According to Gail Tverberg,
Our problem is collapsing demand, everywhere. That is a scary story [referring to this link, which states that shipping rates are now even below the cost of fuel]–basically the same one we hear in different forms, over and over. The world cannot move from growth to shrinkage without huge overcapacity. With overcapacity comes prices that are way too low. No one will exit the market until some type of collapse occurs.She also says,
I recently have been arguing with Chris Martenson on Facebook. Trying to explain to him that peak demand and low prices can bring down things pretty quickly–we can’t count on high prices allowing us to buy what we need forever, just more expensively.Does this make sense?
I am afraid it does. Collapsing demand means that prices are becoming too low for suppliers of goods and services, which will force them out of business. If the problem were localized to one or just a few commodities or industries or countries, we would probably not need to worry about industrial civilization as whole collapsing. In that case it would just be another business cycle, which has happened many times in the past. But the present situation is different, because demand is dropping off in the entire world, across most industries! It is as if a bubble (made of debt) which has been propping up all prices is now deflating. We are kidding ourselves if we think only some companies will go bankrupt and then the rest can continue with higher prices. Not at this scale. When many bankruptcies happen at the same time across many industries, unemployment soars and demand drops further, leading to even lower prices. No companies will be able to cover their operating expenses. The collapse will be a total breakdown of the system, leaving us with no ability to produce the essentials of life anymore, even for the rich (who will then be formerly rich, of course).
Why does Chris Martenson not get this? Why do mainstream economists not get this? Are Gail and her followers the deluded ones, or are everyone else wrong? Methinks Gail is right.