Book Review: GAME OVER – How You Can Prosper In A Shattered Economy

Game OverIn Game Over – How You Can Prosper in a Shattered Economy, author Stephen Leeb presents the world with it’s real problem: Can we develop sustainable alternative energy systems before our old energy systems run out? His answer? Not sure.

Part One, called Resource Shortages: Facing The Facts discusses our ever dwindling oil resources, and the complexity of drilling deeper and deeper wells that produce heavier oil requiring more energy and resources to refine than the good old light sweet crude. Even as the number of oil rigs is increasing, the amount of oil produced isn’t.

And oil isn’t the only commodity that is becoming more scarce and expensive to produce. The mineral resources that we depend on in our technologically advanced society are also harder to find and extract.

At present rates of consumption, we will run out of iridium, lead, silver, antimony, tin, uranium, and tantalum in the next four to 20 years. Within 40 years we’ll be out of zinc, copper, and chromium. Platinum and nickel will soon follow. For the 12 minerals as a whole, on average we have roughly 25 years of supply left. And that doesn’t take into consideration increases in consumption that will occur over time.

And don’t forget that fresh water, needed to mine these minerals, is a commodity, too. And for the record, it’s needed to grow crops and sustain life. According to Leeb, world-wide fresh water consumption has tripled in the last 50 years and as much as one billion people lack the fresh water they need on a daily basis.

In addition to supply problems, we have demand problems. Developing countries such as China and India now want the good life (as defined by Hollywood), and many of the resources the developed world need are located in these developing countries. How long before they say NO, we need this for ourselves? Leeb blames rampant capitalism but before anyone dismisses his premise, he says that the problem is that we as a world have defined ourselves in terms of what we can buy. And that is where the problem really lies.

He also complains that tax and regulatory structures in many countries are far too convoluted. Could the huge sums spent to insure compliance with regulations, tax structures, accountants, and lawyers be better spent developing alternative energies? After all, taxes don’t reduce the complexity of the problems we face because they’re just shifted down to the consumer.

Part Two, We Never Said It Would Be Easy soberly begins by saying we are in a race against time. Claiming we need to have an energy policy that’s a Manhattan Project on steroids, Leeb goes on to say that researchers:

…must focus on figuring out what combination of existing alternative energies has the greatest long-term potential given the rising shortage of the commodities on which those energies will depend.

In other words, we need to look at the big picture. It doesn’t do any good to promote biofuels if we don’t have enough fresh water to sustain the crops. It doesn’t do any good to build a desalinating plant if we don’t have the energy to run it. It doesn’t do any good to mine for more metals if we don’t have enough energy or water. Water and mineral resources are needed to extract oil. Water and oil (in the form of energy) are needed to extract minerals. Energy and minerals are needed to build and run desalination plants.

It’s a vicious circle and it’s all interconnected.

What about those alternative energies? Leeb lays out the problems we’re facing currently:

  • Nuclear Power – a HUGE consumer of water and once it’s used, no one wants it to water their vegetables, wash their clothing, make iced tea, or brush their teeth. Nuculear power is also dependent on uranium and many other mineral resources, which are on the decline. Additionally, there’s that little safety issue. Want one in your backyard?
  • Wind Power – great in theory but tough when the rubber meets the road. Wind turbines are made of steel (iron) and require constant maintenance and lubrication (oil). Right now wind accounts for only one percent of our energy demands. How much steel would it require to build enough for wind energy to account for 25 percent? 50 percent? 100 percent? Those numbers are staggering. Add to it wind’s unreliability and the amount of acreage it would demand and you begin to see the problems wind energy presents.
  • Solar Energy – its biggest issue is cost. There are two ways to collect solar energy: solar cells and solar connectors. Solar cells convert solar energy directly into electricity but they use silicon which is difficult to produce and work with and requires large amounts of water and energy to process. And it is’t clear whether we realize a net gain in energy! Another issue is storage. To date, there is simply no economical way to store solar energy. Additionally, the manufacture of thin film photovoltaics requires the use of one of earth’s rarest metals, tellurium. Tellurium is needed in memory chips, optical discs and as a strengthener in lead and copper. Its rarity has contributed to its 700 percent increase in prices since 2000. Solar collectors, which use the sun’s energy directly, are usable only in certain parts of the world.
  • Geothermal Energy – very promising since it doesn’t depend on another energy source to produce. Its problem is accessibility since only certain parts of the world have sufficient heat generated by the earth’s crust to matter. Current estimates stand at 15 years before we’ve gathered enough information and data to understand how to use it properly.
  • Biofuels and Biomass – the problem is land. There just isn’t enough land to produce enough energy with these. Water is an issue as is the net energy gain. In developing nations there is the question of whether to use corn for food or for energy. Which would you rather have?
  • Other Fossil Fuels – a myriad of problems here. Refining chemicals, water, energy to process, and in the case of coal, less energy content in what remains in the ground that in what we’ve mined in the last 150 years.

In Part Three, Economic Tsunami, we’re given another dose pessimism. Things don’t look too good on the economic front either. With nations falling deeper and deeper in debt, and with the prospects of higher inflation, rising commodity prices, unfriendly but commodity rich nations suddenly thrust into power, and peak commodities, we can only hope to lessen the prospects of a worst case scenario. Only the development of viable and sustainable alternative energy sources will do that. And even that may not be enough.

Aussie money coinsPart Four, Investments for a Chaotic World, can be summed up with one word: Gold. It always amazes me that gold is a store of value. You can’t eat it, get energy from it, use it to produce rain, or build with it. Though investing in gold is probably a good idea since everyone values it so much, Leeb’s account of the global energy crisis and his appeal to buy gold is a regurgitated story that presents itself during every economic crisis. Perhaps more importantly, like all other buy gold stories, there is no good exit strategy.

He does recommend gold ETF’s and various international ETF’s that rely heavily on countries that are resource rich (Brazil, Russia, Australia, Canada, and the continent of Africa).

In the final chapters of the book, Leeb makes some startling predictions. He suggests that stock markets around the world will be shadows of their former selves with volumes declining up to 70 percent. He predicts rampant and staggering inflation and the decline of the white collar worker. He says that wealth will be determined, not by the pieces of paper someone holds, but by the commodities they control (sounds like ancient Egypt, no?).

Buy or Don’t Buy

If you want to learn the ins and outs of how commodities are being depleted, this is the book for you. If you’re a stock picker, looking for some ideas on how to profit from the coming commodity collapse, this is the book for you. If you’re interested in learning about how everything is screwed up, this is the book for you.

BUT – if you’re an index fund investor or if you’re clinically depressed, you’d be better off passing on this one.

Book Giveaway

I’m planning to giveaway my advanced reading copy of Game Over so if you’ll email the FREE BOOK CODE located at the bottom of my RSS feed to thewisdomjournal at g mail dot com, I’ll enter you in the drawing to be held on March 29th. I pay shipping!

photo credit: vagawi

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