The economy goes through cycles of innovation and contraction going back centuries.

What happens is new technologies that increase productivity enter the market and boost every sectors’ profitablity and lower their costs. Think electricity in the 20s, jet air travel in the 50s, the internet in the 90s.

After the growth in productivity slows, all that new liquidity continues to seek returns (of course) but the best returns are financial, as in money chasing money. The late 20s saw “holding companies” and margin buying, the 70s saw junk bonds, and the 00s saw mortgage derivatives.

As to the Oil Drum, some great stuff there but you’ll see a lot of people getting their doomsday thrills off and their leftist axes ground. Peak oil and peak gas will happen someday and opening more areas for drilling will delay that.

The analogy with gold too expensive to extract is weak in that it takes energy to make energy (or gold) so it is a bootstrap interaction. That’s captured in a concept of “energy return on energy invested” or EROEI. It is VERY imprecise and impossible to calculate given the lack of analytical boundaries for the problem. Still, it should be obvious that investing too much energy for too little energy return is a losing game. Corn ethanol is a classic example. Another issue is that all energy forms are not equal. For example, domestic hot water is in no way equal to high voltage electrical service.