Whether you’ve been reading me for a day, a month, or several years, it’s pretty clear by this point that there’s one major theme to my economic predictions: cycles.
I use a hierarchy of four cycles: The 40-year demographic spending wave cycle that shows which generation is spending when. I’ve got the geopolitical cycle that’s around 36 years, 18 up and down (I’m expecting the one we’re in now to make a shift for the positive in 2020). There’s the 8- to 13-year sunspot cycle. And there’s the 45-year innovation cycle (more for developed countries) and the 30-year commodity cycle (for emerging ones).
But recently I was reminded of one of the most fundamental cycles on Earth: climate, which I have actually studied thoroughly. It was while I was watching news reports of how people up North were having to dig their way through six feet of snow just to step out their front door (just one reason I love living in Tampa!).
As this was all unfolding, the debate between global warming alarmists and global cooling advocates rose back into the spotlight. Of course, I think they’re both wrong… and right. That is because there are two important cycles at work here, and neither side is looking at both.
Back when mankind first populated the Earth some 200,000 years ago, the climate cycle was clearly the greatest challenge we homo sapiens faced.
There was an ice age that nearly wiped us out 140,000 years ago. Another ice age crept up 100,000 years later. In both of these cases, the extreme cold devastated human populations. Do you see a cycle here?
When that first ice age subsided into a warming period, human population exploded all the way up and down the east coast of Africa.
Of course, things eventually started cooling again. The fishing and hunting became saturated, signaling the first great migration out of Africa as man sought out new food supplies. We proceeded to populate the whole world between 80,000 and 10,000 years ago by moving from one beach or river valley to the next, especially around the coasts of Asia. Population again took off, until that next ice age hit 40,000 to 20,000 years ago.
If you’ve ever wondered why the world’s population is most concentrated in China, Southeast Asia, and India, it’s because that last ice age forced migration into these warmer and more fertile territories.
Man experienced population booms coming out of both of these ice ages because the Earth also experienced something scientists refer to as “interstitial” periods of rapid warming. As the planet came out of its cold cycle, the retreating glaciers caused a massive release of CO2 and methane from the land and oceans — both greenhouse gases that cause warming.
But something else also came out of that last interstitial period some 10,000 years ago after we first settled most of the world. Mankind was finally able to transition out of the hunter-gatherer lifestyle and begin a lifestyle based on agriculture and settlement, as we entered the Agricultural Revolution. From there we were able to support increasingly growing populations — which also increased CO2 emissions — as well as support the increasing specialization of labor, which prompted a major productivity revolution.
Towns turned into cities. Cities turned into super-cities. And finally… we hit the Malthusian Trap, which is a fancy term the history books have applied to the phenomenon of population outgrowing the means to feed itself. Agriculture had caused population density such that demographics growth just made most people poorer with less food to go around due to limited land. Whereas today we consider demographic growth vital to the economy, back then it was a death sentence.
So what broke the Malthusian Trap? The Industrial Revolution about 250 years ago, as mankind introduced the steam engine and other innovative tools that allowed for much greater productivity in agriculture and whole new industries.
As the chart below shows, this launched the third and greatest population bubble in history.
Now, you know how I feel about bubbles. They always burst. This one is no exception. Population is projected to reach nine to 10 billion by 2060 to 2100. That’s a really frickin’ huge bubble.
And no, I’m not going to come at you with some apocalyptic prediction that another ice age is going to appear out of nowhere and cut the world population down to size. But our population bubble does get at the heart of what this whole global warming debate is all about.
The fact is, we are releasing CO2 into the atmosphere (and many other deadly pollutants into the soils, rivers, and oceans). China is polluting like they’re on steroids and is starting to choke to death, with life expectancies already compromised by as much as 6 years. This is what gets the global warming fanatics in a tizzy as they march armies of lobbyists into the halls of policy-makers trying to get government on board with reducing our carbon emissions.
Of course, the past two cold winters have caused a lot of people to scratch their heads over these concerns. If the planet is heating up, why are we getting such cold winters? If the planet is actually cooling down, why are we worried about CO2?
Both of these arguments miss the truth.
Manmade CO2 emissions are not as much an immediate concern, except in severely polluted places like Beijing or Delhi. Rather, they’re a longer term concern, as greenhouse gases accumulate in the air for decades and in the oceans for centuries. So, even today’s accumulations will impact for a long time.
Of course, these are part of long-term, macro climate trends. There was a one-hundred thousand year gap between the last two ice ages, and considering the last one only ended about 20,000 years ago, we’re still well off from another one.
But we are at the outer range of this interstitial warming period, which would have peaked 5,000 years or so ago had population not ran rampant, reaching the one billion mark in the 1800s. This convinced me early on of the validity of this rising man-made CO2 cycle. It’s kind of like QE — it’s extending a bubble artificially.
But climate runs in smaller, micro trends as well… though still large in our human timeframes.
In the March Boom & Bust newsletter, I show why the marked intensity of sunspot cycles argues that cooling is more the trend for at least the next five years, though it could last as many as 15. These sunspot cycles don’t just go up and down every 8 to 13 years — they peak in intensity every hundred or so years, and then fall for a few decades.
The man-made CO2 trend has accelerated since the Industrial Revolution, and much more in the past one hundred years.
Take into account the projection that human population climbs toward 10 billion before the end of the century, and we’ve got ourselves a big problem on our hands.
With natural CO2 and methane emissions compounding with the greenhouse gases emitted by industrialized economies, we’re looking at greater climate volatility and hence food shortage threats, reduced water supply, and less oxygen, which works against the population bubble we’re currently building.
What I hope is that a shorter term cooling trend does not cause us and our governments to take our eyes off the longer term population, pollution, and carbon emissions threats. Sure, we will increasingly create new technologies to deal with carbon emissions and pollution… but will we be farsighted enough to make these investments?
History shows that we tend to react only after disaster sets in. Preventative measures are not our strong suit.
Still, we have more immediate climate concerns on our hands with the planet cooling at least through 2020. And while governments and new technologies may take awhile to get on board with finding a solution to our long-term problems, we can prepare ourselves now to take advantage of the short- and long-term effects on agricultural commodities like food and beverages that are likely to buck the downward 30-year commodity cycle at times in the next several years. That’s why I recommend you read this month’s issue of Boom & Bust.