Money Supply in an Energy Scarce World, Peak Oil

Richard Douthwaite explains how and why the energy supply and peak oil determine what happens with the economy, unemployment, recession and depression. Douthwaite presented this exclusive talk to Local Future’s 2011 conference: The International Conference on the Sustainability: Energy, Economy, Environment. The conference was organized and directed by Aaron Wissner, president and founder of Local Future, a 501(c)(3) tax-exempt non-profit educational organization.

Notes from the talk:

* Gold was primarily an energy currency because more energy meant more gold, and cheaper energy made cheaper gold.
* Gold standard broke down when the Spanish raided America and then Spain started to import everything, and lost their interest in making things themselves.
* The curse of oil — too sudden an influx of money.
* If you have a source of energy under your control, then you have the power to decide what is done.
* Importing energy is like a loss of sovereignity.
* How many minutes of work does it take to buy a certain food, such as a 3-pound chicken.
* Two measures of complexity: 1. numbers of artificts in common use; 2. number of recognised job descriptions.
* Complexity also can be seen by the number of different goods available in grocery stores, etc.
* The amount of energy to find and produce oil is getting closer and closer to the energy return (EROI).
* How much energy do we need to run a rather complex society?
* Energy Internal Rate of Return — How quickly the energy is available back after the start of the investing.
* Doubts that carbon dioxide sequestration via underground pumping will ever be viable.
* The price of energy has fallen over the centuries, and has been on a plateau.
* Energy is incredibly cheap, 15 cents per KWH.
* A liter of petrol has almost 9 kWH of energy, or 3 weeks of manual work.
* Non-energy commodities are also rising in price.
* US Crude Oil spending as a percent of US GDP
* Importing causes money to leave that country; but then what happens to the money?
* They could not spend all of the money back fast enough; want to invest this money in own economy as much as possible.
* Soverign wealth fund — didn’t spend but lent or invest money, but not spending…
* MONEY HAS TO CIRCULATE.
* If money is lent back into the country, then this lent money must be used for spending, or it will slow the income.
* This was the money lent for the sub-prime mortgages.
* The producers are getting a scarcity rent.
* Balanace of payment deficits at the height of the boom.
* The Euro zone countries can not devalue.
* Overall ratio debt to national income in advanced economies has risen to as much as 150% of GDP.
* They rushed to borrow, to buy, and this accelerated the bubble.
* Debt saturation phase transition… quantitative easing… did not impact economy, only proped up banks
* In all major economies, the financial services sector has been taking an increased proportion of everything produced in economy.
* Is the growth in the financial services sector making such countries uncompetative?
* If the green shoots of recovery appear, than the demand for energy will increase, and so will the prices of energy.
* We will never get a growth economy again.
* Remember that one man’s debt is another man’s asset.
* Is the whole structure going to come crashing down?
* Is there going to be a catastrophic economic collapse? Hagens, Foss
* Energy use and GDP move together.
* We can’t look any longer for growth to solve our problems.
* The weakest borrowers could no longer service their loans, so borrowing collapsed, and with it, the money supply.
* The governments need to act as borrowers of last resort, or the money supply will contract.
* Non-performing loans went up
* If no one is willing to borrow, how will this situation be resolved?

* We need a non-debt money
* Fed should avoid banks altogether, giving money to governments and individuals
* The value of money is created by its users.
* We need a new money system
* We could use local money to bridge a gap
* Community currencies could be all electronic; cell phone to cell phone
* For more information, read the book, Fleeing Vesuvius