Chris Martenson, noted author and analyst, outlines strategies to survive and prosper in our rapidly changing world.
John Nyaradi: Hi, everyone. I’m John Nyaradi, Publisher of Wall Street Sector Selector, a financial media site specializing in exchange traded funds and global markets. Today, I am really pleased to welcome our special guest, Chris Martenson. Chris, welcome to Wall Street Sector Selector.
Chris Martenson: John, it’s a pleasure to be here.
John Nyaradi: Chris, I really enjoy your work and I’m looking forward to our chat today. Chris has a PhD from Duke University where he specialized in neurotoxicology. He also holds MBA from Cornell in the Finance. He has worked in corporate finance and as Vice President of an international Fortune 300 Company.
He’s the author of a book. “The Crash Course: The Unsustainable Future Of Our Economy, Energy, and Environment,” and has a related video which has been translated to ten languages.
So, Chris let’s talk about what you’ve defined as the “Three Es.” Let’s start with the economy.
Chris Martenson: Well certainly, you know, the economy is where I start in this story and it is the thing I care about the most because if we have a functioning economy we can do all kinds of clever things and if we have a dysfunctional economy, life becomes a lot more difficult. Look at Greece; what they could do three years ago, they just can’t do today.
And I’m very concerned that the United States and much of the developed world is heading exactly in the direction of Greece; it’s just a question of timing. A number of years ago, I was concerned about the housing bubble, but I’ll be honest, the housing bubble was – was simply a side bubble on a much larger bubble which is a credit bubble that began in the early 80’s and has carried through to current times. It was enabled by the ultra accommodative policies of Mr. Greenspan and then Dr. Bernanke, and the ECB has piled in along with the Bank of Japan. And this is really, John, it’s a global phenomenon I’ve been tracking for awhile. We have had borrowing habits that have badly exceeded our income, and like all good parties, it was destined to come to an end.
The problem is that we have a monetary system and an economic model that just don’t work in reverse. They only work in growth mode and we got addicted to really fast rates of growth. We’re talking 6, 7% compounded annual increases in debt over many decades and that came to a stop in 2008 and we’ve been living with the consequences since. I truly believe in my heart of hearts that like every human that’s come before them, all the current inhabitants of the Federal Reserve and other associated central banks will try and print our way of this. I’ve been positioned for the idea that we’re going to print and print and I haven’t been disappointed yet in that outlook.
And my main outlook for the economy is really predicated on one simple notion and that is we had too much debt and our current crop of leaders, both fiscal and monetary, seem delightfully unaware that the old party cannot be resurrected. It’s just not coming back and Plan A is to get that party going again. I don’t think it can happen and if it can’t, we’re increasing the risk of a fairly catastrophic failure of the current system. That’s my underlying macro risk that keeps me awake at night and is the one I’ve fashioned all of my advice around.
John Nyaradi: Let’s talk about the second E, energy.
Chris Martenson: I only really care about liquid fuels at this point because 95% of everything that goes from point A to B does so with liquid fuels that come from petroleum.
What we can say about where we are in the energy story is that the world of $20, $30 per barrel oil is in the rear view mirror. It’s never coming back. Where we are in the story is we now have a world of high energy prices.
The part of the story that concerns me is that I think that we’ve got maybe a couple of decades of decent energy left and after that it starts to get really marginal and much more expensive, much more difficult. So, this is a story that is very simple to understand. Cheap energy is in the rear view mirror; we’re going to have to adjust to a higher energy price world but I’m worried that sooner or later this becomes a world of limited supply and that’s a very different world.
One quick statistic that I think summarizes this, is that at current rates of growth of consumption, China and India by the year 2030 will be consuming 100% of all available oil for export on the world markets. Now, clearly that won’t happen, right? Something will have to change well before then. So, what’s going to have to happen will be some really huge structural changes in infrastructure, how our communities are organized. The overall landscape patterns we have used. A lot of things really have to change and we haven’t gotten on that story yet as a nation. So, it creates some challenges. It creates some risks but it also creates some extraordinary opportunities.
John Nyaradi: That leads us, of course, right in to the third E, the environment. Where are now in this environmental picture?
Chris Martenson: I track the environment in two ways. One is what we do in terms of extracting from it in terms of non-renewable natural resources. So, think of your basic minerals, copper, tin, bauxite, things like that.
John, we can look at certain elements that we extract right now and all known reserves of certain items will be completely exhausted in the next 20 years. And once they are – who knows, maybe we’ll find new reserves or potentially, we’ll switch, we’ll substitute. But on the extraction side, we’ve got a story of depletion. We’re chasing thinner, more diluted, more distant deeper deposits to get at what we want to get.
On the other side, I look at what we’re putting back in to the environment. We have dead zones in the oceans and maybe too much carbon dioxide in the atmosphere. We’re depleting our aquifers. Again we have huge challenges coming from this as well as extraordinary opportunities.
The summary of the Three E’s is that we have this economy that must grow. It’s connected to an energy system that really can’t grow anymore and we’ve got the story of depletion and extraction going on in the environment. And all of that sounds like it’s extraordinarily challenging but it’s simply the reality of the world we live in.
And I’m convinced that those who can be aware of where these trends are going, can position themselves to have a very high-quality life. We can have a future shaped by design, not disaster. But for people who are going to sleepwalk into this and by people, I mean it could be an entire culture, I think it could be a fairly disruptive future.
John Nyaradi: You’re putting all of this together at your website, PeakProsperity.com. Tell us about that, about what people can expect to find if they go to your website, Chris?
Chris Martenson: What we’re trying to do there is have a very rational, fact-based, non-emotional discussion about this material. We recognize it’s fairly challenging material and at Peak Prosperity, we have a number of key offerings. The first is the Crash Course, itself. It’s 20 chapters long, freely available. You can just click on each chapter and follow along and watch through the whole logic and all the data behind the Three E’s. You could find the Crash Course in book form as well if you prefer to read.
Then we have my writings on the site and a lot of people from the community have submitted materials. We have all sorts of materials about how to just basically prepare.
We’re trying to help people understand that this is a time when we have become uniquely vulnerable and that we can mitigate this risk by taking a few simple steps and accumulate a few things, move towards a little bit of resilience in the three big areas.
We believe people should have financial resilience and physical resilience and emotional resilience during this chaotic, anxiety-producing time.
John Nyaradi: If you boil all this down, what’s at the top of your mind, what should we be watching for as we head towards the end of the year and the new year in 2013?
Chris Martenson: Well, we have a Fiscal Cliff coming up on December 31st, the chance of that being politically resolved now seems unlikely to me for a variety of reasons. I don’t know that we’ll have the necessary camaraderie and quorum in both parties to really make the kinds of concessions that are going to be required to avoid the Fiscal Cliff. And what we’re already seeing around the world is a steadily weakening situation in Europe, Asia as well; I’m convinced both regions are pretty much in recession at this stage. And the United States is not far behind. We’re basically at stall speed.
So, if the Fiscal Cliff happens, it’s an aggravating factor. It’s not a precipitating factor but it certainly doesn’t help. I’m seeing a very high likelihood of recession in 2013 here in the U.S. and, over the longer term, unless Washington D.C. can get its fiscal house in order, the risk of having a pretty dramatic fiscal crisis and then a currency crisis in the U.S. This is something I’m very much worried about. I advise people that this is a good time to be extremely defensive in your posturing and positioning, let’s worry about return of, not return on, principal.
John Nyaradi: We’ve been talking with Chris Martenson, and it has been a wonderful session. Chris holds a PhD from Duke University and also an MBA from Cornell and so has a fascinating combination expertise in finance and science. You can learn more about Chris and his work just by following the link at the bottom of this interview.
Chris, it has been wonderful chatting with you today. Thanks for joining us. I know we’re all looking forward to talking with you again real soon.
Chris Martenson: John, the pleasure has been mine. Thank you.
(recorded interview, edited for length and clarity)