The World has fundamentally changed in the recent past.
Just to give yourself some perspective, I suggest you read this article in Forbes, an interview with Bill Gross, one of my neighbors here in Newport Beach and one of the world's most respected investment managers, known as "The Bond King."
To paraphrase and oversimplify a bit, Gross basically explains that since the US Government has now elected to "rescue" major parts of the financial system, instead of letting them die according to the principle of "creative destruction," the financial environment will be much more regulated in the future and we will not be able to "go back to the prior stasis."
This sounds to me like the very definition of what I would call a fundamental change.
In fact, Bill Gross estimates that it will take "15 to 20 years to escape this new regulatory environment and the lack of risk taking."
15 to 20 years!
That's an entire financial lifetime! The bulk of many people's productive working years before retirement. I would argue that is very fundamental.
But, if you think the so-called "global economic crisis" is bad, get ready for something worse.
Peak Oil. You can think of it as the "blacker" Black Swan.
The basic problem is that we are completely failing to manage the risk of Peak Oil impacting human civilization.
For one thing, everybody is too myopically focused on the current media darling, global warming.
If you are really interested in understanding how the financial crisis got so out of control, I suggest you read this article in the New York Times by Joe Nocera about Risk Mismanagement.
Even if you don't have a strong background in statistical modeling, Nocera does a great job of explaining the concept of VALUE AT RISK, or VaR and it's relationship to the derivatives that have melted down and driven the world into crisis.
The important concept is the idea of what Nassim Taleb calls the "Black Swan."
A Black Swan is an unforseen event that comes along and causes a disaster even though a fancy, shmancy risk model estimates that the chance of such a thing happening is down around 1% or less. And guess what? The world has seen this Black Swan thing before, and recently, in 1997-1998.
And guess what else? The people who caused it were the "best and the brightest." In fact, the two guys who set the whole thing up were winners of the Nobel Prize in economics.
But they still blew it.
I'm talking about the financial collapse of Long Term Capital Management and the US Government bailout.
See, the basic problem here is that we don't seem to have learned that these really big catastrophic events that seem really unlikely actually can and do happen. And when they do, they trash everything and make everybody look like an idiot. Black Swans bite!
I enjoyed the analogy I heard that it is like a pilot who is flyin' along, flyin' along, and doesn't understand that there is a thing called a THUNDERSTORM!
Well, Peak Oil is an even bigger and badder and blacker Black Swan.
Except Peak Oil is not unforseen.
That is the strange thing.
It is happening right in front of your eyes.
You can have a conversation with anybody anywhere in the USA about gasoline prices and everybody, I mean everybody understands perfectly well that we are paying a high price for gasoline because we have to IMPORT so much.
Duh!
That by definition means that the US production has peaked and we don't have enough domestic oil to go around.
There is just some kind of mental disconnect and people have become sort of numb and blindly charge ahead complaining about Arabs and high gas prices while they jam their foot on the pedal of their SUV to go 85 miles an hour down a residential street towards a red light. Well, at least that's how they drive in Newport Beach, but you get the point.
There is a giant lack of awareness of Peak Oil.
I'm trying to change that. Will you help me?
The best military plan the US could have would be to start a "Manhattan Project" style effort to re-leverage the entire country towards energy sustainability like Matt Simmons has suggested for years. However, the style of such a "Energy Manhattan Project" should only be similar in urgency to the original Manhattan Project. The last thing we need is blind reliance on a panel of government and industry "experts" of the same kind that got us into this mess!
Despite my respect for highly successful guys like Bill Gross, it is still amazing to me that I never, and I mean never hear any discussion at all on "Wall Street" about the relationship between Peak Oil and the economy.
And the interesting thing is that now we know that all the smartest, best educated, best paid people in the financial world were dead wrong.
Are we going to sit around and wait for the Peak Oil Black Swan to bite us too?
It certainly seems like it. Global oil production seems to be peaking right now in 2008-2009.
Dozens of countries, especially the US (1971) have already peaked.
The first part of the solution is developing an AWARENESS of the problem.
