The more I look into the future, the more I see my childhood, and that was a much smaller world, but small doesn't have to mean bad. Of course, as clueless rural white trash, I didn't realize my world was small, and of a lower energy intensity.
Riding my bike everywhere, eating local produce, minimal TV usage (only had 3.5 channels), no real air conditioning. It was actually quite a nice life from that standpoint, but also a very isolated life and we were dirt poor. I remember laying on my bed with my most prized possession, an AM/FM radio, thirsting for contact with the outside world. Or reading every page of the local paper, line by line, because there just wasn't anything else.
Of course isolation allowed the local population to be easily manipulated by politicians, and the politicians were universally corrupt. On the other hand cable news cuts the isolation, but increases the manipulation. So it all works out about even.
People are pretty clueless about how much of life's necessities are not really all that necessary. I get the feeling that before the year is out, they will find out.
As I've talked to my neighbors, trying to feel out just how unaware and mentally unprepared they are, I have noticed that they just don't even consider (or comprehend) economizing. At least not while they still have credit cards. They lifestyle really is non-negotiable, at least they think it is.
Monday, May 25, 2009
Sunday, December 14, 2008
Gestalt?
In retrospect, I never expected things to unfold like they have.
For the last couple of years I have been focused on peak oil/energy as the problem, but the reality was, that there were a multitude of problems, and peak oil was the precipitating event that collapsed a multitude of illusions. I think we may have been able to handle one or two problems, but not this many.
When oil prices surged these last couple of years, the tide went out, and it turned out that everyone was swimming naked. Sure, now that it has happened, it is so obvious, but not prior to these events. It just never occurred to me that everything would meld into such destructive disharmony.
Yes I knew that national and personal debt has been unsustainable for decades, that bankers were crooks, that farming practices were not sustainable, that energy policy was not sustainable, that climate chance was a problem, that politicians were corrupt and that nations would resort to “beggar thy neighbor” in a panic. However, what I never even considered, was that these separate circumstances would join together in a choir of such destruction.
Ooops.....
Beggar-thy-neighbor:
http://financial-dictionary.thefreedictionary.com/Beggar-thy-neighbor
Gestalt
http://www.merriam-webster.com/dictionary/gestalt
For the last couple of years I have been focused on peak oil/energy as the problem, but the reality was, that there were a multitude of problems, and peak oil was the precipitating event that collapsed a multitude of illusions. I think we may have been able to handle one or two problems, but not this many.
When oil prices surged these last couple of years, the tide went out, and it turned out that everyone was swimming naked. Sure, now that it has happened, it is so obvious, but not prior to these events. It just never occurred to me that everything would meld into such destructive disharmony.
Yes I knew that national and personal debt has been unsustainable for decades, that bankers were crooks, that farming practices were not sustainable, that energy policy was not sustainable, that climate chance was a problem, that politicians were corrupt and that nations would resort to “beggar thy neighbor” in a panic. However, what I never even considered, was that these separate circumstances would join together in a choir of such destruction.
Ooops.....
Beggar-thy-neighbor:
http://financial-dictionary.thefreedictionary.com/Beggar-thy-neighbor
Gestalt
http://www.merriam-webster.com/dictionary/gestalt
Saturday, November 29, 2008
What is really going to matter.
Because of the huge sums of money being poured into the financial bailouts, and the fact that we started with a huge national (and personal) debt, the USA is headed for "bankruptcy". This is the start of the second great depression (The Greater Depression).
By the time you have reached this sentence, you are either willing to accept the new reality, or dismissed what I've written and gone back to watching American Idol reruns. Come on back when you have been furloughed/laid off and continue reading.
The Greater Depression doesn't have to mean that everyone is going to go all mad max, but it does mean that only essential government services will continue. Even these essential services will be spotty and limited. These would be tax collection, law enforcement, national defense, sewer and water. Think “third world country”, and you get the idea. Americans will once again be totally dependent on themselves, like they haven't been for almost a century.
When I say spotty service, I mean don't expect the police to show up at a traffic accident, or the military to be building/maintaining high tech equipment. Unless people are dying violent deaths, don't expect a response.
NASA will be gone, most of the Armed Forces technical capability will be gone. Also on the block? Social security, Medicare, schools, road maintenance, the list is endless.
The era you are entering will have history books written about it, much like the American revolution or the great depression. If you think this is all bull, then stop reading and look up the phrase “cognitive dissonance” or the “five stages of grief “. Here is a hint, the first stage is denial.
For those still with me, consider what is important: water, food, shelter, clothes, waste disposal, security, medical and energy. If you are not providing one of these products or services, you will be unemployed, and stay unemployed. “They” will not be calling you back to work, period. Promises will be made, to make everyone go quietly, and maybe even believed by those making them, but eventually reality always wins. Severance pay? Unemployment insurance? Food stamps? Housing subsidies? Welfare? Don't count on it. Remember the government is bankrupt.
So what can we do? Build a bunker and stock it with MRE's?
Well, that may work for a little while, but not for long. We have some modern day examples of what happens in these situations. (Argentina, Yugoslavia, Cuba, North Korea..).
First lesson: Communities survive, not individuals. As much as you think you have prepared, you will not be ready for the violent struggle for survival.
Second: You have to have water. A clean accessible source of water is the greatest thing you can have. It waters crops, sustains the body and make life worth living.
Third: Food is not easy to grow or store. You need seeds, and chances are you don't have them. The right variety of crops for your soil and climate are essential. Then there are the pests: fire ants, Japanese beetles, rabbits, gofers, deer, the list is really long, and includes your neighbors. Even if you manage to harvest enough to survive winter you still have to preserve it. Do you know how to can food? Do you have the equipment? How about a root cellar or drying? Knowledge that our grand parents had, we do not, and relearning it will be an unpleasant experience.
Fourth: Heat prior to the advent of fossil fuel was from biomass. It takes a lot of wood to heat a house with a fireplace. They are not very efficient and the suburbs are not located in a forest. Plus, cutting, collecting and storing fuel is also a lost art. Note: Creosote is a great way to burn down you house!
Five: Security! Let us assume you are successful with items 1 through 4. Chances are, some one will notice how successful you are, then round up some of their friends and “share” in you success.
Time to start thinking about self sufficiency on a personal level!
By the time you have reached this sentence, you are either willing to accept the new reality, or dismissed what I've written and gone back to watching American Idol reruns. Come on back when you have been furloughed/laid off and continue reading.
The Greater Depression doesn't have to mean that everyone is going to go all mad max, but it does mean that only essential government services will continue. Even these essential services will be spotty and limited. These would be tax collection, law enforcement, national defense, sewer and water. Think “third world country”, and you get the idea. Americans will once again be totally dependent on themselves, like they haven't been for almost a century.
When I say spotty service, I mean don't expect the police to show up at a traffic accident, or the military to be building/maintaining high tech equipment. Unless people are dying violent deaths, don't expect a response.
NASA will be gone, most of the Armed Forces technical capability will be gone. Also on the block? Social security, Medicare, schools, road maintenance, the list is endless.
The era you are entering will have history books written about it, much like the American revolution or the great depression. If you think this is all bull, then stop reading and look up the phrase “cognitive dissonance” or the “five stages of grief “. Here is a hint, the first stage is denial.
For those still with me, consider what is important: water, food, shelter, clothes, waste disposal, security, medical and energy. If you are not providing one of these products or services, you will be unemployed, and stay unemployed. “They” will not be calling you back to work, period. Promises will be made, to make everyone go quietly, and maybe even believed by those making them, but eventually reality always wins. Severance pay? Unemployment insurance? Food stamps? Housing subsidies? Welfare? Don't count on it. Remember the government is bankrupt.
So what can we do? Build a bunker and stock it with MRE's?
Well, that may work for a little while, but not for long. We have some modern day examples of what happens in these situations. (Argentina, Yugoslavia, Cuba, North Korea..).
First lesson: Communities survive, not individuals. As much as you think you have prepared, you will not be ready for the violent struggle for survival.
Second: You have to have water. A clean accessible source of water is the greatest thing you can have. It waters crops, sustains the body and make life worth living.
Third: Food is not easy to grow or store. You need seeds, and chances are you don't have them. The right variety of crops for your soil and climate are essential. Then there are the pests: fire ants, Japanese beetles, rabbits, gofers, deer, the list is really long, and includes your neighbors. Even if you manage to harvest enough to survive winter you still have to preserve it. Do you know how to can food? Do you have the equipment? How about a root cellar or drying? Knowledge that our grand parents had, we do not, and relearning it will be an unpleasant experience.
Fourth: Heat prior to the advent of fossil fuel was from biomass. It takes a lot of wood to heat a house with a fireplace. They are not very efficient and the suburbs are not located in a forest. Plus, cutting, collecting and storing fuel is also a lost art. Note: Creosote is a great way to burn down you house!
Five: Security! Let us assume you are successful with items 1 through 4. Chances are, some one will notice how successful you are, then round up some of their friends and “share” in you success.
Time to start thinking about self sufficiency on a personal level!
Saturday, November 8, 2008
What comes next shouldn't be a suprise to anyone.
Can you say FDR style infrastructure projects?
Here is link to a 2003 Federal Reserve Bank of Dallas paper about "Monetary Policy in a Zero-Interest-Rate Economy". (pdf format)
You can't say the fed didn't tell everyone what they were going to do. They published their play book in 2003, and are currently following it.
1)Cut rates to zero. (if fails see #2)
2)Buy “Other domestic securities” (if fails see #3)
3)“The goods & services solution”
a) This article from FT.com makes the argument that the rate cuts didn't work.
"Fed capitulates: the central bank is broken" .
b) Considering the unemployment numbers, I would argue that the alphabet soup of fed facilities and bailouts ( buying up “Other domestic securities”) also didn't work.
c) Next up will be “The goods & services solution”. From the Fed paper:
“The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.”
Looks like the fed is going to resurrect inflation, even if they have to buy the Brooklyn bridge (literally). I would guess that massive infrastructure projects are going to be started. Probably more food stamps. This seems like a perfect ideology match for the new democratic government.
Oh well, we need expanded electric grid and rail service anyway to deal with peakoil.
Here is link to a 2003 Federal Reserve Bank of Dallas paper about "Monetary Policy in a Zero-Interest-Rate Economy". (pdf format)
You can't say the fed didn't tell everyone what they were going to do. They published their play book in 2003, and are currently following it.
1)Cut rates to zero. (if fails see #2)
2)Buy “Other domestic securities” (if fails see #3)
3)“The goods & services solution”
a) This article from FT.com makes the argument that the rate cuts didn't work.
"Fed capitulates: the central bank is broken" .
b) Considering the unemployment numbers, I would argue that the alphabet soup of fed facilities and bailouts ( buying up “Other domestic securities”) also didn't work.
c) Next up will be “The goods & services solution”. From the Fed paper:
“The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.”
Looks like the fed is going to resurrect inflation, even if they have to buy the Brooklyn bridge (literally). I would guess that massive infrastructure projects are going to be started. Probably more food stamps. This seems like a perfect ideology match for the new democratic government.
Oh well, we need expanded electric grid and rail service anyway to deal with peakoil.
Sunday, July 20, 2008
The End!
Well, this looks like “The End”.
The USA has accumulated so much debt that the system is about to collapse. Fannie Mae and Freddie Mac will be the straw that breaks the camels back. During the next couple of months foreign investors will lose faith in the dollar, treasuries and GSE (Freddie and Fannie) bonds. Add on top of that the inability of FDIC to cover all the failed banks and the American public are left in a truly deplorable situation.
The citizens, banks and government of the USA are insolvent. No one, will be able to save anyone, because they are all drowning.
If you want to buy anything, do it by the end of September, after that your money will be worthless.
It didn't have to be this way, regulations were in place, and powers granted to control the orgy of bad loans and worthless bonds. Alan Greenspan could have stopped this from occurring. Bush could have stopped this. Many a book will be written about why they didn't. I'm going to assume that the words “greed”, “power” and “arrogance” will be use to describe their actions.
What is really scary, is that I not convinced there is a "right thing" left to do. All options seem like different flavors of suicide.
It is pretty obvious that the foreign investor are going to simply leave in the next couple of months.
It is also obvious that the politicians are not going to go on an austerity program to pay the bills. Nor are they going to abandon their rich banker friends.
I would love to hear a WORKABLE solution that doesn't crash the economy.
Oh sure, there are “solutions”: devaluate the currency, make the bond holders take a haircut, put Freddie and Fannie in a conservatorship . But all those solutions mean the foreign investors who have artificially propped up the economy will leave.
Got Gold?
The USA has accumulated so much debt that the system is about to collapse. Fannie Mae and Freddie Mac will be the straw that breaks the camels back. During the next couple of months foreign investors will lose faith in the dollar, treasuries and GSE (Freddie and Fannie) bonds. Add on top of that the inability of FDIC to cover all the failed banks and the American public are left in a truly deplorable situation.
The citizens, banks and government of the USA are insolvent. No one, will be able to save anyone, because they are all drowning.
If you want to buy anything, do it by the end of September, after that your money will be worthless.
It didn't have to be this way, regulations were in place, and powers granted to control the orgy of bad loans and worthless bonds. Alan Greenspan could have stopped this from occurring. Bush could have stopped this. Many a book will be written about why they didn't. I'm going to assume that the words “greed”, “power” and “arrogance” will be use to describe their actions.
What is really scary, is that I not convinced there is a "right thing" left to do. All options seem like different flavors of suicide.
It is pretty obvious that the foreign investor are going to simply leave in the next couple of months.
It is also obvious that the politicians are not going to go on an austerity program to pay the bills. Nor are they going to abandon their rich banker friends.
I would love to hear a WORKABLE solution that doesn't crash the economy.
Oh sure, there are “solutions”: devaluate the currency, make the bond holders take a haircut, put Freddie and Fannie in a conservatorship . But all those solutions mean the foreign investors who have artificially propped up the economy will leave.
Got Gold?
Saturday, May 17, 2008
Hank Paulson and Ben Bernanke are a cornered animal?
http://www.minyanville.com/articles/dow-Bernanke-nasdaq-Paulson-crude-Fed/index/a/17152
“One of the best tidbits of advice I received as a young buck was to put yourself in the shoes of the person on the other side of your trade. See what they see. Think what they think. Keep your friends close and your counter-party closer! “
“Hank Paulson and Ben Bernanke have a clear mandate. They’re willing to mortgage our future with hopes that a legitimate economic recovery takes root. We’ve seen this movie before (on the back of the tech bubble) but memories are short given our immediate gratification societal mindset. They’ve got deep pockets. Interest rate cuts, Auction Facilities, discount windows, shifting collateral parameters, Working Groups on Financial Markets, interest on bank reserves, rebate checks, open-market operations and repurchase agreements are all at their disposal.
And if those don’t work, they seem intent on inventing intervention that does. We’ve written extensively about financial engineering and the inherent dangers thereof. The Federal Reserve balance sheet continues to drain as they attempt to fund the banking system. There are only so many bullets left in the gun and the last one will likely be pointed inward.
Still, we must respect the claws of a cornered animal. We’ve passed the point of no return and the government will do everything within (and potentially beyond) its powers to ensure the finance-based global balls remain in the air. You don’t have to agree with it, you simply have to respect it.”
I read this article Wednesday, and it has stuck with me like a pebble in my shoe.
I work for the federal government. As a physicist, I try not to get involved in politics, but on occasion, I do end up substituting for my boss in some very interesting meeting. The dynamics of how the federal bureaucrats think is reflected in the article.
Anyone who thinks that the federal government is intent on doing the right thing, needs a reality enema. Generally the front line people try to do the right thing, but once you pass the first line supervisors, it is just about power and ego. It is all about getting power, defending your power and the public be damned.
Hank and Ben have been given their orders, and if anyone things they are going to have a twinge of regret, or a last minute epiphany, you have not talked to very many bureaucrats.
Saturday, March 29, 2008
The score card up till now, and tomorrows forecast.
Ben Bernanke has stuck religiously to his play book during the current crisis. He has inflated the currency, and stopped bank failures at any cost. If you read his writings, from before his ascension to the throne, nothing so far will have surprised you.
The situation:
The housing bubble popped, the banks were shown to have no clothes, all branches of government were asleep at the wheel, and the only active players on the field are the banks and the Federal reserve.
Will government react to this crisis? No, or at the very least, not before a crash. You will hear plans and platitudes, investigations and calls for reform, but the two major parties need big buck for the election fight this year. There will be no perp walk for the people who bundle campaign contributions. (Or at least not till there are riots in the streets.)
At a chaotic inflection point in history, it is almost impossible to see which forces will triumph, but we can at the very least look at the major players.
Banks, Investment houses and the fed:
The banks aren't illiquid, they are insolvent, bankrupt, broke, a collapsed Ponzi scheme. They bet their investors money on the fantasy that growth will continue indefinitely, and lost. They are just a meaningless facade left in place to fool/fleece the public while gulping from the Federal Reserves tit. Their last big play will be by the individuals who looted them, as they try to bribe the politicians and the Federal reserve into a bailout/pardon.
A really important sub-thread of this, is that having an “account” with one of these institutions is just a promise, to give you money or shares. Until you close out your account, it is all just a promise, backed up by an insolvent institution.
Stocks:
The stock market crash of 29 did not cause the depression, it was caused by the depression. You really have to laugh at people who think stocks will hold value during a crisis. If your broker goes belly up, you are just another creditor. Even assuming you took physical ownership of your stock certificates, 1929 showed what happens to stocks. Add in the growing hatred of “speculators” and you will be lucky if you not arrested for shorting a stock.
Commodities:
It is my opinion that there is a general commodities bubble, and it is bursting. However, some commodities may continue to go up in price. Namely grains and energy. After looking at the data, it appears there are genuine shortages in these areas, and those shortages may even survive a major economic down turn. Although they will take an initial beating with all the other commodities, a real shortages trumps a bubble.
Unfortunately, the process used to invest in commodities isn't as straight forward as opening up a bank account “in oil”. As calls to reign in “speculators” rise the government may finally act (or conspire) to close the market to us humble mortals. (Poof! Goes your money!)
Gold, dollars, euros and yens:
Only a fool would keep his money in the constantly debased dollar at this point. The only problem is where to put savings, if not in dollars? Should we keep them in a bank/investment account? (Hell no!) How about a foreign bank? (You know, the ones that bough all the sub-prime mortgages.) Should you believe in the decoupling fairy? How about federal reserve notes stuffed under your mattress? (Not if a new currency is issued.)
The answer (unfortunately) is to invest in actual stuff. Even more unfortunate is that you can't keep you life saving in spam and bottled water. It won't fit in your house, besides, who the hell wants a house full of spam, and the utility company refuses to take payment in spam (or euros, or gold, or 9mm ammo........).
Foreign Investors:
These are the real wild cards in the equation. At what point do the foreign investors just leave? And if they leave, what happens?
A market crash will be the least of our problems if the foreign money takes a hike.
The federal government runs at a deficit. It spends more than it takes in, then borrows the rest. Much of that is borrowed from other countries. Will higher treasure rates lure them back? They might, if everyone and their brother weren't fleeing to treasures already, driving down the returns. If they loose faith they will ever be paid back, who would invest in a failing government?
My personal strategy is as follows:
Treasuries = 99% of my savings is in treasuries (I don't real have a choice all my saving is in a 401K.)
Home = Up till now, I have been paying off my home at a greatly accelerated rate. But I am pretty sure the loan is held by a “publicly-owned corporation chartered by Congress”. Can my loan get called in if the holder goes belly up? If the payment system locks up because of bank failures, will I be on hook for penalties?
Federal reserve notes and gold/silver = I have a little in a safety deposit box, but it is damn small amount. I may accumulate more, but I really don't know right now.
The situation:
The housing bubble popped, the banks were shown to have no clothes, all branches of government were asleep at the wheel, and the only active players on the field are the banks and the Federal reserve.
Will government react to this crisis? No, or at the very least, not before a crash. You will hear plans and platitudes, investigations and calls for reform, but the two major parties need big buck for the election fight this year. There will be no perp walk for the people who bundle campaign contributions. (Or at least not till there are riots in the streets.)
At a chaotic inflection point in history, it is almost impossible to see which forces will triumph, but we can at the very least look at the major players.
Banks, Investment houses and the fed:
The banks aren't illiquid, they are insolvent, bankrupt, broke, a collapsed Ponzi scheme. They bet their investors money on the fantasy that growth will continue indefinitely, and lost. They are just a meaningless facade left in place to fool/fleece the public while gulping from the Federal Reserves tit. Their last big play will be by the individuals who looted them, as they try to bribe the politicians and the Federal reserve into a bailout/pardon.
A really important sub-thread of this, is that having an “account” with one of these institutions is just a promise, to give you money or shares. Until you close out your account, it is all just a promise, backed up by an insolvent institution.
Stocks:
The stock market crash of 29 did not cause the depression, it was caused by the depression. You really have to laugh at people who think stocks will hold value during a crisis. If your broker goes belly up, you are just another creditor. Even assuming you took physical ownership of your stock certificates, 1929 showed what happens to stocks. Add in the growing hatred of “speculators” and you will be lucky if you not arrested for shorting a stock.
Commodities:
It is my opinion that there is a general commodities bubble, and it is bursting. However, some commodities may continue to go up in price. Namely grains and energy. After looking at the data, it appears there are genuine shortages in these areas, and those shortages may even survive a major economic down turn. Although they will take an initial beating with all the other commodities, a real shortages trumps a bubble.
Unfortunately, the process used to invest in commodities isn't as straight forward as opening up a bank account “in oil”. As calls to reign in “speculators” rise the government may finally act (or conspire) to close the market to us humble mortals. (Poof! Goes your money!)
Gold, dollars, euros and yens:
Only a fool would keep his money in the constantly debased dollar at this point. The only problem is where to put savings, if not in dollars? Should we keep them in a bank/investment account? (Hell no!) How about a foreign bank? (You know, the ones that bough all the sub-prime mortgages.) Should you believe in the decoupling fairy? How about federal reserve notes stuffed under your mattress? (Not if a new currency is issued.)
The answer (unfortunately) is to invest in actual stuff. Even more unfortunate is that you can't keep you life saving in spam and bottled water. It won't fit in your house, besides, who the hell wants a house full of spam, and the utility company refuses to take payment in spam (or euros, or gold, or 9mm ammo........).
Foreign Investors:
These are the real wild cards in the equation. At what point do the foreign investors just leave? And if they leave, what happens?
A market crash will be the least of our problems if the foreign money takes a hike.
The federal government runs at a deficit. It spends more than it takes in, then borrows the rest. Much of that is borrowed from other countries. Will higher treasure rates lure them back? They might, if everyone and their brother weren't fleeing to treasures already, driving down the returns. If they loose faith they will ever be paid back, who would invest in a failing government?
My personal strategy is as follows:
Treasuries = 99% of my savings is in treasuries (I don't real have a choice all my saving is in a 401K.)
Home = Up till now, I have been paying off my home at a greatly accelerated rate. But I am pretty sure the loan is held by a “publicly-owned corporation chartered by Congress”. Can my loan get called in if the holder goes belly up? If the payment system locks up because of bank failures, will I be on hook for penalties?
Federal reserve notes and gold/silver = I have a little in a safety deposit box, but it is damn small amount. I may accumulate more, but I really don't know right now.
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