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GMO-Jeremy Grantham latest letter


Guest Dazel
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Tough to argue with his logic. Not totally there with him on global warming, but burning fossil fuels creates pollution which is harmful to us so we should be looking at cutting it anyway and we need it for fertilizers, plastic and others.

 

So what we have are developed economies fighting pain with higher debt, stimulus and entitlements while the globalization of skills create more capable workers competing for the same goods in a finite resource world. Gets pretty clear that you will need higher skills to retain your standard of living or become a dividend counter as he mentioned. It is also pretty clear that it could lead to financial ruin and conflicts with 7 billion (and growing) extra-consuming hungry selfish mammals.

 

However on the energy front, I think that the increase or adjustment is close to being done. It was driven by costs as he said so non-reversible. Nowadays, it takes on average 1 barrel of oil to extract 3 while it used to be 1 for 100. But IMO, the equilibrium is now being or about to get reached with alternative sources of energy. Solar for example is "infinite" supply and the cost to extract it is now getting attractive and falling. They are also working on solar panels that will convert water directly into hydrogen for use in combustion engines or with fuel cells. I can see a day not too far off where it will make sense for me to put some solar panels up on my roof to generate power and I live in a very low cost area for electricity.

 

My largest worry is around water since there is no known substitute. Aquifers are going to be depleted someday just like oil reservoirs at the rate that we are pumping them. Imagine the impact on the world of getting back to the Dust Bowl era. True that the oceans are untaped, but it will be very expensive water to get at or an unproductive activity to obtain at a higher cost the same commodity (or of lesser quality) that we have today. Many humans won't be able to afford it or the food that it will help produce, so unfortunately they will die. No bacteria or species grows to infinity, so despite our intelligence it seems that the planet is going to put the brakes on our rate of growth via affordability.

 

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