World Economy Collapse: Our Economic Ponzi Scheme

The current global demands on natural systems exceed the Earth’s sustainable yield capacity by nearly 30 percent. We are meeting current demands in part by consuming the Earth’s natural assets, setting the stage for economic collapse once these assets are depleted.

| October 15, 2009

  • Fishery
    Three fourths of oceanic fisheries are now being fished at or beyond capacity, or are recovering from overexploitation. If we continue with business as usual, many of these fisheries will collapse.
    ISTOCKPHOTO/YEN-HUNG WANG

  • Fishery

Our mismanaged world economy today has many of the characteristics of a Ponzi scheme. A Ponzi scheme takes payments from a broad base of investors and uses these to pay off returns. It creates the illusion that it is providing a highly attractive rate of return on investment as a result of savvy investment decisions when in fact these irresistibly high earnings are in part the result of consuming the asset base itself. A Ponzi scheme investment fund can last only as long as the flow of new investments is sufficient to sustain the high rates of return paid out to previous investors. When this is no longer possible, the scheme collapses — just as Bernard Madoff’s $65 billion investment fund did in December 2008. With our current system, we are heading toward a similar world economic collapse.

Although the functioning of the global economy and a Ponzi investment scheme are not entirely analogous, there are some disturbing parallels. As recently as 1950 or so, the world economy was living more or less within its means, consuming only the sustainable yield, in the interest of the natural systems that support it. But then as the economy doubled, and doubled again, and yet again, multiplying eightfold, it began to outrun sustainable yields and consume the asset base itself.

In a 2002 study published by the U.S. National Academy of Sciences, a team of scientists concluded that humanity’s collective demands first surpassed the Earth’s regenerative capacity around 1980. As of 2009, global demands on natural systems exceed their sustainable yield capacity by nearly 30 percent. This means we are meeting current demands in part by consuming the Earth’s natural assets, setting the stage for an eventual Ponzi-type collapse when these assets are depleted.

As of mid-2009, nearly all of the world’s major aquifers were being overpumped. We have more irrigation water than before the overpumping began, in true Ponzi fashion. We get the feeling that we’re doing very well in agriculture, but the reality is that an estimated 400 million people are today being fed by overpumping, a process that is by definition short-term. With aquifers being depleted, this water-based food bubble is about to burst.



A similar situation exists with the melting of mountain glaciers. When glaciers first start to melt, flows in the rivers and the irrigation canals they feed are larger than before the melting started. But after a point, as smaller glaciers disappear and larger ones shrink, the amount of ice melt declines and the river flow diminishes. Thus we have two water-based Ponzi schemes running parallel in agriculture.

And there are more such schemes. As human and livestock populations grow more or less apace, the rising demand for forage eventually exceeds the sustainable yield of grasslands. As a result, the grass deteriorates, leaving the land bare, allowing it to turn to desert. In this Ponzi scheme, herders are forced to rely on food aid, or they migrate to cities.

Steffanie
10/26/2009 8:14:10 AM

1950 - Mom's home with the kids. She tends the home, the garden, bakes bread, tends to the famliy. Dad's at work. They have 1 car, 1 television, and simple life style. Mom has dinner on the table. 2009 - Mom's at work, the kids are raised by a sitter or school system, we have soccer, football ect... We have to have 2 or more cars to shuttle everyone back and forth... Moms tired, McDonalds does the cooking 4 out of 7 nights a week,some other fast food does the rest. we have a television in every room... life is complicated. The government has staffed an entire board of germaphobics to control the food supply. There is no more buying from the family farm, because the food can't be inspected, it's not cost effective for the farmer. Perhaps it's not the nasty oil companies that we need to look at... but our own life styles and what we've become. We will never be "green" until we learn to control our habits individually, not the habits of others. THen and only then will we solve things such as world hunger. Progressive is NOT the answer.... going back to simple living is.


t brandt
10/26/2009 7:07:22 AM

Right conclusion; wrong path. The world economy will collapse as a result of over-population & oil depletion. Current population just barely survives with 1/8th in hunger now. The other 7/8ths are sustained only because technology has raised the carrying capacity of the environment. Oil allows us to artificially improve ag yield. When the oil is depleted, farm yield will fall drastically and factory production & delivery systems will also fail. The underdeveloped nations will then actually have the advantage, already adapted to a life not requiring oil & cheap energy. The dilemma is that if we use less oil now, the economy suffers anyways as commerce slows. We can't sustain our hi tech living standard. "GW" (a lie anyways) would actually help to delay final oil depletion: improved ag yield, less heating fuel required and engines get improved mileage in warmer weather.







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