"It is strangely absurd to suppose that a million of human beings, collected together, are not under the same moral laws which bind each of them separately." ~ Thomas Jefferson
"Crash Course" Caveats
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Recently an "Editor's Pick" here recommended a no-charge Flash presentation by Chris Martenson about the next 20 years, appropriately called The Crash Course. I endorse that; it's outstanding. I've seen many presentations, but never one more professionally delivered. Further, its 2 ' hour total viewing time is split into 21 short parts, so as to make it easy to absorb over a few days if need be. It is articulate, authoritative, and concise; a delight to watch, and highly topical in the present dire situation. I particularly enjoyed his segments on "Bubbles" and on "Fuzzy Numbers." In the latter, he details how the Feds deliberately mis-report some of their key statistics so as to look better and pay out less. Given that most of the Course was made prior to this September's unraveling, it may be considered prophetic.
As with anything else, though, it's a good idea to keep one's critical faculty alive and well; and as I see it, not everything is correctly stated. Its sections about the government's shell-game for creating money are pretty sound and expressed with even greater clarity than the master himself, Murray Rothbard--though the superb presentation tools available today were not around in the master's time. So it's very well worth taking the time to watch. Even on money, however, I saw a flaw, and write this to ensure the weaknesses aren't unobserved.
Dr. Martenson's theme is threefold; he examines Economy, Energy, and Environment. After explaining what compounding and exponential growth mean, he shows that each of the three happen to have reached a highly critical phase right now, and are developing adversely in an exponential manner--fast running out of control. The facts that they are all doing so now together, and are closely interrelated, make the solutions especially challenging; he avers that "massive change is upon us" and "the next 20 years will be completely different from the last 20 years." Since he shares some of the premises we hold on Strike The Root, including an endorsement of the Austrian economic school, it behooves us to give him at least the time of day.
Please watch his presentation yourself, but in a summary much too brief his argument is:
1. On the economy, a debt-based money system is fast running amok at the very time that world population is doubling every four decades with a universal demand for equally rapid growth in prosperity. Such prosperity can result only from savings, yet our savings rate has plummeted in the last 25 years and our debt (personal as well as governmental) already exceeds our ability to support it with income. The current financial fiasco is a mere harbinger of far worse to come.
2. About energy, of which half is oil-derived, the world has already passed the "peak" of availability. There is plenty left, but from now on it will become much more expensive to extract, not just in money terms but in energy terms; that is, the trend is to use more energy to extract new energy, and when as much as one unit is needed to extract one unit, game over: no more energy. Some non-oil sources are nowhere close to that condition and never will be, but those sources (wind, solar, etc.) are so ill-developed that decades of development are needed before they can replace oil, and we don't have decades available.
3. Regarding the environment, he rightly passes by the alleged "global warming" problem as irrelevant, compared to what he calls the very acute and immediate problem of fast-diminishing resources of critical metals, minerals and even food.
Put those three together, as he says they are right now, and you have a sense of why his "Crash Course" deserves our attention.
My antennae twitched early in my first view of the Course, to suggest that Dr. Martenson might be some kind of Malthusian--for right there in the second segment he portrays the dramatic growth in human population as some kind of a problem, not as an object of wonder and celebration. Having watched it all twice now, I'm fairly sure he is one. But that is not a sound reason to dismiss his findings; the mere fact that every prophet of doom from Jeremiah to Al Gore has so far been dead wrong does not mean that Martenson is wrong. If they are to be dismissed, that should happen because his reasoning is wrong, not because we may find his conclusions unwelcome. And since he is a very, very bright person who presents his findings brilliantly, that is no trivial task.
This article begins an assessment, and I hope and expect others will join in to offer something more profound.
Before considering each of Dr. Martenson's "Three Es", I'll pick a nit, because it has later implications: he frequently describes the shape of an exponential curve as a "hockey stick"'i.e., one with a sharp elbow or inflection at some point. That is simply misleading. The slope of a graph of y=nx increases at a constant rate, with no inflection points, and if plotted on a logarithmic scale such a graph appears perfectly linear for that reason. Okay, on to the first E.
One conclusion offered in the Course is that hyperinflation is inevitable, with a consequent dissolution of the economy, because each year at least enough new money must be created to pay the interest on past outstanding debts, of which a large part was incurred by previous acts of money creation. I questioned this, and Dr. Martenson was kind enough to reply and remind me that he was speaking only of the US method, using the Federal Reserve Bank which charges interest for its service.
I can see his point. If the creation of a hundred billion new "dollars" annually requires the future payment of $4 billion in interest, then next year it will need $104 billion, a year later $108.16, then $112.5 billion, and so on until the money system explodes in hyperinflation. I notice that hasn't happened yet, despite 95 years of the Federal Reserve--but it may; he is right.
However, we have to be very careful with the logic here. First, whatever mechanism is used to create new money cannot be free of all cost. The Federal Reserve charges interest, usually about 4% a year; if some wholly-owned central bank did the job, it too would require funding and everything we know about government efficiency says it would not be cheap. More than 4% or less, who can tell--but it would not be zero.
Next, I know of no reason (except government profligacy, repeatedly spending more than it receives) why any new "money" has to be created at all. It is perfectly possible for the economy to operate on the present M3 supply (about $12 trillion) forever, with neither increase nor decrease. For two centuries after America was colonized, a fixed money supply was close to what did prevail, for government was constrained by a gold standard--and the economy did very well. The fact that no government anywhere has withstood the temptation to monetize its debts since the 20th Century began is an indictment of all governments everywhere--but not of the particular ways they do the monetizing. All a government has to do, to avoid inflation, is to match taxes with spending, the latter to include payment of interest and principal on any loans previously incurred for any reason.
Third, two of the most spectacular examples of hyperinflation have been the German one of 1923 and the Zimbabwean one of the present time. Neither of those governments used a debt-based money system (each operated a central bank directly) and the German one stopped the runaway cold by powering off the printing press, just as soon as it got up its nerve. Mr Mugabe's nerve has not yet arisen, as the nearby illustration shows.
The Course segments on the economy do contain some excellent material. There's a fine account of why the "Social Security" system is neither social nor secure, and of how in the last quarter century the US savings rate, on which all future investment depends, has plunged close to zero. The progress of prices over the last 200 years is very well described, although the clear inflection in their growth curve, after the FedGov got its quasi-central bank, proves that their overall change has not been an exponential growth as stated. But Dr. Martenson's main claim here, that the use of an interest-charging Fed makes hyperinflation mathematically inevitable, is not correct in my opinion, for the reasons above. The US economy may collapse, but if so the Federal Reserve will not be the prime culprit; government will. Clearly a zero-government society could not have inflation, for if any bank issued false, unbacked "certificates," it would be out of business by week's end--yet that possibility, alas, earns no mention in the Crash Course.
The "Economy" section of the Course also considers demographics--the exponentially growing world population. However, I saw no rationale advanced to prove that the doubling of the last four decades will be repeated in the next four, let alone the four after that. Against this expectation that it will go on increasing at a little over 1% a year, there is the observation that when a society has become prosperous--when members have some choice about how they will dispose of income surplus to what is required for survival--people choose to have fewer kids. In some (e.g. Russia ) the growth is actually negative--each couple has fewer than two children. Currently a majority of the world's population continues at the subsistence level that has prevailed for 50,000 years--and in which every child is seen as a source of future security--but that is changing fast. As free-market ideas proliferate and governments retreat, that tendency to have two each or fewer will also spread, and the world's population will likely stabilize--but no such consideration appears in the Crash Course.
Even if it does not stabilize, however, it seems to me a classic Malthusian error to deny (even by implication) that (a) human life is immensely valuable by any measure or belief system except those of government and that (b) the more people, the more ingenuity can be expected, to produce good things to eat and drink. No, we are not about to overcrowd this little planet and exhaust its ability to feed us; the reverend doomster was wrong.
In some ways this is the most powerful and worrying part of the Crash Course, because the reserve of oil in the Earth's crust really doesn't care what humans do, with or without governments. Martenson's Peak Oil rationale, first enunciated by M. King Hubbert in 1956, is well established. The Crash Course doesn't discuss how its supply might be prolonged by higher prices that also stimulate production of energy from alternative sources, which I regret; but it is probably true that some time soon, oil will become too expensive in terms of energy required for extraction for more to be produced. All the more reason to hurry to alternative sources of energy; and all the more reason for government to get out of the way--yet that urgent need does not surface in the Course, not even when the obvious first step of "drill, drill, drill" off the coast is subject to political debate. That item alone cries out for private ownership of oceans, such as would prevail when governments have evaporated, but that too is a concept never mentioned.
Additionally, the understanding of energy that Huber & Wells present in their remarkable Bottomless Well, which was written at least two years before the Crash Course appeared, receives no consideration. Those authors argue that "the cost of energy as we use it has less and less to do with the cost of fuel" and predict a bright, limitless future in which the "competitive advantage in manufacturing is now swinging decisively back toward the U.S." because we are uniquely able to order our use of energy through hi-tech. Huber & Wells also reason that humanity is destined to use more and more energy in our pursuit of prosperity and that if one source runs dry, we will rapidly find another. This has indeed been our history; it's hard to see why it should not also be our future. This omission in the Course illustrates what I think is its main and Malthusian failing: Martenson foresees the rapid multiplication of problems, often correctly, but seems to assume that man and his ingenuity in solving them will not progress. That may be true if we are governed; it is absolutely false if we are free. Yet, again, Dr. Martenson makes no mention of what difference would be made to his outlook if the archaic institution of government were abolished altogether.
The Crash Course site incorporates Forums (why not join and contribute?) and some writers there are challenging the doom-laden view about the future of energy. "Majormoney", for example, points out (for "17a") the abundance of energy sources other than oil, and that many of them are not exhaustible, or subject to any kind of "Peak X"--solar, geothermal, wind, tide, etc. Yes, there is urgent need to exploit them, but the steadily rising price of oil will furnish the incentive; the main possible obstacle is government and its regulations, so once again the urgent need is to see it deep-sixed. But of that, Martenson makes no mention.
Not just oil, but other resources too are reaching a "peak" in which the future cost of extraction (copper, coal, even uranium) will be much higher than in the past and in every case the energy needed to do so (not just the money) will rise exponentially; that's the theme of this segment of the Course. Worst of all, food itself is approaching a peak, Martenson says, because after generations of ever-intensifying farming to feed an exponentially-increasing world population, the soil has been depleted; and again, more energy is needed to grow and harvest food. All this, at a moment when population seems poised to add another 150 million mouths a year whose owners all expect and demand that ample food and the wonders of affluent living will fast become theirs. This is not a pretty picture.
Is this true? It's worth a pause to reflect. Obviously, it may be true that some important resources are running out; I do not know, for example, how much copper remains in the Earth's crust and if miners (who have both the incentive and the skills to figure it out) say that it's becoming exhausted, then so it may be. But the energy argument (i.e., that the energy needed for extraction is itself running short) is false, as above; there may be a short-term rise in cost but as soon as inexhaustible energy sources come on-line, that part of the problem will end.
As to resource R1 being literally and fully used up, replacement R2 will be discovered and exploited to take its place, pretty darn quick--for the profit motive will kick in fast, provided only that government keeps out of the way. One example, regarding copper: a generation ago there were no water pipes or telephones without copper, but today there are plastic pipes that are much cheaper and wireless telephones that are cheap enough for most every teenager to carry. Once again, the inexhaustible resource that matters most is that of human ingenuity; and the more humans, the more ingenuity.
The argument about soil depletion seems a worry--but it was also a worry until the late Middle Ages, when crop rotation was invented. Before that happy day, doomsayers may well have been predicting the kind of starvation scenario now envisaged in the Crash Course; but necessity was the mother of invention, and she is still fertile. What the particular solution will be, I don't know--but last time I took a flight, I saw that an enormous part of this land was covered with forest, and it doesn't seem unlikely to me that in coming decades some of that renewable resource will be harvested for fuel and some of the land released, for growing food for the first time ever. The speed with which that happens will relate directly to the degree to which the land owner is free to turn on a dime and respond to whatever price indications are given him by a free market. The same, or similar, is true the world over; soil for food production is abundant worldwide and the main obstacles are governments that prevent its profitable use. Zimbabwe comes to mind in this connection too; one generation ago, as Southern Rhodesia it was producing enough food and to spare, as the second most prosperous nation in Africa . Then farm ownership was prohibited to the only people who knew how to farm . . . so now a loaf costs two billion of the units that, a few years ago, would exchange one for one with the US dollar.
The three acute problems identified in the Crash Course are real and challenging, but all three are significantly overstated as above; so, therefore, is the resulting "perfect storm" that they will combine to produce. Meanwhile, a fourth acute problem is that we have allowed all others to be addressed not by risk-taking innovators with a personal stake in the outcome, but by politicians with enormous power but no such personal stake at all, who have led this country and the world into one major disaster after another. The "market", which served early Americans so well even when restricted, has very largely been supplanted by a non-market, political apparatus called "government." That critical, fourth problem towers above the others in importance, yet receives no explicit mention at all.
The final, eagerly anticipated 22nd segment (numbered 20) appeared while I was writing this review, under the title "What Should I Do?" and some measure of the importance of the "Crash Course" is that it was watched more than 50,000 times in the first 24 hours. I anticipated it might suggest battening down the hatches, or else taking political action; I doubted that it would propose working to remove that great, fourth obstacle so that the other three have some hope of being solved, and unfortunately I was right. No such advice is offered.
In fact, Dr. Martenson gives his very fine version of the first--to batten down the hatches. It suggests what action individuals can and should take to protect ourselves from the hard times to come, having systematically analyzed our own assessments of risks and impacts, and is very well worth watching. He is right; self-preservation must be the first priority. Earlier in the Course, he hints that we may have to live much more simply; and that he is "living proof" that a lower standard of life need not mean a lower quality of life, something Thoreau might applaud. Some here may endorse that; I for one do not. I have not yet given up on the expectation of continuing vast (and perhaps exponential!) growth in prosperity, health and happiness for all of mankind, not by a long shot; the only serious obstacle is government itself, and the means to remove that is already in place.
So it's really too bad that he did not bring it all together and conclude that all the dangers that face us were either created or exacerbated by government and that therefore government has to go. Had he done so, I'd have suggested he join TOLFA so as to help that job get done--by an exponentially growing number of individuals acting without any collective organization at all, with close to zero cost, and inside the very 20-year period he says will be so different from all before.