#215. The price of equilibrium
FUTURITY, REALITY AND THE COMING FINANCIAL CORRECTION
The simplest way to define the current economic and broader situation is that consensus expectations and realistically probable outcomes have become polar opposites.
One of the most predictable consequences of this disparity is a sharp fall, both in asset pricing and in the viability of forward financial commitments.
This essentially optimistic narrative is based on a series of compounding fallacies, which we might summarise as misconceptions of capability.
Three critical realities are ignored. One of these is that the economy is an energy system, which cannot be propelled to infinite expansion by means of the human artefact of money.
A second is that the scope for technology is bounded by the laws of physics.
The third – and arguably the most important – reality ignored by the consensus narrative is that REs are unlikely to replicate the characteristics and economic value historically provided by energy from oil, natural gas and coal.
Those of us who understand the economy in energy terms have to weigh two possible courses of action. These are not mutually exclusive, but a balance does need to be found. One of these is the advocacy of reality. The other is analysis, which involves working out the probable series of events, and providing information which will be of value once the failure of the consensus narrative ushers in a new pragmatism.
…click on the above link to read the rest of the article…
