Industrial Insight

Running out? | April 26, 2011

http://www.realclearmarkets.com/blog/GMO%20April.pdf

Time to Wake Up: Days of Abundant Resources and
Falling Prices Are Over Forever
Jeremy Grantham

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 scientifi c 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 fi nite 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 fi nite 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.


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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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