By Rudo de Ruijter
July 2008, updated 4 October 2010
After more than 150 years of constant increases in the availability of energy and an explosive growth of the world population, we are now entering an era of declining availability of energy. This will cause the world population to shrink. For this new era, new economic principles are needed to maintain prosperity. Part of this is a bank-reform that members of Parliament can compel if they want.
From January 2007 to July 2008 oil-prices rose explosivily. This time it was not about some action of OPEC, a threat of war or a cold winter. Instead, prices rose because of a turning-point in the oil supply. Demand continues to grow while oil extraction has reached its ceiling. And, as the oil exporting countries use more and more oil themselves, they have less oil to sell.
A global recession began in 2008. This recession has temporarily decreased demand for oil and brought the prices down.  However, because ever –increasing availability of oil is in our past, prices will rise once again.
Those who believe that alternative energy sources will replace decreasing oil supplies are wrong. Gas, coal, nuclear, hydro, wind and solar energy cannot make up the shortage of oil. The world population will have to do with less energy.
Today’s mix of energy use consists of 36 percent oil, 24 percent gas, 28 percent coal, 6 percent nuclear, 6 percent hydro-power and 1 percent renewables, like wind and solar energy.
The Canadian researcher Paul Chefurka has made an analysis and a prognosis of each energy source. See the pictures left and beneath. For explanation and details, please read his article World Energy and Population http://www.courtfool.info/en_World_Energy_and_Population.htm
Most big oil fields in the world are “empty” now or slowing down. (Peak-oil.) For the extraction from the remaining smaller fields a lot more investments are needed and the extraction speed is lower. The lowering capacity can only partly be compensated by other sources of energy.
The peak in gas extraction is expected within a relatively short time. The richest coal (anthracite) is depleted for the most part. The remaining coal is poorer in energy and costs more to extract. Coal emits a lot of CO2 and solutions to this problem are still in an experimental stage. The capacity of existing and planned nuclear plants is far too small to compensate for the fall in energy. A rapid making-up of arrears cannot be expected with nuclear plants. For hydro-energy the best locations are already in use and, here too, a multiplication of capacity cannot be expected. Renewable energy, like wind and solar, supply only a small fraction of global energy consumption. In spite of hopeful developments, renewable energy will remain insignificant for a long time.
The explosive growth of the world population was made possible by the abundance of fossile energy. For the remainder it will cost more and more to extract less and less.
The lowering availability of energy will logically lead to a shrinking world population.
Big differences per country
The world population consumes on average 1.8 TOE (Tons of Oil Equivalence) per person per year. The use of energy in the world varies a lot. The 2.8 billion people in China, India, Pakistan and Bangladesh consume 0.8 TOE per person per year. In the US the average is 8 TOE per person per year.
If we take a look at the dependency on energy-import, we notice that, calculated per inhabitant, Western European countries, Japan and the United States import more than 2 TOE per year (numbers from 2005).
When there are shortages in the energy export-markets these importing countries are in trouble first. In this situation, the fact that most energy is traded in dollars is an advantage for the US. Financially the US can dispose of it freely. Since they abandoned the gold standard in 1971 (the year of Peak Oil in the US), they finance their imports by simply creating more dollars as shown by their explosively growing external debt. (See “Cost, abuse and danger of the dollar” for more details.  )
The role of the other energy-importing countries is double. On the one hand their demand for dollars helps to keep the dollar rate upright (and with the dollar rate, the US-imperium). On the other hand, most often they are also military allies of the US, who likewise profit from the domination of countries with big oil reserves, like Iraq  or countries on transit routes, like Afghanistan, that, by the way, also has enormeous reserves of oil, gas and minerals.  Nearly all heavily importdependent countries are united in NATO, and account for 70% of world’s military spendings. (The US alone accounts for over 40%.)
Today’s oil crisis makes it painfully clear, that various forms of energy cannot be exchanged easily. Oil is made into diesel oil and fuel (70 percent), petrol/gasoline (13 percent), bitumen, lubricating oil, kerosene, butane, liquid petrol gas, naphtha, benzene and toluene.
From these, naphtha, benzene and toluene are the raw materials for chemicals, plastics, synthetic fibers and rubbers.
Chemicals are in cleaning products, medicines, anti-freeze, paints, insecticides, fertilizers, soap and explosives. Plastics are used in bags, beer-cases, suit-cases, dustbins, dashboards, pipes, gutters, tubes, floor-coverings and polystyrene. Synthetic fibers and rubbers are made into textiles, silicones and tires. 
All of these products have a place in our daily lives and most of them cannot simply be exchanged for others.
Transport and cohesion
Everywhere in the world the massive availability of diesel and petrol has determined the organization and cohesion of societies. Distances to be covered, considered normal unto now, will become very expensive, particularly in food-supply, commuting, trade and industry. In social life too, short distances will become more and more important.
Food and energy
The modern high-output food production swallows a lot of energy. In the US the production of 1 unit of energy in food demands 1.56 unit of fossil energy. When we also take into account transportation, processing, packaging, distribution, conservation and cooking, 1 unit of energy in food demands not less than 7.36 units of fossil energy.  The biggest threat for the intensive agriculture in 2008 is the doubling of the price of fertilizers, as a result of the oil-crisis.  Products of high-output agriculture will become too expensive for a large part of the world population. The biggest savings in energy can be had by growing food locally and without artificial fertilizers or chemicals.
Continuing is war
With the present size of the world population it is quite certain that there will not be enough food and energy in the coming 75 years. If the world population does not shrink radically and the push for economic growth is not abandoned, more and more of our children will be sent to war to secure more food and energy. (Of course these wars will be camouflaged as peace-keeping operations, development aid, democratizations and anything else the leaders of industrialized countries come up with to avoid the nasty taste of murder and robbery to their citizens.)
The always increasing availability of energy not only allowed an explosive growth of the population, but it also created economic models that function according to the principal of endless economic growth. They assume an always increasing availability of raw materials, energy, work force and consumers.
These models dominate the thinking of politics and economy in most countries of the world. The primary driver of these models is the money-system, that allows private banks to create digital money for loans. Money originates when a loan is issued and vanishes when the principle is paid back. The amount of outstanding loans increases all the time, leading to a permanent inflation. It is an endless devaluation of the money unit, which forms the impulse for ever more activity to forestall impoverishment. (If you don’t use your money, you loose purchasing power.) 
The permanent inflation is an intentionally created effect of today’s banking system. The banks need inflation and create it themselves by the permanent increase of outstanding loans. The usual risk for bankers is that loans are not entirely paid back. When there is inflation, the amount the bank creates as principal for the lender becomes worth less over time. For the lender, it becomes easier to pay it back. The bank doesn’t care that it becomes worth less for the payback of the principal only serves to reduce the created number in their books to zero again. On the contrary, if the total amount of outstanding loans in the country would decrease, which means deflation, it would become more difficult for lenders to pay back their loans and all banks would be at risk simultaneously.
Seemingly, banks have limits in the amounts of loans they are allowed to issue. They must have capital, that corresponds to a small percentage of the outstanding loans and they must keep enough reserves for the payments of their customers and to hand them out cash money. In the US, until 2009, each bank had to keep the equivalent of 10% of all deposits as reserves and could create loans up to 9 times these reserves. The hidden effect of this rule is the money multiplier. When the money of a loan is spent and used in society, it will move from bank to bank. Each bank can issue new loans up to 90% of the received amounts in their customers’ deposit and savings accounts. This ends up with a multiplication of 10 times the initial loan. In fact, banks can collect interest 10 times on the same money then. Henry Ford once said “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”.
In the Netherlands, where this 1:9 limitation did not exist, the ING-bank lends out the same money 36 times! However, these limitations are only an illusion. Each year, the capital of banks is raised with a part of the profits and the pricing of collateral rises by inflation. This means that the amounts of loans can and will increase indefinitely. There is no end to the impulse for growth. (See “Secrets of money, interest and inflation” for more details.)
Although the decrease in available energy becomes visible on the export markets, we still don’t have solutions for our economy – except warfare. For the moment there is a lack of consciousness, knowledge and comprehension.
Today’s money system is unable to deal with a general decrease of economic activities. As soon as the amount of new loans decreases, it means that the value of the money unit rises and, thus, paying back outstanding loans becomes more and more difficult. All banks would be threatened by bankruptcy simultaneously.
During our lifetime we never knew anything else but the growth model. That is in use nearly everywhere in the world. That is why we do not realize sufficiently, it is just an economic model. It only applies in a situation of permanent increase of energy, raw materials, work force and consumers.
When the economy must function with a shrinking availability of energy, we need another economic model.
In the slimming model there is a shrinking production and a shrinking consumption, caused by the decrease of energy. When there is less energy available than needed for a big population, we should – logically – strive for a smaller population. If we start the decrease in population early enough, then, counted per inhabitant, prosperity can be maintained at a high level. (When the population is too big, it will be war and economic crisis.)
Ideally, we would need a money system that is well suited, both for eras of growth as well as for eras of decreasing economic activity. In fact, the principle for such a system is very simple: restrict money creation to one bank in each country. In a democracy, that bank would, logically, be a state bank.
As said, in today’s system new money is created by commercial banks each time loans are made. For all commercial banks together, there is no limit in the unbridled money-creation. It can, at best, be stimulated or slowed down a bit by the interest rate of the central bank. As explained in “Secrets of money, interest and inflation”, central banks themselves profit from inflation and changing interest rates, which allow them income from monetary operations, that guarantee their independence from governments. 
This system of permanent inflation can be stopped by letting only one bank issue money for loans. In a democracy this should be a state bank, managed by the government. Today’s commercial banks would become middlemen between the state bank and the public, and hand the loans to their customers. These banks would no longer be allowed to create money for loans. They would manage their customers’ accounts on behalf of the state bank.
The state bank can immediately stop inflation by limiting the amount of new money-for-loans to the amount of loans that have been repaid. When necessary, it can adjust the money stock to the changing needs of society. This limitation will not lead to a lack of money for new loans. Commercial banks will still be allowed to invite their customers to put their money in funds, that can be lent out to the public too. In that case customers can pay money from their deposit account into the funds’ accounts. This way the funds would use existing money to lend out. This does not increase the money stock and, thus, does not create inflation.
In accordance with the priorities decided by the parliament, the state bank can apply different interest rates for different categories of loans. For instance, long term investments for a sustainable society could be financed at extremely low interest, and, the other way around, unwanted investments can be discouraged by high interest. With interest rates used to steer economic activity according to the real needs of the country, this system offers the best basis to provide the maximum of possible prosperity, not only when the economy grows, but also when activities decrease.
Today, when the government needs more money than collected by taxes, it must borrow from banks and pay interest. In most countries, the payment of interests on public debt constitutes a relatively high share of the taxes. Of course, with a state bank, loans for public expenses would be interest free. Nevertheless, if we want to keep the money stock stable and avoid inflation, we still need to pay back these loans, but we would be freed from the interest on public debt. (Alternatively, the government, instead of borrowing from its state bank, could also create the money itself and spend it directly, with similar results.)
Members of Parliament
In the past, members of parliament have granted special rights to bankers, without understanding what they were doing. The tricks of the bankers have remained hidden from the parliament and the public for almost a century now. Bankers make ever more investment and management decisions that shape our society. The permanent increase of the money stock makes everything buyable. Many classical state institutions (energy & water supply, public transport, post and telecommunications, health care, education, security) have been bought by private corporations in an ongoing process that dismantles the institutions and functions of our democratic governments.
Today’s money system has successfully accompanied and stimulated the growth of our economies, thanks to the fast consumption of fossil energy resources. Until now, rich countries succeeded to import as much energy as they liked, but with the economic development in exporting countries, demand starts to exceed the amount offered. We must be prepared for periods (or even an era) with decreasing availability of energy and less economic activity. We now desperately need a money system that doesn’t collapse when economic activities decrease. With a bank reform like outlined above, we can not only obtain an adequate money system, but also transfer decision power from the bankers to our democratic representatives.
“Permit me to issue and control the money of a nation and I care not who makes its laws.”
(Mayer Anselm Rothschild)
July 2008, updated October 2010
 World Oil Prices 1998 – 2008
 Paul Chefurka, World Energy and Population
 Secrets of money, interest and inflation
 Cost, abuse and danger of the dollar
 Pipelines to 9/11
 Fact sheets US Food System
 New threat to food system: pricey fertilizer
from the archives:
Report: Debtor Prisons on the Rise
The Neoliberal Experiment and Europe’s anti-Austerity Strikes: Governments must Lower Wages or Suffer Financial Blackmail
America’s China Bashing: A Compendium of Junk Economics by Michael Hudson
March to Nowhere by Chris Hedges
Cost, Abuse and Danger of the Dollar by Rudo de Ruijter (2006)
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I think he may have been exaggerating with “unlimited”. I think his point is that in time we can go a long way toward meeting our energy needs with biodiesel from algae, coupled with sensible conservation efforts and solar and wind. With that said, we have to leave open the possibility that this goal may not materialize to the extent we want or as quickly as we want, so the author’s proposals definitely hold merit.
This is a MUST read article.
This article is a brilliant consensus of the situation in which we find ourselves and offers the only strategy short of endless starvation and war to grapple with what is going to be humanity’s greatest challenge ever.
The truth is that no political philosophy, socialism, communism, democracy, republicanism will solve our dilemma without war and starvation … It is in the financial system, specifically our money creation, that radical change is needed and needed now.
Expect the Banking Cartel to fight with every weapon at their disposal this one and only solution to the decline in energy availability. They will use depressions, crashes, trade wars, all out wars to retain their monopoly on the creation of currency and credit.
The economic recipe offered here will surely work if it is ever implemented; however, the peak oil argument is spacious. Easily and cheaply cultivated algae can created almost unlimited bio-diesel which in turn can be refined into the needed products. Whether it is a good idea to remain dependent upon petroleum or bio-diesel, is another question entirely.
Sorry, “unlimited biodiesel” is a pipe dream … This can not be scaled to meet our current energy consumption and will be much more expensive than oil, limiting usage.