Chris Martenson, noted author and analyst, outlines strategies to survive and prosper in our rapidly changing world.
John Nyaradi: Hi, everyone. I’m John Nyaradi, Publisher of Wall Street Sector Selector, a financial media site specializing in exchange traded funds and global markets. Today, I am really pleased to welcome our special guest, Chris Martenson. Chris, welcome to Wall Street Sector Selector.
Chris Martenson: John, it’s a pleasure to be here.
John Nyaradi: Chris, I really enjoy your work and I’m looking forward to our chat today. Chris has a PhD from Duke University where he specialized in neurotoxicology. He also holds MBA from Cornell in the Finance. He has worked in corporate finance and as Vice President of an international Fortune 300 Company.
He’s the author of a book. “The Crash Course: The Unsustainable Future Of Our Economy, Energy, and Environment,” and has a related video which has been translated to ten languages.
So, Chris let’s talk about what you’ve defined as the “Three Es.” Let’s start with the economy.
Chris Martenson: Well certainly, you know, the economy is where I start in this story and it is the thing I care about the most because if we have a functioning economy we can do all kinds of clever things and if we have a dysfunctional economy, life becomes a lot more difficult. Look at Greece; what they could do three years ago, they just can’t do today.
And I’m very concerned that the United States and much of the developed world is heading exactly in the direction of Greece; it’s just a question of timing. A number of years ago, I was concerned about the housing bubble, but I’ll be honest, the housing bubble was – was simply a side bubble on a much larger bubble which is a credit bubble that began in the early 80’s and has carried through to current times. It was enabled by the ultra accommodative policies of Mr. Greenspan and then Dr. Bernanke, and the ECB has piled in along with the Bank of Japan. And this is really, John, it’s a global phenomenon I’ve been tracking for awhile. We have had borrowing habits that have badly exceeded our income, and like all good parties, it was destined to come to an end.
The problem is that we have a monetary system and an economic model that just don’t work in reverse. They only work in growth mode and we got addicted to really fast rates of growth. We’re talking 6, 7% compounded annual increases in debt over many decades and that came to a stop in 2008 and we’ve been living with the consequences since. I truly believe in my heart of hearts that like every human that’s come before them, all the current inhabitants of the Federal Reserve and other associated central banks will try and print our way of this. I’ve been positioned for the idea that we’re going to print and print and I haven’t been disappointed yet in that outlook.
And my main outlook for the economy is really predicated on one simple notion and that is we had too much debt and our current crop of leaders, both fiscal and monetary, seem delightfully unaware that the old party cannot be resurrected. It’s just not coming back and Plan A is to get that party going again. I don’t think it can happen and if it can’t, we’re increasing the risk of a fairly catastrophic failure of the current system. That’s my underlying macro risk that keeps me awake at night and is the one I’ve fashioned all of my advice around.
John Nyaradi: Let’s talk about the second E, energy.
Chris Martenson: I only really care about liquid fuels at this point because 95% of everything that goes from point A to B does so with liquid fuels that come from petroleum.
What we can say about where we are in the energy story is that the world of $20, $30 per barrel oil is in the rear view mirror. It’s never coming back. Where we are in the story is we now have a world of high energy prices.
The part of the story that concerns me is that I think that we’ve got maybe a couple of decades of decent energy left and after that it starts to get really marginal and much more expensive, much more difficult. So, this is a story that is very simple to understand. Cheap energy is in the rear view mirror; we’re going to have to adjust to a higher energy price world but I’m worried that sooner or later this becomes a world of limited supply and that’s a very different world.
One quick statistic that I think summarizes this, is that at current rates of growth of consumption, China and India by the year 2030 will be consuming 100% of all available oil for export on the world markets. Now, clearly that won’t happen, right? Something will have to change well before then. So, what’s going to have to happen will be some really huge structural changes in infrastructure, how our communities are organized. The overall landscape patterns we have used. A lot of things really have to change and we haven’t gotten on that story yet as a nation. So, it creates some challenges. It creates some risks but it also creates some extraordinary opportunities.
John Nyaradi: That leads us, of course, right in to the third E, the environment. Where are now in this environmental picture?
Chris Martenson: I track the environment in two ways. One is what we do in terms of extracting from it in terms of non-renewable natural resources. So, think of your basic minerals, copper, tin, bauxite, things like that.
John, we can look at certain elements that we extract right now and all known reserves of certain items will be completely exhausted in the next 20 years. And once they are – who knows, maybe we’ll find new reserves or potentially, we’ll switch, we’ll substitute. But on the extraction side, we’ve got a story of depletion. We’re chasing thinner, more diluted, more distant deeper deposits to get at what we want to get.
On the other side, I look at what we’re putting back in to the environment. We have dead zones in the oceans and maybe too much carbon dioxide in the atmosphere. We’re depleting our aquifers. Again we have huge challenges coming from this as well as extraordinary opportunities.