Jeremy Grantham is paid to make people money. Among his clients is Dick Cheney, who, based on Grantham’s advice, was well-positioned before the economic collapse (as I noted at the time, Cheney had positioned his portfolio prior to 2008 in anticipation of the dollar’s decline and likely volatility in the debt markets. If he maintained the positions described in 2007, he did just fine during the near collapse).

Grantham has written an extremely bracing report of our current situation, centered on the crisis facing humanity in the form of a wave of resource depletions. The report is not for the weak of heart – it is a careful examination of the various resource constraints facing the world in the near, middle, and long-term, with a view to advising clients about investment strategies. Among his conclusions is that his best advice – a situation of “great difficulty,” he admits – is his “new specialty of regret minimization” (17). This is an investment strategy of the stoic.

In 2007 Grantham wrote that the bursting of the credit bubble “will be across all countries and all assets, with the probable exception of high-grade bonds. Risk premiums in particular will widen. Since no similar global event has occurred before, the stresses to the system are likely to be unexpected.” Given his prophetic track record, I’d say we’d best pay attention.

FPR is sometimes regarded by skeptical readers as a site that recommends a certain lifestyle for the leisure class centered on local life, sustainable economics, and feel-good agrarianism. If Grantham is right – and I am of the view that the evidence is on his side – then the future we face is not a “lifestyle choice,” but no real choice at all: we will need to live more locally, more modestly, and within limits. Or, many of us won’t live at all.

Local Culture
Local Culture
Local Culture
Local Culture


  1. I read Mr. Grantham’s article earlier in the week and found it unnerving. Last night, I asked wife to read the article and to clarify some of the statistical analysis for me; I’m now terrified. Unfortunately, I think the most convincing evidence in the article is found in the charts and the accompanying analysis, which I fear is beyond comprehension for most people.

    Of course, the article will do little to convince the people who think energy and resource scarcity is a “communistic, socialistic, fascistic, one-worlder plot designed to enslave the masses and hasten the arrival of an NWO derived global government.” But then as Jim Kunstler is fond of saying, “these are the same people who think there are four Saudi Arabias buried under Zap, North Dakota.”

  2. Jeremy Grantham is obviously a smart, educated, and thoughtful man. Too, he’s right to point out the inherent unsustainability of many of our current practices–all other things being equal.

    That said, he paints with a very wide brush and with very neat models (shocker: he’s a Keynesian!). The article uses similar arguments to both advocate and discredit long-term planning models; namely, predictable, percentage growth. He’s clever to make the distinction between “compound” growth and “long-term average” growth, but the principle is the same: over time one ends up with a lot more (or less) of something, if current trends continue, unimpeded. But: they’re always, ALWAYS impeded by something, at some point, so it’s all but worthless to think about “The World 2075” with any clarity.

    I also find his argumennt short on applications or solutions. So there are “too many” people? What are we supposed to do about it–have fewer children, quit administering medicine, euthanize the elderly, have more wars? What of those resources we’re running out of? Mankind won’t adapt and find different methods, as it always has? It’s curious he cites “lost” civilizations like the Mayans and Egyptians, as if they were unique species. True, “peoples” have come and gone, but “man” has, in fact, managed to survive (and multiply!) for millennia.

    As for the “softer changes” in behavior, does Grantham expect the State to take care of that? Ought there be a federal or global agency that depends land-uses and means of production? Maybe Mr. Grantham doesn’t intend this to be a policy piece (or even a philosophical one). Perhaps his intention is simply to point out the “realities” of our current situation and frame them in terms of economic benefit to those living. If so, that’s fine. But, if he really thinks all this can be UNDERSTOOD, that a batch of brilliant foresight will make all our lives better, into perpetuity, that’s harder for me to take.

  3. One note regarding population: I think it is a mistake to attempt to estimate, with any accuracy, how many people this world can sustainably maintain simply by adjusting for hydrocarbons, because such an approach fails to account for the availability of good farmland in the Western Hemisphere (and there is a lot of it) that only became available after (or at the same time) hydrocarbons began to be heavily used.

    As Mr. Grantham notes, the world population in 1800 was roughly 800 million. He notes also that up to that point the human species had always maintained its population at the level the world could sustain absent hydrocarbons. However, prior to 1800 most of the western hemisphere was not subject to cultivated farming, at least not with most of the staple crops and animals that supported the population in the Eastern Hemisphere for millennia. As Jared Diamond showed in “Guns, Germs, and Steel,” the differences between the civilizations in the Eastern Hemisphere and the Western Hemisphere prior to colonization were largely due to the availability of easily cultivated and domesticated crops and animals in the former. The only staple crop available in the Eastern Hemisphere prior to colonization was corn, for example, while the Western Hemisphere benefited from a plethora.

    The problem is that the importing of those crops and animals for production in the Western Hemisphere largely coincided with the beginning of hydrocarbons use. In other words, it is probable that even after adjusting for hydrocarbons this world could support a lot more people than 800 million after accounting for the production of easily cultivated and domesticated crops and animals on good land in the Western Hemisphere.

  4. Why anyone might stubbornly hold onto the daft idea that our technological abilities allow us to divorce ourselves from either mere physics or the dirt we stand on is one of the most darkly humorous things about the unfolding reckoning.

    The refrain: ” why didn’t somebody tell us we couldn’t be a sordid little squandering glutton with a 30% voter turnout?” will be raised and anyone who expects the Bunko of our Government- Special interest combine to adequately address the issue should simply shoot themselves now in order to avoid the demoralizing disappoint to come.

    Otherwise, get set for interesting times…..the overfed boredom of the last several decades is over-rated.

  5. Unfortunately, as we have seen with the climate agenda, there IS a “communistic, socialistic, fascistic, one-worlder plot designed to enslave the masses and hasten the arrival of an NWO derived global government.” There is anthropogenic global warming, it is a problem, and there are people who want to use that as an excuse to enslave the masses, or at least grow the government, which amounts to much the same thing.

    Personally, I think we need to hold a Front Porch Tea Party to find community-oriented ways to help us adjust to resource scarity and environmental degredation, whichever problem dominates. But your right-wing tea party types are mostly deep in denial, as are your left-wing grow-the-government-and-enslave-the-masses types. (If the global warmists really believed that carbon-induced AGW was a serious problem, they would have a steep netzero fossil fuels tax by now. But that wouldn’t let them grow the government, which is their real agenda. In other words, they don’t think it’s a serious problem. The right-wing tea partiers scoff at any warnings about research shortages, saying we’ve heard it all before, that it’s not possible that humans could have that kind of effect on the planet. I point out that those are famous last words. Look at the tragedy of the commons that took place for the fishing industry off of Newfoundland, for example. But they just stick their heads deeper in the sand as they drive down the road in their SUVs. (It’s probably because I have such a charming, engaging way of discussing these things with people.)

    Just the same, I think we need to respond to this report by holding a Front Porch Tea Party. Unfortunately, I don’t think a lot of people besides me will come.

  6. Ack again. I forgot to mention that I have been to Zap, North Dakota. I went to early elementary school in another town in the same county. I have been through the area in more recent years. I believe there is a “communistic, socialistic, fascistic, one-worlder plot designed to enslave the masses and hasten the arrival of an NWO derived global government,” but I find it difficult to believe there are four Saudi Arabians buried under Zap, North Dakota.

  7. “I think we need to respond to this report by holding a Front Porch Tea Party. Unfortunately, I don’t think a lot of people besides me will come.”

    I’d go. My wife would love to get me out of the apartment for a while and have the place to herself; even better that I’d have the opportunity to express my poignant views and opinions of matters social, cultural, economic, and political with someone besides her.

  8. I thought this quote from Wikipedia’s entry on Grantham was on target, illustrating the main leadership qualities characterizing the main institutions of modern society:

    In his Fall 2008 GMO letter, Grantham commented on the underlying causes of the world credit crisis:

    “I ask myself, ‘Why is it that several dozen people saw this crisis coming for years?’ I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke — none of them seemed to see it coming.

    I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained — but we end up with an army of left-brained immediate doers.

    So it’s more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored. . . .

    So we kept putting organization people — people who can influence and persuade and cajole — into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don’t have those skills.”[6]

    Grantham focused on the issue of personal traits and leadership in trying to explain how we reached the current economic crisis.

    Powerful, persuasive movers and shakers who lack historical insight, imagination, and long-term vision.

  9. @John Gorentz

    I was not advocating some sort of “big government solution” to the problems of resource scarcity and environmental degradation; rather, I meant only to imply that we first have to admit there’s a problem before we can move forward with possible solutions. Many people think there is some easy solution to the aforementioned problems. Hence the reference to the four Saudi Arabias some people believe are buried under Zap. Personally, like many people here at the “porch,” I hope local solutions can be developed that adequately address the challenges we face in the not too distant future.

    You mention the fishing industry off of Newfoundland as an example of the “we can’t possibly use it all up” mindset. I think we humans, whether through arrogance or willfull ingnorance (probably the same thing), are incapable of comprehending the idea of scarcity. Lately I’ve been reading about the North Sea oil field, and the nonsensical way in which the British government (mainly the Thatcher government at the behest of Nigel Lawson) chose to develop it. Instead of using the resource in a way that would have benefitted the people of Britain for years to come, the government invited the oil companies to “drill, baby drill.” Unfortunately, (at least from the perspective of the British people) the oil companies were all too good at their jobs. The field was ultimately developed so that peak production coincided with a period of historically low oil prices.

    Ultimately my point is this: We face significant challenges going forward–challenges that will require difficult choices and sacrifice from all of us. Why make this already difficult situation worse by veering off into the realm of the absurd?

  10. Robert, I agree entirely on the need to “admit there is a problem.” I find it either frustrating or amusing that there are some, mostly on the right, who think there are no necessary or desirable limits to economic growth, and those on the left, who think there are no necessary or desirable limits to the growth and scope of government.

    I must confess that I misread your comment about Zap, North Dakota. I figured this was some sort of Jimmy Hoffa-like conspiracy theory you were talking about. Until your reply, I wished I had made a crack about your being more likely to find Russian-Germans buried there than Saudi Arabians. (When I was in 2nd grade, there were even a few Russian-German kids who couldn’t understand English, or at least wouldn’t understand it when they didn’t think it was in their best interests to understand it.) But although I haven’t heard the prediction about 4 Saudi Arabias, I’ve heard things like it. I’ve heard people say there is always more oil if only we’d end restrictions on drilling, or restrictions on mining. And I’m sure there is a lot more oil, and that the Obama administration has been corrupt and dishonest in how it has dealt with offshore drilling. But as someone else once said, more oil in the ground doesn’t mean there is more oil that will get us gas at $2/gallon, or even at $4/gallon. I don’t believe the Obama administration’s conspiracy theories about big oil, but I also don’t trust oil companies with energy policy. I’m sure they’d be glad to be allowed to drill for oil, or extract oil that they could sell as gasoline at $10/gallon or $15/gallon, and that it could easily be a fair price. But you don’t hear that part from my fellow conservatives when they complain about restrictions on oil exploration.

    And I don’t understand the mania to end restrictions on drilling in the ANWR just so we can drive our SUVs on long commutes for a few years longer. I kind of like the ANWR the way it is. For that matter, I like Mercer County, North Dakota the way it is. The Army Corps of Engineers has already destroyed too much of it for, in part, the mostly false promise of energy. (One of my early memories is of being taken on a Sunday afternoon outing to archaeological digs that were soon going to be flooded by what is now Lake Sakakawea.) If China’s aggressive military stance means we need the oil to defend our right to patrol the Pacific Ocean, or even worse, if a country with an oppressive Obama-like, or EU-like administration was threatening our security, I’d say plow it up and use that oil to defend ourselves. But it would be a terrible loss, too. So for now, let’s leave that oil in the ground as a sort of insurance policy against future threats. The idea of burning it up now just to keep SUVs running a few years longer seems insane.

  11. Barry A. McCain, it sounds like it’s just the two of us. I’ll roast coffee a few days ahead so it’ll be at its best in time for the party. Remember, a tea party is where the tea is thrown overboard, not drunk. Two of my favorites in my current supply of greens are labeled “Peru FTO Apavam Coop Typica” and “Colombia Finca Buenavista – Carlos Imbachi” You can read about them at Sweet Maria’s web site.

    I understand that one reason for the higher price of coffee in recent years is that as other countries become more prosperous, many of the good coffee-growing hillsides are being converted into expensive home sites with fine vistas. Well, I hate to deny them that for the sake of my gringo coffee habit, so my solution to the problem is to enjoy the good stuff while it lasts. It’s probably just as insane as enjoying our oil while we burn it off as fast as we can, but there it is.

  12. @ John Gorentz, I enjoyed your comments, excepting this – passing a big gasoline tax is not politically feasible, any more than large cuts in entitlement progams. Especially over the last couple of years. I can’t imagine politicians raising taxes during a recession. So I don’t think you can use the lack of a tax increase as evidence of seriousness.

    But you can look at how people live. That says an awful lot about seriousness.

    Professor Deneen, Cheney has only made sense to me when I assume he believes we are living in an age of decreasing resources. He’s been around long enough to know what he can say publicly and retain credibility. And as much as I have disagreed with his public positions, the fact remains that an M-1 Abrams tank is a piece of junk without fuel. That’s something the government has to confront regardless of public opinion. And there’s alot more hard decisions to be made down the road.

  13. John Gorentz: Awesome! Maybe we can meet in Chicago or someplace else in “the middle”. I, too, am a coffee-phile and appreciate your taste. What about evening-time libations? I prefer gin & tonic, but I’m flexible.

    Dave: I don’t disagree with your stance on tax increases, but I always get a little chuckle when someone says “not politically feasible”, “political suicide”, or something similar. Oftentimes it seems to be code for “painful” or “deferred gratification” or “shared sacrifice”. The reality is that sometimes we have to do things we don’t like, lest we lose everything we hold dear. Entitlement reform and infrastructure maintenance are two critical areas we can’t ignore for much longer.

    Is the solution kind of political “microevolution” in which gradual changes add up to a change in opinions? Or, must someone be willing to fall upon his sword, make tough choices, and pay the consequences? (Ironically: Isn’t that what the president tried with ObamaCare? Or, what the previous one attempted with his “War on Terror”?)

    Personally, I think the way to solve so many of these problems is the two-fold combination of citizens “counting their blessings” (“I can’t believe this healthcare is so expesive! Why couldn’t I have died 30 years, like my parents would’ve?) and a steady decline in the size and scope of the federal government.

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