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While official sources forecast U.S. Gross Domestic Product (GDP) to
surpass $20 trillion this year, the real figure is probably much less.
So how much less is real U.S. GDP? Well, that depends on how it is
measured. If we factor in energy consumption and the increase in total
public debt, U.S. GDP is likely less than half of the current figure.
Yes, it sounds insane to say that the current U.S. GDP is likely
overstated by at least 50%, but if we go by fundamental data, it isn’t that
crazy at all. Unfortunately, Americans have been conditioned to
believe that money grows on trees and energy comes from the Wizard of Oz.
Thus, if we need more money, then the U.S. Treasury can print more Federal
Reserve Notes, or we can swipe the credit card. And, if we need
electricity, we just switch on the light. Easy… Peasy.
Due to the highly complex nature of the world in which we live in today,
the individual is clueless as to the tremendous amount of energy and work
that it takes to produce the foods we eat and the goods, energy,
and materials we consume. So, it should be no surprise that U.S.
GDP can be overstated by 50%+.
If we go by the data that shows the growth of Global GDP is related to the
growth of Global Oil Supply, then it is very quite easy to spot inflated GDP
figures. However, you have to be able to understand this essential
ENERGY=GDP relationship. Of course, this is not taught in business or
economic classes in high school or college. Instead, the economic
teachers focus on the insane theory of SUPPLY vs. DEMAND. If
individuals are taught GARBAGE, then their thinking and reasoning is
GARBAGE. So, we really can’t blame them.
In looking at the following chart by Gail Tverberg, the increase in Global
GDP corresponds to the rise in Global Oil Supply:
As the annual growth percentage of World Oil Supply declined in
the periods shown in the chart above, the same trend took place in World GDP.
If we can understand the OIL-GDP relationship figures in the chart, then it
is impossible for a country to grow its GDP if it does not increase its
energy consumption.
A perfect example of a country that increased both its energy consumption
and GDP, is China. We can clearly see that as China’s total energy
consumption increased from 2000 to 2011, so did its GDP:
Furthermore, as China experienced double-digit annual increases in energy
consumption between 2000-2008, its GDP also enjoyed double-digit
growth. However, the same thing can’t be said for the United States as
its GDP nearly doubled since 2000 while total domestic energy consumption
remained flat:
In 2000, the U.S. consumed a total of 98.8 Quadrillion BTU’s (Quad
BTU’s) of energy to produce $10.6 trillion in GDP. Amazingly, in 2017,
the U.S. only burned 97.9 Quad BTU’s to generate $19.4 trillion in GDP.
It seems as if the U.S. economy has figured out some magical way to consume
less energy to produce nearly double the GDP.
Now, if we look at U.S. energy consumption from 1960 to 2000, we can
clearly see that it increased along with the GDP. However, something
changed after 2000 as U.S. GDP continued to grow while energy production
remained flat or even declined. So, it seems as if the Energy Wizard of
Oz stepped in and did his magic to produce GDP out of thin air.
It’s really quite hilarious to watch supposedly intelligent economists on
CNBC and Bloomberg discuss rising U.S. GDP without factoring in energy
consumption. Now, some individuals are going to claim that the U.S.
economy has become more efficient with its energy consumption, so it was able
to double its GDP. While this sounds like a plausible explanation,
unfortunately, the EROI – Energy Returned On Investment of U.S. energy supply
has been falling considerably since 2000. Which means, U.S. energy
efficiency is going in the opposite direction… getting worse, not better.
Now that we understand that a country needs to consume more energy to grow
its GDP, that’s only part of the story. It’s one thing to bamboozle
individuals into believing GDP can increase while energy consumption remains
flat, but another thing entirely to do so as public debt explodes.
Since 2000, U.S. GDP has increased from $10.6 trillion to $19.3 trillion
while total public debt skyrocketed by a staggering $15 trillion:
To put it another way, U.S. GDP increased by $9 trillion over the past
seventeen years by adding $15 trillion worth of debt. Not a bad deal..
ah? So, not only has the Energy Wizard of Oz allowed U.S. GDP to grow
while energy consumption remained flat but we must have had some help with
the massive increase in debt by the Tooth Fairy.
As Americans continue to move blindly towards the coming ENERGY
SENECA CLIFF, there’s going to be a real surprise when ILLUSIONS are replaced
by REALITY.
Lastly, for all the professionals, individuals and bloggers who think they
are really smart by claiming “This time in the stock market is different” or
“Peak oil or the EROI don’t matter,” it’s time that you expand your knowledge
and wisdom. If society has any chance of transitioning from the coming
Energy and Economic Collapse, it will only do so if adults stop acting like
children and grow up.
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