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Page added on April 29, 2011

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Days of Abundant Resources and Falling Prices Are Over Forever

GMO April

Until about 1800, our species had no safety
margin and lived, like other animals, up to the
limit of the food supply, ebbing and fl owing in population.

From about 1800 on the use of hydrocarbons
allowed for an explosion in energy use, in food
supply, and, through the creation of surpluses, a
dramatic increase in wealth and scientific progress.

Since 1800, the population has surged from 800
million to 7 billion, on its way to an estimated 8 billion, at minimum.

The rise in population, the ten-fold increase in
wealth in developed countries, and the current
explosive growth in developing countries have
eaten rapidly into our finite resources of
hydrocarbons and metals, fertilizer, available land, and water.

Now, despite a massive increase in fertilizer
use, the growth in crop yields per acre has
declined from 3.5% in the 1960s to 1.2% today.
There is little productive new land to bring on
and, as people get richer, they eat more
grain-intensive meat. Because the population
continues to grow at over 1%, there is little safety margin.

The problems of compounding growth in the face of
finite resources are not easily understood by
optimistic, short-term-oriented, and relatively
innumerate humans (especially the political variety).

The fact is that no compound growth is
sustainable. If we maintain our desperate focus
on growth, we will run out of everything and
crash. We must substitute qualitative growth for quantitative growth.

But Mrs. Market is helping, and right now she is
sending us the Mother of all price signals. The
prices of all important commodities except oil
declined for 100 years until 2002, by an average
of 70%. From 2002 until now, this entire decline
was erased by a bigger price surge than occurred during World War II.

Statistically, most commodities are now so far
away from their former downward trend that it
makes it very probable that the old trend has
changed ­ that there is in fact a Paradigm Shift
­ perhaps the most important economic event since the Industrial Revolution.

Climate change is associated with weather
instability, but the last year was exceptionally
bad. Near term it will surely get less bad.

Excellent long-term investment opportunities in
resources and resource efficiency are compromised
by the high chance of an improvement in weather
next year and by the possibility that China may stumble.

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.

We all need to develop serious resource plans,
particularly energy policies. There is little time to waste.



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