The end of the world

As we know it, that is. And I'm not talking about May 21. Jeremy Grantham is an investment manager, and this is his quarterly newsletter for investors. (His firm, GMO, does not stand for Genetically Modified Organism but rather Grantham-Mayer-Van Otterloo, in case you care.)

The overall perspective and purpose of Grantham's analysis may not be exactly what readers of this blog are looking for -- he's advising you about investing in commodities and, longer term, resources and resource efficiency. But whatever his motivation and values, he's paying attention to what is actually going on in the world instead of the sideshows that seem to have the undivided attention of our political class and the "journalists" who take dictation from them.

Basically, we're running out of the stuff -- principally petroleum but a lot of metals and fertilizer as well -- that fueled the human population explosion starting in about 1800 and created the anthropocene geological age. As Grantham explains, "The fact is that no compound growth is sustainable." He asks us to imagine the ancient Egyptians, "whose gods, pharaohs, language and general culture lasted for well over 3,000 years." Suppose they started with one cubic meter of possessions, and experienced just 4.5% annual growth. Three thousand years later they would have 10^57 cubic meters of physical possessions, more than the volume of a billion solar systems. Even much lower exponents result in impossibilities.

Grantham sees the price of commodities having no place to go but up, long term, although he expects a short term correction a buying opportunity. But there is no escaping it -- within a few years, just the coming decade, we are going to enter a new world. "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."

That's a rather dry way of putting it. Malthus appeared to be mistaken only because the age of fossil fuels intervened to briefly eliminate all restraints. That's over folks. It's over. It's time to realize we are being hanged, and focus the mind.