, in other languages. So, it kind of took off, and that caught us a little bit off guard; but we’ve been riding that particular wave. There’s a book coming out soon. This is being published by Wylie, and it will be out in March of this year.

So, what is “The Crash Course?” It’s the 3 E’s. I talk about the economy. This is the thing I really care about. We live in a very complex economy. All the things we want to do – the things we want to do with respect to technology, policy – all require us to have an intact, functioning economy, so I care deeply about the opportunities we can contain within that economy; but I believe we can’t look at the economy alone anymore. If we try and solve things economically, we squeeze on that part of the balloon, and it pops out. One of the big areas that’s really looming right now is energy, so I connect these 2 E’s together. You can’t talk about the economy without having an eye firmly focused on energy anymore. It’s always true, but now we’ve got a variety of issues coming up around peak oil, around certain other issues where it’s very serious that we start to understand how these two come together.

And, of course, the third E. The environment for me, in many cases, is a story of resources and resource depletion. There is an enormous and very interesting story contained there, as well; but I’m going to skip over that today. If you want to, you can see more of that in “The Crash Course” itself.

This is the one sentence I boil down. This is the whole Crash Course. If you get this, we’re all done, and you can go out and get seconds or something. This is an important statement to me because, as humans, we tend to model what’s about to happen and what has already just recently happened. When there are sharp corners in the road, they can be tricky to navigate; so it’s really critical that we illuminate that path as much as possible, just so that we have a chance of spotting sharp corners, if any happen to be in existence out there.

What I focus on: The title of this is nonlinear growth. Exponential growth is a kind of nonlinear growth that I focus on a lot. It’s really important to get this, as a concept, down. By exponential growth, we’re just talking about a hockey stick chart. We’ve got an amount of something on the left axis, and on the right horizontal axis we’ve got ourselves time, usually. In this particular case, this is a real hockey stick chart of something. It happens to be a chart of population was the green history and the red being UN projections for the next 40 years or so. This hockey stick chart, you know, whether you live on the flat portion or the steep portion, it’s really critical. Of course, math minded people are saying, “Now, hold on, hold on. You’re just – you’re faking us out here on this,” because one of the features of charts like this is, you can make that hockey stick curve anywhere you want based on what you do with that left axis, right? So if I made that 1 billion instead of 12 billion on the left axis, all of a sudden it’s taking that hard curve in 1900, right? Or if I made it a trillion on the left axis, it flattens out again. It doesn’t look like a problem.

The issue comes in if you can actually contain – if you have a sense of the boundaries of – the system you’re in, all of a sudden, whether you’re on the flat portion or the steep portion has enormous implications. They are completely different places to live. This is something I care about deeply. Where do we put that hard boundary for population? Is it there? I’ve seen estimates somewhere in that zone. Do we put it much lower? I’ve seen estimates far lower. Vitally important that we understand where we’re at with that. Oil: Here’s a chart of oil production, and you know, it’s another one of these J sticks, hockey sticks, whatever we call these things. We have a really pretty firm sense now that we’re going to have a maximum rate of production. If it’s not this year or in 5 years, it’s within 10 or 20 years. Those estimates are getting fewer and fewer. Most people are starting to really center down now, and 2015 is what the US Department of Defense thinks; 2012 is what the Department of Energy accidentally released in a chart by a man who’s been reassigned since, no longer available for comment. It’s not 40 years away anymore. It’s really close. Given the enormity of this, it’s something that really deserves our highest attention.

Of course, we can look at hockey sticks across all kinds of things, and there are people in here who are far more familiar with many of these things than I am. The thing that’s driving every single one of these things, of course, is human population. That’s the key driver underneath all of this, but our economy is also driving this behavior, and that’s something I want to talk about today, to sort of weld in that sense of how the economy plays into this story; so I just want to spend a little bit of time on this exponential growth thing, just a little bit more so that we can get it, because it’s really hard to understand. We’re linear. So, here’s an example. If I gave you 2 erasers, and I asked you to put them in your hands, and said, “I’m going to score you based on how well and evenly you can bring these 2 erasers together,” you’d do really well. If I gave you 2 really powerful magnets and said, “I want you bring these together at an even rate, you would do what everybody does (claps hands together). I can give you a hundred chances at it. You would still experience that behavior every time, because your mind understands that there’s exponential stuff going on there; but you can’t wire between your brain and your muscles to figure out how to contain that. It’s just – we’re just not wired that way.

So, here’s an example to hopefully get us closer to what this really means: How do we get it in our gut what is going on with this particular chart? The example I like to use for this is, I’ve got a magic eye dropper, and I’m going to give you a chance to get at this through this understanding of this. This magic eye dropper is magic, because when I put a drop of water out, it doubles every minute. After 1 minute, you’ve got 2 drops of water in your hand. After 3 minutes, you’ve got 4. After 6 minutes, you can just about fill a thimble up. So in 6 minutes, you’ve filled a thimble up. The question is, if I take everybody here, we jet over to Wembley Stadium – and this is my game, so I get to do 2 things. First, I’m going to make it water tight. The second thing I’m going to do is, I’m going to handcuff you to the highest row of bleacher seats. So, here’s the question: We do this, it’s tomorrow at 12 o’clock in the afternoon. I walk down onto the pitch. I put that magic drop of water right in the middle. You can’t even see it. The question is this: How long do you have to escape from your handcuffs? Any guesses? One o’clock. You’re crazy. All right. You have 50 minutes to escape from your handcuffs. Fifty minutes. Alright, so if there are any skeptics out there, maybe I miscalculated the volume of Wembley Stadium by about 100%, so 12:51 for you skeptics.

That’s not the important question. This is the important question: At what time is the stadium still 97% empty space, and how many of you realize the seriousness of your predicament? Five minutes earlier. Five minutes earlier, it’s still 97% empty space. Only 3% of the stadium is full. All of human history, until 1960, to reach 3 billion people, and 40 years for the next 3 billion. That’s the parallel. Of course, if you are in a stadium which has a fixed boundary, whether you’re on the 3% portion of this curve or you’re in the last 5 minutes is highly, highly relevant – deeply important to the overall story.

So, now we look at oil consumption. We see that there’s a very different sort of thing we might have to think through on this, which is, ‘gosh, we had oil shock 1 back here,’ faithfully indicated on this chart. Jimmy Carter gets on TV, puts on his cardigan, and says, “Hey, we have a problem.” We turned away from that, and we had oil shock 2, thirty-five or thirty-six years later, depending on how you count. The mistake would be to think that we’ve got another 35 or 36 years, because we are not on the same portion of this chart. We are not facing 3%. We’re in the last 5 minutes of the oil game. We don’t have – we’re not at the beginning of that one. This is why understanding where you are is really critically important. If we go back to population, and we ask the question, “Well, if we think we can maximally sustain between 8 or 9 and 12 billion,” that’s one answer. This is a very different answer. They have entirely different solution sets. In many cases, we might not even be able to think of them as problems with solutions. They’re more like a predicament, which has an outcome.

So these exponential charts are everywhere. I could pull up dozens, hundreds of them – in the economy, in energy, in the environment. They’re all worth looking at, but the key concept that I really want you to take away from exponential growth is about speeding up. It’s that, when you get into the last 5 minutes, you have surprisingly little time to deal with the aftereffects. Things speed up. This is the primary lens through which I look at the world, and it fits. It feels to me like lots of things are truly really speeding up at this point in time.

So, let’s turn to my favorite subject: The economy. Here’s how economists see the world. Anybody want me to simplify that for them? Okay, I can. There. That’s an actual formula for growth from the Federal Reserve website, simplified. It’s just growth – but it’s not just any growth. It’s exponential growth. We don’t need a few billion dollars of growth every year in our economy. We need 3%. Anytime you’re growing something by a percentage, you’re growing it exponentially. So we’ve committed ourselves to an entire paradigm, an entire school of thought, an entire ideology. All of our institutions, our financial systems, are tuned for a type of growth called exponential growth. That’s just the system we live in. I’m not here to cast aspersions on it or give pros or cons or sing its praises; I’m just here saying that, by understanding it, we get some insights into how the future might unfold. It all begins here. This is a conversation that surprisingly often escapes otherwise very, very excellent conversations. It’s around, ‘what is the source of this growth? Why do we have to have economic growth?’

It begins with money. I don’t care what your money looks like. I don’t care what color it is. I don’t care what anti-counterfeiting measures you have, who’s on the cover. None of it matters. All money in the world today, if you want to be part of the international community, you subject yourself to IMF and World Bank rules in terms of how your money is constructed; and here’s the only rule: Your money has to be loaned into existence. It’s a feature of our system, but when you loan money into existence, we know something about loans, right? They have a principal component, and they have the interest component. Interest is expressed in percentage. Any time you have anything that’s growing by percentage, it’s growing exponentially. Now, this is a concept I fully developed in “The Crash Course,” spend maybe 20 minutes on it. In the interest of time I’m going to skip past it and ask you to just sort of accept this statement, although it’s a bizarre one. It’s utterly true. That statement there comes off the Federal Reserve website. It’s not my own creation.

So, we think about money. Here’s a graph of US money supply from – I guess it starts in ’59 and comes through to about 2008. For people who are into science, like I am – once upon a time, I was a scientist – what you do if you want to find out something about a system where you have a chart is, you fit curves to it. If you have a really super fit, really good – a curve can fit anywhere from zero, meaning it’s got no relationship, your math is off and your system is being driven elsewise, all the way up to 1. So what do we do? We go ahead and we fit a curve to this thing, and we find out that the relationship is 0.98. Our money system has a 0.98 relationship, or explanatory power if you will, a coefficient of determination, to an exponential fit. That’s how close it is. Now, as a past scientist, once you got to a 0.7 number, I’d be like, “Ah, that’s really – this is really exciting.” By 0.8, I’m going “Wow, I’m really excited.” By 0.9, I’m starting to wonder if fraud is involved. By 0.98, I mean, good grief! This is amazing! We have an exponential money system. There are the data.

But it’s actually debt that drives our world. So, these are Federal Reserve data, and this is debt. This is total credit market debt. Again, we do the same trick, and we put a nice fit onto this thing, and what do we see? Ooh: 0.99. Debt has been growing at almost perfect exponential rate for the past 4 decades. So what does that mean? What are the implications of that? I want to draw your attention to this little tiny piece up here. Starting in 2008, we had this little thing called a financial crisis. It started right at the exact same time that debt growth could no longer keep up with its idealized exponential fit. All of the trouble we’ve been experiencing, all the crises, are contained in the mystery of the gap between those 2 pieces, if you choose to look at it in the way I’ve just described it.

So, we can look at the chart in another way. How long did it take for debt to double? From 1970 to ’77, credit market debt doubled. It increased by a factor of 100%. It took 28 quarters. Then it doubled again in 26 quarters. Doubled again in 26 quarters. It doubled again in 41 quarters, and then in 36 most recently. So in the past 4 decades, debt in America has doubled 5 times. Has our economy gone up by a factor of that many? No, not even close. Not even remotely close. We have been – everything that we know about how the economy works has been predicated upon a period of time when we’ve been growing debt far faster than income, because that’s what GDP really is. It’s your income. So, what are the implications of that? Well, to me, it’s just an unsustainable trend. The definition of something unsustainable is, it will someday stop. That’s the period I believe we’re in. We’re in this period now that’s very uncomfortable economically. We don’t quite know what’s going on. The Federal Reserve is dumping money – I’m picking on the Federal Reserve. Central banks all over the world are dumping money in to try and reignite this particular dynamic right here, without really looking at these other 2 E’s, the energy E or the environment E, because all they know is this one; and they know we need to keep all of our debts doubling.

But for debt to double this next decade, in accordance with the growth of the past 4 decades, it would need to grow from 52 trillion to 104 trillion, in the United States alone. We need to be growing our debts a little over 5 trillion a year. We’re not even remotely on target for that; so that, I think, has some explanatory power for the issue we see in the financial world; but it goes well beyond that. This is a chart that shows total energy use. It stretches way back to the early 1800s. We’re looking at everything on here. This is wood, oil, coal, hydro – everything you can think of is all stacked up in this one chart, and again, we’re looking at – this was fairly linear growth for this little period. That wasn’t, and this sure wasn’t. It’s that last growth phase there. That’s where we double and redoubled and continually re-redoubled our debt loads, under that growth paradigm of energy. This is across everything.

So the question I have, when I look into the future this way, is to say, “Is there anything in this story of energy growth…” because of course you can’t have an economy without energy. If you want your economy to grow, you’ve got to use energy. The correlation between economic growth and energy growth is really tight and very well proven across economies all over the world. So, the question is, if we want to continue these doublings of debt, is there anything in this story that might cause us to frown at that as a concept, as something we would want to count on, rely upon, as we go forward? And to me, the whole mystery is contained in this chart right here. These are really old data. We’re looking here at discovery of oil by decade. It peaked in 1964 at just close to five hundred gigabarrels that year. Well, here’s one of the axioms in the oil business: You can’t pump it until you’ve found it. We haven’t been finding it at anything close to the rates we found going back 50 years now, coming on. So this is just raw data. It is what it is, but it is my supposition that if we can’t pump it until we’ve found it, and oil has been declining, we have to start very soon getting our minds around the idea that oil will begin an inexorable decline at some point.

Interesting fact: The United States’ discovery of oil peaked in 1930. Our physical peak in the US was in 1970, exactly 40 years. Put 40 years on top of 1964, and you get to 2004. That’s right around when conventional oil peaked, give or take a year. It’s just, maybe, one of those interesting coincidences. We’re still growing all our liquids, but man, we’re struggling for it. The Deep Water Horizon was drilling in 18,000 total feet of water and sediment to chase after a find that, if you could pull it all out of the ocean floor all at once, would have supplied 12 hours of global consumption – maybe 24.

Well, so here we have the fundamental conflict. We have this money system. Because it’s exponential, it really must grow. It’s happiest when it’s growing. When I say “must,” it’s not written into law. There’s no convention out there that says this has to be true, but by its design, it really must grow in order to be happy. Against that, the most important energy source of them all, oil, maybe can’t grow. In fact, maybe it’s even going to start shrinking. Do we have a plan B for replacing all the quadrillions of BTUs of energy that are supplied by oil? More importantly, are they liquid fuels? There’s a huge story there, a huge story. So, what I really think is that our money system, then, is just poorly designed. (audience laughs) Alright, no children were harmed in the making of that Photoshop. No groans, okay? It’s Photoshop! So, the question is, “What are the implications? People here from California understand some of the implications of what happens when your debt system sort of runs out of steam: Budget cuts. You know, these are deeply painful, and we have, oft times, states, communities, municipalities, nations that have more experience growing than cutting; and so we don’t always have the muscle memory we need to make good, informed decisions. We’ve never been down this path before, in some cases, for certain individuals; so that’s one implication. The other is that we have to get ready for all kinds of market turbulence, something that I’ve been talking about for years. It feels like it’s fully upon us at this point in time.

What I see, when I look forward into this future – I’ve got a little, tiny future out there – I look at the economy, energy, the environment, and there’s an enormous story around all 3 of these that talks about in the economy, we have an overhang of debt. That’s true. We also have entitlement programs that are wildly underfunded at this point in time. That’s true. We also have a failure to invest in our national infrastructure. Engineers give the US infrastructure for water, sewer, roads, all of that, bridges, you name it, a “D.” We’ll need a couple trillion to fix that up. And so on and so forth. So, just looking into the one “E,” into the economy, I can see a future that says, “Wow! We’ve got some huge costs here. We’ve got some really big things we’re going to have to do, all other things being equal.” But what if energy is not equal in this story? What if we have to reinvest trillions of dollars, as has been suggested, to get our energy infrastructure tuned away from liquid fuels from petroleum and onto something else? Yes, we’ve heard all the stories. There’s tons of natural gas, but there are no natural gas filling stations that you can drive up to today; so we’ll have to build all those out, which means we’ll need all the pipelines to supply them, which means we’re going to need all the cars to be reconfigured. This is all doable, but are we doing that, is what I care about. I hear about what we can do, but the question is, what are we doing?

I see trillions and trillions of dollars that are going to be required to get our energy infrastructure, particularly our transportation infrastructure, into shape; and then there’s a whole story around the environment as well, a whole story I haven’t told you about how we can peer through our global windshield and look at depletion of certain key elements that we know about. Maybe not immediately, but 5, 10, 15, 20 years? Yeah, you betcha. There are certain key elements out there, particularly metals, that are depleting. Maybe we’ll find substitutions, and we’ll do other things. I’m not saying that the economy stops working; I’m just saying that it doesn’t work like it used to; and that’s why the next 20 years don’t look like the past 20 years. It’s just different. But, if we don’t give ourselves the time to mentally adjust and to start physically adjusting to this new reality, then my proposition is, we’re going to have a much harder go of it than we would if we gave ourselves the luxury of time as we go forward in this story.

So the implicit assumption then – implicit and explicit, I suppose, if you cornered somebody – of debt markets that are growing like that is that the future is going to be larger than the present, economically. That’s the story that’s contained in that chart. By larger, I mean more people being sold more things, requiring more energy. Maybe not a lot more: 3%, 2%. It’ll sound tame. It might even sound wise and sophisticated, but it’s an assumption that I’m no longer willing to make, and if that assumption is correct that I’m making, which is that the future cannot grow in the future like it has in the past, it means we’re going to have to re-price and revalue stocks, bonds. All kinds of things take on an entirely new meaning. What is the correct price/earnings ratio for a stock market, in total, which no longer has growth baked into it? It’s a smaller number than the one that’s currently on there, right? So, this is not a story against growth. This is not a story I’m telling that we must do these things or bad things will happen. I’m saying that this is a story that’s just sort of inevitable. It’s baked in that the kind of growth to which we’ve become accustomed, upon which we’re relying, which we’re really hoping will continue, has some legitimate difficulties right now that you can look at just on the basis of data. It’s not – this is just the data.

This is the story that I think we’re going to have to start figuring out. There’s sort of a balance now. Once upon a time, we were able to have both. “Growth or prosperity?” We said “Yes,” and you could have both. But in a world where you have constrained resources, you can either direct your resources to growth or you can direct them toward prosperity. That, to me, is the fundamental framing of the story of population. It’s not an issue of control. It’s not an issue of, ‘do we want to force people to behave in certain ways.’ It’s a question of this: Are you on the side of prosperity or growth? What would you rather have? Would you rather have more people with fewer things, or fewer people with more things? Where do we fall in that story? Because to me, that’s that framing, as I come through this – and I clearly fall on the side of prosperity, because my belief is that if we grow for the sake of growth, where we end up is, in the future, we lose control of that story. We lose our prosperity. Going into a situation of enforced prosperity loss is not where I want to be. It’s not where I want my kids to grow up. I would choose prosperity over growth.

We need to reframe the whole story, because forever, for a long time, it’s been, “Yes, we’ll have both.” I’ve heard many catches of this come out in the conversation so far today from our friends from Australia and from other presentations that developers want this growth, because this is the story they know. If we can reframe it and say, “By pursuing that, what you ultimately do is, you get a little bit of that growth for a little while, and that’s great; but you’re going to lose your prosperity eventually. What would we like to do here?” It’s just a story that we need to start reshaping and telling ourselves differently.

So thank you for that. That’s all I have to say. I think I came in under budget. 1:414 – 27:17 — 47:33

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