To support this growth and to feed all of those people, genetically engineered crops were developed to increase crop yields, oil and gas production has extended into expensive offshore areas and marginal oil sand operations, fish and tree farms were built to compensate for declining fish populations and deforestation, desalination plants have been built in some areas to supply enough clean water. Add higher rents, vastly more expensive medical care to the list too. All of these things, and many more, make life more expensive. Meanwhile incomes are stagnate or down--certainly for the bottom 90%.
Fundamentally we have an affordability problem affecting most workers in this country and it is why consumer spending, and therefore the economy as a whole, is stagnating. Ironically, peak (un-affordable) oil means "too low" of oil prices--- not too high. Amazing, huh?
And low oil prices = lower energy supply = falling economic activity = even lower energy prices.
Many other factors limit growth. In China, in just 10 years, air quality concerns have reached such critical levels that they can no longer use as much coal, which had fueled their astounding rise. Even clean water is becoming more limited (costly) in China. Their debt levels have also reached levels associated with financial crises in other countries. Now even China is trying to dial-back debt spending and trying not to kill people with smog. Ironically now, we're seeing prices for most commodities dropping in price that are too low for producers. Higher environmental, production, debt and other costs are hurting every country now.
The world, humanity, is reaching the limits of growth -- which may cause adverse debt dynamics (defaults at every level) and a sudden collapse.
We've reached the finite limits to growth when the marginal cost of commodities that support growth, like oil, rise so high that consumers can't afford it. That happened in 2008 with $145 oil which triggered a recession and financial crisis. The easy stuff has already been exploited. Now, even $60 oil might cause the same adverse result since healthcare, food, rent prices have rapidly escalated in the past 8 years thanks to ongoing "emergency" measures that have continued 8 yrs past the "crisis." The same thing has happened to nearly every other commodity after 2009 with China's huge debt-fueled growth program.
Also we've reached limits of growth when additional debt, on top of our existing debt burden, no longer helps the economy grow. I covered this in my blog post "We're Reaching The End of The Road."
The beginning of the end became somewhat apparent in the 1970s with the abandonment of the Bretton Woods accord (linking the dollar to gold). The resulting drop in the US dollar led to the Arab oil embargo in 1974, energy costs rose from being very cheap to relatively expensive putting a huge drag on Western growth. In order to maintain previous growth and employment levels, increased debt was used by both governments and individuals to offset higher energy costs. This continues to this day. Higher budget and trade deficits caused by expensive oil imports led to much of our wealth transferred to the oil producers (who turned around and bought US treasury bonds to keep the "scheme" going -- known as "petrodollar recycling.")
In recent years, additional trade deficits with Japan, then China has led to further "leakages" of US domestic wealth. Trump is entirely correct that persistent trade deficits have sucked the life (and jobs) out of our country. The result has been that worker's wages in our country have stagnated or declined as jobs are eliminated -- all of which has stagnated the economy. It's why Globalization had to end at some point and Trump is leading that charge.
In addition to increasing debt, consider the easy money created by the Federal Reserve since the 1970s. They have caused increasing financial instability, have inflated rents, housing and nearly every other costs/asset class (the result of no sound money linked to gold). The Fed is responsible for rising income inequality by disproportionally helping the wealthy -- the ones who own stocks, bonds and inflation hedges. Easy money has caused spectacular crashes/financial crises too in recent decades (year 2000 and 2008)-- each time followed by even lower economic growth. All this is hurting the non-elite working class the most-- those that still have a job. Stagnating incomes is causing our increasing economic malaise. This describes our downward spiral that we find ourselves.
To further "work around" our limits to growth, governments have reduced interest rates to near-zero or below zero. With ultra-low interest rates, retirees can't afford to retire, pension funds fail and insurance companies are hurt. A 3rd stock market and bond market bubble in 17 years has emerged -- really an "everything" bubble. Now rates are rising. Similar to oil prices, too low interest rates hurt some parts of the economy, but higher interest rates hurt a different portion of the economy (the consumer). Like oil prices, it seems we need two different interest rates. One interest rate doesn't work.
Energy production will eventually fall at current prices of $45 to $50 per barrel which are still historically expensive. The price is too low for producers in many nations and oil exporting countries who rely on oil/gas tax revenue to support it's population (like the Middle East countries). Declining production could easily cause an oil price spike that triggers a recession. Then, a recession would in turn trigger a new oil price collapse. We live in a time of potentially dramatic oscillations in energy prices and economic instability. And any massive spending or economic "stimulus" program would likely be snuffed-out by a huge oil price spike if it were truly effective-- which it won't be. Just ask the Japanese who have seen nothing but economic stagnation after 20 years of "stimulus" and zero interest rates. It's a no-win situation.
The problem is that all the debt taken out to support the progress and growth to date becomes even more onerous, even disastrous when the economy stagnates or when it shrinks, say in a recession. Deflation is especially problematic for debt burdens. (That's why Central Banks all over the world are desperate to create inflation.) And, as I've mentioned, a recession could be triggered by a spike in oil prices. Or it could be triggered by a financial crisis in commodity-producing countries (any of the emerging market countries), in China or the EU.
Recovery from the next recession will be very difficult as sovereign debt will be rising dramatically at the same time debt defaults increase. Even governments will reach limits of "rescue" of bad debts and/or banks. Furthermore demographic trends in the world have just turned down and will be a drag on the world economy for decades.
About the only scenario that could reverse the current trend toward collapse is steady ultra-cheap energy (say $10 oil) or a breakthrough in abundant and cheap Thorium or fusion power reactors. But government involvement in any such nuclear energy development will guarantee that it won't be cheap. While the US has very cheap natural gas energy at $3, it's the entire world that needs very cheap energy to grow out of our debts. And expensive alternatives like large-scale Solar and Wind are not the answer. We need cheaper, not more expensive energy. Like I said, it's a no-win situation. We're reaching the end of the road due mainly to the debt.
Perhaps you can pray for a miracle?
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