Are the bread-heads waking up to reality?

[Paul Mobbs]

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I've seen some interesting corporate newsletters over the last few months, all 
seeming to show that even the most conservative market fundamentalist is 
having problems reconciling the spin with the reality of what's happening in 
the world of resources.

The following is from Jeremy Grantham of GMO Capital 
(http://www.gmo.com/America/ -- a privately held global investment group 
managing $107 billion of corporate and public wealth). Obviously, even if it 
hasn't hit the floor, the penny is dropping!

P.


http://www.gmo.com/websitecontent/JGLetterALL_1Q11.pdf

Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over 
Forever

Jeremy Grantham, Chief Investment Officer, GMO Capital, April 2011

Summary of the Summary

The world is using up its natural resources at an alarming rate, and this has 
caused a permanent shift in their value. We all need to adjust our behavior to 
this new environment. It would help if we did it quickly.


Summary

# Until about 1800, our species had no safety margin and lived, like other 
animals, up to the limit of the food supply, ebbing and flowing in population.

# From about 1800 on the use of hydrocarbons allowed for an explosion in 
energy use, in food supply, and, through the creation of surpluses, a dramatic 
increase in wealth and scientific progress.

# Since 1800, the population has surged from 800 million to 7 billion, on its 
way to an estimated 8 billion, at minimum.

# The rise in population, the ten-fold increase in wealth in developed 
countries, and the current explosive growth in developing countries have eaten 
rapidly into our finite resources of hydrocarbons and metals, fertilizer, 
available land, and water.

# Now, despite a massive increase in fertilizer use, the growth in crop yields 
per acre has declined from 3.5% in the 1960s to 1.2% today. There is little 
productive new land to bring on and, as people get richer, they eat more 
grain-intensive meat. Because the population continues to grow at over 1%, 
there is little safety margin.

# The problems of compounding growth in the face of finite resources are not 
easily understood by optimistic, short-term-oriented, and relatively 
innumerate humans (especially the political variety).

# The fact is that no compound growth is sustainable. If we maintain our 
desperate focus on growth, we will run out of everything and crash. We must 
substitute qualitative growth for quantitative growth.

# But Mrs. Market is helping, and right now she is sending us the Mother of 
all price signals. The prices of all important commodities except oil declined 
for 100 years until 2002, by an average of 70%. From 2002 until now, this 
entire decline was erased by a bigger price surge than occurred during World 
War II.

# Statistically, most commodities are now so far away from their former 
downward trend that it makes it very probable that the old trend has changed – 
that there is in fact a Paradigm Shift – perhaps the most important economic 
event since the Industrial Revolution.

# Climate change is associated with weather instability, but the last year was 
exceptionally bad. Near term it will surely get less bad.

# Excellent long-term investment opportunities in resources and resource 
efficiency are compromised by the high chance of an improvement in weather next 
year and by the possibility that China may stumble.

# From now on, price pressure and shortages of resources will be a permanent 
feature of our lives. This will increasingly slow down the growth rate of the 
developed and developing world and put a severe burden on poor countries.

# We all need to develop serious resource plans, particularly energy policies. 
There is little time to waste.

- -- 

.

"We are not for names, nor men, nor titles of Government,
nor are we for this party nor against the other but we are
for justice and mercy and truth and peace and true freedom,
that these may be exalted in our nation, and that goodness,
righteousness, meekness, temperance, peace and unity with
God, and with one another, that these things may abound."
(Edward Burrough, 1659 - from 'Quaker Faith and Practice')

Paul's book, "Energy Beyond Oil", is out now!
For details see http://www.fraw.org.uk/mei/ebo/

Read my 'essay' weblog, "Ecolonomics", at:
http://www.fraw.org.uk/mei/ecolonomics/

Paul Mobbs, Mobbs' Environmental Investigations
3 Grosvenor Road, Banbury OX16 5HN, England
tel./fax (+44/0)1295 261864
email - mobbsey at gn.apc.org
website - http://www.fraw.org.uk/mei/index.shtml
public key - http://www.fraw.org.uk/mei/mobbsey-2011.asc

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