The Crash Course seeks to provide you with a baseline understanding of the economy so that you can better appreciate the risks that we all face. The Intro below is separated from the rest of the sections because you’ll only need to see it once…it tells you about how the Crash Course came to be.
Chapter 1: Three beliefs
Dr. Martenson states his three beliefs: massive change is upon us, that change may overwhelm our ability to respond, and that we do not lack the technology or understanding necessary to build a better future. The next 20 years are not going to be anything like the past 20 years.
Chapter 2: The Three E’s
Understanding our current situation requires acknowledging that the Economy, Energy, and the Environment are all related; in short, that each “E” influences, and competes for our attention with the others. We have never simultaneously faced these issues at such levels, yet none of them can be solved in isolation.
Chapter 3: Exponential Growth
The most important Key Concept of the Crash Course, exponential growth, demonstrates how world population, oil consumption, U.S. money supply, water use, forest loss, species extinction, and fishery exploitation are rapidly reaching their natural limits. The implications for your life are powerful, and demand attention.
Chapter 4: The Power of Compounding
Compounding, the first Key Concept of the Crash Course is explained in this installment. Dr. Martenson draws on a paper by Dr. Albert Bartlett explaining the dangerous implications of steady rates of growth, from oil consumption to population: as Chris says, “With exponential functions, the action only heats up in the last few moments”.
Chapter 5: Growth vs. Prosperity
Contrary to what we’ve grown used to, growth is not the same thing as prosperity. In fact, growth and prosperity are both dependent on the same thing: surplus. Dr. Martenson explains how we’ve been conditioned to want, and to take, both growth and prosperity; however, we are approaching the limits of our physical, finite, earth – the amount of surplus is steadily declining.
Chapter 6: What is Money?
What is a dollar? Sure, it allows us to buy things like food, cars, and iPods; yet, most of us don’t really understand money beyond that. Dr. Martenson not only provides an understandable definition, but also explains what gives our green pieces of paper value, and what dangers any currency must face.
Chapter 7: Money Creation
Understanding how money is created provides a foundation for appreciating the implications of our massive levels of debt, because it tells us how that debt came into being. As John Kenneth Galbraith once said, “The process by which money is created is so simple, the mind is repelled.” Dr. Martenson walks us through this simple process of fractional reserve banking.
Chapter 8: The Fed & Money Creation
Chapter 7 explained money creation via money loaned into existence by banks, on the local level. Chapter 8 explains money creation by the Federal Reserve, where we learn that it is manufactured out of thin air. Perpetual expansion is a requirement of modern banking. The banking system MUST continually expand, because that is how it was designed. By understanding the requirement for continual expansion we will be in a better position to make informed decisions about what is likely to transpire and take meaningful actions to enhance our prospects.
Chapter 9: A Brief History of U.S. Money
Beginning with the panic of 1913, this chapter touches on important events in the history of US money, such as the creation of the Federal reserve, FDRs confiscation of private gold, the Bretton Woods agreement, and Nixons slamming of the gold window. We learn that the current international monetary system of unbacked currencies is only 37 years old, and is operating outside of the standards established by the Bretton Woods agreement. The system were operating within has not been planned or designed: it emerged out of a crisis. Dr. Martenson also provides graphs of total US Federal Debt, and Total US money stock, both of which are growing with no end in sight.
Chapter 10: Inflation
Dr. Martenson establishes inflation as a monetary phenomenon, defined as the decrease of the value of money, caused by too much money around in relation to goods and services. From 1665 to 1776, 111 years, there was absolutely no inflation. From 1665 to 1905, 240 years, the cost of living stayed roughly the same, aside from brief jumps during wars. Unfortunately for us, there was no settling in terms of inflation after World War I or World War II. The military apparatus was not dismantled, and inflation has accelerated to astonishingly high levels.
Chapter 11: How Much is a Trillion?
Recently, we have gotten used to hearing the word “trillion.” From trillions of dollars of government debt to trillion dollar bailout packages, we are spending enormous sums of money. However, most of us dont realize how much a trillion actually is. Dr. Martenson explains how much a trillion is using a few examples, such as a 67.9 mile high stack of $1,000 bills. As he concludes: “Make no mistake, a trillion is a very, very big number and we should not be lulled into complacency simply because it is too big to really get our minds around. That should drive us to action instead.”
Chapter 12: Debt
Dr. Martenson explains how, since debt is a claim on future money, it is therefore a claim on future human labor. To put it simply, debt is future consumption taken today. Key Concept 7 is introduced, that “ever-growing debts implicitly assume that the future is going to be larger than the present.” Dr. Martenson challenges this assumption, and what it means for us if that condition of growth is not met.
Chapter 13: A National Failure to Save
“The next twenty years are going to be completely unlike the last twenty years.” — Dr. Martenson. Chapter 13 begins his explanation for this deeply held belief. On every level of our society, there has been a failure to save. Individuals, cities, counties, states, and corporations have all failed to save, but, more importantly, so has our federal government. Our government has pursued a reckless policy of debt accumulation, while neglecting saving and investing, leading to Dr. Martensons claim that the United States is insolvent. Insolvency, which occurs when ones liabilities exceed assets, is first step on the road to bankruptcy.
Chapter 14: Assets & Demographics
Having examined our nations current, never-before-seen level of debt, as well as our failure to save, we now move on to look at our assets. Key Concept 8 is introduced, that debts are fixed, but assets are variable, sometimes gaining and sometimes losing. Dr. Martenson examines Americas assets, especially in light of our current demographic situation. The effect of the baby boomer generation is specifically considered, with the conclusion that the next 20 years are going to be completely unlike the last twenty years.
Chapter 15: Bubbles
Throughout the long sweep of history, the bursting of asset bubbles has nearly always been traumatic. Social, political and economic upheavals have a bad habit of following asset bubbles, while wealth destruction is a guaranteed feature. Four characteristics of bubbles are observed: that they are self-reinforcing on the way up (higher prices become the justification for higher prices); once they pop, the game is suddenly and permanently over; they are roughly symmetrical in time they take to peak and fall; and they are roughly symmetrical in price, returning to their pre-bubble status. Dr. Martenson concludes that the housing bubble is itself just a symptom of a credit bubble, leaving a final catastrophe of the currency as our most likely outcome.
Chapter 16: Fuzzy Numbers
Dr. Martenson explores how inflation and GDP are measured, how their measurement has changed over years, and what that means concerning the integrity of these government statistics. Substitution, Weighting, Imputations, and Hedonics and their effects on calculating inflation and GDP are each examined. Dr. Martenson traces the social impact of these shady statistics, and finishes by showing how a dishonest determination of inflation further deforms an already flawed GDP calculation.
Chapter 17 (a): Peak Oil
Peak Oil: Energy is the lifeblood of any economy and a steady supply of energy is necessary to maintain the status quo, while an ever-increasing supply is needed to grow an economy. In this chapter, Dr. Chris Martenson explains that Peak Oil is not a theory, rather it is a description of how oil production increases over time, reaches a peak, then declines. Evidence points to a global production peak in the near future, which is troubling since the U.S. imports two-thirds of its oil and relies on it to much of its transportation and food production needs.
Chapter 17 (b): Energy Economics
Petroleum has supplied the surplus energy that has allowed for social complexity, industrialization, and the modern conveniences that we enjoy. In this chapter, Dr. Chris Martenson explains that in the future our supply of surplus energy will decline due to the fact that increasing amounts of energy will be required to produce new energy. When poor net energy (ERoEI) returns are paired with peak oil production, it points to a return to a less complex society.
Chapter 17 (c): Enercy and the economy
What if our exponentially-based economic and monetary systems are really just an artifact of oil? What if all of our rich societal complexity and all of our trillions of dollars of wealth and debt simply are the human expression of surplus energy pumped from the ground? In this chapter, Dr. Chris Martenson predicts what will happen when economic, population, and energy growth reach their natural limits.
Chapter 18: Environmental data
The entire human population reached three billion in 1960, and today more than twice that number of people live on earth with rapid growth expected to continue in the future. Unfortunately, an increasing population increases the demand for earth’s natural resources. In this chapter, Dr. Chris Martenson explains that since the easiest-to-extract, most abundant natural resources are extracted first, our growing population will have to deal with scarce, energy-consuming, low-grade resource availability in the near future.
Chapter 19: Future Shock
Debt, money creation, population, and energy production have all experienced unsustainable exponential growth in recent years. This fact, when paired with the housing bubble, ‘boomer’ retirements, peak oil production, a national failure to save money, and excessive exploitation of natural resources, is cause for alarm. In this summary, Dr. Chris Martenson encourages us, “to return to living within our natural and economic budgets.” The next twenty years are going to be completely unlike the last.
Chapter 20: What should I do?