Often while I am studying our energy future, I run into this question:
“As the price of energy increases, won’t the market respond by inventing new systems that generate new supplies of energy and prevent energy supply problems?”
This question begs the following question.
Does money control the energy supply? Or does the energy supply control the value of money? In order to answer these questions, we first need to understand the concepts of energy and money.
What is energy?
The word “energy” comes from the Greek word meaning activity, “energeia,” and is the quantity of work that can be done by a force. The study of energy turns up in nearly all scientific endeavors, from studies of the beginning of life to space travel.
While energy can take many forms and is never lost, there are observed behaviors of energy expressed by the laws of thermodynamics. These laws are part of physical reality, preventing mankind from “creating” energy and also placing strict limits on its conversions.
Energy is an important part of anything that is alive. One definition of life is “a characteristic of an organism that uses biological processes to change free energy or energy containing substances to a degraded form.” Energy separates life from death, growth from decay, and breakdown from repair.
Most marvels of the modern world are massive energy consumers. A list of industries in the modern world reveals that nearly all are large consumers of energy. Modern transportation, housing, health care, and food production all require huge inputs of energy. The availability of large quantities of energy has changed human existence in such a profound way that it difficult to even contemplate. Much of what is commonly thought of as “amazing technology” and/or the “power of money” is actually “energy availability.”
The energy that humans currently use has allowed modern societies to break free of the limits that preceded and will follow this period. That limit is living with the energy that arrives at Earth each day from the Sun.
What is money?
Money is an accounting system used to facilitate trade and the keeping of accounts. United States money is a “fiat” currency system. Fiat means that federal law requires the currency be accepted for public and private debts. There are no guarantees the money will retain any value. In fact, the US government neither guarantees the value of money nor actually owns any money. All US dollars are owned by a private banking consortium called the Federal Reserve, and congress is prohibited by law from interfering with the wishes of the bankers. The private bankers adjust the money supply and therefore the value of the money as they see fit.
Money, at least the kind that most modern societies use, is a concept created by man and does not exist in the physical world. The rise and fall of currencies is of little consequence to the laws of energy and energy will limit the “wealth” of all organisms, beings, and societies long after all human currencies have collapsed and cease to exist. Money must be managed carefully by humans so that it remains useful in the face of changes in the energy system, for it is energy that powers everything from the human heart to the world’s largest building.