196 comments on Energy Prices, Inflation, and Personal Savings
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Note that if we look at debt as a ratio of debt to nondiscretionary GDP, it looks even worse. The majority of Americans live off the discretionary income of other Americans. During this Great Depression it was probably less than 10%. Perhaps less than 5%.
I think that we are going to see very strong deflationary headwinds--as overextended consumers and businesses try to sell highly leveraged assets. This is going to be compounded by the effects of home builders and auto manufacturers aggressively marking down the prices of new homes and autos in order to keep their businesses going.
Inflationary effects of rising food and energy prices will probably act to worsen these deflationary trends as consumers have less disposable income to support their SUV's and McMansions.
My key advice: cut spending, arrange your life so that you minimize your commute, and most importantly, look into becoming, working for, or investing in a provider of essential goods and services. Whether we like it or not, we are going to be forced to once again become a nation of producers rather than a nation of Jabba The Hut like consumers demanding that someone deliver food and energy to us at permanently low prices.
Perhaps we will have initial inflation when the recession begins, but once the economy spirals downward, deflation is more likely. There will be some items that are expensive, such as energy and some consumer goods, but prices are not going to inflate every year. Wait until you try to sell your assets, you can expect cheap prices.
I've been studying the future since 1989 and it's going to be worse than people imagine from 2007-2012. Here at TOD you don't realize how many people in the New Age community have know about this coming collapse. GNP is about to peak and begin a downward decline. Corporations are going to begin losing money and going out of business. Unemployment is going to skyrocket. It's going to get ugly, then uglier.
People think housing is going to drop 20-25%. That is way too optimistic. Housing will soon begin dropping like a rock. By 2009, prices will have dropped more than 50% and new constuction will have stopped because of excess inventory. Unemployment will be 20% by 2010. With such a huge collapse of the economy, I don't see how inflation can exist.
>Inflationary effects of rising food and energy prices will probably act to worsen these deflationary trends as consumers have less disposable income to support their SUV's and McMansions.
Excellent point. In the future we will likely see asymetrical ecomomic forces. Ultimately when oil and gas production collapses, the costs for food, energy or any consumpable product than requires energy to produce will rise. At the same time, over extended consumers will lack the ability to purchase durable goods and non-essential services even at reduced prices. Unemployment will soar and deflation will begin.
The fed might act to enact a zero rate policy (aka Japan), but I don't see how that would help much, as most financial business will be buried under litigation and last thing they would want to do is issue more questionable loans. Any significant montarization of the dollar would also have serious ramifications, since I doubt many oversea trading partners would want to ship good to the US, nor would oil and gas exporters be willing trade with us.
>My key advice: cut spending, arrange your life so that you minimize your commute, and most importantly, look into becoming, working for, or investing in a provider of essential goods and services.
My advice would be to leave urban regions. Who would want to live in a populated area with soaring unemployment, reduction in local gov't services (police, fire, infrastructure), and soaring crime and drug use. If you're providing essential services in a high crime area, you risk your wealthfare and your life.
You can buy milk at the gas station, just 4 miles away. But you need a 4WD truck to get there in the winter.
Of course, the local meth lab is just two miles away, and they need some reliable help.
Urban areas will do better post-peak than rural areas for a VERY long time. Perhaps selected cities of 100,000 to 300,000 will do best, but not every one.
I really respect you but this is the most head up my ass statement I have read on TOD for a long time:
<qoute>Urban areas will do better post-peak than rural areas for a VERY long time. </quote>
My perspective may be blurred because I live in the boondocks but I don't need you urban people. We have the resources you need like food and firewood. You will starve in the dark.
Todd
"Old Urbanism" can be quite energy efficient. As long as we have an organized monetary economy, I think vital urban areas will be a better place than isolated rural areas. (Phoenix & Las Vegas not included).
I use 6 gallons/month and could cut that down to 4 easily and 2.5 or so gallons/month in a pinch. Supplying our stores can easily be done by rail (Union Pacific, NorfolkSouthern, CSX, Canadian National, BNSF, Kansas City Southern) as well as barge and ocean shipping. We have excellent food within 100 miles (salt, fresh & brackish water + rice & dairy & fruit & sugar).
If we trade food & cotton for fuel, it will come through New Orleans. If you want coffee, it will come through New Orleans. If we import steel or copper, it will come through New Orleans.
As for fear of crime (or much else), that is just not a major motivator for me.
And I informed the police of a 3 generation family from the Missouri Ozarks that are, apparently, dealing meth to construction workers. So drugs are not uniquely an urban problem.
And I can get through the winter without any heat at all if need be (note my last winter).
I spent 4 months helping a friend get his business going (he lived ~6 miles outside Searcy, Arkansas on 44 acres). I was shocked at just how much driving was required to live even with a decent sized garden. His job before starting his own business was in South Little Rock, trips to Wal-Mart were several times a week, etc.
I responded to Lou below.
Look, you are a mouth to feed. You do not produce anything unless I missed it in some post. I appreciate your intellect but that only uses joules.
Here are a series of reasonable queations, my answer to all of them is "yes." What are your answers?
1. I can provide for my energy needs.
Comment: I cannot provide mineral engine oil but I can limit my engine hours to preserve it and run my engines on wood gas.
2. I can provide my food.
Comment: Yes, I can. Boring but sustaining.
3. I can provide my power.
Comment: Yup, beside my PV system, I can run either my 8kW gas generator or my 23kW diesel generator on wood gas.
4. I can provide my household and irrigatation water.
Comment: Again, yes.
5. I can preserve the food I grow.
Comment: Barb had a post on this a few Drumbeats ago that I idn't have time to respond to. The answer is yes. We can steam can,waterbath can, dehydrate, vacuum pack and vacuum pack and freeze (remember I will have power even if the grid goes down).
I don' wat to run this into the ground but shipping coffee thru NO isn't an answer.
Todd
I grew up gardening and have a fairly good knowledge of orchard farming in different climates.
I have good ties to Iceland and Landsvirkjun (their national power company), so I can "bug out" there in extremis. The alternative, in extremis, would be my grandfather's farms in the Bluegrass area of Kentucky, But I will stay here in New Orleans as long as a monetary system stays functioning.
Rainwater cisterns are quite doable & easy.
Here's the crux as I see the urban versus rural debate and it comes down to complexity. And, maybe I should have approached your intial post from this perspective and left out all the ancillary stuff.
Most, but not all, rural lives are probably an order of magnitude less complex then urban lives/living, that is, they do not depend upon complexity (I am not saying that technology is unimportant.).
A simple example: It snows in the higher elevations here - even though we are only 20 miles from the Pacific Ocean. No one "takes care" of snow on the private roads, which encompasses most of the area because it is the boondocks. We have been snowed in for a couple of weeks and others we know of were snowed in for up to 6 weeks this past year. That's life.
Now, how would an urban are deal with this situation? How would those urban areas deal with being totally cut off from civilization for these lengthts of time? Especially, if it was the norm?
My point is that Tainter and, probably, Odum would say that urban complexity is doomed to fail.
Todd
My impression is that most rural living is much more energy intense (especially for transportation) and comparable or slightly less economic value added.
In a non-collapse environment, that will work strongly against rural living and make access to social services (for instance medical) much more difficult.
The rural life of today is not that of 1900. It has (appearances to me) evolved into a very energy intense lifestyle, with "driving everywhere". The "once a month" trip to town lifestyle is long gone. And drugs have migrated as well :-(
BTW, There is a particular type of weed that grows well on disturbed ground in New Orleans that makes good (if spicy) greens.
But if the collapse went to completion and urban living became completely untenable, then the rural areas are the only alternative. Not that rural areas would be good, just not as bad as collapsed cities in the midst of a terrible die-off.
If one is not in prime health and physical condition, you need a support network.
There will be plenty urban/rural squabbles if TSHTF. Conflict predictable, outcome unknowable
- the most long guns
- the best training (i.e. veterans)
- the best aim
Here's looking at you, babe . . . .However, my experience has been that I had less freedom to build a sustainable existence in the city than I do on my rural property. Things like zoning restrictions, small lot sizes and community standards organizations made it difficult to impossible to do many of the things I wanted to do to move towards a less energy lifestyle. The cost of living alone made it necessary to work full-time (ie. 5 days of commuting) to make ends meet in the city. This is no longer the case now that I'm in a rural setting.
I've tried to live sustainably in the city and in the boondocks. For me, it's easier in the boondocks.
That should do wonders for the value of this conversation.
Frankly, I think you're both wrong. The cities won't collapse because they have no food or firewood. The 'burbs won't evaporate because of higher fuel prices. And rural areas won't be left high and dry.
Everyone will have to make major adjustments, and at non-trivial costs (monetary and otherwise). But in everything that I've read about energy issues, I have yet to see anything even remotely approaching a thorough, fact-based analysis that any of the three location categories mentioned above will face extinction.
For example, hand-waving from people like Kunstler about how the 'burbs are doomed is so much balloon juice. Show me exactly your assumptions about 1) what the price of energy will be, 2) how quickly it will reach that level, 3) how people will respond, both individually and collectively through businesses, universities, houses of worship, and gov'ts of all sizes, etc., 4) how technologies currently very close to commercialization, like nanotech Li-ion batteries and far cheaper thin-film solar PV panels will change our situation, 5) how the continued aggressive rollout of utility-scale wind power and the rising interest in tidal and wave power will affect our circumstances, 6) what it would cost, in cash outlay, energy, and cultural change, to abandon the 'burbs and have all those millions of people in the US move into the utopia of densified cities, and how that would be cheaper than finding other methods for people to keep living in the 'burbs (or the cities or in rural areas).
Unless someone is willing to put together this level of detail about their assumptions and the underlying science and economics, then they're just blowing smoke and they don't deserve the attention of anyone on this site or anywhere else.
You sound just like JD.
Todd
Bigger sq ft = increased costs to heat & cool
Larger lots = lower denaity = longer to travel to get to essential services & jobs (on average, being within walking distance of a Super WalMart will be a major plus).
Building quality seems (to me) to have declined steadily and newer homes will require major & expensive repairs and are now "out of fashion" (no concern for energy efficiency, too many sq ft,, and just wrong style/fashion, isolated). 3,000+ sq ft homes built in 1984 will be prime board-up candidates in 2012 IMHO.
Based upon past US experience, demographic changes will be a death blow ro some suburbs. An investor buys one former McMansion from the bank foreclosure at a DEEP discount after a year on the market. He rents to a large group of Hispanic immigrants who take a minivan to work together. Repeat for a couple more homes, have dusty "For Sale - Reduced" signs in front of 1/5th of the homes and decline will be swift from there.
As usual, very well-stated and cogent remarks.
When I write about the future it is labeled science FICTION because that is what it is, namely, informed speculation about what might happen "if this [global warming, peak oil] goes on . . ."
The best post-apocalypse novel, by far, that I've ever read is George R. Stewart's "Earth Abides." In it, guess where a community/tribe of people flourish--Berkeley, California.
For what it is worth, I'll put "Earth Abides" #1 on my list of most highly recommended books to read for people worried about what might happen when TSHTF.
My Mother worked as a nurse in Bellview Childrens' Hospital for 50 cents a day. But she had a job, other people around, was provided meals and housing. Transportation was quite easy, with the bus and subway services. It was much better.
The problem is that most people have only seen pictures of breadlines that were set up in the city. What they fail to realize is that the city was able to concentrate the resources that it had and provide them to people that were in the city. It was much more efficient than rural. Services were much more available and life was a lot more flexible.
My concern is that there will be supply disruptions. The rest of the scenario goes without saying. Your assumption that energy will always be available at a price is wrong IMO.
If all else fails, Tahiti is a sailboat ride away.
;-), maybe if things get really bad you'll be congratulating yourself as you chop wood, and I'll be talking to those island girls.
I'm a few blocks from a railroad track, a bike trail that connects to others, grocery store, two gas stations, hardware store, gun shop, dentist and doctor plus bank and post office--all withing easy walking distance.
Just south of my sugar maple trees is one of the biggest fields in the county, currently planted in alfalfa because of chronically low corn prices. Most fields around here are planted in corn, and most things nontropical grow fine here, including some varieties of tomatoes. In my big back yard is a well-populated community of prarie dogs; wild turkey and pheasants stroll among my bird feeders, abundant good water is easily available from a shallow hand-pump well in my back yard.
My neighbors are armed and friendly (to locals:0)
- No need for dramamine, have never even felt queasy;
- Learned to cook by observing a master chef in the kitchen of St. Paul's Commodore hotel during the 1940s.
- Am really good at cooking to meet individual preferances, e.g. always offer choice of coffee, tea, or cocoa, always offer choice of sandwiches, always have stuff readily available for folks to make their own peanut butter and honey (or whatever) sandwiches.
Can we extend the trip to New Zealand? I have friends there. Also how about Hawai'i on the way back. More friends there.Do you allow fishing from your boat? I like to troll every now and then.
That one didn't make me sick, and I was hungry, so I totally get the importance of rough-water seacook. ;-)
I don't have a boat now, but I figure there would be some response time in any deep crisis ... but this is all "disaster movie" fantasy anyway (or fodder for your next series). I think we'll really get a slow, almost boring, and not always pleasant, energy adjustment.
BTW, if you would like some of my sea-going meal plans, I'd be glad to send them to you. It's funny, if we go on a cruise of three boats together, the people on my boat tends to gain weight, maybe five pounds in a week. The folks on the other boat generally lose several pounds.
Standing watch or navigating--shucks there are a lot of people you can find for that. I recommend beautiful highly educated women from university sailing clubs--especially those with "liberated" views. BTW, a big advantage of women as crew is that they eat only about two-thirds as much as the average man--which on my boats tends to be 4,500-6,000 calories per day, plus wine or beer.
I think a forty footer is a good length. I like Aalberg designed boats made in the 1960s, but there are a ton of others out there. Also, I prefer a yawl or cutter rig to a sloop. On a sloop the masts get too tall, and this can be bad, as your experience illustrates.
Also, I do not believe in engines. They tend to fail when you need them. A good alternative is a couple of hundred-pound thrust electric trolling motor with a few deep cycle batteries plus a small wind propellor/turbine to charge them.
For what it's worth, I once also read Desirable and Undesirable Characteristics of the Offshore Yachts. It's quite a double-whammy if you read it with Fastnet, Force 10. It kinda brings home what "undesirable" means.
For crew, here are my standards:
Best crew I've ever had was Pippi Longstocking. She is grown up now (young side of 30) is an actor and film maker. She got her start working as a body double for some hot actresses whose names you might recognize. She is awesome. One time, 40 knot winds, all the guys are seasick, head is occupied with vomiting fool and she has to pee. So, what does Pippi do? She grabs the leeward shrouds, drops her pants and hangs out to leeward with the cold October waves of Lake Superior slapping her butt.
BTW, she is an adoptive niece of mine and I screen all her male friends. The last one was not good enough for her--filty rich, handsome, owned a fitness club, buffed and even a Heinlein fan. Still, not good enough for Pippi.
She may not be the strongest one on a sailboat, but she may be the smartest. I've taken some hundreds of photos of her (clothed) and have been offerred up to forty dollars just for one snapshot. But I don't do commercial photography.
It would be nice to have a film maker on board.
One of the best places to by big sailboats for cruising the Pacific is in Honolulu. And for why? Because so many rich dunces do the Transpacific, have a horrible experience, and they just turn their yacht over to a broker and say, "Dump it."
HOWEVER, many of these boats are race/cruisers, and that category (IMO) sucks. Cruising boats are built for seaworthiness and comfort. Racing boats are designed to sail as fast as possible--on the edge of coming apart.
Also, I think a lot of yachties run out of funds in Honolulu, then sell their boats to get funds to return to the mainland and start a land life again.
Anyway, I've more than once seen comparable boats for sale in Honolulu for about 25% less than in Newport Beach or the San Francisco Bay area.
Every thing in Urban areas is usually trucked, flown, or barged in over thousand of miles. The average meal in a urban area travels over 1200 miles.
> And the nearest job that you are qualified for is 73 miles away.
Who says I am planning to commute a job? My intention is to become very self sufficient. I no longer see the current hi-tech/energy intensive economy as sustainable. I believe that in the future steady employment will be difficult to achieve, and I prefer not to end up being permenently trapped in area filled with a large group of miserable, unemployeed and desperite people. Finally I don't want to have to climb 40 flights of stairs or sleep in a hot sufficating apartment, which rolling black outs are the norm and its too expensive to run air conditioning.
>Urban areas will do better post-peak than rural areas for a VERY long time. Perhaps selected cities of 100,000 to 300,000 will do best, but not every one.
I have to strongly disagree. Urban areas are very dependant on cheap energy. Food, energy, and manufactured goods are all imported into urban areas. It wasn't until the availability of cheap energy that city populations took off.
Most of the US manufacturing jobs have been moved, or are in the process to relocate to rural areas becuase of the lower labor costs and taxes.
I have been searching for this statistic in the past and have not been able to find it. Can you point me to a good reference site for this info?
Thanks....
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