Human Population Bubble and Regression to the Mean
Oh, where to begin, dear reader? We have something important on our mind…
Where is the real bubble? Is it a bubble in commodities? Or a bubble in the people who buy them?
By the charts ye shall know them — bubbles, that is. The lines roll along nicely, calmly, along the bottom of the page, then all of a sudden, the line shoots up. When you see a chart like that, whether it is the price of tulip bulbs or shares in the South Sea Company, you know what will happen next. The line will go down!
What goes up must come down. A bubble is an extraordinary thing. And all extraordinary things tend to become less extraordinary over time. “Regression to the mean,” is what statisticians call it. The “mean” marks the territory that is normal. Whenever anything ventures into abnormal territory, chances are very high that it will soon come back on familiar ground.
Take an extraordinary person, for example. More than likely, his children and grandchildren will be more like everyone else than like him. It must be a terrible burden to be the son of an extraordinary man; people look at you like you were a dot-com stock in ‘99 — they expect something exceptional. Almost inevitably, they are disappointed.
Or take a Great Empire. What is an empire but an extraordinarily successful state? It stands out in history because it has managed to lord over its neighbors. Yet, what empire lasts? None…all regress to become commoners…ordinary nations.
Or take the weather. A rainy spell may last for a long time. But the more days it rains, the more dry days will be needed to bring the rainfall down to “normal” levels.
Regression to the mean is one of the surest bets an investor can make. Let prices go to extraordinary levels and he’s almost guaranteed that they will come back to normal. In markets, the regression to the mean principle is even more certain than it is in nature. Because extraordinary prices set in motion a series of actions and reactions that almost always bring them back in line. Highflying oil prices, for example, touched off a series of derriere-kicking trends and events.
On the supply side, the industry is spending 4 times as much on exploration and development than it did when the century began. The price of drilling equipment rentals has more than tripled. And now, believe it or not, a young man graduating from an Ivy-league college with a degree in petroleum engineering earns more money than a man who goes to Wall Street.
On the demand side too, changes are underway that cut the amount of oil used. The cure for high prices is high prices. Bubbles are self-correcting. The higher prices cause people to look for alternatives — or simply not use so much. US imports of oil went down over the last 12 years. And, for the first time ever, Americans were driving fewer miles.
Another track of the feedback loop is the economy itself. High oil prices work like higher interest rates or higher taxes — removing money from domestic commerce. The effect is to “cool” the economy…chilling demand for energy.
Elsewhere, substitutes for oil are being developed at breakneck speed — including wind, solar, and bio-fuels.
Regression to the mean works. Markets work. Lower energy prices seem a cinch.
But now we introduce an annoying fillip. While the bubble in oil prices was expanding…another, much bigger bubble was shaping up — and hardly anyone noticed.
Where? Just look in the mirror. At our own species. In the many, many thousands of years of our prehistory, we were hardly worth counting. There were tribes of us all over the globe…but they were small…barely holding their own against other species in the competition for food and resources. It took until about 1800 to get the population up to one billion. Worldwide. Then, man was a big winner. Numero Uno of creation. By 1930 another billion had been added. And another billion was added in the next 40 years. That brings us to about 1970, when the earth hosted about 3 billion two-legged yahoos. Since then, the population has more than doubled. The line shot up, in other words.
But we are a proud and egotistical race. As our numbers rise, we think the road will rise to meet us. What a shock it would be to find that the whole species was mean-reverting, just like everything else! What a surprise to find no road at all — that we are running off the edge of a cliff, like lemmings. More below…
Being in the right place at the right time is far more important than brains. Luck provides better investment returns than talent. Too bad. Because our luck seems to be running out.
George Soros has said the great credit expansion that was born with the baby boomers… and has lasted as long as we have… is now over. Not long after came word that the “end of abundance” is here too. That’s what it said on page 9 of the Financial Times. And then, Bo Diddley died. All the palmy trends of the boomer generation seem to be coming to an end.
Naturally, the world’s leaders were worried. They gathered in Rome that same week for the customary monkeyshines. Even Robert Mugabe — who is banned from traveling in Europe — put on a false mustache so he could dine out on the Via Veneto, leaving his lieutenants in Harare to beat and starve Zimbabwean voters. Poor Mugabe. Goebbels would have gotten a warmer reception at a meeting of Jewish orphans.
At 84, Mr. Mugabe is almost living proof of Haeckel’s biogenetic law. It maintains that the history of the individual rehearses the history of the species. In Mugabe’s long life, from prison cell to presidential palace, he is the history of revolution… a Kerensky and a Stalin… the liberation struggle’s saint and its monster, too… all in one. To black Africans he is a big disappointment. To whites he is proof that Ian Smith was right all along. When Ian Smith left the top man role in Rhodesia, the country was the ‘bread basket of Africa’ with a currency as strong as the pound. Now it is a basket case whose peoples’ bones stick out and whose dollars are already as worthless as a campaign promise.
But everything follows the same laws — from embryo to corpse… from boom to bust… from seed to fruit to rot… nothing escapes, neither an individual, an empire, a species, nor a market.
This is not the first time in our lifetimes that the world has seen this kind of show. In the ‘70s, Paul Ehrlich, like Malthus before him, foresaw a crowded, hungry world. In his popular book, “The Population Bomb,” he said hundreds of millions of people would starve to death. This was a world in which England couldn’t even exist; he said it would disappear by the year 2000. He was wrong about that. He was wrong about a lot of things. Julian Simon challenged him, arguing that a free economy always reduces real prices. On September 29th, 1980, the two made a famous bet — on whether the prices for 5 basic metals — chromium, copper, nickel, tin and tungsten — would actually go down, inflation adjusted, in the following ten years — despite population growth. What happened? Simon won. On the 29th of September, 1990, the prices of all 5 were lower. Ehrlich settled up with a check for $576.07.
In theory, Simon will always win a bet like that; competition and technology always force prices down. But Ehrlich wasn’t wrong about everything. And Simon wasn’t right about everything. While one believed the weight of numbers would send the world to Hell… the other had a god-like faith that the market would always save it, guided by an invisible hand to progress and prosperity. But while Simon is right in theory, the invisible hand is not always the gentle paw that he imagines; it does not necessarily call out for more booze just because the crowd gets thirsty. In fact, sometimes it vanishes altogether, allowing a Mugabe to ruin a country… instead of permitting the free market to build it up.
Simon had the good luck to make his bet at the beginning of a major decline in commodity prices. Oil, for example, hit an all-time high over $100 a barrel, in current dollars, in December 1979. Ten years later, it was trading near $30. And by 1998, the price had fallen to $10. Had he made his bet ten years earlier or ten years later, he probably would have lost.
Back to the raw facts facing the Roman holidaymakers: Over their plates of crespelle all fiorentina, delegates will learn that high food prices are putting millions of people on the verge of starvation. Then, as they wash down their peposo with a tide of Barolo or Chianti Classico, they will reflect on how this came to be. The “green revolution,” someone will mention, seems to have run its course. (Out of politeness or imbecility, no one will mention the Fed’s easy money policies.) Ehrlich’s population bomb never exploded, they might come to believe, because irrigation, selective breeding, and the use of petroleum-based products greatly improved farm productivity.
But now, the green revolution has turned brown. It is as mature as the credit cycle… or Robert Mugabe himself. The water is running out. Opposition to bio-engineering is growing. And petro-chemical inputs are both less effective and much more expensive than they used to be. Result? In 1961, crop yields grew by 10% per year. Lately, they’ve increased less than 1% per year.
Meanwhile, in 1970, there was about 1 acre of arable land on the surface of the planet for every pair of feet. But the feet have multiplied — just like Erhlich said they would — from a bit over 3 billion people to more than 6 billion; and now the species is expanding like sub-prime debt. Just look at a chart. Human population looks just like the Nasdaq in ‘99 or oil in ‘08. This bubble-like population explosion, along with urbanization, highways, pollution, desertification and so forth, has cut the amount of farmland per person in half. Meanwhile, the number of people bellying up to the bar continues to grow by 11% per year — more than 10 times faster than crop yields.
Everyone wants a drink; but there’s only so much beer on tap. Who knows? This may be a good time to short the whole damned race.
Regards,
Bill Bonner
November 19, 2009
Editor’s Note: This article originally appeared in The Daily Reckoning as “Boomer Trends Coming to an End.” To view the original article, please click here.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed and internationally recognized. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.
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Works for me.
The more I regress…
The meaner I get.
Heaven forfend I should ever question the wisdom of the fabulous Bill Bonner, so I will only say that–being a Texan, y’know–I have a very wide acquaintance among petroleum engineers, landmen, oil men, and former ex-pats from Saudi Aramco, and I cannot advise sending a son off to college to become a petroleum engineer. Our oil lease is aging quietly and profitablyy (no question oil is there; we’ve had successful wells three times in the past), which is fine with me; the best possible result for us is to hold off another year and a half until the lease expires, lease again, and then drill.
Real money, as our guru knows, comes from the land, not bubbles. If you purchase even a little now and a bit of livestock you may well be attain at least the security of a yeoman farmer before this century is too far into the teens–supposing you learn how to keep the animals propagating and manage to grow a few some produce.
well the solution is there but no one has the innovation or the will to exploit it as a species we are more akin to a swarm of locusts or a virus we migrate in relatively small numbers to a habitable location and than we breed like rabbits and consume all the natural resources we can get our hand’s on. hey im not against my species just how we are but this does not have to be the end of the line… there are more resources in space than anything on this planet enough to power a thriving civilization for aeons water on the moon oceans of natural gas on a moon orbiting neptune planets and moons we could terraform heck i just watched something and they mentioned a lightyears wide cloud of ethyl alcohol there is plenty if we just would try to get there well there is the old saying dont kepp all your eggs in 1 basket or you drop the basket and splat there go all your eggs
j….wow, thats all i got
so all we gotta do is go off planet and get everything we need?
where do you suppose we should grow our food?
did you read the article?….per human farmland diminishes as populus increases
maybe we could find some off planet investors as buyers of last resort for fed securities while we are at it
start training astronauts for booming ‘space employment opportunities’
able to double employment in that sector with the edition of fifty guys…..
soylent green will be people….i’m just worried it wont be very nutritious
How exactly have oil imports declined over the last 12 years?
http://tonto.eia.doe.gov/dnav/.....1&f=M
At the risk of regressing, Mr. Bonner published two essays on 06/06/08, and somehow, we end up with this, today, er, yesterday–about 1.5 (regular, earth) years later. He even “signed” it, too: Regards, Bill Bonner. November 19, 2009.
This is like trying to figure out who wrote what, when, in the Book Of Deuteronomy.
And why?
I think the reference to Bo Diddley’ death, included in this redaction, points to the real meaning for today’s reader, when we recall: “Bo Diddley (was) a Gunslinger”.
OHHH! NOW I see!!–Mr Bonner sent over his stuff from 06/06/08 in response to Mr. Kunstler’s stuff about overpopulation & the yeast people!!!
Well…smack me upside the head with a square guitar!
Chuckles, fellow readers and responders. Ah, would that there were “terraformable” planets within reach and that we had the technology and the funds necessary to develop them. I have been an avid sci fi fan for fifty years or so, and I would love being a pioneer. Since this scenario does not strike me as likely any time soon, I shall continue on the assumption that the best solution available “after” (after any number of things which lead to the destruction of the food distribution network) is to strive now to be a leading proponent of the Preparocracy, those who will be set up to be at least landed gentry when what is left of this country slides back to the 18th century. There will be zealot-controlled areas “if,” and abundant bandits, but the best I can see “if” events lead to a hundred million dead are small agrarian societies. Dukes, Barons, landed gentry, yeoman farmers, a small artisan class, those who “mine” the dead cities for glass, metal, bolts of cloth, spare parts, a few innkeepers–and an enormous servant class. Get in on the ground floor now! If you have, can pay for, or have a friend who will share even a few acres of land, less than $5,000 now will set you up to live very well. That’s what insurance is for, and my suggestion will pay yearly dividends in beef and chicken.
Let’s remember how many farmers it takes to feed a hundred and thirty people. One. In 1960, that farmer could only feed twenty-five. There was more oil around then, and it was cheaper. Yet fewer need farm now even though oil is scarcer and more expensive. Ag science feeds people. The science will get better. As for water, we have the same amount of water we have always had. It just moves around. We will get better at putting it to more efficient use. Considering population, many times an exponential rise is followed not by a shortable plummet but by a long leveling off maintaining and consolidating the advance. Barring apocalyptic worldwide conflagration, which is not highly probable, then world population will continue to grow until at least 2040 and level off at around nine billion. Does that really scare anyone? It’s only 2-3 billion more people added over the next 30 years.
Correct me if I’m wrong but going from 6.7 billion now to 9 billion in 2040 is an additional 2.3 billion. A 34% increase. Divided by 30 years equals about 1.13 % per year. Going forward that is not 11% per year in population growth. Grain prices are now back at 1992 levels despite spiking up to a triple from 1992′s prices last year. More people to feed and though food prices are volatile they have reverted to the mean. People are multiplying but there is no overall scarcity of food at least as indicated by price.
[...] Free market analogy to population control Thought this was good, worth the read. There are some pretty nice one-liners in there. Human Population Bubble and Regression to the Mean [...]
Interesting argument, Mr. Simmons, but few farmers can feed 130 people more than an item or two at most. A farm and a ranch together do not make a grocery store. Both together cannot provide food year around for a group or even for themselves without canning and preserving. We have gone from 5.1 million family farms that FDR had to feed a population of 125 million, to 2.1 million and a population of over 300 million and Agribiz supplying–at present–most of the food. Corporations cannot endure current economic conditions as efficiently as individuals can because we are more accustomed to sacrifices and have lower expectations of profits. We will continue to supply our families first and sell what we have left over. What many do not grasp is that farming and ranching are not something anyone can do immediately; we are not a bunch of hayseeds without skills or experience. In addition, we seek to preserve family land and our way of life. It takes a great deal to make me admit that I cannot do anything, but I admit freely that we are unlikely to be able to expand our operation to provide beef for 130 others. It can’t be done. The capital investment is enormous, the work specialized, and we have precisely the same difficulties with rising taxes, feed costs, labor expenses, and losses due to regulations.
in response to
….wow, thats all i got
so all we gotta do is go off planet and get everything we need?
where do you suppose we should grow our food?
did you read the article?….per human farmland diminishes as populus increases
maybe we could find some off planet investors as buyers of last resort for fed securities while we are at it
start training astronauts for booming ’space employment opportunities’
able to double employment in that sector with the edition of fifty guys…..
soylent green will be people….i’m just worried it wont be very nutritious
well hydroponics for starters or is that too hard of a concept to get nasa already has plans selfsustaining hydroponics bay powered by sunlight
running out of land hmmm within 50 yrs with current not future current technology we could create a breathable atmosphere on mars suitable for human beings
booming employment opportunities, well lets see maybe you are not familiar mining with metals such as gold,platinum asteriods composed of these maybe you should do a little research yourself to see how these elements are formed and the idea may be more lucrative to you
please dont insult my intelligince with your snide condescending flippant dismissal of any idea not the norm of course this is not an easy fix nor is it something that would happen overnight however yes you are probably right my fathers generation hasd no spine so all you in power would rather sit and watch rome crumble so i guess the best solution would be to go home cook a nice thanksgiving dinner and lace the turkey with cyannide and reccomend the same thing to all my friends at least im optimistic for the human race enjoy watching rome crumble
Last time I went off-planet for a little snack, it ended in divorce. I think Mr. Bonner is well prepared for the future–he has a ranch in Argentina, with cattle that eat sand.
Steverino, I don’t know if it is a prize, exactly, but around my laughter here is a a request that you ask Gary for my e-mail address. My, I like your intelligence, sense of humor, and flair with words. LBT
J….next summer go buy “home grown” tomatoes at a local farmers’ market. We aren’t allowed by law to call them “organic” even though they are grown without pesticides or artificial fertilizers or growth hormones; the big boys bought that label from Congress, and it doesn’t mean at all what rational people think it does. At the same time, pick up some “hydroponic” tomatoes; they’re marked, you won’t have any trouble.
A simple taste test will show you all to well why we don’t want to live on things grown in vats. I don’t CARE if they grow under sun-mimicking lights in a nutrient solution which is, in theory, equal to the finest naturally composted soil, there is NO comparison in the taste of the two. The ones we grow with garlic and Marigolds to keep a few pests away, picking off yucky green tomato worms by hand, have so much flavor that you will be able to tell the difference blindfolded. Hydroponic food has far less taste, and the vegetables in your produce section touted as “organic,” at twice the price, are a sham not worth your money. Fake is fake, be it tomatoes, “cheese food,” or hydrolized soy protein masquerading as bland, textureless meat.
I refuse to eat fake food or feed it to my family and hands. Our idea of a “convenience” food is Hellman’s mayonnaise–and that only because it is too easy to redecorate the kitchen in olive oil making our own. We make our own magnificent soups, including tomato, chicken noodle, beef-vegetable, hot ‘n’ sour, baked potato, clam chowder, and cream of whatever you want. It doesn’t take long. Chicken? Not only will we not touch the polluted products in grocery stores, but what we fry on an off day is vastly superior to anything the Colonel, Churches, Popeyes, Chicken Express, or any other chain I ever tried turned out. OUR chickens grow up eating disgusting things that wriggle, jump, and fly, supplemented with a little grain free from hormones, antibiotics, or pesticides. Yeah, so it takes over twice as long to get a bird to eating size. Start ahead of time. The future is not in vats; it is in reduced taxes, reduced population, and increased home farms. LBT
Did you say “real money…comes from the land”? Get outta town! Have you heard about the 1920′s Florida land bubble? Check it out, dirt farmer! A friendly heads up from MOONWATCHER.
Dear LBT
Connection to the earth is enormously satisfying and rewarding in a multitude of ways, and sensitivity to a local environment and neighborhood marks a truly civilized(formal academic education not required) human. However, let’s not limit ourselves to experiencing only our own backyards, despite the sage’s advice that we can see the whole world from there.
Hi everyone, it’s Thanksgiving Day! I’m enjoying my extra day off, and I am planning to make something fun that will probably involve a car trip and seeing something new in Crawfordsville I haven’t seen yet.
You write new post at Thanksgiving?
Moonwatcher…I never said that money comes from speculating in real estate, other than the wisdom that in general there won’t be any more beach front property. Woo-hoo, what fun in Dubai, with the artificial islands in the shape of palm trees and the world! They have their “Friday Surprises” on Wednesday because they think Thursday and Friday are the “weekend.” Hey, what’s the problem with saying you can’t even pay the interest on 60 BILLION dollars in debt?
I say that security (up to the point where yearly taxation and death duties breaks up your farm or ranch) is to be found in land which supports our needs, with the supposition that we can expand through enormous work and feed others. In the BEST of years we are doing very well if we get a 4% ROI, and so it has always been. My daddy always said, “You can’t afford to run cows unless you have a private income!” Fortunately, he did. In the worst of times great wealth is a milk cow, a few head of cattle, chickens, and a garden. I am not really a dirt farmer, Moonwatcher. We’re ranchers who “garden” in several small greenhouses which we find far more comfortable. Better think about producing a few veggies yourself. LBT
Dear, dear Bill:
Always a pleasure to hear from you. If there is anything greater than dropping out of the madness of modern life (while retaining Internet!) and growing your own vegetables and livestock, I haven’t found it in nearly 70 years of living all sorts of places and doing quite a few unusual things. My darling Charles is 72, and he feels exactly the same way, having been most of the places I haven’t and done many things I haven’t. To ME, my friend, being “environmentally sensitive” means precisely and exactly caring for my land to prevent erosion and increase fertility, and watching over for our livestock–which has names, except for those who will lead marvelous lives until it is time for the freezer. We don’t eat our friends. I have no interest whatsoever in the fates of the Snail Darter and Painted Turtle, far less “fairy shrimp.” I care about our land, our families, our critters (who are very dear to us), and encouraging others who are attempting to pull themselves up by their boot straps. One of MY contributions this week was offering the use of our Thunder (pound for pound the most expensive animal on the place) for stud service. We will be entertaining (and feeding and caring for) the entire “herd” of a young man who is knocking himself out to become self-sufficient. His four beautiful girls are his stake, and this will be his first kidding season. He did not ASK for any favors; I offered, with a glad heart, stud service Thunder is GLAD to provide, worth $600, and I’m not about to charge the kid the standard $2/day each for feed for six weeks. It isn’t that much trouble to cut a little extra brush, the pastures are in great condition, and a little grain will never be missed. That is not CHARITY. It is encouraging those who deserve it. It is a hand UP, not a hand OUT, for someone who is sacrificing for the future. He didn’t ask it. In fact…I am very touched that he offered me my choice of his four beautiful girls in lieu of standard charges. I’d love to have all of them, but only if I pay him for them. I smiled, and told him that in three years, when he has as many goats as we do now, I would LOVE to have a doeling out of his glorious Esther–by a different buck. I’m very careful to keep my gene pool as wide as possible. If more people under stood the difference. John X works full time on a thriving model farm and lives in a motor home on site so that he can fund his dream. He doesn’t think he is “entitled” to anything. He risks everything he has on his ability and a sensible plan, and I feel privileged to help him. I haven’t any sympathy at all for those who take and think they owe nothing in return. Great response, thanks again. Linda
Our association aims to promote children’s homes intereselse children and to solve the major problems that we face. If in our daily life we face a whole series of material needs such as lack of diet quality, insufficient clothing and poor quality or living quarters and inadequate playground, though they are not the most important problems our, as one might think at first. The real problems we face almost daily is the emotional nature and the social integration. The fact that we lack parental love that other children benefit each day, or the fact that when we were in school or on the street, people, when they hear that we are the children’s house, we look with a certain reluctance, this is the thing that we hurt the most. Even later, they completed a school and we must look for a job or a house, we have a hard to solve these problems because our world looks like some mentally retarded which is very good to Feresti. It is these prejudices, which has the world to us, we aim to eliminate with this
Imagination to power. Every resource arises from the human imagination. No man can say what the imagination will decide to learn about next. The primary problem is getting the dead hand of the past from our throats.
Contact me if you want to discuss how soon we can expect to see 2 billion people go bye-bye. Call is fine: 509-758-0629