Mankind is now consuming 22% more than the planet Earth can generate a vast and chronic deficit that threatens to drive up the value of natural resources for the rest of our lifetime and beyond.
Put another way, were overspending our resources by the equivalent of 2.5 billion soccer fields of land, water and minerals each year.
Thats the conclusion of Global Footprint Network, which has crunched 4,000 different economic and environmental variables since 1961.
Based on their data, each human being on the planet consumes the resources and production of 2.2 hectares. But the resources available to support that person are coming from the equivalent of just 1.8 hectares.
That leaves a massive, global natural resource deficit of the equivalent of 0.4 hectares per person, or roughly 22%!
How does this compare to Americas huge budget deficits and record-smashing trade deficits?
It doesnt.
This natural resource deficit is so many times larger and so far beyond the decision-making power of any authority on Earth, it simply cannot be compared to more fiscal or financial deficits.
Suffice it to say that our budget and trade deficits will impact the economies of some countries for some years. The planets natural resource deficit, in contrast, could impact virtually all countries for centuries.
Unlike the nations huge debt load, this is not a far-away issue that politicians can leave to our children and grandchildren. Nor is it one that can be resolved through a normal market adjustment.
Rather, it is a mammoth force thats plowing ahead right now, nonstop, day after day … creating ever greater scarcities and mandating ever higher prices to ration the available resources.
In More Developed Countries
The Natural Resource Deficit
Is Even More Severe
The 22% deficit is the global average. In industrial countries, its much worse.
In the U.S., for example, our natural resource deficit is closer to 106%. In other words, were using about twice as much water … twice as much food … and twice as much energy than we can generate!
Meanwhile, Germany is consuming 2.4 times its capacity … the U.K. 3.5 times … and, resource-poor Japan, a whopping 5.4 times!
How do nations cope with their natural resource shortfalls?
The answer is short and simple: Trade. Countries with natural resource deficits trade with the countries with surpluses.
If they dont have enough oil, they import it. If theyre deforested and need timber, they get it from countries with abundant forests and plenty of remaining trees.
How does the entire planet cope with a global natural resource deficit?
For this question, there is no short answer. When the world as a whole runs a deficit, theres no way to make it up.
This reality is why Im so concerned. But, what happens next is truly upsetting …
Our Global Natural Resource Deficit
Is Forcing Us to Devour Ourselves
For lack of a better term, were turning into environmental cannibals.
This phenomenon, called ecological overshoot, is a nightmarish scenario in which we suck up more resources than can ever be replaced.
Science fiction?
I wish! In fact, right now were overshooting like theres no tomorrow.
When it comes to certain minerals and resources, this should come as no surprise to you. For quite some time, weve been telling you about the shortfalls in non-renewable resources like gold, silver, rare minerals, and petroleum. For years, weve known that the well was running dry.
But the global deficit is actually far beyond just non-renewable resources. Its also putting our precious renewable resources in jeopardy.
Im talking about collapsing world fisheries … the extinction of multiple species … deforestation … and even the loss of groundwater in much of the world.
The Growth in India and China Is
Making This Crisis Come Sooner
And With Greater Impact
Right now, China natural resource consumption per person is derived from an average of 1.6 hectares or equivalent. India is a meager 0.7 hectares, well below the global average of 2.2 hectares … and far, far below the U.S. average of 9.7 hectares.
That may sound pretty frugal. But its only half the story. The facts: Even though China and India dont consume much on a per-person basis, theyre still running big ecological deficits.
Factor in the fact that these two countries are the most populous on earth, and you find that: China and India alone now account for a staggering 59% of the global natural resource deficit.
Thats more than the deficits of Germany … Japan … and the U.S. combined.
So much for the present situation. Now, think about the future for a moment …
What happens as China and Indias red-hot economies continue to grow and per-person consumption goes through the roof?
My answer: A global natural crunch of unprecedented dimensions.
But dont take my word for it. According to the Worldwatch Institutes State of the World 2006 Report, if India and China were to consume natural resources like the U.S. does, TWO MORE PLANET EARTHS would be needed to fuel their economies.
Mind boggling!
And were not just talking about oil or gas here. Were talking about virtually every natural resource that Mother Nature has to offer. Coal. Wheat. Corn. Rubber. Palm oil. Rice. Soybeans. Sugar. And … potable drinking water which is already in shorter supply than oil.
Will India and China reach U.S. consumption levels in our lifetimes? No. But they dont have to. All that you need is for India and China to reach European consumption levels, which average about HALF of those in the United States, and wed still need another entire planet Earth to provide adequate natural resources.
I cant tell you how long that will take maybe 25 years, maybe more. But I can tell you this: Theyre already on their way right now.
Between now and then, India and Chinas economies will double … triple even quadruple their hunger for natural resources.
Worldwatch explains it this way: China uses 1/13th as much oil per person as the U.S. In India, they use a miniscule 1/28th.
But if per person oil consumption in India and China were to reach just one half the current levels in the U.S., wed need another 100 million barrels of oil per day just to keep up!
That would mean that todays worldwide production of 85 million barrels of oil per day would have to more than DOUBLE just to keep pace with oil consumption in India and China.
Bottom line: Weve passed the invisible threshold from an era of apparent abundance to an era of real shortages and rising prices for commodities and natural resources.
Nothing short of a miracle in alternative fuels and energy will stop fossil fuel prices from going sky-high in the years ahead.
All this is why I am so bullish on the natural resource sectors. Its why Ive recommended key core positions in energy shares, mining shares, and food companies, and even companies helping to solve the worlds dire water crisis.
Theres no replacing these natural resource shortages. Natural resources are becoming more and more precious each year, each month, each week, and in some cases like oil and gold even by the day.
If youre not already in some of these markets, start with the basics. In gold, I like the DWS Gold Fund (SCGDX), up 42% since I first recommended it in May 2004.
For a diversified natural resource fund, my favorite is US Globals Global Resources (PSPFX).
And for my latest recommendations in natural resource stocks and other specialized mutual funds and investments, please see the current issue of my Real Wealth Report.
Best wishes,
Larry Edelson
Editor, Real Wealth Report
About MONEY AND MARKETS
MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
2006 by Weiss Research, Inc. All rights reserved.
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