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Thanks to the Federal government spewing out trillions in bailout money, I am afraid we are in for a nearly unescapable "double whammy" quite soon. We are seeing the first "hit" right now--deflation in commodities (including oil), rising unemployment, stagnant wages, and declining equity and real estate markets caused by a collapse in an overheated economy and bursting speculative bubbles. That's bad enough. But the second leg will be far worse and far more dangerous. That will be massive inflation ignited by all of that bailout money chasing non-existent goods and depleting natural resources. The latter will be exacerbated when the Fed's folly completes the debasing of the dollar in the eyes of those who sell us oil--and the price, in dollars, explodes--or those countries simply refuse to sell oil to us at all. We will then see the perfect storm in which people's income, savings, and investments are evaporating--and the basic "stuff" they need to live is exploding in price--if it is available at all. Honestly, for that scenario there really is no "shelter." The result will be a massive decline in the material standard of living for most all Americans. And I fear there may be many of us--the spoiled brats that we have become--who aren't going to behave nicely when that day comes.
Here's some more of that sobering reading that everybody hates--but people should start heeding:
Kunslter's latest blog (12/1/08): James Howard Kunstler
His whole blog for 12/1 is worth reading, but these paragraphs bears quotation here:
Quote:
Does Mr. O (President-elect Obama) know that the current drop in oil prices (due to massive financial deleveraging) has resulted in the cancellation or postponment of the very oil production projects that were hoped to offset the coming depletions? It's not worth it for an oil enterprise (private or foreign) to drill in deepwater or venture into arctic regions when oil is priced at $50-a-barrel -- if it costs $80 to get the stuff out of the ground. It's not worth digging up tar sands in Canada at that price. This halt in activity is going to boomerang back on the US in a year or so, with depletions ongoing everywhere and no new oil to take its place. Does Mr. O know that we're just as likely to see shortages as a resuming rise in oil prices here in the US during his coming term?
Does Mr. O know that the current re-inflation program being run by the Treasury and the Federal Reserve is so egregious that it may lead to loss of the dollar's legitimacy, to the renunciation of dollar holdings by other nations, to the down-rating of US Treasury debt instruments, and finally to an inability of the US to purchase foreign oil -- which comprises two-thirds of all the oil we use every day?
People also need a real stark history lesson here about Colorado, and what the future may hold for this place. Colorado has always been an increadibly beautiful place--but it did not see a massive increase in population until after World War II. Why? Well, first it did not have a real economic base until late in the 19th Century--that was provided by, yes, a government program for the most part--namely, the subsidization of the purchase of silver at very favorable prices by the Federal government. That caused the second necessary ingredient for economic growth to develop in Colorado--its railroad transportation infrastructure (now largely abandoned). That allowed Colorado's first huge growth spurt to occur from about 1880 to 1893. When the government ended its lucrative purchases of silver in 1893, the Colorado economy largely collapsed, and did not fully recover until after World War II.
The second wave of Colorado growth occurred when the Federal government--once again--massively subsidized the creation of the national highway system that connected still somewhat remote Colorado with the rest of the country. The Feds did the same thing again with airports and air travel--DIA being the latest, and undoubtedly final example. That, and cheap, plentiful oil to allow people and goods to get to and from Colorado led to the growth that occurred from the end of World War II until now.
But what now? All of things that made Colorado growth possible in the last half-century are now coming to a close. Cheap oil is gone for good (despite the current temporary drop in prices--those won't last for long). The highway infrastructure? It's deteriorating at a rate far faster than it can be rebuilt. It is unsustainable--and, truth is, Federal highway planners have known that since the 1960's. Air travel? For middle-class Americans, it's going to be toast in a very few years.
So, if Colorado is going keep from sliding back into isolated backwater status--its economy unable to sustain even a fraction of its current population, then it better start figuring out (along with the rest of the United States) how to revitalize its rail transportation system--both freight and passenger. If Colorado does not, it will revert to being a semi-wilderness that few people will even be able to get to, and a place unable to sustain even a meager population at any level of material comfort. Unfortunately, most Americans (and most of their political leadership) are too brainwashed to even envision that is the course that MUST be taken, and we are also going to have to figure out where to come up with money to do it. A good start would be take some of the billions being flushed down the real estate bailout rathole and investing in it something that might actually provide some long-term benefits.
Kunstler again:
Quote:
Does Mr. O know that we are not going to run the US automobile and truck fleet on any combination of alt.fuels? Continuing it by other means is a fantasy that will only disappoint us. The motoring era is coming to an end. Heroic investments in highway infrastructure to create jobs will be a tragic waste of our dwindling capital. The pressure for Mr. O to make these misinvestments will be enormous, perhaps insurmountable. There are probably not a thousand people in the US who agree with what I am saying -- meaning the consensus to keep the cars running at all costs overwhelms reality at the moment. Does Mr. O's concept of "change" include the possibility that we may have to live very differently in this society?
Economist Optimistic For Colorado During Recession, an article from cbs4denver.com, reports that Colorado's mix of jobs and minimal housing bubble gives the state an advantage, according to economics expert Nancy Jianakoplos of Colorado State University. "We're not as dependent on financial services as some of the country. We're not as dependent on the automobile industry," said Jianakoplos. Many economists, including Jianakoplos, believe that the economy could very well turn around by mid-to-late spring. Colorado's downturn is expected to be less extreme with a recovery that's right on pace with the rest of the country.
cbs4denver.com - Economist Optimistic For Colorado During Recession (http://cbs4denver.com/business/recession.colorado.economy.2.877636.html - broken link)
Economist Optimistic For Colorado During Recession, an article from cbs4denver.com, reports that Colorado's mix of jobs and minimal housing bubble gives the state an advantage, according to economics expert Nancy Jianakoplos of Colorado State University. "We're not as dependent on financial services as some of the country. We're not as dependent on the automobile industry," said Jianakoplos. Many economists, including Jianakoplos, believe that the economy could very well turn around by mid-to-late spring. Colorado's downturn is expected to be less extreme with a recovery that's right on pace with the rest of the country.
cbs4denver.com - Economist Optimistic For Colorado During Recession (http://cbs4denver.com/business/recession.colorado.economy.2.877636.html - broken link)
Today's Denver Post pointed out that Colorado has not been clobbered like some other areas. The article mentions COLO SPGS economist Tucker Hart Adams, now retired from her post as Chief Economist for U.S.Bank. In today's article, she says the recession will last for all of 2009 an I see no reason to argue with her. LINK:
- Colorado's status isn't as evident - The Denver Post
I don't agree with Kuntsler's vision, at least in the short term. We need rail and streetcars, yes, but we need our interstates repaired to run trucks and buses on until we have the alternative transport systems. There will be an interim period where people still live in suburbs and commute to work and buy at centralized markets. The end of suburbia and return to an agrarian way of life will come, but not as soon as many think. the Roman roads are still visible and in use in some parts of the world. I see private ownership of autos being gradually restricted/heavily taxed, but roads are still essential for vital services.
Economist Optimistic For Colorado During Recession, an article from cbs4denver.com, reports that Colorado's mix of jobs and minimal housing bubble gives the state an advantage, according to economics expert Nancy Jianakoplos of Colorado State University. "We're not as dependent on financial services as some of the country. We're not as dependent on the automobile industry," said Jianakoplos. Many economists, including Jianakoplos, believe that the economy could very well turn around by mid-to-late spring. Colorado's downturn is expected to be less extreme with a recovery that's right on pace with the rest of the country.
cbs4denver.com - Economist Optimistic For Colorado During Recession (http://cbs4denver.com/business/recession.colorado.economy.2.877636.html - broken link)
Colorado doesn't have a "minimal housing bubble." Our bubble collapse only seems less severe because it started earlier and has been more gradual than the cliff-diving now seen in AZ, CA, FL, and NV. Denver had a 5.4% decline from Sep 07 - Sep 08, according to recently released Case Shiller data. So the owner of a $300,000 house had $16,200 of his net worth evaporate, or about $1320 a month, or over $44 a day including Sundays. That's better than the 17.4% average loss in the 20 surveyed cities, but it also means a person who bought that $300K house with a 95% loan-to-value loan (i.e. 5% down payment) in Sep 07 is already underwater after only a year. That "minimal" housing bubble is a personal economic disaster.
If "Helicopter Ben" Bernanke really follows through with what he said yesterday, and the Fed follows the 1990s Japan playbook and starts buying long-term treasuries, I think there's a very good chance we will see double-digit mortgage interest rates within a year, as flight to long term treasuries starves the rest of the long-term bond markets for capital. That'll make 2009 the top end of another severe leg down in housing. Based on the latest Credit Suisse data on Pay Option ARM recasts, the default rates on mortgages are going to accelerate through 2012. And the effects of the intensifying spiral up in unemployment have not yet played into the housing market. It was falling when people still had secure jobs...now how do we expect near-term improvement??! Until prices come back down to ~3X annual incomes, it's all just hype, smoke and mirrors. Including here in Colorado.
Two personal friends got pink slips from their employers today. One has worked for the same company for more than 25 years, and 40% of their sales staff was cut "permanently." He's my age and owns his home and cars outright, and has no revolving debt. He will live comfortably on his unemployment benefits. He is calm and without fear. My other friend, in her late 50s, now finds herself just a few missed mortgage payments away from the road to homelessness. She's in a state of hysterical panic right now. Quite a contrast. What a difference the burden of debt makes.
This afternoon, as if on cue, I was in line behind a lady in a Colorado Springs grocery store--she just about came unhinged when her credit card was rejected as she tried to purchase a shopping cart full of food. Mind you that this was not a shabbily-dressed trailer tramp with two buck teeth and an unlit Marlboro hanging out of the corner of her mouth. Her hair and nails suggested a recent and expensive trip to the beauty parlor. Her leather jacket probably cost twice what that basket of groceries did. The look of panic, outrage, and helplessness combined on her face was striking. Also quite interesting was her rather unkind approach to the checkout clerk and the manager, which suggested that she somehow believed it was their duty to find a way for her to pay for the groceries. Imagine how things are going to play out if estimates of 45% of the nation's credit card lines being cancelled prove correct.
Debt is Demoralizing
Last edited by Bob from down south; 12-02-2008 at 06:23 PM..
Well, I guess I'll just have to add Prairie Dog ranchin' to my list of Depression enterprises!!
Debt is Deplorable
there's also fox, coyote, squirrel, songbirds, waterfowl, domestic animals....I think some of us can eat well for a little while before we have to start eating each other
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some good news
