As we’ve been discussing of late here at PeakProsperity.com, humans desperately need a new story to live by. The old one is increasingly dysfunctional and rather obviously headed for either a quite dismal or possibly disastrous future. One of the chief impediments to recognizing the dysfunction of the old story and adopting a new one is the most powerful of all human emotional states: Denial.
I used to think that Desire was the most powerful human emotion because people are prone to risking everything in their lives – careers, marriages, relationships with their family and close friends – pursuing lust or accumulating 10,000 times more money and possessions than they need in their desire for “more.”
Perhaps it was my own blind spot(s) that prevented me from really appreciating just how powerful human denial really is. But here we are, 40 years after the Club of Rome and 7 years after the Great Financial Accident of 2008, collectively pretending that neither was a sign warning of the dangers we face — as a global society — if we continue our unsustainable policies and practices that assume perpetual growth.
In the realm of economics, the level of collective denial gripping the earth’s power centers is extraordinary. Perhaps that should be of little surprise, as we’re now at the height of the largest set of nested financial bubbles ever blown in world history.
The bigger the bubble(s) the bigger the levels of denial required to sustain their expansion. These bubbles are doozies, and that explains the massive and ongoing efforts to prevent any sort of reality from creeping into the national and global dialog.
To understand this pattern of avoidance of unpleasant realities, consider the behavior of cities — even entire nations — which cannot bring themselves to talk openly about their state of insolvency, let alone do something about it.
Chicago has amassed debt and underfunded liabilities totaling $63 billion, or more than $61,000 per household. Illinois already ‘enjoys’ the second highest property tax rate in the nation at 2.28 percent of a property’s value, which means the average property tax bill for the median home is $5,200 per year. On top of that, Illinois’ income tax is a flat 5% and brings in a total of $18 billion from 4.7 million households, or $3,800 per household. Combined, that’s $9,000 in taxes per year per average household (which earns $38,625).
Here’s the brutal math: the current city deficit is 675% of current tax receipts. How exactly does Chicago plan to scrape another $61,000 out of each household on top of the existing tax bills?
It doesn’t. It has no plan. The plan is to simply remain in denial and ignore everything until it all breaks down. Which it has indeed started to do, with the ever-late, after-the-horse-has-already-left-the-barn downgrade of the city’s debt to junk status by Moodys.
Or perhaps we could note that of the six mayoral candidates seeking election to run the city of Philadelphia, not one has even talked about its massive $5.7 billion pension shortfall during the campaign, even as they promise expanded pre-kindergarten programs and tax cuts. Not one. Do you think that any of them has an actual plan to address that budget gap’s dream-crushing burden?
They don’t. The only ‘plan’ they have is to remain in denial and ignore everything until it all breaks down. And then, we might guess, blame the prior administrations.
Japan has the most debt per person of any nation in the world, standing at nearly $100,000 per resident. And that burden is growing every year. Yet in 2005, Japan passed an important milestone as its population peaked at 128 million. It’s been declining ever since. Japan lost 244,000 net residents in 2013, and is now trundling on a downwards population trajectory for the next 50-60 years. And at the same time, it is growing older — Japan has the second highest median age in the world.
Clearly that demographic profile is a recipe for economic shrinkage, not growth. And yet the Japanese central bankers and politicians are hell-bent on creating rapid economic growth via the twin cattle prods of reckless money printing and excessive government borrowing. How is it that the leaders of Japan have convinced themselves that rapid economic growth is what they need (instead of the more rational and opposite case of managed economic shrinkage)? What’s their plan, exactly?
They have no plan. The plan is to simply remain in denial and ignore everything until it all breaks down.
The same story is written everywhere, with every example sharing the same common element of presumed perpetual growth. Everybody plans on growing steadily, forever into the future, amen.
The United States is no different. It’s own entitlement shortfalls, pegged at anywhere from $60 trillion to $220 trillion, are themselves still derived with the assumption of future growth.
Here’s the ‘plan’ for the US according to the CBO:
Yes, the ‘plan’ is for the US to someday have an economy equal to the entire current world GDP as it stands here in 2015. Does that make any sense to anybody at all? Who thinks that’s a realistic plan?
By 2080 when this is supposed to take place, the entire world will be past the peak of all known sources of energy. And Phosphate. And soil. And fresh water. And oceanic fish biomass. And who knows what else. And yet the CBO blithely assumes that US, all on its own, will be producing and consuming 100% of what the entire world does today.
The above chart helps us visualize one of the largest and most potentially destructive forms of denial on display. Our collective denial of limits. It’s also good to remember that all of the entitlement shortfalls are ‘only’ as bad as they because of the assumption of uninterrupted US economic growth. Should economic growth fall short of that spectacular run that will take the US to a worldly level of consumption and production, then the entitlement programs will prove to be just that much more underfunded.
Sadly, it’s on the natural fronts that human denial seems to be at its most extreme. Hollywood visions and SciFi fantasies aside (where humans live in sealed capsules and subsist entirely on man-made foods), humans are 100% utterly dependent on the natural world for their survival. Food, water, oxygen, and predictable temperatures and rainfall patterns provide the basics of life.
To focus on just one part, which I also detail in The Crash Course book, humans are rapidly degrading our soils upon which everything depends.
Not only are we obviously losing topsoil to erosion and generally turning soil into lifeless dirt by stripping out its biological diversity, we are mining these soils for their micro and macro nutrients yet have no coordinated plan for replacing them.
Obviously if you take minerals like calcium and magnesium out of the soils in the form of harvested grains and vegetables, they’ll need to be replaced. Right now they are mainly flushed out to sea, never to be economically recovered.
The situation is pretty grim as I recently outlined in a recent report on our nation’s poor soil management practices. Here’s some more context for that view:
Britain has only 100 harvests left in its farm soil as scientists warn of growing ‘agricultural crisis’
Oct 20, 2014
Intense over-farming means there are only 100 harvests left in the soil of the UK’s countryside, a study has found.
With a growing population and the declining standard of British farmland, scientists warned thatwe are on course for an “agricultural crisis” unless dramatic action is taken.
Despite the traditional perception that there is a green and pleasant land outside the grey, barren landscape of our cities, researchers from the University of Sheffield found that on average urban plots of soil were richer in nutrients than many farms.
“With a growing population to feed, and the nutrients in our soil in sharp decline, we may soon see an agricultural crisis,” Professor Dunnett said.
“Meanwhile we are also seeing a sharp decrease in bio-diversity in the UK which has a disastrous knock-on effect on our wildlife Lack of pollinators means reduction in food.
Scientists in the UK are being matched by scientists elsewhere, noting that humanity’s general approach towards soils and farming are obviously destructive and exceptionally unsustainable. It should be setting off alarm bells that urban plots are found to be more nutrient-dense than many farms.
The loss of biodiversity is something that we just cannot yet fully comprehend, as all of nature is an enormously intertwined set of complex relationships. Of course, our failure to understand and appreciate the true role(s) of biodiversity will not protect us from the consequences of destroying it.
Any culture that ruins its soils cannot claim any sort of sophistication at all. That just flunks the basic IQ test. It’s not unlike watching a brilliant piano prodigy starve to death because he can’t manage the details of making his own meals despite a well-stocked kitchen. No matter how beautifully he can play, he simply lacks the necessary skills to sustain himself.
Human security at risk as depletion of soil accelerates, scientists warn
May 7, 2015
Steadily and alarmingly, humans have been depleting Earth’s soil resources faster than the nutrients can be replenished. If this trajectory does not change, soil erosion, combined with the effects of climate change, will present a huge risk to global food security over the next century, warns a review paper authored by some of the top soil scientists in the country.
The paper singles out farming, which accelerates erosion and nutrient removal, as the primary game changer in soil health.
“Ever since humans developed agriculture, we’ve been transforming the planet and throwing the soil’s nutrient cycle out of balance,” said the paper’s lead author, Ronald Amundson, a professor of environmental science, policy and management at the University of California, Berkeley. “Because the changes happen slowly, often taking two to three generations to be noticed, people are not cognizant of the geological transformation taking place.”
Notice the shifting baselines phenomenon happening here. Because the changes have taken place over three generations, our culture is incapable of recognizing the threat, let alone properly responding to it.
Instead of a bucolic pastime, farming has become just another mirror reflecting our destructive ways. Rather than carefully working within natural cycles, the average farming practice seeks to dominate and override nature.
Just spray and you’re done! Easy-peasy. Of course, this has the chance of knocking out your birds and your bees as well as the butterflies and who knows what other essential and beneficial insects as I recently laid out in the report: Suicide By Pesticide.
Pesticides kill the bugs we don’t want and many more besides. Herbicides knock out weeds, but also lots of other life-forms we do need and want kept alive. Fungicides knock out bad funguses and good ones alike.
This lazy approach to farming, although chemically sophisticated, lacks any real connection to the cycles of nature the most obvious one being the strip-mining of the macro and micro nutrients.
There was a reason that the herbivores roamed over the same grounds for hundreds of thousands and even millions of years. That worked to keep everything in balance and led to the creation of the thickest and healthiest soils imaginable when the American West was first plowed not all that long ago (by historical standards).
Horribly bleak study sees ‘empty landscape’ as large herbivores vanish at startling rate
May 4, 2015
They never ateanybody — but now, some of planet Earth’s innocentvegetarians face end times.Large herbivores — elephants, hippos, rhinos and gorillas among them — are vanishing from the globe at a startling rate, with some 60 percent threatened with extinction, a team of scientists reports.
The situation is so dire, according toa new study, that it threatens an “empty landscape” in some ecosystems “across much of the planet Earth.”
The authors were clear: This is a big problem — and it’s a problem with us, not them.
This slaughterand its consequences are not modest, the article said. In fact, the rate of decline is such that “ever-larger swaths of the world will soon lack many of the vital ecological services these animals provide, resulting in enormous ecological and social costs.”
Herbivores, it turns out, don’t just idle about munching on various green things. They play a vital role as “ecosystem engineers,” the paper said — expanding grasslands for plant species, dispersing seeds in manure, and, in the ultimate sacrifice, providing food for predators.
It’s the last paragraph that’s essential to understand.
Nature is so subtle and complex, that we have only recently learned that wolves shape rivers. Or perhaps the Native Americans knew that and it is our ‘modern’ culture that is only re-figuring all this out. I was confused by the thought of wolves shaping rivers the first time I heard it too, but it’s all laid out in this handy 4 minute video:
The loss of large herbivores will re-shape the landscape in ways that we do not yet understand and therefore cannot appreciate. But they are certainly ‘ecosystem engineers’ and the loss of those services, to put it in transactional terms that economists might relate to, will lead to a whole host of as-yet-undefined changes some of which we will regret.
We’re Not At The Tipping Point; We’ve Already Passed It
The roles of eating, digesting and spreading seeds and manure seem like things we can make do without, here at the apex of the petroleum age, but in a few short decades we will understand just how much energy was necessary and how much value was created by the actions of these herbivores.
In Part 2: Life Beyond The Tipping Point we look at the looming net energy crisis is mathematically certain to place increasing limits on the modern way of life, in our lifetime — likely much sooner than we want or are prepared for. In sum, despite the intent of world leaders to blindly deny the economic, ecological and energetic cliffs we are hurdling towards, society has already long past the point where painful ramifications can be avoided. At this stage, destiny will be determined at the individual level, depending on what steps each of takes now, before those ramifications arrive in force.
Click here to read Part 2 of this report(free executive summary, enrollment required for full access)
Images: Flickr (licence attribution)
About the Author
Executive summary: Father of three young children; author; obsessive financial observer; trained as a scientist; experienced in business; has made profound changes in his lifestyle because of what he sees coming.
First of all, I am not an economist. I am trained as a scientist, having completed both a PhD and a post-doctoral program at Duke University, where I specialized in neurotoxicology. I tell you this because my extensive training as a scientist informs and guides how I think. I gather data, I develop hypotheses, and I continually seek to accept or reject my hypotheses based on the evidence at hand. I let the data tell me the story.
It is also important for you to know that I entered the profession of science with the intention of teaching at the college level. I love teaching, and I especially enjoy the challenge of explaining difficult or complicated subjects to people with limited or no background in those subjects. Over the years I’ve gotten pretty good at it.
Once I figured out that most of the (so-called) better colleges place “effective teacher” pretty much near the bottom of their list of characteristics that factor into tenure review, I switched gears, obtained an MBA from Cornell (in Finance), and spent the next ten years working my way through positions in both corporate finance and strategic consulting. From these experiences I gather my comfort with numbers and finance.