The plateau begins when peak oil induces massive price shocks contributing to economic recession. The recession in turn reduces consumption, lessening the strain on resources and precipitating a collapse in fuel prices. Lower prices create new space for renewed consumption and economic recovery. This “undulating plateau” is a period of major price fluctuation, which could last from 5 to 10 years before oil capacity limits are permanently breached and we arrive at the era of irreversibly scarce oil supplies and high prices.
The corrupt lending practices of banks interacted with the impact of rising inflation. While sheer greed partly explains this behaviour, it’s a bit more complicated than that. The structural fragility of the global financial system had been obvious since the dot com boom and bust in the late 1990s. The capitalist imperative to keep growing by continually generating profits is structural - i.e. capitalism systematizes human greed and makes it necessary for economic survival. If the financial sector didn’t find a new outlet for investment to continue growing the economy, the economy would contract. If the financial sector was to continue growing, it had to find a new previously untapped market for debt-credit creation and the associated milieu of ‘financial products’ - this new market consisted of ‘low-income’ people and even the struggling middle classes, namely, the majority of the population. The very imperative to grow - simply to avoid banks and corporations losing profits, contracting and then failing - pushed banks into even more corrupt lending practices, which combined with long-term structural energy and monetary constraints, creating a bubble of virtual growth that was bound to implode at some point.
How to Create a Quadrillion Dollars ‘Ex Nihilo’
So the housing markets were only the underbelly of a much larger beast. So-called “structured financial” products served as mechanisms to generate massive profits for elite investors by deepening levels of debt. This leads back to the structural issue of the monetary system, based on fractional reserve banking - that is, the creation of money from nothing, simply by entering numbers into a computer, as credit charged at interest. Traditionally, banks could create credit or debt-money up to 12 times what they held in reserve.
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