Last year, legendary investor Jeremy Grantham published a treatise on the explosion of commodity prices. Also he offers a strikingly depressing view of the future of humanity.
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Grantham believes the world is undergoing a constant “shift” paradigm “, in which the number of people on Earth as a result is constantly ahead of the planet’s ability to feed us.
The phenomenon of an increasing number of people using not infinite natural resources cannot last forever, says Grantham, and the cost of metals, hydrocarbons (oil), and food now starts to reflect it.
In the meantime, here is a list of Grantham’s arguments, as well as key moments at the end.
– Over the past 200 years, the world’s population has exploded – how and predicted Malthus. What he could not foresee is discoveries of oil and other natural resources that could (temporarily) support the population explosion. These resources now are dwindling … 
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– Over the past 100 years, commodity prices have trended by decrease, as technologies cheapened their extraction and production. Grantham believes that this trend is over forever. 
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– Take, for example, oil … oil was traded at approximately 16 dollars per barrel for a hundred years. Then when demand exceeded supply, the paradigm has shifted – to about 35 dollars per barrel. Now, Grantham believes, the paradigm has shifted again, to an average of about $ 75 a barrel. 
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– Why is the paradigm shift? Because demand is now growing much faster than offers. World oil production since the 1970s hardly increased while oil use is dramatic increased. 
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– And do not buy the promises that future discovery of deposits will save us. In the 1980s, we started every year consume more oil than found. This inequality has since only increasing. 
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– And not only oil is experiencing a price paradigm shift. The cost of metals has also risen sharply. For example, a 100-year-old iron ore price review. 
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– The story with metals is the same as with oil: everything low hanging fruits are already harvested. Despite the use of new technology, output per ton of metal ore continues to fall. Here to for example, output per ton of copper ore: 
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– The same story with food. Forty years ago average yield growth per acre was an impressive 3.5 percent per year. He was ahead of the global growth rate. The former population is about 2 percent. However in recent years growth yields per acre fell to about 1.5 percent. this is dangerous close to population growth and at some point the line intersect. 
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– By the way, the increase in yield is the result intensive use of fertilizers, and most fertilizers are the same raw material (e.g. potassium). So there are endless stocks there is no fertilizer either. 
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– No wonder food prices are growing rapidly. 
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– So why is all this happening now, although the population has exploded in the world for two centuries? The answer, in part, lies in The impressive growth of China, India and other large countries. The use of resources by these countries is staggering. Here are the ratings in percent of global consumption of various resources that consumed by China alone. (China is only 9 percent of global GDP. And consumes 53 percent of the world cement!). 
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Grantham:
Brief Summary
The world uses its natural resources at an alarming rate, and this causes a constant shift in their value. We all have to adjust your behavior in accordance with these new conditions. This will help if we do this without delay.
Summary
* Until about 1800, our species had no reserve reserves, and lived like other animal species in accordance with restrictions food, which led to a decrease or increase in population.
* Around the 1800s, the use of hydrocarbons led to an explosion in energy use, in food production, and through the creation of large surpluses to a huge increase in savings and scientific progress.
* From 1800, the population grew from 800 million to 7 billion, and already approaching 8 billion.
* Population growth, tenfold increase in savings in developed countries, and the current explosive growth in developing countries is fast eat away from our limited resources of hydrocarbons and metals, fertilizers, free land and water.
* Now, despite a significant increase in use fertilizers, yield growth per hectare decreased from 3.5 in 1960 to 1.2 percent currently. There is little free land left which could be involved, and as people getting richer, they eat more and more meat fed on grain. As the population continues to grow over one percent, stock there is little strength left.
* Growth problems in conditions of limited resources are not very well understood optimistic, short-term oriented periods and people with little thought in arithmetic (including politicians).
* The fact is that composite growth is not sustainable. If we we continue our desperate focus on growth, we lose everything and perish. We must replace quality growth. quantitative.
* Prices for all important commodities except oil at over a hundred years until 2002 declined by an average of 70 percent. From 2002 to the present, this whole decline has been leveled even more than during World War II, price growth.
* Statistically, most commodities are now so far from its former downtrend that it makes quite it is likely that the old trend has changed – which is actually is a paradigm shift – perhaps the most important economic an event since the industrial revolution.
* Climate change is associated with weather instability, but last year was exceptionally bad. In the short term, the weather will probably be less bad.
* Excellent long-term investment opportunities in resources and their effective use is compromised by better weather in next year and the likelihood that China may to trip over.
* From now on, price pressures and lack of resources will be permanent elements of our lives. This will lead to more growing slowdown in developed and developing countries, and a heavy burden will fall on poor countries.
* We all need to develop serious resource plans, and in in particular, energy policy. Time to them scatter, we don’t have much.
China time
