Silent Archimedes

Book Review: The Coming Economic Collapse

Posted by silentarchimedes on May 25, 2008

How You Can Thrive When Oil Costs $200 a Barrel

Author: Stephen Leeb, PhD with Glen Strathy

Wow, so where to begin…

When I first saw this book at Barnes and Noble for $5.98 (Bargain Priced) I was very skeptical of its title. Even the three-toned cover art seemed amateur. A quick glance at the Table of Contents and words such as disaster, collapse, collision, blind, madness, dangerous, crisis, havoc, and armageddon are interspersed in the titles! Although I had become an avid follower of the bull markets in gold and commodities, and understood the problems facing America, my first thought was, “This book must be an extreme contrarian’s attempt at scaring the public and consequently helping him profit on the sales.” However, as I was reading this book, with the understanding that the information in there was 2+ years old, I could not help but realize how so many of his predictions have or show strong signs of coming true.

WHY I READ THIS BOOK

As someone who is in his early 30s, I still remember the days of $.80/gallon of gas and the dot com indulgence in the late 1990s when I was in college. Things seemed so perfect. It was my first taste of real life, and boy, was it good. Since then I have seen America slide into a quick descent towards decadence. I won’t say who is to blame, as I think many groups are, but nonetheless, I have seen myself becoming more of a contrarian, more disenamored with our future. I wanted to see how this came to be… I started reading James Turk and his gold escapades, Warren Buffet and his beliefs, and the whole Federal Reserve role in society. I realized I had to start looking out for myself, because I didn’t know how much the government would. That’s when I accidentally came upon this book in Barnes and Noble.

THE AUTHOR: STEPHEN LEEB

I had never heard of Stephen Leeb before I picked up this book, but he did publish an earlier book in 2004, The Oil Factor, that predicted the rise of oil prices due to increasing demand and vague supply. In 2004, crude oil was ~$30/bbl, which in an of itself was not that out of the ordinary. He was obviously not alone in that prediction, but was nonetheless in the minority. Leeb has a PhD in Psychology and that definitely plays a role in his analyses.

SHORT SUMMARY

Leeb claims in his book that once global peak oil (when daily global production of oil begins to decrease) occurs, the price of oil will skyrocket and economies around the world, especially the highly oil-dependent United States, will have a very difficult time coping with it. In his worst case scenario, he sees large-scale violence and civil wars that could lead to the collapse of society and the return to self-subsisting 19th century lifestyles. In his best case scenario, governments and industries tackle this massive problem of dwindling energy and dependence on oil by gracefully transitioning society to alternative energies, such as wind, coal, and others. He doesn’t really expound the most likely scenario, but he alludes many times to how it might already be too late, or how dire the situation is. It is apparent that he believes we are closer to the worst case scenario, and it is best for individuals to take actions before it rapidly deteriorates.

REVIEW

The biggest positives about this book is that a lot of what he preaches are coming true. I can’t say how much I would have believed his book if I had read it when it was first published in 2006, although it would have still been an interesting read. As a background, in 2006, crude oil was about $60/bbl, unleaded gas was about $2.00 to $3.00 per gallon. In his 2004 book, he predicted oil would rise from the then $30/bbl to $100/bbl in the next few years. In this book, he predicts $100 oil is now conservative and $200 is likely by the end of the decade! Today, May 25, 2008, light crude oil on NYMEX is over $131/bbl and my local town’s gas just hit $4.00 for unleaded.


Price of light crude oil – [2000-early 2008]

In the first part of the book, he uses his psychology and economics background to show that past civilizations have failed due to exactly the same problem we currently face, decreasing resources coupled with lack of leadership by the government and lack of open-minded thinking by the masses. He uses the word groupthink many times throughout the book. Although this part of the book is hard to disagree with, it is not all that groundbreaking. It is shown many times that the actions of the mass are quite different than the actions of an individual, albeit the difficulty in being a non-conformist. It is also not new to realize that the government and corporation do not act in the best interests of its people and its survival. One can argue that a benevolent leader does not exist.

The second part of the book, lays the oil problem entirely on the table. The high price of oil is here to stay. World supply will reach peak production soon, and demand continues to increase. A lot of good analogies are used to describe the illogical actions of many in society. He compares the U.S. government’s propensity to give Big Oil lots of subsidies as akin to a person stranded in the Arctic in wintertime with only two weeks’ worth of firewood, deciding to burn it all the first night. Then he talks about the repercussions and likely scenarios for a post-oil world. By comparing the current situation with the 1970s oil crisis and the Great Depression, he hopes that we have learned from the past.

In the final part of the book, he offers suggestions on how individuals can capitalize on this increasingly dire situation. This is the part that really seals it in. Although his predictions on oil prices have rung true, the investment ideas he offers greatly supports his hypothesis. For example, he suggests the buying of gold. At the time of his writing, gold was $460/oz. Today, as of May 25, 2008, it is over $925/oz. and breached a high of $1020/oz a few months ago. Then he suggest buying oil service companies, such as Schlumberger (SLB). In 2006, SLB was ~$60/shr. Today it is over $100/shr. There are numerous other investment suggestions he offers, and a quick finance check shows many have rung true. I leave it up to you to read. The only major suggestion that fell hollow was his belief that real estate would remain a viable investment. As we know, the bubble has burst, and real estate has been one of the worst investments the past few years. However, what is interesting is he didn’t think the bubble would burst because he believed the government would chose higher inflation over the more dangerous real estate crisis.

VERDICT

This is a very easy to read book. It offers a lot of historical comparisons, psychological explanations (groupthink, I tell ya!), and blunt analogies to support his hypothesis. It can sometimes feel like he is repeating the same things, and I’m not sure if he is reaching for things to write or if he adamantly wants you to understand the urgency. However, no one can really argue with the facts. The oil crisis is indeed an immense problem facing the world, especially the United States. This book does a good job at laying it all on the table. I recommend picking up this book to read. At best, you become really wealthy…

Rating: 8 out of 10 oil barrels

POLL: How severe do you think the upcoming economic collapse will be?
1) Hah! There won’t be one!
2) Ehh, stop freaking out. It’ll be small.
3) It’ll be a regular recession. Like the early 1990s.
4) This is a long recession, but we’ll be back.
5) Lower quality of life is here to stay.
6) End of society…

View Results

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One Response to “Book Review: The Coming Economic Collapse”

  1. Uncle Pavian said

    Wasn’t it Homer Simpson who observed, “ACK! We’re all gonna die!”

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