– Dmitry Orlov]
In light of recent events such as the Arab Spring and Occupy Wall Street I thought it would be pertinent to review Hubbert’s Third Prophecy about the cultural crisis he expected. He wrote about it in the article entitled “Exponential Growth as a Transient Phenomenon in Human History”. In case you are not familiar with Hubbert’s first two prophecies, he predicted both the US and world oil peak very accurately.
In 1956 Hubbert predicted the US oil peak would be sometime between 1969 and 1971. For this he was ridiculed and laughed off the face of the earth (almost). Turned out the US oil peak was in 1970. This is something the drill-baby-drill, it’s all the environmentalists’ fault, ditto heads don’t know anything about.
Next in 1974 Hubbert predicted the world oil peak to happen about 1998. However he DID say that if OPEC were to restrict the supply, then the peak would be delayed by 10-15 years which would put it at 2008-2013, or exactly right. Here is what Hubbert’s prediction (to scale by MBPD) looks like overlayed onto a reasonably close estimate of the actual global oil peak which started in 2005 and has continued as a plateau up to now.
OK, now is anyone willing to make a bet that Hubbert’s THIRD prophecy is wrong? Didn’t think so. Here it is:
Hubbert said, “The third curve (on the left) is simply the mathematical curve for exponential growth. No physical quantity can follow this curve for more than a brief period of time. However, a sum of money, being of a nonphysical nature and growing according to the rules of compound interest at a fixed interest rate, can follow that curve indefinitely…Our principle constraints are cultural…we have evolved a culture so heavily dependent upon the continuance of exponential growth for its stability that it is incapable of reckoning with problems of non-growth…it behooves us…to begin a serious examination of the…cultural adjustments necessary…before unmanageable crises arise…”
Ok, anyone see any cultural crisis happening? Yeah, what about a worldwide uprising of the 99% against the 1%? What does this have to do with Hubbert’s Third Prophecy? EVERYTHING!
Here is a graph of total US debt in all sectors up to end of 2009:
Here is same curve overlayed with same time scale on global oil peak:
Looks kinda like Hubbert’s graph above doesn’t it? That’s because it is. Debt can continue to increase indefinitely, while oil can’t. And since our entire money system is based on debt with interest attached there is no way to escape it. All money is debt because we have allowed banks and the fed to create all our money through interest-bearing loans by using the fractional reserve system. The details are unimportant, the main point is that our money supply is created by interest-bearing loans of banks and the fed. Therefore, the economy must always grow in order to pay back the interest. When the economy can’t grow anymore…collapse.
Here is what has happened to US debt over the last several years:
2008 US Debt:GDP ratio = 350%
2009 4Q US Debt:GDP ratio = 425%
2011: US Debt:GDP ratio = 475%?
Debt has continued to grow because we don’t have a real economy anymore, we have a fictitious funny-money phantom economy of mostly financial speculation. Here is what happened in 2008:
As we all know, we had a stock market crash, a housing crash, an oil price spike and crash, and an employment crash. Because we don’t have a real economy any more we have papered over these problems by creating more debt. The taxpayers bailed out the criminal fraudsters on Wall St., taking on more government debt, and the fed bailed out many bankrupt banks internationally ($12 Trillion), indenturing the taxpayers for future debt.
Since debt represents ultimately a claim on real assets, debt cannot continue forever if growth of the real resource based economy has stopped. This is Hubbert’s Third Prophecy: When economic growth cannot continue due to the lack of affordable oil, then we will have a cultural crisis. Well here we are folks. The solution of the powers that be? Create more funny money through the fed’s “quantitative easing program”. The solution of the Keynesian economists? Take on more government debt through interest bearing loans by selling Treasury bonds to the fed, China, and other parties (stimulus). The solution of the right-wing “deficit hawks”? Cut government (social) spending to the bone to “cut the deficit” which they created through monstrous military spending, and tax cuts to themselves. Guess what. None of these are going to work. The solution is structural in the monetary system itself. When all money is debt, there is always interest to pay and growth is required.
Hubbert didn’t mention one other notable feature of a debt-money system. It systematically pumps wealth from the bottom 80% of the population in wealth to the top 20%. The bottom 80% pay interest while the top 20% collects it, and of course most of the interest is collected by the top 10%. When all money is debt, that’s a lot of money going to the top. The Occupy Wall Street people aren’t stupid. They know the game is rigged.
A solution is some form of Public Credit Money. That means that money is issued without interest:
- 100% reserve requirements (abolish bank money)
- Abolish Federal Reserve notes (end private central banking)
- Issue Treasury Notes INTEREST-FREE (Greenbacks)
- Issue state or local currency (warrants, bills of credit, zero interest bonds)
- . Social Credit (CH Douglas)
- Kucinich NEED Act
Each of these topics could have a separate article, but I will summarize briefly.
Debt-based money is incompatible with the post oil-peak world. It’s only a matter of time before it collapses in default.
For further reading see:
Web of Debt, Ellen Brown
Gary Flomenhoft is currently a Fellow at the Gund Institute. The article was first presented at a “Gund Tea” on Oct 28th, 2011.
He received a BS in Mechanical Engineering from Tufts University in 1977, and a Master in Public Policy from the University of Maryland in 2001, with a certificate in Ecological Economics. Gary has a diverse background of practical experience ranging from environmental technology and Green politics, to aerospace and systems engineering.
Gary was a founding member of the Green Party of California, co-founder of the US Green Party Organizing Committee, and in 1990 and 1992 served as Policy Director and spokesperson for the first Green Party congressional campaigns in the US in Santa Barbara, California. He is co-founder and Vice-President of the non-profit Geonomy Society which is concerned with democratic rights to land and resource rents. From 1992-1996 Gary managed two small electric vehicle companies, and ran his own EV conversion and online parts company from 1996 to 2000. From 2000-2001 he worked as a Program Assistant for economic development at the US Dept. of Housing and Urban Development.
Gary’s current interests in Ecological Economics focus on three areas: renewable energy, international sustainable development, and green taxes and common assets. He teaches 4 energy courses at UVM, including a renewable energy workshop in Dominica, and co-teaches a sustainable development course in St. Lucia. His policy work focusses on implementation of green taxes and common assets in Vermont, ie: payment for the use of “the commons” with dividends paid to all of us.