This is a guest post by Richard Heinberg. Richard is a Senior Fellow of the Post Carbon Institute and author of five books on resource depletion and societal responses to the energy problem. He can be found on the web at www.richardheinberg.com and www.postcarbon.org.

Everyone agrees: our economy is sick. The inescapable symptoms include declines in consumer spending and consumer confidence, together with a contraction of international trade and available credit. Add a collapse in real estate values and carnage in the automotive and airline industries and the picture looks grim indeed.

But why are both the U.S. economy and the larger global economy ailing? Among the mainstream media, world leaders, and America’s economists-in-chief (Treasury Secretary Geithner and Federal Reserve Chairman Bernanke) there is near-unanimity of opinion: these recent troubles are primarily due to a combination of bad real estate loans and poor regulation of financial derivatives.

This is the Conventional Diagnosis. If it is correct, then the treatment for our economic malady might logically include heavy doses of bailout money for beleaguered financial institutions, mortgage lenders, and car companies; better regulation of derivatives and futures markets; and stimulus programs to jumpstart consumer spending.

But what if this diagnosis is fundamentally flawed? The metaphor needs no belaboring: we all know that tragedy can result from a doctor’s misreading of symptoms, mistaking one disease for another.

There is a good deal of evidence that we are now a little past "peak oil". Many of us find it doesn't feel quite like we had imagined.

A lot of us had expected that peak oil would be basically a liquids fuels crisis, caused by geological limits. We expected that the solutions of the Department of Energy's Hirsch Report would be sufficient to forestall a crisis, especially if we had started 20 years ago, instead of now. These solutions included things like more oil from tar sands, improving automobile efficiency, and electrification of transport.

Now, when we seem to be at peak oil, we find the current situation feels a lot more like a "box" caused by limits to growth, rather than a liquid fuels crisis. The limits are of many forms--not just geological limits relating to oil--but other resource limits as well, such as fresh water, and concerns about climate change and the environment. The financial system is even behaving strangely.

Abstract: An updated systems model of global climate, resources, and energy extending the original World3 (“Limits to Growth”) model by inclusion of climate change and it's interaction with resources and energy. Outcomes are derived for total energy resources, human population, nutrition, consumption, economic activity and other parameters. Long-term outcomes are derived for a 1900 C.E. to 2100 C.E. time sequence, with human population decline.

Cassandra's story is very old: she was cursed that she would always tell the truth and never be believed. But it is also a very modern story and, perhaps, the quintessential Cassandras of our age are the group of scientists who prepared and published in 1972 the book titled "The Limits to Growth". With its scenarios of civilization collapse, the book shocked the world perhaps more than Cassandra had shocked her fellow Trojan citizens when she had predicted the fall of their city to the Achaeans. Just as Cassandra was not believed, so it was for the "Limits to Growth" which, today, is still widely seen as a thoroughly flawed study, wrong all along. This opinion is based only on lies and distortions but, apparently, Cassandra's curse is still alive and well in our times.

Above: image from an Athenian red vase from 5th century BC: Cassandra falls victim of the usual destiny of those who tell inconvenient truths.