JEREMY GRANTHAM: We're Headed For A Disaster Of Biblical Proportions

I have taken this from the Business Insider:

Legendary investor Jeremy Grantham of GMO has published a treatise on the root cause of exploding commodity prices.

He has also offered a startlingly depressing outlook for the future of humanity.

Grantham concludes that the world has undergone a permanent "paradigm shift" in which the number of people on planet Earth has finally and permanently outstripped the planet's ability to support us.

Specifically, Grantham says, the phenomenon of ever-more humans using a finite supply of natural resources cannot continue forever--and the prices of metals, hydrocarbons (oil), and food are now beginning to reflect that.

In other words, Grantham says, it is different this time.

Grantham believes that the trend of the last 100 years, in which the prices of almost all major commodities have steadily declined, is permanently over. And from here on in, humans will be competing more--and paying more--for ever-scarcer resources.

From an investment standpoint, this paradigm shift need not mean disaster: Grantham says the obvious play is to own "the stuff in the ground" (and the ground itself, as the huge boom in farmland prices illustrates). The less obvious but equally compelling play is to own companies and technologies that facilitate resource conservation.

From a societal standpoint, the news is far worse. Grantham believes that the planet can only sustainably support about 1.5 billion humans, versus the 7 billion on Earth right now (heading to 10-12 billion). For all of history except the last 200 years, the human population has been controlled via the limits of the food supply. Grantham thinks that, eventually, the same force will come into play again.

The hope of the optimists, of course, is that "science" will find a solution to this problem, the way it has for the past 150 years. But unless the world immediately wakes up to the severity of the problem--and makes fixing it a global priority--Grantham doesn't see that happening.

Graphs to summarize Grantham's argument are available here.

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm.  Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

He has been a vocal critic of various governmental responses to the Global Financial Crisis.