Any sense of prosperity in today's economy is based on a falsehood, claims Steve St. Angelo, proprietor of the SRSrocco Report website.
Like we here at PeakProsperity.com, Steve is a student of energy. He shares our worldview that net energy per capita has been in steady decline, and a result, future growth will be limited. Also like us, he notes that the "growth" seen over the past several decades hasn't been due to surplus net energy (which makes being able to do more possible). Instead, it has been fueled by debt - which essentially steals prosperity from the future and consumes it today.
Any third-grader with a crayon can quickly tell you that kind of scam can't last forever. And it can't. Once the can can't be kicked any further and the next economic and/or financial crisis is upon us, Steve sees today's over-inflated asset prices quickly dropping by a gut-wrenching 50-75%:
What we have is a totally propped-up market based upon debt. Energy isn’t producing positive growth, really. So instead of having real economic growth, we have inflated economic growth and inflated asset values.
As the energy return on investment started to fall for the United States in the 1970s, we had to start off-shoring our manufacturing as a way to extend the US lifestyle. We couldn’t afford the manufacturing anymore because of our oil energy return on investment. It moved over to other parts of the world where labor was cheaper. And we started buying more homes, more things, more stuff. And we went into debt to do that. That has extended the "leech and spend" US suburban economy.
If you look at it on face value it looks like this is continuing. People are moving around, buying stuff, a lot of people are traveling -- but it is all based on a lot of debt. When the debt finally implodes, the really nasty face of this whole fraud will be shown to all Americans. I don’t think many people are prepared for it (...)
When growth starts to decline, I think we're going to see the valuations of assets decline considerably. It's anyone’s guess how quickly they can fall, but according to what I have been looking at, I think we are going to see a 50% increase in real estate values right off the bat. I am not saying this will happen in a day, but the first wave will be a 30-50% decrease in real estate values when the markets really start to crack. They are already at the edge of the cliff -- and I see prices falling down the cliff, struggling to recover, and then falling even further. Actually, I predict within the next 5-10 years, we can easily see a 75% or more reduction in real estate values.
What does that mean for stocks and bonds? The same thing. If we start going into more rapid disintegration, you are going to see the valuations of stocks, bonds and real estate really decline -- much greater than anybody has any idea.
Click the play button below to listen to Chris' interview with Steve St Angelo (60m:16s).