Tuesday, March 2, 2010

Its a Cold Cruel World - Part 3

Where was I? Old folks and recent college grads...

You see, the 17% "real unemployment" is not "real unemployment", either. To make accurate comparisons as Oil and energy become less and less available on a per capita basis is the real issue. (Here's something to think about... Oil consumption in kilocalorie terms per person, or per capita, in the U.S. is down about 5 or 6 % since 2005... more people, and less kilocalories....) we as a society have to start telling ourselves THE TRUTH. The 40 million folks over the age of 65 should not be excluded from the employment calculations because they sure as h*ll did not pay into the system what they are extracting (otherwise, we would have a surplus), and they sure as h*ll are not producing members of society for the most part.

Same goes with young adults. People in college are an enormous consumption drag on our output. The entire college population that is not working should also be counted into the employment numbers.

There are a few other groups - prisoners, the disabled, welfare and food stamp recipients that are not employed et al, and when you add seniors and college students et al... the remaining producers and tax payers simply cannot support the government services these groups require by NOT WORKING! (Yes, you can argue that education is an investment, and in a large minority that is true... so we will have to discount for that portion - while once again subtracting for the 23 to 30 year olds that live on their parent's couch playing video games.) The non working spouses of folks making a decent living and NOT taking care of the home unassisted must also be added this number.

Unfortunately, and I want to say this gingerly and with respect.. we would need to calculate all military personnel as well.

ALL, that's right, ALL of these folks are consuming from the tax pool or disposable earnings pool that the tax payers are paying into, and there are simply too many people drawing from the pool and not enough people paying into the pool... now add to this equation the fact that Oil subsidizes the efforts of those paying into the pool and reduces the requests from those drawing from the pool.

Up until this point we have had the international bond market to fund this absurd cluster f***, particularly China and Japan, but now it appears that they are choking on the paper, and the Federal Reserve has had to step in and monetize the debt. The good news, if you want to call it that, is that the deflation in non government debt has outpaced the printing presses, and will for some time to come. Still, the Administration is NOT making noises about "jacking the social security retirement age" just for the fun of it. They got some guys there (Volker) that can count, too.

Of course, these pools of tax dollars for social programs have the perverse effect of creating more and more dependent people, another exponential function to calculate (in Dr. Bartlett's famous speech he speaks of a local politician that says he grasps the "e" function, but does not believe that it applies on the local level... to which Dr. Bartlett amusingly replies: "Oh, great. We have a local politician that believes that the laws of Mathematics do not apply in Boulder County, Colorado... worse, he has a degree from this (Univ. of Col. Boulder) institution... how embarrassing!") Certain members of the political establishment can see clearly that Americans are addicted to Oil, but CANNOT seem to see that American's are addicted to unfunded and teetering "social programs" (free money).

In the end, "It's a Cold, Cruel World" and the world will make the adjustments for us because as I have said a GAZILLION times before: There is no macro solution to any of this. The mass of of folks believing in, and addicted to (and hence unable to provide for themselves), these entitlements is just too f*&^%ing large to be overcome (thank you, FDR) politically. You can see this in the price of Gold, Oil, the employment situation et al...

Speaking of employment... all of the absurd regulatory overreach (as well as the not so absurd) will come apart in the near future. Sexual harassment policies, discrimination policies, government worker's unions, etc... were all creations of the age of cheap and abundant energy, along with a long list of social and political "isms". Feminism? Gone. Liberalism? Say good night, Gracie. The NAACP? Gay Rights? Who cares? We won't have any money to fund any of this stuff. In a resource constrained world nobody is going to care who you are sleeping with (especially if it simply cannot result in a pregnancy) or what you are angry about.

To be Continued...


30 comments:

westexas said...

ELM (Export Land Model) 2.0 Discussion:

http://www.theoildrum.com/node/6262#comment-595189

Based on recent trends, what the US and other developed countries can import from oil exporting countries is what is left over after China, India, et al take what they want. So just how small is that number--the Net/Net number left after Chindia, et al's imports--in regard to the (2005) top five net oil exporters?

Anonymous said...

Greg,

Well said! Now if I could convey the message to others as well,well, maybe not they will get in touch with reality soon enough.

One group of people that I do not ever here of in the unemployeed/under-employed (u-3 &u-6 )is small business owners,1 man operations. It seems to me they are not counted effectively since they are none payers of unemployment taxes mostly, however,are just as much in the slow/underemployed/unemployed. Maybe they are and I don't see it.

peace

Anonymous said...

Just as government regulation has been used by big business to create barriers to market entry and competition, so has government regulation raised the cost of entry of new employees into the labor force. There is full employment at the right wage level. More labor input means more product output, and EVERYONE will end up better off.

Regards,

Coal Guy

Anonymous said...
This comment has been removed by a blog administrator.
bureaucrat said...

Three little things ...

I know Mish has a rabid hatred of unions, especially government unions, but in the case of the Federal govt., by law, the Federal unions can't negotiate over anything that matters -- pay, benefits, managerial stuff is all out of bounds. The Federal employee unions are basically powerless by law.

And for all the hatred of unions, and the desire to bust all us govt. workers down to minimum wage workers or, better yet, contract out everything, just remember .. we used to have American governmental bodies that were like that, and they were rife with nepotism (hiring of family members), massive theft, corruption, pay-to-play, total incompetence, shitty all the way around. The New Orleans police department was the lowest paid major department not too long ago. You want to be arrested and "handled" by those hoodlums, the ones who fled the flood and shot at citizens? You get what you pay for.

With regard to westexas ... our five biggest oil suppliers may have peaked or are hampered, but they are still closer to us than to China or India. Canada, Mexico, Venezuela, Nigeria, even Iraq -- all but Canada have national oil companies who have no idea what the hell they are doing. They could supply us with WAY more oil with the proper ... persuation. :) Invade Nigeria & Venezuela!!! We have experience with that invasion stuff now. Gonna have to do it some day anyway.

Greg T. Jeffers said...

I deleted a comment I filed under "Smart A$$". IF you have something intelligent to say that is in keeping with the intellectual pursuit of the points under discussion, feel free to repost.

Anonymous said...

Ever see a 10,000lb drilling kelly drop onto a man's chest(I have)? How about the 3,000 dead coal miners that died in unsafe mines in the year 1916? How about the millions of little kids that were maimed and killed while working in factories with unsafe machinery and in mines before child labor was outlawed?

Sometimes there are good reasons for regulations.

And another point- People who have to nurse an 80 year old parent(s) aren't likely to pick up and move to the opposite coast to take on a new job. Or are they likely to make a radical change of profession. A dynamic and mobile labor force has long been considered an American strength. And social security freed younger people up to adapt to a dynamic economy as well as allowing older workers to move out of the way for younger workers to advance.

Greg T. Jeffers said...

TO the smart A$$ whose comments I deleted:

Look, I know I gored many a sacred cow... but the fact is that the LEVERAGE gained by society's producers with the use of Oil is going AWAY. And the demand from the consumers is also leveraged - the OTHER WAY.

I just call them as I see them. You don't have to read my stuff... its not like you have a big investment in a subscription.

Greg T. Jeffers said...

But if you ARE going to comment, don't waste your time with smart a$$ stuff - I will delete it.

Greg T. Jeffers said...

Anon @ 2:17:

I never said there weren't worthwhile regulations... only that the funding simply won't be there and that eventually we will be doing triage on regulations to determine which really can and should survive.

Look, I did not say what I HOPED would occur, only that there simply is not enough money for this - and at some point the international bond market is going to skip our Treasury auctions.... and THAT WILL BE THAT. It doesn't matter what we want, or hope, or wish for. Some things are immutable and ineluctable - its as simple as 2.71828183. If you don't know what that number represents just google it.

Greg T. Jeffers said...

BTW... before the end of my lifetime, child labor will be the norm for many American children unless something REALLY bad happens...

And spare me the guilt trip and manipulations, oK? Let's have a legitimate co-examination of the issues.

PioneerPreppy said...

Bureaucrat - I don't want to push government employees to minimum wage and I don't think any reasonable person does either. Yet the pensions they do get are outrageous in some areas and has left many people feeling very upset. At least around here, which isn't far from you I don't think.

Greg - as for all these unemployed who will need to take lesser employment you are completely correct, hell I did it myself and now drive a fork lift and load boxes all day. The problem I see is the actual number of these jobs, there just aren't enough to go around at present.

I hope we can make it through until the shrinking economy opens up more of these jobs. I just am not sure it won't come to armed resistance in some areas honestly depending on how hard the government pushes for more taxes and less freedoms.

Greg T. Jeffers said...

Lastly, IMHO there will not be a "dynamic and mobile work force" when Oil stops arriving at our ports.

rfenney said...

We are shortly coming to the "freeze-in-place" moment. Mobility is already becoming an issue. I get queries on a daily bases to "come and work for us" in another state but it is no longer worth it to do it especially when I could be sacked shortly after moving. This mobility thing has done much more harm to our families than benefit. The Internet provides all the mobility we need. Now lets get down to building production capacity while we still have the resources to do it. China, India? Don't make me laugh, we will not be able to afford the energy to support globalism shortly.

Let get this deflation event going so we can get to where we can start to build things again! Yes it is going to heart but guess what? It is going to happen anyway.....

bureaucrat said...

NO doubt my (planned) retirement at age 57 with 30 years to go, being paid 35% of my salary as a pension, and having a generous "401" plan is indeed, by current standards, more than the average American worker has to look forward to. I haven't gotten it yet (only 42 :)) and I fully expect it to be less than advertised, as the money has already been stolen from the Federal retirement accounts for daily spending (just like the Social Security fund) and all I have is a blip on the screen saying

bureaucrat said...

how much I really have. Who knows where reality is?

My concern lately is .. have we gutted the American industrial infrastructure because the Chinese will work for 10 cents an hour, or are those Chinese products that are imported so cheap because of Chinese govt. currency manipulation? (making the Chinese currency artificially weaker, making imports cheaper) Further, how many people in America (the top 1% of income earners, who get 67% of the national income today, which hasn't been the case since the 1920s) got rich offshoring all these jobs to China and India?

Apparently the Greeks, with their own currency, bought many of their own products domestically, until they joined the European Union in 2001. Now that Germany can beat the Greek companies on price with their exports (the one-currency Euro made that possible), Greece is swirling down the toilet.

These are questions nobody is really exploring.

Anonymous said...

Part 3 was one the most cogent, concise and reality based commentaries I've seen for awhile. I copied this to a few of my friends/family, although they may still avoid my emails from my news articles on issues with food, water, and oil from years ago--that of course can't ever effect disneyland/fantasy island of the USA.

As people's lives look more like the baseline of Erikson's heirarchy of needs, most of these "isms" and "issues" will recede, since you need to have a lot of time and energy to worry about extra stuff--things that many of our ancestors didn't have much time for, at least during certain times of the year.

PioneerPreppy said...

Bureaucrat-

I think localized industry will have to reform and/or grow, which was what I meant by jobs created by the shrinking economy.

The bright spot I guess is that all these Chinese workers who work for less won't really matter as the actual cost of transporting the goods will be too great.

Will be the same for all goods as for food, we will have to depend on local industry and production.

The end is not what I worry about its the shrinking in progress when everyone is fighting for the crumbs.

Greg T. Jeffers said...

Anon @ 4:51:

Cogent, huh? Well, I write on the fly, barely a proof read to be found...

Dan said...

Seaborne transportation uses almost no energy per ton mile, rail transport only slightly more. It’s the last mile that is the problem and it is faced by all producers equally, foreign and domestic. I think globalization will break down for political reasons, not technical.

PioneerPreppy said...

Seaborne wasn't really the biggest concern and unless we sink alot of infra-structure money into the current rail system I doubt it will help much.

I was thinking more along the lines of energy overall that unless the world reconfigures for other energy sources the advantages of large scale production will be reduced. Which will force us into a more localized small scale industry output.

The archdruid report had a good post on why factories are not always the best way to go recently.

Anonymous said...

Greg,

I have been reading your blog regularly for about a month now. One thing that I have not seen you address in the postings I have read is your view on the effects all of this will have on society in the terms of extreme social unrest or possibly even collapse. I realize you are not a "doomer" in the apocaliptic sense of the word, but if even half of what you predict (and I agree with you) comes to fruition in the next few years, our society will never be the same. Furthermore, as this stack of cards collapses under its own weight, even an optimist (bureaucrat) would have to agree that the changes will not simply be in terms of lower paying jobs and riding bikes to work. I envision an entire nation that sees itself cheated out of what they either have earned or feel they are entitled to simply by being an American. I am far from the extreme end that feels society will destroy itself in a matter of days and we will all be running around shooting zombies, but I also know that we cannot go through these types of fundamental changes in our lives without additional consequences. When half of our country is dependent upon the government for its very survival (both in terms of employees and benefit recepients), something has to give. I would appreciate your thoughts.

bureaucrat said...

Here's a thought -- until you see your local supermarkets and gas stations start closing, there isn't going to be any unrest and there isn't going to be a collapse. It's a lot less fun in reality that in those Mad Max movies. :)

Anonymous said...

We are a lazy people. When I hire people for my Construction company I go through 10 or 20 to get to one hard worker. The best workers are young dad's that have to support their family's. When colapse happens we will just be poor. Don't be fat, Lazy and unskilled. I can hunt, fish, poor concrete, lay block, do simple electrical work, play guitar and sing, and what I can't do I will figure out. Every third world nation handles it. Maybe we just become a more simple, slower paced agraian economy. With industry slowly falling off or maybe quickly who knows. Looters wont last i can tell you that. Only city slickers think that dumb shit. I have a small arsenal to protect my family. Have a good week.

Anonymous said...

bur,

I can't figure you out. This blog, as with most others is filled with like minded people on varying degrees of the spectrum and then some random idiots who like to say stupid things to get a rise out of others. You however are not easy to catagorize. Your obviously a smart guy who has his crap together and when you say things they are typically well informed and based in logic or contrary information to the ideas presented here. My question to you is why spend so much time on a blog offering the oposite opinon to most feelings and ideas that are shared here? It has to be more than pure entertainment and most people gravitate towards like minded people and not the opposite. I'm not entirely sure where you fall on the political spectrum (i'm assuming liberal/ progressive), but I'm a little stumped on your thought process. I can't say I really agree with your thoughts and your smiley faces drive me nuts, but you seem to be genuine. Help me out here.

Greg T. Jeffers said...

Anon @ 9:17:

WoW! Bur, I gotta say that I have been wanting to ask that for some time...

Greg T. Jeffers said...

Anon @ 6:38:

Over the longer term say 20 to 30 years, I am less than sanguine about my children's future. Since I am powerless over much of this, and because my views on this will distract (and cause some to view me as a kook) I don't go there in this forum.

I am not worried about society per se. We will work it out PROVIDED that there is enough food. The problem is, I believe at some point there will not be enough food (not saying it is this year or next or whenever), and that will be a BIG problem.

Anonymous said...

Anon 9:17,

Bur WAS a big time prepper who started too early and now is sitting on a ton of canned bennie wennies and the expiration date is quickly coming due and still no collapse as a whole. He still sees IT coming just not the way he first heard that IT would,sheepish... :)


Bur 8:25,

Did you catch the News when all that snow hit the DC area over the last few weeks. Walmart shelves were to the bone. This is were the problems will start. Someone crying wolf or enough people connect the dots. Imagine 50%,60%,70% 0f the population googled AMERICAN ENERGY CRISIS one day instead of AMERICAN IDIOL, and woke up for a few minutes. Thats when you will see the gas stations close.

I myself beleive in the numbers (ethonal, corn,crude oil,pop.growth,shelf life,etc and say no way )and humans' predictable and unpredictable nature. I think this year and next will interesting to say the least.

peace

Donal Lang said...

Couple of points:

Wages and real wages are two different things. Wages can stay at the same number (say Minimum Wage) but fall in buying power as the $ declines, so no direct confrontation with Unions.

Bear in mind that oil and food is internationally traded so have a world price (or more precisely 'equal opportunity costs') for both Americans and Chinese, but wages and benefits are different. A devaluing $ can devalue until the US (or European) minimum Wage has the same 'value' as the Chinese wage for that job. At that point you and Europe can compete with China (but we'd all have to get back to doing some proper work!).

Isn't Globalisation a wonderful thing!

Regarding Unemployment figures; I'd say its more realistic to take the number of people actually employed (payroll) as a percentage of population from age 16 upwards. All governments hide unemplyment behind as many veils as they can shimmy behind.

But these numbers are all meaningless really; in 10 years time 'employed' will be growing enough food for your family or making physically-useful stuff for your neighbours, it won't mean retailing, or aerospace, or house-building, or car-making, or consultant, or 'technician' in a nail bar!

Westexas; scary! Imagine what the price of oil will be. And who will outbid the military (of both America and China!)?

bureaucrat said...

Oooooooh, part 4 just posted!!!