I'm not so sure that the system will grind to a halt, but I do suspect it will both shrink and slow down. Growth isn't necessary for trade to occur. Nor is growth of the total economy necessary for investment. There are parts of the economy that will grow and those parts will get investment. The return on the investment will be small, much smaller than in the past, but it will be there.

I'm not saying that the markets will save us. I'm also not saying that I trust that my current portfolio, a large part of which is invested in ETFs of several major markets, will just grow as in the past. Nor am I saying that I disagree with your recommended courses of action. But I think it is too strong to say that "the machine is grinding to a halt". We're going to get (or are getting) a wallop and its affects are going to last a long time, but markets are incredibly adaptable, and as long as people want to trade goods and services, they will exist, if not grow inexorably.

Hi, Mark.

I don't think it will be the end of all markets. Forgive me if I left you with that impression. Where humans are markets are sure to spring up, of that I'm sure.

Let me be more specific: the current system of trade that depends on far flung suppliers that equally depend on relatively stable exchange rates between the currencies of different countries will grind to a halt.

This is no small thing. I'm not sure I could find even a handful of articles of clothing in my closet that are made in North America.

In the aftermath, small, hyperlocal markets will emerge.

(edit)
As for growth being necessary, I think you'll find all our systems are predicated on the notion that business profits will exist and grow in the future:

  • our pension schemes
  • our social safety net
  • our ability in incur and service debt
  • growth is priced into the value of every stock

and so on.

-André

Cool. I think we are nearly of same mind. Completely agree that many of the services we enjoy today are going to change for the worse if not disappear altogether for a time.

Let's think about a system where growth is not expected. Heck, let's say that our current system comes to that realization. Bam! The markets drop massively with that expectation. Some markets even close as capital flees for cover. But where does the capital flee to? Commodities? Bonds? Cash? Inflation will probably make folk avoid cash and bonds. Companies will still exist, perhaps not the ones we know today, but those that survive will have learned their lesson. Ultimately, all that cash, probably much less valuable cash, will move back into the markets. But then what?

My bet is on growth. Not exponential growth, but a more sustainable curve. Perhaps logarithmic or logistic and starting well below what we're at today. Without the expectation of 6% profit per year, the markets will be much more sane. You won't throw your money into them unless you actually know something. People will still make money in the markets, even on average, just not the kind of money we've grown used to in the last 50 years.

But there's going to be some real suckage between now and then.

I think that without oil, money will have very little value compared to what it has now. The world has way too much money in it as it is, parked in bank accounts with owners who think they have real "wealth."