We live in an exponential age. Our pension funds presume 7% compounding returns. Our central banks target 2% compounding inflation (emphasis on target). Our GDP grows exponentially over time, although the pace varies from year to year. Our living standards require exponentially more energy as they rise.
Our population… well, that used to grow exponentially, too. But things have changed in much of the world as we begin to recognise that there are certain limits to exponential growth…
Well, what if the same shift in demographics affected all the other parts of our society next? What if GDP growth, investment returns, the money supply and energy supply stopped growing exponentially, too, just like our population?
Actually, it’s not a matter of “if”, but “when?”, according to my guest below.
You happen to live at a time when humans will finally have to confront the fact that our exponential money system and resource consumption will encounter hard physical limits.
And this is very bad news for our economy, financial system, monetary system and living standards, because they all rely on exponential growth continuing.
In other words, we have constructed social, economic and energy systems that depend upon on enduring exponential growth in order to function properly. If the underlying exponential growth upon which they are based comes to a halt, they go into a tailspin.
Our financial markets are the most relevant example:
All of the developed world’s bond and stock markets are priced with the implicit and explicit assumption baked in that there will be continued future growth in the economy, corporate earnings, money supply, debt, and all the rest.
But what if that growth never arrives? What then? Without robust growth, those markets will be worth a lot less than their current valuations. And that’s a huge risk for individual portfolios, pensions, endowments and even social stability.
Right now, our energy and monetary systems are beginning to break down as the consequences of presuming exponential growth is going to happen get disappointed. We’re seeing shortages of our most basic goods and supply chains are breaking down.
We’re seeing the most severe consequences of this in places like Peru, Sri Lanka and Japan. But they are spreading, fast.
This may prove to be the most important edition of Fortune & Freedom that ever crosses your screens.
For you, this could be the beginning of the same journey that I embarked upon some 14 years ago.
And it starts here:
And if you’d like to hear from Nigel and other guests more often and more conveniently, why not sign up to the new Fortune & Freedom podcast on Apple Podcasts, Spotify, Amazon Music or Google Podcasts?
Nick Hubble
Editor, Fortune & Freedom
