“The unfolding social and political unrest in the Middle East/North African (MENA) region are emblematic of changes that will be visiting the rest of the developed world in the near future. Yes, dictators, corruption, and weak justice all play into the MENA situation but underlying those insults is a deeper structural flaw that rests on the relentless math of energy depletion and its relationship to economic growth. The short version of the story is this: the global economy utterly depends on cheap oil to function. Without cheap oil, the economy will not work quite the same as it did before.
We have irreversibly slipped into a world of ever-increasing energy costs and those, predictably, are dragging down the weaker players first. By failing to appreciate the fundamental and irreplaceable role of energy in fostering economic growth, the world’s high priests and priestesses of monetary and fiscal policy have placed the developed world in the exact same situation as the MENA countries.
No, printing more money and manufacturing more debt to promote more consumption will not help anything. In fact these efforts are harmful because they distract us from what’s really at the heart of the issue; instead we should honestly admit to ourselves that we have a gigantic energy-based economic and monetary predicament on our hands. One that requires a clear-eye diagnosis, and adult-sized conversations about what sorts of intelligent responses make sense here.
Assuming the west fails to heed the warnings and lessons being served up by the MENA region, the predictions are easy enough to make. Fiscal and monetary crises will sweep inwards from the weaker regions towards the center. Markets will violently gyrate but ultimately destroy wealth. We still have time, but not a lot, especially considering that the leadership of the developed world is, for the most part, operating with the wrong narrative in place. The right one would consider energy and other critical environmental resources equally alongside economic goals. ”