Sunday, November 30, 2008

Peak Oil or Depression

Both it seems...

I have attempted to wrap my mind around the real reason that gas prices have fallen so drastically since I "left the world". It seems that the answer, or at least a reasonable theory that serves is an answer is decreased demand resulting from other economic woes. That is such a simplistic answer (albeit it is riddled with economic mysticism at its core) to be beautiful. Peak oil has not gone away you see, oh no far from it. The over all product in the ground has not increased, production facilities to suck up those pesky hard to get drops in untapped places have not been developed. Supply remains the same, demand has decreased.

Peak oil has not gone away....

But depression - that is deflation right. It is hard to see deflation in prices anywhere right? Perhaps if we look at the "good retail season" and all the deep discounts out there. Folks are rejoicing that Black Friday was a success but maybe this is a two-edged sword. If people are buying because prices are cut so deeply could that not be the initial stages of a deflationary period. What happens in Febuary or March after everyone has used up their disposable income (or last bit of their credit line) on deeply discounted merchandise? Do retailers then discount things even further? At what point are companies moving products at so deep a discount just to generate some cash flow that they cannot continue to produce/procure?

From The Automatic Earth

Thanks to a credit boom that dates back to at least the early 1980s, and which accelerated rapidly after the millennium, the vast majority of the effective money supply is credit. A credit boom can mimic currency inflation in important ways, as credit acts as a money equivalent during the expansion phase. There are, however, important differences. Whereas currency inflation divides the real wealth pie into smaller and smaller pieces, devaluing each one in a form of forced loss sharing, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. This generates the appearance of a substantial increase in real wealth through leverage, but is an illusion. The apparent wealth is virtual, and once expansion morphs into contraction, the excess claims are rapidly extinguished in a chaotic real wealth grab. It is this prospect that we are currently facing today, as credit destruction is already well underway, and the destruction of credit is hugely deflationary. As money is the lubricant in the economic engine, a shortage will cause that engine to seize up, as happened in the 1930s. An important point to remember is that demand is not what people want, it is what they are ready, willing and able to pay for. The fall in aggregate demand that characterizes a depression reflects a lack of purchasing power, not a lack of want. With very little money and no access to credit, people can starve amid plenty.

According to the author credit, or more accurately an uncontrolled credit boom is the problem. Of course at the root of that is a prevailing sense of entitlement and greed. The author is kind in their description calling it "high expectations" - perhaps - greedy and materialistic fit too I believe.

I must admit, even when I try to read and stay connected to the world I live far from it. I currently leave on a small Army post in the middle of the desert, before here I was stationed in Korea and between here and there I have been back to the middle east. I have been away from home all of my adult life - I do not really know what goes on in the lives or regular people. My wife tells me from time to time that she talked to so-and-so and that they are losing their job or that their company is cutting back etc. My mother told me on the phone the other day that our local paper back home had six pages of foreclosures. These are things I cannot connect to or understand. I do not have debt, I do not worry about losing my job, I do not know anyone who does (well I have had troops get into debt problems but that is not really what I meant - their issues are generally related to too much stereo equipment and not enough paycheck, they will still have a place to live regardless).

I do know that I have been searching very hard for a piece of land way out in the boonies. I have not been able to help but notice that land is cheap.

I suppose this is all worth watching - as I have suggested before it seems high time to prepare to secede from things because if predictions of doom and gloom are correct and deflationary times are coming the man that can provide for himself and his family will be infinitely better off. And maybe, just maybe, come March that laptop that crazy woman ripped from my hands will go on deep, deep, deep discount.....

Human Nature and The Meaning of Christmas

Some say, mistakenly, that Christmas is a time that brings out the very best in us. After all we have the chance to drop change in a bucket outside of all the mega-stores. We send cards of joy and love to people we care about and to some that we really do not care about at all. We eat, spend time with family and friends and give gifts.

It sounds wonderful, as children we actually believed it was wonderful - perhaps ultimately that is part of the root of the problem. I will not go into a long rant about the meaning of Christmas and all that because truth be told - in our day and time Christmas is about the economy stupid. To corporate America it is all about retail sales during the ever increasing period of time from Halloween to New Years. (and I will not talk about the annoying fact that each year that retail season seems to expand just a little bit more).

My wife wants a new laptop, so being a thrifty sort of guy I pointed out that one could be had at an after Thanksgiving sell for $250. I was perfectly willing to venture out at 12 midnight on friday after thanksgiving to procure this inexpensive device. I have never done anything like that and I thought the idea seemed appealing - a little exciting. It was something atypical for me, a chance to experience something new, see something new and in the end get a cheap laptop.

We stood in line for three hours, shivering and hugging for warmth. It seemed that for two hours and fifty minutes of my wait everyone remembered the simple lessons we all learned in kindergarten about forming a line and staying in line. Ten minutes prior to the store opening almost everyone forgot those lessons. I witnessed people exiting their warm cars and rushing to the door, erasing any remnant of the orderly line that had previously formed.

At this point, my blood pressure rose a bit. After all, I had arrived early, stood in the cold and was willing to take my chances on actually getting a laptop with those that had arrived before me. I did not at all like the idea of people arriving late, or worse, sitting in warm cars and then breaking in line.

I cooled myself with the thought that this was a wonderful opportunity to observe human nature and use it as opportunity to discuss with my wife my theory about the future of our land.

Once the store employees opened the door things were just as you probably imagine that they were going to be at this point in this little story - bedlam. Grown people running through a store, pushing, shoving, etc. etc. I arrived at the counter that was distributing the laptops sometime after the initial rush. I was distracted along the way watching parts and pieces of the mob peel off to converge on various "bargains" along the way. I suppose people had an idea of what they came for and they were not going to allow something as silly as civility to get in the way at that point. I also refused to run, in a store, for any reason other than life or limb. To my surprise I found that when I asked the girl behind the counter for one of the laptops she said "yes sir, we have one left" smiling and handing me the box.

I was further surprised when a woman behind me reached over me and grabbed it out of my hand. That is right, she literally came over my back and grabbed it.

I have a lot of PTSD issues I have worked on in various ways over the years. I am not ashamed to admit that I have had nightmares, that I have on occasion stopped dead in my steps at a sight, sound or smell. I have worked though most things and am left simply with what I think any normal man should be left with after seeing the worst of the human condition too many times. One thing I have never been able to get rid of is a powerful fight or flight response when I am startled or my personal space is invaded too quickly. My wife never startles me anymore, we have just adjusted to that.

This woman, coming over my back like that startled me. It was God in heaven that prevented me from laying her out on the floor. All of the physiological reactions took place, but thank goodness when I spun around I was able to quell the impulse.

There is of course, a much larger issue here. That woman doing that to me was just one of probably thousands of such instances across the country. I know I witnessed several other such events that very morning in that very store. I could not help but think to myself "what if these people were hungry". After all, if people are so willing to abandon civility over a silly electronic device what would they do if they were hungry.

Christmas is all about retail sales and materialism it seems and my little foray into the shopping world only served to remind me of just how far we have fallen. It is a sad state of affairs.

Wednesday, November 26, 2008

Once Again Into the Fray

Over the last nine, yes I believe it has been at least nine, months I have been divorced from the world almost entirely. This was partially by choice, and partly by circumstances. That is not entirely true, to be certain my work took me "out off and away" from the real world but it was my choice to make no attempt to stay connected. If you are an old reader then you know full well what I do as a profession and I have no intention on commenting on any of my activities or thoughts related to those activities here and now.

I do not know for instance any of what occurred in the election. I did vote for Chuck Baldwin via absentee ballot but as for the rest of that nonsense I do not have a clue. I know that gas prices soared and have now fallen and that the misinformed masses now rejoice. I have a theory as to what has occurred but I have not read anything or heard anything proposing a theory supported by facts. (I suspect that the administration dug into the strategic reserves prior to the election but I could be off base). I do not know what songs are popular ( I have enjoyed my select music on my IPOD when time permitted but those are things written and sung long ago). I could not begin to tell you anything that occurred in the sports world, I know the olympics occurred but that is it. I have not looked at a newspaper, read a blog, searched news on the net or even engaged in a conversation about current events outside of my bubble for several months. That is the strike me down right here truth.

I have read several books, all by long dead authors. I have thought a lot. I am not even certain that I still retain whatever feeble skills at conveying thoughts in writing I might once have had. Everything I have written over the last several months has been short, concise and primarily bulleted.

One thing has become infinitely clearer to me as I have thought of things great and small during quiet and not so quiet moments these last few months. All problems and issues can be essentially boiled down into one fundamental issue; immorality. The seven deadly sins have essentially been turned into virtues respected by our society.

Of particular note is our redfining meaning ofredefined sloth. Do not misread me, the others are genuinely disturbing, but sloth has engendered a sense of entitlement. Self-reliance, self-responsibility and self-discipline are no longer required - we are lazy and expect that someone else will fix it, whatever "it" is in any particular situation. We so easily accept the notion that bigger is better as applied to any circumstance. I see this in my job continually, in large and small things. This is of course just a micro view of the prevailing attitude almost everywhere. As a collective we look askew at the individual that stands up in his little piece of the world and states that he can handle his own issues.

I decided not to stay connected to the world because I know that fundamentally it is impossible to argue with almost anyone about the state of the world so long as they live and breath inside the paradigm of how things are. To most the world is made up of simplicities - a political system that presents two teams, complete with mascots; and a view of the economy that revolves around their paycheck, their petroleum bill and their welfare.

Who wants to talk about fundamental issues? Most that understand them tune out the truth in the secure knowledge that nothing at all can be done to change things.

I do not know the answer to that question - but the truth is out there and it should be stated over and over by as many as have a voice to state it. So I am back, and that is all I have to say about that.