He explains that the world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value and that we all need to quickly adjust our behavior to this new environment.
Here are some interesting quotes from the newsletter:
- "no compound growth is sustainable "
- "From now on, price pressure and shortages of resources will be a permanent feature of our lives"
- "not just “peak oil,” but “peak everything,”"
He have specific paragraph for peak oil (N.B: 70 to 80 USD per barrel for new oil fields, same figure as Marc Faber) metals and agricultural commodities which he all see increase in price.
Finally he also notes the possible downward risks (short term) namely the weather for agriculture commodities and China could experienced a crash as its economy overheats (ce cited Jim Chanos). Out of those events he suggest a 25% chance commodities prices stumble, but if the weather is good (for farming) or China crashes the odds are 80%.
He concludes with "The U.S. and every other country need a longer-term resource plan, especially for energy, and we need it now! "
I strongly recommend you read the complete 19-page newsletter which is available for free on GMO website
I completely agree with Jeremy Grantham, that we would have to live a more simpler live, possibly control the population in order to avoid a catastrophe (massive loss of life) longer term.
Investment wise, I would not buy commodities right now (that's also a risk) and wait for a correction (as we have so many risks) before loading up massively either buying commodities themselves, commodities related stocks (might be risky due to demand destruction and reverses decrease) or ETF. Those are not really safe in case of financial collapse, but the easiest to acquire, some physical gold and silver stored in your home can not hurt, although the best would probably to have production capacity such as a farm or a mine, but it's very difficult to do for most people. In case a major crisis, the rule of law will go out of the window (martial law), and nothing is safe. Let's hope it does not go that far.
Finally, here's an excellent video playlist (8 videos - over one hour) of a lecture (year 2002) explaining the exponential function and showing the problems that will occur when it is applied to population and economic growth.