The Top 5 Looming Financial Issues

by: John Lounsbury July 28, 2008 | about stocks: DIA / QQQQ / SPY    

John Lounsbury

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With all the turmoil in investment markets, I have found it useful to try to estimate major financial issues that will influence the American economy over the next few years and several decades. This will summarize my current findings ranked in order of total dollar value. All of these problems need to be resolved for the future viability of our way of life. I think it is obvious that if the biggest problem is not solved, what we do with the other four will be of little consequence.

Issue #5: The estimated asset write-downs resulting from the 2007-2008 credit crisis. The International Monetary Fund has estimated this to be $1.1 trillion. Less than half of this has been realized to date. The time frame for this to be totally realized is one to three years. The potential for this estimate to be too high is limited to a couple hundred billion at the most. The potential for this estimate to be too low depends on whether or not we see an extended downward spiral in home prices and the associated worsening of credit markets. Worst case scenario is probably another $1 to $1.5 trillion, corresponding to defaults on 20% to 30% of home mortgages.

Issue #4: U.S. national debt of $4.4 Trillion. This figure is obtained from the “Long-tern Financial Outlook”, U.S. Government Accountability Office, Jan. 2008. Government estimates envision a balanced budget by 2013. If you believe this, I would like to sell you a well known bridge over the East River. However, I will use that to project the national debt to grow to $5.9 Trillion in the next five years. The probability that this is too high an estimate is extremely low. The probability that the national debt will be larger than $5.9 Trillion in 2013 is very high. Furthermore, I am skeptical that a balanced budget will be achieved, not only in five years, but even in 10 years. The risk is high that the national debt will continue to grow through deficit spending for many years to come. I do not have a rational way to estimate an upper limit for the national debt in five years or beyond.

Issue #3: The unfunded liabilty of the Social Security System is estimated to be $6.7 Trillion (Government Accountability Office, Jan. 2008). This number could be higher with inflation above the report estimate - approximately 3%. The time frame for this figure is several decades.

Issue #2: The unfunded liability of Medicare is estimated by the Government Accountability Office to be $34.1 Trillion. Again, higher inflation could raise this estimate. The time frame is several decades.

Issue #1: The cost of imported oil. Many sources have estimated the 2008 cost for imported oil to be approximately $800 Billion at an average price of $120 to $130 per barrel. The estimate for the hidden cost of oil - added military expense, environmental expense, health care expense, infrastructure degradation, etc - was approximately $825 Billion per year in 2006. See here for details on the hidden cost (.pdf). 

If we assume the 2006 hidden costs and the estimated 2008 purchase cost to be applicable for the next 30 years, the cost of importing oil over that time frame is approximately $48.7 Trillion. The likelihood that this too high an estimate is extremely small. To lower the cost not only does the price of oil have to stay at or below current levels, the amount of oil we import must stay at or below current levels and there must be no inflation for 30 years. With that scenario, the present value of a cash flow of $1.6 Trillion per year is $45 Trillion at a discount rate of 5%.

It is much more likely that the annual cost for imported oil will rise from the $1.6 Trillion per year. If the cost rises by 10% per year (probably too small a figure), the present value of the cash flows over 30 years is approximately $58 Trillion. The cost of continuing current energy policy is somewhere between $45 Trillion (an unrealistic lower bound) and something larger than $58 Trillion. Half of this money is paid to entities outside of our economy and can only return to us by purchase of our assets. A lot of the hidden cost remains within our economy, but none contributes to higher productivity. The hidden costs are basically maintenance expenses.

I have been trying to find some economist who would assess how the investment in getting the energy problem addressed would positively effect the federal debt, Social Security and Medicare problems. If we were to develop domestic energy sources that would remove the need for imported oil within ten years (Al Gore has called for such an effort), $40 Trillion (or more) of Issue #1 would not go overseas and to maintenance of the oil import system, but would be spent domestically on new production and distribution systems. If I (arbitrarily) assign 60% to labor and 20% to domestic corporate profit, potential federal income tax revenue increases by $7 Trillion or so, Social Security revenues are increased by about $4 Trillion, and Medicare revenues are increased by about $1 Trillion. This is all back of the envelope, and does not incorporate the time value of money considerations.

The problem is that there must be political will to deal with a level of economic austerity usually found only in times of major war, such as WW II. Can America face the music or has our country become prisoner to living in the moment?

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This article has 58 comments:

  •  
    Jul 27 08:06 AM
    The Bureau of Public Debt shows US Public Debt outstanding at $9.5 Trillion. We are broke already !
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  •  
    Jul 27 08:18 AM
    "The problem is that there must be political will to deal with a level of economic austerity usually found only in times of major war, such as WW II."

    An apt comparison. Conscription. Food and fuel rationing. Retooling GM and F to make tanks, jeeps, and bombs. Confiscatory taxation. Censorship. Internment of resident aliens.

    And who do you propose to attack? ... Mexico?
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  •  
    Jul 27 09:43 AM
    The link to the website for the hidden cost of oil was not displayed in the article as publiched. It is setamericafree.org/saf...

    Sorry
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  •  
    Jul 27 10:29 AM
    I would propose to attack the energy crisis. As a nation we need to decide which (or all?) of the following should be pursued: solar, wind, geothermal, tidal, nuclear, biofuels, coal, oil, natural gas....

    The decisions made should make sure we do not sacrifice our future for current convenience. That is the austerity that may have to be faced. Otherwise, I will "get mine" and "my grandchildren will be so brilliant they can figure it out" will be the modus operandi.

    The government can only do a small part of what needs to be done to get to a sustainable future. Private, even individual, enterprise will carry the load. The government did not invent the automobile, the airplane and our modern transportation vehicles. The government did, however provide most of the infrastructure that enabled them to become engines of our economy. A different model is the railroad system, where both vehicles and infrastructure have been predominantly private. Without an effective form of government cooperation, the rail system has not been able to prosper against the competition from other transportation means. This is an example of the law of unintended consequences. Overly supporting one area of transportation (public highways and airports) without equivalent support for railroads has not necessarily put us in the best competitive position.

    So what I hope to see develop are government policies that enable all future energy sources to be developed and implemented by the ingenuity and entreprenurial resources of the U.S.A., while making sure that the full diversity of energy production needed for economic vitality is not thwarted. Our policy will be effective if it can get us to an energy condition that is sustainable for the next 150 years, as the fossil fuel age has been for the past 150 years.

    This may be too idealistic, because we have to overcome the predispositions of polititians pandering for their next re-election. We have to overcome the influence of the lobbies, current and future, that will try to maximize their own interests to the detriment of all the others. This country cannot have a good future if it is dominated by the oil lobby, the wind lobby, the solar lobby, the nuclear lobby, the coal lobby, the environmental lobby, etc individually or in any sub-set. All lobbies should have the right to make input, open and publicly, but none should dominate the others.

    Somehow we need to find a way allow the path to the sustainable future. I feel the path will be torturous if it is driven by the next quarter income statement, the next year's profits and the next five years' profits. Giving up smaller near-term profits for sustainable future longevity is the austerity I refer to. If our current and future titans of the energy business focus on 10, 20 and 30 year business plans the outcome for our economy may be much rosier. Government policy can influence the time scale of private enterprise business plans.

    As far as auserity for the average citizen, that's coming whether we face the energy crisis or not. If we face the crisis and solve it, the austerity ends in 10 years or so. If we never face it, austerity could go on forever.

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  •  
    Jul 27 10:39 AM
    The chickens have come home to roost, and the droppings are just starting to accumulate. In my area we were late to the housing boom, which didn't peak until late 2006. Over 40 % of the loans written were interest only. When these loans are refinanced, only then will we have a grasp on how deep the guano is.

    The same dolts who think we can drill our way out of the energy shortage will tell you we can print our way out of the mortgage mess. We are doomed! Buy guns and ammo, and be prepared to defend yourselves. Why do you think the gun grab is on? Our "leaders" know the end is near.
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  •  
    Jul 27 11:40 AM
    The top 10% of the American population have 90% of the wealth and the bottom 50% have 3% of the wealth.

    A similar disparity exists in income.

    Any analysis of the American economy and its profligacy has to be examined within the perspective of plutocracy.

    The plutocracy has little to fear from a coming economic meltdown. It is the bottom 90% who will suffer and who are now suffering from the economic and social policies of the plutocracy.

    Trickle down indeed.

    America resembles 18th century England more every day. One wonders when titles will become fashionable.

    Is there an Earl of Redmington and Prince of Omaha in our future?
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  •  
    Jul 27 11:52 AM
    carey_jim is so right.the stadiumfiller beer(belgium)swillers havent quite figured it out yet.as socialism for the rich creeps in capitalism as we knew it will die. i dont know what will replace it but the standard of living for americans will go down.when the stadiums are no longer filling up the critical point may have been reached.the roman empire anyone?
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  •  
    Jul 27 11:59 AM
    "The Top 5 Financial Issues for the Coming Decades"
    1. The price and ability to feed yourself and your family-(food).
    2. The price of available housing, with appurtenant expenses, taxes etc
    3. Cost of raising a family, clothes, education, marginal living expenses.
    4. Cost and ability to provide for old age and health expenses.
    5. Ability to find a job with an adequate wage to accomplish the above.
    Don't need 4 pages to answer that question.
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  •  
    Jul 27 01:04 PM
    I believe that if 1) we address the energy issue soon and commit ovurselves to a national goal of energy independence, and 2) reduce our preference for all things imported from other countries, others will be largely addressed. Boone Picken's proposal offers a good starting point for a national conversation and decision making. So, I say, let us get behind that one and get our Presidential candidates to commit to addressing this energy issue based on a "NO Option Left Out" approach. Then we can launch a national campign to reduce our imports. Perhaps in twenty years we would have the major issues licked and leave our future generations something to work with.
    SK
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  •  
    Jul 27 01:22 PM
    CAPTBOB--

    your 5 are due primarily to the author's 5.

    the FED has been creating digital debt dollars for too many years.
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  •  
    Jul 27 01:27 PM
    i am not an economics major neither it is my day job.

    but i have been reading lately...and i think some of the thinking about social security, national debt, energy payment flowing out of usa, medicare liability etc are flawed..

    1. medicare and SS are not liability written in stone or paper......they will be reduced drastically if they cannot be financed, which means US govt ability to fund them is least of my worries, i am more worried about the ensuing socialism that will overpower america.

    2. national debt....its not a debt if nobody forces you to pay it, china/japan/middle east are the financers of our debt....and what do they get in return? more fiat currency.....so we are not giving them of any value.....but my only worry will be if china/japan/middle east will stop supplying goods for the fiat currency/USD that we offer to them in future....i dont see it happening.

    of course they can come to usa and try to buy real assets in form of companies/properties..... BUD)...so whats the big deal if ownership changes....as long as they play by our rules.

    4. same thing applies to cost of oil, we are paying paper money in return for real energy/OIL.....and i wont worry about the fact that we are transferring wealth.

    but i will be more worries about the fact the big oil companies and vested interests have taken over the USA congress/politics....a... they make sure we keep a huge military to protect their business in OIL. but this is to do more with stupid people electing corrupt politicians due to some misguided issues (religion/environmenta... etc..)
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  •  
    Jul 27 01:33 PM
    it is not the presidential candidates, it is the idiots elected to the congress who only do what the lobbyist pay them to do. People who elect the pelosi,reids, kennedy, schumers of the world will never allow election of someone willing to do something for the country. the defeatocrats and their messiah certainly will not solve any problem. the republicians are inept in politics and have no leadership or ideas. liberalism is a mental illness since feeling replace actions and shows caring for those less fortunate. the problem remains, but people feel good about "helping" the cause.
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  •  
    Jul 27 01:51 PM
    Tex-Fore!: Pretty much right-on;
    I can name one (elected congressman) who told them the truth and Not-what they wanted to hear--as a Presidential candidate.

    Recognized for his insight loved for his "Truth" none the less raised 0-$$-and faded into the twilight, unremembered for his proclamations, which are now coming to pass.
    His name??--Ron Paul
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  •  
    Jul 27 02:19 PM
    techy - - -

    I am also a technology wonk (Ph.D in Chemistry and 34 years in corporate America, mostly as an engineering manager). So I keep appealing to those formally trained in economics to enter discussion for my edification. None the less, the last 16 years of practice in personal financial planning and investment management have opened my eyes (and Mind( to isues I never really considered as a techy.

    I appreciate the detail of your discussion and questions. Let's have a look at what you said as best I am equipped to discuss.

    1. I agree. Social Security & Medicare can be changed over time. It is possible that the "unfunded liablity" may be reduced. Two problems: (a) Many people now in retirement are at the margins of poverty (and many yet to retire will be); reduction of payments from these sources might put an unmanageable strain on our economy. And (b) a responsible solution to these programs' deficiencies may not be achievable with our form of government where elected officials are pandering to win the next election. I am not presumptuous enough to propose a solution. But the problem is there and America needs to find a way to get it out on the table instead of living from one election to the next.

    2. The problem will come home to roost in the form of hyperinflation in dollar terms. When Asia, with potentially 3 billion consumers, produces ten times as much product for their own consumption as they do for U.S. consumption, the upward movement of Asian living standards will drastically raise the prices we pay for their goods. I believe the only way we can combat this potential outcome is to raise our own productivity to be competitive. This will never happen with imported energy, which in an of itself, without competition from Asia, is producing inflation and stealing dollars that would otherwise be invested in our means of prodution.

    3. The problem with foreign ownership of U.S. assets is that the profit from those do not stay in the U.S. If there is some reasonable parity between U.S. ownership of foreign assets and foreign ownership of U.S. assets, this can be a healthy situation. If it is very one-sided, it is good primarily for the U.S. (much more U.S. ownership of foreign assets) or it is good only for foreign interests (much more foreign ownership of U.S. assets). It is true that our corpor

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  •  
    Jul 27 02:31 PM
    Yes captbob, Ron Paul is exactly the type of leader this country needs but, of course, he was a threat to the establishment's lucrative status quo and was therefore not allowed to succeed.

    Politicians do not get reelected by making the current population suffer for the benefit of future unborn and unknown generations. Corporate executives do not get to keep their grossly overpaid positions and their outrageous perks by sacrificing near term profits dividends and stock prices in favor of the long term advantage, which will only occur after they are deceased. Such is selfish, egocentric human nature. Learn to live with it.
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  •  
    Jul 27 02:34 PM
    Sorry - I mishit a key and my discussion was posted prematurely.

    It is true that our corporate income taxes are paid by all owners, domestic and foreign, but I think most of us agree that it is not the most productive use of resources to have the only benefit of corporate activity be taxes paid to the government. If we are to have a future, our own people must have the opportunity to build wealth. Does anyone want to argue that taxes paid to the government build wealth?

    4. I think you are arguing that we are paying for oil with a fiat currency which has no value (or little value). I think that is not a broad enough view. Currency has a value based on what it can be exchanged for. In the discussion of 2., above, I mentioned the spectre of hyperinflation. What good will it do us if we have devalued our currency to provide fuel for heating and transportation? What have we produced of lasting value? I call it "burning money".

    5. I have no issue with your summary. What I am hoping for is a start on some progress to change the situation. Can either McCain or Obama make a difference? Maybe, but texasgolfer and captbob correctly point out that no president can impact significantly all by himself.
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  •  
    Jul 27 03:12 PM
    "U.S. national debt of $4.4 Trillion."

    Please explain. My understanding is that it is currently around $9.5T. Congress just raised the debt limit from $9.8 to $10.6 trillion.
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  •  
    Jul 27 03:15 PM
    To #2 and #3, you should add the unfunded pension obligations due public (federal, state, and local) employees. Promises, promises, all due later, except that later isn't so far away any more.

    Bottom line, we are a debt-addicted soon to be bankrupt nation.
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  •  
    Jul 27 03:19 PM
    From an economic point of view, energy is the source of almost all value and wealth. The biggest difference between 1908 and 2008 is cheap oil over the intervening period. If we don't find a replacement, 2108 could look a lot like 1908, including a much smaller human population.
    Reply | Link to Comment
  •  
    Jul 27 03:31 PM
    When I was a young man, my mentors always advised, "When you take something out of the window, be sure to put something back in." In other words, if you choose to focus on a problem, recommend solutions. Don't just throw the problem on the table unless you have a way to at least recommend its resolution. What's yours?
    Reply | Link to Comment
  •  
    Jul 27 03:40 PM
    I'm afraid the answer here is individual rather than collective. Centralized government and corporate actions are what got us into the mess we're in and can hardly be expected to get us out of it. Each person or family or, at most, small community needs to take action to protect themselves from the inevitable collapse of the central system. Move out of large cities. Install solar or wind power generation to isolate from the grid as much as possible. Get hybrid, or better yet, all electric transportation and forget about long trips. Stockpile at least 6 months food and water. And, finally, accumulate weapons and ammo to defend yourself. Read Kunstler.
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  •  
    Jul 27 03:40 PM
    I am flat out amazed at all the discussion related to how much is owed and to whom, what the national debt is, what's going to happen when 30 billion Asians finally decide what they want to be when they grow up, how "they" make it impossible for any people to function well politically, financially,or accumulate wealth, etc. in the U.S. Economics, war, etc. and nothing is said about EDUCATION or the lack of it's availability or more accurately phrased, the lack of a populace who could care less about getting educated because they have been raised on a diet of caviar laced with fried fat, high tech games, and shootin hoops, dog fights and preacher teaching the gospel of "God wants you to be RICH" (and unaccountable) at the same time.
    Having been born poor in 1931 USA, I was old enough soon after the end of WW2 to realize that without winning WW2, there is no way the USA of today could have reached it's apex of wealth and scattered that wealth about the incrementally growing populace with such ease (compared to any other nation in the world....civilized or 3rd and 4th world nations).
    Btm line is that only a war of signficant length and decimation of peoples in the top five (pick a number) most prosperous nations in today or tomorrow's world of the next fifty years...give or take (purely guess on my part) will straighten out many of today's imbalances. A fresh start is needed, although it is highly questionable that the human race, cloned or not will ever learn the ultimate lesson needed to be learned...which is that there has never, ever been any free lunches since the world began with Eve providing an apple to Adam. Not for the earliest cave man, Greek or Roman empires nor the Byzentine. Belief in God or not, there is a price to be paid for everything except death, it comes for everyone sooner or later and if B.O. has his way it will be sooner and more than likely... taxed to the hilt.
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  •  
    Jul 27 03:52 PM
    To put it in another perspective, where would you put one million dollars in cash if you had it? Why?
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  •  
    Jul 27 04:18 PM
    there is no place you could $1mil. because you cant trust anybody or entity.there are no more ethics,truths or obligations.people are talking about burying gold in the backyard & at the same time fretting the scum in dc will outlaw owning gold.vietnam just outlawed owning gold.a huge shaft should be put next to the wash.monument in honor of what we are getting.
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  •  
    Jul 27 05:14 PM
    1. Energy. No mention is made of the fact that political thugs wrecked the nuclear power industry, crippled oil and coal, and have studiously ignored technological advances in those industries.
    2."government builds wealth" How much is government spending on infrastructure and necessary services and at what cost? How much is government spending on dubious redistribution schemes and at what cost? Paying people to not work, work very little, or be overpaid for working is more expensive than people realize. Their labor is devalued directly by taxes and then devalued indirectly when they have to compete against their own money in the marketplace.
    3. Hidden Costs. I don't have time to debunk the hidden cost reductio absurdum. But what are the hidden costs of eating or sex(which leads to children,which leads to ohmygod-should sex be 1-10 on the misery index?). Of course most of the hidden cost of energy can be defeated with a hoe, some seeds, and a plot of ground. That will have to do until we develop low energy suspended animation.
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  •  
    Jul 27 05:39 PM
    Compurad: "Where would you put a million dollars in cash if you had it?" I think my previous comment answers that excellent question. Some of it in a rural and mostly self sufficient retreat. Anything left over would be invested in high dividend oil and commodity stocks, mostly foreign, to try to stay even with inflation.
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  •  
    Jul 27 06:13 PM
    All great civilizations come to an end.
    Remember the bully who would push you around? At some point, he could no longer bully because a newer, tougher bully took over.
    The USA (not calling us a bully), has reached its critical "mass" and is now slowly but, surely, losing its ability to perform. Aside from our massive military capability, (which we should consider using now) to protect our interests, we are no longer the "bully".
    China is the new "bully". They will have greater economic strength and shortly, greater military strength eventually.
    Could this disaster of the downfall of the USA been avoided? NO!
    However, it could have been delayed dramatically. Remember when Nikita Kruschev while banging his shoe in the U.N.? He said, our demise would all come from within. He was correct....to the most part.
    Ever since the great years of prosperity after WW Two, during the 1950's, we have been on a downward slope, starting in the early 60's. Do you remember what began? The morals and standards that made us the greatest country on this planet were beginning to be undermined and destroyed right before our very eyes.
    In the 1950's, education in the USA was superior. The NYC schooling system was the best in the world. Education, discipline, family values existed. Relative to today's cost of living, the teachers were paid less than today. Becoming a teacher in NYC today will make you a millionaire. Yet, the standard of education is inferior to the rest of the world, (with few exceptions). Why?
    Once civil rights, women's rights, gay rights became the cry of the minority ultra-liberal population, the majority caved in and a guilt ridden response took over. Standards were considered unfair and either reduced or dropped. Morals turned topsey turvy.
    Jump ahead to today's news. Illegal immigrant kills husband and son.
    It turns out he was previously arrested for other crimes in the USA.
    San Francisco (the land of the sick), mayor, declared in a bill which was ratified by legislation, makes it illegal to make law enforcement agencies become aware of the Illegal Immigrant status of any captured felon. In other words, if you are an illegal immigrant in San Francisco; commit a crime; get caught....your illegal status will be protected in San Francisco.
    Think about that for a moment.
    Illegal immigrant/commits crime/released/illegal status ignored in San Francisco because the mayor decided to made SF a safe haven for illegals, regardless of their criminal activity.
    If you are outraged by this, good. You should be.
    If you defend the SF mayor, you are the problem.
    This example I have provided summarizes in a few moments, the state of affairs of what was once the greatest country on this planet.
    Another example. I use to teach in the largest high school in NYC.
    During a meeting of teachers and principal to discuss problems and solutions for new teachers, one of the teacher's said that he had a student who wouldnt stop cursing in class. He explained how he tried everything to stop this behavior which affected his control of the class room and his ability to teach. It was obvious, to me, and to most of the other teachers in that room, that the administration needed to take over and take some strong steps to get this situation resolved. The Principal, listening to the teacher's complaint, said the following: "I have a good idea. Why don't you go to the student who curses and say to him....that if you stop cursing today, I will add one point to your grade!!!"
    This is from the mouth of the principal of the largest high school in NYC!!!
    If you are outraged by this, good. You should be.
    If you defend the student and the principal, you are the problem.
    The dumbing down of America. The loss of values, standards, morals.
    This is what is responsible for the quick descent of the USA.
    The USA saved Europe three times. Both world wars and causing the break up of the USSR. Western Europe hates us. Eastern Europe, no longer a slave to communism LOVES us.
    It makes no difference any more. Let me tell you why.
    1) National debt will destroy this country. What does the rest of the world need the USA for? If the dollar has no value, what will we provide of value? Strong military is all we have.
    2)Personal debt will destroy this country. People who live their lives without ever considering how much money they will need to survive in the future, spend today as if they can print the money endlessly.
    Case in point. People buying homes/taking loans they can not afford. Bad decisions which the American tax payer will be hit with.
    3)Overload on Social Security/Medicare. You can forget about benefits being available down the road. The money is NOT there.
    4)The cost of living will increase exponentially. The price of oil will skyrocket. Why? Peak oil is upon us. Demand is greater than supply and growing at a rate that is about to reach critical mass.
    Alternative energy? This is the only possible answer.
    A Manhattan Project, (name of project creating atomic bomb) to develop a hydrogen fuel, (which will be unlimited, infinite) created by the greatest scientific minds in the USA will change everything.
    Oil imports will cease. We will become the richest nation on this planet by being the "owner" of the technology that will power the world's energy needs. Our debt will end. This will be the only possible solution to a crisis, that at this moment will explode over the course of the next 20 years.
    Be prepared for the following:
    Half the wealth of this nation will evaporate:
    Costs will increase exponentially and at the same time supplies will dwindle.
    The very small minority of super rich will be able to survive.
    The middle class will become the greatest to suffer as the initial efforts to stem the tide of our economic collapse will be to raise taxes.
    The poor will initially fair better as the democratic led government will provide for them, (out of the pockets of the middle class primarily/the ultra rich wont be affected).
    The monetary system of this country will break down and total martial law/anarchy will be the law of the land.
    Finally, we will use the only tool we have to create wealth. The military. Wars for natural resources will occur with China/Russia/Middle East. We will eventually capitulate and become slave labor/third world status or use the nuclear option which will be the final solution.
    NOTE: Another solution would be some world wide pandemic which will wipe out 50% of the world's population.
    It's really a simple mathematical observation.
    If the demand on supplies by all nations (all commodities) are growing at a rate of 35% a year, the need for these supplies will double every 2 years. The formula is simple. Divide the rate of increase into 70. (35 into 70 is 2 times.) Imagine you had savings of one dollar. This year, you need 1 penny to survive. In two years, you double that and need 2 pennies. You will have 98 pennies left and feel safe. Then the two pennies becomes 4...and the 4 becomes 8. But, you still have 92 pennies left and still feel safe.
    Then, the 8 becomes 16 and the 16 becomes 32 and then the 32 becomes 64. Now you only have 36 pennies left. Remember, as demand increase by 35% a year, the need doubles every two years.
    So, when do you realize that you are in deep trouble? Answer? The next to last year of doubling the need. Because, the very next year you will need 128 pennies and it is not there.
    Why am I showing this simple mathematical observation. Simple.
    This is how oil is being used.
    This is how foods are being used.
    This is how water is being used.
    This is how all elements/minerals we take from the earth are being used.
    Unless the demand stops growing.( it wont) Unless the population stops growing. (it wont). Unless the supplies increase as fast as the demand, (and it wont). The conclusion is that there will come a time when there is not enough "stuff" for everyone. This is why China is currently buying all the oil/nickel/iron/copper... etc... mines all over the world right now.
    Remember when the need for pennies reaches 50?
    Then, the next time the need doubles, (35% increase of demand a year), the need will exceed the supply.
    Math does not lie.
    What can you do about it?
    Nothing.
    Even the rich will not survive. The starving will kill the rich and then kill themselves.
    Not a pretty future.
    There is only one way to prevent this.
    Create an infinite supply of energy. (Hydrogen is the answer).
    Create an infinite supply of food. (technology to create food (molecularly) in the laboratory is the answer.
    Reduce population growth....or better yet, a world wide loss of half the population.

    What will I do in the coming years?
    Simple.
    Leave the USA and move to a third world country and have the ability to grow my own foods and capture rain water.
    Learn to accept the future.
    Give to others as much as I can.
    Die with dignity.

    Hasta la vista baby!!