“We can create money, but we cannot create energy, only extract what exists — FASTER.”
No 2757 by fw, July 5, 2021 —
“We can create money, but we cannot create energy, only extract what exists — FASTER. And importantly, when money is created the interest is not. This creates a growth imperative for our economy to be able to pay interest in the future. Whenever we’ve encountered resource or energy limits – for example, the 1970s – we started to use the social construct of credit to overcome the near-term economic pain. In every single year since 1965, the United States and the world have grown their total debt more than they’ve grown their economies.” —Nate Hagens, from his Myth #22
My transcript of this repost focuses on Nate’s 2:55-minute crash course in economics – a valiant attempt to explain to the untutored (like myself) the relationship between money and resources. Without fully understanding his explanation, I’ll just accept at face value that he effectively discredits Myth #22: “We Can Always Get More Resources If We Have More Money.” Myth #22 is one of 33 myths Nate covered in his May 21st Earth Day talk titled, Earth and Humanity: Myth and Reality. The beauty of his 2hr, 52min long, information-rich Earth Day talk is that it is more of an indexed reference tool for recurrent consultation than a lecture meant to be assimilated in one sitting.
At the bottom of this post is a complete time-stamped list of the titles of all of Hagens’ 33 myths, plus his opening Introduction and closing Interventions (and Wild Ideas). The myths can be watched in any order — but, as Hagens mentions, the order decided on seems logical.
Briefly, Nate Hagens is a systems synthesist and well-known speaker on the big-picture issues facing human society. Before becoming a professor of an Honors seminar at the University of Minnesota, Nate was President of Sanctuary Asset Management and a Vice President at the investment firms Salomon Brothers and Lehman Brothers. He has a Masters Degree in Finance with Honors from the University of Chicago and a PhD in Natural Resources from the University of Vermont.
The video segment of Myth #22, embedded in the repost below, starts at the 41:46 time stamp. (Although segment # ends at 44:41, the video will continue to play until it is stopped manually.) For those who would prefer to watch Nate’s address on You Tube, without the transcript, click on the following linked title, which is also pre-set to begin at 41:46.
TRANSCRIPT: Myth #22 (Starts at 41:46, Ends at 44:41)
[On Screen title: “With More Money We’ll Create More Resources”
As more people are becoming aware, money doesn’t grow on trees. But it does grow. When commercial banks make loans, or when central banks monetize debt, the growth in our money supply happens without reference to underlying energy, materials or the environment.
We can’t understand energy or our biophysical situation without also understanding money. 95% of modern money comes from banks making loans. Commercial banks do not loan out existing money – as is taught in economics textbooks – they create it.
At the moment, new money comes into existence, the amount of energy and materials in the world remains the same. This is a problem because money is ultimately a claim on energy and resources. Whenever we spend a dollar or a Euro or a Yen we are buying something that required energy to mine, process, and deliver.
We can create money, but we cannot create energy, only extract what exists — FASTER. And importantly, when money is created the interest is not. This creates a growth imperative for our economy to be able to pay interest in the future.
Whenever we’ve encountered resource or energy limits – for example, the 1970s – we started to use the social construct of credit to overcome the near-term economic pain. In every single year since 1965, the United States and the world have grown their total debt more than they’ve grown their economies. This graph illustrates conceptually the infinite potential to create money, contrasted with the finite nature of economic inputs like forests, minerals, and oil. [Black line is money; Red line is non-renewable resources; Green line is sustainable flows].
So, the same dynamic with respect to debt increasing shale production, at a cost of future steeper future decline, also applies to economic growth of individuals and entire countries, and the GDP of the world. We can use debt temporarily to pull consumption forward in time, but there are limits. The blue and red lines represent current versus future time respectively. Notice that with debt and credit, GDP consumption levels are increased today relative to not using debt, but at a cost of lowering GDP in consumption, in the future.
This is incredibly relevant to our current situation where governments are adhering to Modern Monetary Theory, printing tens of trillions around the world to stabilize economies from the pandemic and kick-start green policies.
There are other problems with this. But from a biophysical perspective, even though we can print more money, we cannot print more resources, only extract what exists – FASTER.
44:41 — End of Myth #22
LIST OF THE 33 MYTHS (plus opening introduction, Interventions (and Wild Ideas and Closing thoughts)
Nate notes that the myths themselves are listed in reverse numerical order from #33 down to #1, while the time markers are in chronological order from beginning to end, which facilitates their quick and easy location on the video. The myths can be watched in any order, but the order they’re in made the most sense to Hagens. To go directly to the beginning of any numbered myth or to the opening Introduction and closing Interventions and Wild Ideas, just click on the hyperlinked time stamp in front of the term “Myth” .
Time stamps: // 0:04 Introduction // 2:20 Myth #33: The Experts Have ALL the Answers // 4:16 Myth #32: Humans Are Separate From Nature // 6:45 Myth #31: Humans Are Mostly Selfish // 12:17 — Myth #30: More Is Better // 18:12 Myth #29: “Someday I’ll Have enough” // 21:18 Myth #28: We Care About the Future // 23:38 Myth #27: Everyone Has Their Own Truth // 26:37 Myth #26: Truth Matters // 29:31 Myth #25: Energy Is Merely a Commodity // 34:28 Myth #24: The American Dream is Based on Hard Work and Cleverness // 36:05 Myth #23: Oil: The USA Will Be the Next Saudi Arabia // 41:46 Myth #22: We Can Always Get More Resources if We Have More Money // 44:42 Myth #21: Renewables Can Power THIS Civilization // 50:55 Myth #20: In the future we won’t need oil due to Peak Demand!! // 55:01 Myth #19: We Can Achieve Net Zero!! (by 2050 or any date) // 59:54 Myth #18: As Earth runs out of resources, We’ll Colonize Outer Space!! // 1:02:26 Myth #17: Growth Is Forever // 1:05:04 Myth #16: GDP Is the Right Goal for Society // 1:10:56 Myth #15: Overpopulation Is the Main Driver // 1:15:21 Myth #14: Technology Will Solve It // 1:21:16 Myth #13: The Environment Is Part of the Economy // 1:24:04 Myth #12: The Natural World Is Ours // 1:27:03 Myth #11: Climate Change Is the Core Problem // 1:32:44 Myth #10: Billionaires and Politicians Are in Charge // 1:38:56 Myth #9: Financial Markets Give Us the Right Signals for the Future // 1:43:22 Myth #8: Stimulus Is Permanent // 1:48:37 Myth #7: We Need to Crash the System to Get a Fresh Start // 1:52:43 Myth #6: The Use of Nuclear Weapons Is Unthinkable // 1:57:03 Myth #5: Fossil Fuel Companies Are at Fault // 2:03:01 Myth #4: Capitalism Is to Blame // 2:07:54 Myth #3: Humans Are Bad // 2:11:37 Myth #2: We Face a Shortage of Energy // 2:14:17 Myth #1: We Are Doomed // 2:19:56 Interventions (and Wild Ideas)
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