GMO Quarterly Letter: Grantham On The Coming "Peak Everything" Disaster

Tyler Durden's picture

It was just three short months ago that Jeremy Grantham was spewing Malthusian fire and brimstone. He did so, however, from a broadly generalist perspective. Today, the head of GMO has released his second follow up in the "peak everything" series which is sure to provoke yet another round of bickering and debate between the disciples and nemeses of the logarithmic function and its applications in the real world. Among the key topic dissected this time are ongoing resource depletion and soil erosion. To wit: "As the population continues to grow, we will be stressed by recurrent shortages of hydrocarbons, metals, water, and, especially, fertilizer. Our global agriculture, though, will clearly bear the greatest stresses. It may have the responsibility for feeding an extra two to three billion mouths, an increase of 30% to 40% in just 40 years. The availability of the highest quality land will almost certainly continue to shrink slowly, and the quality of typical arable soil will continue to slowly decline globally due to erosion despite increased efforts to prevent it. This puts a huge burden on increasing productivity...Here, the discussion is about the pain and time involved in getting to long-term sustainability as well as trying to separate the merely irritating from the real, often surreptitious, threats to the long-term viability of our current affluent but reckless society. The moral however, is clear. As Jim Rogers likes to say: be a farmer not a banker – the world needs good farmers!"

Below is Grantham's thesis summary:


  • We humans have the brains and the means to reach real planetary sustainability. The problem is with us and our focus on short-term growth and pro ts, which is likely to cause suffering on a vast scale. With foresight and thoughtful planning, this suffering is completely avoidable.
  • Although we will have energy problems with peak oil, this is probably an area where human ingenuity will indeed eventually triumph and in 50 years we will have muddled through well enough, despite price problems along the way.
  • Shortages of metals and fresh water will each cause severe problems, but in the end we will adjust our behavior enough to be merely irritated rather than threatened, although in the case of metals, the pressure from shortages and higher prices will slowly increase forever.
  • Running out completely of potassium (potash) and phosphorus (phosphates) and eroding our soils are the real long-term problems we face. Their total or nearly total depletion would make it impossible to feed the 10 billion people expected 50 years from now.
  • Potassium and phosphorus are necessary for all life; they can not be manufactured and cannot be substituted for. We depend on finite mined resources that are very unevenly scattered around the world.
  • Globally, soil is eroding at a rate that is several times that of the natural replacement rate. It is probable, although not certain, that the U.S. is still losing ground. The world as a whole certainly is.
  • In particular, a significant number of poor countries found mostly in Africa and Asia will almost certainly suffer from increasing malnutrition and starvation. The possibility of foreign assistance on the scale required seems remote.
  • The many stresses on agriculture will be exacerbated at least slightly by increasing temperatures, and severely by increased weather instability, especially more frequent and severe droughts and floods.
  • Capitalism, despite its magnificent virtues in the short term– above all, its ability to adjust to changing conditions – has several weaknesses that affect this issue.
    • It cannot deal with the tragedy of the commons, e.g., overfishing, collective soil erosion, and air contamination.
    • The finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and demand.
    • More generally, because of the use of very high discount rates, modern capitalism attributes no material cost to damage that occurs far into the future. Our grandchildren and the problems they will face because of a warming planet with increasing weather instability and, particularly, with resource shortages, have, to the standard capitalist approach, no material present value.

And so on. Much more inside.

Grant Ham

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NuckingFuts's picture

Peak Bitchez, Bitchez

NuckingFuts's picture

The moral however, is clear. As Jim Rogers likes to say: be a farmer not a banker – the world needs good farmers!"

We just dug 2,000 more pounds of potates today......... Will trade carbs for silver and gold.  See you soon.

mt paul's picture

one potato

one oz of silver

RobD's picture

Feed those carbs to a pig and we may have a deal. Carbs are poison unless a beast processes them into protein and fat first.

Chuck Walla's picture

Hey! There's room for both. A pork chop with a potato, ummmmm....

Smiddywesson's picture

If carbs are poision, then why do we have flat teeth?  We are omnivores.

Hulk's picture

Match carb intake to your level of activity and all is well. Otherwise, they are deadly...

Fedophile's picture

Haven't you heard we're iPadivores?

Long-John-Silver's picture

The only problem with your argument is a brain that allows us to cut meat with tools we make.

That tool can be nothing more than a flake sharpened rock. 

BigJim's picture

Feed those carbs to a pig and we may have a deal. Carbs are poison unless a beast processes them into protein and fat first.

Vegetables are what food eats.

snowball777's picture

...said the obese, heart-diseased corn-syrup addict.


sun tzu's picture

I guess lions and tigers are all obese, heart-diseased corn syrup addicts

snowball777's picture

This just in: you're not a lion, ape-boy. The next time you run down dinner and rip it open with your own teeth, make a video.

ping's picture

Finally! I knew I was taping that stuff for a good reason. 

TheMerryPrankster's picture

Everything gives you cancer:

Joe Jackson said so.

On a long enough timeline we're all dead.


jdrose1985's picture

Caused by the lack of effective toxin removal by the body.

Antiperspirant : breast cancer

knavechild's picture

The problem is that the government wants to deem farmers as terrorists and send FDA swat teams after you if you grow organic produce. We're literally living in a totalitarian nightmare that will only get worse.

Reptil's picture


In europe it's not there yet but the seeds of monoculutured exclusive agriculture are sprouting from the ground now.

And not many are aware that the US of A's revolution is upon us.

Silver Kiwi's picture

don't blame the Govt, blame Monsanto.

Bananamerican's picture

can't they be one and the same?

Smiddywesson's picture

don't blame the Govt, blame Monsanto

Blame facism.  Corporations exist to make money.  You SHOULD blame the government.

Reptil's picture

Yes, that's the party that is responsible.

The Government (EU as well as USA) is tied at the hip to Monsanto, agreed.

Long-John-Silver's picture

Even better is holding back water behind a dam and releasing it to flood and destroy thousands of acres of farm land rendering it useless for many years.

TheMerryPrankster's picture

Even better is flooding fertile farmland with flood water, when there is a drought in Texas and the Southwest. A very good case could be made for building a diversionary channel from the upper or middle Mississippi River to the southwestern states, it would provide fresh water and jobs and add valuable infrastructure to our nation.

The lack of vision by our leaders and our populace borders on blindness.

sun tzu's picture

We can't waste money on useful public projects like that. We need to build bigger and better federal buildings. The old ones are at least 10 years old by now. 

AnAnonymous's picture

The lack of vision by our leaders and our populace borders on blindness.


How? The US is characterized by a strong inequality between US citizens.

Some people accumulate  to live without any kind of work (including getting the money to work) through five or six generations while others struggle to make the ends meet on a month basis.

With such inequality, it is not possible to form a cohesive social project.

Flooding right now arable land is a sound strategy for anyone in the US who falls in the first category, that is with an offspring destined to prosper for at the least the next six generations to come.

By flooding arable land, these people preserve them and put them out of reach of the greedy people living on a monthly basis who would like to consume them right now.

The first category of people have enough time ahead to know they will be still here when the land becomes once again farming friendly.

rajat_bhatia's picture

You guys, the indian metals exchange opens up on saturday, what do you guys suggest i should do? i hold Copper Shorts as of now...

Oh regional Indian's picture

rajat, copper shorts are really heavy, no?

Do you hold them up with iron belts or steel suspenders?

Just curious.

I personally prefer cotton. They chafe less.

Jai ho!


sun tzu's picture

I suggest you have a beer and cool off in the swimming pool

snowball777's picture

Peak Bitchez, Bitchez


Au contraire....bitchez be quite renewable.

mt paul's picture

peak peas



DaBernank's picture

Of course I take it with more than 1 grain of salt but it's an interesting thesis. There was a "study" done at Cornell University a few years back where a group of researchers crunched a whole bunch of data and determined that the earth could indefinitely support only 2 billion people.

Cheesy Bastard's picture

Mt. Everest-Peak peak. 

JohnG's picture

Finally a thread not about politics!

Now reading article....

lewy14's picture

This is all about politics.

This is a sanctimonious New Englander explaining to his own dopamine receptors why he needs to abolish democracy and capitalism in favor of rule by him and his crew - you know, the smart, right thinking, forsighted Central Planners. For the kids. For the planet. For great justice!

His dopamine receptors need the explanation because <i>power rocks</i> is too crude for his self regard.

I grew up with sanctimounious New England culture and when I moved away I saw through their bullshit. It always ends up in the same place - the necessity of rule by smart, right thinking people.

Like themselves.

disabledvet's picture

Doesn't leave a lot of room for the native populations does it? If it's capitalism the money buys the excuse propagated by the media. If it's government there are no appeal rights. Of course it does beg the question "why did we have a founding document in the first place?" Apparently those were people who understood their mortality all too well. Not the current crop:

Gordon Freeman's picture

Lewy:  Amen, brother!  I know just what you mean.  

A New England "liberal" is the American fauna's version of a European fascist.

Temporalist's picture

Forbes on CPI:

"It works like this: If steak gets too expensive and you start buying hamburger instead… well, your price of beef hasn’t really gone up and your cost of living is unchanged. This is one of the reasons official CPI is running 3.6%, but if it were still calculated the way it was before the Greenspan Commission went to work, it would be 11.1%."

"Under “chained CPI,” if your hamburger gets too expensive and you start buying beans instead… well, your price of protein hasn’t really gone up and your cost of living is unchanged."

Bob's picture

The Times of the nineteenth of December had published the official forecasts of the output of various classes of consumption goods in the fourth quarter of 1983, which was also the sixth quarter of the Ninth Three-Year Plan. Today's issue contained a statement of the actual output, from which it appeared that the forecasts were in every instance grossly wrong. Winston's job was to rectify the original figures by making them agree with the later ones. As for the third message, it referred to a very simple error which could be set right in a couple of minutes. As short a time ago as February, the Ministry of Plenty had issued a promise (a "categorical pledge" were the official words) that there would be no reduction of the chocolate ration during 1984. Actually, as Winston was aware, the chocolate ration was to be reduced from thirty grams to twenty at the end of the present week. All that was needed was to substitute for the original promise a warning that it would probably be necessary to reduce the ration at some time in April. (1.4.6)

Orwell, 1984


In our case, on the other hand, this new definition of inflation eliminates the need for a "memory hole" altogether.  Your standard of living has not changed . . . the numbers themselves prove it. 

Numbers do not lie.  Believe.

It reminds me of our steadily "increasing" GDP--progressively more and more inflated by the wonders of financial industry "productivity" --where Mr. Market has become the "all knowing, unbiased" substitute for Big Brother.

Of course, nobody who "matters" will care.  Those who are still getting their full chocolate ration will deny they are getting more than others and, to the extent that they acknowledge it at all, will dismiss complaints by the have nots as proof of ignorance and blind jealousy that are immune to reason. 

By the end, stark inequity per se will be de facto evidence of the corrosive effect of such personal perversities.  It is the complaints, in and of themselves, that will be considered the problem: They strain the social fabric and undermine confidence.  Are we not all in this together?

Mr. Market requires confidence to be happy. And if he's happy, we'll be happy.  

Belief is Happiness.  Disbelief is Destruction.

Spastica Rex's picture

Believe in material abundance and sensual pleasure and ye shall be saved.

TheMerryPrankster's picture

Can I get some slack, please?


11b40's picture

+10.......thanks, Bob.

Isn't it amazing how clearly Huxley & Orwell could see the distant future, yet today "nobody could have seen this coming" is the visionary standard we live by.

Seer's picture

"By the end, stark inequity per se will be de facto evidence of the corrosive effect of such personal perversities."

It's a really fine edge here...  As I go forward in time I'll be seen as having "more."  There won't be any reflection on the fact that this was due to previous frugality, frugality during times that others "party'd on."

Having others define what inequity is is sure way to ensure that They maintain their level of control (for the sake of those who have not- "doing God's work!").

Spastica Rex's picture

This sounds like equivocation to me.

DCFusor's picture

Yet another case of manipulating people via messing up the language they speak and think in.  In this particular case, it's simply a change from the Cost of Living (dubiously calculated anyway) to the Cost of Barely Staying Alive.  It would be better to change the name to more closely describe what's being measured.

CS Lewis wrote about this post WWII and it had already been going on long before.

Cost of living, at minimum, ought to be computed for various age classes.  When I was young, the things I had to buy were different by quite a bit.  No meds for one thing.  But I had to buy furniture and silverware, my first car, rent on an apartment.  Real "starting out in life" stuff ate all my money.

At the other end of my life, I own homes, a farm, will never manage to throw away enough of the junk I've collected, have to keep a couple computers upgraded, and now have the odd medical expense.  Most of the rest is taken care of for good -- or as long as I'm likely to live from here.

Now, with "hedonics" - if a computer costs the same, but is rated twice as fast, it's now calculated to cost half as much.  But I can't buy a half speed/half cost computer so easily....You could think Ipad, or just the fact that printers still cost about the same, power supplies and monitors and so on -- and cables.

But of course all that is missing the point - these numbers are cooked, and the people doing the cooking have a strong motive, as many of their expenses are tied to them, like say, COLA for SS, we darned old farts just live too long these days...Cooking the books seems to be the lazy, easy way out, where for example costing out how much the legal profession and laws add to medical expenses is harder -- and would make a lot more people a lot more angry.  My mother, a psychologist (who can't touch a patient, and can't even prescribe any drugs, just talk) paid more per HOUR for malpractice insurance than most people make in their regular jobs.  Does anyone else see a problem there?  Ditto costs of basic medical equipment, tests and so on -- all boosted by legal liability to ridiculous levels -- several times what they really should "cost" if the makers were only say, tripling their money.

Bob's picture

How much of the extra medical costs attributed to "defensive medicine" by doctors swearing it's the lawyers' fault (while tremendously profiting as a goup and as an industry controlled by doctors) are really the result of tort abuse is indeed difficult to quantify.  All we've got is their sworn pleas for relief.  They make 1000x more off this action than lawyers and clients, imo. 

As to your mom's predicament, I'm afraid somebody's word is not credible on that.  Unless your mother works less than 5-6 hours a week, she cannot possibly be paying "more per HOUR for malpractice insurance than most people make in their regular jobs."  Evan a minimum wage job worked full time yields $17k per year, while  APA Malpractice Insurance (always the most expensive carrier) was $3,000 per year last I knew.  No pyscholgist is paying $17k per year for malpractice insurance . . . unless their professional/claim history has labeled them as a poor risk. 

11b40's picture


There are many common sense solutions to problems, but we lack the collective will to put them in place, or the corruption is simply too overwhelming for changes to be implemented.

Just one small example - this morning on C-Span, there was a discussion on money in politics.  On and on they went, describing the problem and all the reasons we could really do anything about it.  I could not get in on the phone lines, but there is a great political solution that the public would rally around if someone had the courage and motivation to pick up the ball and run with it.  Change the law to say that only registered voters could make campaign contributions.  End of corporate money, union money, foreign money, PAC money....bye, bye special interest groups and Washington's lobby industry.  But, strangely, no one mentioned real solutions.

To your point above, far too many special interests have given bought themselves privileges....passes to loot the citizens, if you will.