Peak Cheap Oil and the Global Reserve Currency

The Great Simplification #91 with Luke Gromen

This week…

Many following this podcast know I deeply care about the environment, global heating, the oceans, and biodiversity issues. Unfortunately, the global macro financial environment may soon relegate those issues - as critical as they are - further behind on our culture’s focus list. Today, financial analyst Luke Gromen joins me to discuss how the availability of cheap energy has underpinned our current financial architecture and expectations - and what peak cheap oil and unsustainable debt levels imply for the not too distant future. A central part of this story is the rise of the US dollar as a global reserve currency tightly linked with the ability to purchase oil - subsequently leading to the US becoming a major exporter of debt. What are the implications for this dynamic in a future with depleting economically accessible oil?

Luke Gromen is the Founder and President of research firm Forest For The Trees, LLC, whose goal is to aggregate a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for clients. Luke founded FFTT to apply what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America. Luke has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.

How have countries with economies based on natural resources and manufacturing differed in their response to geopolitical uncertainty in comparison to those who are based around finance and the service industry? What might the response be from countries holding US debt in anticipation of a declining oil supply? What does this mean for the future of global currencies in a simplified global economy and a finance system that will eventually need to be re-tethered to the finite nature of Earth?

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In case you missed it…

Last week, Professor Nick Haddad, a conservation scientist with a focus on butterflies and other insects, joined me to discuss what decades of research have indicated about the declining state of insect populations. These creatures - often considered pests - act as the foundation of critical ecosystem functions. The overlooked degradation of butterflies, beetles, bees, ants, ladybugs, and countless other species have huge ripple effects across our local and global ecological functions - from a loss of bird populations to a reduced ability to grow food. Nick and I unpack the full scope of this decline and what it might mean for humans, other animals, and the biosphere.

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