Tuesday, July 21, 2009
How peak oil relates to debt
"The underlying problem is the fact that the current level of debt (by individuals, businesses, and governments) cannot be maintained, unless we have a growing economy. The reason we need a growing economy for the debt system to work is that a person can borrow from tomorrow only if tomorrow is better than today. (This is especially the case if loans require the payment of interest.) But if tomorrow is worse than today, borrowing from the future doesn't work. Even if tomorrow is the same as today, the system doesn't work, if loans need to be paid back with interest. The problem is that the economy cannot grow unless oil production is truly rising. This lack of growth in world oil production since 2005 is what is causing the debt collapse we are now seeing."