Chris does a brilliant job of highlighting that the debt induced fiat monetary system which has driven our economic progress over the last 50-years is likely to fail in the future. In fact it was really nothing more than a sophisticated ponzi scheme which can only continue on the basis of perpetual compounded growth and a continued acquisition of real physical energy resources. The virtual economic economy is tied to the physical world -- this perpetual growth cannot continue forever as we are seeing with the massive de-leveraging across all asset classes in the current 2008 - 2010 recession.
Chapter 1 - Three Beliefs -
"The first is that the next twenty years are going to be completely unlike the last twenty years. Why is this important? Because we tend to base our view of the future on our most recent experience. That’s just part of being a human. It is also a gigantic liability at key turning points. So I say that massive change is already upon us. When I first gave this material as a talk three years ago, I used to say, "Massive change is coming." Well, it’s here now, and the belief I hold is that it’s really just getting underway, and I’ll show you why I believe that. Next I believe that its possible – possible – that the pace and/or scope of change could overwhelm the ability of our key social and support institutions to adapt."
Chapter 2 - The Three "E"s -
Chapter 2 - The Three "E"s -
"Massive change is upon us. To understand the nature of this change, we need to understand the three “E”s – the Economy, Energy, and the Environment"
Chapter 3 - Exponential Growth -
"Once an exponential function “turns the corner,” even though the percentage rate of growth might remain constant and possibly quite low, the amounts do not. They pile up faster and faster. Oil consumption, the US money supply, world population, worldwide water use, species extinction, and other critical areas all follow an exponential curve in their growth, and all have turned or will soon turn that critical corner."
Chapter 4 - Compounding is the Problem -
"If something is increasing over time on a percentage basis, it is growing exponentially. With exponential functions, the action really only heats up in the last few moments. There is simply not a lot of maneuvering room once you hop on the vertical portion of a compound graph."
Chapter 5 - Growth vs. Prosperity -
"For the past few hundred years we have been lulled into linking the two concepts, because there was always sufficient surplus energy that we could have both growth AND prosperity. But what’s going to happen when 100% of our surplus money or energy is being used to simply grow? And what happens if there’s not enough surplus to even fund growth alone?"
Chapter 6 - What is Money -
"Money should possess three characteristics. The first is that it should be a store of value. Historically, gold and silver filled this role perfectly because they were rare, took a lot of human energy to mine, and did not corrode or rust. By contrast, the US dollar pretty much constantly loses value over time"
Chapter 7 - Money Creation -
"John Kenneth Galbraith once famously said, “The process by which money is created is so simple that the mind is repelled.” We’re about to discuss that very thing. Money creation is a bizarre thing to ponder. It is actually a very simple process, but it’s really difficult to accept. Money is loaned into existence. Conversely, when loans are paid back, money ‘disappears.’"
Chapter 8 - The Fed - Money Creation -
"All dollars are backed by debt. There are two kinds of money out there. At the local bank level, all new money is loaned into existence. At the Federal Reserve level, money is simply manufactured out of thin air and then exchanged for interest-paying government debt. And perpetual expansion is a requirement of modern banking."
Chapter 9 - A Brief History of US Money -
"The purpose of this section is to show you that the US government has radically shifted the rules during times of emergency and that our monetary system is really a lot younger than you might think."
Chapter 10 - Inflation -
"Most of us think of inflation as rising prices, but that’s not quite right. Inflation is not caused by rising prices. Rising prices are a symptom of inflation. Inflation is caused by the presence of too much money in relation to goods and services. What we experience is things going up in price, but in fact, inflation is really the value of your money going down, simply because there’s too much of it around. Inflation is, everywhere and always, a monetary phenomenon."
Chapter 11- How much is a Trillion? -
"A trillion is a very, very big number, and I think it would be worth spending a couple of minutes trying to get our arms around the concept. Make no mistake, we should not be lulled into complacency simply because it is too big to really get our minds around. Keep this lesson in mind as we discuss the total accumulated debts and liabilities of the US, which are many tens of trillions of dollars."
Chapter 12 - Debt -
"For you and me, there are only two ways to settle a debt: 1) Pay it off or 2) default on it. If you have a printing press like the government does, a third option exists: 3) Printing money to pay for the debt. So what is debt, really? Debt represents future consumption taken today. Our entire economic system, and by extension our way of life, is founded on debt, and debt is founded on the assumption that the future will always be bigger than the past. Therefore it is utterly vital that we examine this assumption closely, because if this assumption is false, so are a lot of other critical things that we may be taking for granted."
Chapter 13 - A National Failure to Save -
"A personal failure to save has been reflected by a state and local failure to save, which are mirrored by a corporate failure to save, all dwarfed by a failure to save at the federal government level. And capping it all off is a profound failure to invest. All of these deficits lie before us and lead me to conclude that the next twenty years are going to be completely unlike the last twenty years."
Chapter 14 - Assets & Demographics -
"Our nation has a historic, never-before-seen level of debt and a historic failure to save. Along with debt and savings, one also has to consider assets. After all, does it really matter if you have no savings and a million dollars of debt, if you have assets worth 10 million?"
Chapter 15 - Bubbles -
"Bubbles used to happen once every generation or so, because it took time to forget the pain from the damage. Today we are facing the bursting of a second major asset bubble, housing, spaced less than ten years from the bursting of the dot-com bubble. This is simply astounding and thoroughly unprecedented. It is the largest bubble in all of history and will probably be the most destructive. And it is happening right now."
Chapter 16 - Fuzzy Numbers -
"Our economic recession, and possibly depression, can be partially explained by the extent to which we have chosen to provide ourselves with misleading economic data. Certainly if you share my concerns over stocks, bonds, and 401K holdings, or are a serious investor of any sort, you owe it to yourself to listen to this explanation of how wrong our measures of inflation and GDP really are."
Chapter 17a - Peak Oil -
"Peak Oil is simply a fact. Peak Oil is NOT synonymous with “running out of oil.” But the most urgent issue before us does not lie with identifying the precise moment of Peak Oil. What we need to be most concerned with is the day that world petroleum demand outstrips available supply. It is at that moment that the oil markets will change forever - and probably quite suddenly."
Chapter 17b - Energy Budgeting -
"With sufficient surplus energy, humans can construct remarkably complex creations in short order. Social complexity relies on surplus energy. Societies that unwillingly lose complexity are notoriously unpleasant places to live. Given this, shouldn’t we pay close attention to how much surplus energy we’ve got and where it comes from?"
Chapter 17c - Energy and the Economy -
"In theory, there’s nothing problematic with living in a world full of exponential growth and depletion curves – as long as the world does not have any boundaries. However, exponential functions take on enormous importance when they approach a physical boundary, as seems to be the case for oil in the very near future. Both discoveries and production indicate that we could be at oil’s exponential boundary already. What will happen to our exponential, debt-based money system? Is it even possible for it to function in a world without constant growth? These are important questions, and they deserve answers."
Chapter 18 - Environmental Data -
"Our money system requires continual economic growth, but energy depletion will run headlong into dwindling resource returns to limit future growth options. Overpopulation will increase competition and demand for fossil fuel energy sources such as crude oil and coal, as well as for natural gas and sources of alternative energy."
Chapter 19 - Future Shock -
"Money, credit, growth. Exponential growth. Debt, future, history. Failure to save. Assets, housing, bubble, financial panic. Demographics, wealth, boomers, falling values. Fuzzy numbers. Energy, oil, growth. Peak Oil. Environment, resources, exploitation, change."