Letters to the Editor
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attention: editor
Something's not right about this sentence (that ends with a comma):
It became so easy to buy insurance against the possibility of a bank default or other financial disaster that no one gave a second thought to the taks of borrowing billions of dollars for a leveraged buyout or exotic hedge fund bet,
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Wealth evaporates
Well, the equity has disappeared from the value of peoples houses, so their ability to finance spending from that source has gone away. Now, it appears that the value of securities is evaporating, so that is no longer a source of feel-good wealth. The price of gas and other forms of energy are going up. At least we will import fewer Chinese goods as the spending spree ends. I wonder how the tycoons of Wall Street will manage to transfer their losses to the middle class, as they so often do.
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I know, I know. Chicken Little.
I dunno about the rest of you, but I watch my investments every day, and I'm ready to go to cash at any moment. Or gold, even.
If you have investments in the market, or you're just interested in it, or both, it's worth keeping this in mind: when it finally dawns on Wall Street that the end of cheap oil is the end of growth as we know it for some indefinite period--that is, as long as we have no energy source as dense and cheap as fossil-fuels--this market will go into freefall, and it's not at all clear where it will land.
Think about it. If, every year, the total population of the planet is increasing (it is), and every year, available energy is decreasing (it is), then growth becomes a zero-sum proposition. For the US to grow, it'll have to take something from someone else, and that goes for the entire world.
An investment in stocks is simply an assumption that the investment will grow. The decline in world-production of fossil-fuels, a decline that may well have already begun (we won't know for awhile yet), means the end of growth as we have known it for 150 years and more.
Wall Street has so far managed to use simple denial to avoid the consequences of the decline of fossil-fuels.
As anyone knows who's studied human psychology, denial works as long as a situation remains stable. If the situation gets worse, if reality bites harder and harder, eventually, denial turns into something else. And that something else is usually quite unpredictable.
www.warsocialism.com
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had_enough - Available Energy
Available Energy is not decreasing. Available fossil fuels may be decreasing, but we haven't even begun to harness the energy available as a side-effect of our planet's rotation. Wind and tidal energy are enormous opportunities as are solar and geothermal.
Tunnel vision in energy policy is the problem, not available energy.
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the dollar
the key to this all is that the dollar is cooked,and we are buried in debt.as a trader,i make my living at this and the rot under the hood is historically nasty.the fed gave us easy money to keep the balls in the air,the moment to pay for that is at hand.if the fed wants to keep the consumer floating,they will cut rates and kill the dollar......
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had_enough
i've been trading in gold/silver for a few years now,the last bubble at the end of these bubbles will be a hard asset bubble,and history says gold is the insurance that will save your purchasing power as inflation rises.that has been how this rot has been masked,low rates to force folks into risk(and punish savers)and inflation in real assets masked by fake government #'s and the imported deflation from overseas.sure tech stuff you buy once gets cheaper,but food,energy,the real daily bills,tuition,insurance,medical bills,these just keep climbing as wages for the working man do not keep up with things.this will get ugly...
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re: Chicken little
I don't know - why cry uncle or peak oil every time the market corrects? if your investment thesis is correct (scarcity in fossil fuel), then redeploy your money accordingly. There are a lot of possibilities out there, from oil and oil services companies to utilities and alternative energy stocks. For my part I believe that after an almost 2000 points runup in the past 3 months it is time for a healthy retracement. On a fundamental level, yes the american economy is headed for the toilets - but as usual, not everybody will hurt the same. Now think about it: the low dollar allows the Bush administration to reduce the cost of the debt incurred by the unwise tax cuts and the crazy Iraqi adventure. There is no way inflationary pressures will abate, since there is no way in hell the Fed will raise interest rates after Nov 2007 (a year before the elections...). At present the housing sector is like the proverbial ambulance. A rate hike now would be like an AQI IED exploding under that ambulance (ok, dubious metaphor).
Currency traders know that, so everyone is shorting the dollar until at least mid-2008. The result is that large, multinational US companies will keep reaping the benefits of an unusually competitive environment (Boeing just announced that the boom in airplane orders would continue well into 2009 - hint, hint). Meanwhile we, the peones, we'll be feeling it at the pump, at the grocery store, when we fly cross-country to visit the parents, etc etc. But that's the point, we're peones.
So what can you do about it? Keep putting money in that index fund and let it grow - or even better, entrust it to people like IFA (www.ifa.com). Stop worrying and learn to love the market. And yes, in the long run, we're all dead anyways.
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@big old geek...and all
you wrote:
Wind and tidal energy are enormous opportunities as are solar and geothermal.
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the calculations of energy density (not to say utility) of all major alternative energy sources have already been done..and they come up short. Fossil-fuels have a unique energy density, orders of magnitude (yes, that much), higher than ANY other alternative.
Do the research. I had a website comparing the relative energy density of various energy sources available to us (I can't come up with it at the moment, but I'll see if I can find it and post it here), and fossil-fuel density is light-years ahead of everything else. Practically, anyway. We can't make up the difference even with intensive, efficient use of ALL alternatives..something that could take a half-century of development, at least.
The industrial/technological/population growth of the human species has been fueled by oil, and nothing else. Take away oil, we're all back to the bronze age. Our entire way of life in the US is a direct result of our profligate, irresponsible use of millions of years of ancient sunshine...we can't sustain that way of life, not even close, without fossil fuels. The math on the subject is dismally clear.
And now China and India want what we have. That will be literally impossible. There's not enough oil left for them to have what we have. There's not enough oil left for US to have what we have.
I am becoming less optimistic every day, as I contemplate the insanity around me. No one understands. No-one. By that I mean, a handful of people around the world, relatively speaking, gets this. But that's it.
Your post displays the human trait--probably genetically-based--that if we "run out" we'll "get more." Think about it. The entire human experiment is now balanced on that single paradigm: if we "run out" we'll "get more." What if we can't "get more?" What then?
That's about when I start wondering just how I, or anyone, will survive the next 20 or 30 years.
www.warsocialism.com
www.dieoff.org
(the dieoff site especially is full of well-sourced links and articles that show that alternative energy sources will not save us. It also contains several convincing essays suggesting that once the oil runs short, endless war for the last of it will be our collective fate.)
There are over 6 billion human beings on this planet. The most optimistic estimate of a *sustainable* population (that does not eat into its resource and environmental capital any more than we already have), is around a billion.
And that, my friends, is the real elephant in the room: what exactly will happen to the other 5 billion in the next 50 years? Because if world oil production begins declining at 10-20% yearly (a not unreasonable number, based on the declines at current large fields, Cantarell, and the North Sea fields being signal examples. And given that there are no major fields left to discover and exploit.) there will not be enough energy to support that 6-billion. In a cruel irony, the people on earth who have very simple rural lifestyles that might enable them to survive, are very likely the ones who will die first.
We here in the US will suffer plenty though, and will be lucky to escape nuclear war, frankly.
I don't want any of this to be true. But James Howard Kunstler puts it well on his website: we're all going to have to make "other arrangements." You decide what those might be..