The mantra these days is that we need growth to offset a double-dip recession. After all, if the economy is growing, everything else ought to work itself out…
Well, it depends on the nature of the growth.
Everybody understands that a rapid increase of the currency in circulation is a ready path to inflation. They also get that accelerating growth concentrated in one economic sector will risk intensifying problems in other sectors that aren't participating in the advance.
Yet growth is still widely perceived as being a good in itself – a kind of general elixir for whatever ails a market.
How many times during the ongoing political campaign have we seen "growth" as the key to:
- increasing employment;
- reducing the budget deficit;
- allowing a reduction in taxes;
- permitting an increase in benefits;
- creating better business startup opportunities; or
- curing the common cold (or just about anything else that comes to mind)?
This is especially true with energy.
Pundits translate sluggish energy demand into a concern about economic decline. Expanding demand, on the other hand, is always regarded as evidence of everything that's noble and right about capitalism.
The point is made in both directions, actually.
Some consider an improvement in energy demand to be an indicator of an improving (by definition an expanding) economy. Others see signals of economic growth as a springboard for expanding fuel and power demand.
Either way, economic growth is the essential foundation upon which investment decisions are made in the energy sector. Positive or negative spin is given as part of every argument over oil, gas, nuclear, renewable and alternative sources, or biofuel advance.
Seems logical enough.
Yet consider this….
The Limits of Continuous Growth
This idea that growth is a pre-condition for every good economic consequence is a very modern one.
It was first contained as an essential premise in Adam Smith's division of labor principle, Ricardo's law of comparative advantage, and Malthus' doctrine of diminishing returns.
The required growth expectation begins with changing views of population.
It is only very recently (in the last 200 years or so) that nations began to expect the human population to increase over time.
It used to be that wars, disease, and Mother Nature were sufficient "blood lettings" of the society. In many quarters of Europe, a stagnant population count was even regarded as preferable.
Economic growth provides for (or may even require) a growth in the number of people supported by it. Conversely, the traditional view held that a decline in one would result in pressure to slow growth in the other.
But underlying this all was the need for growth. Without growth, the argument went, no economic recovery is possible.
Here's the problem with that…
The growth that is first expected, then cajoled, then demanded, has a very dangerous element attached to it. Growth is one thing, but the continuously required expanding growth is something else altogether.
This approach to economics produces unsustainable growth patterns – a pyramid scheme that inevitably collapses.
An Eye-Opening Look into the Future
I have been aware of this problem in energy for some time. It's one of the main underpinnings of the "boom and bust" cycles we experience periodically, in everything from the price of crude oil to the distribution of electricity.
Lately, however, the results have become more pronounced. And more alarming.
That's why, for the past six months, I've been working with my Money Map Press colleagues to investigate and analyze this growth crisis.
What resulted is a groundbreaking documentary I hope you'll take the time to view. We released it last week. If you haven't seen it yet, I urge you to watch the video right here.
The ideas in this video are going to revise the approach to investing in energy, our approach to the economy, and the impact of growth on the environment.
Moving forward, we are going to be talking a lot about the conclusions Keith Fitz-Gerald, Chris Martenson, and I reached.
Because make no mistake…
The growth crisis is going to impact how we invest in energy. As this crisis widens and takes hold, it is going to introduce some amazing opportunities for profit.
Related Articles and Links:
- Money Morning:
Why Gas Prices are Heading Higher
- Money Morning:
Oil Prices Look For Steady Rebound
- Money Morning:
Four Things Suppressing Crude Oil Prices Today
- Money Morning:
The Trajectory is for Oil Prices to Rise
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.