Jeremy Grantham endeared himself to resource depletionists once again this week, as the longtime manager at asset giant GMO confronted the issue of limits, in a finite world. | see: Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever.
I wrote about Grantham’s original revelations in late 2009, when he first disclosed to the public his views on resource depletion, and in particular peak oil. Like the rest of us who’ve attempted to explain the trailing, cultural normalcy bias that’s been built up over the past 100 years, however, Jeremy’s discovered that having spoken—even from the mantle of GMO—doesn’t mean asset management professionals will pay attention. From my 2009 post: Peak Oil and Professional Money Management:
I was unsurprised to read Jeremy Grantham’s passing lament in his latest Quarterly Letter, that, his previous remarks on resource depletion went almost completely unnoticed, as though his words “had disappeared down a black hole.”
The decision of the University of Texas to trade a billion US Dollars for gold, revealed last week, remains an outlier among a profession otherwise stuck in Normal (Gauss). Surely Grantham knows that at Yale, at Harvard, and at CALPERS capital is being managed to optimize for relative gains among fellow asset managers. Worse, at a time of declining purchasing power among nearly all paper currencies (a feature of resource depletion) the profession continues to get away with posting nominal gains as the real losses mount.
The religion that makes this all possible of course is contemporary economic theory, with its belief in the infinite capability of credit. Indeed, the tie that binds all contemporary economists from Mankiw and Barro and Summers, to Krugman, Galbraith and DeLong is the view that economies are only restrained by man-made constructs–either regulatory or monetary. Hardly anyone believes in a physical limit that would permanently downshift future industrial growth, thus making current debt obligations either unserviceable, or unpayable. Grantham will come in for much uninformed criticism for these views. Or, like the rest of us, he’ll simply be ignored. But let’s be clear: the religion Grantham is up against is the belief in infinite resources in a finite world.
Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever – Jeremy Grantham, GMO (free registration required).
Image: via comenter RDY, at The Oil Drum.
Mr. Soddy’s Ecological Economy, Eric Zencey, 2008.