Collapse American Style — After Paying More Than We Can Afford

In effect, the OPEC oil embargo of the mid-1970s provided a trial run of a supposed societal collapse that would proceed from the slow movement of foreign oil prices upward subsequent to running low on domestic supplies of oil. While it may be more complex than that, this notion seems a simple application of the age old economic principle of supply and demand. Thus, as we run out of oil it becomes ever more a rare and precious resource for which we will be forced to pay more and more. After all, nearly everything runs on oil or on some derivative product from it. Therefore, as the theory goes, we would be forced to pay more and more until far more money was going out the door than coming in. This imbalance in international trade will threaten the values of the dollar.

As time goes by, or so the story goes, our balance of trade payments with other countries will put us into great debt to foreign nations. We will pay them in dollars and when we run out we will print more money. Periodically as American debt piles up we will borrow money to pay down the debt over time and as new money is printed its value is inflated and paying back debt will effectively becomes easier. It’s a simple idea. If money inflates say ten fold and everyone has more of it, today’s dollar becomes ten dollars tomorrow. So, if I borrow a dollar from you today and it becomes ten dollars tomorrow, I’ll settle my one dollar debt with you by giving you one of my ten dollars. Oh! And, I’ll add ten cents as well (the ten percent interest I agreed to pay). This is inflating away the debt. The only problem with the idea is that other countries to whom we owe money for oil may see the game for what it is and say, sorry we don’t accept your dollars any more. They are worthless. So, no gold, no oil.

Under those circumstances the whole nature of the society changes. We have to use other internal energy sources as no foreign oil will be available to us. How will we adjust? We’ll use our own oil, but not too rapidly. We have been building and using nuclear reactors, natural gas and renewable forms of energy. We have also been slowly at work conserving and approving the efficiency of utilization of all forms of energy available to us. Maybe we will get by, but it will be hard for a while.

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