Thanks for commenting, Chris. Re: the Hollywood ending, I understand how those conversations go. I don't need to pursue that further.

As for not being able to predict the future, please don't be insulted by this but I've found in my work that often that point is made as an excuse to stop thinking (remember that I coach business executives -- they are not immune from this particular foible). Of course you can't predict the future. But you can set ranges and bracket the possibilities. So let's not stop and instead keep going.

On the positive side, does anyone think the economy can grow while oil supply is shrinking? That's clearly impossible given how dependent on oil our economy is. (There are a few people who think this, we call them cornucopians and they are stuck in a paradigm and they can't see that they are stuck, so it's valid to ignore them for now.)

So that leaves the economy staying even as the best outcome possible. Is even that tenable?

No, because the best estimates are that each % of oil provides between 0.6% (from the last oil shocks; see Hirsch's paper on the topic) to 2.5% of the GDP. Given those two data points and at least looking to determine the correct order of magnitude, Hirsch reasons that a 1:10 ratio is too low and that a 10:1 ratio is too high, thus for his purposes a 1:1 ratio works well. I'll use the same order of magnitude.

Now we are left with the economy declining at something like the same rate that oil is declining as the best possible outcome.

What's the worst possible outcome?

The worst possible outcome is that people around the world collectively wake up and realize that the money they think they have in the bank is really nothing but numbers in a computer database. What gives those numbers value are two things:

• the agreement that people will perform work when numbers are moved from one database to another
• that the law is there to enforce the contracts that specify the moving of numbers between databases

In other words, these numbers are just an agreement between people backed by the force of law. They are nothing more than that. Agreements can and do change all the time.

If people stop agreeing to the above, then the system breaks down — completely. The numbers in the databases become just numbers in a database.

Now that we've bracketed the best and worst cases (neither of which are very pleasant), let's look at what could cause people to stop agreeing that these numbers in the database are worth paying attention to.

One thing that would do that is massive defaults on the loans that are the source of our fiat currency (see Chris Martenson's Crash Course and the video Money as Debt to understand this point clearly). At that point it doesn't matter if the force of law is there to back up a contract because if the business or individual can't gather the money to service the debt the law can't do anything about it except organize the cleanup.

So what would cause a massive default of loans?

One thing that for sure would do that is a declining economy in which wave after wave of businesses and individuals declare bankruptcy. The filing for bankruptcy is primarily designed to discharge debts at some fraction of the original amount. Countries that allow quick discharges, like the U.S., have tended to be more resilient than those for which bankruptcy is more onerous because entrepreneurs are allowed within a relatively short time frame to dust themselves off and try again. But this would overwhelm the system.

All of a sudden a gradual decline doesn't seem very likely, does it? A massive wave of loan defaults is actually probable as oil is removed from the world economy.

Soon the financiers and asset holders will realize that their best bet is to turn their assets into cash which can then be used to buy things that they really want, like farm land, for instance. That will be the beginning of the Great Asset Selloff and you can already see the beginning of it as we enter the depression by looking at the number of listings in Craigslist.

When I started selling my car at the beginning of February there were about twenty Subaru of all models available in the Bay Area of San Francisco. My strategy was to be the lowest price always so that I got the calls before anyone else. I had two buyers that I foolishly thought were already getting a great deal so I didn't budge during negotiations and they walked away. That occurred at the$600 and $800 below-Blue Book prices. My final selling price at the beginning of May? $1400 below Blue Book and it was getting to be quite a job making sure I was the lowest price because the final week I counted over 70 Subarus of just my model.

The machine is grinding to a halt. Me saying so might just have people prepare a little who wouldn't otherwise, even at the cost of potentially speeding up the process.

So I think a long-term investment strategy has no logical basis to it — at all (see Chris' comment below). And I don't even think it's "on the edge" or "could go either way." Mathematically the economy we have set up requires growth. Remove oil and one removes growth. Remove growth and the system collapses. Period. If the reader doesn't believe that, ask someone who understands this to walk you through it.

That's why in the Post Peak Living Six Week UnCrash Course I recommend that people turn their money into things as quickly as they can (the course and The Guide To Post Peak Living have recommended things). I also coach people to give up their attachment to how they thought the future was going to look and start creating a new future for themselves worth living into. No one is going to give people their new role; they are going to have to create it for themselves and start preparing now. For instance, I am taking a welding course and am going to buy a welding machine and supplies. I figure that might be a good backup skill to have.

And I wish the very best of luck to all of us.

-André
President, PostPeakLiving.com
Cofounder, Post Carbon Marin (part of the Relocalize.net network)

ChrisN said:

We already have a multitude of possible solutions to this problem. It's really more a question of political will and financial health than anything else

This sounds very cornucopian. Did you really mean that there is no doubt that alternative technologies and resources can substitute for fossil fuels, on the same scale for all uses, as well as allowing continued growth of the economy, into the future, with only politics and economics stopping that move?

Could you clarify whether that is what you meant?

That's why investing in the energy sector is the focus of the book, and why a discussion about fiat currency and economic theory would have been off topic.

I think fiat currency discussion and economic theory should have been covered(I haven't read the book). what's most likely to happen is that we're going to have massive inflation and even hyperinflation as fiat currencies feel the strain of inflation. it may not be wise to hold some currencies. some fiat currencies might go away. some might convert back to gold or silver standard.