FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
August 22, 2023

IN THIS ISSUE:

1. Is It The End Of The World As We Know It? No

2. Population Soars But Natural Resources Remain Abundant

3. But We Have To Run Out At Some Point, Don’t We?

4. Consumers Blame High Inflation On Greedy Corporations

Overview: Is It The End Of The World As We Know It? No

We all grew up amidst rather constant warnings that the world as we know it would come to an end in our lifetimes, due primarily to uncontrolled population growth. Perhaps the most controversial was Paul Ehrlich’s 1968 book “Population Bomb” which predicted mass starvation by the end of the century. Many others were equally apocalyptic.

Of course, as we all know, these doomsday predictions have not come to pass. The world’s population has increased eightfold since 1800 – from under 1 billion to over 8 billion today, and yet standards of living have never been higher.

Despite increases in consumption, and contrary to the prophecies of generations of doomsayers, the world hasn’t run out of a single metal or mineral. In fact, resources have generally grown cheaper relative to income over the past two centuries. Even on the largest cosmic scale, resources may well be limitless.

Such a statement as the above might sound impossible, even reckless. But researchers are increasingly coming to this very conclusion – that Earth may never run out of natural resources and energy.

What follows is my summary of a very interesting article which ran in The Wall Street Journal in late July entitled: “We Will Never Run Out of Resources.” The authors argue that while the supply of natural resources is theoretically finite, human knowledge and creativity are limitless.

They conclude we may never run out of natural resources.

Population Soars But Natural Resources Remain Abundant

So, how can a rapidly growing population expand resource abundance? Some of the ways are well known. Consider increased supply. When the price of a resource increases, people have an incentive to find new sources of it.

Geologists have surveyed only a fraction of the Earth’s crust, let alone the ocean floor. As surveying and extracting technologies improve, geologists and engineers will go deeper, faster, cheaper and cleaner to reach hitherto untouched minerals. Efficiency gains also contribute to resource abundance.

In the late 1950s an aluminum can weighed close to 3 ounces. Today it weighs less than half an ounce. That smaller mass represents considerable environmental, energy and raw-material savings. Market incentives motivated people to search for opportunities and new knowledge to reduce the cost of an input (aluminum) to produce a cheaper output (a Coca-Cola can). Technological improvement drives a continual process whereby we can produce more from less.

Plus, innovation creates opportunities for substitution. For centuries spermaceti, a waxy substance found in the heads of sperm whales, was used to make the candles that provided light in people’s homes. Long before the whales might have run out, we switched to electricity.

Countless other inventions and discoveries have allowed us to increase supply and decrease demand for natural resources over the years. This innovative process will no doubt continue long after those of us reading this have passed on. In this regard, our future has never looked brighter.

We’re living in an era of dematerialization. Not long ago, every hotel room in the US was equipped with a thick blue copper cable to connect the guest’s laptop to the Internet. Nowadays guests use Wi-Fi – no cables necessary. Likewise, the smartphone has minimized, if not eliminated, the need for paper calendars, maps, dictionaries, encyclopedias, etc. as well as for metal or plastic radios, cameras, telephones, stereos, alarm clocks and more.

Perhaps less appreciated is that apart from a minuscule amount of aluminum and titanium that we have shot into outer space, all of our material resources are still here on Earth. Vast quantities of steel may have been “used” to build our skyscrapers, and copper in power cables, but all that metal could be recovered and reassigned.

But We Have To Run Out At Some Point, Don’t We?

Common sense implies that since no physical resource is infinite, the cupboard will eventually grow bare. Given ever-increasing consumption, we will reach a level where all useful atoms are physically incorporated into objects that make our lives better. Given that, won’t economic growth plateau or reverse course entirely at that point? You can’t have unlimited growth on a planet with a finite number of atoms. Or can you?

This argument has no bearing on any real resource issue. It invokes a hypothetical future when we are mining the Earth’s very core for rare elements and draining its oceans to sustain billions of thirsty humans. Yet this is so far in the future one can argue it is not necessarily relevant to any present-day policies or planning.

Today, the bottleneck isn’t physical resources but knowledge of how to use them to our benefit. Not just theoretical knowledge but down-to-earth, practical engineering knowledge. We need to improve that as fast as we can.

The best news perhaps is not only that natural resources remain abundant, but the cost of energy is bound to fall. The sun is effectively a nuclear fusion reactor converting millions of tons of mass into energy every second. Someday soon we will be able to capture as much of that energy as we like via super-efficient solar panels.

The difficulty won’t be harvesting that energy but getting rid of waste heat by radiating it into space. We may find it more convenient to make our own fusion reactors. All the elements found on Earth other than hydrogen and helium were made by transmutation in various kinds of stars. In the distant future, we could use artificial fusion not only for energy but for artificial transmutation, to make whatever elements we like.

All we need is abundant energy and hydrogen, which is plentiful in the water that covers most of the Earth’s surface and is the most common element in the universe.

Many researchers now believe that long before humans have extracted all the useful atoms in the Earth’s crust and oceans, we will develop the technological sophistication to obtain vastly more atoms and energy from asteroids, planets and beyond.

In that future, just as has always been the case in the past, the only bottleneck will be the rate at which new knowledge can be created. And nothing prevents us from improving that rate too. In summary, knowledge is the ultimate resource and there are no limits on creating it.

Consumers Blame High Inflation On Greedy Corporations

Turning to another topic, as we all know inflation has climbed higher than expected in the last year. The Consumer Price Index (CPI) spiked to an annual rate of 9.1% in June of last year, the largest monthly increase in over 40 years.

While the CPI has come down considerably since the peak in the summer of 2022, it still remains well above levels seen over the last 15 years. As you also know, the Fed has responded to the jump in inflation with 11 interest rate hikes, and a 12^th may be coming before the end of this year.

So, the question is, who do consumers blame for this unexpected jump in inflation?  A recent YouGov polling survey undertaken in June found that more Americans blame inflation on “large corporations seeking maximum profits” than any other option they were given. A massive 61% of US adults think profit??hunting corporations deserve most of the blame for inflation, up from 52% in 2022.

For context: this exceeds the number who blame big spending by the federal government, the price of foreign oil, the war in Ukraine or the level of consumer demand. Independents saw the biggest swing towards this profits??led inflation explanation – so this perception among consumers is now widespread.

What jumps out most for me in the chart above is something which is not included at all in the Top 10 reasons most Americans cite for high inflation. How about the Federal Reserve Bank and the huge role it plays in setting monetary policy – which can greatly affect the inflation rate? This omission seems very odd to me.

In the end, I find it most interesting that the largest percentage of Americans blame profit-seeking corporations as the main culprit for high inflation. I could argue that corporations are not the largest contributor to high inflation. I would put record large government spending and recent supply chain disruptions at the top of my list.

While we can debate the causes of the latest round of high inflation, it seems to me that more Americans are watching inflation today than ever before. I conclude that this is a good thing. I’ll leave it there for today.

Best personal regards,

Gary D. Halbert

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