With the financial, energy and political world coming apart at the seams, I think it is time to "connect the dots". Shall we?
I used to get a decent amount of "fan email". Lately, I have been getting hate email. You see, I simply pointed out that if you are actually rooting for the energy crisis to bring capitalism to its knees (I am not. I am a stone cold capitalist. It is not incompatible to me to make money on the energy crisis. Markets solve at least as many problems they create, the folks that interfere with market mechanisms might want to take a hard look in the mirror and see if they can say the same about themselves with a straight face), you are also rooting for the slaughter of the "Goose That Laid The Golden Egg". You see, the lack of Oil will harm the rich, corporations, small business, and the self employed financially. They, in turn will pay less taxes which in turn fund the state and federal social programs - Medicare, Medicaid, Disability, Unemployment, Food Assistance, Farm Subsidies, etc.... Less funding = less program. No funding = no funding. Why is it so offensive for me to state the bloody obvious?
I pointed out that the funding for social programs was going to dry up like Paris Hilton left in the Vegas sun. I was wrong. I should have said that the funding has been drying up in REAL dollars for several years now, and that the "rate of change" would now accelerate greatly.
It seems that most of us agree that the Federal Government is LYING about the rate of price inflation. Well..... if that is true (and it is), then the COLA (Cost of Living Adjustments) in the social programs are smaller (much smaller) than rate of inflation.
So let us take a number. Any number. Just kidding. I think that the U.S. understates price inflation by 8% per year, and has for 3, perhaps 4 years. In real terms the dollars received by beneficiaries of the social programs has declined by .92x.92x.92 (78% of what they were receiving) and maybe x.92 again (72% of what they were receiving). unfortunately, even with this deception, these programs are breaking the bank (literally) and the federal budget. Only now, as anyone with an internet connection can see for themselves, the funding for our profligate homes and cars is not there (because the economic production is not there. "They" were willing to fund us for a the last couple of decades, but that has come to an end). If you doubt this, just take a good look at a couple of REALLY SILLY social programs - Fannie Mae and Freddie Mac.
Peak oil means = "Peak Credit", "Peak Social Programs", "Peak Military Expenditure", "Peak Prison Population", "Peak Food", "Peak Fresh Water", "Peak Government". Not one of these phenomenom care about your, or my, political sensibilities. Zero. None at all. Not even a little bit.
Good Luck!
Mentatt (at) yahoo (d0t) com
Subscribe to:
Post Comments (Atom)
14 comments:
I don't know who is sending you hate mail, but they are continuing to ignore reality and will suffer the consequenses along with the rest of us, some more than others.
Lets face it, the party is over. How the incompetatnt bafoons in the district of corruption mismanage the after party hangover will effect and affect us all.
Oldman in the Boonies
I completely agree with your "real world" inflation figgers. For instance, I got a promotion, and a $200 a month raise in January (before taxes, so let's say $150 take home). Do I have that much left over every month? No. My bills have gone up enough to completely erase that raise. Personally, I've figured my "real world" inflation to be about 30% this year alone.
While inflation is the easiest economics for people to understand and identify (who doesn't use food & energy?), a part of the financial community is suggesting that what we really have, and what I think they may be right about, is actually DEFLATION, the same significant drops in prices that are associated with the Great Depression. Inflation is bad, but deflation is worse (deflation is much harder to fix). The loss of housing value (and most peoples' wealth is in their house) is going to cause a massive wholesale decrease in demand across the board (fewer cars bought, less furniture, fewer boats & vacations, etc.) No one has any money today, credit cards are maxed out, and the banks don't want to lend anymore. When demand goes down, prices go down. Peak oil is causing the food and energy prices to increase, and that is masking what is going on. This has been suggested by Mike Shedlock, and I'm sure you know of his blog. I think he may have a point: we don't have rising prices except in food and energy. We instead have an ongoing and oncoming massive drop in demand at hand, precipitated by the loss of wealth via housing. Possible?
Anonymous:
I am a big fan of Mish Shedlock. And, surprisingly, we do not disagree as much as you might think.
There is a BIG difference between PRiCE inflation and MONETARY and CREDIT inflation. These are not mutually exclusive events. You can have monetary deflation brought about by declining home prices and declining lending (remember how money is created in a fractional reserve banking system) and price inflation down stream of anything that is energy intensive.
And yes,. while monetary inflation can be annoying, monetary deflation would better be described as TERRIFYING.
Mayberry:
Thank you for your comments. I suspected the circumstances you describe, and hope that others will comment or email with their personal experience in making the end of the money and the end of the month, meet.
Hence, "making ends meet".
First Anonymous:
Maybe I exaggerated... maybe it wasn't hate mail, maybe it was more:
"you are a fucking jerk and when Obama gets in he is going to do A, B and C and then X,Y, and Z and if it weren't for jackass pessimists like you, blah, blah, blah..."
BTW I like the "District of Corruption", and will use it in the future.
Deflation during the (first?) great depression was caused by excessive savings causing a constriction in the money supply, hence the tax, inflate and spend policy- it looked good at the time. Today it appears we have inflation in non durable necessities, (fuel, food, etc…) sucking up the income that would have gone to durable luxury goods and thus causing the fire sales. Deflation will only last as long as excess inventories do.
Japan has had a never-seems-to-go away deflation for the last 18 years. Must have a LOT of inventory. :)
Yes, deflation isn't prices going down (that's just a symptom of it), nor is it caused by people refusing to spend or large inventories of unsold items (more symptoms).
The deflation we have to worry about is the removal of huge amounts of money from the economy caused by default on debt. Every time a loan is created, money blinks into existence & can be used to buy stuff & drive the economy. When the loan defaults, the money disappears. Get enough of this happening and businesses close through lack of finance, people lose their jobs, banks fail ... and no-one has any money to spend. Those who have some will hold onto it. The economy grinds to a standstill.
The 1930s all over again, but worse as we have a higher population and declining resources.
As Greg said, TERRIFYING.
Greg,
"We don't need no stinkin' hate mail". Discovered your blog a month ago and am a loyal addict--in fact, I miss your articles on the weekend! I work in Saudi Arabia (for THE oil company) and have watched Peak Oil develop for about 20 months. I want to encourage you. I find you accurate, the only one who can keep their sense of humor, and helpful. For example, in "Confirmation" you helped me think about what International central bankers were thinking--I would have missed that completey, even though I have lived overseas--3 different continents--for 22 years. PLEASE keep up the good work. You are certainly benefitting me. And let me close with a ...wait for it...Good Luck to you and your family.
This confusion between inflation and deflation (and the possibility of both at the same time) seems to confuse even governments; for example the UK wants to hold high central bank interest rates to 'control' inflation, but the US Fed cuts interest rates to stimulate the economy, both in response to the same perceived problem.
The problem is that governments can't publicly admit they have no control over the long-term real underlying economy, only the short term economy of fiscal or monetary stimulus. But sooner or later the piper must be paid. This is payday. Welcome to reality.
Oil has given us 50 years of cheap (almost free) energy, like each of us having 50 slaves that don't eat or drink but do everything for us. I'd say we should be grateful that we have been the lucky generation to have had the full, amazing benefits from it all. Even if we now have to watch as it all unravels for our kids.
G:
As for your detractors, stop making sense and they will cut you some slack. To paraphrase our friend, Westexas, there are two types of people, those that realize that we have a finite resource base and those that will. I am open to some action on which party extinguishes itself first.
LD
Thanks guys for the excellent comments.
Donal, a fractional reserve banking system is entirely based on CONFIDENCE. Of course, government big shots would keep smiling right down to the moment thieves are removing the copper flashing on the White House (just making a point, not predicting political collapse).
Greg, SOMEBODY still has confidence enough to keep buying shares, because by all logic the markets should have plummeted by now.
I can only assume that foreign holders of dollars are trying to swap them for any company that looks like it may retain some real value when the bloodbath is over.
I'd suggest you all teach your kids to speak Arabic, Russian or Mandarin so at least they can understand what their new bosses are telling them to do!
Post a Comment