I gave a little talk at a financial conference (Casey Research) that included the following very simple economic scenario:
- Oil prices are going up (inexorably). China + Peak Oil + Financial diversification. Oil doesn’t stop going up until GDP goes down. It’s an inexorable force until then.
- The US middle class is broken. A hollow husk unable to withstand the slightest gust. Regardless, it’s the ultimate source of demand for the global economy. It’s an immovable barrier.
- When oil hits ~$150 a barrel the impact occurs between inexorable force and immovable barrier. The combo of higher prices at the pump and for everything else (food and other essentials) starts to crush middle class budgets and force defaults. The economy shrinks until the price of oil goes down enough to be affordable again (for those still left in the middle class).
We keep repeat the pattern above until we’re in the second depression (D2). Long term low demand.
Phi Beta Iota: This is precisely why the BRICS (now including South Africa) and a new coalition, perhaps led by Cuba and Venezuela since Chile is refusing to lead, should focus on the immediate challenge of creating infinite free renewable energy–the foundation for global non-zero advances. Such a strategy would be inherently ethical, legal, citizen-centered, and non-violent as well as non-intrusive on any conceivable concept of sovereignty or indigenous privilege.