Wednesday, April 2, 2014

Decreased EROI is deflationary

What is the one thing that may have caused the huge growth the human race has experienced over the last 150 years?

Fundamentally, it has to be hydrocarbon energy. Oil and gas.

If that is the case then can we surmise that generations have become accustomed to "growth". And have we not come to expect growth as a normal condition of economic health.

In a fractional reserve banking system, as is in practice most of the world over it is economic activity, and growth, that enables the creation of money by the borrowing and lending.

If the fundamental driver of growth is getting more expensive when measured in energy expended for energy recovered then the cost of energy must restrain growth. And a restraint of growth will restrain the economy and velocity of money which is the driver of money creation will be subdued.

As it has been for years.

And if the cost of energy rises for businesses depending on the consumption of energy, and most do,they will have less to spend on other aspects of the business. Namely, labor and materials.

So, does it not follow that the effect of a real higher energy cost is deflation since the higher cost of energy slows growth and growth is essential to the printing of money in a fractional reserve system of economics? And hasn't the world been fighting deflationary forces since oil peaked in the 1980s. Is this the "pushing on a string"?

My question, and my thought, is that the human race will go to any length to continue "growth", and will go to any lengths and to the ends of the earth to get the hydrocarbon fuels they have come to depend on for economic growth.

Buy the explorers and the drillers.

just thinkin'



No comments:

Post a Comment

All comments are appreciated as it will give me a chance to adjust my content to any real people who may be out there. Thank you. gh