“We expect strong growth in the world economy until 2050, with average real GDP growth rates of 4.6 percent per annum until 2030 and 3.8 percent per annum between 2030 and 2050,” Buiter wrote in a market research.
“As a result, world GDP should rise in real PPP-adjusted terms from $72 trillion in 2010 to $380 trillion dollars in 2050,” he wrote.
“Real” means, incidentally, ex-inflation. (The usually-reported numbers are nominal GDP, which doesn’t adjust for constant purchasing power, that is, “constant dollars”.) That adjustment by itself is somewhat problematic as I have repeatedly documented, as the actual price of things experienced by the public is often wildly different than that “reported” in the so-called “official” inflation statistics.
Here, for example, is the one-year national gasoline price chart from “Gas Buddy“:
That’s a 23.5% increase. The most-recent CPI index shows about 13.5% (January to January) which looks pretty close. The problem is that the CPI assumes you spend just 4.8% of your income on gasoline.
For someone who makes close to minimum wage, or $18,000 a year, their after-FICA income is about $1,400 monthly. That allows $67 a month for gasoline. At $3.31/gallon you can buy about 20 gallons of gas, which is roughly one fill-up in most mid-sized cars.
If your car gets 30mpg (and most older vehicles do not, especially in city driving) then you can go 600 miles in one month on that fuel. There are 20 working days (on average) in a month, so one can not travel more than 30 miles – both ways – in a workday.
Oh yeah, they also assume you spend just $28.70 a month in acquisition cost on a used vehicle (that is, if you buy a used car and keep it for two years before it dies, on the very bottom of the car-buying pile, you spend a mere $500 on that car’s acquisition) and a laughable $21 monthly on maintenance, including tires, oil changes, repairs and parts.
All of these figures are, of course, laughable for people in the lower income strata, which is why ramps in commodity prices are so destructive to the standard of living for many Americans, say much less poor people in other nations.
But the real problem in the cited “REAL GDP” projections is that we’ve learned exactly nothing in terms of the underlying scam when it comes to the fundamental mathematical laws of exponents.
See, underlying every dollar of GDP is a unit of energy output. It cannot be otherwise. The dollar you spend on a new dishwasher or washing machine requires not only funds for purchase (which ultimately is, in part, comprised of the energy and raw materials to construct the item) but in addition it requires energy on a continuing basis in order for it to be useful.
It gets even worse when we start talking about industrial output. Nearly 13% of all energy use in the United States goes into two places – chemical production and petroleum refining. Those two sectors in turn produce the materials that we need in order to feed the rest of our energy beast. Residential consumption of energy is a bit over 20% of the total, with transportation being close to 30%.
Now scale all of this up by a factor of five!
In a word: How?
I don’t believe it. Now perhaps ten years from now we’ll have our “First Contact” moment, figure out how to build a warp engine, and everything will change. Perhaps.
But I can’t make plans around the appearance of Zefram Cochrane. I must instead look toward both what we’re capable of right here and now, along with what a reasonable man believes we will be able to achieve in terms of technological capacity over the next forty years.
There are many who are buoyed by Moore’s Law when it comes to the process of computing power since the 1950s. But one should note, with great care, that the limits of Moore’s Law have stunted continued progress in that regard, driving us toward not faster processors but rather toward arrays of slower ones.
For the same reason that all these other ethereal claims of exponential growth get in trouble: Mathematical facts.
One should be very careful about attempting to extrapolate exponential growth, because it is a mathematical impossibility for it to continue indefinitely. But of course nobody does. This is how we wind up with ridiculously-rosy projections for things like School Board budgets, growth projections in cities and similar things.
Now we have crack-smoking “analysts” telling us that we’re going to multiply the current GDP in the world by five but they present no plan to do so given the resources – particular but not only in energy – that we have available to us.
Best of luck on this one folks.