Over the last few weeks, I’ve been talking a lot about cycles that seem to chart the course of human life. It’s a pretty counterintuitive idea until you realize that EVERYTHING in the Universe lives according to a certain rhythm.
But, what happens when the inputs that fuel the rhythm fail?
Well, the rhythm – or cycle – dies. And, it’s replaced by a new one.
But, what if the owners of the old cycle go to war against the new cycle?
Lots and lots of people die. In fact, whole civilizations have died because the old cycle was too successful, which meant that they killed off the new one.
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When Cycles Die
Look closely at the words in the phrase ‘Business Cycle’. You’ve heard of it before, and it seems like a fairly innocuous term.
Business and Cycle? What’s wrong with putting the word business together with the word cycle?
Well, nothing, except the word business represents an entity that needs something to sell that has been manufactured somewhere, unless we’re talking about an agricultural product. And, you can’t have much in the way of manufacturing if 90% of the population are farmers.
Life In 1790
That was the situation in the US, in 1790. Out of a population of 3,929,214 people, only 392,921.4 (10%) were available for anything other than farming. And, when you subtract the politicians, policemen, postal workers, transportation workers, school teachers and sanitation engineers…
…is there anyone left to do manufacturing?
Of course not, or at least… not very many.
There was no business cycle in 1790. What ruled the day was an agricultural cycle that was fueled by the weather.
So, when did the ‘business cycle’ begin?
The Birth Of The Business Cycle
Well, the first known use of the phrase ‘business cycle’ was in 1919, and that’s a very interesting moment to start using such a term.
Why do I say that?
Well, 1919 was almost 50 years since the beginning of the industrial revolution. And, it was a long enough time for smart people to realize that there was a pattern to the ups and downs of the sale of manufactured goods.
But, wait, I said that the fuel for the ‘agricultural cycle’ was the weather. So…
What was the fuel for the business cycle?
Coal and oil.
The Buggy Whip Cycle
Now, before we dive into that, let me ask you another question.
What fueled the success of the buggy whip industry?
As long as there was a relatively easy supply of horses and a demand for them, there was going to be a demand for buggy whips. And, there would have undoubtedly been a certain rhythm to the ups and downs of buggy whip sales.
Maybe we could have had an economist develop an idea called the ‘buggy whip cycle’?
But, something killed the ‘buggy whip cycle’, and that something was the car.
Why do we have cars?
Coal and oil.
Coal And Oil Fuel The Business Cycle
So, coal and oil are the fuel – quite literally – of the business cycle. Without it, we go back to being farmers and the ‘agricultural cycle’.
Are you ready to be a farmer?
My wife is, but I’ve fought her off until now. But, I won’t be able to for much longer if things keep going the way that they are.
Papering Over Peak Oil
You see, in 2005, just as predicted, we reached the peak in conventional oil production, world wide.
How did we respond?
Cheap loans to companies doing fracking.
This has worked for a while, but we just had a MASSIVE downgrade to the estimates of how much ‘frackable’ oil there is in the ground.
Did you notice that two thirds of shale oil in the United States just went ‘poof’?
The ‘Shale Oil Boom’ in the US just went bust, because the Monterey Shale reserves in California have been down-graded by a whopping 96%.
Fracking Is A Failure
Here’s another problem that you are probably not aware of. For every dollar of oil these frackers get out of the ground, they spend $1.50. And, this can only get worse as these fracking companies use up the easiest-to-get-to oil deposits. Furthermore, these ‘frackers’ exist only because of the availability of cheap loans.
When those loans are no longer cheap, what do you think is going to happen?
When The Fracking Boom Goes Bust
Well, the fracking oil boom will die. Worse, since fracking has been masking the decline in oil production around the world, the collapse of fracking will send a tsunami of asset destruction throughout the US and the world economy. Companies everywhere will collapse.
The price of oil is the single most important input to the cost of doing business. The second most important input is the price of coal. (Thank God that coal hasn’t reached its peak in production… yet.)
What happens to a company when the cost of transportation is too high to ship their goods?
What happens when the price of gas is so high that people have to choose between paying the mortgage and putting gas in their tank to go to work?
What happens when the price of wheat is too low for a farmer to put fuel in his tractor?
What happens to an airline when the price of airfare is too low to buy fuel for their jets?
Prices go up, mortgages fail, and companies go out of business.
Industrial Society Collapses
Basically we are talking about the collapse of our industrial society, unless we can find an alternative to our current sources of energy. And, we might do that eventually, but we have a problem. By artificially propping up the oil industry, we have delayed the process of discovery for those alternate sources of energy.
And, to add a bit of a shiver to our discussion, the 2014 BP Statistical Review just came out a few days ago, and it essentially indicates that the only thing keeping oil production positive was US fracking.
Are you starting to feel that we have just run out of time?
Yeah. Me too.
Collapsing It The Roman Way
There’s a rather awful website that created an interesting picture of what happens when you prop something up that should fail:
This guy blames Christianity for the problem, but he’s completely wrong. The problem comes from how the Roman Empire collapsed. I won’t go into all the reasons for it, but suffice it to say that Rome propped up her empire with fake money, cheap loans, an aggressive military and didn’t allow her system to ‘reset’.
Too many powerful people had too much to lose by a change in the system, so they held on too long. And, that killed… everything.
The result was a thousand years of darkness.
This Means World War III
And, we are… doing it again.
When our petroleum-fueled economy begins to collapse, what is going to happen to the business cycle?
The business cycle will begin to die, and the world will go to war.
Are you ready for this?
(That’s a link. Do more than just think about it.)
Please Educate Yourself About Peak Oil
Here’s the article that inspired all of the above (h/t: Steve Quayle):
This really is a life and death issue, and you owe it to yourself to understand it:
There are a ton of resources out there, so there are lots of opportunities to learn. And then, share what you know. As God said to Ezekiel (Ezekiel 3:16-21), about those who see danger without giving warning, the deaths of those who die will be held against you.
If you find a flaw in my reasoning, have a question, or wish to add your own viewpoint, leave a comment on the website. Your input is truly welcome.
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