The great debate among those of us on the Economy Deathwatch seems to be whether the debacle we observe around us will resolve as a crash or a slow-motion financial train wreck. It seems to me that at every layer of the system, we're susceptible to both.... Some things are crashing as I write.
The dollar is losing about a cent every three weeks against other currencies. A penny doesn't seem like much, but keep that pace up for another year and the world's "reserve currency" becomes the world's reserve toilet paper....
Of course the government's consumer price inflation figures and employment numbers are dismissed broadly as lacking credence. But anybody who has bought a bag of onions and a jar of jam lately knows that things are way up in the supermarket aisles, and so many illegal Mexican migrants were employed in the Sunbelt housing boom, that their absence in the bust won't register on any chart.
...the very real realm of poor choices, fiscal and fiduciary irresponsibility, deliberately deceptive policy, criminal malfeasance, and the broad abandonment of standards in acceptable behavior by people in authority. A lot of observers attribute this to the Gordon Gecko ethos -- the discovery back in the 1980s that "greed is good," which was meant to trump a previous ethos that life is tragic.
... it is hard to imagine we will get through the month of December without some major trauma in the markets. In fact, I'd go so far as to predict a thousand-point drop (or more) in the Dow just in this week after Thanksgiving. Real wealth "out there" is evaporating like popsicles...
... My own hunch is that average Americans are so maxed out on debt that they don't know whether to shit or go blind. Perhaps lots of them are willing to take a last step into fatal insolvency in order to put a plasma TV screen under the Christmas tree and appear as heroes to their families. If that's the case, it would only imply a greater bloodbath in credit card default thundering through the system in February and March, which would only deepen the carnage in collateralized debt instruments further up the food chain.
...The rise in price is only the mildest symptom of growing instability for the system that allocates the world's most critical resource. Even in the face of "demand destruction," weird changes are occurring in the way that the oil producers do business. The decline in export rates and the new spirit of "oil nationalism" will take center stage now, even if the US economy seizes up. These phenomena will represent a new cycle in world affairs: the global contest for remaining fossil fuel resources.
Sooner rather than later, the next symptom will appear: spot shortages around the US and hoarding behavior. This is what will finally wake the American public out of its long sleepwalk (and Matthew Simmons said this first, by the way) -- when the lines form at the gas stations and the tempers flare and the handguns come out of the glove compartments.
NVDL: In a high level meeting between the Chinese oke who bought a massive stake in Standard Bank, question were put to a power broker from Goldman Sachs about the long term future of world energy. He was somewhat dismissive (others would say sensible) in saying: if the US and China can reach the levels of efficiency that Japan now has, no one is going to have a problem.
Simple. All the bankers Ja'd and went 'Amen'.
Problem is, Japan is one of the smallest countries in the world (in terms of landmass), China and the US are amongst the largest. Even if they start building train stations in backyards across the country, the pinch has already started. I'm going to give some very counterintuitive advice: Start Partying! Party like there is no tomorrow, 'cos guess, what, tomorrow ever after just got cancelled.
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