1. There is no limit to energy, but it takes time to become available. High quality energy reduces labor and increases productivity. The success of the mass economy in producing a profligate amount of goods results for efficient usage of energy and fossil fuels substituted for human energy for goods produced. Throughout this period individuals accumulated great amounts of goods, capital, and property. Growth because inexpensive energy and cheap transportation allowed companies to become national companies, their names household words, and scaled as industrial empires of enormous power. Mass means the energy, materials, and embodied resources required to produce a product or perform a service. The dominate means of amassing wealth and power in the mass economy was the exploitation of natural resources, because it was in the transformation that the great profit of industry were found. The end goal of the mass economy was the elimination of labor.
2. As energy cost increase, small business paradox rises. When energy peaks in the short term – cheapness decreases; productivity falls, energy costs soar. Energy not resources is critical to our future. Small business produce quality products and the consumer seek these products because of his decreasing real wages. Persons, business, and organizations that practice disintermediation will prosper and thrive as the contracting economy squeezes out the intermediary activities. Small companies produce twenty four times as many industrial innovations per research dollar as do large companies.
3. Energy Conservation does not work and reflects short-term vision. Energy innovation develops new sources of energy (solar, fusion, and nuclear) making energy more abundant and cheaper. Oil is on the demise. Oil energy has become more expensive. Industrial countries are face with a choice, either consume more energy and drive the price higher, making goods more expensive and causing inflation and declining wages; or they can make the economy more informative by developing methods of production and patterns of consumption that use less energy and capital resource and more knowledge.
4. Cheap energy created a consumer who burned increasing amounts of energy to support a life-style and enabled towns, neighborhoods, and families to consume vast amounts of resource and produce little in return. Energy usage increased by a factor of 4. Energy consumption transformed into applications of high quality energy: medical, household entertainment, and production robots. An US citizen commands in BTU equivalent, the services and goods of a hundred slaves.
5. What is information? It is design, utility, craft, durability, and knowledge added to mass.
6. Real wages are dropping, total energy consumption increasing, and production quality and efficiency rising. While governments and politicians are debating the course in regards to higher energy prices, higher cost of capital, and declining wages, businesses, consumers, and householders are already adapting. Adaptation to the rising cost of energy is creating the informative economy. America cars weight 30 percent less than a decade ago. The result is less consumption of material and energy.
7. Information is replacing mass by revolutionizing the design, creation, and function of goods and services. Small businesses are the winners because they represent the informative economy and not the mass economy. The more work put into a product, the higher the price. Despite a profoundly shaken economy, products and services that contain a high degree of informative information are prospering.
8. We need to know what will thrive and what will dies and why. We need to know, within a field or industry, why some companies prosper and other stagnation.
9. The Scarcity of money equation. In 1973, energy and capital rose in value and the value of the worker’s time declined. The rising cost of capital indicated that money was more expensive to borrow reflected in high interest rates an inflation. The high cost of money was passed onto the consumer as higher product prices without increasing industry’s revenue. Consumers put off buying cars and houses, a little longer. The rising cost of energy has raised transportation and distribution costs. This will eliminate the middleman and change sales channels, to achieve a competitive price. Savers will be rewarded for the usage of their money. 25 percent of the world trade is done by barter and between 10 to 22 percent of the US gross national product is barter.
10. Inflation indicates economic growth, new innovations, and construction of infrastructure. Businesses that depend on mass markets, cheap transportation, and predictable consumers are losing out to smaller, more nimble companies. Many corporations are paying out more in interest than in dividends, and borrowing more money each year than they are generating in profits.
11. Goods are getting cheaper. As prices fell in relation to wages, goods became cheaper. After WWII, a new consumer emerged; the solid middle-class blue or white collar worker who had money to spend on discretionary purchases. Because production, retailing, advertising, and distribution had all become gigantic in scale to meet demand for goods, smaller manufacturers were crowded out and bad products drove out good ones; quality lower and near break even profits occurred.
12. Government size is shrinking, government revenues are diminishing, and future growth of additional tax revenues, unlikely. Government faces the dilemma of raise taxes and further choking economic recovery and revenues, or not increasing taxes resulting in decline in revenues caused from economic stagnation. Local government credit rating is dropping preventing qualification for loans. There are two ways to make a fortune: through taxation or through trade – buying goods cheaply in one place and selling them at a higher price in another.
13. The confidence game of debt and capital. The cost of capital will remain high. Communism failed because it allocated capital in unnecessary factories, faulty inventions, and the overproduction of goods – misallocating funds and bring no benefit to the economy. During inflation the value of money declines. Inflation represents the cost of capital. As price rises, the value of money declines, so to hold money during inflation is to see its value decrease. This why people are adapt to spend during inflation. In the 1970s, over 97 percent of the GNP was consumed and 2 ½ percent was reinvested. Much of the spending was finance through increased debt. The cost of capital will remain high through the transition from the mass economy to the informational economy. When the government borrows money from the private sector and spends it on government purchases, this is money not available for lending to businesses. Money supply and capital are not the same. Economist say that inflation results when the annual growth of the money supply consistently exceeds the rate of growth in gross national product. When inflation is rising and currency is falling, the sensible thing to do is get out of currency and buy something that will rise with the tide of inflation. Between 1950 and 1980, federal debt rose 300 percent, consumer debt increased 1,300 percent, mortgages increased 1,500 percent, and state and local government 1,300 percent. The debt has been increasing and growing faster than the nominal rte of economic growth. As the amount of money required to service debt increases, less money is available for investment and as growth slows, the more difficult it becomes for the economy to meet all of its debts. As greater demands are place on existing capital to pay debt, interest rates go up, making the expense of carrying debt even more punitive to everyone. Corporations are purchasing growth and earnings by going more deeply into debt. Real-Interest rates can be calculated as the difference between inflation and high-quality long term bonds. In 1982, real interest rates were 7 to 8 percent, a fifty year high and the normal real interest rates of 2 to 3 percent. The fed placed reserves in the economy, fearing economic collapse; as debt increased faster than the rate of economic, it increased the demand for cash and raised interest rates; the rapid increase in money supply created inflation and a new upward spiral of debt as individuals and businesses tried to borrow. The nations need for new debt increased in order to keep afloat during economic contraction.
14. We are in an economy that requires more dept to survive but whose ability to sustain the debt in declining. The structure of debt could no longer be sustained by the economy, and a long painful period of deflation and liquidation took place.
15. A new trick, Companies use the currency exchange rates to higher report earnings for sales in foreign countries, as the dollar demises, the foreign currency strengthens, and inflates the reported earnings and inflates the stock price.
16. The power of one: Request company financial and study them; find out if your company is stinking; does the company have a negative cash flow; what are the companies strength and weaknesses; and is the company living on borrowed time.