Tullett Prebon, if you haven’t heard of them, describe themselves as:
…an intermediary in wholesale financial markets facilitating the trading activities of its clients, in particular commercial and investment banks [in] seven major product groups: Volatility, Rates, Non Banking, Treasury, Energy and Commodities, Credit and Equities.
They are, in other words, not all that hard to tell apart from Friends of the Earth. So you might be forgiven a small double take when you read the contents of their latest report to clients:
The global economy is in the grip of a forest of dangerous financial and non-financial exponentials. A series of key indicators – including population growth, energy consumption, cumulative inflation and the money supply – all appear to have turned into exponential ‘hockey-stick’ curves.
Amongst the non-financial indicators, there are reasons to fear that exponential trends in population growth and energy consumption may not be sustainable, because both may be heading for practicality constraints. Meanwhile, the intrinsic values of the principal currencies (including the dollar, the euro and sterling) may be threatened by escalating debt, by dangerously rapid expansion in the money supply, and by continuing deteriorations in purchasing power.
We conclude that the ‘forest of exponentials’ is indeed highly dangerous, particularly because it is neither properly understood, effectively calibrated or coherently managed. In particular, we identify an urgent need to foster an understanding of energy returns on energy invested (EROEI), and to develop a universal system of measurement and calibration.
