ECONOMY

Four areas covered for change and risk within the economy

1.  Money as a claim on energy and resources 

2.  Debt as a future claim on energy and resources

3.  Currency and power conflict

4.  Personal EROI - Customer/Employee/Individual buying power

5.  Monitoring the Math

DETACHED OBSERVATION STATEMENT #1

>  Money is a claim on Energy and Resources

Energy and resources are correlated to wealth.  Money is a claim on these energy and resources.  

Since money needs and energy to convert, the risk is that there is too much money vs the energy and resources available.  Human society can print as much fiat and crypto as they want, however, they cannot print water, oil, natural gas, minerals, materials, etc.  

Since moving off the gold standard in the 1970s, the worlds currency is now fiat.  It is not tied to a physical asset.  As such, the growth of money (claims on energy and resources) has ballooned.   There are other forms of money that can be used in transactions (with new additions like crypto).  However, all forms of money need the energy and resources to claim.  

Another risk is that a digital number in a bank account is at risk due to its value being based on perception of confidence within the markets of that value.  As an example, if there is a rush to claim digital/fiat money, the value of its purchasing power would diminish quickly due to the overabundance of such fiat money and that prices would rise dramatically on a large claim of lower EROI energy and resources (run on banks with lack of confidence).

To summarize, two risks to monitor.  Too much money compared to available energy and resources and lack of confidence in a leveraged system of fiat.

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IMPORTANT QUICK NOTE ON MONEY

There is a lot of discussion about government and their budgets in the news.  

Two quick notes:

1.  The US Federal Government is not like a household.  The issuer of a currency has much more power than a user of the currency.  The implications of debt on the US government is different than the debt of a state, a county, a city, a corporation, or an individual.  

2.  US Government is the Issuer of Currency.  State, county, city, corporate, and individuals are users of such currency.  Excessive debt at the federal level has different implications than at the state and local.

DETACHED OBSERVATION STATEMENT #2

>  Debt is a future claim on energy and resources

With lower EROI on energy and resources combined with human pursuit of wealth, debt has increased dramatically over the last few decades.  Debt allows future demand pulled forward and those who hold that debt have a future claim on energy and resources.  

Along with adding more money to the system, debt is a way to increase consumption and the economy.  Debt can be leveraged to improve results.  The world economy is much larger because of all the debt and leverage.  Too much debt and leverage can become a major risk because even a small decline in income, asset values, or liquidity can be magnified into large losses, forced selling, defaults, and cascading financial stress. 

DETACHED OBSERVATION STATEMENT #3

>  Competition/Cooperation of the US dollar - Other currencies

Conflict is not just on a battlefield, nations compete and cooperate for power/survival.  The US dollar is the worlds reserve currency.  The United States has additional power in that other nations have to use the US dollar in transactions which creates demand for the currency.  It has allowed the US to have larger debts.  The trend is away from the US dollar as nations seek other alternatives and as nations compete for currency use.  This conflict is on display every day and the results of this competition and conflict will impact organizations and individuals in various ways as we move forward.    

Additional coverage of this topic will covered within the Global Village Section.

DETACHED OBSERVATION STATEMENT #4

Personal financial Surplus impact on organizations

Within the energy section, we discussed EROI on a human wide scale.  In this section, we will cover personal financial surplus.  Humans need a certain amount of calories to survive.  Surplus energy can then be spent on other activities.  Financial surplus for this section is monitoring how customers and employees are surviving financially.  What is there position in terms of affording life?   How does this impact their approach-avoid actions?

Each person has their own personal financial experience.  Incomes for most people are not moving up fast enough to match costs within the US.  This dynamic will play out differently depending on the business type and customer profiles.  

It is important to monitor the affordability for people to buy the things they need to not just survive - but feel better about their world.  Another risk we will be monitoring is perception risk.  How does a person perceive their personal situation currently and going forward.  It is recommended to have a map that monitors the perceptions of customers, patients, and employees.  

DETACHED OBSERVATION STATEMENT #4

Math to monitor for the economy, money, and debt.  

What is the growth of an economy?  What is the money supply?  What is the debt and the rate of increase in that debt?  What are the interest rates and durations of debt corresponding to that debt?  There are a lot of math questions that an organization or an individual can monitor for the economy, money, and debt.  The last one to ask is if the change is linear or exponential?  The rate of change plays an important role in future risk.

Society:  Within the energy and resource section, EROI and cost of resources were emphasized.  As will be seen, all the categories within this Adapting to Change section impact one another.  Increase of money supply and debt can hide some of the risk of lower EROI and higher extraction costs.  Detached recommendations from a society standpoint:

>  What are the changes in energy EROI and resource costs of extraction and what is that compared to money supply and debt?  Is human society losing real growth?  Have a system to monitor these threee categories together.

>  Monitor how society is leveraging and determine the potential risks.  Is human society being real with its potential risks?

Organizations:  The monitoring of the economy, money supply, debt, leverage, and other areas in this area are of high importance.  Areas to map and monitor for organizations include:

Personal situations and perceptions of customers, patients, and employees.

Revenues - Expenses - Surpluses of Federal Government, State and Local, and the organization itself.

How the economy, customers, patients, and employees use money - trends.

Combining all the categories of this section and the potential changes and risks (Energy, Resources, Economy, Environent, Knowledge, Technology, and the Global Village).

Individuals: