Lessons from the ‘flu and the panic

Suggestible bunch are we not. Like children in a sweet shop, never able to concentrate, always jumping from one novelty to another. In our (humankind’s) case, it is more ‘the little shop of horrors’, though.

Not content with fretting over our finances, we were delighted to be ‘terrorised’ with a possible pandemic. The lust for the story from institutions as respectable as the BBC was shocking to behold. To some extent, yes, the media are responsible for ‘hyping’ the story but in the main they only reflect the societies they serve.

Our culture is one that tolerates exaggerations and excesses in the name of advertising and marketing to the point where the language and culture seem positively ‘Orwellian’. ‘Newspeak’ has become ‘Unspeak’ and nobody speaks plainly. If ‘bullshit baffles brains’ then it suits those in command of the media (politicians, advertisers and media moguls) to have us distracted and permanently disoriented.

It becomes impossible for people to keep track of long term trends and keep to strategies for managing them, if we are kept ‘off balance’ by the barrage of noise drowning out the signal.

In my head I try to keep track of four trends.

In the short term, we are in the midst of a major realignment of our global taste for risk and everyone is moving to reduce our debt/equity ratios. In plain English, everyone wants less debt because of the losses they have just incurred from having too much debt. This process will last 4-5 more years at a minimum and major asset classes such as houses and stock markets will be moribund for most of this time.

In the medium term, we are still in the midst of the revolution known as the Digital Age or the Service Economy or the Internet. The novelties that have delighted us over the last ten years such as cheap flights and online stores are now mature and poised to undermine most business models. This process will last another 10 years and will give a cost advantage to those who grab it that will define those who survive the current debt crisis and who thrives in the post-crisis era. The adoption of these technologies seems likely to undermine the fragile state of the residential and commercial property markets.

In the medium term, we are also in the midst of the least known but potentially most disruptive trend of all. No not the ‘Climate Catastrophe’ but ‘Peak Oil’. The debt crisis was clearly caused by the spike in crude oil prices in the summer of ’08. Although, the property boom had peaked before the run up to 145$ it was this spike that caused a loss of faith in the transport intensive globalised economy. We are now experiencing the cascade effects of that loss of faith.

Oil has collapsed in price, right enough. Only a few people have bothered to look at what has happened to the supply of oil. Remarkably, it has only dropped by about 10%. This implies a price inelasticity of about 85%. Any reduction in the supply of oil will drive the price back up to $145 and way above. The reduction started sometime last year depending on whose figures you prefer.

The ‘Climate Catastrophe’ is also under way. It will be huge. But the disruption will be caused by the absence of the cheap oil we have been addicted to for the last hundred years. The disruption will stop the overdeveloped world affording the innovations that might abate the ‘Catastrophe’. The disruption will stop the underdeveloped world from eating for lack of cheap fertiliser and irrigation water and transportation fuel. The disruption will stop the poor from exporting their oil to the rich, who may be inclined to use their militaries to grab it. The disruption will stop the rich shipping it due to the fragility of the transport webs.

The ‘Catastrophe’ will be the anvil on which the ‘Peak Oil’ hammer will smite us. For just as the shortage will stop us doing stuff, our need to do stuff will increase because Mother Nature is going to do a lot less of it for us.

Oh and by the way, that pandemic you were having the ‘heebeejeebies’ about – that will arrive, for real, sometime in the medium term.

Humankind is a mamallian herd with the attention span of an insect. It can barely concentrate on one problem long enough to think it through let alone solve it. How do you think it is likely to do when 4 major challenges come along at once.

Yep, that’s right. We’re screwed.

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