During May to September 2007 I had plenty of time for reflection and observation. In September 2007 I expressed concern to my family that we could be headed for something nasty and that it could be the big one. Like an idiot I prepared our house for sale when I should have just taken whatever I could get. By January 2008 when I put it on the market it was too late and I didn’t read it.
In September 2007 I said we had a 50:50 chance that this could be the big one coming – the one that would change things forever. By January 2008 I had upgraded that to a 75% chance. I am still sticking with that, but the odds may be slightly higher.
By the big one, I mean when the world hits the wall, when scarcity of natural resources governs, not scarcity of money. Growth will no longer be the status quo. It is physically impossible for this to be the case. That means decline is inevitable. It doesn’t mean the end of the world but it does mean a whole new paradigm, particularly in what one invests in.
If the attached graph is correct and there is to be an oil slide of 2.9% pa that will probably translate to a decline in GDP of about 1.5% pa. Scary stuff if you are hoping to return to business as usual. Australia is particularly vulnerable because of where it currently competes to buy oil. Nearly all of those countries are already in decline (cf Vietnam, Indonesia). The projected deficit in what we want and what we can get is 55% by 2025.
The way I see it, the recession could be long enough that it takes us into the next oil shortage which in turn will precipitate a tumbling oil price through catastrophic collapse of demand. A bumpy ride is ahead for sure. No conventional wisdom is going to cope with this. We may even see a change in government breakup. The dichotomy now is supposedly to share the scarce resource of monetary wealth. What if it breaks into how to share the scarce resource of the environment?