From George Ure's daily report http://www.urbansurvival.com/week.htm
"This is like watching one of those 'rooms full of ping pong balls on mouse traps that demonstrate how a chain-reaction works' except that this one happens like molasses. Seems like about one data point per quarter:
*Q2 08: Oil goes way up.
*Q3 08: Passenger travel falls
*Q4 08: Fall accelerates
*Q1 09: Airplane makers likely to cut production rates, lay off humans.
*Q2 09: Hotel/rental car consolidations/failures ought to make headlines
*Q3 09: Another round of airline consolidations
*Q4 09: More travel fall off....
And that's how a Depression looks."
Thursday, December 18, 2008
Monday, November 24, 2008
Kunstler's Suburbs vs. Jeff Vail's
Jeff Vail (www.jeffvail.net) in his latest post proposes an interesting future for the suburbs that is very different from the bleak fate Jim Kunstler describes (www.kunstler.com). Vail mentions research by John Jeavons into sustainable small-scale agriculture, showing that only 4,000 square feet per person is needed. This assumes a vegetarian diet, but also requires no outside input of fertilizer etc., and is achieved by growing 60% high carbon produce such as corn in order to provide compost for the soil. Since the average size of the suburban lot is larger than a city lot (Vail mentions 1/4 acre), the suburbanites at least have the space to do this.
I think Vail has a good point, and also has made the correct observation in his last few posts that we're basically stuck with the suburbs and that those who live there will have to keep living there because they won't be able to sell their houses in order to move, and even if they could then the new occupant would replace them (note to reader, the assumption here is that gasoline will be scarce or expensive or both - I know that's not true right now, but remember a few months ago?) He also has argued that commuting costs can easily be negated by measures like car pooling.
So his argument interesting, but I still think that the suburban model for current society is a great inefficiency. What he proposes is taking this model and turning it into something more like the rural past, so that it becomes efficient again. But it is no longer the suburbs then. I know it's just semantics - and I think he has given a good solution to this problem.
The big question is can people who live in the suburbs accept this.
I think Vail has a good point, and also has made the correct observation in his last few posts that we're basically stuck with the suburbs and that those who live there will have to keep living there because they won't be able to sell their houses in order to move, and even if they could then the new occupant would replace them (note to reader, the assumption here is that gasoline will be scarce or expensive or both - I know that's not true right now, but remember a few months ago?) He also has argued that commuting costs can easily be negated by measures like car pooling.
So his argument interesting, but I still think that the suburban model for current society is a great inefficiency. What he proposes is taking this model and turning it into something more like the rural past, so that it becomes efficient again. But it is no longer the suburbs then. I know it's just semantics - and I think he has given a good solution to this problem.
The big question is can people who live in the suburbs accept this.
Thursday, November 13, 2008
What Happens When the U.S. Defaults On Its Debt?
Okay, this is unthinkable, right? Unfortunately not. Europe 2020 http://www.europe2020.org/?lang=en , a website that forecasts political and other events and their impact is predicting that the U.S. will default this Summer (2009). This site has been warning about our current financial debacle for several years, and they seem to have called it right so far. An article in Money Week was also talking about the possibility of a U.S. default. A CNBC article shows that as we keep increasing our national debt by bailouts and other capital injections (in order to prevent financial collapse), at some point our credit rating will be lowered, which will lead to the default. Martin Hennecke, senior manager of private clients at Tyche is quoted:
"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.
The problem we face is this: we need to throw huge sums of money into our economy to keep it from collapsing, but we don't have the money, so we have to increase our debt. But increasing our debt will at some point cause the same kind of collapse, when our credit rating is lowered.
What happens to us when we default? I think at that point we will be on our own, i.e. limited to only the resources within our borders. That means very little oil. Think about the implications of that for a minute. All military activities abroad will have to stop, and the basic routine of all daily life will no longer work. The good part is that we are a vast nation still with much natural wealth, and we should be able to produce all our own food and shelter, but only if we totally redesign how we go about it. So farming must now be by manual labor rather than machines, using no chemicals for pest control or fertilizer (because all these things depend on oil). Food must be grown near where it is used. Jobs in our traditional economy will be totally useless and will disappear. They have no value since they are based on trade with the rest of the world, rather than on producing things that we need here. It seems that the only way this can happen in an orderly way is for government to create basically a command economy of some sort and assign people to roles in it. Maybe this can be done through incentive rather than directive, but we may not have time for that. And I know, China and the Soviet Union have proved that this doesn't work. So what is a better alternative?
Do you believe this can happen in the United States without massive social disorder and perhaps revolution? We better pray that it can.
"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.
The problem we face is this: we need to throw huge sums of money into our economy to keep it from collapsing, but we don't have the money, so we have to increase our debt. But increasing our debt will at some point cause the same kind of collapse, when our credit rating is lowered.
What happens to us when we default? I think at that point we will be on our own, i.e. limited to only the resources within our borders. That means very little oil. Think about the implications of that for a minute. All military activities abroad will have to stop, and the basic routine of all daily life will no longer work. The good part is that we are a vast nation still with much natural wealth, and we should be able to produce all our own food and shelter, but only if we totally redesign how we go about it. So farming must now be by manual labor rather than machines, using no chemicals for pest control or fertilizer (because all these things depend on oil). Food must be grown near where it is used. Jobs in our traditional economy will be totally useless and will disappear. They have no value since they are based on trade with the rest of the world, rather than on producing things that we need here. It seems that the only way this can happen in an orderly way is for government to create basically a command economy of some sort and assign people to roles in it. Maybe this can be done through incentive rather than directive, but we may not have time for that. And I know, China and the Soviet Union have proved that this doesn't work. So what is a better alternative?
Do you believe this can happen in the United States without massive social disorder and perhaps revolution? We better pray that it can.
What the Election Means
Last week the United States of America elected Barack Obama President by a clear margin. I voted for him and believe me I am very happy that he won. I was moved to tears by the historic implications of his acceptance speech in Grant Park, as was Jesse Jackson, and it sounded like Jim Lehrer either had a frog in his throat or maybe he too was overcome by the moment. John McCain was gracious in defeat - I believe this was the real John McCain finally free of the burden of running for president, now able to be himself.
As great as this is from a historic perspective, it does nothing to change the grim financial and social circumstances we are facing. It does offer some hope, however. First of all, it means that people are ready to try something different, and we also will have a president who ran on "change" (though the specifics were not defined). And we cannot discount the new goodwill we should have from the rest of the world, and the prospect of repairing some broken relationships.
People are ready to try something different, but how different? And even if they are ready for the kind of radical social change that will be required to survive (see my next post), will Barack Obama be bold enough to risk this kind of action? It is tragic in many ways that he has inherited a set of problems decades in the making that will most likely make him or any president look like a failure. I wish him well and hope for great things from him, we are going to need an inspiring leader in the next few years.
As great as this is from a historic perspective, it does nothing to change the grim financial and social circumstances we are facing. It does offer some hope, however. First of all, it means that people are ready to try something different, and we also will have a president who ran on "change" (though the specifics were not defined). And we cannot discount the new goodwill we should have from the rest of the world, and the prospect of repairing some broken relationships.
People are ready to try something different, but how different? And even if they are ready for the kind of radical social change that will be required to survive (see my next post), will Barack Obama be bold enough to risk this kind of action? It is tragic in many ways that he has inherited a set of problems decades in the making that will most likely make him or any president look like a failure. I wish him well and hope for great things from him, we are going to need an inspiring leader in the next few years.
Monday, October 6, 2008
Hold On To Your Seats
...it looks like we're in for a wild ride this week! With the 700 billion dollar congressional bailout safely passed last Friday, everything should go back to normal, right? This morning with the Dow down below 10,000 , it looks like things are still coming apart. Over the weekend there was word of big problems in the foreign markets, and Paul Krugman pointed out that the credit situation was still dire, and seemed to have not been affected by the bailout. The credit crisis is the real problem, the stock market is not really the indicator to watch, but it does get people's attention.
Meanwhile we have about the weirdest and most tumultuous circumstances I can ever remember when coming down to the wire in a presidential election. The candidates are having trouble keeping up with rapidly changing events, which threaten new surprises every day. With the election 30 days off and with the rate we've been clicking off momentous historical events (3 per week seems to be about the average), this 30 days seems like an eternity. The newsmedia were talking about this, how any one of these events would have been the story of the year normally, and how they are being swamped by these things. Their reporting seems matter of fact because they haven't really had time to take it in; so you have analysts sitting around discussing the day's events with nervous laughter, when you'd expect them to be sounding the alarm, that life is changing drastically for all of us.
Meanwhile we have about the weirdest and most tumultuous circumstances I can ever remember when coming down to the wire in a presidential election. The candidates are having trouble keeping up with rapidly changing events, which threaten new surprises every day. With the election 30 days off and with the rate we've been clicking off momentous historical events (3 per week seems to be about the average), this 30 days seems like an eternity. The newsmedia were talking about this, how any one of these events would have been the story of the year normally, and how they are being swamped by these things. Their reporting seems matter of fact because they haven't really had time to take it in; so you have analysts sitting around discussing the day's events with nervous laughter, when you'd expect them to be sounding the alarm, that life is changing drastically for all of us.
Monday, September 29, 2008
death spiral
I don't think I need to say anything this week, the news headlines speak for themselves.
Monday, September 22, 2008
Attempted Revolution
As one of the contributor's to Jim Cramer's www.thestreet.com said, "We just had a revolution". Not quite. Although by the end of the day last Friday it seemed inevitable that Congress would authorize Henry Paulson's proposed bailout of the entire Financial System, today Congress is pushing back, as some commentator's like Paul Krugman weigh in and point out that this bailout may not work unless it pays inflated values for the toxic securities. In which case the taxpayers get stuck with the bill and the financial companies make money on the deal.
Of course the bailout of AIG, the insurance giant, is already accomplished. But it looks like this last step may not be a certainty, and hopefully it won't be. What a way to make policy - basically at gunpoint. What can't be accomplished in decades by the legislative process can be engineered in 10 days if you have a sufficiently large crisis.
Of course the bailout of AIG, the insurance giant, is already accomplished. But it looks like this last step may not be a certainty, and hopefully it won't be. What a way to make policy - basically at gunpoint. What can't be accomplished in decades by the legislative process can be engineered in 10 days if you have a sufficiently large crisis.
Tuesday, September 16, 2008
Finally Taking Notice
Last week Fannie and Freddie were nationalized, this week Lehman Bros. goes bankrupt and Merrill Lynch is bought out for half its value. And now the news media at least is starting to notice that something is wrong. NPR anchors sounded genuinely worried Monday morning, and CNN gave breaking news coverage to the Lehman/Merrill story. News stories now openly mention the comparison to the bank panic of 1907 and the great depression.
One thing that strikes me is that back in the 1930's probably half the U.S. population were farmers, industry and manufacturing were located here, and we had large oil reserves. Now our food is raised and distributed by giant agribusinesses, we import most of our manufactured goods, and import a large amount of our oil. I think we're a lot less prepared for hard times now than we were in the 30's.
One thing that strikes me is that back in the 1930's probably half the U.S. population were farmers, industry and manufacturing were located here, and we had large oil reserves. Now our food is raised and distributed by giant agribusinesses, we import most of our manufactured goods, and import a large amount of our oil. I think we're a lot less prepared for hard times now than we were in the 30's.
Monday, September 8, 2008
The Economy
First I'll just mention that as we anticipated in the last post, Fannie and Freddie have been nationalized. This rated a front page fairly bold headline in the Salem Statesman Journal and an interview with Secretary of Treasury Henry Paulson on NPR this morning. I have the suspicion that I could ask ten people on the street and I'd be lucky if one of them knew about it.
Now back to our topic: what is "the economy". We are told that Fannie and Freddy had to be nationalized to save the economy. For the some workers this means that we can now be assured that if we sit in front of a computer screen for eight hours every day we will be able to make our house payment and car payment and buy food and household items produced in distant countries, and so life will go on as usual. For others the 8 hours in front of the computer may be replaced by eight hours or more driving a UPS truck or maybe wiring an office complex. For almost no one will it mean growing food for local consuption or manufacturing something. Manufacturing has been outsourced to other countries with lower wages, and likewise much of food production.
So what does the US economy actually produce that is of any use? I can't think of much, they say that 70% of our economy is in the service sector and retail. So we buy and sell stuff to each other and maybe provide services (James Kunstler's ubiquitous tanning salons, fitness centers, perhaps auto repair, carpet laying, etc.) Some of these things do seem useful around here, but can't be exported to the other parts of the world that we get our food and goods from.
It seems to me that right now we're pretty much living off the generosity of the rest of the world, which makes the stuff that we actually need. I can't see that we're giving them anything they need in return.
Now back to our topic: what is "the economy". We are told that Fannie and Freddy had to be nationalized to save the economy. For the some workers this means that we can now be assured that if we sit in front of a computer screen for eight hours every day we will be able to make our house payment and car payment and buy food and household items produced in distant countries, and so life will go on as usual. For others the 8 hours in front of the computer may be replaced by eight hours or more driving a UPS truck or maybe wiring an office complex. For almost no one will it mean growing food for local consuption or manufacturing something. Manufacturing has been outsourced to other countries with lower wages, and likewise much of food production.
So what does the US economy actually produce that is of any use? I can't think of much, they say that 70% of our economy is in the service sector and retail. So we buy and sell stuff to each other and maybe provide services (James Kunstler's ubiquitous tanning salons, fitness centers, perhaps auto repair, carpet laying, etc.) Some of these things do seem useful around here, but can't be exported to the other parts of the world that we get our food and goods from.
It seems to me that right now we're pretty much living off the generosity of the rest of the world, which makes the stuff that we actually need. I can't see that we're giving them anything they need in return.
Wednesday, September 3, 2008
Fannie, Freddie will be nationalized
Heard a story on NPR this morning saying it is pretty likely that the two home mortgage Government Sponsored Enterprises Fannie Mae and Freddy Mac will be nationalized, i.e. the taxpayer will assume all their debts. This is necessary to keep the housing market from totally freezing up (which would happen if there were no Fannie and Freddy since they are the only ones offering mortgages right now) and to keep big foreign stakeholders like China from losing their investment. We can't afford to have China lose the money they have invested in Fannie and Freddy because we depend on them so much for other debt; I believe we have about an 800 billion dollar trade imbalance with China.
Ben Bernanke and the Federal Reserve took fairly extreme action to try to prevent this around a month ago, but they still ended up in this position. The recurring theme in this housing/economy crisis seems to be that we can stall the inevitable for a little while, but it always ends up happening anyway. Why do we try to stall it? Because it is bad. Therefore when it actually does happen, as is happening to Fannie and Freddy now, I don't believe the reassurances that things are actually okay and it's perfectly fine to do this.
Ben Bernanke and the Federal Reserve took fairly extreme action to try to prevent this around a month ago, but they still ended up in this position. The recurring theme in this housing/economy crisis seems to be that we can stall the inevitable for a little while, but it always ends up happening anyway. Why do we try to stall it? Because it is bad. Therefore when it actually does happen, as is happening to Fannie and Freddy now, I don't believe the reassurances that things are actually okay and it's perfectly fine to do this.
Tuesday, August 5, 2008
Saw an article saying that hotel business was down 20% from last year to this year, and that 100 small cities were expecting to lose airline service this year. Also saw several articles talking about the possibility of General Motors going bankrupt - maybe Jim Cramer was on to something.
There was a surprising article in the Washington Post (surprising because I wouldn't expect to see it in this paper) saying that free market capitalism may have had its run and was now on the retreat. The writer felt that the average american had reached the point where they had nothing more to gain from increased globalism and more to lose. He also pointed out that although we like to keep government out of things, we also expect a certain level of fairness and workability in our social system regarding things like health care, and that we have fallen well below this level.
There was a surprising article in the Washington Post (surprising because I wouldn't expect to see it in this paper) saying that free market capitalism may have had its run and was now on the retreat. The writer felt that the average american had reached the point where they had nothing more to gain from increased globalism and more to lose. He also pointed out that although we like to keep government out of things, we also expect a certain level of fairness and workability in our social system regarding things like health care, and that we have fallen well below this level.
Monday, July 28, 2008
Air Travel to End Soon - July 28, 2008
The local paper ran an article about the troubles of the airline industry. Last year they had 31 billion in expenses and 5 billion in profit, this year their expenses have almost doubled to 51 billion. Salem is losing it's airline service, after having it for about a year. Some of you may be surprised that this small town has airline service, and if you saw the tiny airport you'd be even more surprised. The airline is pulling out because of insufficient passengers. Another article was promising that we'd restore the service soon; I don't think it's ever coming back (and no great loss in my opinion). What's more, I think this year we will see that air travel is no longer an option for the average person. First because of the expense, and second because the airlines will no longer offer it for many routes.
What will happen to the economies based on the availability of air travel? Things like hotels, restaurants, convention centers, city budgets? As these businesses are forced to cut back due to diminished revenue, people will lose their jobs. As these people spend less, other businesses will be impacted, furthering the cycle.
What will happen to the economies based on the availability of air travel? Things like hotels, restaurants, convention centers, city budgets? As these businesses are forced to cut back due to diminished revenue, people will lose their jobs. As these people spend less, other businesses will be impacted, furthering the cycle.
Sunday, July 20, 2008
You have a front row seat
Sunday, July 20, 2008 - Salem, Oregon
They say an old Chinese curse is "may you live in interesting times". I'd like to welcome those of you living in the United States to what should prove to be a very interesting next couple of years. All you have to do is keep your eyes open, our nation is coming apart right in front of you.
Last week there was a front page headline about the Federal Reserve's emergency rescue of the two giant home mortgage corporations, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddy Mac. Jim Cramer (of cable's Mad Money) when asked how we'd know we have hit the bottom of the market replied - when all the banks that need to fail have failed, and when General Motors and Ford have declared bankruptcy. This is serious stuff. Last week there was also a run on a large California bank (Indie Mac - where do they get these names) causing it to be taken over by regulators.
There is much discussion of these things on the news (public radio and public TV at least), but where I live in Salem Oregon it seems like the average person on the street isn't worried and in fact isn't even thinking about this.
So I'd like to invite you to join me in watching this unfold. I plan to post what I observe happening around me here in Oregon. I'm wondering what it will take to get people's attention.
They say an old Chinese curse is "may you live in interesting times". I'd like to welcome those of you living in the United States to what should prove to be a very interesting next couple of years. All you have to do is keep your eyes open, our nation is coming apart right in front of you.
Last week there was a front page headline about the Federal Reserve's emergency rescue of the two giant home mortgage corporations, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddy Mac. Jim Cramer (of cable's Mad Money) when asked how we'd know we have hit the bottom of the market replied - when all the banks that need to fail have failed, and when General Motors and Ford have declared bankruptcy. This is serious stuff. Last week there was also a run on a large California bank (Indie Mac - where do they get these names) causing it to be taken over by regulators.
There is much discussion of these things on the news (public radio and public TV at least), but where I live in Salem Oregon it seems like the average person on the street isn't worried and in fact isn't even thinking about this.
So I'd like to invite you to join me in watching this unfold. I plan to post what I observe happening around me here in Oregon. I'm wondering what it will take to get people's attention.
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